Johnny Angell

Private or Public, that is the Question?

Alltel, a major public firm in Little Rock has been rumored to a subject of a private buyout for some time now. This morning's paper reveals the Acxiom, another major public firm in Little Rock will be part of a private buyout, if approved.

Advantages to the buyout, per the article are "relief of pressure from meeting quarterly-earnings expectations. And complying with regulations and other aspects of being a public company cost Acxiom about $15 million a year...going private would allow the company to make more long-term investments..." Similar issues have been mentioned with the Alltel buyout.

I've long thought that Wall Street (I use the phrase to mean the entire equity investment process) was short sighted. Gotta make those short term gains and profits for the investors. Can't have a quarter in which expectations aren't met. This kind of management is not always good for the long term good of the company. Planning and decisions that aren't looking much further than the end of your nose, that doesn't seem good to me.

In the interest of full disclosure, like many Americans, I am an investor, mostly in mutual funds, which means I hold stock. I've never been a speculator, always invested for the long term.

It seems to me that if publicly held companies made most of their decisions with the long-term in mind, we'd still see investment gains and there would a smaller likelihood of major stock market downturns. I'm not advocating the end of equity investment, just suggesting that Wall Street lift its eyes up a few degrees and look further down the road.

Johnny
www.teamfurr.org
Another cat? Perhaps. For love there is also a season; its seeds must be resown. But a family cat is not replaceable like a wornout coat or a set of tires. Each new kitten becomes its own cat, and none is repeated. I am four cats old, measuring out my life in friends that have succeeded but not replaced one another.--Irving Townsend

Michael Warner

Re: Private or Public, that is the Question?

The last time I had a corporate job it was with a company that was privately held for half the time I was there then went the whole IPO route. Given the stock options and explosive growth following the IPO I certainly made more money but it was a much better run company while it was private. It went from being very customer and employee oriented to being a slave to Wall Street. The things we did to get the numbers just right for Wall Street analysts eventually undermined the whole business model. I left years ago but rumor has it they're looking for a major investor to buy back their stock and go private again.

JohnRice

Re: Private or Public, that is the Question?

Actually, you are engaging in somewhat speculative investment, you are just having the fund manager(s) do the buying and selling for you. You are absolutely right though. "Wall Street" hasn't always been so impatient. People used to invest for the long term. I suspect there will be many more enormous private acquisitions, just like Chrysler. It's an unfortunate inevitability, but probably better than how things are now with absurd CEO incomes, particularly at poorly performing compannies. There is no way that will wash with private corporations.

They flutter behind you, your possible pasts.
Some bright-eyed and crazy, some frightened and lost.

Chris Lockwood

Re: Private or Public, that is the Question?

> I'm not advocating the end of equity investment, just suggesting that Wall Street lift its eyes up a few degrees and look further down the road.

Might as well wish for world peace while you're at it, since it's not gonna happen with the way things are set up.

You should be blaming the investors as much as, if not more than, the companies. Consider a company that sacrifices short-term gain for long-term success. It will be rewarded by having its stock dumped by those who want better ROI now, so unless the company wants its stock in the crapper, it has to play ball and keep those quarterly earnings looking good.

Clinton McClure

Re: Private or Public, that is the Question?

Alltel isn't just a major public firm, they're also a major cell phone carrier. Having said that, over the past seven or eight years, the company has become quite volatile with nonstop managerial changes and employee layoffs. Basically, no one is steering the boat. They are still strong in the market, but lagging behind such companies as Cingular/AT&T and Sprint. Here's where private investors are seeing a chance to not only dip their fingers into the cell phone market, but do it successfully.

Axciom, on the other hand, has always been strong in the data market. It was rumored last year that Axciom was part of an effort to purchase Alltel, then ValueAct tried to force a hostile takeover of Axciom. Charles Morgan (CEO), along with the board of directors, successfully fought down the takeover and agreed to have (I believe) 2 ValueAct members on the Axciom board. Now, it seems ValueAct has partnered with another private firm to outright buy Axciom.

*Post edited to correct mis-information.*

Don't Panic

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Johnny Angell

Re: Private or Public, that is the Question?

I do, I just didn't make that clear. Perhaps we need an item in the annual report called "What we did to Look Good Short Term and F$#$K Us Up Long Term."

Johnny
www.teamfurr.org
Another cat? Perhaps. For love there is also a season; its seeds must be resown. But a family cat is not replaceable like a wornout coat or a set of tires. Each new kitten becomes its own cat, and none is repeated. I am four cats old, measuring out my life in friends that have succeeded but not replaced one another.--Irving Townsend

BrianW

Re: Private or Public, that is the Question?

I've seen (i.e., worked for) extreme behaviors of both private and public companies. One public company I worked for would literally sell empty boxes so it could book another $10,000 in revenue for one quarter, only to spend $80,000 the following quarter to fly a team of engineers to the customer's site to build what was sold (the “box contents”) from scratch. The company was constantly mortgaging away massive future profits just to make the current quarter look a tiny bit better.

I've also worked for a private engineering company in which the company owner, who wasn't an engineer, insisted on defying the engineers' data, findings, risk analyses, and recommendations, and instead told us exactly how to solve a problem or design a product. We were constantly developing products which, instead of solving real problems in the real world, solved his imaginary problems in his imaginary world. Ultimately it was his money and his company, and he didn't give anyone enough stake in it to care whether it succeeded, so nobody ever sat him down and told him his ideas wouldn't work. (Well, actually, a few of us did, but they were quickly fired.) We just did what he asked and produced worthless products, according to his design specification.

It doesn't have to be like that in either case. Public companies can be run by a board/management team that can maintain a long-term outlook without giving in to immediate earnings pressure. And private companies can be run by owners who know the areas and extent of their competence and allow their employees to apply their expertise to make the company a success.

Bottom line, the company leaders – not whether the company is public or private – will determine the viability and profitability of the company and the usefulness of the company's products or services.

-Brian
Come, Rubidia. Let's blow this epoch.