Lehman’s good bank/bad bank strategy

Lehman Brothers is looking for ways to survive the credit crisis, and one of its proposals is to split itself into a “good” and a “bad” bank. Under the plan, Lehman would spin off about $30 billion of commercial real estate and mortgages into a new, “bad” publicly traded company, freeing up the “good” Lehman from the drag on its shares tied to investor concern over those troubled commercial assets. Such a strategy isn’t new, and it worked for Mellon Bank in 1988. (The New York Times) The value of commercial real estate transactions worldwide was only $306 billion in the first half of this year, about half the level of the same period in 2007. “It’s hard to sugarcoat what’s going on,” says Dan Fasulo at Real Capital. (

Dell switches tack on in-house manufacturing

No. 2 PC maker Dell has decided to sell all its computer factories worldwide and switch to a contract-production model, The Wall Street Journal reported. Dell reportedly hopes to have all its manufacturing plants sold in 18 months, most likely to Asia-based contract manufacturers. (Reuters) Dell for a long time has made its own products, but the switch in focus to laptops has made that business model less cost-effective. (The Wall Street Journal) “As the company moves away from its direct sales business model,” said HSBC analyst Wang Wanli in Taipei, “Outsourcing production to third-party manufacturers will help them become more flexible.” (Bloomberg)

Samsung eyes SanDisk

South Korea’s Samsung, the world’s top maker of flash memory, says it may buy U.S. rival SanDisk, which is valued at $3.2 billion. (Reuters) The merger could spell trouble for Toshiba, which already lags Samsung in the $15 billion flash memory chip market. Toshiba also has plans to build new semiconductor plants with SanDisk. Samsung currently pays SanDisk up to $500 million in patent royalties each year. (Bloomberg) In other merger news, U.S. tobacco giant Altria is reportedly in late-stage talks to buy UST, the maker of Skoal and Copenhagen smokeless tobacco, for more than $10 billion. Smokeless tobacco is one of the few growth areas for the industry. The deal could be done by Monday. (The New York Times)

A bond by any other name . . .

The typical Indiana taxpayer is not a fan of subsidizing the Indianapolis Colts’ new $717 million stadium, $612 million of which is from state bonds. So to make the project more popular, the state is urging bond issuers JPMorgan Chase and City Securities Corp. to play up the connection to star quarterback Peyton Manning. “Would you rather buy some Peyton Manning bonds or some sewer bonds?” said Ryan Kitchell of Indiana’s Office of Management and Budget. Not everyone’s buying it, but demand for the bonds is actually quite strong. Indiana says the new stadium and adjoining convention center will bring jobs to the state, but taxpayer-financed football stadiums often fail as economic development engines. (Bloomberg)