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India, Inc.: Wake up!

Posted on Tuesday, Jun 21st 2005

Today’s Journal reports: “Chinese appliance maker Qingdao Haier Ltd. and private-equity funds Blackstone Group and Bain Capital have sent Maytag Corp. an indication of interest, potentially setting off a bidding war for the ailing Iowa icon. Maytag said it has received a “preliminary nonbinding proposal” from the three parties to acquire the U.S. appliance maker for $16 a share, or $1.28 billion, in cash. ” Not long ago, Chinese company Lenovo acquired IBM’s PC Business.

What the Chinese are doing is applying leveraged buy-outs on big, fat, powerful American brands reeling under margin pressures, and “leveraging” what they do really well: low-cost manufacturing to shave the fat off, while at the same time gaining access to brand power and distribution channels. Add to that the looming opportunity of a downright humongous domestic market, and the leverage becomes enormous!

This leads me to wonder how long India, Inc. will remain asleep at the wheels? I have been writing about LBO opportunities using India (Epiphany, Saba) publicly, and have had numerous discussions on the subject privately with various relevant people.

Software is India’s LBO opportunity. For God’s sake, guys, take advantage of it with some delicious savvy that I observe in the Chinese, and do not, in the Indians!

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Business Week’s recent article on Tech Buy Outs: https://www.businessweek.com/the_thread/dealflow/archives/2005/05/tech_buyout_sho.html

AND

My Comment on the subject:
The most important thing missing from tech buy-outs is strategic re-engineering.

Traditionally, LBO investors have mastered the financial and operational leverage aspect, but Tech, by its very nature, is not a simple beast. Too many things change in a market over a reasonably short period of time, including what technology enables.

Your list uses a relatively simple / simplistic algorithm for financial leverage. If you do some strategic re-engineering, many other companies would come up on the list: Netflix, LSI Logic, E.piphany, Saba Software, …

Here is some analysis on each of them:

LSI Logic: https://sramanamitra.com/blog/24
Netflix: https://sramanamitra.com/blog/69
Palm: https://sramanamitra.com/blog/72
E.piphany: https://sramanamitra.com/blog/27
Saba: https://sramanamitra.com/blog/28
Mentor Graphics: https://sramanamitra.com/blog/35

Sramana Mitra Tuesday, June 21, 2005 at 10:25 PM PT