Friday, July 31, 2015
Weak oil hits Exxon Mobil, Chevron; Emergency measures fail to halt China stock slide; Volkswagen beats Toyota in top automaker race
1 Weak oil hits Exxon Mobil and Chevron (BBC) Plunging crude oil prices weighed on quarterly earnings at the world's biggest oil company. Exxon Mobil reported it earned $4.2bn in the second quarter, which marked a drop of more than 50% from last year. Since last year, Brent crude oil prices have fallen more than 40%.
"Our quarterly results reflect the disparate impacts of the current commodity price environment, but also demonstrate the strength of our sound operations, superior project execution capabilities, as well as continued discipline in capital and expense management," said Rex Tillerson, Exxon Mobil's chairman and CEO.
The massive drop in crude oil prices also weighed on results at oil producer, Chevron. Second quarter profit fell 90% from last year, to $571m. "Second quarter financial results were weak, reflecting a crude price decline of nearly 50% from a year ago," Chevron chief executive officer, John Watson, said.
Oil giant Royal Dutch Shell announced this week it has shed 6,500 jobs as part of cost-cutting plans as it seeks to counter falling oil prices.
2 Emergency measures fail to halt China stock slide (Katie Allen in The Guardian) On the Chinese stock market, on one side there are the individual investors, who are in the midst of what may be the greatest wave of panic-driven selling we’ve witnessed since Black Tuesday, when billions of dollars were lost in a single day of trading on the New York stock exchange. On the other side: the Chinese government. Worryingly, there’s some evidence that the rest of us are stuck in the middle.
The average Chinese investor had been all too eager to participate in the speculative frenzy that sent the Shanghai Composite Index from only 2,000 points in July 2014 to a peak of 5,200 a little more than a month ago. Nearly 6% of new investors’ households weren’t literate by any measure, according to one survey.
As happens with all bubbles – something happened to make someone pause and say “Wait a second, this is absurd” and start to sell, the fallout was equally violent: a decline of 8%, of 14%; a string of losses that so far has caused some $4tn in market value to simply evaporate in less than a month.
Now that an estimated 90 million Chinese citizens probably are sitting on outsize portfolio losses, the selloff presents a direct challenge to the leadership of China, President Xi Jinping and his colleagues. Unsurprisingly, they have combatted the selloff ferociously. Short selling? Limited, as the state press hints that it’s unpatriotic. The government has launched a $120bn market stabilization fund, suspended IPOs, and has banned insiders like CEOs and board members from selling stock in their companies for at least the next six months.
There are many ways in which what’s happening in China today could affect our financial futures for years to come, given the importance of the country in the global economy. Consider, for a moment, that events in China have already sent investors fleeing to bonds as a safe haven once more. Then there is the commodities market, where China has long reigned supreme. It is already weighing on the economic outlook for resource-rich nations like Australia.
3 Volkswagen beats Toyota in top automaker race (Johannesburg Times) Toyota has fallen behind Volkswagen in the race for the world's biggest automaker title, as the German giant outsold its Japanese rival in the first half of the year. Toyota said it sold 5.02 million vehicles worldwide between January and June, falling below earlier figures from Volkswagen of 5.04 million units shifted in the same period.
US-based General Motors was sitting in third spot with 4.86 million in sales. Camry and Prius maker Toyota broke GM's decades-long reign as the world's top automaker in 2008 but lost the crown three years later as Japan's 2011 earthquake-tsunami disaster hammered production and disrupted the supply chains of the country's automakers.
In 2012, Toyota again overtook its Detroit rival, which sells the Chevrolet and luxury Cadillac brands, to grab the top spot globally. But the Japanese automaker is expecting sales this year to slip to 10.15 million from a record 10.23 million vehicles in 2014, owing to a shaky outlook for Japan and as it beefs up its focus on quality after a string of safety scandals.
Volkswagen is now in pole position as the German automaker rides momentum in emerging economies that will likely see it take the top spot in annual global auto sales for the first time in 2015. Toyota, among other major automakers, has also been struggling to recover a reputation for safety after the recall of millions of cars around the world for various problems.
Thursday, July 30, 2015
US growth picks up to 2.3%; Shell and Centrica cut 12,000 jobs; How not to be too busy for one's own good
1 US growth picks up to 2.3% (BBC) The US economy grew at an annualised pace of 2.3% in the three months to June. The figure - the first estimate of growth in the second quarter - followed an upwardly revised growth rate of 0.6% in the first three months of the year.
The Commerce Department said growth was boosted by increased consumer spending and cheaper fuel prices. Analysts said the figure could make the US Federal Reserve more likely to raise interest rates in September.
The 2.3% annualised growth rate is equivalent to 0.6% growth quarter-on-quarter, as measured in most other countries. For example, on Tuesday, official figures showed that the UK economy grew by an estimated 0.7% in the April-to-June period from the previous quarter.
Recent figures have shown the US economy creating more than 200,000 jobs a month, and the unemployment rate has now dropped to 5.3%. The latest figures fit with the pattern seen since the recession ended six years ago: weak growth at the start of the year, followed by a rebound in spring and summer.
The Commerce Department also downgraded its estimates for US growth between 2011 and 2014, saying the economy expanded at an average annual rate of 2% rather than the 2.3% previously forecast, underlining the tepid expansion.
2 Shell and Centrica cut 12,000 jobs (Terry Macalister in The Guardian) More than 12,000 jobs are being axed by two of Britain’s leading energy companies on the back of lower oil prices and major internal restructuring.
Shell is to cut 6,500 staff and contractors worldwide while Centrica, the owner of British Gas, wants 6,000 jobs to go, mainly in the UK. The cutbacks at Centrica – one of the big six domestic gas and electricity suppliers – is likely to cause a political storm as the British Gas arm doubled its profits to £528m.
The price of oil has halved over the past 12 months, forcing oil and gas companies to go on the defensive and spending to be slashed. But Centrica has come under new management, which promised radical change. Shell saw its second-quarter profits slump by 35% to £3.36bn, while Centrica’s first-half adjusted operating profits were down by only 3% to £1bn.
Centrica, under its new boss, Iain Conn, says it wants to save £750m of annual cost savings by 2020 and plans to dispose of up to £1bn of oil and wind assets. Conn, who was brought in from BP at the start of the year, said he was cutting back on North Sea exploration and production, as well as power generation but promised to keep investors happy.
3 How not to be too busy for one’s own good (Jesse Sostrin in San Francisco Chronicle) You have likely heard some version of this conventional wisdom about business success: If you work longer, push harder and give more, then you might break through. But you've also likely pondered the problem: How can you break through when you’ve pushed yourself to the breaking point?
I believe it is time for busy entrepreneurs, managers and leaders to take off their superhero capes once and for all; the superhuman notion of getting more and better work done with fewer resources is a profoundly damaging myth whose time has passed.
The reason is the destructive pattern that stems directly from the myth and affects the vast majority of entrepreneurs, managers and leaders. The problem with this inverse equation is that when demands outpace the resources you have available, you end up negotiating with yourself about which fire of the day you will put out while painfully neglecting the others. I call this set of imperfect choices the manager’s dilemma because it is truly a no-win situation without an obvious solution.
To assess your own risk level for the dilemma, answer these three questions: Have the demands on you increased over the past several months? Are they likely to stay elevated and/or continue rising? If your demands have increased, have you gained enough additional time, energy, resources and focus to adequately address them?
You’re tilting toward the danger zone if you answered “yes,” “yes” and “no” to these questions -- describing a sequence that reflects the underlying dynamic of the inverse equation. If you can’t afford to relax and recharge because things are too busy, then you know you must make the time.
And if some priorities have to be sacrificed because you are overwhelmed by too many deadlines and demands, then you know you have to redefine what truly matters and commit to that. If you cannot make these changes, you just might be too busy for your own good.
Wednesday, July 29, 2015
Half of online world use Facebook; England bankruptcies lowest in 15 years; Whitney Houston and virtual heir apparents
1 Half of online world use Facebook (Katie Hope on BBC) Half the world's estimated online population now check into social networking giant Facebook at least once a month. Facebook said the number of people who check into the social network at least monthly grew 13% to 1.49 billion in the three months to the end of June.
The number is equal to half of the estimated three billion people who use the internet worldwide. Of those users, it said well over half, 65%, were now accessing Facebook daily. The rise in monthly active users helped drive second quarter revenue up 39% year-on-year to $4.04bn. Mobile advertising revenue was the biggest factor, accounting for more than three quarters of the total.
In the US, the company said people were now spending more than one out of every five minutes on their smartphones on Facebook. "But as well as keeping an eye on the short term gains they're also keeping an eye on the long term so they're future proofing themselves - it's clear this is an organisational imperative," Forrester analyst Erna Alfred Liousas said.
Facebook said that costs and expenditures for the quarter had surged by 82% to a hefty $2.8bn. As a result, net income fell 9.1% to $719m - equal to 25 cents a share - but the firm said if various expenses were excluded earnings would have been 50 cents a share.
Facebook also highlighted the increasing importance of video, saying that usage continued to grow. And it said it would start selling its Oculus Rift 3D headset in the first three months of next year. "3D content is the obvious next thing after video. Video will be huge, gaming will be huge. Once you start to get a critical mass we can get a social app which we are more specialised in," said Mr Zuckerberg.
2 England bankruptcies lowest in 15 years (Patrick Collinson in The Guardian) Just one person was made bankrupt in the City of London in 2014, compared to 101 in Blackpool, according to figures from the Insolvency Service which reveal a deep north-south divide in debt problems.
The total number of personal bankruptcies in England and Wales peaked during the financial crisis in 2009, but has fallen dramatically and now stands at the lowest level for 15 years. Part of the reason is that individuals are opting for other forms of insolvency – such as individual voluntary arrangements [IVAs] and debt relief orders [DROs]. These have fallen from the peak seen in 2009, but are still nearly three times the rate in 2000.
Blackpool council said 2014 was a good year for the town’s tourist trade, but acknowledged the deep financial problems faced by many residents. “We are one of the most economically deprived areas in the UK so perhaps it’s not that suprising we have a high level of personal insolvencies. Studies have also shown that Blackpool has been among the towns hardest hit by government cuts.”
Nationally, debt advisers are warning that interest rate rises and the loss of tax credits is likely to see the downward trend in insolvencies since 2009 go into reverse. Jane Tully of the Money Advice Trust, said: “This steady downward trend in insolvencies is welcome news. We must be mindful, however, of what lies ahead. Household debt is forecast to pass its pre-recession peak of 169% of household incomes in 2020. We are concerned that many will turn to credit to plug gaps in their budgets.”
3 Whitney Houston and virtual heir apparents (Khaleej Times) With the untimely and unfortunate death of Bobbi Kristina Brown - the late Whitney Houston's daughter - there is widespread speculation on what will happen to Houston's financial 'legacy': her life's earnings, her properties - that would have normally been passed on to her daughter. With Bobbi Kristina dead at 22, the field has been left wide open.
Who will inherit Whitney Houston's vast fortune? It's turned out to be a million-dollar question. It is ironical that on the same day Facebook introduced its legacy feature in the UK; it's now gone live, and millions of Facebook users can now nominate an 'inheritor'.
We've all heard of apps that continue to tweet your train of thoughts after you're dead and gone - and it sounded somewhat odd, even morbid, that you could pretend to live on virtually. But what Facebook is doing is creating a property out of its page (the legacy feature will soon be a worldwide phenomenon); it's almost like having a piece of real estate with your personal touches (and possessions) in place, and you are, in turn, "willing" it to who you consider your most worthy inheritor: the one who will take forward your vision.
Although it may seem like overarching ambition on Zuckerberg's part to assume his brand can be this valuable, Netizens are excited at the prospect. Some are being made to feel important that this is yet another feather in their caps, one that can be "passed on"; and some are made to feel equally important that they stand to inherit something so virtually valuable.
And there is bound to be a smaller percentage of Facebook users who will perhaps get creeped out at the prospect of their social media page being used as a goldmine. Here too, the field is wide open, and as Facebook would say, more comments are awaited.
Monday, July 27, 2015
IMF warns of gloomy Eurozone outlook; China keeps buying shares as markets tank again; UAE moves to subsidy-free oil regime
1 IMF warns of gloomy Eurozone outlook (Katie Allen in The Guardian) The International Monetary Fund has warned the eurozone faces a gloomy economic outlook thanks to lingering worries over Greece, high unemployment and a banking sector still battling to shake off the financial crisis.
The IMF’s latest healthcheck on the eurozone found it was “susceptible to negative shocks” as growth continues to falter and monetary policymakers run out of ways to help. It called for an urgent “collective push” from the currency union to speed up reforms or else risk years of lost growth.
Near-term fillips such as the European Central Bank’s (ECB) massive money-printing programme, low oil prices and a weak euro could only spur the economy for so long, IMF staff said after its annual discussions with eurozone policymakers. In the Fund’s view the medium-term looks subdued because of “a chronic lack of demand, impaired corporate and bank balance sheets, and deeply rooted structural weaknesses”.
The IMF’s review said: “The recovery is strengthening, underpinned by lower oil prices and the ECB’s expanded asset purchase programme. But the medium-term outlook remains weak, weighed down by the legacies of insufficient demand, lagging productivity, and weak bank and corporate balance sheets.
It urged the ECB to stand ready to expand its quantitative easing (QE) programme, where it buys eurozone governments’ bonds using electronically created money, if financial conditions get significantly tighter and also said the scheme might need to go beyond September 2016, currently pencilled in as the end-date. The IMF is forecasting eurozone GDP growth of 1.5% this year and 1.7% next year.
2 China keeps buying shares as markets tank again (BBC) In an effort to prop up its stock market, Chinese regulators said they are continuing their purchase of shares. The move by China Securities Finance Corporation (CSFC) was made to dispel "rumours that the national margin trading service provider has backed off from stabilizing the stock market."
Chinese stocks tumbled 8.5% earlier. That was their biggest drop in a single day since February 2007. The decline followed weak economic data on profit at Chinese industrial firms on Monday and a disappointing private factory sector survey on Friday. Investors were also worried by reports the CSFC had started to return - ahead of schedule - money it borrowed to stabilise the stock market.
China's government's rescue plan to keep the value of stocks, or equities as they are also known, has included a police crackdown on short-selling - betting on the decline of shares' values - and a six-month ban on big shareholders selling stocks.
3 UAE moves to subsidy-free oil regime (Haseeb Haider in Khaleej Times) A high-powered committee is meeting at the Ministry of Energy in Abu Dhabi today to review and determine new oil prices, which will be implemented from August 1 in line with the government's policy of zero subsidy on petroleum products.
Moody's Investors Service and Bank of America Merrill Lynch, meanwhile, have welcomed the introduction of subsidy reforms in the UAE. In its credit report, Moody's Investors Service said government finances - dented by the downturn in global oil prices - will receive a boost.
The Abu Dhabi government's subsidies and transfers likely stood at Dh48 billion in 2014 or 5.8 per cent of GDP, but this largely represents the Abu Dhabi Water and Electricity Authority's water and electricity tariff support, as the latter represented a third of total on-budget subsidies in 2011.
The remainder of the subsidies was accounted for by housing support, Northern Emirates support, industrial, social and other support. The fiscal benefits are therefore indirect, the research said. Energy subsidies and rapid domestic energy consumption growth pushed the fiscal breakeven oil price higher as Adnoc profit taxes remitted to the budget have been lower than otherwise.
"Despite progress in diversification, hydrocarbon revenues comprised 75 per cent of the UAE's consolidated revenues in 2014," said Mathias Angonin, an analyst with Moody's Investors Service in Dubai. Moody's expects a 27 per cent drop in consolidated government revenues, in line with a forecast for Brent crude prices to average $60 per barrel in 2015, versus $101 in 2014,
In 2015, the UAE will likely face a fiscal deficit of 2.3 per cent of GDP, its first deficit since 2010, and a decline from a 10.3 per cent surplus in 2014. Phasing out fuel subsidies will partly offset the negative effect of lower oil prices. Increases in gasoline prices will reduce the economic cost of subsidies the UAE public sector has provided to domestic consumers.
Sunday, July 26, 2015
Tough times for global mining industry; Africa cannot choose between democracy and security; UN restores Timbuktu's destroyed mausoleums
1 Tough times for global mining industry (Nils Pratley in The Guardian) The party is over in the mining industry – again. There is a strong whiff of 2009, the year after the great financial crisis. Almost every commodity is falling in price. Assumptions for demand, investment, jobs and shareholders’ dividends are being ripped up.
The share price of once-mighty Anglo American illustrates the industry’s feast-or-famine characteristics. Between 2003 and 2009, Anglo’s shares travelled from 900p to £33 and then back to 900p; after 2009, they rose again to £33 but are now 778p.
How does that happen? The group’s Minas-Rio operation in Brazil was conceived in 2007 when the price of iron ore was $150 a tonne. Anglo spent $8.4bn, instead of a planned $2.9bn, on building the mine plus infrastructure. Throw in acquisition costs and Anglo owned an asset with a notional value of $14bn. Three write-downs later, and with iron ore fetching closer to $50 a tonne, Minas-Rio is now valued by Anglo at just $3.6bn.
Part of that financial pain was self-inflicted. The deeper malaise affecting the entire industry is weaker demand from China, the biggest consumer of raw materials. A country with 20% of the world’s population takes about 45% of global copper production; and Chinese steelmakers buy almost 60% of exported iron ore, mostly from Brazil and Australia. When China slows, upsets happen.
One difference from 2009 is more encouraging for the producers. Balance sheets are stronger and most mining chief executives, instead of placing blind faith in a “stronger for longer” commodities supercycle, have been talking the language of production efficiency and investment discipline.
2 Africa cannot choose between democracy and security (Howard LaFranchi in Christian Science Monitor/Khaleej Times) Critics fault president Barack Obama for failing to offer Africa the kind of generously funded programmes that president George W. Bush did with his President's Emergency Plan for AIDS Relief (PEPFAR) and the Millennium Challenge development initiative, and for ceding America's preeminent place in Africa to a resource-hungry China.
But the Africa trip to Kenya - his paternal family's home - before continuing on to Ethiopia offers him an opportunity to put his Africa policy on more concrete footing. Obama's fourth Africa trip as president presented a stage for him to lay out the more pragmatic policy he has developed for the continent in the homestretch of his presidency.
It's a policy that is heavier on partnership and fostering homegrown entrepreneurship than on big-ticket aid programmes, while moving away from the reliance on the symbolism of the administration's early years, Africa analysts say.
"Obama came into office as a symbol for Africa, being the first African-American president, but that generated very high expectations that in turn led to very deep disappointment when it turned out Africa was not the priority for the US that people expected," says Joseph Siegle, director of research at the National Defence University's Africa Center for Strategic Studies in Washington.
Critics say Obama's focus on pragmatic approaches to Africa has led him to play down the emphasis on democratisation and human rights that has long been a hallmark of US Africa policy. Indeed, his decision to include Ethiopia in this trip drew howls of protest from human rights advocates who blast the Horn of Africa country as one of the continent's most authoritarian regimes and worst violators of rights, particularly freedom of expression.
"Africa is growing - Kenya, in particular, is enjoying sustained economic growth - but this growth tends to be highly unequal" and too often tied to corruption, Siegle says. "The rising inequalities are a particularly strong rallying cry for armed violence," he adds. Africans have to realize that democracy and security go hand in hand, that they can't have one without the other.
3 UN restores Timbuktu’s destroyed mausoleums (San Francisco Chronicle) Fourteen mausoleums in Mali's northern city of Timbuktu that were destroyed by Islamic extremists have been restored by the United Nations. UNESCO's director general and Mali's cultural minister inaugurated the reconstructed mausoleums in the desert city that was once a major center of learning and trade in the Middle Ages.
The entire city of Timbuktu is listed as a World Heritage Site by UNESCO. At the peak of its influence in the 15th and 16th centuries, Timbuktu counted 180 schools and universities which received thousands of students from all over the Muslim world. Islamic radicals who overran Timbuktu in 2012 destroyed 14 of the city's 16 mausoleums, one-room structures that house the tombs of the city's great thinkers. The extremists condemned the buildings as totems of idolatry.
The mausoleums were left barely more than heaps of mud, reminders of the brutal rule of the militants, who imposed an extreme version of Islamic law on this fabled city, forcing women to wear veils, banning music and carrying out executions and public whippings. The militants were driven out after nearly a year by a French military intervention.
The reconstruction of the mausoleums took more than a year and cost about $500,000, UNESCO said as part of a series of projects in Timbuktu being carried out by UNESCO.
Friday, July 24, 2015
WTO's 'landmark' IT trade deal; New York's $15 per hour highest minimum wage; New skills for the changing workplace
1 WTO’s ‘landmark’ IT trade deal (BBC) The World Trade Organisation (WTO) has struck a "landmark" deal to cut tariffs on $1.3 trn worth of technology products. The deal will update the 18-year-old IT Agreement and add 200 products to the zero tariff list. It is expected to give a boost to producers of goods ranging from video games to medical equipment.
The WTO says the sum is equal to global trade in iron, steel, textiles and clothing combined. "Today's agreement is a landmark," said WTO Director-General Roberto Azevedo. The final technical details will be worked out until December.
The existing 1996 IT agreement was seen by industry and policy makers as woefully out of date as it did not cover devices and products invented since then. Technology manufacturers such as General Electric, Intel, Texas Instruments, Microsoft and Nintendo are among the many companies expected to benefit from the deal. Negotiations on updating the technology agreement began in 2012.
2 New York’s $15 per hour may be highest minimum wage (George Arnett & Alberto Nardelli in The Guardian) Fast-food workers in New York City will be paid a minimum wage of $15 an hour by 2018 with the rate rolling out to the rest of the state by 2021. The move follows more than a year of campaigning on the issue. San Francisco, Los Angeles and Seattle have all approved a $15 minimum wage for all employees in the three cities.
At today’s exchange rate, $15 is a higher minimum wage than any other major jurisdiction in the world. Australia comes closest with a $12.50 base hourly wage. Major European economies such as France and Germany (which introduced a minimum wage after the last general election) hover around the $10 and $9 mark respectively.
The rate is below $5 an hour in Greece and Spain, which is similar to Japan ($6), and even lower in Brazil where it’s $1.25 - though of course the cost of living varies between states and countries. An hourly wage of $15 is of course still the exception in the US and many jobs are exempt from the rate. The minimum wage at a federal level is $7.25.
3 New skills for the changing workplace (Chia Yan Min in Straits Times) In the past 20 years, the computer and digital revolution has changed the workplace almost beyond recognition, and jobs that involve repeated, routine actions are being replaced by automated machines and robots, says Ms Christine Wright, managing director of recruiting experts Hays.
This disruption is taking place across all industries and in all geographies. According to a 2013 study by the Oxford Martin School, 47 per cent of all jobs in the US and Britain are at risk because of computerisation. Amid this upheaval, new jobs and industries are coming to the fore. For instance, Google - now so ubiquitous that it even has its own verb - was founded just 17 years ago.
Other key trends are also emerging, including a growing ageing population in the developed world and their attendant healthcare needs as well as the anticipated vast spending on infrastructure in developing countries, notes Ms Wright. These developments will bump up global demand for healthcare professionals, architects and civil engineers in the coming decades.
Large e-commerce retailers are looking for people "who can think of the entire e-commerce supply chain". "A very different set of skills is needed to sell in the digital world, compared to brick and mortar," says Aparna Bharadwaj of the Boston Consultancy Group.
Tuesday, July 21, 2015
Record third quarter for Apple; US tech rally seen unraveling; Toshiba scandal mars Japan corporate governance image
1 Record third quarter for Apple (Katie Hope on BBC) Apple has posted a record third quarter as soaring demand for iPhones sent profits higher. The technology giant sold 47.5 million iPhones in the quarter to 27 June, up 35% on a year ago, with Mac computer sales up 9% to 4.8 million. The performance resulted in what chief executive Tim Cook called "an amazing quarter".
Profits rose by 38% to $10.7bn, while revenue was up 33% to $49.6bn. The third quarter is typically the slowest for iPhone sales because many customers put off buying new phones, on the expectation of a new model. Despite the strong results, shares fell 6.7%, or $8.85, to $121.89 in after-market trading in New York.
Analysts blamed the fall on disappointment about the company's revenue forecasts for the fourth quarter, which were slightly lower than expected, as well as the firm's profits being too heavily dependent on the iPhone. Demand for its iPad tablets remained weak, with Apple selling 10.9 million, down 18% from a year earlier.
Apple said its gross margin - the difference between the amount it spends on making the products versus how much consumers pay - was 39.7%, up slightly on a year ago. But Colin Gillis, an analyst for BGC Partners, said that the firm's "complete dependence" on iPhone sales and growth in China was still a concern.
2 US tech rally seen unraveling (Straits Times) The biggest technology rally since October was knocked cold, as disappointing earnings reports punished Microsoft and left Apple in danger of its worst-ever loss of market value.
Five days after Google's earnings sparked the largest one-day increase in market capitalization, computer and software shares are tumbling. Apple, Microsoft and Yahoo! retreated on disappointing results. Apple, the world's most valuable company, dropped 6.7 per cent, a slump that would wipe more than $50 billion from its value.
Cracks in the facade appeared before Tuesday. Intel, kicking off earnings by the largest US technology companies last week, said it expects the personal-computer market to fall further than expected, spotlighting the challenges for chipmakers. International Business Machines Corp. dropped 5.9 per cent during regular trading Tuesday after sales fell for a 13th quarter.
At the start of the year, analysts forecast the technology sector would deliver a 13 per cent increase in profit during the second quarter, according to a Bloomberg survey. Those expectations were lowered to a 2.4 per cent gain as of July 17.
Apple had recovered almost 10 per cent in the past two weeks leading up to earnings, after being pushed to the brink of a correction. The shares dropped 9.7 per cent from an all-time high in February through July 9, erasing $83 billion of market value, amid concern a rout in China's market would leave consumer with less money to buy gadgets.
3 Toshiba scandal mars Japan corporate governance image (Martin Foster in The Guardian) The Toshiba accounting scandal comes just six weeks after the introduction of a corporate governance code in Japan that was meant to pave the way to a more open dialogue between companies and shareholders.
Toshiba overstated its operating profits by 151.8bn yen (£780m) over several years in accounting irregularities involving its top management, independent investigators said on Monday. On Tuesday, the president, vice-chairman and adviser quit.
“The scandal is definitely is a big hit for the Abe regime and Abenomics, since reformed corporate governance is a key element of Japan’s growth strategy,” said Andrew DeWit, a professor at Tokyo’s Rikkyo University.
Japanese companies have had a history of difficult relationships with their shareholders. An ACCA and KPMG Singapore corporate governance report released in November 2014 ranked Japan 21st of 25 countries surveyed, behind the Philippines, Indonesia, Cambodia and China.
The similarities between the Toshiba case and that of Olympus – whose boss quit in 2011 after it was revealed that $1.7bn (£1.1bn) of losses had been hidden – have not gone unnoticed.
Monday, July 20, 2015
Euro as the 'New' Coke of currencies; IBM sales drop for 13th straight quarter; Why parents push kids into the rat race
1 Euro as the ‘New’ Coke of currencies (Larry Elliott in The Guardian) The date 23 April 1985 was a momentous day in the life of the Coca-Cola corporation. For years, the company had been planning a new drink to see off the challenge from Pepsi. There was no expense spared for Project Kansas.
“New” Coke (as it was dubbed) bombed. The company responded with alacrity. It didn’t say consumers were wrong. It didn’t say that given time New Coke would be a success. Instead, it recognised that there was only one option: to go back to the traditional formula. This returned to the shelves on 11 July 1985, within three months of “New” Coke’s launch.
There is a lesson here for both businesses and policymakers – and European policymakers in particular. Sixteen years after its launch, it should be clear even to its most die-hard supporters that the euro is New Coke. European politicians took a formula that was working and messed around with it.
They changed the ingredients that made the European Union a success, thinking it would be an improvement. Coca-Cola thought New Coke would see off the challenge from Pepsi. Europe thought the euro would see off the challenge from the US. Both were wrong. The only difference is that Coke quickly saw the writing on the wall, and that Europe still hasn’t.
It is not hard to see why the pre-euro European Union was popular. The EU was seen as a symbol of peace and prosperity after a period when the continent had been beset by mass unemployment, poverty, dictatorship and war. Britain’s decision to join what was then the European Economic Community in 1973 was mainly due to the feeling that Germany, France and Italy had found the secret of economic success.
Since the birth of the euro, it has been a different story. In the good times, monetary policy is too loose for their needs, leading to asset bubbles, inflationary pressure and the loss of competitiveness. In the bad times, there are no shock absorbers. Devaluation of the currency is not possible. The euro was a bad idea. Getting rid of it and reverting to a more sensible way of running the European economy is not as easy as taking a product off the shelves. But the single currency is New Coke, and the sooner Europe realises that the better.
2 IBM sales drop for 13th straight quarter (BBC) IBM has reported a fall in sales for the 13th consecutive quarter. The world's largest technology services company said that revenue fell 13.5% to $20.8bn, while net profit fell 17% to $3.5bn.
The strong US dollar and IBM's decision to move away from its hardware business to focus on higher-margin operations both hit its performance. Chief executive Ginni Rometty said that the second-quarter results reflected the company's ongoing transformation.
IBM said much of the fall was due to the impact of the strong US dollar and the sale of its System x business. Excluding that unit, sales were down by just 18%. In contrast, it said revenues from its new areas of focus - cloud computing, analytics and engagement - had risen by more than 20% this year.
3 Why parents push kids into the rat race (Asha Iyer Kumar in Khaleej Times) The task of finding our wards a niche in this world isn't easy anymore, for things aren't the same as when we or our parents were children. The challenges of child bearing and rearing aren't the same as it was then and parents are at their wit's end trying to chart the course of their children's progress.
Parents of past generations wanted their children to be 'happily settled,' the term essentially implying comfortable finances and amiable domesticity. Parents today are fighting battles at different levels - with the world to make sure their young ones stay unharmed by its toxic influences and vagaries; with societal prejudices and false standards of worth that can shatter their children's self-esteem, with themselves, and with self-assertive children whose demands are exceedingly materialistic.
Even when we berate the rat race, we exhort them to it. Compete. Succeed. Be aggressive. Achieve things in life that we didn't. Be happy. Make us proud. It's all we want of you in life. Simultaneously, we also seek 'peace of mind' for them, but we don't utter it, for we realise that things that fetch true peacefulness are unmaterialistic and we are afraid to prescribe it.
So we strive to arm them to the teeth and watch nervously from the sidelines as they battle it out in the middle, unsure if they will still romp home in victory. In the end we merely say a tad resignedly, 'we did our bit. Now it's their destiny'.
Sunday, July 19, 2015
Greece deal lands in uncertain territory; Emirates space mission a new era for Middle East; A global market for Third-World comedy
1 Greece deal lands in uncertain territory (Khaleej Times) Hours before marathon talks on bailout modalities were to begin; a former Greek finance minister has forecast that they are doomed to fail. Yanis Varoufakis, whose resignation was seen as a conciliatory gesture towards the eurozone financial wizards, believes that his cash-strapped country will be back to square one and the so-called deal will go down in history as the greatest disaster of macroeconomic mismanagement.
Greece was hoping for an instant cash tranche of Euro 86 billion in exchange for introducing reforms that could have consoled the international donors, especially the European Commission, to a great extent. But now it seems Varoufakis's assessment will go a long way in molding public opinion and might also impact the smooth implementation of the deal.
What it literally means is that Greece was left with a poor choice - either to become a political martyr or get away with whatever peanuts the donors were willing to dole out, and Athens made the worst choice of capitulation for reasons of exigency.
It is also very likely that Varoufakis could emerge as the alternative political voice for the debt-laden country, leading to more speculative theories in times to come as to how better Greece can manage its woes. Notwithstanding what Prime Minister Alexis Tsipras has to say, one thing is for sure: the deal has landed in an uncertain territory and there are bound to be many a slip between the cup and the lip.
2 Emirates space mission a new era for Middle East (Kareem Shaheen in The Guardian) If all goes well, the United Arab Emirates will have a space probe orbiting Mars by 2021 – a first for an Arab world embroiled in endemic conflict. And, as the man leading the Emirates Mars Mission, 32-year-old Omran Sharaf has a lot on his plate. “It’s something we have to do if we want to progress and move forward. If we can reach Mars, all challenges for the nation should be doable.”
Announced in July 2014 by Sheikh Mohammed bin Rashid, the UAE’s vice-president and Dubai’s ruler, the Emirates Mars Mission is expected to launch in July 2020 sending the probe hurtling on the 60 million km journey to the red planet. It is expected to arrive seven months later, half a century to the year since the founding of the country, a union of seven emirates on the Arabian gulf.
The mission is set to last for at least two years. The team hopes the round-the-clock data gathering will help provide a detailed insight into the planet’s evolution. Dubai’s name has become synonymous with grand, headline-grabbing projects – the country’s skyline now features the tallest building in the world, the Burj Khalifa; passengers flying into Dubai airport, one of the largest in the world, can see manmade islands in the shape of palm trees from the air; and the city inaugurated a metro system in 2009.
Dubai at one point teetered on the edge of financial collapse after the global credit crunch at the end of the last decade, but has since recovered with the aid of a bailout from the UAE’s oil-rich capital, Abu Dhabi. At the time, the breakneck speed of growth had appeared almost hubristic.
“This mission is not about reaching Mars but about inspiring a whole new generation and transforming the way youth think within the region,” says Sharaf. “The goal here is hope, for humanity, for the region, for youth in countries with lots of conflict.”
3 A global market for Third-World comedy (Lenoie Wagner in Johannesburg Times) Comedians are becoming one of South Africa's prime exports. Soon after it was announced that Trevor Noah would become the new host of The Daily Show, stand-up David Kibuuka said he would join Noah on the top American show as one of the writers.
Loyiso Gola recently joined the Australian satire The Weekly Show as a correspondent. And now Jason Goliath and ventriloquist Conrad Koch (the man behind Chester Missing) are heading to the world's largest international comedy event - the Just for Laughs festival in Montreal, Canada. Top international funnymen like Dave Chappelle, Kevin Hart, Mike Myers, Neil Patrick Harris, Rob Schneider and Jimmy Carr will be at the festival - as will Noah.
Goliath said: "The greatest comedians in the world will be performing. The guys that have already peaked are going to be engaging with younger comedians like myself. It's my wedding day in stand-up comedy."
Industry veteran Joe Parker said: "Comedy is growing in this country and comedians are getting better, which means the competition makes everyone work harder." Parker warned that international fame was by no means certain. "I wouldn't say our comedians are in demand but rather that they are working hard to make themselves in demand."
Goliath said: "The world is tired of First-World stories, the world is hungry for Third-World stories because comedy is based on and comes from pain and nobody knows pain better than South Africans." The challenge is finding a way of sharing this pain in a way that international audiences can relate to.
Wednesday, July 15, 2015
Greece agrees to austerity, triggers street protests; After 80 years, Mexico opens up oil sector; At Japanese hotel, robots 'man' reception
1 Greece agrees to austerity, triggers street protests (The Guardian) Five years into the worst crisis to hit their country in decades, Greek MPs voted by a large majority in the early hours of Thursday morning to accept draconian austerity as the price of further bailout funds but at great personal cost to prime minister Alexis Tsipras.
In a vote that saw tensions soar in and outside parliament, the embattled leader’s radical leftist Syriza party suffered huge losses as 40 MPs revolted against the measures. A total of 229 lawmakers voted in favour of the internationally mandated measures, 64 against and six abstained.
As expected, it was backed by pro-European opposition parties, including the former ruling party New Democracy, as well as the Syriza’s coalition partners, the rightwing Independent Greeks. But it was rejected en masse by MPs from the hardline Left Platform grouping within Syriza.
The outcome will significantly weaken Tsipras as the scale of the rebellion sinks in. Stripped of its working majority, the Syriza-dominated two-party coalition will struggle to enforce the pension cuts and VAT increases outlined in the deal or implement any other legislation outside.
But there was also relief that the Greek parliament had overwhelmingly supported reforms to ensure that talks on a third bailout for the debt-stricken country can begin.
The prospect of Greece plunging into political turmoil will be heightened by speculation that Tsipras may be forced to call early elections after a cabinet reshuffle expected on Thursday. He is likely to remove objectors within his party but could struggle to govern effectively. The threat of Athens being forcibly ejected from the eurozone appeared to focus minds with more MPs voting in favour of austerity reforms than at any other time in the crisis.
2 After 80 years, Mexico opens up oil sector (BBC) For the first time in nearly 80 years, Mexico has opened up its oil industry to foreign investors, selling off 14 exploration blocks in the Gulf of Mexico. However, only two of the blocks were sold in the auction, falling short of the government's expectations.
Bidders were expected to sign new contracts with the Mexican state to explore, produce and refine oil. Mexico has fallen from the world's fifth biggest oil producer to tenth. Private oil contracts were being awarded for the first time since the industry was nationalised in 1938.
The auctions are part of the government's plan to encourage private investment and boost oil production. Only nine companies took part in the auction, fewer than the 25 originally planned.
3 At Japanese hotel, robots do check-in, check-out (San Francisco Chronicle) The English-speaking receptionist is a vicious-looking dinosaur, and the one speaking Japanese is a female humanoid with blinking lashes. "If you want to check in, push one," the dinosaur says. The visitor still has to punch a button on the desk, and type in information on a touch panel screen.
From the front desk to the porter that's an automated trolley taking luggage up to the room, a hotel in southwestern Japan, aptly called Weird Hotel, is "manned" almost totally by robots to save labor costs.
Hideo Sawada, who runs the hotel as part of an amusement park, insists using robots is not a gimmick, but a serious effort to utilize technology and achieve efficiency. Another feature of the hotel is the use of facial recognition technology, instead of the standard electronic keys, by registering the digital image of the guest's face during check-in. The reason? Robots aren't good at finding keys, if people happen to lose them.
Staying at Henn na Hotel, as it is called in Japanese, starts at 9,000 yen ($80), a bargain for Japan, where a stay in one of the nicer hotels can easily cost twice or three times that much. The concierge is a doll-like hairless robot with voice recognition that prattles breakfast and event information. It cannot call a cab or do other errands.
Japan is a world leader in robotics technology, and the government is trumpeting robotics as a pillar of its growth strategy. Robots have long been used here in manufacturing. But interest is also high in exploring the potential of robots in human interaction, including helping care for the elderly.
Robotics is also key in the decommissioning of the three reactors in Fukushima, northern Japan, which went into meltdowns in 2011, in the worst nuclear catastrophe since Chernobyl.