ConsumerIT - For Europe's High Volume PC Retailers, Distributors & Builders

BLUFF or REAL?  IBM Walks Out of Sun Deal.

Sun didn’t like the reduced offer IBM made. The Sun Board threatened to open the sale to other bidders. IBM decided to walk out. Now it’s a game of brinkmanship as we see who blinks first.

The deal’s collapse raises questions about Sun’s next move, but IBM’s offer was only reduced from $9.55 a share to $9.40 after 100 lawyers did due diligence.(For one example, IBM says change-of-control payments to senior employees are higher in number and amount than anticipated.)

Sun wanted tighter provisions to restrict IBM’s ability to walk away from the deal. Most analysts think Sun lacks leverage and will come off worse if IBM really walks.

Go The Sun Also Doesn’t Rise

  

Marketing In A Tough Economy
By Barry Judge, CMO of BEST BUY

Editor’s Note: From the Blog of Barry Judge, the CMO for Best Buy Co., Inc. Barry helps provide overall vision and leadership to all areas of marketing for the enterprise, including brand management, customer R&D, trend, promotions, advertising, marcom, public affarirs and internal communications. He helps guide the brand strategy for the company, drive the development of new marketing capabilities and empower marketing innovation as the company transforms to put the customer at the center of our business model.

Recently I was asked to provide my philosophy on marketing in a down economy by a marketing publication In response to that request, I penned three marketing planning principles for dealing with a bad economy. These are just my thoughts and I would be interested in your feedback to my thoughts as well as any different POVs.

Principle 1: Seek out pockets of demand, and invest

Take a closer look at the marketplace for areas where consumer demand remains relatively strong or where demand is emerging as a result of the weakening economy:

First, identify and focus investment on your highest-value customers. These customers are your most identifiable and reliable source of revenue and profit across your business; and because they are enthusiasts for your products or services, they will be most likely to continue spending in your categories during a down economy. At Best Buy, we can identify them through our database and loyalty programs, so we can target offers, communication, and investment directly to them.

Second, target product segments based on “need” where your value propositions are strong enough to drive revenue growth and share gain. For example, in our industry, some products have become consumer necessities (e.g., cell phones, PCs) and therefore may be more resilient during times when consumers pull back their spending on more discretionary items. Direct efforts to drive greater share in these segments while cutting back in areas where demand has declined.

Third, identify and invest in consumer segments or geographic regions that are likely to grow during a declining economy. For example, unemployed workers tend to startup small businesses during a recession and create demand for small business IT products and support. We can direct our efforts and our value propositions toward these segments or regions in order to capture that demand.

Principle 2: “Sweat” your marketing assets

Take a new look at existing marketing programs to find new ways to create leverage and customer preference.

This effort includes maximizing advertising ROI by intensively focusing on how each program effectively targets demand. It includes trimming programs that no longer make sense in an environment where advertising ROI is at a premium, cutting programs that target segments where demand has disappeared, increasing investment in areas where demand is relatively strong, or squeezing more out of fixed asset programs that have the capacity to work harder.

Principle 3: Invest in brand experience and the brand story

Find ways to improve the brand experience and tell the story of how the brand is differentiated during a time when price becomes more important to many customers.

For Best Buy, marketing investments in the brand experience have included initiatives like improvements to our Web site to support a better customer experience at the first touchpoint of the brand. We have also demonstrated our support of customers who have been disappointed by technology by offering $50 gift cards to all our customers who bought obsolete HD-DVDs.

We are also continuing to refine our messaging (internal and external) to support our brand story so that we have a clear point of view on how Best Buy is a relevant and better choice for our customers.

Go Barry Judge’s Blog

CyberClean, Swiss Compound, Cleans Up Office “Staph” and Solves Keyboard “Grime Scene”

The keyboard is well-known to hold more germs than your toilet seat. Hey, don’t blame us for this info. In 2004, a researcher at University of Arizona found desks can support 10 million bacteria and the average office contains 20,961 germs per square inch. Keyboards averaged at 3295 per square inch and computer mice 1676. The toilet seat only averaged only 49 germs per square inch.

Which? ( a consumer association) in UK commissioned a microbiologist to test more than 30 keyboards in its offices. Compared to toilet seats and toilet door handles, one keyboard was 5X filthier. One keyboard held 150X over the level of acceptable bacteria and two other keyboards were found to contain Staph germs.

And now the filthy nature of keyboards is legend. You can catch diarrhea, menningitis, flu and other nasty stuff from your high tech office. Yet only 22% of workers clean their keyboards monthly (and 10% confess they have never, ever thought about cleaning their keyboards.)

And one reason why people don’t clean their keyboards is…well, it’s awkward to clean. The real bad stuff is in the cracks of the keypads.

At CeBIT, we found an easier to solve your customer’s keyboard "grime scene." CyberClean was shown on the stand of Joker AG from Switzerland. CyberClean boasts “Swiss Formula Patented Cleaning Action," a high-tech cleaning compound that cleans and kills germs from between those cavities and crevasses found on keyboards and other hard-to-clean surfaces.

IT companies are looking for acquisitions as organic growth is difficult given the poor economy. And valuations are very cheap now.

That's why IBM (with $13 billion in cash) wants to buy Sun for $6.5 billion. IBM wants to become a one-stop shop for all IT related offerings, whether  hardware, software services or solutions.

IBM is the world's largest maker of servers (IDC, Q4 2008) with a market share of 36.3%. HP came next with 29.0%, Dell 10.6%, Sun 9.3% and Fujitsu (now without Siemens) 4.2%. The Top 5 server vendors all posted declines in Q4 server revenue, hurt by cuts in corporate spending.

This deal may be about servers, but the timing's about Cisco.

Cisco just announced its first entry into servers, and they're joining the server business with an Armada of other IT vendors under the heading of “Unified Computing" that brings in an alliance of VMWare (leader in software that helps companies get more from the hardware they have), Microsoft, BMC, Intel and storage maker EMC.

Because Cisco is sitting on $30 billion in cash, its next step after its entry into servers could have been...buying Sun! So IBM has tried to block this move by inviting to take Sun off the table. If the deal falters, will Cisco step in as a higher bidder?

Cisco's entry into the server market will trigger a wave of mergers and acquisitions in IT. It is only the first volley in another battle waged in a 30 Years War to control "the castle" of IT (that data fortress known as a network).

Go The IBM and Sun Deal