Samsung Floats Possibility of Split

...

Samsung on Tuesday announced road map for a corporate restructuring that might include splitting itself into two firms.

The company has retained external advisors to review the optimal corporate structure for its activities. The review is expected to take six months. Depending on the findings, Samsung may create a holding company structure and might list its shares on additional international exchanges.

The company also announced that it will allocate more money to shareholder returns, buy and cancel shares, increase dividends and pay them quarterly, bring in independent board members with international experience, and improve corporate governance.

Samsung "has the complex and messy chaebol structure that makes Westerners crazy," said Charles Sizemore, founder of Sizemore Capital.

"Moving to something closer to a Western-style holding company will make [it] more transparent, easier to understand, and should generally raise its appeal to non-Korean investors," he told the E-Commerce Times.

Although Samsung appears to have raised the possibility of altering its chaebol structure, a split is unlikely, said Barry Randall, chief investment officer at Crabtree Asset Management.

"Asian culture is deeply conservative, and change on that scale would likely only occur as a result of either a seismic event surrounding the country -- like war -- or because of a countrywide change in policy that would be proactive rather than a reaction to events seen as temporary in nature," he told the E-Commerce Times.

The new shareholder-friendly changes "assume that Samsung will remain intact," Randall noted. "It seems unlikely [Samsung] would be so specific in their promises if their intent was to split the company into two or more pieces."

"I'd like to see [Samsung] split up," said Holger Mueller, a principal analyst at Constellation Research, noting that the company's many businesses are too far apart, and there are too few synergies.

A split would give Samsung better focus, make it a better attraction for talent, and facilitate more openness in working with partners, he told the E-Commerce Times.

However, a split "doesn't address the cause of Samsung's difficulties," observed Rob Enderle, principal analyst at the Enderle Group.

"This is a form-over-function move that leaves them exposed strategically but will take pressure off them for the short term," he told the E-Commerce Times.

Google this summer announced a restructuring that resulted in its becoming a wholly owned subsidiary of a new umbrella company, Alphabet.

Alphabet became the publicly traded entity, but Google's two classes of shares continue to trade on Nasdaq as GOOGL and GOOG.

All shares of Google automatically converted one-on-one to shares of Alphabet.

The restructured firm has a hub-and-spoke architecture, with a pared-down Google handling the company's core business: Internet products.

Whether Samsung could be thinking of a restructuring along those lines is open to speculation, but "that's like moving the chairs on the Titanic," Enderle said. "The mistakes weren't caused because Samsung's too large but by bad decisions."

Further, Google was "anticipating massive fines and other penalties associated with antitrust complaints that mostly came from the EU," Enderle remarked, and it restructured to limit the impact to part of the company, as well as possibly reduce the fines.

Google restructured from a position of strength, Sizemore pointed out, while Samsung "is operating from a weakened position overall, owing to dissatisfaction with chaebols in general and the [Galaxy Note7's] failure in particular."

A split "will not address the cultural issues required to truly make a big change," said Ray Wang, CEO of Constellation Research.

Samsung "has an opportunity to rethink how they want to remake themselves; to rethink partnerships and market ecosystems," he told the E-Commerce Times. "Once they find that mission in their own digital transformation, they will be able to address governance and structure."

Richard Adhikari has written about high-tech for leading industry publications since the 1990s and wonders where it's all leading to. Will implanted RFID chips in humans be the Mark of the Beast? Will nanotech solve our coming food crisis? Does Sturgeon's Law still hold true? You can connect with Richard on Google+.

Categories
Guide
0 Comment

Leave a Reply

Captcha image


RELATED BY

  • 5300c769af79e

    Check It Out, This Could be the Galaxy S7 Active on Its Way to AT&T

    A little over a month ago, we talked about the idea of there being a Samsung Galaxy S7 Active, not only because Samsung mentioned the device in a listing for one of their apps, but because this is a long-running line of exclusive phones for AT&T that makes a lot of sense.It’s a pretty brilliant product idea (super high-end rugged phone) that should live on, even if we do all hate the fact that you can’t get it outside of a single carrier.
  • 5300c769af79e

    Google Expands Free Apps For Work Offer

    In October, Google began subsidizing Google Apps for Work for business customers locked into Enterprise Agreements (EAs), as a way to encourage them to consider Google's software.The company claims that the security benefits of Google Apps are particularly useful to mid-market businesses.
  • 5300c769af79e

    DEAL: Nexus 5X 32GB for $240, Nexus 6 for $280

    You can pick-up last year’s Nexus 5X with 32GB storage for just $239.The Nexus 5X is available at the price ($160 discount) in either white or black as a brand new unit and is shipped to you for free.
  • 5300c769af79e

    T-Mobile's Latest Freebie Is 1 Year of MLB.TV Premium

    TV Premium and MLB.The MLB services will be available on April 4 via the carrier's T-Mobile Tuesdays app (iOS, Android).