[axel77]

Originally Posted by DMcCunney

The answer to "Is the market big enough" will depend upon who you are. Smaller companies can address markets that bigger companies can't touch.

It depends. Yes larger companies are generally slower and have more management work for everything. But they can come in with a decent amount of experience. For the taxi example I guess even BMW will have less expenses designing a new car, compared to e.g. me starting up a new company to design a new car. The second case would be enourmous of costs.

Simple answer: it isn't.

Exactly, so it isn't IMHO a good point to proove GE didn't want to do it, when nobody wanted so.

The usual corporate impulse is to try to maximize profit. But this is misleading, as the basic question is "How much profit is required?" The answer to that is simple: profit must be enough to cover the marginal cost of capital. That number may be higher than the maximum profit the company thinks it can make. In that case, the operation may not be long for this world...

"Cash cows" usually have already money invested in them. So even if you stop the operation immediatly they will just lose that investment forever. Its very common to set a product on cashcow state to get any money out of it, as long it exceeds the operation costs. You cannot withdraw that investment anymore to move it anywhere more profitable, because it is bound already. We usually never here of anything to be moved to a cash cow, since companies are secretive about it. But you can usually read between the lines, no more development, no further investment into a product. Product is to be cashed until it dies...

Companies will use existing operations as "cash cows" to finance other developments, but the "cash cows" have to throw off enormous amounts of cash.

As said no, cash cows need just to throw off enough money for standing operation costs. Investment has already been done, you cannot move it somewhere else.

Also financial capital is actually something in comparison quite dynamic in a company. You can catch capital if you need it from either loans, or you can even (within limits) sell or buy you own shares to move money in or out as you need it. So arguing with the optimal place of money is IMHO not a good point to start with.

On the other hand companies have fixed assets, like personnal. Altough you can quickly get rid of it, it takes a lot of time to get it, to train it, to get the teams working somethly. [Something one investor at a company I worked at didnt get. You cannot fire personnal during some bad months, hire new coders after you get better, and expect the new team even being closely as productive as the old one.

So for any company, deciding what your R&D department works on is a fundamental strategic decission. But not so much where you liquid assets are right at the moment.... because they are compared to anything else *liquid*

As an example pertinent to what MobileRead is interested in, take publishing. The industry went through an upheaval some years back as multi-media conglomerates acquired publishing houses to complement their existing operations in movies, TV, music, and gaming. They thought they saw synergies in having multiple forms of content under one roof. Those associations are beginning to unravel. For instance, TimeWarner sold off the Warner Books division to Hachette, who renamed it Grand Central Publishing. The problem was simple: book publishing can't achieve the levels of revenue and profitability possible in things like movies and TV.

Yes the question is, if having some things working together within one roof is more effective or having them work at seperate roofs is more effective. This greatly depends on what the things is. But its not so that the bigger the roof the bigger the thing needs to be.

Conglomerates in other media areas with publishing operations are finding that out the hard way. Their publishing arms are under intense pressure to boost revenue and profit (IE: publish more best sellers). and some publishing arms are being divested. They simply don't fit with what the larger company is doing. They are profitable, but not profitable enough

The question is not if its profitable "enough", the question is how you get the maximum of effciency. Sometimes this means merge, sometimes this means split.

Axel, my basic point is simple: Sony is a big company, and requires big numbers to justify doing something.

And this is where I disagree with. Really I cannot see Phillips deciding it would be smarter to make a spinoff (iRex) tells us they trust less in the future of eInk devices than sony does. Sony and Phillips just seem to have a different idea of how to run things more effectively.

The Philips management put money in a new company, so does it make iRex devotion to eInk devices any less worth than Sony's? I don't think so.

Sony wants growth. Note that the Reader operation is now a separate division. Sony appears to see a significant market in electronic literature and devices to display it, and is addressing that market. Sony is a huge outfit, with a market capitalization of 29 billion dollars. What do you think "growth" means for an outfit that size? (See here for an overview of their numbers.)

Again, big companies might be effective or ineffective compared to small companies depending on which area they work on, how they work on. But I disagree that money grows faster within big companies than within small. If this would be the case everybody would invest his money only in big companies...

And as a share holder you know that it often is quite the contrary. Enourmous companies are "blue chips", they will give you some fair calculatable revenue for your invested money. But very likely nothing extraordinary will happen. If you buy sharers of a little new company, they easly can be tenfold or more worth within a few years, or they are worth nothing.