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 98
Global Business
Update
(7th
Jan.’09---13th Jan.’09)
Contents
Global Corporate
1 RBS sells Bank of China holding
2 Jaguar Land Rover cuts 450 staff
3 Toshiba eyes Fujitsu disk outfit
4 Pfizer considers cutting 240 jobs
5 Nortel in bankruptcy protection
6 Accounting Scandal Rocks Indian Outsourcer Satyam
7 Tesco sees 'challenging' trading
Global Outsourcing
8 Indian Outsourcing Giant Admits Fraud
9 Unisys and Dr Pepper extend IT outsourcing deal
10 Troubles of Satyam Could Benefit Rivals and 2 U.S. Companies
11 Warner Bros. outsourcing jobs to India and Poland
12 Technology, outsourcing seen to drive growth in ’09
13 IBM, Accenture May Win Clients
as Satyam Rocks India
14 Global IT spending expected to
fall 3 percent in '09
Global Economy
15 Germany agrees 50bn euro stimulus
16 UK's trade gap hits record level
17 UK manufacturing declines sharply
18 Obama plan 'would lift
economy'
19 Fuel prices may go down again: Deora
20 Satyam, Nano not
to hit FDI flow: Volvo MD
Global Markets
21 Satyam tremor
drags Indian ADRs
22 Oil falls to
below $39 on weak demand
23 Recto expects
zero percent export growth this year
24 Satyam effect:
US-listed Indian stocks lose $2 bn
25 Wipro dips nearly 12 pct on World Bank ban
Global Corporate
1 RBS sells Bank of China holding
Royal Bank of Scotland (RBS) has
sold its entire stake in Bank of China, the mainland's third biggest lender,
for $2.34bn (£1.6bn). RBS sold its 4.3% stake, of about 10.8 billion shares, at
a price of 1.71 Hong Kong dollars per share.
It has been looking recently to sell some of its operations as it seeks to
boost its balance sheet. Shares in Bank of China had closed on Tuesday at
HK$1.85. On Wednesday the shares were up 3.8% at HK$1.92. Others to sell stakes
in Chinese banks recently include Bank of America, UBS and Hong
Kong billionaire Li Ka-shing. The sale comes a couple of months
after the UK
government took a near-60% stake in RBS amid fears about its solvency. The
decision to sell the stake forms part of the ongoing strategic review of the
group's businesses announced in October, RBS said in a statement.
13th January 2009, www.bbc.co.uk
2. Jaguar Land Rover has announced
it is cutting 450 staff
Three hundred managers will be
made redundant while 150 salaried agency staff will also lose their jobs. The
firm, which was bought by Tata from Ford for £1.7bn last year, said the action
was to combat the credit crunch and a severe reduction in demand. Based in
Gaydon, Warwickshire, it employs about 15,000 people in Castle Bromwich, Coventry and Solihull in the West
Midlands and Halewood, Merseyside. Prime Minister Gordon Brown's
spokesman said the government was disappointed. He added: Jaguar Land
Rover's decision today reflects the continued downturn in the market and that
is a reflection of what is happening more generally in the global economy.
Business Secretary Lord Mandelson confirmed the government was looking into a
possible rescue package for the car industry.
12th January 2009, www.bbc.co.uk
3 Toshiba eyes Fujitsu disk outfit
Japanese electronics giant
Toshiba has confirmed it is in talks to buy Fujitsu's hard disk drive (HDD)
arm. A deal would create the world's largest maker of small hard drives, which
are used in products such as laptops or satellite navigation equipment. Toshiba
is looking to expand its HDD business, while Fujitsu wants to concentrate on
its IT consulting. Fujitsu said the company was in talks with a number of parties
about the future of its HDD operations, Size matters in the hard-drive
business, and Toshiba would be able to benefit from being the biggest maker of
2.5-inch drives, said Mitsubishi UFJ Securities analyst Yukihiko Shimada. In Japan, the
Nikkei business daily said any deal between Fujitsu and Toshiba would be worth
30bn-40bn yen ($340m-$450m; £233m-£308m). Shares in Fujitsu and Toshiba climbed
more than 5% on the news.
11th January 2009,
www.bbc.co.uk
4 Pfizer considers cutting 240 jobs
Up to 240 jobs are under threat
at the pharmaceutical firm Pfizer's research and development site in Sandwich, Kent.
The company said it was part of a move to improve efficiency which would see
between five to eight per cent of the global workforce facing redundancy.
Pfizer said up to 800 scientists would be laid off in its latest effort to
refocus disappointing research efforts. It has begun a 90-day consultation
period, but in a statement said it did not make these decisions lightly.
12th January 2009, www.bbc.co.uk
5 Nortel in bankruptcy protection
Nortel Networks, North America's biggest maker of telephone equipment, has
filed for bankruptcy protection. The move by the firm, based in the Canadian
city of Toronto,
came as the global economic downturn continued to eat into its already fragile
business. Nortel employs about 95,000 people worldwide, including about 2,000
in the UK,
where it is a key Olympic sponsor. Under US Chapter 11 bankruptcy protection
law, a firm can keep trading while it aims to sort out its finances. Nortel
said that the bankruptcy protection was intended to help it emerge from this
process as a more focused, financially sound and competitive company.
8th January 2009, www.bbc.co.uk
6 Accounting Scandal Rocks Indian Outsourcer Satyam
Satyam customers need to move
swiftly in evaluating how the Indian outsourcer ' s newly revealed financial
fraud will impact their own IT operations, say analysts. In a bombshell
disclosure, Satyam founder and chairman B. Ramalinga Raju quit Wednesday,
admitting in a five-page resignation letter that the company had been
meticulously inflating its financial figures for years. People are blown away
by this. There ' s never been anything close in scale to this fraud in the IT
services business, said John McCarthy, VP of research at Forrester Research.
Clearly, customers can ' t ignore this situation. Satyam clients need to be
assessing the impact and rolling out recovery plans for Satyam-provided IT
services that now need to be moved to other vendors or brought back in house,
he said. Outsourcing consulting firm NeoIT has several urgent recommendations
for clients, said the firm ' s CEO, Eugene Kublanov. Literally, in the next
couple of days, the next week, be prepared with a risk mitigation plan, he
advises Satyam customers. Satyam customers need to "fully understand the
Satyam situation," which in a worst-case scenario could have the company
being unable to pay its workers and vendors and filing for bankruptcy, and in a
best-case scenario containing the situation to "the boardroom" and
emerging with a black eye, Kublanov said. The most likely scenario, though, is
that the outsourcer will have a change of control, with Satyam being bought or
merged with another services provider. In any of these scenarios, there will be
disruption in service" for Satyam clients, Kublanov said. "This
situation is extremely shocking and, frankly, very disrupting to clients.
7th January 2009, http://www.informationweek.com/story/showArticle.jhtml?articleID=212701119
7 Tesco sees 'challenging' trading
Supermarket giant Tesco has
reported sales growth in line with expectations for the key Christmas period,
but said trading conditions were challenging. Like-for-like UK
sales, excluding petrol, rose 2.5% in the seven weeks to 10 January. Adjusting
for the lower value added tax rate, sales rose 3.5%. Total group sales rose by
11.6% during the period, helped by overseas growth. The economic slowdown is
forcing consumers to cut their spending, notably on non-essential goods. A
survey of the UK economy,
released on Tuesday by the British Chambers of Commerce (BCC) suggested there
had been a "frightening deterioration" in the UK economy
towards the end of 2008. While Tesco's UK like-for-like sales growth was
the slowest since the early 1990s, Sainsbury's reported last week that it had enjoyed
its "best ever Christmas", with sales up 4.5%.
13th January 2009, www.bbc.co.uk
Global Outsourcing
8 Indian Outsourcing Giant Admits Fraud
The leader of one of India's largest
technology outsourcing companies, Satyam Computer Services, on Wednesday
admitted cooking its books and committing other grave financial wrongdoing to
inflate profits over several years. The revelation shook India's stock market and sent shockwaves across
the country's booming software industry, while television commentators quickly
dubbed Satyam India's
Enron. The company, India's
fourth-largest information technology firm, with more than 53,000 employees,
services several Fortune 500 companies, including General Motors, General Electric
and IBM. The range of services includes application software development,
engineering design solutions and back-office customer services. The investment
firm DSP Merrill Lynch immediately informed the Indian stock exchange that it
has terminated its engagement with the software giant, which is also registered
on the New York Stock Exchange.
7th January 2009, www.washingtonpost.com
9 Unisys and Dr Pepper extend IT outsourcing deal
US beverages group Dr Pepper
Snapple has extended its IT outsourcing contract with Unisys. The two first
began their partnership in 2005 and have increased their collaboration for
another year, with Unisys managing IT services for 5,000 Dr Pepper staff. It
will provide IT support in areas such as equipment maintenance, installation,
moves, adds and changes, as well as hardware and software assistance.
Partnering with Unisys for outsourcing services helps Dr Pepper Snapple Group
keep IT costs in line and streamline operations, said Virginia Guthrie, chief
information officer at Dr Pepper Snapple Group. By outsourcing the IT
operations to Unisys, the firm can focus on improving efficiency and helping
staff to better serve distributors and customers, she added. Scott Vogel, vice
president of Unisys global outsourcing and infrastructure services for the US western
region, said the firm is proud to have helped Dr Pepper staff to do their jobs.
This week IT firm Steria announced that it has signed a five-year outsourcing
deal with insurance company Capita Life and Pensions.
8th January 2009, www.tutorial-reports.com
10 Troubles of Satyam Could Benefit Rivals and 2 U.S.
Companies
The financial fraud at Satyam is
rippling through the technology services industry, as customers scramble to
line up other suppliers and rivals look to pick up business. Already,
competitors are angling for a share of Satyam’s nearly $2 billion in annual
revenue. The big winners from the fallout are likely to be two American
companies, Accenture and I.B.M., Rod Bourgeois, a technology services
specialist at Sanford C. Bernstein & Company, said Thursday. Accenture and
I.B.M., Mr. Bourgeois said, have three advantages over other competitors. Each
company already supplies most of the blue-chip corporate clients of Satyam.
I.B.M. and Accenture have built up their Indian operations in recent years, so
they offer Satyam customers the same skills at competitive prices. And they are
not Indian companies. The $50 billion-a-year offshore outsourcing business was
growing at a 29 percent annual rate until the credit crisis hit last fall, Mr.
Bourgeois said. But he now forecasts growth in 2009 to be about 10 percent.
9th January 2009, www.newyorktimes.com
11 Warner Bros. outsourcing jobs to India and Poland
It's no secret that Warner Bros.
is poised to slash dozens if not hundreds of jobs at its Burbank headquarters in the first quarter.
The Time Warner Inc. studio will join a train of other entertainment companies
including NBC/Universal and Viacom Inc. to cut costs across their operations in
the face of tough industry economics and the deepening recession. Although the
number and timing of layoffs at Warner is still being determined, it will
definitely impact scores of "back office" workers in management
information systems, finance and accounting. Many of those jobs will be
outsourced to India and Poland,
according to people familiar with the situation. Once Warner finalizes its plans,
it will conduct training sessions with the outsource workers at its Burbank lot as well as at
its various offices around the world. Those who work in other divisions at the
studio will also be affected, but at this point, it is unclear to what extent.
All department heads at Warner have been asked to come up with a specific plan
to reduce costs in their respective divisions, which will include cutting
travel and entertainment expenses, trimming marketing budgets and eliminating
jobs. In 2005, Warner went through a similar top-to-bottom cost-cutting
exercise to help shore up its bottom line in the face of declining DVD sales,
flat movie ticket revenues and a less robust TV syndication market. That
belt-tightening resulted in about 400 job losses -- more than 5% of the
studio's workforce -- around the world, including about 300 in Burbank. Warner Bros. employs around 8,000
worldwide.
10th January 2009, www.tutorial-reports.com
12 Technology, outsourcing seen to drive growth in ’09
INFOTECH think
tank XMG sees information technology (IT) and offshoring to serve as catalysts
in driving business efficiency and cost savings for the region, although it
warned that troubled economic times are in store for the global economy in
2009. XMG pointed out that IT industry economics will force alignment with the
principle of complexity reduction and economizing IT budgets and that, as
identified by the survey completed at the end of 2008, good guidance and wise
investment tops the list of decision-makers for 2009.The research firm noted
that the top concerns of Asia-Pacific chief information officers (CIOs) this
year include matters that deal with measuring the efficiency and effectiveness
of and minimizing the risks of ICT [information and communications technology]
CT investments. In order of priority, XMG said the top 10 concerns of IT
executives this year are measuring the efficiency and effectiveness of IT
investments; minimizing the risks; financial planning; establishing a strategic
approach to information security; improving decision-making; strengthening IT
risk management through technology portfolio management; developing a robust
mobile security strategy and policies for an increasingly mobile work force;
insituting corporate governance effectively; investing in work force
recruitment and retention programs; and strengthening and ensuring service
levels are market competitive.
12th January 2009, www.businessmirror.com
13 IBM, Accenture May Win Clients
as Satyam Rocks India
International Business Machines
Corp. and Accenture Ltd. are in a stronger position to win new contracts after
the fraud at Satyam Computer Services Ltd. tarnished the credibility of India’s outsourcing
industry. Companies seeking to outsource some of their operations -- such as
handling customer calls or testing software -- may turn to U.S. firms in the
short term as they grow wary of the risks of working with smaller companies
abroad, said Moshe Katri, an analyst at Cowen and Co. IBM and Accenture are the
two largest U.S. computer-services providers. It’s going to create a temporary
or near-term crisis of confidence in the sector, said Katri, who is based in New York. This is really
the first time this has happened in our industry. Satyam Chairman Ramalinga
Raju’s admission that he fabricated $1 billion in cash and assets will force India to
strengthen corporate-governance rules or risk undermining an industry that took
a decade to develop, Katri said. Satyam, based in Hyderabad,
writes software and manages computer systems for clients including
ArcelorMittal, the world’s largest steelmaker, and Nissan Motor Co., Japan’s
third-biggest carmaker.
13th January 2009, www.bloomberg.com
14 Global IT spending expected to
fall 3 percent in '09
IT spending worldwide is expected
to slip 3 percent this year, with computer makers taking the brunt of the
decline, according to a Forrester Research report released Tuesday. Global IT
spending is predicted to drop to $1.66 trillion this year, marking the first
time in seven years the industry has not grown, according to the report, which
used U.S. dollars as its form of measurement. Our forecast for 2009 rests on
the assumptions that the economic recession in the U.S. and other major economies will
start to end in the second half of 2009," Andrew Bartels, Forrester
Research principal analyst, said in a statement. "For IT vendor
strategists, the global IT market will be a gloomy one in 2009, with prospects
of improvement in 2010. Unlike in past years, there are no significant growth
markets to offset the weak ones. Spending on computer equipment is expected to
drop 4 percent this year to $434 billion. The sector includes such items as
personal computers, servers, storage devices, and peripherals. The software
sector, by contrast, is expected to suffer less with spending anticipated to
come in at roughly the same level as last year.
13th January 2009, www.tutorial-reports.com
Global Economy
15 Germany agrees 50bn euro stimulus
German Chancellor Angela Merkel
has unveiled an economic stimulus package worth about 50bn euros ($67bn; £45bn)
to kick-start Europe's largest economy. The
measures include investments in railways, roads and schools, as well as a
number of tax relief initiatives. It is aimed at helping the country during
what some fear could be its worst recession since World War II. An earlier
23bn-euro plan to stimulate the economy, passed last month, was derided for
being too cautious. We will do everything possible to make sure Germany not
only gets through this crisis but emerges stronger, Ms Merkel said. The
agreement follows squabbles between the Social Democrats and Christian
Democrats over how to shore up the German economy and prevent job losses. All
in all, it is a package that will help get us through the financial crisis and
secure jobs, said Christian Democrat parliamentary president Volker Kauder.
13th January 2009, www.bbc.co.uk
16 UK's trade gap hits record level
The UK's goods trade gap with the rest
of the world reached record levels in November, official figures show. The
deficit stood at £8.33bn, the Office for National Statistics said, up from
October's figure, which was revised downwards to £7.631bn. The trade gap - the
difference between imports and exports - with non-European nations also hit a
record at £5.30bn. The worse-than-expected data suggested that the weaker
sterling was not enough to boost demand for UK exports. Yet more bad news, said
Alan Clarke, UK
economist at BNP Paribas. The trade figures reinforce expectations that we are
going to see a horrific contraction in GDP in the fourth quarter, he added. GDP
figures are set to be released on 23 January. Total exports dropped by 6% in
November, with imports down 2% for the month. A major reason for the slowdown
in exports was lower demand from the US.
10th January 2009, www.bbc.co.uk
17 UK manufacturing declines sharply
UK manufacturing output fell at its
fastest pace since 1981 in November, official figures showed, underlining the
fragile state of the economy. Output fell 7.4% from a year earlier - the
biggest drop since June 1981. On a monthly basis, the fall was 2.9%, the Office
for National Statistics said. The news is likely to reinforce expectations that
policymakers need to do more to stave off a deep recession. The Bank of England
cut interest rates to 1.5% on Thursday, a 315-year low. James Knightley, an
economist at ING said that the UK
economy could shrink by around 3% this year. The weak figures hit the pound,
which briefly fell against the euro and the dollar. Paul Dales, UK economist at Capital Economics, said that
manufacturing was likely to continue to plunge despite the weaker pound, which
should make UK
goods more competitive on international markets.
9th January 2009, www.bbc.co.uk
18 Obama plan 'would lift economy
The stimulus package proposed by
President-elect Barack Obama would give the US economy a "significant
boost", says Federal Reserve boss Ben Bernanke. In a speech in London, Mr Bernanke said
that any plan must be accompanied by measures to stabilise and strengthen the
financial system. Mr Bernanke added that financial institutions deemed too big
to fail had to accept closer regulation. He said the central bank still had
"powerful tools" to tackle the crisis. The incoming administration
and the Congress are currently discussing a substantial fiscal package that, if
enacted, could provide a significant boost to economic activity, he said. But
he said that a modern economy could not grow unless its financial system was
operating effectively.
11th January 2009, www.bbc.co.uk
19 Fuel prices may go down again: Deora
India may cut fuel prices again, Oil Minister Murli Deora said
on Wednesday, a month after the government last lowered state-set rates for
petrol and diesel. We are looking at reducing prices of petrol, diesel and LPG.
We are trying. There is a possibility. I cannot give you any time frame, Deora
told reporters. India
cut gasoline prices by 10 per cent and diesel by 6 per cent in the first week
of December, when it also announced other measures to lift wobbly markets in a
slowing economy. The likely cut in fuel prices, ahead of general elections due
by May, will further reduce inflation, which has already fallen to a near
10-month low of 6.6 per cent. Analysts say low inflation may fuel further cuts
in central bank interest rates to help India's $1 trillion economy, which
is expected to grow about 7 per cent in 2008/09, slowing from a blistering 9
per cent in each of the previous three years.
8th January 2009, www.financialexpress.com
20 Satyam, Nano not
to hit FDI flow: Volvo MD
The
Satyam fiasco, which rocked the IT industry, and the Tatas pulling out of the
prestigious 'Nano' project from Singur last year, would in no way affect flow
of Foreign Direct Investments (FDI) into India,
a top official of luxury car maker Volvo Car India said. I don't think such
incidents will play a big role in this country. From the long-term point of
view, I think the need for FDIs will increase for a country like India, Volvo
Car India Managing Director Paul de Voijs said. This Satyam case may be a
larger issue here, but I think that will not get much attention in any other
country, he said. On the company's performance after entering the Indian market
last year, he said the car maker has so far sold 100 units.
12th
January 2009,
www.financialexpress.com
Global Markets
21 Satyam tremor
drags Indian ADRs
Indian shares listed on the American bourses
settled mostly in the red, while Infosys defied the trend, after the New York
Stock Exchange halted trading in Satyam Computer at its bourses. Led by
internet firm Sify, the shares of 16 Indian entities witnessed a plunge in their
share prices. While American Depository Receipts (ADRs) of Sify Technologies
nosedived 17.98 per cent to settle at USD 1.46, shares of two private sector
lenders -- ICICI Bank and HDFC Bank -- plunged as much as 13 per cent on the
NYSE. On January 7, the New York Stock Exchange
halted trading in Satyam Computer Services Ltd after Satyam stock plunged by
over 90 per cent to 0.85 dollars in pre-market trade in the US following Satyam
founder and chairman B Ramalinga Raju's confession of a Rs 8,000 crore fraud in
the company. However, a NYSE spokesperson did not specify as to when the
trading would be resumed in Satyam.
8th January 2009, www.financialexpress.com
22 Oil falls to below $39 on weak demand
Oil fell more than $2 to below $39 a barrel
on Monday, dragged down by widespread evidence that deepening recession was
reducing global energy consumption. The decline came despite news that Saudi Arabia planned to cut output to below its
agreed target, as well as gas supply disruptions in Europe as a result of the
Russia-Ukraine dispute and tensions in the Middle East.
US light crude for February delivery fell $2.18 to a low of $38.65 by 1020 GMT.
London Brent crude fell $1.62 to $42.80. US jobless data on Friday set the tone
for the market. A US
government report showed employers slashed jobs by 524,000 in December, driving
the national unemployment rate to its highest level in almost 16 years.
9th January 2009, www.financialexpress.com
23 Recto expects
zero percent export growth this year
THE National Economic and
Development Authority (Neda) warned that massive layoffs by exporting firms may
be possible if export earnings growth post a 30-percent decline in 2009. Neda
director general and Socioeconomic Planning Secretary Ralph Recto said,
however, that the country will not be posting this much decline in 2009. In
fact, Recto said he only expects the country to post a zero-percent export
growth in 2009. The National Statistics Office (NSO) released on Tuesday the
latest export data which showed that export earnings declined by 11.9 percent
in November, while the average export growth from January to November posted a
growth of 0.76 percent. For as long as it is flat, I don’t expect massive
layoffs. That means they will not hire new employees. But if exports decline by
30 percent, that is worrisome, Recto told reporters. Recto also said if export growth reaches
negative territory, he is not that worried. He said businesses will not layoff
employees immediately because they have invested in the training and expertise
of these employees.
12th January 2009, www.businessmirror.com
24 Satyam effect:
US-listed Indian stocks lose
$2 bn
Indian stocks listed on the
American bourses suffered a loss of close to USD 2 billion in a week, following
unfolding of India's
biggest accounting fraud by NYSE-listed Satyam Computer. Despite, a halt in
trading in Satyam Computer from Wednesday, the rest of the 15 Indian stocks on
US bourses bore the brunt of the negative market sentiment and witnessed a fall
of USD 1.94 billion in their combined market capitalisation in the week ending
January 9. Meanwhile, the Hyderabad-based company, which traded on the first
two day of the week, added USD 2.66 billion on the speculations that some rival
IT firm might acquire it. The combined market-cap of all firms excludes
Satyam's valuations for the two days.
11th January 2009, www.financialexpress.com
25 Wipro dips
nearly 12 pct on World Bank ban
India's third largest IT services
exporter Wipro dipped as much as 12 per cent in early trade on Monday on the
bourses, after the company said it is not eligible to bid for contracts with
the World Bank till 2011. Shares of Wipro Technologies skid over 12 per cent to
touch its intra-day low of Rs 220 on the Bombay Stock Exchange. Later, the
scrip was trading at Rs 240.50 down 4.05 per cent on the bourse. According to
the revised disclosure policies, the company disclosed its vendor status with
World Bank as per which the company said it is not eligible to contest direct
contracts with the World Bank till 2011. On the National Stock Exchange, the
company's shares slipped 11.25 per cent to touch an intra-day low of Rs 222.70,
from its previous days close.
12th January 2009, www.financialexpress.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