Global Business

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 87

Global Business Update
(6th August’08----19th August’08)

Contents

Global Corporate

1 Record profits for BHP Billiton

2 Wal-Mart to invest $1bn in Brazil

3 Origin urges rejection of BG bid

4 Mahindra not interested in GM's Hummer

5 Fortis Healthworld to acquire CRS Health

6 Reliance looking at diesel exports to Pakistan

7 BlackBerry Bold`s home launch soon

8 TCS may buy Citi`s India BPO arm

Global Outsourcing

9 Sun Microsystems Signs Three Year Outsourcing Deal With Exigen Services

10 Midway Games cuts 90 developers in Austin

11 IBM wins outsourcing agreement with South American industrial group

12 IBM wins Latin American outsourcing contract

13 Outsourcing cos form association

14 NWP and Accenture extend outsourcing agreement

15 Sony, Toshiba to boost overseas LCD outsourcing

16 NEC to halt outsourcing of PC output in Japan-Nikkei

Global Economy

17 US inflation fastest since 1991

18 US home foreclosures increase 55%

19 Zimbabwe inflation rockets higher

20 Recession in UK 'is months away'

21 India in public sector pay deal

22 Mittal sees credit crunch effects abating

Global Markets

23 Dollar hits 6-month high on global 'pain trade'

24 Idea defers open offer for Spice Comm

25 IFC sells stake in Dabur Pharma

26 Gold dips below $800 again, Platinum down 5%

27 Oil climbs above $115 per barrel

Global Corporate

1 Record profits for BHP Billiton

Mining giant BHP Billiton has announced record annual profits for the seventh consecutive year on the back of surging commodity prices. The Anglo-Australian firm saw profits rise by 12.4% to $15.4bn (£8.2bn) in the year to the end of June. BHP predicted that demand for commodities would remain strong in the longer term, but said the global economy would slow in the near term. The EU is currently probing BHP's $170bn bid for rival Rio Tinto. Increased production of copper, iron ore, manganese ore and alloy and alumina all bolstered BHP's profits. But BHP said that while higher prices for oil and other commodities had contributed to its results, surging energy, fuel and shipping costs had offset some of the gains. Commodity prices have fallen in recent weeks, leading to speculation that demand for natural resources may be waning. But BHP said that it was confident that this was not the case. China has been the main driver for demand and while there has been a bit of a slowdown, we're confident that it will continue to have high demand for decades to come. the firm's chief executive Marius Kloppers told the BBC.
18th August 2008, www.bbc.co.uk

2 Wal-Mart to invest $1bn in Brazil

The world's largest retailer, Wal-Mart, says it will invest some 1.8bn reais ($1.1bn; £588m) to expand in Brazil. The firm said it would open between 80 and 90 stores in 2009 in Latin America's largest country. Wal-Mart, which opened its first outlet in Brazil in 1995, has 318 stores there and a local workforce of 70,000. The announcement followed a meeting between the head of the firm's America division, Craig Herkert, and Brazilian President Luiz Inacio Lula da Silva. Brazil's economy has expanded in recent months thanks in part to more affordable consumer credit and rising incomes. Even as retailers are feeling the pinch of a slowdown in the US, many are counting on stronger growth in developing markets in places such as China, Russia and Brazil.

16th August 2008, www.bbc.co.uk

3 Origin urges rejection of BG bid

Australian energy firm Origin has again urged shareholders to reject a 13.8bn Australian dollar ($13.1bn; £6.7bn) takeover bid from UK rival BG Group. Reiterating its stance from July, Australia's second-biggest energy firm said BG's offer price of A$15.50 undervalued Origin and its prospects. But BG boss Frank Chapman, leading the hostile bid, said: "Origin's response lacks any substance or clarity." And he said there was no evidence to support the view BG undervalued Origin. Nor is there any forecast or other financial information which could assist shareholders in valuing the company and making a timely and informed decision, added Mr Chapman, who is BG's chief executive. BG said in June it would go directly to Origin's shareholders after the board rejected a friendly bid of A$15.50 a share in May. Origin is a strongly performing, Australian integrated energy company with an impressive track record of growth, its chairman Kevin McCann said in a statement on Tuesday.

15th August 2008, www.bbc.co.uk

4 Mahindra not interested in GM's Hummer

Mahindra & Mahindra Ltd, India's top utility vehicle maker, is not interested in buying General Motors' Hummer brand, a senior official said on Monday. "There has been a lot of speculation, I want to say categorically we are not pursuing Hummer, period," Vice Chairman Anand Mahindra told reporters. "We are pursuing our own models strategy and we do not want to tarnish our lean warrior strategy," he said, referring to Mahindra's plans for a line-up of eco-friendly vehicles. Mahindra, also the country's top tractor maker, last month bought the assets of motorbike and scooter maker Kinetic Motor.

18th August 2008, www.financialexpress.com

5 Fortis Healthworld to acquire CRS Health

Fortis Healthworld, a Religare Group company, will acquire pharmacy retail chain CRS Health as part of expansion, while re-christening itself as Religare Wellness. The company is also repositioning as a health and wellness company with wider range of services. This rebranding along with the acquisition is a significant move to take our interest in the wellness retail space to the next level, Religare Enterprises CEO and Managing Director Sunil Godhwani said. As part of the Rs 15-crore-proposed deal, Fortis HealthWorld will acquire all 27 retail stores and four warehouses of CRS Health in India. Acquisition and integration under the Religare Wellness brand is expected to be completed within next 30 days. We intend extending the brand values and brand equity to various services within our promoter group, wellness retail being one of them, Godhwani said. Post integration, the total number of the stores under the Religare brand will exceed 100 and the geographical footprint of it would spread from North India to South and West, including Tamil Nadu and Maharashtra.

15th August 2008, www.financialexpress.com

6 Reliance looking at diesel exports to Pakistan

Reliance Industries is looking at exporting diesel from its upcoming refinery at Jamnagar in Gujarat to Pakistan after Islamabad last month allowed import of fuel from India. In July, Pakistan announced expanding bilateral trade with India by allowing more imports, including diesel and fuel oil. Reliance is likely to commission its 29 million tons a year export-oriented unit by October and Pakistan will be one of the destinations besides the US and Europe of the high value fuel it will produce, industry sources said. The company has been trying to get an entry into Pakistan for the past four years, which imports 7-8 million tons of diesel a year to meet its domestic needs and it is only now that the neighbouring country has allowed import of fuel from India. Its existing 33 million tons a year Jamnagar refinery in Gujarat and the upcoming unit adjacent to it offer the cheapest option for Pakistan but the Islamic nation has been getting fuel from countries like Kuwait at a heavy discount and Reliance has to better that price.

14th August 2008, www.financialexpress.com

7 BlackBerry Bold`s home launch soon

Canadian telecom giant Research in Motion (RIM), which skipped its own backyard earlier this month to unveil its much-hyped BlackBerry Bold in Austria, Russia and Turkey, will reportedly launch the wonder smartphone here this week. The Canadian launch of the BlackBerry Bold comes within weeks after Apple's iPhone3G made waves here. The cable network and media giant Rogers will support the Blackberry Bold system across Canada. The company has neither commented on this week's launch, nor given any pricing details. Though the new smartphone is being touted as RIM's reply to the iPhone, experts say it still remains a device for business users and professionals. However, a plethora of new features on it will certainly endear it young students and teens. RIM has not made any announcement yet, but the market buzz is that the Waterloo-based company will unveil its real rival to the iPhone only later this year. Like the iPhone3G, the Bold version of BlackBerry too operates on the much faster 3G network. It has a half-VGA LCD display with 480x320 resolution, a powerful 624 MHz processor and 1 GB internal storage memory. With a 2 megapixel camera with video recording capability, built-in flash and digital zoom, the new device also boasts an advanced media player that displays pictures and slideshows quickly, plays movies smoothly in full screen mode and manages an entire music collection.

12th August 2008, www.financialexpress.com

8 TCS may buy Citi`s India BPO arm

Tata Consultancy Services is close to acquiring Citigroup's captive back office unit in India for about USD 500-550 million, a leading business daily reported. The announcement of a deal for Citigroup Global Services is likely to be made "within three weeks", according to sources close to the development. TCS, India's top software services exporter, has edged IBM in the race for the Citi unit and the deal would guarantee TCS business for the unit from Citigroup for five years. A spokesman for Citi in India declined comment on the report. A spokesman for TCS also declined comment, calling the report speculative. The paper had reported in June that Citigroup was restructuring its India back office operations and that it may sell or outsource most of these assets. Citigroup unveiled a reorganisation of its Asia-Pacific business on Monday, giving its regional heads increased authority.

11th August 2008, www.financialexpress.com

Global Outsourcing

9 Sun Microsystems Signs Three Year Outsourcing Deal With Exigen Services

Exigen Services, the leading next generation application outsourcing provider, today has announced a multi-year application development and maintenance outsourcing deal with IT giant, Sun Microsystems Inc. Under the terms of the agreement, Exigen Services will provide application development and maintenance services for a portfolio of products in Sun's Services division. Sun Microsystems chose Exigen Services for their unique approach to creating a true partnership with customers, and their industry-recognized expertise with Agile development methodologies such as SCRUM and eXtreme Programming (XP).

10th August 2008, www.tutorial-reports.com

10 Midway Games cuts 90 developers in Austin

Midway Games Inc. says it will eliminate most of its Austin game development team as the company retools to concentrate on projects most likely to succeed. The Chicago-based game company behind the "Mortal Kombat" series says it's canceling development of an unnamed game in its Austin studio and will cut 90 of the 130 local positions as a result. Midway says two prototype teams and the company's Central Outsourcing Group will continue to operate out of the Austin studio. In a company release, Midway says the decision will allow it to "maximize development resources and apply manpower and capital to projects with the highest chances of success." "While this was a very difficult decision, we feel it was the right thing to do for the future of Midway," says Matt Booty, interim president and CEO of Midway. "We view every game as an investment that must meet certain standards for quality, scheduling, and profitability.

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

11 IBM wins outsourcing agreement with South American industrial group

IBM, an IT technology and services company, has announced on 8 August that it signed an agreement in June this year with Brazilian industrial group Saint-Gobain to provide the group with outsourced IT infrastructure. IBM will be responsible for storage on demand hosting services, administration, support and IT systems management. The contract also includes migration of all servers installed at Saint-Gobain headquarters in So Paulo to two data centres of IBM's Global Delivery Center (GDC), in Hortolndia. The current Saint-Gobain infrastructure team, which currently has 37 professionals responsible for IT Operations including production, support, architecture and projects, will now focus on business expansion, identifying needs and defining strategies.

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

12 IBM wins Latin American outsourcing contract

IBM and Saint-Gobain didn’t disclose financial terms of the five-year deal. Saint-Gobain will outsource its entire IT infrastructure to IBM in Brazil, a statement says. IBM will be responsible for storage, administration, tech support and systems management. By 2009, IBM also will take over operation of all of the servers at Saint-Gobain’s current Brazilian headquarters in Sao Paulo.

16th August 2008, www.tutorial-reports.com

13 Outsourcing cos form association

To carve out a distinct identity for themselves, outsourcing companies like call centres, tele-banking service providers and other IT-enabled service firms, which use telecom infrastructure as their business model, have formed an association to promote the industry. We have formed Other Service Providers Association of India (OSPAI). The aim of OSPAI is to promote Indian outsourcing industry by way of recommending and assisting in policy changes based on industry and market needs," sources said. "OSPAI will closely work with DoT, Trai, ministry of law, ministry of labour, ministry of finance, STPI, SEZ, various associations and industry representatives to achieve growth of the outsourcing industry," the sources added further.
10th August 2008, www.tutorial-reports.com

14 NWP and Accenture extend outsourcing agreement

NWP Services Corporation (NWP), a provider of financial transaction processing solutions in the US, has extended its existing outsourcing contract with Accenture. The existing contract, signed in 2005, was for ten years but has now been extended by a further three years. It covers the provision of software development and software support services related to NWP's customer care and billing information functions. Accenture will continue to provide NWP with technology services including software development and support, batch and production infrastructure operations, systems performance and tuning and Web development.

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

15 Sony, Toshiba to boost overseas LCD outsourcing

Sony Corp and Toshiba Corp are set to sharply increase the percentage of their LCD televisions outsourced to Taiwanese manufacturers as a cost-cutting move, the Nikkei business daily said on Saturday. While both companies will continue to make LCD televisions at their own factories, they hope to meet growing demand through electronics manufacturing services EMS firms in Taiwan. Sony, which outsourced production of roughly 500,000 LCD televisions to Taiwanese firms in the 2007 business year, is set to raise this to more than 3 million in the current business year ending in March 2009, the Nikkei said. To do so, it is believed to have signed a contract with Hon Hai Precision, the paper added.

17th August 2008, www.tutorial-reports.com

16 NEC to halt outsourcing of PC output in Japan-Nikkei

Japanese electronics conglomerate NEC Corp will stop outsourcing production of personal computers in Japan by the end of the year and consolidate its assembly lines, the Nikkei business daily said on Monday. NEC plans to bring together its dispersed assembly lines at a factory in Yamagata Prefecture, the newspaper said.

19th August 2008, www.tutorial-reports.com

US prices rose by 5.6% in the year to July, the fastest inflation rate for more than 17 years, figures show. The rate of inflation was much greater than economists had predicted, driven higher by the 30% increase in energy prices during the period. Food costs were 6% higher than a year earlier, the figures showed. The price rises are squeezing consumers further. Inflation-adjusted average weekly earnings fell by 3.1% in July compared with a year earlier. Despite the high inflation figure, economists predict the rate will begin to slow from next month as a result of recent falls in the oil price. Oil reached a record high of $147 a barrel in July but has fallen significantly since.

More than 272,000 people in the US received a foreclosure notice in July, a rise of 55% on a year earlier, according to analysts Realtytrac. Florida and California had the highest rate of foreclosures, figures showed. In a further indication of the severe problems affecting the US housing market, more than 77,000 homes were repossessed in July. As a result of this increase, 17% of all homes for sale in the US are repossessed properties. US mortgage giant Fannie Mae recently announced that it was opening new offices in California and Florida to try to increase the sale of foreclosed properties it owns. It is even considering selling them in bulk to investors. Last month, the US government introduced new legislation to try to prevent homeowners losing their properties. Realtytrac said this could help the number of foreclosures start to stabilise as early as the first quarter of next year.

The rate of inflation in Zimbabwe jumped to just over 11,250,000% in June, official figures show. It gained 9,035,045.5 percentage points from the May rate of 2,233,713.4%, said state media quoting the Central Statistical Office (CSO). However, experts believe the actual rate of inflation may be much higher. Zimbabwe is in the midst of a dire economic crisis with unemployment at almost 80%, most manufacturing at a halt and basic foods in short supply. High money supplies have also been fuelling hyperinflation. Critics have accused President Robert Mugabe's government of printing money to finance his election campaign and prop up the economy. Month-on-month inflation in the country accelerated to 839.3% from 433.4%.

Recession looms in the UK in the next six to nine months as firms face "a difficult and risky climate", the British Chambers of Commerce warns. UK growth will be slightly negative or zero in the next two or three quarters, but a major recession is unlikely, the BCC says in its latest forecast. But prospects will be worse if interest rates are not cut soon, it adds. The BCC predicts UK unemployment will rise by between 250,000 and 300,000 in the next 18 months to two years. That could take the jobless total to more than two million for the first time since Labour came to power in 1997. Over the next two or three quarters, we expect UK GDP growth to be slightly negative or zero, satisfying the conditions of technical recession, the BCC says.
13th August 2008, www.bbc.co.uk

India's cabinet has approved higher wages for government workers after the recommendations of a pay panel report earlier this year. The higher wages for 5 million workers will cost 221bn rupees ($5.2bn;£2.77bn) in 2008/09. It comes as Indian inflation soared faster than expected in early August to a 13-year high of 12.44%. The cabinet has approved the pay commission report minister Hansraj Bhardwaj said. Analysts have said extra borrowing may be needed to pay for the wage increases, placing pressure on public finances. But finance minister Palaniappan Chidambaram said India would meet its fiscal deficit target for 2008/09 despite the pay increase. The wage hike had been taken into account when preparing the budget for the financial year starting in April 2008, he said. The pay rises are to be backdated to January 2006, with the government paying back money owed in two stages - 40% during 2008/09, and 60% in 2009/10.

Steel tycoon Lakshmi Mittal has said that the shock of credit crunch should moderate by early next year, with the crisis mainly affecting the financial and consumer sectors. I am sure that there will be some calmness in the whole turmoil in the next six to nine months, the Financial Times reported quoting Lakshmi Mittal, who is the chairman and chief executive of world's biggest steel maker ArcelorMittal. According to the newspaper, Lakshmi Mittal said that large parts of manufacturing industry would not suffer the same problems as those parts of the world economy more closely linked to banking and finance such as housing and consumer goods.

The dollar vaulted to a six-month high against a basket of currencies on Monday, racking up more gains as heightened worries about the global economy's strength sparked a sell-off in the euro and higher-yielding currencies. The euro fell further below $1.50 after having suffered its biggest one-day drop since January 2001 on Friday, breaking a slew of key chart levels that have convinced some analysts the dollar may be in the process of snapping its seven-year slide. Hedge funds and other market players have rushed to cut losses by covering short positions in the dollar, unwinding bets favouring the euro, Australian dollar and commodities which had been made in the belief that the global economy could hold up during the US downturn. Investors were caught off guard by the European Central Bank's acknowledgment last week that economic growth had slowed more than it expected and by a sudden shift in expectations towards interest rate cuts in Australia.

Aditya Birla group firm Idea Cellular on Thursday said it has deferred its open offer for an additional 20 per cent stake in Spice Communications following a delay in approval for the same from the market regulator SEBI. In an announcement made to the shareholders of Spice Communications, Idea Cellular said the revised schedule for the open offer of Rs 1,066.62 crore for a 20 per cent stake in the firm would be announced separately. The open offer was earlier scheduled to open on August 22 and close on September 11, the company said in a filing to the Bombay Stock Exchange. On June 30, Idea Cellular had announced the open offer for acquiring about 13.79 crore shares, representing 20 per cent stake in the BK Modi-led firm at a price of Rs 77.30 per share. The announcement was made by Idea Cellular along with Persons Acting in Concert (PACs), including Telekom Malaysia International (TMI), TMI Mauritius, TM International Berhad and Green Acre Agro Services.

Dabur Pharma Ltd said on Monday the World Bank's private sector lender, International Finance Corp, has sold its entire shareholding of 12.14 million shares in the company. It had said last week, Fresenius Kabi, a unit of German healthCare group Fresenius SE, will invest 10-30 million euros in the API plant of the company. Shares in Dabur Pharma were flat at 67.60 rupees in the Mumbai market.

Platinum slipped more than 5 per cent on Tuesday to its lowest since mid-September last year, on waning demand from automakers and general weakness in precious metals that saw gold dip back below $800. Gold's fall after rising more than 1 per cent in New York shows the metal remains vulnerable to gains in the dollar. Silver also dropped and palladium struck its lowest level since mid-June 2006. Spot platinum dropped to $1,315.50/1,335.50 an ounce from 1,386/1,406 an ounce late in New York, with falls in Japanese futures adding to selling pressure. It fell as low as $1,310 at one point. EU autommobile production decreases. Both gold and platinum continue to be bearish. Platinum may be below $1, 200, said Kazuhiko Saito of Interes Capital Management in Tokyo. Platinum powered to a record high of $2,290 an ounce in March after a power shortage in main producer South Africa disrupted mining and triggered supply worries.

Oil prices edged up to above $115 a barrel on Wednesday, as a lower US dollar rekindled buying in oil and other commodities. US crude rose half a per cent or 56 cents to $115.09 a barrel, while London Brent crude climbed 45 cents to $113.70 a barrel at 0323 GMT. "There could be further upside, but it will not be that much because of the poor economic outlook (in the West)," said Gerard Rigby of Fuel First Consulting in Sydney. The dollar struggled to extend its gains against the euro, which fell to a six-month low on Tuesday, as traders look beyond evidence of a euro zone growth slowdown for any signs the European Central Bank would consider cutting interest rates. An index that measures the dollar's performance against a basket of six major currencies was nearly flat at 76.745, slipping from a new high for the year of 77.413 hit on Tuesday. Eyes were also on the upcoming weekly oil products data to be released by the Energy Information Administration later on Wednesday in the US.

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