Global Business |Update|
(A weekly
update on Global Business )
Skyline Business School
Hauz Khas Enclave, New Delhi 110 016
Tel: 2686 4848, 2686 6968
Issue 100
Global Business
Update
(21st Jan.’09---27th Jan.’09)
Contents
Global Corporate
1 Recession hits Severn Trent sales
2 Lehman deal adds to Nomura losses
3 Asda creating 7,000 new UK jobs
4 Citigroup cancels corporate jet
5 Profits shrink at Sumitomo Mitsui
6 Canon profits hit as sales fall
7 Pfizer to acquire Wyeth for $68 bn
8 Satyam stake to expand L&T Infotech: L&T
Global Outsourcing
9 Arena Solutions/Symphony Consulting Survey Offers Insight Into
Mitigating Outsourcing Risk
10 Sony Ramps up Its Reform Efforts
11 India's outsourcing clients on the lookout for red flags
12 Boeing Reconsiders Outsourcing On 787
13 XL WORLD Opens New Outsourcing Facility in Albania
14 Philippines expected to emerge as premier non-voice outsourcing hub
15 India's outsourcing sector faces bleak outlook: analysts
Global
Economy
16 World growth 'worst for 60 years'
17 China vows to help WTO on piracy
18 Pound bounces back above $1.40
19 US home sales see surprise rise
20 Oil falls despite Opec output cut
21 Over 1,000 workers displaced by collapse of 27 rural banks
22 Government shifting priority from spurring investments to saving jobs in
workplaces
Global Markets
23 Microsoft, Google face same headwinds
24 EBay forecast disappoints Wall St view
25 Does Pfizer have the cure for the pain?
26 Bleak outlook for capital inflows this year
Global Corporate
1 Recession hits Severn Trent sales
Severn Trent has warned that its latest annual revenues will be
up to £25m less than the year before, because of firms using less water in the
recession. The company supplies water across the Midlands and parts of Wales,
a region that includes a number of Jaguar Land Rover plants that have cut
production. Severn Trent said the closure of High Street stores including
Woolworths and MFI had also reduced water usage. Severn Trent's financial year
runs until the end of March. The firm said it now expected reduced water
consumption by firms across its region to cut its revenues by between £20m and
£25m from the previous financial year. Severn Trent had previously said it
expected a drop of between £12m and £15m from a year earlier.
27th January 2009,
www.bbc.co.uk
2 Lehman deal adds to Nomura losses
Nomura has reported heavy losses for the final three months of
2008, as it struggles to integrate parts of failed US bank Lehman Brothers.
The broker made a net loss of 342.9bn yen ($3.8bn; £2.7bn) compared with a
profit of 21.8bn yen a year ago. Its decision to buy the Asian and European
operations of collapsed US bank Lehman Brothers hit earnings hard. Last
quarter was extraordinary for our industry and Nomura was no exception, said
Nomura boss Keniche Watanabe. The results represent the fourth consecutive
quarterly loss for the company, Japan's largest stockbroking firm. Total
revenue for the period collapsed to just 2.71bn yen, compared with 400.37bn
yen for the final quarter of 2007.
25th January 2009,
www.bbc.co.uk
3 Asda creating 7,000 new UK jobs
Asda is to create 7,000 new jobs this year, becoming the latest supermarket to
add new positions as their sales continue to rise despite the recession. The
firm, part of US giant Wal-Mart, said about 3,700 of the new jobs would be
created by opening 14 new stores and the extension of 15 existing outlets. An
additional 2,000 positions are being created at its home shopping unit, plus
about 1,000 through organic growth. Asda's news comes as broadcaster BSkyB
said it was creating 1,000 new jobs. BSkyB said it needed to create the jobs
to cope with continuing strong demand for its services. It also follows
similar moves by rivals Tesco, Sainsbury's, Morrisons and Waitrose.
26th January 2009,
www.bbc.co.uk
4 Citigroup cancels corporate jet
Troubled US bank Citigroup has cancelled an order for a new
corporate jet after President Barack Obama questioned the wisdom of the
purchase. The White House asked whether buying the jet was the best use of
money at this point for a bank that took $45bn (£31.6bn) of public money last
autumn. The bank made a loss of $8.29bn in the last three months of 2008 and
was forced to split into two new firms. Citigroup ordered the jet before the
credit crisis hit the banking sector. The bank said it had paid a deposit for
the plane in 2005. Reports suggest the jet would have cost $50m. The pressure
placed on Citigroup by the White House comes as part of a concerted effort by
the new administration to place tougher conditions on providing state aid. New
US Treasury Secretary Timothy Geithner wants corporate recipients of public
money to be more accountable to the government. In November, the bosses of
Chrysler, Ford and General Motors were roundly criticised for flying to
Washington in private jets to ask Congress for a bail-out using public funds.
25th January 2009,
www.bbc.co.uk
5 Profits shrink at Sumitomo Mitsui
Japan's third largest bank, Sumitomo Mitsui, has seen third
quarter net profit fall 99% to 154m yen ($1.7m; £1.19m) from 148.9bn yen a
year before. Japan's major banks have been hit hard by rising costs of bad
loans and heavy losses on their stock portfolios. The group also said net
profit for the April to December period fell 74% amid the worsening global
economic turmoil. Japan's banks have stakes in their corporate clients, making
them sensitive to equity market swings. The major problem for Japanese banks
is their large equity holdings, said Kristine Li, a bank analyst at KBC
Securities in Tokyo. If the Nikkei falls from here, the impairment losses in
the fourth quarter, which is more important than the third quarter, could be
even bigger. That could force many banks to revise down their full-year and
some banks to raise new capital. However, the Nikkei index edged 0.56% higher
on Wednesday, helped by news of an expansion of a US stimulus plan and adding
to the 4.9% jump recorded on Tuesday.
24th January 2009,
www.bbc.co.uk
6 Canon profits hit as sales fall
Canon, the world's largest maker of digital cameras, has become
the latest firm to report a sharp drop in profits because of the economic
downturn. Net profits for the final quarter of 2008 fell 90% from a year
earlier to 11.62bn yen ($130m; £92m). For 2008 as a whole, net profit fell 37%
to 309.15bn yen, with revenues down 9% to 4.09 trillion yen. Profitability was
also hit hard by the strength of the yen, which makes Japanese exports more
expensive. The company expects trading conditions to get even tougher in 2009,
and has forecast net profits for 2009 to be 98bn yen, a fall of 68.3% on 2008.
23rd January 2009,
www.bbc.co.uk
7 Pfizer to acquire Wyeth for $68 bn
Pharmaceutical major Pfizer said it will buy out rival firm
Wyeth for USD 68 billion in a cash-and-stock transaction. In a filing to the
New York Stock Exchange, Pfizer today said it has entered into a
definitive-agreement with Wyeth "under which Pfizer will acquire Wyeth in a
cash-and-stock transaction currently valued at USD 50.19 per share, or a total
of approximately USD 68 billion. The boards of directors of both the companies
have approved the combination. The two firms were in talks since June last
year for a possible merger. The transaction will be financed through a
combination of cash, debt and stock. A consortium of banks has provided
commitments for a total of USD 22.5 billion in debt, the filing added. Under
the terms of the transaction Wyeth shareholders would get USD 50.19 per share,
paying USD 33 a share in cash and Pfizer stocks at USD 0.985 a share.
25th January 2009,
www.financialexpress.com
8 Satyam stake to expand L&T Infotech: L&T
Engineering and construction firm Larsen & Toubro is looking to
expand its software unit by trebling its stake in fraud-hit Satyam Computer
Services, Larsen Chairman A.M. Naik said on Tuesday. Larsen had raised its
holding in Satyam on Friday to 12 per cent from 4 per cent. Overall, we are
only trying to improve our situation, Naik told an analysts conference call
that was aired on a television channel. If nothing else, to really make L&T
Infotech bigger by our stake in Satyam, Naik said.
24th January 2009,
www.financialexpress.com
Global Outsourcing
9 Arena Solutions/Symphony Consulting Survey Offers Insight Into Mitigating
Outsourcing Risk
Arena Solutions, a provider of on-demand software that helps
small and mid-size manufacturers manage their complex and constantly changing
product record, and Symphony Consulting, a Silicon Valley-based manufacturing
outsourcing, procurement, and supply chain consulting firm, today announced
results from a recent survey of 672 small and mid-size businesses (SMBs) on
their manufacturing outsourcing practices. The survey unveiled fundamental
communication gaps as one of the most common challenges for SMBs working with
outsourced manufacturing partners. Survey results suggest companies can
mitigate outsourcing risks by formalizing relationships with their contract
manufacturers (CMs), engaging in more careful planning and employing Bill of
Materials (BOM) management systems as part of their overall product lifecycle
management (PLM) program. Taking these steps can better ensure that vital
manufacturing information and design data are communicated to all stakeholders
clearly, quickly and consistently.
22nd January 2009,
www.msnbc.com
10 Sony Ramps up Its Reform Efforts
Hard times are forcing Sony CEO Howard Stringer to give up his
Mr. Nice Guy act. The Welsh-born American executive, who has used charm and
wit to sell the rank and file on a modest reform agenda, is suddenly ramming
through more drastic measures. That's because evaporating consumer demand and
a sharp surge in the yen have left the Japanese tech giant no better off than
it was when Stringer started three and a half years ago. The company's future
depends on whether Stringer can deliver. On Jan. 22, Sony issued its second
profit warning in three months, saying it now forecasts a $2.9 billion annual
operating loss—its first in 14 years—instead of $2.2 billion in profits. Sales
are predicted to fall 13%, to $86 billion, rather than gain 1.4%, as had been
projected.
23rd January 2009,
www.businessweek.com
11 India's outsourcing clients on the lookout for red flags
Choosing an outsourcing vendor was never easy. But after the
fraud this month at India's Satyam Computer Services, it has got harder. The
confession by the former Satyam chairman B Ramalinga Raju that he fixed the
accounts of India's fourth largest software group for several years, under the
noses of auditors and international regulators, seems to have made one thing
clear: companies looking to divest functions to a third party based offshore
will have to outsource part of the process of finding this partner to a
private investigation firm to check all is as it seems.
24th January 2009,
www.ft.com
12 Boeing Reconsiders Outsourcing On 787
Labor unions may be poised for a huge "I told you so" at
Boeing's expense. Business Week reports that after four major delays and two
lost years, Boeing is rethinking its strategy of outsourcing so much the
construction of its new 787 Dreamline. IAM members made limits on outsourcing
a major bargaining issue in the settlement of their 58-day strike against the
company last year. Boeing engineers say problems with partners have forced the
company to repeatedly send staffers out to suppliers to resolve issues. The
first 787 flight was originally supposed to happen in August 2007. Boeing now
hopes to make that happen by this June, with first deliveries now projected
for Spring of 2010.
22nd January 2009,
www.tutorial-reports.com
13 XL WORLD Opens New Outsourcing Facility in Albania
XL World announces the opening of its new multilingual
outsourcing centre in Shkoder, Albania. The new facility substantially expands
XL World's current operations from its three centres in Romania and will offer
call center and business process outsourcing services in more than 10 European
languages (English, French, German, Spanish and others). The new centre was
inaugurated on January 16, 2009 in the presence of the Albanian General
Director of Labour and Educational Policies, Mr. Muharrem Gjevili, in
representation of the Labour minister, who confirmed the Albanian government's
strong intent to support foreign investments in Albania and appreciates the
value that companies such as XL World bring in terms of workforce occupation
and industry knowledge. XL World's new centre can employ 350 people, in
addition to the 1,000 employees currently hired by XL World in Romania. XL
World's expansion to Albania represents a differentiating factor for the
company, which is currently one of the leading providers of outsourcing
services in Eastern Europe. XL World's mission is to provide reliable services
for companies that need multilingual outsourcing at reasonable costs.
23rd January 2009,
www.tutorial-reports.com
14 Philippines expected to emerge as premier non-voice outsourcing hub
The Philippines, whose offshore market has grown 46% annually
since 2004, is poised to emerge as a leading destination for non-voice
business process outsourcing (BPO) work for customers looking beyond India,
Dallas, Texas-based Everest Research Institute said in a statement on Friday.
The $35-billion global BPO market is projected to grow to $220 billion-$280
billion by 2012, with non-voice work accounting for 90% of that growth.
Although a number of providers have already tapped the Philippines for a wide
range of non-voice functions, there is limited awareness of the Philippines’
capability in non-voice services, which has grown significantly over the past
three years, according to the Institute’s study, titled: "The Silent Knight:
The Philippines’ Emerging Non-Voice BPO Capability." The study includes inputs
from the Business Processing Association of the Philippines. The $6.8-million
Philippines offshore market employs more than 450,000 people, most of them in
voice-based services.
25th January 2009,
www.businessworld.com
15 India's outsourcing sector faces bleak outlook: analysts
India's software sector, reeling from a huge accounting fraud in
one of its flagship companies, faces further problems as US firms scale back
in a troubled global business environment, analysts said. Two of India's top
IT companies -- Infosys Technologies and Wipro -- have acknowledged that their
revenues are under pressure. Meanwhile, India's largest software exporter Tata
Consultancy Services (TCS) saw its third-quarter net profit rise by a
lower-than-expected 1.57 percent from a year earlier because of the global
economic slowdown. It traditionally gives no guidance. The flurry of dismal
earnings news and a one-billion-dollar false accounting scandal at Satyam
Computer Services earlier this month has combined to cool investor sentiment
towards the once red-hot sector, which employs two million workers in India.
We're seeing a clear slowdown for the IT giants (in the latest quarter) and
it's not a surprise, said Apurva Shah, head of research at brokerage Prabhudas
Lilladher. Brokerage firms and analysts say the outlook appears bleak for the
top IT companies for at least the next two quarters. The near-term outlook for
India's IT sector is cautious and uncertain, said Harit Shah, software analyst
at Angel Broking.
26th January 2009,
www.tutorial-reports.com
Global Economy
16 World growth 'worst for 60 years
World economic growth is set to fall to just 0.5% this year, its
lowest rate since World War II, warns the International Monetary Fund (IMF).
In October, the IMF had predicted world output would increase by 2.2% in 2009.
It now projects the UK, which recently entered recession, will see its economy
shrink by 2.8% next year, the worst contraction among advanced nations. The
IMF says financial markets remain under stress and the global economy has
taken a "sharp turn for the worse". In another gloomy view of the UK economy,
the Institute for Fiscal Studies (IFS) said Britain would be saddled with
government debt for more than 20 years. IFS director Robert Chote warned that
spending would have to be cut or taxes raised by more than planned to allow
public finances to recover. The predictions came as Pascal Lamy, the director
general of the World Trade Organization, urged countries not to react to the
global economic crisis by resorting to protectionism. Speaking from the World
Economic Forum in Davos, Mr Lamy said such a move would be "a big mistake".
27th January 2009,
www.bbc.co.uk
17 China vows to help WTO on piracy
China has promised to co-operate in the global fight against
counterfeit goods, in response to a highly critical ruling from the World
Trade Organization. The commerce ministry said it would "continue to promote
international exchanges" on intellectual property rights, but gave no firm
details. In a US-backed case, the WTO ruled on Monday that Beijing ignored
piracy of DVDs and its customs policies were lax. US companies say Chinese
piracy costs them billions of dollars every year. In its ruling, the WTO
largely supported the US claims against China and found Beijing had breached
trade rules. The WTO was particularly critical of Chinese customs for allowing
seized goods to be reintroduced into the market. And it said Beijing had
turned a blind eye to piracy of DVDs and CDs. It recommended that China "bring
the copyright law and the customs measures into conformity with its
obligations
26th January 2009,
www.bbc.co.uk
18 Pound bounces back above $1.40
The pound has rallied slightly against the dollar, pushing back
above $1.40, as UK banking shares continue to rise. Sterling was up more than
one-and-half cents against the US dollar at $1.4094, having touched 24-year
lows last week near $1.35. Confidence in the pound rose after Barclays said on
Monday that its annual profits would beat expectations. Shares in Barclays,
Lloyds TSB and Royal Bank of Scotland all rose more than 10% in trading on
Tuesday morning. By mid-afternoon, Lloyds and Barclays had fallen back
slightly but were still up more than 5% on the day. Bank shares fell heavily
last week, sparking fears that another UK High Street bank may have to be
nationalised. This prompted a sell-off in sterling, taking it down to levels
not seen since late 1985. But Barclays' announcement on Monday that it
expected gross profits to be more than £5.3bn for 2008 led to the bank's share
price surging more than 70% on the day. They rose a further 10% on Tuesday
morning.
24th January 2009,
www.bbc.co.uk
19 US home sales see surprise rise
US home sales unexpectedly rose in December as buyers took
advantage of much lower house prices, industry figures have showed. Sales of
existing homes rose 6.5% to an annual rate of 4.74 million, up from 4.45
million units in November, the National Association of Realtors said. Analysts
had been expecting December sales to total 4.4 million. For 2008 as a whole,
sales fell 13.1% to 4.91 million units, the worst year in a decade. It appears
some buyers are taking advantage of much lower home prices, said Lawrence Yun,
the association's chief economist. Buyers will continue to have an edge over
sellers for the foreseeable future. The association said that existing home
prices fell by 15.3% in December from the same period a year earlier, with 45%
of transactions viewed as distress sales.
25th January 2009,
www.bbc.co.uk
20 Oil falls despite Opec output cut
Oil prices have fallen by more than $1 a barrel on continued
forecasts of a deepening global economic downturn. US light crude for March
delivery fell $1.22 to $45.25 a barrel, before recovering slightly to $45.52.
London Brent crude slipped $1.00 to $47.37. Oil prices rose by 14% towards the
end of last week on evidence that Opec oil producers were reducing output. But
analysts predict energy use will fall this year as recession hits most of the
largest developed economies. The market is correcting from the sharp rally on
Friday, said Christopher Bellew, broker at Bache Commodities in London.
Essentially the market is range-bound with poor demand being balanced by Opec
production cuts. Oil's $2-a-barrel rally on Friday came as it appeared that
Opec was keeping to its promise of a 2.2 million barrel a day production cut
this month. Prices have fallen as low as $35 a barrel recently. Oil prices
peaked at above $147 a barrel in July last year.
24th January 2009,
www.ft.com
21 Over 1,000 workers displaced by collapse of 27 rural banks
More than 1,000 workers have been thrown out of their jobs as a
result of the collapse of 27 banks, mostly rural lenders, over the last 12
months, the Trade Union Congress of the Philippines (TUCP) reported Monday.
Former Senator and TUCP secretary-general Ernesto Herrera appealed to industry
groups for help in finding new employment for the displaced personnel, mostly
branch heads, cashiers, accountants, tellers and credit investigators. Herrera
addressed his plea to the Bankers Association of the Philippines, Chamber of
Thrift Banks, and the Rural Bankers Association of the Philippines. The
industry groups should adopt reintegration programs for the dislocated staff
as well as other bank employees that may be disenfranchised in the months
ahead, said Herrera, former chairman of the Senate labor, employment and human
resources development committee.
23rd January 2009,
www.businessmirror.com
22 Government shifting priority from spurring investments to saving jobs in
workplaces
HOW do you come up with an incentives package that will persuade
companies being hit by the crisis to drop their plans to retrench workers or
totally shut down operations without sacrificing too much the government
revenues and violating existing laws. This is now the problem that is cracking
the brains of government policymakers who are currently crafting the 2009
edition of the Investment Priorities Plan (IPP). Trade Undersecretary and
Board of Investments (BOI) managing head Elmer Hernandez said they are now in
discussions with the National Economic and Development Authority (Neda),
Department of Finance (DOF) and the Office of the President (OP) on how they
can use the fiscal incentives given under the IPP in stopping the bleeding of
firms in the country because of the global economic meltdown and prevent more
job losses. With the current realities, Hernandez said the IPP will have to
deviate from its original purpose of driving new investments and focus on the
foremost task at hand—save jobs. “We already approved the basic framework, and
our most important consideration is how to save jobs,” Hernandez said.
22nd January 2009,
www.businessmirror.com
Global Markets
23 Microsoft, Google face same headwinds
The world’s largest software company, Microsoft Corp., and
Internet giant Google Inc. have more in common than the dominance of their
respective markets. Both are also essentially one-trick ponies that have used
their prodigious cash flows to pursue a host of side projects in attempts to
diversify. And neither has had much success. Their other non-core projects
should be next. Microsoft’s core competency remains software—its ubiquitous
operating system and various other programs. These account for 82% of its
revenues and nearly all of its operating income. The company has used a lot of
those profits to support forays into products like videogames and online
search. But those haven’t become the money-spinners it hoped for. Microsoft’s
Xbox gaming console just turned its first profit last year after seven years
on the market. In 2007, the company had to take a $1 billion (Rs4,890 crore)
charge to repair defective units.
23rd January 2009,
www.livemint.com
24 EBay forecast disappoints Wall St view
EBay Inc beat expectations for quarterly profit on Wednesday but
gave a weaker-than-expected forecast for the current quarter, sending its
shares down nearly 6%. Some on Wall Street question how eBay will generate
growth, given curtailed consumer spending and pressure from a host of
competitors. The company has increased its emphasis on fixed-price goods
instead of auctions, making it more of a direct rival to Amazon.com Inc, which
many view as the stronger firm. The global spending slowdown has hurt eBay’s
ability to attract buyers to its auction sites and the stronger US dollar also
crimped profit from its overseas operations. Clearly we’ve been operating in
an almost unprecedented external environment, Chief Executive John Donahoe
told analysts. Analysts said the company’s first-quarter view, which came in
well below Wall Street estimates, was a bleak sign, particularly as the
company gave no forecast for the full year.
25th January 2009,
www.livemint.com
25 Does Pfizer have the cure for the pain
Pharmaceuticals firm Pfizer Inc. knows a thing or two about
cures. But it hasn’t found an effective remedy for treating the pain its
shareholders have been enduring. The stock trades at 1997 levels, while
finding growth in a recession is a challenge. A potential deal with Wyeth, a
drugs group half its size, looks like decent therapy. It’s not that Wyeth
offers a killer pipeline to answer Pfizer’s difficulties in bringing out new
blockbuster drugs and the loss of patent protection on its top cholesterol
drug Lipitor in two years’ time. But a merger would allow the two groups to
substantially reduce costs and more effectively pool their research and
development spending.
27th January 2009,
www.economictimes.com
26 Bleak outlook for capital inflows this year
The Institute of International Finance (IIF), the global
association of financial institutions, has forecast a sharp drop in net
capital inflows to emerging markets in 2009, to $165 billion, from $466
billion (Rs22.78 trillion) in 2008. The size of the drop becomes clearer when
we recall that 2007 saw a net inflow of $929 billion. But there is a ray of
hope for the stock markets—net portfolio outflows from emerging markets are
expected to be much lower this year, at a mere $3 billion, compared to a
staggering $89 billion last year. Says IIF: “With equity positions smaller and
prices much lower, we project net portfolio equity outflows to be quite modest
in 2009.” Even better, IIF estimates emerging Asia will see a net inflow of $7
billion worth of portfolio investments in 2009, after net outflows of $55
billion last year.
27th January 2009,
www.livemint.com
Compiled by:
Himanshu Gupta
BBA (MAHE) L3,S2 - 3rd Year
Skyline Business School
Hauz Khas Enclave, New Delhi 110 016
Tel: 2686 4848, 2686 6968
www.SkylineCollege.com