Post-merger issues - 21

Oracle Loses Would-Be Customer To SAP Due To Integration Concerns

Oracle’s problem is one of the most common facing acquirers today – being able to successfully integrate an acquisition. It appears that Oracle faces a substantial technology challenge before it can obtain the revenue growth that it hoped to obtain through the acquisition of Retek

SAP and Oracle are locked in a fierce battle over the enterprise-resource planning software market, with SAP fighting to retain its lead and Oracle hoping to catch up through an aggressive acquisition strategy.
And in a close battle, every success, no matter how small, is celebrated. That's why SAP is announcing today that it beat Oracle in a bid for the business of Sport Chalet, a $350-million-a-year retailer. One of the biggest turnoffs to Oracle, says Sport Chalet CFO Howard Kaminsky, was -- ouch -- lack of integration between Oracle financial applications and the retail apps of Retek, which it acquired about 18 months ago.
SAP's offering for the retail market, by comparison, "was ahead of its time in that a lot of pieces were integrated," Kaminsky says. Oracle was a close runner up, he says, but Sport Chalet was concerned that an employee in accounts payable, for example, would see a different screen then a buyer on the merchandising side, even if the data was the same. "It wasn't like Oracle couldn't do everything; it just felt like SAP had an edge," he says.
Such impressions on would-be customers aren't good for Oracle, as the potential difficulty of integrating its myriad acquisitions is the biggest question hanging over its success in ERP. With the Sport Chalet deal, SAP also is gloating over the win of a "midmarket" company, or one under $1 billion in revenue, which is key to SAP's aggressive plans to grow from 35,000 to 100,000 customers by 2010.

Will the Target's Customers Be Loyal to You?

Customer loyalty seems like an often-overlooked factor in valuing a company.

In today's competitive marketplace, customer loyalty is serious business. It's widely known that holding onto an existing customer is far less expensive than trying to gain a new one. It's also well documented that there's a high risk of customer defection following a merger or acquisition. Most buyers anticipate some degree of customer-base erosion post-closing. How can a buyer evaluate the risks associated with a potentially weak customer base?
However, what many buyers fail to do is to get a deep understanding of the behavioral and attitudinal attributes of the target's customers and quantify the acquisition's impact on customer loyalty before shaking hands on a deal. Although most buyers are armed with financial statistics on a target, many lack data on the stability and loyalty of the target company's customer base - an important indicator for forecasting future revenues.
Evaluation of a customer base should be an integral part of due diligence. An objective customer loyalty audit can reveal what drives customer loyalty. For example, customer loyalty may be impacted by the products or services delivered by the company, by the relationships with current staff or by a variety of other factors.
Over the past few years, great strides have been made in customer satisfaction measurement techniques, which help companies identify and understand their customer base, gauge customer loyalty, and develop a loyalty profile. Customer loyalty is an attitudinal metric that captures the strength of a customer relationship, which is strongly linked to critical customer behaviors. Tracking and managing loyalty can help a company understand the reasons why customers defect, and how important they are to its bottom line.
A customer loyalty profile also can be used to place an asset value on the customer base.  Using a customer loyalty metric for a broad cross-section of customers allows a company to analyze its customer profile, identify problem situations, and develop a plan for converting neutral and vulnerable customers into loyal ones. Scientifically measuring customer loyalty is a key step to minimizing risk in buying a company.

Energizer buys Playtex and launches new Schick products

With an acquisition and some solid profits, Energizer (ENR) is sparking Wall Street's interest despite its direct battle with consumer goods giant Procter & Gamble (PG).  Energizer, primarily a battery maker, also owns the Schick razor brand. It's trying to buy feminine care products maker Playtex (PYX). The merged company would compete against giant Procter & Gamble, including its huge Duracell division, in nearly every one of its product areas. 

A.G. Edwards & Wachovia merger: merger plans unravel

NEW YORK - Wachovia Corp. last week put the finishing touches on its retention package for brokers with A.G. Edwards Inc., and the company plans to announce details as early as today or as late as Wednesday.
Although Charlotte, N.C.-based Wachovia didn't release any of the particulars of the retention package, some potential details were widely discussed by A.G. Edwards' 6,618 representatives and recruiters at competing firms who are talking to those reps.
According to two industry recruiters who asked not to be identified, one scenario could hurt small producers, with reps producing less than $350,000 in fees and commissions getting no bonus, and bigger producers in the range of $800,000 to $1 million getting a bonus of 100%.
Another potential retention bonus could have brokers receiving 40% of their fees and commissions, one of the recruiters said. 

A Loss for Sprint

Sprint Nextel (S) continues struggling against its competition while having problems with the customers it acquired in its merger with Nextel Communications.

The Reston [Va.] company lost $211 million [7 cents per share] during the quarter ended Mar. 31, compared to $164 million earned [5 cents] during the same period last year. Ever since Sprint bought Nextel in 2004 in a $35 billion deal, the merged giant has struggled with spikes in customer defections and drops in per-user revenue. The number of Sprint Nextel customers who paid for their phone usage at the end of the month declined by 220,000 during the March quarter, bringing the total number of post-paid subscribers to 41.6 million.
A bright point was that the company's wireless business added nearly 600,000 subscribers and ended the quarter with 53.6 million total, or 10% more compared to the same period last year. But much of the gains came from prepaid customers, who don't tend to pay as much or as regularly.
Even so, sales haven't picked up much yet. Sprint's total revenue amounted to $10.1 billion during the March quarter, with wireless revenue accounting for $8.7 billion and wireline $1.6 billion. During the same period last year Sprint had $10.07 billion in sales.
Investors grew more optimistic and bid up Sprint's stock by 2.7% to $20.54 per share in early trading on the New York Stock Exchange after the news on May 2. The stock price has risen from its 52-week low of $15.92 on Aug. 22.Lets look at what went wrong so far with this merger:
1)     The name of the new company: “Sprint, together with Nextel”.  Reminds me of “the artist formerly knows a Prince, or the” Los Angeles Dodgers of Anaheim”.
2)     They wonder why they are losing business customers but still don’t offer phones that work internationally.  Cingular offers a dozen or more.
3)     The Sprint IVR menu to access sales and service is one of the worst I have ever used – not a good thing for a phone company.
4)     I have had long waits every time I have been in a Sprint store for sales help.
5)     My company’s two-year contract expires with Sprint in a few days.  I have not heard once from Sprint about renewing my contract.
There may be an opportunity to sell short.