[OPE-L:7552] [OPE-L:1092] American crash

Rakesh Bhandari (bhandari@phoenix.Princeton.EDU)
Sun, 29 Aug 1999 15:15:35 -0400 (EDT)

Dear Alejandro,

I don't deny that US is headed for crisis; I am only pointing to
evidence that it will be preceded by a sharp devaluation of the dollar or
massive decline in capital imports.

Here is an interesting article.

*Note that total value of European acquisitions of US high tech companies
was 3x more the first of this year than the first half of last year.

*Japanese multinationals may start picking up their US acquisitions as

The Outlook

Europeans Gobble
American High-Tech
By Bernard Wysocki Jr.

The Wall Street Journal
Page A1
(Copyright (c) 1999, Dow Jones & Company, Inc.)

Corrections & Amplifications

BROADVIEW INTERNATIONAL LLC is an investment bank whose name was changed
from Broadview Associates
last year. In yesterday's Outlook column, Broadview International was
incorrectly identified as a unit of Broadview
Associates. (WSJ Aug. 17, 1999)

WASHINGTON -- Europe has been discovering America for 500 years, but in
the latest chapter, European corporate
giants are discovering U.S. high - technology companies, and buying
dozens of them. In the action unfolding this year,
the biggest trans-Atlantic deal was the $56 billion acquisition of
AirTouch Communications Inc. by Britain's Vodafone
Group PLC. But that was hardly the only deal of note.

In the first half of 1999 alone, there were 93 other acquisitions of
U.S. technology firms by European buyers, up 34%
from a year earlier, according to a survey by London-based Broadview
International, a unit of U.S. investment bank
Broadview Associates. The total value of European acquisitions of U.S.
technology companies during the first half of this
year reached $72 billion, nearly triple the first half of 1998.

And there are signs that the buying spree may pick up momentum. Many of
the lumbering giants of European technology,
including France's Alcatel SA, Sweden's Telefon AB L.M. Ericsson and
Philips Electronics NV of the Netherlands, have
been actively buying U.S. companies for years, and they continue to seek
new targets. And while M&A activity within
Europe is strong, surveys say about 50% of European companies' targets
are American.

"The European companies realize that they need the technology to
compete. It's faster and cheaper just to buy it," says
Joseph Quinlan, senior international economist at Morgan Stanley Dean
Witter Inc. That's especially true of technologies
in the fast-evolving Internet sphere, where buying American can give the
European multinationals a leg up on rivals.

This year alone, Alcatel has made three acquisitions in the U.S., mostly
in "broadband" technologies that allow high-speed
data transmission over networks. General Electric Co. of Britain has
made two acquisitions, including a $4 billion purchase
of Fore Systems Inc., another cutting-edge broadband player. German
electronics giant Siemens AG has bought four U.S.

In the U.S., both small and big companies exploit the Internet. In
Europe, the digital revolution is mostly a big-company
gamebut reinvigorated with American high-tech acquisitions.

To be sure, European giants have long been active in the U.S., but the
current activity marks a new phase. In the past,
Siemens expanded in the U.S. mainly by building new "green-field" plants
and by making huge acquisitions in older
technologies. These days, company executives are thinking differently:
They are making a larger number of smaller
purchases rather than a few huge ones, especially regarding the
Internet. "We think it is far wiser to take the `string of
pearls' approach, adding smaller pearls to the string to make the
necklace more valuable," says Volker Jung, a Siemens

And most of the new targets are young companies, which makes the $72
billion that foreign companies spent on U.S.
acquisitions during the first half even more impressive, says Victor
Basta, London-based managing director at Broadview.
"It's much higher risk, but the strategic benefits could be enormous,"
he adds.

European companies have little choice but to accept the risks. In many
high-tech industries, Europe lags behind the U.S.
Personal-computer usage is much lower in Europe than in the U.S. The
number of Web sites per 1,000 people is 113 in
the U.S., compared with 24 in Britain and 8.6 in France, says the
International Telecommunications Union, a
standard-setting group. And there is far more innovation occurring in
the U.S.

Looking ahead, some investment banks in Europe believe the acquisition
activity is headed for explosive growth. Mr.
Basta says the volume of deals could surge if megadeals involving major
carriers such as British Telecommunications PLC
or Deutsche Telekom AG come through. Bankers also expect to see more
European companies transform themselves to
resemble Japan's Softbank, which has expanded its software and services
to include substantial stakes in highflying
Internet companies.

That raises another question: whether Japan's multinationals are ready
to stage their own buying binge in the U.S. In the
1980s, Japanese made huge purchases of real estate and companies, and
sometimes took stakes in leading-edge venture
companies. They largely retreated in the 1990s, but there is some sign
that Japanese multinationals are again looking at the

What it all means, of course, is that the U.S. is likely to remain the
world's investment destination of choice for some time
to come. And even though some foreign portfolio investors are having
second thoughts about America's sky-high stock
market, when it comes to building or buying companies, the U.S. is still

A study by A.T. Kearney Inc. showed that in the first half of 1999, the
U.S., already the No. 1 investment destination,
pulled away from the pack. Among French companies, executives
universally named the U.S. their highest-priority
investment target. So did German executives. Moreover, the Kearney study
found many newcomers to the U.S.,
especially from Europe.

"There are a lot of first-time entrants jumping in," says Paul
Laudicina, managing director of Kearney's global business
policy council. "I think most firms that were sitting on the sidelines
assumed we had a bubble economy in the U.S. They
were waiting for the asset values to implode. Then they decided they
could no longer wait."