September 29, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

Secretly, executives at Dell must have been hoping for more. Dell is suffering from continuing price pressure on its products, while HP has seen something of a renaissance. For example, Dell’s profits in the third quarter were just half the level recorded a year earlier. But then, just as the runes seemed to be with HP, scandal struck. First there were leaks, with secret information finding its way into the hands of the press. Then the investigators employed a tactic known as pretexting, by impersonating the people they were investigating to gain information. The company’s chair got the blame, and lost her job, and yet the company’s share price has hardly budged.

Yesterday, HP’s chief executive, Mark Hurd, and former chairperson Patricia Dunn appeared before the U.S. House Energy and Commerce Committee.

It was a grilling, with congressman John Dingell describing the investigation as “a plumbers’ operation that could make Richard Nixon blush if he were still alive. And yet, the share price went up.

It all comes down to Mr Hurd. He has been doing good work at HP but any hint he is embroiled in the affair, and markets could take fright.

Yesterday, he came out smelling of roses. He was humble, took responsibility when few believed it was his fault, referred to Churchill when he said of the affair it was “not my finest hour” and said: “I take full responsibility and these are the steps we are taking to fix things.” He added: “If Bill Hewlett and Dave Packard were alive today they would be appalled.” And, with that magnanimous statement, Mr Hurd, who apparently had very little to do with the investigation, walked away. It appears, he is off the hook.

Ms Dunn, who oversaw the investigation was not so lucky. She said she was not responsible, and did not know ‘pretexting’ techniques were employed. Ms Dunn said: “My understanding was that these records were publicly available.” To which Rep. Greg Walden replied: “You really believe that…you honestly believe it was that simple?”

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September 29, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

More economists are talking about the dangers of the US hitting recession, and yet the latest news was shrugged off by market analysis that could have come straight from the Mickey Mouse School of Economics.

There’s no sign that the slowdown in US house prices has effected the rest of the economy, say exuberant traders. “So let’s buy”. Yesterday the Dow Jones Industrial 500 closed within four points of an all time high.

And yet, the latest economic data revealed the US economy slowed far more than had previously been thought in the second quarter, dropping from an annualised rate of 5.6 percent in Q1 to a mere 2.6 percent. This was 0.3 percentage points down from the previous estimate last month.

With oil down in price - even though it’s still at levels that would have made headlines two years ago, they say the US will bounce back, thanks to cheaper fuel making everyone feel better off, and inflationary pressures easing to boot.

But, we question whether this is so. On the CNN Money site this morning, Mark Zandi, chief economist for Moody’s Economy.com, was quoted as saying: “Today I would put recession odds at 1 in 4. A month ago, it was 1 in 5. A year ago, 1 in 10.”

It will take time to see what impact the recent slowdown in the US house market will have on the rest of the economy. It will take time to see whether the Fed’s run of continuously upping the interest rate has worked, or whether inflationary pressures still exist. We are not so sure the recent falls in oil will make that much difference.

It begs the question: why are US markets booming? In the past, recessions have been preceded by falls in the stock market. We wonder whether the irrational exuberance that Alan Greenspan used to talk about in the heyday of the dot com boom has returned.

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September 29, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

When Philip Green was trying to buy Marks and Spencer, his critics said he was nothing more than a cost cutter. Those doubters said Stuart Rose was the real class act. After all, he ran Bhs before Green took it over, and the reforms that saw such a dramatic change in the retailer’s standing were to a large extent put in place by Rose. It’s just that Green saw it through, or so went the argument.

For that reason, more than any other, shareholders at MS decided to give Rose a go, and bravely turned down Green’s 400p bid. But the mighty Marks had been through a torrid time, with a previous regime change doing little to change fortunes. It was easy to be cynical about Rose and his plans, and it must have been tempting to sell out to Green, after all, his track record was extraordinary. At the EGM when the Rose plan was accepted, one shareholder said he preferred to see the company “through Rose tinted spectacles”, but at the time, many thought these same shareholders really were seeing the world though a distorted view, based on the misguided notion that MS would inevitably recover.

And yet, two and a bit years on, those optimists have been proved right. MS is back, and as for Bhs, it’s down in the dumps.

The latest round in the Green versus Rose battle was unveiled yesterday, with Rose having gone into a commanding lead. Over the last 12 months profits at Bhs have halved, from £105 million a year ago, to £48.5 million. Like for like sales were down an alarming 7 percent, and analysts have started talking about how it’s now time for Green to show he is more than just a cost cutter.

Relax, Green’s on the case. He has put in place a new team, and he is working 16 hours a day. What’s the point in having all that money if you work 16 hours a day? - Ed.

Contrast this with MS. Reform is everywhere. Take the latest TV ads. There are two, one starring Twiggy and Erin O’Connor, and then the same ad is mirrored with children acting out the same poses of their more illustrious colleagues, to the sound of the Monkeys. The two ads are superb, and illustrate how well thought out the reformation at MS has been.

It’s not that the improvements at the store can be explained by the new ads, rather the campaign is indicative of a company whose management know what they are doing.

How does this hit the bottom line? While like for likes tumble at Bhs, MS saw an 8.2 percent rise in its last quarter, while shares are now trading at over 640p, almost 50 percent up on the Green offer.

Investment and Business News is a succinct, erudite and informative roundup of today’s top news stories on business and the economy, with analysis thrown in. It’s free, and to subscribe: visit this link

September 28, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

If only Ken had kept quiet. When London Mayor Ken Livingstone visited New York recently he was asked his plans for London’s economy, to which he replied “Sarbanes-Oxley”. But alas New York Mayor, Michael Bloomberg, was listening.

According to an article in today’s Independent, business leaders in the US are becoming more frustrated over the Sarbanes-Oxley regulations, and now Mr Bloomberg has retained management consulting firm, McKinsey, to report on what New York needs to do to retain its number one spot. It’s believed the Sarbanes-Oxley regulation will come under the spotlight in the report.

Investment and Business News is a succinct, erudite and informative roundup of today’s top news stories on business and the economy, with analysis thrown in. It’s free, and to subscribe: visit this link

September 28, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

The Dow Jones Industrial 500 went within 27 points of its all time high yesterday, before ending the day on 11689, 30 points off the record.

Some analysts are predicting the index could pass its all time high mark this week.

It was good news on the US property market that helped yesterday’s rise. The latest data from the US Commerce Department revealed a 4.1 percent rise in new home sales in August, and that annual new home sales were better than market expectations.

The Commerce Department stats contradicted data from The National Association of Realtors released earlier this week which indicated a much less healthy market, with the median price of US homes seeing its biggest annual fall since 1990.

In the US, markets are also celebrating the recent falls in oil, although here again, the signals are mixed. Sure oil has fallen in recent weeks, and yet, ironically yesterday it surged nearly $2 a barrel. Fears that OPEC would reduce oil supply, in order to maintain the current price, were behind the drop.

There was also good news on inflation, but tempered with lingering doubts.

The good news: a Fed official has said he believes US inflation has peaked and is likely to fall. According to Kansas City Federal Reserve President, Thomas A. Hoenig, the interest rate rises already implemented by the Fed are still working. The inference: there’s no need to raise rates again.

But as one official made positive noises, another sounded a warning. Federal Reserve Bank of Richmond President, Jeffrey Lacker, said that he voted for an interest rise, when the Fed met last week.

It’s been a rough few years for the Dow Jones. What with the dot com crash, 9/11, Enron, the US recession, it’s no surprise the market collapsed so dramatically earlier this decade.

And yet, with fears that the US could hit recession next year not gone altogether, it’s perhaps a little surprising that Uncle Sam’s most high profile index should be putting on such a startling performance.

Investment and Business News is a succinct, erudite and informative roundup of today’s top news stories on business and the economy, with analysis thrown in. It’s free, and to subscribe: visit this link

September 28, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

There was a time when Eidos was one of the giants of the video games industry and SCi a minnow. But despite boasting the talismanic Lara Croft titles in its line up, Eidos hit hard times. Even so, when SCi first expressed interest in buying it, the mighty Eidos looked down its nose, from its lofty position. But, in the end SCi did scoop the prize, buying out Eidos for £74 million. Yesterday, markets were able to analyse the effect of this purchase, and it seems likely they were impressed.

Trading profit for the year stood at £27.4m - up from a loss of £5.8m in the previous 12 months.

“We have successfully re-launched key brands and built a comprehensive and high-quality product portfolio to underpin future profitable growth,” Chief Executive Jane Cavanagh said in a statement.

“SCi is financially robust and ideally positioned to take advantage of the growth in Next Generation consoles and the growing demand for mobile and on-line content.”

2.9 million copies the game ‘Tomb Raider: Legend’ were sold while ‘Hitman: Blood Money’ sold 1.4 million copies.

But future plans entail more than just blood and gore.

Rob Murphy, the finance director, said: “Our core audience is 18 to 30-year-olds that play Hitman, but there is a growing audience of people that do not want to play first-person shooting games. Video games are increasingly appealing to a wider audience.”

Investment and Business News is a succinct, erudite and informative roundup of today’s top news stories on business and the economy, with analysis thrown in. It’s free, and to subscribe: visit this link

September 28, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

Four services, forty pounds, NTL has launched its quadruple play service, or as Sir Richard Branson once referred to it, Four Pay.

For forty pounds a month, customers can have 2 megabits per second broadband, 30 channels of TV, fixed line telephony and a Virgin mobile SIM.

Neil Berkett, chief operating officer of NTL Telewest, said: “Quadplay demonstrates the unique power of the Cable-Virgin Mobile union and this is just the beginning. Our new package represents unbeatable value while meeting a wide range of consumers’ entertainment and communication needs”.

We noticed with interest that one of the services being offered is the facility to install broadband by an expert. As broadband, computer hardware, and telephony increasingly look like commodities, technical support is fast becoming the way players can differentiate themselves. DSG recently announced its Tech Guys service - and BT too has been making lots of noises in this area.

The NTL four pay service has its critics, they say that families make decisions about which broadband, TV and fixed line telephone company to use, while the choice of mobile service is an individual decision. In any case, goes the argument, Virgin Mobile’s customers are typically less upmarket, and less likely to determine the family decision about broadband supplier (in other words, Virgin has more kids as customers).

On the other hand, TV transmitted over mobile phones is expected to be the big thing next year, and economies of scale in Four Pay will exist in content production. And in the new Internet and mobile phone TV era, content really will be king.

Investment and Business News is a succinct, erudite and informative roundup of today’s top news stories on business and the economy, with analysis thrown in. It’s free, and to subscribe: visit this link

September 27, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

January 14 2000: that was the day the Dow Jones Industrial Average hit 11,722.98, an all time high. Then markets crashed. By May this year, the index was creeping up, with many talking about it passing a new high. But, once again the ‘crash’ word came out again, as markets fell.

The adage says: “Sell in May and go away”, and that appears to be what has happened. As the holiday season ends, markets are creeping up. Last night the Dow closed at 11669.5, just over a 50 points short of the record.

Meanwhile, the FTSE 100 rose 75 points yesterday to close at 5873, but it’s still 200 points or so down on the 6091 level it reached in May, which itself was well short of the record set on December 30 1999 of 6990.

Investment and Business News is a succinct, erudite and informative roundup of today’s top news stories on business and the economy, with analysis thrown in. It’s free, and to subscribe: visit this link

September 27, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

Those Anglo Saxons. In the US they are borrowed up to the hilt, and in the UK, we are not far behind. According to a report from Datamonitor, the UK takes up more than a third of consumer debt across Europe.

Apparently, the average Brit owes £3,175. As for the last year, British consumers borrowed £215bn, whereas across Europe total borrowing was just £600 billion.

Paul Marsh, financial services analyst at Datamonitor said: “The difference between Britain and the rest of Western Europe is striking and is a result of the UK’s insatiable appetite for credit. In contrast, many other major European countries have a culture of saving and frugalness, and countries such as France and Germany are particularly debt averse.”

Apparently, the Germans tend to borrow mainly for buying cars, but the French will use credit for buying household appliances.

As for the credit card companies? The challenge now, says Datamonitor, is to persuade Germans to use their credit cards.

Investment and Business News is a succinct, erudite and informative roundup of today’s top news stories on business and the economy, with analysis thrown in. It’s free, and to subscribe: visit this link

September 27, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

The UK needs more scientists, better government procurement, and more corporate spending on RD. As for the US, its privileged position in the global economy could be under threat. Its government spends too much, especially on defence, and its current trade deficit poses a major threat, says a new report from the World Economic Forum.

Until last year, the US was the most competitive economy in the world, but it’s slipped back to sixth place, behind Switzerland, Finland, Sweden, Denmark and Singapore.

The top rankings of Switzerland and the Nordic countries show that good institutions and competent macroeconomic management, coupled with world-class educational attainment and a focus on technology and innovation are a successful strategy for boosting competitiveness in an increasingly complex global economy. Business activity in these countries benefits from a well-developed institutional framework, characterized by the rule of law, an efficient judicial system and high levels of transparency and accountability within public institutions. Excellent infrastructure is an additional positive feature of the business environment says the World Economic Forum.

But poor old Uncle Sam. As Augusto Lopez-Claros, Chief Economist and Head of the World Economic Forum’s Global Competitiveness Network said: ” Two areas are of some concern and if unattended could allow other countries - in a highly competitive global economy - to challenge the US’s privileged position. First, with potentially open-ended expenditure commitments linked to defence and homeland security, ongoing plans to lower taxes further, as well as other longer-term potential claims on the budget, the prospects for sustained fiscal adjustment seem not too bright. With a low savings rate, record-high current account deficits and a worsening of the US’s net debtor position, there is a non-negligible risk to both the country’s overall competitiveness and, given the relative size of the US economy, the future of the global economy. Second, while the US has, in general, an excellent institutional framework, the quality of the country’s public institutions falls somewhat short of the levels of transparency and efficiency seen in other OECD members.”

As for the UK, Mr Lopez-Claros said: “As a country on the leading edge of technological innovation, it also does very well for business sophistication and technological readiness but slightly less well for innovation, where it could see improvements in government procurement of advanced tech products, the availability of scientists and engineers and company spending on RD”.

The UK stands in tenth place, behind Japan, Germany and the Netherlands.

As for the future: “Our indicators point to the rapidly growing importance of higher education and training as engines of productivity growth. Countries that, like the Nordics, are investing heavily in education are likely to see rising levels of income per capita, growing success in reducing poverty and an increasing ability to establish a presence in the global economy”, concluded Mr Lopez-Claros.

For further information

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