Maureen, can you come in for a moment please?'' Aloke Basu spoke into the speakerphone. It wasn't 9 am yet-the scheduled office opening time-but Basu had already been at work for the last half hour. His secretary of five years, Maureen D'Souza, had been hauled out of bed by an early morning call from Basu, and she had reached office 15 minutes before her boss.

If the 48-year-old CEO of Prime Gadgets-an electronics equipment manufacturer-seemed nervous, it was for good reason. The previous evening, he had signed a deal with TelECom-a telecom gear manufacturer-to be acquired for Rs 750 crore. Later in the day, he was going to break the news to his employees. But before that he had an important moral responsibility to deal with. He had to have a chat with Nirupam Balakrishnan-a friend and also the head of Prime's handheld computer business. Barely two years ago, Prime had acquired Balakrishnan's fledgling Hand Technologies, which had a great product idea but little money to commercialise it. Balakrishnan's pet project was now nearing completion, and if the boat was going to be rocked, then Basu had better alert his friend.

''Sorry, Maureen,'' Basu said coming out of his reverie. ''We've got a busy day ahead. First of all, I want you to organise for Nirupam to meet me at the conference room in another 30 minutes. At 4 pm, I want to meet everybody else at the cafeteria.''

At exactly half-past-nine, Maureen announced the arrival of Balakrishnan. Basu got up from his chair and walked halfway across his room to greet his friend. ''Boy, is somebody extra polite today,'' Balakrishnan quipped as he took a seat.

''Nirupam, I wanted you to be the first to hear it,'' Basu said, pausing for effect. The man in front of him stiffened. ''I am selling out.''

''I don't believe this,'' roared Balakrishnan. ''You make it sound as if you are going on a vacation. Before I ask you who the buyer is, I want to know if you put anything in the agreement that secures Hand Tech's future.'' Balakrishnan still referred to Prime's division as Hand Tech. ''You know my project is at a critical juncture. And I hope I don't have to go looking for a new investor at this stage.''

''You won't have to,'' said Basu. ''You, your project, and your team have all been taken care of. In fact, Hand Tech is one of the reasons why TelECom agreed to buy us. It's a hardware conglomerate that now wants a slice of the consumer electronics pie. Under the new arrangement, both Prime and Hand Tech will become divisions of TelECom, which has deeper pockets than Prime. So, you may have more money flowing into your R&D.'' Before the meeting concluded, Basu made it clear that he would continue to head Prime's business (as TelECom's division) and Balakrishnan would be the head of Hand Tech.

A week after the deal was made public, Homi Guzder, CEO of TelECom, along with his Director (Corporate Affairs), Rohit Kapoor, and VP (Business Development), Pradeep Singh, paid a visit. Guzder didn't pussyfoot. He made it clear that TelECom would henceforth be calling the shots and Singh would be the pointman for both Prime and Hand Tech. When the meeting was over, Balakrishnan left with a bad taste in his mouth.

The first three months of the merger went without any hitch. But then trouble started. Some senior executives at Prime were unhappy with the new reporting structure. Singh, they accused, had too many things on his platter and wasn't devoting any time to address their issues. There was just three months to go before Basu moved out of Prime, but Singh had made no effort to identify a successor. Rumours were that Singh wanted himself to be the division's boss.

Fights got messier when it came to capital allocation. Meetings were already on for next year's budgets, but it was obvious that the diversified TelECom's other businesses would sponge on the profits of Prime. Balakrishnan feared worse. Not only was TelECom's structure too bureaucratic for Hand Tech's comfort, but budgets were proving to be a big problem. Since Hand Tech had no revenues, forget profits, to show, TelECom's senior executives were against spending too much on the division. Privately, Guzder seemed to share the view. When the annual allocations left Balakrishnan hand-to-mouth, he decided to have a chat with Guzder.

The new CEO, as usual, was to the point. ''Look, Nirupam we are still trying to digest the Prime acquisition. I cannot afford to invest any more time and money into Hand Tech than we already do.''

''I don't want your time, only money,'' Balakrishnan clarified. ''And I am not even suggesting that you increase my budget. I want you to consider spinning off Hand Tech as a separate company. I have spoken to a few merchant bankers. If our new product becomes a hit, we can expect a tidy sum from the IPO.''

''That's a big if, as I see it,'' replied Guzder without batting an eyelid. ''That said, a spin off might be a good idea. But only in the long term. Meanwhile, do a good job of the product.'' With that the meeting was over.

The following month saw the launch of Hand Tech's handheld computer. It was an instant hit. Over the next six months, the product not only topped sales charts, but also got other electronics majors interested in the segment. Indeed, it seemed that an industry was being born. Balakrishnan had four more products in the pipeline, but he needed a lot more money than TelECom was willing to invest. He decided to have another chat with Guzder.

''I've done my bit of the bargain,'' Balakrishnan said as soon as the meeting got underway. ''It's your turn now.''

''Guess what?'' said Guzder. ''I spoke to a few merchant bankers myself and they say Hand Tech will do just fine as a division of TelECom. You are making decent profits. An IPO may not yield our shareholders any more value.''

''I am happy that you finally seem to find Hand Tech attractive enough,'' replied Balakrishnan. ''But the ballgame now changes. We have at least four big companies working on similar products. I need big budgets to boost my R&D and marketing spend. And that will happen only when we spin off Hand Tech.''

''TelECom's stock will take a hit if I spin off Hand Tech,'' said Guzder. ''I would be foolish to do that.''

''But Hand Tech will be slaughtered if the big companies enter the market. I need to expand R&D and marketing. It's as simple as that.''

''I am not sure,'' Guzder dithered. ''Let me give it another thought.''

What should Guzder do? Should he spin off Hand Tech and risk a run on TelECom's stock or retain it as a division and hope that Hand Tech will somehow succeed in fighting its bigger rivals?

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