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 86

 

 

 

Global Business Update

(9th July----15th July)

 

Contents

 

Global Corporate

1 Yahoo rejects new break-up offer

2 Boeing receives Gulf state orders

3 Santander agrees £1.2bn A&L deal

4 Philips sees 54% fall in profits

5 JCB axes 650 jobs throughout UK

6 Thomas Cook cancels airline deal

7 RBS eyes Australian assets sale

 

Global Outsourcing

8 NXP signs global outsourcing contracts with Atos Origin

9 Outsourcing covers a third of services

10 Convergys Appoints Jim Goetz as Chief Information Officer

11 Coca-Cola initiates outsourcing that affects Brandon facility

12 EXL Renews its Outsourcing Contract with Aviva in Noida

13 IBM signs $60 Mln. outsourcing contract with Thailand bank

14 CBN’s planned outsourcing of cash transportation

 

Global Economy

15 Indian inflation approaches 12%

16 Oil hits new high on Iran fears

17 Japan's wholesale inflation rises

18 Chinese exports slow during June

19 Sales remain flat on High Street

20 US seeks to calm investor fears

 

Global Market

21 NHPC IPO to be delayed till October

22 Rupee at near 3-week high

23 No change in oil prices assessment: RBI

24 Oil trades at USD 143.43 per barrel

 

Global Corporate

 

1 Yahoo rejects new break-up offer
Yahoo has angrily rejected a joint takeover offer from Microsoft and the investor Carl Icahn. Microsoft would have bought Yahoo's search engine while Mr Icahn would have ended up with the rest of the business. Yahoo objected to being given only 24 hours to consider the offer and there being no opportunity to negotiate the terms of the deal. It is ludicrous to think that our board would accept such a proposal, Yahoo said in a statement. This odd and opportunistic alliance of Microsoft and Carl Icahn has anything but the interests of Yahoo!'s stockholders in mind, Roy Bostock, chairman of Yahoo, said. The proposal involved the immediate removal of the Yahoo board as well as its top management. The statement from Yahoo repeated the offer to sell the entire company to Microsoft for at least $33 (£16.5) a share and suggested that a takeover of the entire company would be much simpler than the proposed restructuring.

13th July 2008, www.bbc.co.uk

 

2 Boeing receives Gulf state orders

Boeing has received a raft of orders from Gulf states eager to capitalise on money received from soaring oil prices. United Arab Emirates carrier Etihad Airways is to buy 35 mid-sized Boeing Dreamliner jets and 10 mid-sized Boeing 777s in a deal worth $9bn (£4.5bn). Meanwhile budget carrier FlyDubai has ordered 54 of the popular 737 planes at the Farnborough International Airshow. The event, where many deals are announced, has also seen Airbus sell eight A330s to Saudi Arabian Airlines. Boeing and Airbus - the world's largest plane makers - are hoping that their more fuel efficient aircraft will help attract customers amid rocketing oil prices. The industry faces a tough challenge coping with the soaring cost of jet fuel at the same time as many customers are beginning to tighten their belts and cut back on travel. For our customers clearly the volatility of fuel price remains a huge issue, said Boeing chief executive Scott Carson. However the high cost of oil - which last week went above $147 a barrel - is providing additional revenue to the producer nations, many of whose carriers are looking to expand their fleets. The FlyDubai deal - the airline's first bulk order - is worth about $4bn (£2bn).

10th July 2008, www.bbc.co.uk

 

3 Santander agrees £1.2bn A&L deal

Spanish bank Santander has agreed a deal to buy UK lender Alliance & Leicester (A&L) for about £1.26bn. Santander said A&L shareholders would get one of its shares for every three they now hold in the UK bank. Shares in A&L soared by more than 50% on Monday after it disclosed that it had received a bid approach, which the BBC revealed was from Santander. Santander is effectively offering 317 pence per A&L share and expects the deal to be completed by October. But BBC business editor Robert Peston says the deal with Abbey-owner Santander may pose competition issues. Santander plans to merge A&L with Abbey, which it bought in 2004, leading unions to express fears about job losses. But our correspondent added that the deal also represented an apparent vote of confidence in the UK's troubled housing market.

11th July 2008, www.bbc.co.uk

 

4 Philips sees 54% fall in profits

Philips Electronics has said its second quarter profits fell by more than half from a year earlier despite strong sales in several emerging markets. The Dutch company announced net profit of 720m euros (£575.1m; $1.14bn) down from 1.57bn euros in the same quarter last year. Television sales in emerging markets, like Eastern Europe were robust, helped by the Euro 2008 football tournament. Sales rose 6% to 6.46bn euros, above analysts' expectations of 6.35bn euros. Chief executive Gerard Kleisterlee was positive about the sales results, saying they proved the company's resilience in a rapidly deteriorating macro-economic environment. Philips said a sale of its shares in Taiwan Semiconductor Manufacturing, made under a plan to reduce its holding in the firm to zero by 2010, produced just 780m euros compared with 1.2bn euros in the second quarter last year - contributing to the fall in profit.
12th July 2008, www.bbc.co.uk

 

5 JCB axes 650 jobs throughout UK

Digger firm JCB has announced a redundancy programme that will result in the loss of 500 manufacturing and about 150 other jobs across the UK. The move is a result of a rapid decline in orders, which has led to a 20% decrease in the forecast production schedule for 2008. The construction industry has been badly affected by the credit crunch and rising raw materials prices. The Rocester, Staffordshire-based firm has 11 factories around the UK. Growing demand for JCB products in some emerging markets such as Russia, the Middle East and Brazil has not been enough to reverse the downturn in the construction sector in developed markets, said JCB group chief executive Matthew Taylor.

10th July 2008, www.bbc.co.uk

 

6 Thomas Cook cancels airline deal

Thomas Cook has cancelled plans to merge its German charter airline Condor with rival Air Berlin after discussions with the competition regulator. The German Cartel Office had expressed concerns that the deal could reduce holidaymakers' choice of flights to popular Mediterranean destinations. Thomas Cook said Condor was still a "strong business" and was looking for an alternative deal. The two airlines announced plans to merge in September 2007. In the light of discussions about alternative options for Condor, Thomas Cook also said it was suspending its 375m euro (£299m) share buy-back deal. Thomas Cook expected savings from the merger to total 70m euros a year by 2010. But analysts said the deal would not necessarily have solved the problems the airlines are facing, particularly rising fuel costs and falling demand. We have long expected this, given the ever-declining share price of Air Berlin, the very generous terms and the deteriorating macroeconomic environment, said Landsbanki analyst Mark Reed.

10th July 2008, www.bbc.co.uk

 

7 RBS eyes Australian assets sale

Royal Bank of Scotland (RBS) is looking to sell the Australian and New Zealand operations of ABN Amro - the Dutch bank it bought last year. National Australia Bank said it was in talks to buy ABN's investment and corporate banking units from RBS. Last year RBS led a consortium to buy ABN Amro in a deal worth 71bn euros ($112bn; £56.7bn). Since then, global credit problems and a tougher economic environment have forced RBS to strengthen its finances. Last month, the Edinburgh-based company raised £12bn after selling shares to existing shareholders in a rights issue - the biggest in UK corporate history. It has also sold off the UK's biggest train leasing firm, Angel Trains, for £3.6bn to a consortium and is keen to offload its insurance assets, which include Direct Line and Churchill. But with firms intent on preserving capital and cheap debt difficult to come by, it may struggle to get the price it wants, analysts say. Zurich Financial Services, one of the leading bidders, pulled out of the race for these businesses on Thursday. National Australia Bank said that there was "no certainty" that a deal would be reached.

9th July 2008, www.bbc.co.uk

 

Global Outsourcing

 

8 NXP signs global outsourcing contracts with Atos Origin

NXP, the independent semiconductor company founded by Philips, has awarded a five-year outsourcing contract to international IT services company Atos Origin. Under the contract Atos Origin will deliver global datacenter management services. This contract follows a business application hosting & datacenter services agreement signed last month. Together the contracts are worth E155 million. At the same time Atos Origin is selected as NXP's managed service integrator, responsible for managing its local and global IT suppliers. This agreement will result in increased flexibility, reliability, and cost savings for NXP using datacenter consolidation, global sourcing, best practice implementation and innovation. As part of this new contract, Atos Origin will manage all infrastructure services for NXP's core business 24/7 to help consolidate and optimize all global manufacturing and engineering data centres. These services, which comprise consulting and outsourcing services, are based on Atos Origin's global sourcing strategy. Atos Origin and NXP will work with jointly agreed key performance indicators including systems availability, continuous service, cost reductions and output performance levels. This indicates the strategic importance to NXP and high level of confidence that Atos Origin holds to perform according to set targets.

9th July 2008, www.tutorial-reports.com

 

9 Outsourcing covers a third of services

A third of all public services – far more than previously thought – are now delivered by the private and voluntary sectors, according to a report commissioned by the government that for the first time reveals the extent to which public service provision has been transformed by the private sector. The study by DeAnne ­Julius, an economist and former member of the Bank of England’s monetary policy committee, shows the public service industry has doubled in little more than a decade and now embraces everything from health to waste management, IT, welfare-to-work, training, construction and legal services. It also shows the UK is at the forefront of the outsourcing trend. Although the US spends more cash on outsourced services, the UK spends a larger share of its gross domestic product than the US or any other Organisation for Economic Co-operation and Development country except Sweden and Australia.

11th July 2008, www.tutorial-reports.com

 

10 Convergys Appoints Jim Goetz as Chief Information Officer

Convergys Corporation a global leader in relationship management, announces the appointment of Jim Goetz as Chief Information Officer. Goetz will report to Earl Shanks, Convergys' Chief Financial Officer. In this leadership role, Goetz will be responsible for strategic planning and global implementation of the information systems and technology function for Convergys including programming, systems development, database management, computer operations, telecommunications, and outsourcing. Goetz will also interact with clients as the strategic leader for Convergys' technology solutions from an internal and outsourcing perspective. Most recently, Goetz served as CIO for the ServiceMaster Company where he led transformational initiatives in technology infrastructure, applications, and business capabilities used throughout the ServiceMaster consumer brands including TruGreen, Terminix, American Home Shield, ServiceMaster Clean, and Merry Maids.

12th July 2008, www.tutorial-reports.com

 

11 Coca-Cola initiates outsourcing that affects Brandon facility

Coca-Cola executives met with employees in Brandon throughout the day Thursday to discuss the company's plans to enter into an outsourcing agreement with Capgemini. Coca-Cola will be outsourcing some services of the Brandon center, though no contracts have been signed yet. Right now about 150 positions might be impacted, Norman Ross, spokesman, said. Ross said the company hopes that number will be reduced through attrition or employees going to work for other parts of Coca-Cola's Tampa Bay operations. Coca-Cola wants the Brandon center to remain a global hub for financial services, Ross said. The company operates a handful of financial services centers. It plans to close the Dallas facility.

11th July 2008, www.tutorial-reports.com

 

12 EXL Renews its Outsourcing Contract with Aviva in Noida

ExlService Holdings, Inc, a leading provider of transformation and outsourcing solutions, today made several key announcements with respect to its relationship with Aviva: Aviva has confirmed its commitment to EXL by renewing its outsourcing contract with EXL to provide services from EXL's Noida facility through January 2012 including provisions relating to annual minimum volume commitments. The existing Noida contract with Aviva is in effect until July 2009. Aviva has provided notice to EXL with respect to the exercise of the Build Operate Transfer (BOT) contract currently in place with EXL in Pune. The anticipated date of transfer of the Pune operations for Aviva is expected to be around August 9, 2008. Aviva is consolidating its captive operations and BOT contracts after conducting a commercial process for the sale of the assets. Cathryn Riley, Chief Operating Officer of Aviva, stated: We have enjoyed a long-term relationship with EXL which we look forward to continuing. EXL is a partner that we have come to rely on for excellent customer service and process reengineering and transformation skills. Extending the Noida contract makes absolute sense to us as we continue to enjoy the mutual benefit from Aviva's relationship with EXL.

12th July 2008, www.tutorial-reports.com

 

13 IBM signs $60 Mln. outsourcing contract with Thailand bank

IBM Corp announced it has signed an information technology outsourcing services contract worth two billion baht, or approximately $60 million, with the Thailand-based Thanachart Bank Public Co. Ltd. The seven-year contract, signed in March 2008, requires IBM to enhance the bank's IT capacity, increase client satisfaction and address progressive growth with world-class standards.The Armonk, New York based IBM would provide services to various Thanachart Group companies like Thanachart Securities Public Co. Ltd., Thanachart Fund Management Co. Ltd., Thanachart Life Assurance Co. Ltd. and Thanachart Insurance Co. Ltd. As per the agreement, the bank would receive IT outsourcing services including data center service, disaster recovery service, server and network management and IT security operations.

13th July 2008, www.tutorial-reports.com

 

14 CBN’s planned outsourcing of cash transportation

The Cental Bank of Nigeria (CBN) has advertised its intention to divorce an integral duty which it has performed over the years – cash transportation processing function. In furtherance of this plan, CBN had circulated to the banking industry a draft guideline for the regulation of all cash operations in the country. It is expected that the implementation of full disengagement from cash handling services is any time from now. The underpinning reason for the proposed plan as disclosed by CBN is the culmination of the challenges the new impetus in the banking industry has thrown up. It is the perception of the financial institution that outsourcing its cash transportation and processing function to credible private operators would enable it focus more attention on the exercise of its statutory obligation to rapidly expand the banking sector as well as redirect its resources effectively to other core activities. The proposed plan is in consonance with modern practice all over the world Organisations, even government organs, now tend to be leaner through devolution of ancillary functions to specialized firms to focus entire resources to core areas . The result of such development is the attainment of organizational goals at minimal cost.

14th July 2008, www.tutorial-reports.com

 

Global Economy

 

15 Indian inflation approaches 12%

Wholesale prices in India grew by 11.89% in the year to the end of June, the fastest rate since the measure began in 1995. Inflation has tripled over the last six months, driven by the soaring cost of food and fuel. Figures also showed that the output of India's factories grew by its slowest rate in six years. Industrial output rose 3.8% in May, compared to the same month in 2007, a sharp drop on the April's 6.2% growth. The industrial output numbers ... are a reflection of manufacturers anticipating a slowdown in consumer spending as high inflation bites into incomes and some scale-back of fresh production plans, said economist Shuchita Mehta, from Standard Chartered Bank. The Reserve Bank of India has been increasing interest rates to try and dampen inflation. Last month, it increased its main lending rate twice in two weeks to 8.5%. But higher interest rates could cause economic growth to slow further, analysts predict. Economists suggest the economy is unlikely to grow at 8-8.5% this year, as the government has predicted.

11th July 2008, www.bbc.co.uk

 

16 Oil hits new high on Iran fears

Crude oil has jumped to new record highs above $147, driven by ongoing geopolitical concerns over Iran. US light sweet crude rose to highs of $147.27, before dipping back to $145.08. In London, Brent crude climbed to $147.02, before settling at $144.49. Market experts put the increase down to concerns about Opec member Iran's recent missile tests, concerns about global supplies and the weak dollar. As a result, oil prices have jumped more than $10 in the past two days. On Thursday, oil prices surged by almost $6 on the back of worries about missle tests by Iran - the second largest member of oil producing cartel Opec. A day earlier, the country successfully test-fired long and medium-range missiles adding to concerns about Tehran's disputed nuclear programme. Traders are also said to be concerned about global supplies after a Nigerian militant group said it would call off a ceasefire following a UK offer to help quell violence in the oil-rich Delta. The group - the Movement for the Emancipation of the Niger Delta (Mend) - has been behind a series of high profile attacks on oil installations and kidnaps of expatriate oil workers in the past which has contributed to oil production in the country falling by around a quarter.

10th July 2008, www.bbc.co.uk

 

17 Japan's wholesale inflation rises

Japanese wholesale prices reached a 27-year high in June, spurred by high crude oil prices and the rising cost of raw materials such as steel and grain. Prices rose 0.8% from May and grew 5.6% year-on-year, marking the biggest annual hike since February 1981. Despite rising prices, the central bank is wary of increasing interest rates and sparking an economic slowdown. The Bank of Japan policy board is due to meet next week to make a decision on interest rates. However analysts said they expected the rate to be held at 0.5% We still think the recent rise in price data are unlikely to prompt the bank of Japan to raise rates, said economist Junko Nishioka at RBS Securities. The Bank of Japan is focused more on the negative impact of the price rises on demand, rather than the possibility of continuous inflation pressure, he said. The latest data has deepened the gloom surrounding many of the country's firms which have seen their profit margins hit hard in recent times.

10th July 2008, www.bbc.co.uk

 

18 Chinese exports slow during June

China's exports grew at their slowest pace in four months in June, causing its trade surplus figure to fall by more than 20% from a year earlier. The government may now try to slow the growth of China's currency, which is making Chinese exports more expensive. Exports grew to $121.5bn (£62bn), an 18.2% year on year rise but lower than the 28% rise seen in May. Beijing has let the yuan rise against the dollar to slow incoming export revenue, which is driving up prices. The surplus of $21.4bn was still China's biggest so far this year since a surplus of $22.7bn in December. Meanwhile, the growing demand for overseas resources to fuel the country's expanding economy pushed imports up 23.7%, to $100.1bn in June. The slowdown in the export figures reflects the downturn in global growth and may indicate the world's largest economy, the US, is on the edge of a recession. The US is China's second biggest export market after the European Union. The Chinese government has recently allowed the yuan to grow against the dollar as it seeks to tackle inflation in China which is near 12-year highs.

13th July 2008, www.bbc.co.uk

 

19 Sales remain flat on High Street

The small sales growth seen in the UK High Street in May was just a start-of- summer blip, according to the British Retail Consortium (BRC). The BRC said retailers failed to hold on to the sales lift in June as tighter household budgets and fluctuating weather kept shoppers away from stores Like-for-like retail sales fell 0.4% compared with June 2007. Total sales, which include new stores, rose 2.1%. Sales of food were up, but against the suppressed sales of a wet June in 2007. Food and drink was the only sector to show significant growth, the BRC said. Clothing and footwear sales were the biggest losers, with furniture and homewares slipping further below the previous year's levels.

12th July 2008, www.bbc.co.uk

 

20 US seeks to calm investor fears

The heads of the Federal Reserve and the US Treasury have moved to calm fears about the financial health of the nation's two largest mortgage firms. Shares in Fannie Mae and Freddie Mac hit 17-year lows in Thursday trading amid talk of a government bail-out. Ben Bernanke and Henry Paulson also called for new powers to shield the economy from crises such as the collapse of a Wall Street firm. They told the US Congress they needed to modernise the regulatory system. Mr Paulson, the Treasury Secretary, and Mr Bernanke, head of the Federal Reserve, told a hearing of the House Financial Services Committee that Fannie Mae and Freddie Mac had adequate capital. Investors fear the two mortgage firms may need a government bail-out, after comments from a former central banker that suggested the institutions might not be solvent. Both firms are raising funds to cover losses of more than $11bn (£5.6bn) since the credit crisis began last year.
10th July 2008, www.financialexpress.com

Global Market

 

21 NHPC IPO to be delayed till October

State-run NHPC Ltd's much awaited Initial Public Offer to raise up to Rs 1,590 crore may be delayed till October, as the company is still searching for its sixth non-official director. We have five non-official directors on board and are in search of the sixth one, as soon as it is finalised we would hit the market, which may be around October," NHPC Chairman and Managing Director S K Garg said. The company had filed its draft prospectus with market regulator SEBI for the IPO in April last year. It, however, got delayed over appointment of non-official directors on time, a condition mandatory for any company to float an IPO. NHPC, which accounts for 3.7 per cent of country's total power generation capacity, plans to raise at least Rs 1,590 crore through the IPO to part-fund expansion plans.

10th July 2008, www.financialexpress.com

 

22 Rupee at near 3-week high

The Indian rupee climbed to near-three week highs on Monday as softer oil prices calmed concerns of a widening trade deficit, but weakness in the offshore market checked sharp gains. At 9:49 a.m., the partially convertible rupee was at 42.81/82 per dollar, 0.14 per cent stronger than Friday's close of 42.87/88. It hit a 15-month low of 43.50 early this month. here has been dollar selling by some custodial banks but dollar/rupee should find support around 42.75 levels, said U. Venkatraman, head of treasury at Mumbai-based IDBI Bank. Asian stocks edged up, the dollar gained and government bonds fell on Monday after Washington proposed an emergency plan to rescue the top US mortgage finance companies, offering to buy shares if necessary.

11th July 2008, www.tutorial-reports.com

23 No change in oil prices assessment: RBI

The RBI’s assessment of oil prices has not changed since it raised interest rates in June, its deputy governor said on Thursday, ahead of a scheduled policy review at the end of the month. Rakesh Mohan also said expectations were encouraging for monsoon, which was crucial for the country's rural economy that depends on bountiful rains for irrigation. The Reserve Bank of India had raised rates twice last month, by 25 basis points on June 11 and half a per centage point on June 24, when it also increased the deposits that banks must set aside by 50 basis points, to douse inflation that had risen to 13-year highs above 11 per cent. It had then said the monetary tightening should be viewed in the context of high and volatile energy prices that were no longer a temporary phenomenon. In our assessment the oil price situation hasn't changed since the last monetary policy action that we did  Mohan said.

12th July 2008, www.financialexpress.com

24 Oil trades at USD 143.43 per barrel

Oil prices fell by more than USD 1.50 in Asia on Monday after supply worries helped push prices to a record high last week. New York's main oil contract, light sweet crude for August delivery, fell USD 1.65 to USD 143.43 a barrel. The contract hit an intra-day peak of USD 147.27 before closing at USD 145.08, up USD 3.43 on the New York Mercantile Exchange Friday. Brent North Sea oil for August delivery fell USD 1.24 to USD 143.25. On Friday Brent jumped as high as USD 147.50, a new intra-day record, before settling up USD 2.46 at USD 144.49 in London. Tensions between the West and Iran, along with unrest in Nigeria, have helped to support the high prices, according to dealers. Oil prices have almost doubled over the past year and have soared since breaking through USD 100 at the start of the year. The record prices have sparked protests around the world amid fears for economic growth.

13th July 2008, www.financialexpress.com