Home' Trinidad and Tobago Guardian : July 18th 2013 Contents BG28 | THE ECONOMIST
BUSINESS GUARDIAN www.guardian.co.tt JULY 2013 • WEEK THREE
Since his election five years ago, President
Ma Ying-jeou of Taiwan has argued to a
suspicious public that his policies for close
business ties across the Taiwan Strait will
not bring the democratic island under
China s sway. Instead, he says, they will
help to end Taiwan s exclusion from a bur-
geoning global network of free-trade agree-
China usually presses other countries not
to forge formal ties with Taiwan, which it
has continued to claim since the two parted
ways in 1949. Free-trade agreements have
proliferated across Asia, but countries fearful
of offending China have kept Taiwan out
of them, though its economy is built upon
The only solution, Ma contended, was to
sign a trade agreement with China, which
Taiwan did in 2010. This, he hoped, would
encourage other countries to follow China s
Though he has faced much criticism for
it at home, Ma s strategy may be working.
On July 10 Taiwan signed a trade pact with
New Zealand, its first with a country that
recognises China. Given that China did not
thwart the deal, and that New Zealand is
a developed Western democracy, it is a
notable diplomatic coup. New Zealand, for
its part, often gets in early with such pacts.
It also sees Taiwan s market, its 10th-largest,
as important, notably for milk and butter.
China offers business deals to Taiwan in
the expectation that the island will become
enmeshed in its enormous economy, leading
eventually to reunification. By not objecting
to the New Zealand agreement, it hopes to
foster goodwill among Taiwanese sick of
their country s diplomatic isolation. Chinese
policymakers would much rather see support
for Ma s China-friendly Nationalist Party
than for the pro-independence opposition,
the Democratic Progressive Party.
China also seems to have been reassured
that New Zealand has already struck trade
agreements with China and Hong Kong.
This probably made it easier to reassure
Chinese hard-liners that the deal was with
the remaining part of China, rather than
between two independent states.
Meanwhile the signing ceremony in
Wellington, New Zealand, bore the usual
hallmarks of Taiwan s diplomatic limbo.
Senior officials were absent. In the agreement
Taiwan was not described as the state it is,
but as "the separate customs territory of
Taiwan, Penghu, Kinmen and Matsu (Chi-
In Taiwan officials hope that the New
Zealand deal and a similar one due with
Singapore will persuade others, such as
India, to do the same. Some policy-makers
even hope that Taiwan may one day join
regional trade blocs such as the growing
Still Ma, whose popularity is falling, may
struggle to convince all his compatriots that
more open trade is good for Taiwan. The
DPP and others are furious with the way
he rammed through a services deal in June
that deepens Taiwan s trade pact with China,
and many fear that the deregulation and
liberalisation such free-trade pacts can bring
will destroy small Taiwanese businesses.
Ma has much to do to prove that ending
isolation also can bring prosperity.
@2013 Economist Newspaper Ltd. (Dis-
tributed by the New York Times Syndi-
Which would you choose: US$13.65 for sure now,
or a slim chance of US$14 in a few months?
That is the question before Dell s shareholders in
a vote on July 18. With Silver Lake, a private-equity
firm, Michael Dell---the company s biggest shareholder,
with a 15.6 per cent stake---is offeringUS$13.65 a share
to buy them out of the company he founded. The deal
values the computer maker at US$24.4 billion.
Activist investor Carl Icahn and Southeastern Asset
Management, an investment firm, are urging rejection.
They say that Dell and his pals want the company on
Icahn and Southeastern, together holders of 12.8
per cent of Dell s shares, are not the only dissenters.
Nonetheless, Dell and Silver Lake are likely to get their
way, even though Dell is not voting. On July 8 they
won the endorsement of Institutional Shareholder
Services and Glass Lewis, two leading advisers to fund
"It brings over a lot of index funds," someone close
to the buy-out team says.
Both sides believe that, despite a rocky few years,
Dell s prospects could be bright. Both agree that the
firm must shift from selling personal computers into
providing services, storage and software for companies.
The metamorphosis has been under way for a while,
and Dell has spent $13 billion on acquisitions.
Dell thinks the road ahead is so bumpy that it is
best travelled under cover of private ownership, however,
and Icahn disagrees. He says that he has a better idea:
To pay US$14 a share, to a limit of 72 per cent of the
company, and retain a stock-market listing. Then those
who wanted to take the chance would share in any
Dell s prospects, though, are anything but bright.
The plan, in essence, is to pay for the transformation
with the cash flow from PCs, which still bring in more
than 60 per cent of the company s revenue.
According to ISS, however, "there is compelling evi-
dence ... that the business equation undergirding the
transformational strategy ... is deteriorating rapidly."
Since Dell and Silver Lake made their offer in early
February, the PC market has gone from bad to woeful.
A dreadful first-quarter shipment survey by IDC, a
research firm, prompted Blackstone, another private-
equity firm that had taken a close look at Dell s books,
to walk away.
This week IDC said that PC shipments were down
by 11.4 per cent, year on year, in the second quarter.
Dell s latest quarterly results, published in May, were
dire, with revenues down by two per cent and profits
down by 79 per cent in the past year, although servers
were a bright spot. Since the deal was announced,
analysts forecasts of Dell s profits for this year have
fallen by 38 per cent.
All this has made the buyout deal look better by
the day. It offers shareholders 25 per cent more than
the price on the day before it was first rumoured in
January. The board committee overseeing the possible
sale already had coaxed several increases out of Dell
and Silver Lake before the offer was made public, and
the buyout group has been adamant that it will not
raise its bid again to pay Icahn to go away.
The dissidents grumble that long-term shareholders
are being offered a discount, not a premium: In February
2012 Dell s shares were fetching better than US$18
apiece. Their alternative is an uncertain prospect, how-
ever. Only the buyout will be put to a vote on July 18.
The malcontents proposal will be considered only if
the buyout is rejected and if the board is replaced with
a new crew nominated by Icahn and Southeastern.
Dell would vote on that, and it is not hard to guess
@2013 Economist Newspaper Ltd. (Distributed
by the New York Times Syndicate)
The Dell buyout:
As good as it's
going to get
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