A Trading Frenzy Over Oh-So-Hot LinkedIn Shares

“When the ducks are quacking, feed them.”

This was one reader’s sardonic comment left on a Reuters Breakingviews commentary about high-flying LinkedIn’s recent sale of stock worth $1.2 billion at $223 a share. It raises a question about such hyped share sales. They are no doubt good for LinkedIn and its advisers, but do they benefit LinkedIn shareholders? Or do they just feed a trading frenzy?

That shares of LinkedIn are on fire is not in doubt. LinkedIn went public at a price of $45 a share in 2011. Since then, the stock price of the business-oriented social networking company has steadily risen, even as Facebook went through a troublesome initial public offering from which it is just recovering. LinkedIn shares closed on Tuesday at $252.17. At that price, LinkedIn, which had just $688 million in revenue for the first six months of its 2013 fiscal year, has a market value of nearly $33 billion, according to Google Finance. As for earnings, something Silicon Valley typically scoffs at, LinkedIn actually makes money. Last quarter, it had net income of $26 million â€" not much, but something./p>

LinkedIn is a real company with tremendous growth potential, but let’s face it: with these earnings and revenue figures, LinkedIn’s stock price is in nosebleed territory. LinkedIn trades at a price-to-earnings ratio of 722. For comparison, Facebook stock trades at a ratio of 165 times price to earnings and Google 27 times price to earnings.

Selling more of your stock when it is in high demand, even superhot, is not unique. It is also not unusual to see technology companies with no earnings and not much revenue sell stock. We saw it in the Internet bubble.

In May, Tesla, the highest of all the high-flying stocks on the market right now, sold $360 million worth of stock at the price of $92.24. Since then, Tesla stock has only gone higher. It now trades at $166.37 a share, giving it a market capitalization of $20 billion for a car company. Yes, a car company.

Research on secondary stock offerings, offerings of stock once the company has already traded, has shown that in general, they tend to underperform the market. That is not surprising. Management knows its company the best. Assuming it wants to maximize the value of its stock, management will sell stock when it thinks the stock is overpriced, and buy when it thinks it is underpriced. That is why stock buybacks are all the rage on Wall Street. They are a signal to the market that the company’s shares are underpriced.

Indeed, one of the things that happened in the Tesla stock sale was that its founder, Elon Musk, bought an additional $100 million of stock. This was no doubt deliberately done to ameliorate this well-known problem and send a countersignal to the market. After all, if management â€" and Mr. Musk at that â€" is buying part of the stock, the sale is more likely underpriced, not overpriced. Then again, Mr. Musk owns about 26 percent of Tesla, a stake now worth over $5 billion, so what’s $100 million more?

Because of the quality problem with secondary offerings, they are often sold at a discount to the share price at the time. In LinkedIn’s case for example, the shares were sold for $223 a share, a discount of almost 7 percent from the closing price of LinkedIn stock on Sept. 4, the day the offering was priced.

According to one study, the average discount for a secondary offering is 2.75 percent. The higher number here is most likely a result of LinkedIn’s share price. Given its volatility and heights, buyers wanted to make sure they had enough room to make a profit. And given that volume in LinkedIn shares was more than double the norm on the day after the offering, at six million shares, it is likely that most buyers of the stock were simply quick to flip it.

Secondary offerings are big business. According to Dealogic, $184.3 billion worth of stock was sold last year in secondary offerings. But in most cases these were intended for specific purposes or otherwise just normal capital markets fund-raisings.

But in the case of LinkedIn, and Tesla, too, these secondary offerings are different. They are sales in a trading mania. And make no mistake, there is a frenzy around these stocks, particularly Tesla. When a college student puts his entire savings of $30,000 in Tesla and sees it go to $250,000 but still doesn’t sell â€" well, you know you have probably seen this movie before.

There is a real likelihood that this could all end in tears, and I say that as someone who back in the tech bubble bought Ask Jeeves at $180 a share.

At this point, the question becomes whether LinkedIn has a responsibility here not to sell shares, given the place of its stock price.

It’s a hard call really. The ducks are quacking, and there is money that can help the company later on if things go completely awry. But companies should also be looking after the best interests of their shareholders.

LinkedIn did not respond to a request for comment.

It is easy to say that the company can sell stock, so it should. But it was that kind of behavior that got us into the tech bubble and the tremendous crash that came afterward. As Reuters Breakingviews wrote in praising LinkedIn for selling at such a high price, perhaps LinkedIn “will eventually reverse the trick and repurchase stock at a bargain-basement price.”

That is the real risk here. The stocks may be going up now, but if the past is anything on Wall Street, these big stock run-ups are too often accompanied by falls.

That is what it comes down to. Do companies have a responsibility to halt a crazy run-up in their shares and to look out for their shareholders? There are reasons to think that they do, but it’s clear for Tesla and LinkedIn that they seem fine with feeding the animals.

Corzine Seeks Dismissal of Civil Charges in MF Global Case

Jon S. Corzine, the embattled former New Jersey politician accused of a failure at the helm of the brokerage firm MF Global, is fighting back.

Lawyers for Mr. Corzine filed a legal motion late Tuesday to dismiss a civil case against him brought by the Commodity Futures Trading Commission, the federal agency that regulated MF Global until its demise in 2011. The 30-page motion, filed in United States District Court in Manhattan, outlined the contours of Mr. Corzine’s defense and leveled a sharp critique of his federal adversary.

“There is no evidence demonstrating that Mr. Corzine knowingly directed unlawful conduct or acted without good faith,” the lawyers, Andrew J. Levander and Benjamin E. Rosenberg at Dechert, said in the motion. “Rather than acknowledge that reality and move on, the C.F.T.C. has clung to its baseless presumptions and manufactured charges of wrongdoing that are supposedly connected to Mr. Corzine.”

The trading commission’s case, filed in June, stems from the largest Wall Street collapse since the financial crisis. Mr. Corzine, a former New Jersey senator and governor, ran MF Global when it collapsed into bankruptcy in October 2011, a blowup that coincided with the brokerage’s apparent misuse of customer money.

Mr. Corzine’s risk taking, the trading commission claims, paved the way to the firm’s demise. And as chief executive, according to the government, he failed to prevent a lower-level employee from using customer money for its own purposes. The commission also sued that employee, Edith O’Brien, an assistant treasurer, who oversaw the transfer of customer money from the firm’s Chicago office to banks like JPMorgan Chase. Customer money is supposed to be sacrosanct on Wall Street, where brokerages are required to keep it segregated from their own funds.

The commission did not accuse Mr. Corzine of authorizing the breach of more than $1 billion in customer money, or even knowing that the wrongdoing had happened. Instead, the suit hinged on his supposed failure to “diligently supervise” the firm as it raided the client accounts. The suit also argued that Mr. Corzine was subject to so-called control person liability, a legal provision that allows for the punishment of executives for the bad acts of lower-level employees.

Surprising Enhancements to Apple’s iPhone Line

September 10, 2013, 4:50 pm

Tuesday morning, Apple caught up to its own rumor mill. It took the wraps off the two new iPhones that everyone had already predicted: the iPhone 5C and the iPhone 5S, which will be available on Sept. 20.

The 5C is the budget model. It’s basically last year’s iPhone 5 but with a plastic body (lacquered for extra shininess!), available in five colors. It will be $100 with a two-year contract.

The more exciting new phone is the iPhone 5S. It looks almost identical to the iPhone 5, except that it’s available in black, white or a classy-looking coppery gold. It’s priced the same as last year’s model, too: $200, $300 and $400 for the models with 16, 32 and 64 gigabytes of storage.

Inside, though, there’s a new processor, which Apple says is twice as fast as before. It’s also the cellphone world’s first 64-bit processor, according to the company, which is an especially attractive feature for game makers; it can “load in” new scenes five times faster than the previous chip.

There’s also a coprocessor â€" a smaller, assistant chip â€" dedicated to monitoring and processing data from the phone’s motion and location circuits. It can continuously monitor your activity and location (for fitness and journaling apps, for example) at a battery cost of only one-sixth what the main processor would require.

There’s also a more refined camera. Apple says that it has an f/2.2 lens, meaning much better in low light, and that its pixels are bigger than before, meaning even better in low light (and color and dynamic range are better). The sensor itself is 15 percent bigger, which is a great help.

The flash is worth writing home about. It’s actually two LED flashes â€" white and amber.

When you take a flash photo, there’s an initial flash; that’s the camera measuring the color temperature of the scene. Then there’s an immediate second flash, the real flash. The two LED’s fire in combination, balanced to match the light in the room to keep colors pure. In combination, they can flash in 1,000 different color-temperature tones. The idea is to eliminate the ugly white bleached-out look of most flash photos. Apple says this is the first such color-adapting flash on any camera â€" not just on a phone.

You also get 10 frames-per-second burst mode and 120 frames-per-second slow-motion video. The samples look great.

Finally, the iPhone 5S has a fingerprint reader, ingeniously built right into the Home button. You don’t have to push the button â€" just touch it â€" to wake the phone and unlock it. It works at any angle.

You can teach it to recognize up to five fingers, yours or a loved one’s; teaching it involves opening the Settings app and tapping the Home button about a dozen times, as the phone builds a more and more complete picture of your whorls, loops and arches.

You can use it instead of a password to make purchases from Apple’s online stores, too â€" books, music, TV shows and so on. At the moment, other apps can’t use it â€" for logins into Web sites, Twitter and so on. Apple says it may add that feature down the road, but for now, it’s for unlocking the phone and making Apple purchases only.

Apple says that the images of your fingerprints are encrypted and stored on the phone’s chip, and that they’re never transmitted or stored online, by Apple or anyone else.

As I tweeted the news, many of my Twitter followers (I’m @pogue) were quick to scoff.

“Your fingerprint is not stored online? You are a funny man, Mr. Pogue,” wrote one.

“Ha ha! Soon as your finger touches it, you are scanned and in the system. NSA has your prints!” wrote another.

Look, I get that people are suspicious and cynical after all the revelations about the National Security Agency and its back doors into our phones and e-mail.

But using the fingerprint reader is optional; if you prefer a password, you can still use one. Indeed, you must also set up a password; the “enter password” box appears automatically after three failed efforts to use your fingerprint.

The point is that, according to Apple, only 50 percent of us bother to put a password on our phones, and that’s not good. Here’s a security protocol that’s far faster and more convenient than a password, but even more secure.

Furthermore, if you’re convinced that Apple is lying and the world is out to get you, why aren’t you equally worried about using a login password? How do you know Apple’s not transmitting that to the N.S.A., too?

If that’s your worry, I submit that you have much greater worries. You must also worry that Verizon is listening in to your phone calls, Visa is laughing its head off at your purchases, and Garmin is tracking your road trips on a map somewhere.

Besides â€" surely you don’t believe the N.S.A. needs to hack into our phones to get our fingerprints. Surely it already has them.

Several of my Twitter correspondents argue that their worry is muggers. “It’s a lot easier to force a finger to a button than extract a password from a brain.”

I don’t get that, either. If a mugger has a gun to your head, I don’t think you’d hesitate to provide your password.

Besides, Apple’s new Activation Lock feature lets you “brick” the phone by remote control, making it worthless after a theft. So this whole mugger scenario is a bit ridiculous.

The iPhone 5S isn’t the first cellphone with a fingerprint reader; the Motorola Atrix had one on the sleep switch a couple of years ago, but it didn’t work well at all, and was abandoned.

I got a few minutes with the 5S at Apple’s event introducing the phone. I trained it to recognize my finger, then used it to unlock the phone a couple of times. It worked perfectly, which is a welcome advance. And the placement on the Home button is ingenious.

The fingerprint reader, improved camera sensor and dual-tone flash are far more important than the sort of treading-water moves Apple has spent most of its efforts in making since Steve Jobs’s death: “the iPad, only smaller” or “the iPod Touch, with sharper screen.” These are surprising, cutting-edge and truly useful enhancements; I can’t wait to spend some time with the new phones to see how well they live up to the promise.

Vodafone Calls Hedge Fund’s Bluff

Vodafone is right to defy the hedge funds over its $10 billion bid for Kabel Deutschland. The London-listed mobile giant says it won’t alter its agreed offer for the German cable company, even after Elliott Management and Davidson Kempner amassed possible blocking stakes of 10.9 percent and 3.4 percent. Vodafone’s resolve makes sense - a failed deal would hit everyone. But even if the offer succeeds, a fight looms over the remainder of Kabel Deutschland’s shares.

With its tender expiring on Sept. 11, Vodafone says it will not sweeten its 84.50 euro-a-share offer, or lower its 75 percent acceptance threshold. That’s the only way to play this. Though important to Vodafone, the deal is already pricey. With a huge U.S. windfall arriving, and other European businesses potentially in its sights, this would be a bad time to appear soft.

Moreover, settling for a smaller stake would undermine the deal’s logic. With less than 75 percent, Vodafone would not be able to obtain the “domination agreement” needed to integrate its target company under German law.

There is sense to calling Elliott’s bluff too. The investor has staked more than 800 million euros on this deal, and would suffer if it collapsed. The most likely counter-bidder, Liberty Global, would pay less - even if it judged the antitrust hurdles were surmountable.

Better to think of this as the opening gambit in a so-called “back-end” trade, where investors argue over the value of outstanding securities. German M.&A. rules specify minority investors must receive cash or a fixed dividend as compensation for a domination agreement. The valuations involved can be challenged, and courts often end up giving investors more.

Elliott and Davidson Kempner might even tender some of their shares to ensure the current Vodafone deal succeeds, while keeping enough stock to benefit from this likely sweetener.

Any shareholders who kept stock with a fixed dividend could eventually fight another battle over valuation, if Vodafone wanted to use a squeeze-out to gain 100 percent control. But Vodafone could sit tight for years. That might require too much patience - even for Elliott.

Quentin Webb is a columnist for Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

European Plan for Transaction Tax Runs Into Legal Hurdle

LONDON - European Union legal advisers say in an opinion that a proposed tax on financial transactions would exceed national jurisdictions and is not compatible with E.U. treaties

That view puts pressure on the 11 European countries that have pushed for the tax - including Germany, France, Spain and Italy - to either change the proposal or scrap it.

The opinion, which was published in a paper internally by a legal group advising the European Commission, emerged on Tuesday. It concluded that the proposed tax “exceeds member states’ jurisdiction for taxation” and “is discriminatory and likely to lead to distortion of competition.”

In the aftermath of the financial crisis, some European leaders have seen a tax as a way to reduce excessive risk-taking in the financial industry by charging a levy on the trading of stocks, bonds and other financial products.

Almost certain to hail the legal finding are officials in Britain and the United States, which have opposed the tax proposal. Britain started legal action to try to block the plan. Prime Minister David Cameron has argued that a transaction tax would harm Britain’s competitiveness as a financial center and that of the European Union as a whole.

Earlier this year, the tax proposal failed to win unanimous approval from the 17 E.U. countries that use the euro.

The advice from the advisory group, the Legal Service of the Council of the European Union, might give ”the main supporters of the financial transaction tax a valuable political escape route to move away from this internationally unpopular tax proposal and either limit the scope of the financial transaction tax or scrap it all together,” said Ben Jones, a principal associate at the international law firm Eversheds.

But Emer Traynor, a spokeswoman for the European Commission, the administrative arm of the European Union, rejected the service’s findings. She said the opinion was only one of a range of consultations and ”certainly doesn’t imply any necessary slowdown in the work being done to progress the financial transaction tax.”

”We stand firm that the proposed financial transaction tax is legally sound and fully in line with the E.U. treaties and international tax law,” Ms. Traynor said.

The proposal would require financial institutions to pay a tax of at least one-tenth of 1 percent of the value of transactions with other institutions. Each year, the tax could raise up to 35 billion euros, or $46 billion, the commission estimates.

The Council Legal Service took issue with a clause in the plan calling for the tax to be applied to financial trades executed by banks based in the European countries that sign on to the law, even if the transaction took place elsewhere.

That could mean that British or U.S. institutions, for example, could still be liable to pay the tax. Mr. Cameron said in May that the tax plan would not work unless applied globally across all markets.

The Confederation of British Industry, a business lobby group, said on Tuesday that the legal advice showed it was ”time to draw a line under this flawed proposal.” The proposed tax ”would have damaging implications for growth, jobs and investment beyond the member states involved,” said Leo Ringer, the head of the lobby’s financial services unit.

James Kanter contributed reporting from Brussels.

Tesco Sells U.S. Grocery Chain to Burkle

Tesco, the British supermarket chain, completed its retreat from the United States on Tuesday after selling most of its Fresh & Easy convenience stores to an affiliate of the money-management firm run by the billionaire Ronald W. Burkle.

The affiliate of the Yucaipa Companies agreed to acquire more than 150 stores as well as Fresh & Easy’s distribution and production operations in Riverside, Calif. More than 4,000 employees will also transfer to the new business, Tesco said in a statement. As part of the deal, Tesco will lend the new business $126 million.

Full terms of the transaction were not disclosed. It is expected to be completed within three months.

Fresh & Easy operates 200 neighborhood markets in California, Nevada and Arizona. Those stores not included in the transaction will be closed in the coming weeks, the company said.

“The decision we are announcing today represents the best outcome for Tesco shareholders and Fresh & Easy’s stakeholders,” Philip Clarke, the chief executive of Tesco, said in a statement. “It offers us an orderly and efficient exit from the U.S. market while protecting the jobs of more than 4,000 colleagues at Fresh & Easy.”

Tesco initially hoped it had discovered a market niche for smaller stores offering warm meals along the West Coast and set up Fresh & Easy stores starting in 2007. But it soon became clear that the stores failed to compete with larger supermarkets as the economic slump crimped consumer spending. Attempts to turn the business around by changing store interiors, the product range and marketing also failed.

Tesco said last December that it would most likely withdraw from the United States and disclosed in April that the move would cost it £1.2 billion, or $1.8 billion.

A Pension Plan With a Flair for Deal-Making

Pension funds typically have a mediated relationship with private equity, investing money with managers that handle the deal-making. But as a $6 billion deal on Monday showed, one pension fund in Canada is a buyout player in its own right.

The Canada Pension Plan Investment Board, with about $185 billion under management, often flexes its own deal-making muscle with direct investments alongside private equity firms. Teaming up with Ares Management, it was a lead buyer on Monday of the Neiman Marcus luxury retail chain.

Even when it invests in funds managed by private equity firms, the Canadian pension plan often exerts its influence. One way it does so is by choosing to invest in certain “emerging” managers that are on the smaller side but have the potential to grow, Jim Fasano, the head of private equity funds for the pension plan, told the digital publication Privcap in a video interview.

“We like to think of ourselves as a deeper partner,” Mr. Fasano said in the interview.

The full interview is at PrivCap’s Web site.

Icahn’s Last Chance on Dell

Carl C. Icahn may have given up his campaign to block Dell Inc. from going private in a vote on Thursday. But the activist investor still has a good shot at another goal: getting more for his shares than the company’s founder, Michael S. Dell, wants to pay.

Mr. Icahn says he will seek appraisal rights in the Delaware courts, a legal maneuver that lets a judge decide how much Dell shares are really worth. And growing evidence indicates that he stands a good chance of coming out ahead by doing so.

In theory, seeking appraisal rights is a risky move - the judge could decide that Dell shares are, fundamentally, worth less than the the $13.75 each that Mr. Dell and the investment firm Silver Lake Partners are offering. Then Mr. Icahn would be stuck with that lower price.

But a new analysis from lawyers at Fish & Richardson suggests that it’s unlikely. In the last 20 years, Delaware courts have rarely settled on a value lower than the transaction price - and never in a deal like the one Dell is contemplating.

The findings echo those of at least two other analyses of appraisal rights cases, cited by Steven M. Davidoff, the Deal Professor, and by Gretchen Morgenson in The New York Times.

The latest analysis, which is planned for publication in Law360 on Wednesday, was carried out at the request of the Dell Valuation Trust, a fledgling effort to coordinate investors seeking appraisal rights in the Dell transaction. The trust is being organized by the Shareholder Forum, an organization run by a former investment banker, Gary Lutin, that seeks to inform investors.

The Fish & Richardson analysis found that, in 45 appraisal-rights cases in the last two decades, the courts have set a “fair value” below the corresponding transaction price for just eight deals, or about 18 percent of the time.

None of those eight outliers were “standalone” buyouts, where the company was being bought for its own sake, rather than, say, in order to fold it into another, similar company. Among standalone buyouts, the courts set share values at anywhere from 3.5 percent over the deal price to more than double the deal price.

In other words, if Mr. Icahn’s bid for appraisal rights follows the traditional pattern, it’s unlikely that he’ll receive less than $13.75 a share - and he may well receive more. The same holds for other investors who seek appraisal rights.

Mr. Lutin called appraisal rights “a value investor’s dream come true,” with pricing based not on the vagaries of the market, but on a company’s intrinsic value, as calculated by Delaware judges, who have considerable experience evaluating business arguments.

Nothing is guaranteed, of course. If Dell’s buyout vote fails on Thursday, the transaction falls through and appraisal rights are irrelevant â€" there’s no deal price to dispute. Some of the companies included in the Fish & Richardson analysis were small, and few deals anywhere match Dell’s in size or scope, leaving it an open question how predictive any retrospective analysis can be.

As for other investors, only those who have jumped through the right hoops ahead of the Thursday vote stand to benefit; other shareholders are stuck with what Mr. Dell and his partners are offering. Given the bureaucratic hurdles involved, it is likely to be too late for most investors to seek appraisal rights now if they haven’t started the process already.

In some ways, of course, it shouldn’t be surprising that investors often win when they seek appraisal rights.

Delaware courts are supposed to take multiple factors into consideration, including market value, asset value, dividends, earnings prospects and intellectual property values. The approach approximates how many investors would calculate a company’s “intrinsic” value.

In other words, to conclude that investors seeking appraisal rights should get less than the deal price implies that the buyers are overpaying on a fundamental level. That’s unlikely, the Fish & Richardson lawyers concluded.

“Management buyers, after all,” they write, “can be expected to know their company’s intrinsic value best and are not likely to convince the court that they knowingly offered to pay more than the company was worth.”

Dow Index Drops Bank of America, Alcoa and H.P.

The Dow Jones industrial average is shaking up its roster.

Alcoa, Bank of America and Hewlett-Packard â€" three stalwarts of corporate America that have fallen out of favor lately with investors â€" will be removed from the Dow, to be replaced by Goldman Sachs, Visa and Nike, the parent company of the index said on Tuesday.

The change, which will take effect at the start of trading on Sept. 23, is the largest revision to the index since April 2004, when AT&T, Eastman Kodak and International Paper were dropped. And it reflects the changing landscape on Wall Street and in the broader economy.

The decision to remove the three companies was prompted by their sagging stock prices and by the index committee’s desire to diversify the mix of companies represented, according to S.&P. Dow Jones Indices, the company that operates the index.

It will not affect the level of the index, the company said.

With 30 blue-chip companies as its members, the Dow index is closely watched as a barometer of the broader market. It has recovered strongly since the turmoil of the financial crisis and is up about 15 percent this year.

For Alcoa, its exclusion is a symbolic comedown. The aluminum company, which joined the index in 1959, has traditionally kicked off earnings season. In recent years, the company has contended with a global slump in aluminum demand.

Bank of America and Hewlett-Packard, more recent entrants to the Dow, are each confronting challenges of their own.

The bank, whose entry into the Dow was announced in November 2008, has been working to shrink its business in the aftermath of the financial crisis. Its stock has languished as it has dealt with the legal fallout from its acquisition of the subprime lender Countrywide Financial in 2008.

Hewlett-Packard was only the second computer company in the Dow when it was added in 1997, coming after I.B.M. Now, it is fighting to turn around its business. In an example of its continuing woes, the company took a large writedown last year on its disastrous acquisition of the British software company Autonomy.

H.P.’s shares fell about 1.5 percent on Tuesday after the changes were announced. Bank of America’s stock, however, rose modestly.

The new entrants, by contrast, are seen as having relatively bright futures. Goldman has survived the financial crisis in better shape than rivals. In July, the firm reported that its profit had doubled in the second quarter.

Visa, the San Francisco-based payments giant, has enjoyed a buoyant stock price in recent years on the strength of new payment technology. The company’s stock was up about 1.6 percent on Tuesday, while Goldman’s stock rose more than 3 percent.

Nike, too, has experienced a rising stock price in recent years, and its stock was up about 1.8 percent on Tuesday.

Cisco to Buy Flash-Storage Company

Cisco, one of the most acquisitive technology companies in Silicon Valley, agreed on Tuesday to pay $415 million in cash for Whiptail, which makes software to manage flash storage in the cloud.

For Cisco, best known as a networking company, the deal for Whiptail is among its first moves into the storage space. But the deal may also increase the tensions between Cisco and an important partner, EMC, the large storage company based in Massachusetts.

Last year, VMware, which is majority owned by EMC, paid $1.26 billion for Nicira, a next-generation networking company. That deal pit EMC and Cisco against each other. The deal not only reduced EMC’s need for Cisco’s products, but it put the two companies in direct competition for selling networking gear to their customers.

EMC’s chief executive, Joe Tucci, speaking at the Techonomy Conference in Tucson, Ariz., last November, acknowledged that VMware’s deal for Nicira had created some tensions.

“Cisco is our closest and most strategic partner, and we’ll have a long, prosperous relationship,” Mr. Tucci said. But buying Nicira put “a little stress on the relationship,” he said.

By purchasing Whiptail, Cisco has effectively hit back. Whiptail makes software that allows corporate clients to easily manage large arrays of flash storage in the cloud, an area EMC has traditionally excelled at. What’s more, EMC bought a key Whiptail competitor, XtremIO, last year .

As large enterprise technology companies rush to provide eve rmore services to their clients, tensions between longtime partners are likely to become more common.

“We are focused on providing a converged infrastructure including compute, network and high-performance solid state that will help address our customers’ requirements for next-generation computing environments,” Paul Perez, general manager of Cisco’s computing systems product group, said in a statement.

Evercore advised Whiptail.

Morning Agenda: ‘A Homeowner’s Worst Nightmare’

SCRUTINY FOR AN INVASIVE FORECLOSURE TACTIC  |  Faced with millions of foreclosures, the nation’s biggest banks turn to property management firms to help them navigate the wreckage. But the firms are coming under fire for using questionable and possibly illegal tactics, and the scrutiny threatens to ensnare JPMorgan Chase, Bank of America, Citibank and other lenders, Jessica Silver-Greenberg reports in DealBook.

Illinois on Monday became the first state to take on the property management firms legally, contending in a lawsuit that Safeguard Properties, the largest of the firms, wrongfully dispossessed hundreds of homeowners in the state. Lisa Madigan, the attorney general, claims that Safeguard broke into homes despite stark evidence that homeowners still lived in them, bullied tenants into leaving even though they had no legal obligation to do so and, in some cases, damaged the very homes they were sent to protect, according to the suit, Ms. Silver-Greenberg reports.

“This is a homeowner’s worst nightmare,” Ms. Madigan said in an interview, noting that her office had received more than 400 complaints about Safeguard. Diane R. Fusco, a spokeswoman for Safeguard, said that the company had not received the lawsuit, and she added that the company follows a rigorous system to determine whether a property is vacant before starting any work.

IF LEHMAN HAD BEEN SAVED  |  With the five-year anniversary of the collapse of Lehman Brothers approaching this weekend, “the most intriguing hypothetical question about those fateful days is what would have happened had the government bailed out Lehman,” Andrew Ross Sorkin writes in the DealBook column. The decision not to rescue Lehman has been considered the domino that led to the tumbling of so many others, including the bailout of the American International Group.

But a rescue would not necessarily have helped the broader financial system or the economy. “In truth, in the fairy-tale version of bailing out Lehman, the next domino, A.I.G., would have fallen even harder,” Mr. Sorkin writes. “If the politics of bailing out Lehman were bad, the politics of bailing out A.I.G. would have been worse. And the systemic risk that a failure of A.I.G. posed was orders of magnitude greater than Lehman’s collapse.”

“Had the Fed stepped in to save A.I.G. at that point anyway, despite the politics, it then becomes increasingly unlikely that the Treasury Department would have been able to muster enough Congressional support to pass” the bailout known as the Troubled Asset Relief Program.

KOCH BROTHERS OFFER $7 BILLION FOR MOLEX  |  The conglomerate run by Charles and David Koch made a big move on Monday into a new line of business, offering to buy Molex, a relatively obscure maker of electronics plugs for the likes of Apple â€" for $7.2 billion, DealBook’s Michael J. de la Merced reports. The deal is the biggest by Koch Industries in eight years, trailing only the conglomerate’s roughly $22 billion takeover of Georgia-Pacific in 2005. “But it may signal that the conglomerate is on the prowl for more opportunities,” Mr. de la Merced writes.

ON THE AGENDA  |  Apple is introducing two new iPhones at an event at its Cupertino, Calif., headquarters. Sanford I. Weill, the former Citigroup chief, is on CNBC at 7 a.m. James P. Gorman, the chief executive of Morgan Stanley, is on CNBC at 2:30 p.m.

A $250 MILLION PLEDGE EVAPORATES  |  “When tiny Centre College, in Danville, Ky., announced in July that it had received a $250 million donation, the largest outright gift ever made to a liberal arts college, it left out a small detail. The donor â€" the A. Eugene Brockman Charitable Trust â€" did not yet have the money,” DealBook’s Peter Lattman reports. “On Monday, the college said that the gift had been withdrawn.”

The gift, it turned out, had been contingent on a scuttled $3.4 billion loan deal involving Reynolds & Reynolds, a large privately held company that provides software and services to car dealers. “In retrospect, we might have put a big asterisk on this thing, but no one had any inkling that this would come about,” John Roush, the president of Centre College, said in an interview.

Mergers & Acquisitions »

Icahn Calls Off Fight Over Dell’s Sale  |  After months of fighting and a seemingly inexhaustible stream of sharp-tongued letters, Carl C. Icahn is ending his battle against Dell’s proposed sale to its founder.
DealBook »

The Tweet Goes On for Icahn  |  Carl Icahn conceded defeat on Dell, but he has had better luck with Apple, Richard Beales of Reuters Breakingviews writes.
REUTERS BREAKINGVIEWS

Neiman Marcus Is Sold for $6 Billion  |  The owners of the luxury retail chain agreed on Monday to sell it to a group led by Ares Management and a Canadian pension plan.
DealBook »

Time Inc. Said to Be in Talks to Buy Magazines  |  Time Inc. “is in late stage talks” to acquire five magazines including “Travel + Leisure” and “Food & Wine” from the publishing unit of American Express, The Wall Street Journal reports, citing two unidentified people familiar with the matter.
WALL STREET JOURNAL

Western Digital to Buy Virident Systems  |  Western Digital, the maker of hard drives, said on Monday that it would buy Virident Systems, a maker of flash memory for servers, for $685 million in cash.
DealBook »

Finance Chief Steps Down at KPN  |  Royal KPN, the Dutch telecommunications company, said on Monday that its chief financial officer had resigned but that the move was not related to a takeover attempt by América Móvil.
DealBook »

INVESTMENT BANKING »

At Goldman, a Paycheck No Longer Equals an Account  |  For years, employees at Goldman Sachs automatically received a brokerage account. But in recent months, the firm has notified several employees, most of whom have assets valued at less than $1 million, that their accounts are being transferred to Fidelity.
DealBook »

Inside Morgan Stanley’s Effort to Shed Risk  |  “It actually makes life a lot simpler,” James P. Gorman, Morgan Stanley’s chief executive, told The Wall Street Journal of the new limits placed on the bank’s business. Traders, he said, “know exactly the size of the sandbox they’re playing in.”
WALL STREET JOURNAL

JPMorgan and Insurer Settle Suit  |  JPMorgan Chase and Assurant agreed to pay $300 million in the settlement, which calls for the bank to stop accepting commissions for so-called force-placed insurance policies.
DealBook »

JPMorgan Chase Picks 2 for Board Seats  |  JPMorgan Chase said its board intended to elect two new directors: Linda B. Bammann, who was deputy head of risk management at JPMorgan until her retirement in 2005, and Michael A. Neal, former chairman and chief executive of GE Capital.
DealBook »

Bank of America Said to Cut Jobs in Mortgages  |  Bank of America plans to “eliminate about 2,100 jobs and shutter 16 mortgage offices as rising interest rates weaken loan demand,” Bloomberg News reports, citing two unidentified people with knowledge of the plans.
BLOOMBERG NEWS

A Young Analyst’s Skeptical Report Draws Criticism  |  After a report by a 26-year-old analyst led to a 6 percent fall in the stock of Kinder Morgan last week, other analysts took aim at the report.
REUTERS

PRIVATE EQUITY »

A Pension Plan With a Flair for Deal-Making  |  Jim Fasano, head of private equity funds for the Canadian Pension Plan Investment Board, which was part of a group that agreed this week to buy Neiman Marcus, talks to Privcap about how the fund invests its large pool of capital.
PRIVCAP

HEDGE FUNDS »

Seeking Answers From Green Mountain Coffee  |  The sales figures at Green Mountain, the roaster behind the popular Keurig coffee makers, don’t seem to add up, Jesse Eisinger of ProPublica writes in his column, The Trade.
DealBook »

Tiger Global Said to Be Starting New Fund  |  Tiger Global Management, the stock-focused hedge fund and private equity firm run by Chase Coleman, is starting a new “long-only” fund, CNBC reports, citing two unidentified people familiar with the situation.
CNBC

I.P.O./OFFERINGS »

Chinese Developer Said to Seek $1 Billion in I.P.O.  |  The SZITIC Commercial Property Company, a Chinese shopping mall developer, is planning an initial public offering in Hong Kong that could raise as much as $1 billion, The Wall Street Journal reports, citing unidentified people familiar with the matter.
WALL STREET JOURNAL

SunEdison Seeks to Spin Off Chip Unit  |  SunEdison, the solar power company, filed to spin off its semiconductor unit, SunEdison Semiconductor, through an initial public offering of up to $250 million.
SEC

VENTURE CAPITAL »

Consumer Analytics Firm Clarabridge Raises $80 Million  |  Clarabridge, which offers software that lets big companies analyze the behavior of their customers, is announcing on Tuesday that it has raised an $80 million financing round led by Summit Partners, General Catalyst Partners and Yuchun Lee.
CLARABRIDGE

With MoPub Acquisition, Twitter Plans to Sell Ads for Other Companies  |  “Twitter has been focused on building up a business selling advertisements that blend into the flow of 140-character messages that make up its social network,” Vindu Goel reports on the Bits blog. “Now it plans to sell similar ads on other companies’ mobile apps, too.”
NEW YORK TIMES BITS

LEGAL/REGULATORY »

S.&P.’s Counterattack on the Government  |  In its defense against a Justice Department lawsuit, Standard & Poor’s argues that it was improperly targeted because it lowered the credit rating on federal debt two years ago. How far it will get with that argument is an open question, Peter J. Henning writes in the White Collar Watch column.
DealBook »

Swiss Parliament Approves Deal on Tax Evasion  |  Swiss lawmakers in the lower house of parliament approved a law on Monday that requires the country’s banks to report the holdings of their American clients to tax authorities, Agence France-Presse reports. The upper house of parliament had already approved the law.
Agence France-Presse

Furniture Brands Files for Bankruptcy  |  The furniture maker Furniture Brands International filed for bankruptcy on Monday with a deal to sell its assets to Oaktree Capital Management for $166 million, The Wall Street Journal reports.
WALL STREET JOURNAL

Ex-Administration Lawyer Rejoins Skadden, Arps  |  Boris Bershteyn, a former senior lawyer in the Obama administration, is rejoining Skadden, Arps, Slate, Meagher & Flom, the law firm based in New York.
DealBook »

Market Rebound in China Shows Beijing’s Resolve  |  Those predicting a sharp slowdown in China a couple of months ago appear to have underestimated the central government’s determination to keep things on track, Bill Bishop writes in the China Insider column.
DealBook »

Google Makes New Offer in European Antitrust Case  |  “Google made a second try last week to settle a three-year-old antitrust case with the European Union, officials said. Neither side released details of the offer, however, and rivals continued to call for the American technology company to cede more control of its Internet search and advertising business,” The New York Times writes.
NEW YORK TIMES

Morning Agenda: ‘A Homeowner’s Worst Nightmare’

SCRUTINY FOR AN INVASIVE FORECLOSURE TACTIC  |  Faced with millions of foreclosures, the nation’s biggest banks turn to property management firms to help them navigate the wreckage. But the firms are coming under fire for using questionable and possibly illegal tactics, and the scrutiny threatens to ensnare JPMorgan Chase, Bank of America, Citibank and other lenders, Jessica Silver-Greenberg reports in DealBook.

Illinois on Monday became the first state to take on the property management firms legally, contending in a lawsuit that Safeguard Properties, the largest of the firms, wrongfully dispossessed hundreds of homeowners in the state. Lisa Madigan, the attorney general, claims that Safeguard broke into homes despite stark evidence that homeowners still lived in them, bullied tenants into leaving even though they had no legal obligation to do so and, in some cases, damaged the very homes they were sent to protect, according to the suit, Ms. Silver-Greenberg reports.

“This is a homeowner’s worst nightmare,” Ms. Madigan said in an interview, noting that her office had received more than 400 complaints about Safeguard. Diane R. Fusco, a spokeswoman for Safeguard, said that the company had not received the lawsuit, and she added that the company follows a rigorous system to determine whether a property is vacant before starting any work.

IF LEHMAN HAD BEEN SAVED  |  With the five-year anniversary of the collapse of Lehman Brothers approaching this weekend, “the most intriguing hypothetical question about those fateful days is what would have happened had the government bailed out Lehman,” Andrew Ross Sorkin writes in the DealBook column. The decision not to rescue Lehman has been considered the domino that led to the tumbling of so many others, including the bailout of the American International Group.

But a rescue would not necessarily have helped the broader financial system or the economy. “In truth, in the fairy-tale version of bailing out Lehman, the next domino, A.I.G., would have fallen even harder,” Mr. Sorkin writes. “If the politics of bailing out Lehman were bad, the politics of bailing out A.I.G. would have been worse. And the systemic risk that a failure of A.I.G. posed was orders of magnitude greater than Lehman’s collapse.”

“Had the Fed stepped in to save A.I.G. at that point anyway, despite the politics, it then becomes increasingly unlikely that the Treasury Department would have been able to muster enough Congressional support to pass” the bailout known as the Troubled Asset Relief Program.

KOCH BROTHERS OFFER $7 BILLION FOR MOLEX  |  The conglomerate run by Charles and David Koch made a big move on Monday into a new line of business, offering to buy Molex, a relatively obscure maker of electronics plugs for the likes of Apple â€" for $7.2 billion, DealBook’s Michael J. de la Merced reports. The deal is the biggest by Koch Industries in eight years, trailing only the conglomerate’s roughly $22 billion takeover of Georgia-Pacific in 2005. “But it may signal that the conglomerate is on the prowl for more opportunities,” Mr. de la Merced writes.

ON THE AGENDA  |  Apple is introducing two new iPhones at an event at its Cupertino, Calif., headquarters. Sanford I. Weill, the former Citigroup chief, is on CNBC at 7 a.m. James P. Gorman, the chief executive of Morgan Stanley, is on CNBC at 2:30 p.m.

A $250 MILLION PLEDGE EVAPORATES  |  “When tiny Centre College, in Danville, Ky., announced in July that it had received a $250 million donation, the largest outright gift ever made to a liberal arts college, it left out a small detail. The donor â€" the A. Eugene Brockman Charitable Trust â€" did not yet have the money,” DealBook’s Peter Lattman reports. “On Monday, the college said that the gift had been withdrawn.”

The gift, it turned out, had been contingent on a scuttled $3.4 billion loan deal involving Reynolds & Reynolds, a large privately held company that provides software and services to car dealers. “In retrospect, we might have put a big asterisk on this thing, but no one had any inkling that this would come about,” John Roush, the president of Centre College, said in an interview.

Mergers & Acquisitions »

Icahn Calls Off Fight Over Dell’s Sale  |  After months of fighting and a seemingly inexhaustible stream of sharp-tongued letters, Carl C. Icahn is ending his battle against Dell’s proposed sale to its founder.
DealBook »

The Tweet Goes On for Icahn  |  Carl Icahn conceded defeat on Dell, but he has had better luck with Apple, Richard Beales of Reuters Breakingviews writes.
REUTERS BREAKINGVIEWS

Neiman Marcus Is Sold for $6 Billion  |  The owners of the luxury retail chain agreed on Monday to sell it to a group led by Ares Management and a Canadian pension plan.
DealBook »

Time Inc. Said to Be in Talks to Buy Magazines  |  Time Inc. “is in late stage talks” to acquire five magazines including “Travel + Leisure” and “Food & Wine” from the publishing unit of American Express, The Wall Street Journal reports, citing two unidentified people familiar with the matter.
WALL STREET JOURNAL

Western Digital to Buy Virident Systems  |  Western Digital, the maker of hard drives, said on Monday that it would buy Virident Systems, a maker of flash memory for servers, for $685 million in cash.
DealBook »

Finance Chief Steps Down at KPN  |  Royal KPN, the Dutch telecommunications company, said on Monday that its chief financial officer had resigned but that the move was not related to a takeover attempt by América Móvil.
DealBook »

INVESTMENT BANKING »

At Goldman, a Paycheck No Longer Equals an Account  |  For years, employees at Goldman Sachs automatically received a brokerage account. But in recent months, the firm has notified several employees, most of whom have assets valued at less than $1 million, that their accounts are being transferred to Fidelity.
DealBook »

Inside Morgan Stanley’s Effort to Shed Risk  |  “It actually makes life a lot simpler,” James P. Gorman, Morgan Stanley’s chief executive, told The Wall Street Journal of the new limits placed on the bank’s business. Traders, he said, “know exactly the size of the sandbox they’re playing in.”
WALL STREET JOURNAL

JPMorgan and Insurer Settle Suit  |  JPMorgan Chase and Assurant agreed to pay $300 million in the settlement, which calls for the bank to stop accepting commissions for so-called force-placed insurance policies.
DealBook »

JPMorgan Chase Picks 2 for Board Seats  |  JPMorgan Chase said its board intended to elect two new directors: Linda B. Bammann, who was deputy head of risk management at JPMorgan until her retirement in 2005, and Michael A. Neal, former chairman and chief executive of GE Capital.
DealBook »

Bank of America Said to Cut Jobs in Mortgages  |  Bank of America plans to “eliminate about 2,100 jobs and shutter 16 mortgage offices as rising interest rates weaken loan demand,” Bloomberg News reports, citing two unidentified people with knowledge of the plans.
BLOOMBERG NEWS

A Young Analyst’s Skeptical Report Draws Criticism  |  After a report by a 26-year-old analyst led to a 6 percent fall in the stock of Kinder Morgan last week, other analysts took aim at the report.
REUTERS

PRIVATE EQUITY »

A Pension Plan With a Flair for Deal-Making  |  Jim Fasano, head of private equity funds for the Canadian Pension Plan Investment Board, which was part of a group that agreed this week to buy Neiman Marcus, talks to Privcap about how the fund invests its large pool of capital.
PRIVCAP

HEDGE FUNDS »

Seeking Answers From Green Mountain Coffee  |  The sales figures at Green Mountain, the roaster behind the popular Keurig coffee makers, don’t seem to add up, Jesse Eisinger of ProPublica writes in his column, The Trade.
DealBook »

Tiger Global Said to Be Starting New Fund  |  Tiger Global Management, the stock-focused hedge fund and private equity firm run by Chase Coleman, is starting a new “long-only” fund, CNBC reports, citing two unidentified people familiar with the situation.
CNBC

I.P.O./OFFERINGS »

Chinese Developer Said to Seek $1 Billion in I.P.O.  |  The SZITIC Commercial Property Company, a Chinese shopping mall developer, is planning an initial public offering in Hong Kong that could raise as much as $1 billion, The Wall Street Journal reports, citing unidentified people familiar with the matter.
WALL STREET JOURNAL

SunEdison Seeks to Spin Off Chip Unit  |  SunEdison, the solar power company, filed to spin off its semiconductor unit, SunEdison Semiconductor, through an initial public offering of up to $250 million.
SEC

VENTURE CAPITAL »

Consumer Analytics Firm Clarabridge Raises $80 Million  |  Clarabridge, which offers software that lets big companies analyze the behavior of their customers, is announcing on Tuesday that it has raised an $80 million financing round led by Summit Partners, General Catalyst Partners and Yuchun Lee.
CLARABRIDGE

With MoPub Acquisition, Twitter Plans to Sell Ads for Other Companies  |  “Twitter has been focused on building up a business selling advertisements that blend into the flow of 140-character messages that make up its social network,” Vindu Goel reports on the Bits blog. “Now it plans to sell similar ads on other companies’ mobile apps, too.”
NEW YORK TIMES BITS

LEGAL/REGULATORY »

S.&P.’s Counterattack on the Government  |  In its defense against a Justice Department lawsuit, Standard & Poor’s argues that it was improperly targeted because it lowered the credit rating on federal debt two years ago. How far it will get with that argument is an open question, Peter J. Henning writes in the White Collar Watch column.
DealBook »

Swiss Parliament Approves Deal on Tax Evasion  |  Swiss lawmakers in the lower house of parliament approved a law on Monday that requires the country’s banks to report the holdings of their American clients to tax authorities, Agence France-Presse reports. The upper house of parliament had already approved the law.
Agence France-Presse

Furniture Brands Files for Bankruptcy  |  The furniture maker Furniture Brands International filed for bankruptcy on Monday with a deal to sell its assets to Oaktree Capital Management for $166 million, The Wall Street Journal reports.
WALL STREET JOURNAL

Ex-Administration Lawyer Rejoins Skadden, Arps  |  Boris Bershteyn, a former senior lawyer in the Obama administration, is rejoining Skadden, Arps, Slate, Meagher & Flom, the law firm based in New York.
DealBook »

Market Rebound in China Shows Beijing’s Resolve  |  Those predicting a sharp slowdown in China a couple of months ago appear to have underestimated the central government’s determination to keep things on track, Bill Bishop writes in the China Insider column.
DealBook »

Google Makes New Offer in European Antitrust Case  |  “Google made a second try last week to settle a three-year-old antitrust case with the European Union, officials said. Neither side released details of the offer, however, and rivals continued to call for the American technology company to cede more control of its Internet search and advertising business,” The New York Times writes.
NEW YORK TIMES