It must be painful for shareholders of
to see the erstwhile PC maker disparaging the business it's selling even as the so-called buyer of that business,
Gores Technology Group
, sings its praises. Given that Micron wants to keep investing its shareholders' money in a new business, it makes one wonder who's to be trusted.
Privately held Gores is the so-called buyer of
, the name of the new stand-alone PC business based in Nampa, Idaho, because Micron actually is paying Gores $70 million to take it away. It's as if Micron decided that the best alternative to running this business would be to dump it in the ocean, but it'd be easier to pay Gores to take ownership. Micron may share in future profits or a sale of the business, a similar arrangement Gores made with
when it bought the
But listen to the unkind words Micron uses to describe its own baby: "With growth rates in the PC industry plunging -- dropping more than 6% in the fourth quarter alone -- and price wars by major competitors significantly reducing gross margins, the PC business is becoming a major drain on the company's cash reserves,'' says Joel Kocher, the former
executive who just couldn't make a go of Micron's PC shop, in a statement. Kocher wasn't available to discuss his news, but his statement elaborates on how MicronPC will at least now stop being a headache to Micron's shareholders.
What a different spiel from Alec Gores, a little-known bottom feeder in Los Angeles who's threatening to become the grim reaper of Silicon Valley. "The acquisition of MicronPC provides an exciting opportunity for GTG," he says in a separate release. We are confident that the business has significant potential, and we look forward to providing the leadership and resources required to create and sustain a dynamic and market leading enterprise." Gores also wasn't available Tuesday, but his commentary sure reads like a taunt of the folks with whom he anticipates closing a deal within 30 days. A Gores spokesman allows that the firm's namesake currently is hard at work on another blockbuster deal.
Right From Wrong
Who's right here? It doesn't matter anymore for Micron shareholders. They lost out a long time ago as Micron, despite a penchant for making computers techies love to use, got badly beaten in the business market by Dell and
A better question is how likely it is that Kocher will be a success in the Web-hosting business, Micron's next adventure. Micron is merging its
business with Web hoster
and together they intend to focus on small- and medium-sized businesses. Presumably, there's no angle in going after
, the leader in Web hosting that isn't exactly having an easy go of things these days itself.
Why rain on Micron's parade before it even gets going? What many forget is that despite superior products, the main problem Micron Electronics faced in the PC business was that the small- and medium-sized business stinks. It turns out that Dell did a good job, thank you very much, of serving smaller businesses. The last "enterprise" company to make a big deal about serving the smaller end of the spectrum was
, and look where that got them.
Investors, who still must approve the Micron-Interland merger, don't seem too impressed. The stock closed at $1.91 in Tuesday trading, not far above its 52-week low of $1.50. Investors don't seem that excited by the reminder there might be a special cash dividend in the offing if Micron-Interland ends up with significantly more than $200 million in the bank after the deal closes. Micron says that after forking over $70 million to help Gores fund MicronPC, it'll have $230 million to $240 million in the bank. But it also says its current hosting business is burning through about $7 million per quarter.
The losses should stop next year, says Micron, which also disclosed that its projected second-fiscal-quarter loss on MicronPC (accounted for as a discontinued operation) will be $162 million, not the previous $147 million.
If not, perhaps it can pay Alec Gores to take its Web-hosting business as well.