Jeff Matthews
Nov 25, 20144 min
IBM trades to highs on
activist related speculation (161.85 +0.95)
—Briefing.com,
November 23, 2014
IBM Chief Counsel: “Ginni? Fred here.”
IBM CEO Ginni Rometty: “What’s wrong?”
Chief Counsel: “Activists are circling.”
Rometty: “Oh geez.”
Chief Counsel: “Yeah. I’ve got the biggest shark of all on hold. He wants to talk.”
Rometty: “Carl Icahn??”
Chief Counsel:
“No. Icahn watches Netflix and
uses an iPhone. He thinks we’re ‘old
economy.’ Worse than Icahn.”
Rometty: “Donald Trump?”
Chief Counsel:
“No. Even worse.”
Rometty:
“Worse than Donald Trump? How is
that possible?”
Chief Counsel:
“It’s possible. It’s those guys
from 3G.”
Rometty: “Yikes.
The Brazilians? The ones who
took over Burger King and slashed and burned?”
Chief Counsel: “Yeah. And they bought Heinz with Warren
Buffett—your pal.”
Rometty: “Well, he’s not my pal after we had to
reset the ‘earnings roadmap’ and the stock tanked. Stupid roadmap. How did Palmisano ever come up with that
idea?”
Chief Counsel:
“It worked, didn’t it?”
Rometty:
“Only long enough for Sam to exercise his stock options. Not me.”
Chief Counsel:
“Well your options may be in the money soon enough, if these 3G guys go
ahead. You want to talk to them?”
Rometty:
“Put ‘em on.”
Chief Counsel:
“Right now?”
Rometty:
“It’s better than watching these Fast Money yahoos trash talk me on
CNBC.”
Chief Counsel:
“Hold on… Okay, here we go. Oscar? You there?”
Oscar: “Yes. I have seven minutes before I have to fire 37
people and figure out how to convince young males to buy hamburgers made with
wood shavings. Let’s get going.”
Rometty:
“What do have in mind?”
Oscar:
“We at 3G would like to buy IBM—”
Rometty:
“Outright? That’s not activism,
that’s a hostile takeover!”
Oscar:
“Call it what you like. We see
great opportunity to run IBM more efficiently.”
Rometty:
“Oh yeah? Starting where?”
Oscar:
“Layoffs. IBM has too many
employees.”
Rometty:
“Says who?”
Oscar:
“You have over 400,000 employees!”
Rometty:
“That number is so last week.”
Oscar:
“You’ve had layoffs in the last
week? Well then, I must congratulate
you.”
Chief Counsel: “Careful, we haven’t publicly
disclosed anything.”
Rometty: “Okay.
So what else does 3G think we need to change?”
Oscar: “Well,
according to our internal due diligence you have a very inefficient field staff
reporting structure. At Burger King we
have 14,000 field staff reporting to seventy-five MBAs who all work out of their cars.”
Rometty:
“That’s nothing. At IBM our entire
field staff of 80,000 reports to three college grads and a transfer student.”
Chief Counsel:
“Ginni, that’s never been disclosed—”
Rometty:
“Relax, Fred. The transfer
student doesn’t even speak English.”
Oscar: “Somehow
our due diligence did not discover that.
Well played.”
Rometty: “Thank
you. What else you got?”
Oscar: “Well,
corporate overhead. At Burger King we
eliminated all corporate jets except mine, and everyone takes a Greyhound bus
when they travel more than 300 miles.”
Rometty: “What
do they do under 300 miles?”
Oscar: “They hitch-hike.”
Rometty:
“That’s nothing. All travel
requests at IBM have to get approved by a cardboard cut-out of Dilbert.”
Oscar: “Brilliant!”
Rometty: “It’s
called returning value to shareholders, not employees.”
Oscar: “And we admire that. But your headquarters staff appears bloated to us—”
Rometty: “That’s because it doesn’t
exist.”
Oscar:
“Doesn’t exist?”
Rometty:
“No. It was outsourced to India
years ago.”
Oscar:
“Then why do our satellite images of the IBM headquarters parking lot show so many cars?”
Rometty:
“That’s my security detail. And
my lawn service.”
Chief Counsel:
“Ginni, I really think this is inappropriate—”
Rometty:
“Not at all. If this guy thinks
he can tell me how to run IBM even less
for employees and customers than we already do, he’s got another thing coming. He’s a piker.”
Oscar:
“Well let’s discuss your taxes.
We at 3G know how to operate tax-efficiently across all multi-national
jurisdictions—”
Rometty: “Our tax rate was 15.6% last year. How do you beat that?”
Oscar:
“We think applying a ‘Dutch Sandwich’ could move billions in pre-tax income to a lower tax rate nation without any change in your corporate headquarters—”
Rometty:
“Been there, done that.”
Oscar: “Well, a ‘Double Irish’ would reduce taxes on
intellectual property by shifting—”
Rometty:
“You’re five years too late pal.
Next?”
Oscar: “A
‘French Cuff’?”
Rometty:
“So ’90s.”
Oscar:
“The ‘Jamaican Bobsled’?”
Rometty:
“Who do you think invented the
‘Jamaican Bobsled’?”
Oscar: “What about a ‘Hong Kong Stir-Fry’…a ‘Singapore
Sling’…a ‘Portuguese Man-O-War’?”
Rometty:
“Is this the ’80s calling now? Puh-leeze.”
Oscar:
“Well, I must say, your tax avoidance strategies seem quite advanced. I’ve run out of options.”
Rometty:
“You didn’t ask about the ‘Belgian Waffle.’”
Oscar:
“Fala sério! We heard the rumors about it, but believed it to be a myth, like Bigfoot. You mean there is such a thing?”
Rometty: “Wouldn’t you like to know?”
Oscar: “Please? I beg of you.”
Rometty: “If you guys drop this takeover idea, I might—.”
Oscar: “Consider it dropped.”
Rometty: “Alright. But first, make sure your door is closed, your auditor is nowhere nearby, and listen carefully… Now just imagine you found a way to merge with an entire country, whose citizens could be made to unwittingly pay your taxes for you—.”
Chief Counsel:
“This conversation is finished! Ms.
Rometty has nothing further to add!”
Oscar:
“El Diablo!”
###
Jeff Matthews
Author “Secrets in Plain
Sight: Business and Investing Secrets of Warren Buffett”
(eBooks on Investing,
2014) Available now at Amazon.com
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2014 NotMakingThisUp, LLC
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