By most accounts, technology is the area to stay away from, but for Gores Technology Group, a Los Angeles-based firm that specializes in turnarounds, it’s a great time for technology companies. Gores this month agreed to purchase two new companies in need of attention, the PC division of Micron Electronics, now called Micron PC, and VeriFone, a provider of electronic payment solutions.
In the first of the two deals, Gores will acquire 100% of Micron PC. The deal is a non-standard deal and therefore does not have a purchase price. Gores will assume $170 million of liabilities and will fund an undisclosed amount of the business going forward. Micron, which is being advised by Credit Suisse First Boston, will contribute $70 million in cash. The Micron deal is expected to close by publication of this issue.
Gores does not manage a fund, but rather invests private money principally from its founder Alec Gores.
Over the next few months, Micron will be undergoing restructuring at the hands of it new owner in order to secure the PC business and options for revenue generation, said David McGovern, an executive vice president at Gores. “We’re also looking at opportunities to build the PC business through acquisition and to refocus the business on contract manufacturing and build that side of the business,” he said.
Most people would likely be a little nervous about taking on a failing technology company in a sector that is not predicted to see increased growth in coming years, but Gores is confident in its expertise. “Obviously we’re concerned that it’s a difficult business, but that’s what we specialize in,” said McGovern. “We recognize that it’s not a growing area although we do think there will continue to be opportunities to generate revenue in the business.”
One of the attractive aspects of Micron PC’s business was a relationship with the U.S. government. The company which generates a solid $400 million revenue base from sales to various government entities. “We’d prefer to have a stronger brand name,” said McGovern. “But we think that they’ve got a good solid customer base in the government area.”
Mike Adkins, the general manager of Micron will be named the president, and James Bailey, a group president at Gores, will assist in the turnaround.
In October of last year, Bailey joined the management team of The Learning Co. after Gores acquired the failing company and orchestrated the turnaround that put the firm on the map. When Gores bought the company from Mattel, it was suffering from losses of more than $1.5 million per day. Within 75 days, Gores had brought the company back to profitability.
A Slice of HP
This month Gores also agreed to purchase VeriFone from Hewlett Packard for an undisclosed price. The company provides electronic payment solutions to financial institutions, merchants and consumers.
“VeriFone has established the groundwork for the long-awaited growth of smart cards in the U.S.,” said Doug Bergeron, a group president at Gores, in a statement. “The company has staked its claim to future payment markets by taking a lead in emerging smart card and mobile commerce technologies. We believe its best years are yet to come.”
Hewlett Packard is selling the company to focus on its “core competencies related to service-centric computing and providing solutions for an always-on Internet infrastructure,” said John Brennan, HP vice president, in the same statement.