DealBook: Choices Ahead for the Dell Board, but Not Much Time

DealBook: Activist Investor to Step Down From Yahoo Board

Steve Marcus/ReutersDaniel S. Loeb, founder of Third Point, at a conference in Las Vegas last year.

2:09 p.m. | Updated To add Third Point’s earnings from its investment in Yahoo and include Yahoo’s afternoon share price.

The activist investor Daniel S. Loeb is parting ways with Yahoo.

Mr. Loeb, whose campaign to change Yahoo culminated in the appointment last year of Marissa Mayer as the company’s chief executive, has submitted his resignation from the board, Yahoo said Monday.

Two other directors originally nominated by Mr. Loeb’s firm, Harry J. Wilson and Michael J. Wolf, are also stepping down. The resignations, effective July 31, will leave Yahoo with a seven-member board, the company said.

In addition, Yahoo has agreed to buy 40 million shares of its stock from Mr. Loeb’s firm, Third Point, at a price of $29.11 a share, the closing price on Friday. That will leave Third Point with about 20 million Yahoo shares, or less than 2 percent of the common stock outstanding.

Third Point, which initially disclosed a 5.15 percent stake in Yahoo in September 2011, more than doubled its investment in less than two years. It initially paid about $509 million for 40 million shares, which it sold on Monday for $1.16 billion.

Yahoo’s stock fell more than 4 percent in trading on Monday, dipping below $28 a share in afternoon trading.

The hiring of Ms. Mayer from Google last July was considered a coup for Yahoo, an aging technology company in need of a fresh direction. She has overseen a string of acquisitions since then, including the $1.1 billion deal for Tumblr in May.

“Since our board’s rigorous search led us to hire Marissa Mayer as C.E.O., Yahoo’s stock price has nearly doubled, delivering significant value for shareholders,” Mr. Loeb said in a statement.

Ms. Mayer’s appointment came after a hard-fought campaign by Mr. Loeb that led to the ouster of the previous chief executive, Scott Thompson, in May of last year.

Yahoo said Monday that Max Levchin, a co-founder of PayPal, would remain on the board. His appointment in December was supported by both Third Point and the board.

The share repurchase plan announced Monday is part of Yahoo’s previously announced plan to buy $1.9 billion of stock, the company said.

“Daniel Loeb had the vision to see Yahoo for its immense potential — the potential to return to greatness as a company and the potential to deliver significant shareholder value,” Ms. Mayer said in a statement. “While there’s still a lot of work ahead, they’ve given us a great foundation.”

DealBook: Worried About Defeat for Dell Offer, Board and Bidders Prepare Maneuvers

Justin Sullivan/Getty ImagesMichael Dell and Silver Lake are working to convince Dell shareholders that they will not raise their $24.4 billion bid.

July 17, 5:05 p.m. | Updated

A high-stakes game of poker is now being played over the fate of Dell Inc., less than 36 hours before shareholders are scheduled to vote on the computer company’s proposed $24.4 billion sale to its founder.

A special committee of Dell’s board is poised to adjourn the vote on Thursday morning because it is concerned that the offer may be defeated by shareholders, people briefed on the matter said on Tuesday. The directors have signaled for days that they would rather postpone the shareholder meeting, giving them time to either elicit a higher bid from Michael S. Dell and his partner, the investment firm Silver Lake — or get the buyers to declare their current offer of $13.65 best and final.

Meanwhile, Mr. Dell and Silver Lake are working behind the scenes to convince shareholders that they will not raise their current offer and are prepared to walk away.

The jockeying comes amid more signs that the deal faces stiff investor opposition. BlackRock, which owns a nearly 4.5 percent stake, has voted no, according to one of the people briefed on the matter. And the mutual fund manager T. Rowe Price, which owns a 4 percent stake, said publicly on Monday that it remained opposed to the deal.

The primary opponents to the leveraged buyout, the billionaire activist Carl C. Icahn and the asset management firm Southeastern Asset Management, have pressed their argument that the proposed sale would shortchange investors. They contend that their plan, in which the company would buy back 1.1 billion shares for $14 apiece, would deliver more to fellow shareholders while letting them participate in any revival of the computer company.

In a letter to investors sent on Tuesday, the Dell special committee again sought to rebut Mr. Icahn’s claims, arguing that a so-called leveraged recapitalization would leave shareholders owning stakes in a more indebted company. Moreover, Mr. Icahn’s offer requires investors to completely replace Dell’s board with the activist’s own slate of candidates.

Still, the directors remain pessimistic because of the tough threshold for approval of Mr. Dell’s deal. More than 42 percent of the company’s shares must be voted in favor of the transaction. More than 21 percent of Dell’s shares — including the roughly 13 percent stake held by Mr. Icahn and Southeastern — is currently arrayed against the proposal, this person said.

By briefly opening the shareholder meeting and then adjourning, the special committee buys more time to twist arms. The maneuver will let the company maintain the current record date of June 3, the day by which investors must have owned shares to participate in the vote. (That said, Dell directors may be ultimately fine with moving the date.)

Both the special committee and the buyer group believe that many of Dell’s shareholders are wagering that Mr. Dell and Silver Lake will blink and raise their offer. By some estimates, nearly one-quarter of Dell shares held as of June 3 are now in the hands of arbitrageurs, who bet on the outcome of mergers.

But people close to the would-be buyers argue that there is less incentive than ever for the consortium to increase their bid, pointing to the company’s declining earnings; increasingly negative analyst outlooks on sales of personal computers; and the rising cost of debt borrowing.

As recently as last week, the research firm Gartner estimated that worldwide PC shipments had fallen from the year-ago period by roughly 11 percent, to 76 million units. That is the fifth consecutive quarter of falling sales.

Meanwhile, raising the offer above $13.65 a share could prove expensive. A 25-cent increase of the bid would require an additional $400 million or so in new equity, hurting the potential return of Mr. Dell and Silver Lake.

Any bump in price would need the approval of both partners, even as many shareholders are hoping that the company founder would succumb to pressure and make additional concessions to allow an increase in the price.

Shares in Dell closed on Tuesday at $13.02, down almost 1 percent.

DealBook: Michael Dell Is Said to Be Encouraged by Board to Raise Offer

Kimihiro Hoshino/Agence France-Presse — Getty ImagesMichael S. Dell, founder of the computer company that bears his name.

Michael S. Dell may have to dig deeper into his pockets if he wants his $24.4 billion bid for the computer company he founded to succeed.

A special committee of Dell’s directors encouraged him over the weekend to raise the offer price of $13.65 a share, a person briefed on the matter said on Tuesday.

Yet while Mr. Dell listened to the suggestion, he did not commit to a course of action. Furthermore, Mr. Dell and his private equity partner in the deal, Silver Lake, have not had any discussions about raising the current price, according to a person close to the firm.

Yet pressure is building on the buyout as two big Dell shareholders — Carl C. Icahn and the asset manager Southeastern Asset Management — continue to attack the deal with a shareholder vote drawing rapidly near.

The special committee is growing worried that the buyout offer will fail to win a majority of Dell shares that excludes Mr. Dell’s 16 percent stake at the vote on July 18, the person briefed on the matter said. Some 43 percent of the Dell shares need to be voted in favor of the offer. The directors have already taken a number of meetings with major investors that have left them pessimistic about the bid’s prospects, and now believe that a major shareholder advisory firm is poised to recommend a rejection of the takeover.

Mr. Dell’s offer, made in partnership with Silver Lake, has been criticized for months by a number of big outside investors. But any bump in price would most likely come from the company founder, who already made concessions to reach the current price.

Silver Lake, which had refused to raise the bid beyond $13.60 at one point, has become increasingly worried about the deterioration of Dell’s business, a person close to the firm said. At the moment, it would not be devastated if the deal fell apart.

That has left Mr. Dell — who agreed to contribute his 16 percent stake in the company at a price of $13.36 to leave more money for other shareholders — the most likely source of additional money.

Yet any bump in price from Mr. Dell would still need the assent of Silver Lake, since that would affect the returns on its investment.

A representative for Mr. Dell was not immediately available for comment.

The pressure on the current offer stems from the billionaire Mr. Icahn and Southeastern Asset Management. They are campaigning for an alternative plan: a huge stock buyback that would pay investors $14 a share and leave the company publicly traded.

Mr. Icahn pressed his attack in recent days, outlining the $5.2 billion in debt financing he has arranged with the investment bank Jefferies to support his proposal.

Other shareholders appear to have been little moved by Mr. Icahn’s announcements: Dell’s stock has risen 0.2 percent over the last five days, ending on Tuesday at $13.38.

The special board committee has heard from a number of investors that the current offer price was insufficient. And a tough meeting with Institutional Shareholder Services, the most influential proxy advisory firm, left directors with the impression that it would urge shareholders to vote down the transaction.

I.S.S. is expected to release its recommendation next week, and could still recommend that shareholders adopt Mr. Dell’s offer. It has told Dell’s committee that it is weighing the merits of the management buyout against inaction, and would not factor in an alternative plan like Mr. Icahn’s.

Traditionally, I.S.S.’s recommendations have held enormous sway over institutional investors, though in recent years the firm’s influence appears to have waned somewhat. Still, Dell’s special committee believes that a recommendation for the buyout would ensure its passage.

The special committee’s approach was reported earlier by CNBC.

DealBook: Oracle to Leave Nasdaq for the Big Board

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DealBook: Oracle to Leave Nasdaq for the Big Board

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H.P. Chairman Steps Down as 2 Resign From Board

The move may give Meg Whitman, H.P.’s chief executive, a little more breathing room in her long and painful effort to turn the technology giant around. H.P. is one of the biggest technology companies in terms of sales, but for years it has been marked with financial losses, bungled acquisitions, and turbulence in the executive ranks and boardroom.

Ms. Whitman, who took over in September 2011, has said H.P. will return to modest profitability in 2014 and have robust growth in the years after.

“The pressure is on Meg,” said Toni Sacconaghi, an analyst with Bernstein Research. But, he said, a housecleaning of the board “bought her a year.”

Mr. Lane, who will continue to serve on the board, will be temporarily succeeded by Ralph Whitworth, an activist shareholder who joined the H.P. board in November 2011. He has been a champion of Ms. Whitman.

No successors for the departing board members — John H. Hammergren and G. Kennedy Thompson — were immediately named. The two, who barely survived re-election to the board at a meeting in late March, are expected to serve until May.

During the shareholders meeting, Mr. Whitworth took the unusual step of indicating, while voting for directors was under way, that some board members would soon step down.

“All boards should evolve, certainly when they’ve had the recent past this one does,” he said. “You can expect some evolution of the board over the coming years — months, maybe.”

It is not clear whether this comment swayed some votes toward Mr. Hammergren and Mr. Thompson, two of the longest-serving board members. Mr. Hammergren received 54 percent of the vote and Mr. Thompson 55 percent. Mr. Lane was re-elected with 59 percent of all votes cast. Other board members had majorities of over 90 percent.

“Having under 60 percent is not a vote of confidence,” Mr. Sacconaghi said. “They worked hard to secure support, and in the end they barely got a majority for these three people. It reflected the sins of the past.”

Mr. Lane said the vote was a major reason he was stepping down.

“After reflecting on the stockholder vote last month, I’ve decided to step down as executive chairman to reduce any distraction from H.P.’s ongoing turnaround,” he said in a statement issued on Thursday by H.P.

In the same statement, Mr. Whitworth said Ms. Whitman “is leading a herculean turnaround, so most of all, we must build and maintain the best possible leadership structure for Meg and H.P.’s entire team to succeed.”

Mr. Lane and the other two board members were publicly criticized for their oversight of H.P., including a spectacularly expensive acquisition that later failed, both before and after the shareholder vote. On Thursday, their critics were quick to praise their resignations.

“Directors must be willing to ask tough questions, challenge assumptions and have the capacity to walk away from a deal that is unlikely to add value for shareholders,” said ISS, a proxy advisory firm that opposed Mr. Lane. “That clearly didn’t happen at H.P., and shareholders hold Mr. Lane accountable for that failure.”

The New York City comptroller, John C. Liu, another critic of the company, said in a statement, “H.P.’s board got the message.” He added, “This a good day for H.P., its board and its share owners.” The New York City pension fund has over $100 million in H.P. stock.

Mr. Hammergren, who as chief executive of the McKesson Corporation is one of the highest-paid chief executives in the United States, has served on H.P.’s board since 2005. He was on the board while it was at the center of a scandal involving spying on journalists, board members and employees, and during the 2010 resignation of Mark Hurd as chief executive after he admitted to improper relations with a contract employee.

Mr. Hurd’s successor, Léo Apotheker, lasted less than a year. He was hired without meeting or speaking with most members of the board. As chief, he agreed to pay $11.1 billion for Autonomy, a British software company and mused publicly about whether to sell H.P.’s personal computer business. He was succeeded by Ms. Whitman a month after those actions.

Late last year, H.P. took a more than $8 billion accounting charge in conjunction with the Autonomy purchase. It contended that it had been misled about the health of the company.

Mr. Thompson, a principal of Aquiline Capital Partners and a former chairman of Wachovia, joined the H.P. board in 2006, after the spying scandal. Mr. Lane, a former president of Oracle and a venture capitalist at Kleiner Perkins, joined the H.P. board in 2010. He was a vocal supporter of Mr. Apotheker.

Bits Blog: H.P.’s Board Wins Re-election Despite Opposition

Members of Hewlett-Packard’s board dodged a bullet Wednesday.

Despite opposition from two shareholder advisory services and several prominent institutional investors, all of the company’s 11 board members were re-elected at the company’s annual meeting in Mountain View, Calif., on Wednesday, receiving at least the minimum 50 percent of shareholder votes.

But in a few cases, the margins of victory were unusually narrow. And one highly visible and active board member, Ralph Whitworth, indicated that changes to the board would be coming soon.

“This board is among the best I’ve seen,” said Mr. Whitworth, who runs the Relational Investors fund, and owns $800 million in H.P. stock. “Having said that, all boards should evolve, certainly when they’ve had the recent past this one does. You can expect some evolution of the board over the coming years — months maybe.”

H.P. has had three chief executives in as many years, and last November took an $8.8 billion accounting charge in conjunction with its 2011 acquisition of Autonomy, a British software company, incurring shareholder wrath.

Mr. Whitworth did not say who might be going, but several members of the board have been criticized in the run-up to Wednesday’s vote.

John Hammergren, the chairman and chief executive of McKesson Corporation, and G. Kennedy Thompson, the former chief executive of Wachovia, who are the board’s longest-serving members, have come under particular fire. Raymond Lane, the board’s chairman, and Marc Andreessen, a prominent Silicon Valley investor, were also the target of critics because of their significant roles in the Autonomy acquisition.

In Wednesday’s voting, Mr. Hammergren was re-elected with a plurality of only about 54 percent of total votes cast, while Mr. Thompson got 55 percent. Mr. Lane received a 59 percent majority, while Mr. Andreessen got 70 percent.

One other board member, Rajiv Gupta, the former C.E.O. of Rohm and Haas and a board member since 2009, received a positive vote of about 80 percent. Everyone else, including Meg Whitman, H.P.’s chief executive, received a majority of 90 percent or higher.

Mr. Whitworth was extremely positive about H.P.’s prospects, echoing early comments by Ms. Whitman that the company was well along in its rebuilding plan and would have accelerated growth in 2014.

Ms. Whitman’s comments were almost a play-by-play repeat of earlier roadmaps for H.P. – get the finances under control, rebuild customer relationships, build better products, and teach the sales force to offer more profitable packages of H.P. products.

As earlier, she framed it in the context of making H.P. a leader in a technology world of cloud computing, mobile devices, data analytics and security.

While Ms. Whitman said things were proceeding according to schedule, Mr. Whitworth was even more positive.

“There are things going on under the surface here, maybe out of the spotlight, that are just incredible,” he said.

DealBook: Dell Board Committee Insists Sale Was Best Outcome

Sean Gallup/Getty ImagesA Dell display station at a technology fair in Germany.

The special committee of Dell’s board that supervised the company’s $24.4 billion sale to its founder reiterated on Wednesday that the deal was the best option for shareholders.

The committee said it bargained hard before the current offer to take it private was finalized.

“We negotiated aggressively to ensure that stockholders received the best possible value,” it said.

The statement comes after weeks of bickering between Dell and some of its shareholders, including its two biggest outside investors, over the $13.65-a-share bid from the company’s founder and chief executive, Michael S. Dell, and the investment firm Silver Lake Partners.

Southeastern Asset Management and T. Rowe Price, who together hold about 13 percent of Dell, have said they will not support the current offer.

Southeastern, an asset management firm with an activist streak, has hired advisers to advance its cause, and it demanded a list of Dell’s shareholders on Tuesday. The firm has said it values Dell at over $20 a share, and people briefed on the matter said it would prefer to see the deal die rather than let the current sale go forward.

For much of the last month, shares in Dell have traded above the offer price, suggesting investors are anticipating an improved offer from its founder. So far, Mr. Dell and Silver Lake have resisted improving their bid. Shares closed on Tuesday at $14.07.

In its letter to Dell’s directors on Tuesday, Southeastern wrote that the board “appears to have dismissed better alternatives for public owners and selected a transaction, which has been publicly derided by shareholders as opportunistic and grossly undervalued, that favors management.”

But the special committee said in its statement on Wednesday that it had considered all possible alternatives, including continuing Dell’s current business strategy; borrowing money and then paying out a special dividend; and selling all or part of the company.

The group, led by Alex J. Mandl, handled the sale negotiations, which were directed on the buyers’ side by Egon Durban, an executive at Silver Lake.

The committee also said it had requested a number of provisions designed to help any competing bidders make a higher offer, including a contract with the investment bank Evercore Partners that rewards the firm for finding a better offer.

Evercore has until March 22 to find a superior bid, though people briefed on the matter have said they do not expect any to arise.

DealBook: Yahoo Shakes Up Its Board

Araya Diaz/Getty Images for TechcrunchMax Levchin formed Slide, a company that helped produce Web applications for Facebook. He was nominated for director by Daniel S. Loeb.

Yahoo announced a number of changes to its board on Thursday, including the addition of Max Levchin, a co-founder of PayPal.

The company also said two directors were stepping down: Brad Smith, the chief executive of Intuit, and David W. Kenny, chief executive of the Weather Channel.

Yahoo’s latest board changes signal its continued push to become a top technology company once more, a strategy it began in July, when it hired Marissa Mayer away from Google to become its new chief executive.

Since taking over, Ms. Mayer has emphasized ways to modernize Yahoo staples like its e-mail and the Flickr photo service, to help the company square off against ever-newer competitors.

Bringing in Mr. Levchin is intended to help with that push and show a commitment to developing enticing new offerings. He served as PayPal’s chief technology officer before forming Slide, a company that eventually helped produce Web applications for Facebook. Google bought Slide for about $180 million two years ago, and Mr. Levchin left the Internet giant when it closed Slide last year.

“Max is someone I’ve admired throughout my career for his phenomenal sense for great products and keen focus on user experiences,” Ms. Mayer said in a statement. “I’m confident that his strong product and technology expertise will be a tremendous asset to Yahoo as we work to transform the world’s daily habits.”

Stephen Lam/ReutersMarissa Mayer, chief of Yahoo.Steve Marcus/ReutersDaniel S. Loeb, manager of the hedge fund Third Point.

He will serve as the fourth director nominated by Daniel S. Loeb, the activist hedge fund manager who joined Yahoo’s board in May after mounting a prominent challenge to the company’s directors. Mr. Loeb’s other directors, besides himself, are Michael J. Wolf, a media consultant, and Harry J. Wilson, a turnaround expert who served on the Obama administration’s automotive task force.

Since joining Yahoo’s board, Mr. Loeb has helped orchestrate a number of changes, including hiring Ms. Mayer.

Mr. Loeb was introduced to Mr. Levchin by Mr. Wolf, who had served on Slide’s board of advisers. They met in Silicon Valley ahead of the proxy fight, when Mr. Loeb was recruiting candidates for Yahoo board seats.

One of the departing directors, Mr. Smith, was a main supervisor of Yahoo’s turnaround efforts, including its talks with private equity firms about a capital infusion into the Web company and its eventual deal to sell some of its stake in Alibaba back to its Chinese Internet partner.

The other, Mr. Kenny, became the Weather Channel’s chief executive in January and was formerly the president of Akamai Technologies. Mr. Kenny had briefly considered campaigning for Yahoo’s top spot last year.

Both men were stepping down to focus on their respective companies, according to Yahoo.

“Both David and Brad played critical roles in bringing me to Yahoo, so I’m especially grateful for the opportunity and trust they’ve placed in me,” Ms. Mayer said. “We will miss their leadership and partnership, and I know I speak for everyone at Yahoo in wishing them the best.”

‘Glee’ Hunk — Shirtless, Ripped & Stiff as a Board

'Glee' Hunk
Shirtless, Ripped &
Stiff as a Board Here's the one reason you should still be watching "Glee" ... new cast member Dean Geyer's yoked body.

Flashing his ripped and hairless acting muscles, the 26-year-old skateboarded shirtless through Santa Monica on Wednesday.

Now this is something to sing and dance about.

 

Bits Blog: Carol Bartz on the Yahoo Board That Fired Her and Advice for Marissa Mayer

If Carol Bartz, the former chief executive of Yahoo, could go back in time, she would have changed one thing about her relationship with the board that fired her by phone last year.

Ms. Bartz would have spent more time understanding the relationships between the board members, she said Tuesday at Fortune’s Most Powerful Women summit in Laguna Niguel, Calif.

Alex Gallardo/Reuters Carol Bartz at Fortune’s Most Powerful Women event.

“I didn’t understand or have the time or take the time — that’s a much better thing to say, take the time — to understand the relationships they had between themselves,” she said.

How could she have done that as chief executive? “Well, you go in the men’s room,” she said. In reality, she added, she should have arranged dinners with two board members at a time.

Ms. Bartz gave Yahoo’s former board some credit — but also a little dig.

“Unfortunately for the board, they had gone through one year of the acquisition battle with Microsoft,” she said. “And in fairness to them, they just wanted it to be simple, like no more press, no more anything. But the business is tougher than that.”

Now Marissa Mayer has taken over as chief executive of Yahoo, with an entirely new board. Ms. Bartz said she and Ms. Mayer have spoken about the job.

Her advice for Ms. Mayer was to understand that change at such a big company is hard. Ms. Mayer is trying to change Yahoo’s culture in ways big and small, like serving free food and acquiring more startups.

“One piece of advice I would give her is changing culture is not a sprint, it’s a marathon,” Ms. Bartz said. “It’s very, very hard to affect culture. And you can get surprised thinking you’re farther down the path of change than you really are because, frankly, most of us like the way things are.”

Employees might nod when an executive suggests changes, she said, “then they go back to their cube and go, ‘I ain’t doing that.’ And so I think that’s important for all of us, is to realize how stuck individuals can be, much less 14,000 people.”

Ms. Bartz did not rule out taking another chief executive role, saying she is an opportunist rather than a planner.

“I grew up in a small town in Wisconsin,” she said. “I never thought I’d be where I am. I never thought I’d have bling,” she said, flashing the rings on her fingers before adding, with perfect comic timing, “that I bought.”

Ms. Bartz is the lead director of Cisco Systems, where she has been on the board for two decades, and she has also served on seven other public company boards during that time.

The difference between a good board and a bad one, she said, is not panicking, which she said the Cisco board achieves, and being genuinely interested in the company rather than prestige or money.

She said she has turned down board positions from banks because “I like banks because they keep my money safe, but I don’t want to talk about banks 12 times a year.”

Directors who are genuinely interested will take the time to get to know one another and the executives, but not be afraid to fire one another, she said.

“When trouble strikes, which it always does — bad economy, bad quarter, activists, takeover — when trouble strikes, those board members who don’t understand or are not committed are not helpful,” she said.

Google Goes Back to the Drawing Board for Nexus Q

But last week, just five weeks after the introductory pomp at the annual developers’ conference, Google indefinitely postponed shipment of the device.

Though Google was hardly betting the company on the Q, the failure reveals deeper challenges for the Internet search giant as it tries to move into two new areas: hardware and social technology. Though the hardware for the Q, which Google built in a factory in San Jose, Calif., has for the most part been well received, early users say the device simply does not do enough. And for what it does, at $299, it is too expensive.

The company’s only statement on the delay came in a letter to customers who had ordered it. The letter acknowledged the criticism of early users and said, “we have decided to postpone the consumer launch of Nexus Q while we work on making it even better.” Customers who ordered the device already will receive it at no charge.

Google’s push to build the Q is part of the epic battle between Google, Apple, Microsoft and Amazon.com for control of the living room — the TV shows and movies we watch, the music we listen to and the advertisements we see while sitting on the sofa.

“The battle for the TV is raging,” said James L. McQuivey, an analyst on media and technology at Forrester. “If you’re Google and you know the future of advertising is going to encompass all the screens — the ones you’re strong on, the PC and mobile phone, but also TV — then you’ve got to nail that piece or you run the risk of hitting a ceiling with your revenue potential.”

Advertisers are expected to spend $64.8 billion on TV this year, compared with $39.5 billion online, according to eMarketer, the advertising research firm. People are spending less time reading print publications or listening to the radio in favor of digital devices, eMarketer said, and they are spending more time watching old-fashioned TV.

The delay of the Q is not Google’s first misstep as it tries to become a consumer electronics company and make its products jump off computers and phones and into the family room. Google’s Internet-connected TV, Google TV, has struggled to sign on programming partners and rumbled with hardware makers, and has not caught on widely with TV viewers. Like the Q, it was delayed in its early days to improve the software, though Consumer Reports called LG’s latest Google TV the best version of the product yet.

The Q plugs into TVs or speakers so its owners can listen to music or play video from their Android phones or tablets. It is similar to devices like Apple TV, Boxee, Roku and Google TV.

But the Q is much more expensive than those products and does much less. It plays music, movies and TV shows only from Google Play’s limited collection and YouTube, and can be controlled only by Android devices. It is unclear how it would work with Google TV. The Nexus 7, however, a $199 tablet computer that Google introduced on the same day, has been met with rave reviews and is selling quickly, and can be used as a remote control for TVs.

Tech companies want people to buy their devices so they will also buy their media, and vice versa. Amazon.com sells Kindles so people will buy e-books from Amazon, and Apple sells music on iTunes so people will buy iPods. Companies are racing with one another, because once people store enough media with one service, it is much harder to persuade them to switch services or devices.

Though analysts say the race is far from the finish line, a problem for Google is that most people have not purchased much in the way of music and movies from Google.

“They only extended it to people who had music inside Google Music and media purchased off Google Play which, let’s admit, was a much smaller market than Apple iTunes, Amazon and any other media outlet,” said Chris Silva, a mobile analyst at the Altimeter Group. “They want to get people using Android and using Google Play for media and they know it’s an uphill battle, which is why they’re pushing it so hard.”

Google also hoped that the Q would be the centerpiece of its fledgling efforts to connect home devices to the Internet. It has said it wants to tackle not just the entertainment space but the whole home, eventually connecting coffee pots to the Internet so they can be turned off remotely, for instance, or refrigerators so they can order milk when it is running low.