Daily Archives: September 29, 2009

With IT “Not a Great Place to Be,” Siemens Moves Could Affect Nortel Asset Sales

Siemens AG, the sprawling German engineering giant with multiple business units, is completing a “tough” fiscal year, according to a Bloomberg report.

Although none of Siemens’ business units is knocking the cover off the ball, the company’s information-technology businesses have not helped the corporate cause.

Information technology is “not a great place to be in these days,” says Joe Kaeser, Siemens’ Chief Financial Officer (CFO). He reports that Siemens will review joint ventures, including Nokia Siemens Networks (NSN), the wireless-networks business whose ownership it shares with Finland’s Nokia. Kaeser said the unit is not meeting Siemens’ performance targets.

Another Siemens joint venture is Siemens Enterprise Communications, partly owned by private-equity firm The Gores Group.

Siemens Enterprise Communications recently bid on Nortel’s enterprise business assets. Avaya submitted the highest auction bid, but the sale is being reviewed by the Canadian government. While not tendering a bid as high as Avaya’s, Siemens Enterprise Communications’ proposal offered greater benefits to Canada. Nonetheless, if Siemens’ commitment wavers to its enterprise-networks joint venture, Avaya might win the Nortel assets by default.

Earlier in the Nortel garage sale, Nokia Siemens Networks advanced the stalking-horse bid for Nortel’s wireless business. It eventually was overtaken at auction by a $1.13 billion offer from Ericsson.

Siemens has said it might have to write down the value of its stake in the unprofitable NSN. It’s possible, though not yet probable, that Siemens might want Nokia to buy out its stake in the company.

Depending on how Siemens proceeds, NSN could find itself constrained from bidding on Nortel’s LTE patents. Ericsson and RIM are thought to be at the front of that particular queue, but Nokia — a smartphone vendor as well as a purveyor of wireless-networking equipment — would have reason to consider a bid.

GE CEO Says We’ll See Weakest Recovery in Decades

Yesterday I wrote that we aren’t mired in a typical recession and that we shouldn’t expect a typical recovery. What we’re going through is qualitatively different this time, and we should not expect the consumer-driven US economy to return to its formerly robust health soon.

Well, General Electric Co. CEO Jeffrey Immelt agrees that this recovery will be different, and not in a good way. Speaking in Singapore, Immelt warned today that high unemployment and slower lending will drag on U.S. economic growth, likely resulting in the weakest recovery in decades.

Said Immelt:

“There are reasons to believe that this recovery could look different from ones in the past. There’s not a lot of confidence that it’s going to be great.”

“Easing up money has always been the elixir to keep the economy in recovery mode. But once you get interest rates to zero percent, you can’t go much below that, which is kind of where we are right now.”

“A lot of the jobs lost in financial services and construction are never coming back.”

Later in the same address, Immelt said the following:

“How the Chinese economy does in the short-term is probably more important than sitting there praying for a robust recovery in the U.S. I bet they (the Chinese) make it through this crisis and come out stronger.”

Google Nearer to Completing On2 Acquisition

Google moved one step closer to completing its acquisition of On2 Technologies today.

Video-compression vendor On2 announced that it and Google have been granted early termination by the Federal Trade Commission and the Antitrust Division of the Department of Justice of the mandatory waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.

With that milestone achieved, the two companies have satisfied a key condition for completion of the proposed merger. The deal also is subject to the adoption of the merger agreement by On2 shareholders at a special meeting.

The only serious threat to the consummation of the acquisition is a lawsuit filed by dissident On2 shareholders unhappy with the price the company’s officers extracted from Google.

Although the shareholders behind the lawsuit contend that On2’s directors violated their fiduciary duty in not seeking another prospective buyer and in failing to negotiate a higher price from Google, their case might be difficult to prove. Google could probably make it go away by agreeing to raise its offer by a few cents per share, but there’s been no indication that’s about to happen.

Microsoft’s Free MSE “Good Enough” to Take Consumer Share from Symantec, Others

As Microsoft today releases its free anti-malware suite, Microsoft Security Essentials, the for-pay vendors of competing products are moving the goalposts and repositioning to fight on different turf.

A replacement for Windows Live OneCare, the for-a-fee security suite that was retired at the end of June 2009, Microsoft Security Essentials (MSE) includes anti-malware and anti-rootkit protection. It does not come with a firewall, but Microsoft provides a free firewall with Windows.

Microsoft is positioning MSE as a capable, lightweight anti-virus, anti-spyware program, pointing out that it consumes fewer resources than for-pay anti-malware suites from the likes of McAfee, Symantec and Trend Micro. Microsoft also has positioned MSE as a worthy rival to any of the free anti-malware offerings on the market.

As eWeek notes, the product will be available in eight languages and 19 countries.

Mary-Jo Foley of ZDNet’s All About Microsoft points out that Microsoft is aiming MSE at the consumer market, where many customers are unwilling or unable to pay for security software. She explains that Microsoft representatives believed it was worth offering customers a free product to help thwart security breaches on unprotected Windows PCs that could be used as bots to infect other users’ systems.

The free suite is a client-only offering, with no centralized server capabilities. It does not include the enterprise-class business features associated with Microsoft’s for-pay Forefront security products, which provide not only anti-malware protection but also real-time reputation services, archiving, encryption, disaster recovery, and policy enforcement. Then again, not many consumers require those features.

Predictably, the for-pay anti-malware vendors are attempting to change the rules of engagement. Recognizing that Microsoft is a threat to vaporize revenues they derive from for-pay consumer anti-virus products, these vendors are trying to play on consumers’ fears and on Microsoft’s status as a relative newcomer to the anti-malware space.

Said Con Mallon, EMEA Consumer product marketing director at Symantec:

“The security industry has moved on from the product Microsoft is launching. Unique malware and social engineering fly under the radar of the traditional signature based technology employed by free security tools such as Microsoft’s. . . . ”

“We believe the false sense of security provided by this tool is almost as dangerous as having no security at all. The latest generation of internet security is real-time and reputation-based, operating in real-time and not relying on a signature being produced and downloaded before the computer is protected.”

You can almost see the smoke billowing from his ears. Considering some recent anti-malware test results, Symantec might want to hold its fire.

Microsoft’s MSE received plaudits recently from independent testing firm AV-Test GmbH, which evaluated its performance in combating nearly 3,2000 common viruses, bot Trojans, and worms.

Said AV-Test’s Andreas Marx of MSE:

“All files were properly detected and treated by the product. That’s good, as several other [antivirus] scanners are still not able to detect and kill all of these critters yet.”

What’s more, Symantec’s Endpoint Protection failed a recent Virus Bulletin anti-malware test that Microsoft passed using the same AV engine built into MSE.

The fact is, for many consumers, especially in developing markets, what Microsoft is offering with MSE will be sufficient, particularly considering the price. The for-pay vendors of consumer anti-malware suites will lose market share and revenue to Microsoft. It’s not a question of whether they will lose business, but of how much.

Microsoft will continue to charge for its Forefront offerings for enterprise security, and that’s where Symantec, McAfee, and Trend Micro should look to make their stands. In enterprise markets, they will have a better chance to successfully exploit Microsoft’s relative inexperience as a security player.

SEC Foists Well-Intentioned Governance Reforms on Dell

Dell has filed a tentative settlement with the Securities and Exchange Commission (SEC) relating to an investor lawsuit.

Dell pursued the settlement after the SEC determined that the company had exaggerated sales by $359 million and profits by $92 million during a period extending from 2003 beyond 2006.

As John Oates of The Register put it:

Dell has settled a long-running court case brought by disgruntled shareholders, who accused management of artificially boosting Dell’s shareprice so they could offload their personal holdings.

Even so, nothing in the settlement concedes wrongdoing by Dell representatives. Instead, the agreement requires the company to fork over $1.75 million in legal fees and to enact numerous corporate-governance reforms.

Dell, for example, must ensure that at least 60 percent of board directors will be independent (at least in name and in theory). In future, each director will receive training at Dell’s expense, and directors will have “complete and open access” to Dell management and employees without requiring coordination involving the chairman or board-liaison office.

That last provision, well intentioned but somewhat naive about the wily ways of the boardroom, will be a double-edged sword for Dell employees. In my experience, board members can have their own hidden agendas, often impenetrably opaque and inscrutable, not to mention intensely politicized.

While I understand that the provision is meant to foster laudable honesty, probity, and transparency within the company, I also know that board members cannot always be trusted to put the interests of a whistle-blowing employee above their own convoluted priorities. Employees best tread warily in that serpent’s den.

Still, in no way do I condone the dubious practices alleged to have been perpetrated at Dell. So let me make my position clear: I encourage employees to speak out emphatically on ethical violations and questionable business practices within their companies, but I also encourage them to document all relevant interactions and to consult counsel every step of the way.

Remember, people at the top of the corporate food chain rarely serve themselves up as scapegoats, as a certain case involving a former McAfee employee makes clear.