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 101
Global Business
Update
(28th Jan.’09---3rd Feb’09)
Contents
Global Corporate
1 Motorola loses ground to rivals
2 Royal bank chair steps down early
3 Scania cuts jobs as profit slumps
4 Merck profits beat expectations
5 Miner BHP sees profits fall 25%
6 San Miguel approves up to $816 million bond sales
7 Mitsubishi sees first annual loss in 3 years
8 ADAG fast tracks mega power project
9 Satyam an isolated case, does not reflect industry: Nasscom
Global Outsourcing
10 Sony Ericsson and IBM Sign a 5-Year Outsourcing Agreement
11 TCS leads race for Sony's $100-million outsourcing deal
12 Recession may drive re-thinking of outsourcing deals
13 The Outsourcing Industry in India on the fast track
14 CIBER, Inc. Announces Acquisition of Canon's CTS Direct Consulting Business by CIBER ITO Division
15 Lockton Launches Outsourcing, Data Breaches Risk Management Service
Global Economy
16 Obama predicts more bank failures
17 Chinese spending creates deficit
18 Commercial property values plunge
19 Obama wants to avoid 'trade war'
20 Peso bucks depreciation trend in Asia
21 Bank of England lent banks £185bn
Global Market
22 European stocks up as Alcatel results beat forecasts
23 BoJ unveils $11 billion stock buying scheme
24 Banks, energy drag Europe shares down
25 World’s top 500 banks witness a 32% decline in brand value
26 Pfizer deal highlights irony of bank bailouts
Global Corporate
1 Motorola loses ground to rivals
Mobile phone giant Motorola posted a fourth-quarter loss in 2008
as it slipped to fifth place in the global mobile phone market. It reported a
net loss of $3.6bn (£2.5bn) for the three months to the end of December,
compared with a $100m profit for the same period in 2007. The company also
said it was suspending its quarterly dividend and looking for a new chief
financial officer. Paul Liska has left as CFO. No reason was given for his
departure. The firm said it lacked a popular handset to compete with its
rivals and will now focus on mid-tier to high-end phones. The news sent
Motorola shares down 10%. The company said sales volumes were falling faster
than the industry's. Revenues for the quarter fell to $7.1bn from $9.65bn a
year ago.
3rd February 2009,
www.bbc.co.uk
2 Royal bank chair steps down early
The chairman of part-nationalised Royal Bank of Scotland has
stepped down two months earlier than planned. Sir Tom McKillop - due to retire
in April - brought forward his departure to allow successor Sir Philip Hampton
to overhaul the troubled bank's board. RBS is set to be 70% owned by taxpayers
after a year of turmoil which could leave it as much as £28bn in the red. Sir
Tom said he wished Sir Philip and the board every success in the difficult
financial environment. The bank executive - who was paid £750,000 as chairman
of RBS in 2007 - is likely to face probing questions from MPs on the Treasury
Select Committee next week over the board's supervision of the business.
1st February 2009,
www.bbc.co.uk
3 Scania cuts jobs as profit slumps
Swedish truck maker Scania is to cut 2,000 jobs after quarterly
profits fell by close to half. The firm reported a 44% drop in earnings as
sales fell in the fourth quarter on the back of the global downturn, and truck
orders fell 98%. Net profit in the final three months of 2008 was 1.52bn
kronor ($182m; £126m), down from 2.7bn kronor a year earlier. Scania will cut
its workforce from 12,000 to 10,000 by laying off 2,000 workers on temporary
contracts. The numbers will be reduced by the end of the first quarter of
2009. Sales dropped 8% to 22.6bn kronor from 24.5bn kronor a year earlier.
Orders for new trucks shrank to 2,400 from 26,000 a year earlier. Transport
companies had considerable difficulties obtaining investment financing and
business loans, the firm said in a statement.
31st January 2009,
www.bbc.co.uk
4 Merck profits beat expectations
Drugs firm Merck has reported better-than-expected fourth
quarter profits. The US company earned $1.64bn (£1.14bn) for the three months
to the end of December, helped by cost controls and sales of its diabetes
drugs. It made a loss of $1.63bn for the same period in 2007, when it took a
$4.85bn charge related to a legal settlement for its withdrawn Vioxx drug.
However, quarterly sales were down 3% to $6bn compared to the last three
months of 2007. The firm left its outlook for 2009 unchanged at a time when
many companies are either cutting or not issuing forecasts because of economic
uncertainty. Merck shares were up 4.1% at $29.60 before the opening bell.
There is increased competition in the pharmaceuticals market at the moment.
Last week Pfizer confirmed it would merge with smaller rival Wyeth in a deal
worth $68bn (£50bn).
1st February 2009,
www.bbc.co.uk
5 Miner BHP sees profits fall 25%
Mining giant BHP Billiton has seen its half-year profits fall by
a quarter, saying it had been hit by "a rapid deterioration in market
conditions". The Anglo-Australian firm made a pre-tax profit of US$6.9bn
(£4.8bn) in the six months to 31 December, down 25% from $9.1bn a year
earlier. BHP said it was also affected by one-off costs, including the
abandonment of its bid interest in rival Rio Tinto. Global metal demand and
prices have slumped as the economy has worsened.
1st February 2009,
www.bbc.co.uk
6 San Miguel approves up to $816 million bond sales
San Miguel Brewery Inc. board of directors approved a plan to
sell as much as 38.8 billion pesos ($816 million) of bonds to acquire some of
its parent’s assets. The money raised will be used to buy San Miguel Corp.’s
domestic beer brands and a parcel of land, the unit said in a statement to the
Philippine Stock Exchange. The bonds may be denominated in pesos or dollars,
or both, San Miguel Brewery said. The debt-free brewer’s profit last year
jumped 25 percent to 10.04 billion pesos as revenue rose 11 percent after
selling 174.5 million cases of beer, it said in a separate statement today.
San Miguel Brewery plans to sell about 15 billion pesos of bonds to domestic
investors this month and about $500 million of dollar-denominated debt by the
end of March, a banker and a company official, who declined to be identified,
said Jan. 29. The company that’s been making San Miguel Beer for more than a
century plans to sell coupon-bearing bonds with maturities of three and five
years, and 10-year, zero-coupon notes to domestic investors as early as
February, a banker said last week. San Miguel Brewery rose 1 percent to 10
pesos at 10:36 a.m. today in Manila trading. San Miguel Corp.’s A and B shares
were unchanged and the benchmark Philippine Stock Exchange Index was little
changed.
2nd February 2009,
www.businessmirror.com
7 Mitsubishi sees first annual loss in 3 years
Mitsubishi Motors Corp. reported a quarterly loss on Wednesday
and said its annual result will plunge into the red for the first time in
three years, hit by plummeting global demand and a rising yen. Japan's
fourth-largest automaker said its group net loss will amount to 60 billion yen
($670 million) in the fiscal year through March 2009. The company had earlier
projected a net profit of 20 billion yen. Mitsubishi said sinking demand amid
a deepening global downturn and a rising yen were to blame for the dismal
forecast, which would mark its first net loss in three years. A strong yen
hurts Japanese exporters by eroding their overseas income. Over 80 percent of
Mitsubishi's revenue comes from sales abroad. The company said its net loss
for the fiscal third quarter was 17.6 billion yen, against a net profit of
27.3 billion yen a year earlier. Revenue dropped 30 percent year-on-year to
444.1 billion yen, and Mitsubishi suffered an operating loss of 5.5 billion
yen, reversing from an operating profit of 33.2 billion yen.
29th January 2009,
www.financialexpress.com
8 ADAG fast tracks mega power project
Work on the much-delayed 7,480 MW Dadri power project in Uttar
Pradesh is expected to start soon with the Reliance Anil Dhirubhai Ambani
Group (R-ADAG) entering the final stages of tying up with equipment
manufacturers. Group company Reliance Power, which is setting up the gas-fired
project, has put on the fast track talks with equipment majors such as General
Electric (GE) and Bharat Heavy Electricals (BHEL) for turbines, boilers and
generators, a senior group official said. We are negotiating with a host of
companies including GE, BHEL, Alstom and a couple of Chinese firms. Among
them, GE has even given us the assurance that it can execute the project
within 24 months, the official said. Moreover, he said, the equipment
manufacturers have assured that turbines could be supplied within nine to 11
months from the date of placing the order.
30th January 2009,
www.economictimes.com
9 Satyam an isolated case, does not reflect industry: Nasscom
The country's software lobby Nasscom on Wednesday said that
Satyam is an isolated case and not a reflection of the IT industry, which is
robust on values and parameters. The board of Satyam is doing a great job...
It's a one-off case. Let us move on from what has happened in Satyam, Nasscom
President Som Mittal said here. Let us follow on the intrinsic value of the
company, he said. Ever since the Satyam accounting fraud came to light early
last month, the IT industry body has been maintaining that the sector would
not be affected by the incident.
31st January 2009,
www.economictimes.com
Global Outsourcing
10 Sony Ericsson and IBM Sign a
5-Year Outsourcing Agreement
IBM today announced that the company has signed a five-year
outsourcing agreement with Sony Ericsson regarding the management of
Application Maintenance and Development of all of Sony Ericsson's SAP
applications globally. IBM will leverage their global leadership in
Application Management Services for the delivery of best-in-class solutions to
support Sony Ericsson's operations and business improvement initiatives in an
efficient and cost effective manner. Sony Ericsson, a fifty-fifty joint
venture of Sony Corporation and Ericsson, was established in October 2001.
Sony Ericsson Mobile Communications is a global provider of mobile multimedia
devices, including feature-rich phones, accessories and PC cards. The products
combine powerful technology with innovative applications for mobile imaging,
music, communications and entertainment.
29th January 2009,
www.tutorial-reports.com
11 TCS leads race for Sony's $100-million outsourcing deal
India’s largest software exporter TCS is leading the race to win
an outsourcing contract worth $60-100 million from Sony, the Japanese Nine
trends for IT sector in 2009 electronics giant struggling under huge losses
and a high cost operating structure. As part of its attempts to reduce cost of
managing IT operations, Sony is discussing a contract to manage its desktops
and servers over 3-5 years, a person familiar with the discussions told ET on
condition of anonymity. While ET could not independently verify the details of
this contract, at least two people familiar with the development confirmed
that Sony is evaluating vendors. When contacted on Thursday, a TCS
spokesperson said the company would not comment on specific customer contracts
yet to be awarded
30th January 2009,
www.economictimes.com
12 Recession may drive re-thinking of outsourcing deals
Outsourcing of various services and functions within companies
will continue during the ongoing global recession, but for U.S. companies, the
rate of outsourcing may slow slightly and more companies may take a closer
look at their existing outsourcing deals for cost reduction opportunities. A
new report from law firm Morrison Foerster’s sourcing practice points out that
firms that negotiated outsourcing contracts in the past five years “could not
have possibly anticipated economic upheaval on the scale that we are
witnessing today.” As a result, those outsourcing contracts may need to be
re-structured to better match desired costs and services levels. There may be
opportunities to relax certain service levels in those deals in the current
market that could provide cost savings. Or in some cases, there may be some
services that could not be handled in-house during a busy economic time, but
during a recession could easily be taken back in-house.
29th January 2009,
www.tutorial-reports.com
13 The Outsourcing Industry in India on the fast track
India is blessed with its unmatched talent pool that works in
harmony with efficient and conducive governmental policies allowing specific
cost advantages in return for quality jobs. The advancement of IT enabled
offshore outsourcing in India is continuously encouraged by the government. As
a complement to this, we have the foundations of our school education
strengthened by its focus on science and information technology which helps to
mould a highly competent posterity. Indian outsourcing industry is steadily
gaining momentum now-a-days which is rightly propelled by the combined efforts
of the Indian government and IT industry. At present, India has gained ample
repute and made its solid presence felt in the global outsourcing market by
virtue of its steady and unparalleled performance.
1st February 2009,
www.bignews.biz
14 CIBER, Inc. Announces Acquisition of Canon's CTS Direct Consulting Business
by CIBER ITO Division
CIBER, Inc. an international system consultancy and outsourcing provider,
announced that CIBER, Inc. has successfully completed the acquisition of Canon
Technology Solutions, Inc. (CTS), a subsidiary of Canon U.S.A., Inc. The
acquisition allows CIBER to expand its IT Outsourcing (ITO) division with CTS,
a leading provider of advanced technology solutions and consulting services
since 1985. CTS has helped leading corporations create and sustain competitive
advantage by achieving greater levels of productivity through the intelligent
application of enabling technologies. CTS offers market-leading consulting,
technology and business solutions in enterprise, business infrastructure,
content management, and IT managed services. The acquisition of CTS by CIBER
will strengthen the company's position as a leading provider of flexible,
dependable IT services and solutions to the IT Outsourcing market.
2nd February 2009,
www.tutorial-reports.com
15 Lockton Launches Outsourcing, Data Breaches Risk Management Service
Lockton announced that is launching a unique set of risk management services
to help companies address outsourcing risk and corporate response plans for
data breaches. These services are supported by leading cyber insurance
underwriters at Lloyd's--ACE Global Markets, Brit Syndicates Limited, Hiscox
-- and legal and security experts, said the bulletin. The two services,
"Vendor Risk Management and Contract Governance" and "Designing a Security
Breach Incident Response Plan," address the increasing scope of risks
associated with outsourcing/off-shoring critical business and information
technology (IT) functions.
1st February 2009,
www.tutorial-reports.com
Global Economy
16 Obama predicts more bank failures
US President Barack Obama has warned that more US banks are
likely to fail, as the full extent of their losses in the economic crisis
becomes clear. Speaking to NBC News, Mr Obama said some banks won't make it
but stressed that people's deposits would be safe. He has asked Treasury
Secretary Timothy Geithner to draw up guidelines for banks receiving
taxpayers' money. Meanwhile, he warned of a difficult next few days as the
Senate begins to debate his $800bn (£567bn) rescue plan. In an interview with
NBC, Mr Obama said it was likely the banks had not yet fully acknowledged the
extent of their losses.
2nd February 2009,
www.bbc.co.uk
17 Chinese spending creates deficit
China has reported a budget deficit of 111bn yuan
($16.2bn;£11.5bn) in 2008 after a big increase in government spending to boost
the economy. An increase in revenue of 19.5% was offset by a 25.4% rise in
spending, compared with the previous year. The Ministry of Finance said the
jump in spending was largely due to relief funds needed to cope with the
Sichuan earthquake in May 2008. China also spent billions of dollars on a
stimulus package in November. The government pledged almost $600bn to invest
in housing, infrastructure and post-earthquake reconstruction over the next
two years in order to kick-start the country's slowing economy. And there may
be more money on the way.
31st January 2009,
www.bbc.co.uk
18 Commercial property values
plunge
UK commercial property values fell by a record amount in 2008,
according to Investment Property Databank (IPD). Its UK Quarterly Property
Index showed commercial properties lost 26.4% of their value last year - the
most since records began in 1987. The values of office buildings, shops and
warehouses are now broadly in line with December 2001 levels. Five and a half
years of growth has been lost in 18 months of successive falls, IPD said.
Values were down 14.4% in the last three months of the year compared to the
previous quarter, another record fall. In nominal terms, we have never tracked
a year with this level of capital decline, said Ian Cullen, IPD's co-founding
director.
1st February 2009,
www.bbc.co.uk
19 Obama wants to avoid 'trade
war
US President Barack Obama has said he wants to avoid economic
stimulus measures that would signal protectionism or spark a trade war. Mr
Obama was responding to international criticism of a "Buy American" clause in
the $800bn (£567bn) US economic recovery package. The clause seeks to ensure
that only US iron, steel and manufactured goods are used in projects funded by
the bill. The EU said the clause would send "the worst possible signal". A
European Commission spokesman said the EU would launch a complaint with the
World Trade Organization (WTO) if the clause remained. European and Canadian
ambassadors to Washington had already warned that the clause could provoke
protectionism and trigger retaliatory moves. I think we need to make sure
that any provisions that are in there are not going to trigger a trade war.
3rd February 2009,
www.bbc.co.uk
20 Peso bucks depreciation trend in Asia
The peso gained about 0.3 percent against the US dollar in
January, which turned out to be a negative month for other Asian
currencies, amid perception that the domestic economy was capable
of withstanding the global financial shock, according to DBS Bank. The peso is
so far the only currency in the region which managed to appreciate against the
greenback, preserving its gains despite the Bangko Sentral ng Pilipinas’ (BSP)
move on Thursday to slash key interest rates by half a percentage point, Bank
of the Philippine Islands (BPI) said in separate commentary. The only currency
that managed to beat its sell indicator to post an appreciation in January was
the Philippine peso. To some extent, this was attributed to the resilience of
the Philippine economy,” Southeast Asia’s largest bank said on Friday.
31st January 2009,
www.businessmirror.com
21 Bank of England lent banks £185bn
The Bank of England has announced that it has lent £185bn to
financial institutions since April under its special liquidity scheme (SLS).
The SLS was set up to allow banks to temporarily swap assets that were
difficult to trade, such as mortgage-backed debt, for UK Treasury Bills. Banks
were able to make the exchanges until 30 January. The Federal Reserve has also
recognised substantial strains on the system and is extending its liquidity
scheme. The Bank of England said that 32 banks and building societies took
part in the scheme. The idea of the SLS was to help encourage banks to resume
normal lending practices by reducing the uncertainty that having illiquid
assets on balance sheets was creating.
1st February 2009,
www.bbc.co.uk
Global Market
22 European stocks up as Alcatel results beat forecasts
Extending the previous session’s gain the European shares surged
in early trade on Wednesday, as Alcatel-Lucent reported a forecast-beating
quarterly sales while overshadowing the disappointing earnings from the Swiss
pharma major Roche. Miners were on the rise after BHP Billiton, the world’s
biggest miner, reported 2.2% increase in first-half profits, boosted by a last
burst of Chinese demand growth. BHP was up 3.3%, while Rio Tinto gained 2.1%
and Anglo American added 2%. The FTSEurofirst 300 index of top European stocks
was higher by 0.7% at 797.69 points, at 0937 GMT. The benchmark index - which
is still down 4.5% in 2009 - gained 1.9% on Tuesday, boosted by Vodafone’s
reassuring update.
3rd February 2009,
www.livemint.com
23 BoJ unveils $11 billion stock buying scheme
The Bank of Japan pledged on Tuesday to buy $11 billion in
stocks held by Japanese banks, saying their biggest risk was exposure to share
markets and that the measure would help stabilise the country’s financial
system. It revives a scheme from earlier this decade to head off a domestic
banking crisis and comes as Japanese banks seek to limit their losses from the
Tokyo stock market that has fallen by more than a third since the end of last
March in the face of the global financial storm. If you look at what kind of
risks big Japanese banks have now, the biggest risk is not credit risk. It’s
volatility in share prices, said Bank of Japan governor Masaaki Shirakawa.
Share prices fluctuate on various factors, not just domestic factors. Right
now international markets are not stable and Japanese share prices are
falling. Those banks always have to consider such risks.
1st February 2009,
www.livemint.com
24 Banks, energy drag Europe shares down
European stocks were down early on Monday, led by the banks and
energy stocks, as investors worried about corporate profits. By 0932 GMT, the
pan-European FTSEurofirst 300 index of top shares was down 2.8% at 774.45
points. Third week of heavy earnings reporting with around 60% of S&P
companies still to come - this is another nervous week. It’s all about
earnings. said Bernard McAlinden, market strategist at NCB Stockbrokers in
Dublin. Euro zone manufacturing business shrank at a slightly slower pace in
January while factory prices plunged at their fastest rate in at least six
years, a survey showed, leaving scope for further ECB rate cuts. The
stabilization in the PMI is of course welcome, but the data is far from
suggesting the manufacturing sector is out of the woods, said Martin Enlund,
economist, Handelsbanken.
31st January 2009,
www.livemint.com
25 World’s top 500 banks witness a 32% decline in brand value
The global credit crisis that has felled some of the world’s
best known financial institutions and left survivors with a mountain of bad
debt has also taken a heavy toll on banks’ brand valuations. The world’s top
500 banks lost brand value worth $218.1 billion (about Rs10.8 trillion), a 32%
drop over the past year, while their market capitalization slumped by $3.9
trillion, or 51%, according to a global survey. State Bank of India (SBI), the
nation’s biggest lender, was the only Indian institution to figure in the top
100 rankings.
29th January 2009,
www.livemint.com
26 Pfizer deal highlights irony of bank bailouts
Pharmaceutical company Pfizer Inc.’s $68 billion (Rs3.33
trillion) purchase of Wyeth shows the irony of the government’s bank bailout.
The takeover of the maker of Preparation-H and Chapstick is being greased by
$22.5 billion in loans from a consortium that resembles a who’s who of
Troubled Assets Relief Program, or TARP, recipients. Using taxpayer money to
fund Pfizer’s deal and its ensuing corporate bloodletting will put the new
government’s belief in free markets to a much-needed test.
29th 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