A Takeover occurs when one firm makes a bid for another, and buys at least 50% of the equity. Approval from the target firm is not required.
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<H2>For This Investigation...
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...I will pick a the takeover of Commodore Business Machines by Escom. The principle assets of Commodore at the time was the Amiga computer, though they had produced IBM compatible PCs (referred to from now on as PCs) in the past. Due to the perhaps technical nature of some terms, a glossary is provided at the end. Now a little history...
<B>1958</B> Commodore was formed.
<B>1985</B> Commodore released the first Amiga, the A1000.
<B>1993</B> Commodore report a loss of $357 million for the year.
<B>1994</B> Apr Commodore US go into voluntary liquidation. Many companies express an interest in purchasing Commodore's assets.
<B>1994</B> Jun Commodore UK, who did not go into liquidation, decide to attempt a management buy out.
<B>1994</B> Nov Creative Equipment International express interest in purchasing Commodore.
<B>1995</B> Mar Escom intend to buy Commodore; previously they were only interested in the Commodore name and logo.
<B>1995</B> Apr Commodore's assets are auctioned to Escom for $10 million. Commodore UK's management buy out does not go ahead.
<B>1995</B> Later Escom form daughter company Amiga Technologies; the first Amigas since the takeover were back on sale, 'Commodore' PCs started to appear.
<B>1996</B> The Amiga chips are licensed to Viscorp (see later). In a final(?) twist to the story, Escom are now set to sell Amiga Technologies to Viscorp for around $40 million.
<I>(For more information about the various companies, see the appendices).</I>
Note that I wrote to Amiga Technologies/Escom UK, and the ex-managing director of Commodore UK, but I have not received information back from them.
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<H2>Why Did It Occur?
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Inevitably, it was the financial problems faced by Commodore that resulted in the takeover. The reasons for Commodore's collapse are examined in the appendices, but simply, 1993 resulted in a loss of $356.5 million, and they filed for voluntary liquidation in April 1994.
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<H2>Who Was Affected?
Escom
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Escom were originally only interested in the Commodore name and logo for their own PCs (the old Commodore PCs were fairly popular in Germany). They now have many such Pentium PCs, and the logo appears on related computer products. Unfortunately, I have not heard back from Escom/Amiga Technologies, so I do not know how profitable these machines have been.
Escom had to invest a lot of money; firstly the $10 million to buy Commodore, but the manufacturing lines had to be completely restarted (the machines being out of production for over a year).
Other costs would have been advertising. This is a significant barrier to market entry in the computer industry. Although Escom are established in this field, the Amiga had lost a lot of ground to the PC, and Escom's reputation wouldn't necessarily count for much. Even a year afterwards, there has been virtually no advertising, which can only harm the Amiga users in the long term. Those who know about the rereleased Amigas are likely to already own one anyway.
Escom are now set to sell Amiga Technologies to Viscorp (see appendices) for $40 million. I do not have any financial figures of Escom, but this is likely to cover their costs. If it does (and they will retain the Commodore name/logo), then they will have benefitted, on purely financial terms.
In fact, Escom made a loss of $85 million last financial year. Although $40 million does not cover this, it must be rembered that there are other reasons for this loss, such as their purchase of Rumbelows outlets and the development of several new PC lines; in brief, it is their continued expansion which has resulted in this loss.
<H2>Employees
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The employees of Commodore certainly did not benefit from the takeover. In particular, Commodore UK. After giving up their attempt at a mangement buy-out, they hoped to work with Escom in the UK market, but this was not to be the case.
The creation of Amiga Technologies was to create jobs, however, and the expansion of Escom in general would have created jobs.
<H2>Amiga Users/Consumers
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This group of people were affected greatly. I shall first consider Amiga models and prices.
(Note that I have simplified the list, and given prices for equivalent specifications. It is clear that the choice of models has been narrowed.)
Before I consider prices, another factor must be taken into account. Computer parts always fall in price. The A4000T prices, above, include a hard drive (1200Mb), which dropped from around #À700-#À750 to #À250 in the same period. Therefore, prices without hard drives are:
It is clear that prices actually rose under Escom. In their defence, Escom stated that RAM prices had recently increased, and there were increased costs due to setting up the manufacturing lines again so quickly. Also, the Escom produced machines come with around #À500 worth of software, compared to around #À100 before. This makes price comparisons difficult, as it would have of course cost less than #À500 per unit to Escom, and the value to the individual would probably be less than #À500, as they wouldn't be intending to buy the software otherwise.
There is also the consideration of new machines. The A1200, most popular of the Amiga range was released in December 1992; as Commodore's problems during 1994 meant no new machines were possible, it was hoped that Escom would release an updated machine, though this is still not the case.
All this serves as a negative multiplier. High prices and old machines means that few are attracted to the platform. Lack of advertising means that confidence from developers in the machine dwindles.
A takeover that takes a year to be resolved is bound to have negative consequences for the machine and its users, but many consider that Escom have failed in some vital areas. Out of the marketing mix, only Place has been fulfilled, with reestablished mail order/high street outlets, though even this may not be seen to have been done well, as many Escom stores seem to want to sell PCs than the lower cost (thus lower commission?) Amiga.
All is not bad though; Commodore had their criticisms too, and although Escom's plans for the short term were not too good, they had many great ideas for the long term.
One of the problems with computers such as the Amiga and the Macintosh (unlike PCs) is that they are only able to be produced by one company. Escom had plans to license the Amiga to other companies, thus creating more choice to the consumer, more advertising and more applications for the machine. One such license was to be to Viscorp.
Also, Escom have released a 'pack' with a modem and internet software as standard. Although not a new machine as such, it does provide 'net access easily. Unfortunately, this is the type of product that would appeal to those who don't have a computer, but wish to get online to the internet; it too, however, has not been advertised.
Although Escom released no new machines, they have been reported to be working on a new range of machines. More details are in the appendices, but Escom's choice of future technology for the Amiga is generally considered far better than Commodore's choice.
Now Amiga Technologies is to be sold to Viscorp (rather than just licensed), they state that they intend to continue this line of development. At recent press conferences (World of Amiga Show, London; Toulouse, France), Viscorp stated their plans (see appendices), and it is generally considered that they will handle things much better than Escom.
It may have been better if Viscorp brought out Commodore last year, but either way, maybe in the long run the takeover will be for the best?
<H2>Other Companies
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Many companies, in some way, were affected. Commodore's main distributer was Silica and SDL, who were owned by Prodis Plc. Naturally, they suffered due to the lack of machines to sell, and found themselves with financial problems. They were bought out themselves by Anglo Corporation Plc in late 1995.
Also affected would be Amiga-only hardware and software developers. A diminishing user base means reduced sales; delays in new machines means restricting requirements for new software.
Then there are high-street retailers; a survey in late '94 showed that 82% wanted the Amiga back.
In another sense, it could be argued that comanies related to the PC benefitted, as more people moved to that format instead.
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<H2>Summary
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Although Escom may have benefitted, the Amiga users have certainly not in the short term. It may be, however, that in the future, things will work out far better than they could have been with Commodore (see Appendices for more details).
