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By Janet Banks and Diane Coutu
As the economy softens, corporate downsizing appears almost inevitable. Don’t panic yet, through. While layoff decions might seem beyond your control, there’s plenty you can do to make sure you retain your job.
In this article, Banks, a former HR executive at Chase Manhattan and FleetBoston Financial, and Coutu, an HBR senior editor and former affiliate scholar at the Boston Psychoanalytic Society and Institute, describe how to improve your chances of survival. It’s mostly a matter of coolheaded planning they observe. When cuts loom, the first thing to do is act like a survivor. Be confident and cheerful. Research shows that congeniality trumps competence when push cornes to shove. Look to the future by focusing on customers, for without them, no one will have work. Survivors also tend to be versatile, tight budgets demand managers who can wear several hats, so startdemonstrating what other capabilities you can offer. If
you’re, say, a managers who once worked as a teacher, take on a training role.
Remember to be a good corporate citizen: Participation matters now more than ever. It isn’t the time to behave as if work is beneath you or to argue for a new title. When one executive’s departement was folded under the management of a less-experienced colleague, she swallowed her pride and wholeheart-edly supported the hierarchy. Her superiors noticed her commitment and eventually rewarded her with a prestigious appointment.
It’s also important to offer leaders hope and realistic solutions. Energize your colleagues around change, like the VP of learning at a firm undergoing major staff reductions did. He organized a humorous in-house radio show that revived spirits and helped management communicate with employees-and ended up with a promotion.
Source : Harvard Business Review
Tuesday, February 10, 2009
Three Keys To Staying Ethical In The Age Of Madoff
By Umaimah Mendhro and Abhinav Sinha
Lessons from executives who kept themselves clean in Pakistan and India, where corruption is the rule.
What separates a Rod Blagojevich from a Patrick Fitzgerald? A Bernard Madoff from a Warren Buffett? What makes such people, at either extreme, so different from any of us? Everything--and not too much.
As citizens of Pakistan and India who are students at Harvard Business School, we spent a considerable amount of time over the past several months interviewing and drawing lessons from 12 leaders in Pakistan and seven in India who are carrying the torch of ethical business behavior. Come factory shutdowns, forced resignations or life threats, they've been standing up against corruption in environments where corruption is the rule.
Conventional wisdom and our own preconceptions hold that a mix of many complex, research-worthy characteristics and influences separates the highly moral from the corrupt. What we found suggested, to the contrary, that it all comes down to three simple things: honesty in use of language; insistence on proper behavior, even ahead of proper values; and a refusal to allow for gray areas.
The highly moral leaders we interviewed, whose colleagues think of them as somewhat crazy and unreasonable, have created personal identities, personal brands of sorts, for always standing up for the right thing. We call them "ethical mavericks." They are moral absolutists. To them, wrong is not defined by context, bribery not by the amount of money involved, and corruption not by how seemingly innocuous an act may be.
One of them, the founder and chief executive officer of a family-owned private business in Pakistan, had to face a formidable client who would not sign a contract until he was "paid a commission." Unwilling to give in, this CEO ended up losing more than 95% of his business and running up losses in the millions of dollars over two years.
He didn't fire a single employee, though. Nor did he try to evaluate the price his organization would have to pay for not being corrupt. And in time, he not only turned his company around but used its down period to train all his top managers to enter a new, and now highly profitable, line of business.
These ethical mavericks all use language to achieve clarity. When we asked the CEO of one of the largest retail businesses in Pakistan why no one before him had raised a red flag about the questionable practices carried out by his company, he said it was because no one thought to call what they observed "unethical" or "wrong"; they just called it "aggressive selling." In other words, corruption remained unquestioned not because people were malicious or greedy or poor but because corrupt behavior came wrapped in smooth, palatable jargon.
The CEO of a major software company in India not only clearly identified corruption at an individual level but also ensured that he communicated it to his entire organization. He not only stood up against corruption at different times during the evolution of the company but also let his employees know the costs the company had borne because of the stands it had taken. All of his employees are shown interactive videos about real, individual experiences.
The ethical mavericks also let their life experiences reinforce their values. Experiences happen, they say, and they confront you with choices about what you want to stand, and be known, for. "A victory against corruption is the best boost for an individual to pursue the right path," said the CEO of a large agribusiness concern in India.
Here are the three lessons we came away with after interviewing our ethical mavericks:
--Call corruption corruption. One of the most important things a leader can impart to his or her organization is an honest and explicit use of language. Corruption comes with many names, new and old. Ferret out the corrupt behaviors concealed in talk of complex derivatives, tax savings and import surcharges. Watch out when people discuss innovation, strategic business practices and competitive advantage. Use your power of language. You've been practicing it since you were two.
--Enforce behavior that creates new values. Behavior results from values, yes. But values can result from behavior too. Use experiences to enforce behavior that creates strong values. We met a young government official in Pakistan who had to spend time shadowing his manager and supporting him in weeding out corrupt employees. He credits his now deeply held opposition to corruption to that one experience.
And, most important:
--Give up on the security of wavering. There are no gray areas when it comes to corruption. Moral absolutism may sound like an archaic and austere concept, but it's a quality all these ethical mavericks share, and it's exactly what is needed to establish a clear, strong, unwavering voice for doing the right thing, especially when the costs are high.
In these difficult times, we can all benefit from more clarity in our language, a hearty dose of accountability in our actions and a handful of unwavering, stable guideposts. The world needs more credible, confident, nonconformist leaders who are worth following.
Source : Forbes.com
Lessons from executives who kept themselves clean in Pakistan and India, where corruption is the rule.
What separates a Rod Blagojevich from a Patrick Fitzgerald? A Bernard Madoff from a Warren Buffett? What makes such people, at either extreme, so different from any of us? Everything--and not too much.
As citizens of Pakistan and India who are students at Harvard Business School, we spent a considerable amount of time over the past several months interviewing and drawing lessons from 12 leaders in Pakistan and seven in India who are carrying the torch of ethical business behavior. Come factory shutdowns, forced resignations or life threats, they've been standing up against corruption in environments where corruption is the rule.
Conventional wisdom and our own preconceptions hold that a mix of many complex, research-worthy characteristics and influences separates the highly moral from the corrupt. What we found suggested, to the contrary, that it all comes down to three simple things: honesty in use of language; insistence on proper behavior, even ahead of proper values; and a refusal to allow for gray areas.
The highly moral leaders we interviewed, whose colleagues think of them as somewhat crazy and unreasonable, have created personal identities, personal brands of sorts, for always standing up for the right thing. We call them "ethical mavericks." They are moral absolutists. To them, wrong is not defined by context, bribery not by the amount of money involved, and corruption not by how seemingly innocuous an act may be.
One of them, the founder and chief executive officer of a family-owned private business in Pakistan, had to face a formidable client who would not sign a contract until he was "paid a commission." Unwilling to give in, this CEO ended up losing more than 95% of his business and running up losses in the millions of dollars over two years.
He didn't fire a single employee, though. Nor did he try to evaluate the price his organization would have to pay for not being corrupt. And in time, he not only turned his company around but used its down period to train all his top managers to enter a new, and now highly profitable, line of business.
These ethical mavericks all use language to achieve clarity. When we asked the CEO of one of the largest retail businesses in Pakistan why no one before him had raised a red flag about the questionable practices carried out by his company, he said it was because no one thought to call what they observed "unethical" or "wrong"; they just called it "aggressive selling." In other words, corruption remained unquestioned not because people were malicious or greedy or poor but because corrupt behavior came wrapped in smooth, palatable jargon.
The CEO of a major software company in India not only clearly identified corruption at an individual level but also ensured that he communicated it to his entire organization. He not only stood up against corruption at different times during the evolution of the company but also let his employees know the costs the company had borne because of the stands it had taken. All of his employees are shown interactive videos about real, individual experiences.
The ethical mavericks also let their life experiences reinforce their values. Experiences happen, they say, and they confront you with choices about what you want to stand, and be known, for. "A victory against corruption is the best boost for an individual to pursue the right path," said the CEO of a large agribusiness concern in India.
Here are the three lessons we came away with after interviewing our ethical mavericks:
--Call corruption corruption. One of the most important things a leader can impart to his or her organization is an honest and explicit use of language. Corruption comes with many names, new and old. Ferret out the corrupt behaviors concealed in talk of complex derivatives, tax savings and import surcharges. Watch out when people discuss innovation, strategic business practices and competitive advantage. Use your power of language. You've been practicing it since you were two.
--Enforce behavior that creates new values. Behavior results from values, yes. But values can result from behavior too. Use experiences to enforce behavior that creates strong values. We met a young government official in Pakistan who had to spend time shadowing his manager and supporting him in weeding out corrupt employees. He credits his now deeply held opposition to corruption to that one experience.
And, most important:
--Give up on the security of wavering. There are no gray areas when it comes to corruption. Moral absolutism may sound like an archaic and austere concept, but it's a quality all these ethical mavericks share, and it's exactly what is needed to establish a clear, strong, unwavering voice for doing the right thing, especially when the costs are high.
In these difficult times, we can all benefit from more clarity in our language, a hearty dose of accountability in our actions and a handful of unwavering, stable guideposts. The world needs more credible, confident, nonconformist leaders who are worth following.
Source : Forbes.com
U.S. offers $2 trillion bank plan but stocks slump
By Glenn Somerville
WASHINGTON (Reuters) - U.S. Treasury chief Timothy Geithner on Tuesday unveiled a new bank rescue plan that would put $2 trillion to work mopping up bad assets and restoring credit, but stock markets plunged on fears it would not work.
Global markets had intensely awaited Geithner's ideas for a plan mixing private and public funding to stabilize a financial system tottering under the weight of bad mortgages, but were disappointed over the scant detail he provided.
The Dow Jones industrial average closed down more than 380 points or 4.6 percent in its biggest one-day percentage drop since December 1, while prices for U.S. government bonds climbed as investors sought safety. The KBW index of bank stocks fell almost 14 percent.
Geithner said lack of public confidence in prior rescue efforts had made it all the more difficult to stop "a dangerous dynamic" in which a lack of credit undercuts the economy and leads to more weakness among banks, worsening the recession.
"This is very complicated to get it right," he said in an interview on Bloomberg Television. "We are going to try to get it right before we give the details so that we don't add further to uncertainty in these markets."
In a speech, on television and in Capitol Hill testimony, Geithner made his case for how the Obama administration plans to handle the roughly $350 billion left in a $700 billion financial bailout fund approved by Congress in October.
He studiously avoided saying whether the administration might have to ask Congress for more money to fix the banks, restore credit and counter recession, but did not rule it out.
"We're going to consult with the Congress carefully to try to make sure the world understands that the resources necessary to solve this will be available over time," Geithner told CNBC, adding:
"The important thing is that ... we send a basic signal, working with the Congress, that we will do what's necessary to fix this."
Market participants, however, were frustrated. "Investors want clarity, simplicity and resolution. This plan is seen as convoluted, obfuscating and clouded," said James Ellman, president of Seacliff Capital in San Francisco.
LEVERAGING PRIVATE MONEY
A centerpiece of the renamed "Financial Stability Plan" is a proposal to set up a public-private investment fund, in partnership with the Federal Deposit Insurance Corp, a bank watchdog, and the Federal Reserve, the U.S. central bank.
Seeded with public money, it would leverage up to $500 billion -- and possibly as much as $1 trillion -- so that toxic assets can be purged from a weakened banking system.
Geithner told an invited audience at the U.S. Treasury that $50 billion in federal rescue funds will be used to try to stem home foreclosures and soften the crushing impact of the deep housing crisis now afflicting the entire economy.
The plan would also expand a Fed program aimed at expanding credit card, student, auto and small business lending.
The program includes an expansion of the Fed's Term Asset-backed Securities Loan Facility (TALF), which is aimed at expanding lending for credit cards, student and auto loans.
The lending facility is to expand from its current $200-billion limit, thanks to a jump in Treasury funding to $100 billion from $20 billion, which will provide a platform to enable up to $1 trillion of new consumer lending.
The Fed lending facility will also be able to include commercial mortgage-backed securities as well as mortgage-backed securities packaged by private financial institutions.
The Treasury is tussling with the worst problems in decades, stemming from careless lending that helped fuel a housing crisis that has now dragged the U.S. economy and much of the rest of the world into deep recession.
Geithner warned it will take time to resolve the crisis but his proposals to do so failed to reassure market participants.
"Investors want clarity, simplicity, and resolution. This plan is seen as convoluted, obfuscating, and clouded," said James Ellman, President of Seacliff Capital in San Francisco.
Geithner acknowledged deep skepticism has developed over the fairness and efficiency of a $700-billion bank bailout program approved by Congress in October. About half of that money has been committed, including $250 billion in the form of direct capital injections for troubled banks.
He said leaders of some financial institutions that have received money had squandered the good faith that is needed to make the bank rescue effective.
"The spectacle of huge amounts of taxpayer money being provided to the same institutions that helped cause the crisis, with limited transparency and oversight, added to public distrust," Geithner said.
President Barack Obama said on Monday that cleaning up banks' balance sheets was a priority and didn't rule out the possibility that it will take more money than the $700 billion Congress already has approved to complete the job.
"We don't know yet whether we're going to need additional money or how much additional money we'll need until we see how successful we are at restoring a level of confidence in the marketplace," Obama told a news conference.
(Additional reporting by David Lawder and Mark Felsenthal; Editing by James Dalgleish)
WASHINGTON (Reuters) - U.S. Treasury chief Timothy Geithner on Tuesday unveiled a new bank rescue plan that would put $2 trillion to work mopping up bad assets and restoring credit, but stock markets plunged on fears it would not work.
Global markets had intensely awaited Geithner's ideas for a plan mixing private and public funding to stabilize a financial system tottering under the weight of bad mortgages, but were disappointed over the scant detail he provided.
The Dow Jones industrial average closed down more than 380 points or 4.6 percent in its biggest one-day percentage drop since December 1, while prices for U.S. government bonds climbed as investors sought safety. The KBW index of bank stocks fell almost 14 percent.
Geithner said lack of public confidence in prior rescue efforts had made it all the more difficult to stop "a dangerous dynamic" in which a lack of credit undercuts the economy and leads to more weakness among banks, worsening the recession.
"This is very complicated to get it right," he said in an interview on Bloomberg Television. "We are going to try to get it right before we give the details so that we don't add further to uncertainty in these markets."
In a speech, on television and in Capitol Hill testimony, Geithner made his case for how the Obama administration plans to handle the roughly $350 billion left in a $700 billion financial bailout fund approved by Congress in October.
He studiously avoided saying whether the administration might have to ask Congress for more money to fix the banks, restore credit and counter recession, but did not rule it out.
"We're going to consult with the Congress carefully to try to make sure the world understands that the resources necessary to solve this will be available over time," Geithner told CNBC, adding:
"The important thing is that ... we send a basic signal, working with the Congress, that we will do what's necessary to fix this."
Market participants, however, were frustrated. "Investors want clarity, simplicity and resolution. This plan is seen as convoluted, obfuscating and clouded," said James Ellman, president of Seacliff Capital in San Francisco.
LEVERAGING PRIVATE MONEY
A centerpiece of the renamed "Financial Stability Plan" is a proposal to set up a public-private investment fund, in partnership with the Federal Deposit Insurance Corp, a bank watchdog, and the Federal Reserve, the U.S. central bank.
Seeded with public money, it would leverage up to $500 billion -- and possibly as much as $1 trillion -- so that toxic assets can be purged from a weakened banking system.
Geithner told an invited audience at the U.S. Treasury that $50 billion in federal rescue funds will be used to try to stem home foreclosures and soften the crushing impact of the deep housing crisis now afflicting the entire economy.
The plan would also expand a Fed program aimed at expanding credit card, student, auto and small business lending.
The program includes an expansion of the Fed's Term Asset-backed Securities Loan Facility (TALF), which is aimed at expanding lending for credit cards, student and auto loans.
The lending facility is to expand from its current $200-billion limit, thanks to a jump in Treasury funding to $100 billion from $20 billion, which will provide a platform to enable up to $1 trillion of new consumer lending.
The Fed lending facility will also be able to include commercial mortgage-backed securities as well as mortgage-backed securities packaged by private financial institutions.
The Treasury is tussling with the worst problems in decades, stemming from careless lending that helped fuel a housing crisis that has now dragged the U.S. economy and much of the rest of the world into deep recession.
Geithner warned it will take time to resolve the crisis but his proposals to do so failed to reassure market participants.
"Investors want clarity, simplicity, and resolution. This plan is seen as convoluted, obfuscating, and clouded," said James Ellman, President of Seacliff Capital in San Francisco.
Geithner acknowledged deep skepticism has developed over the fairness and efficiency of a $700-billion bank bailout program approved by Congress in October. About half of that money has been committed, including $250 billion in the form of direct capital injections for troubled banks.
He said leaders of some financial institutions that have received money had squandered the good faith that is needed to make the bank rescue effective.
"The spectacle of huge amounts of taxpayer money being provided to the same institutions that helped cause the crisis, with limited transparency and oversight, added to public distrust," Geithner said.
President Barack Obama said on Monday that cleaning up banks' balance sheets was a priority and didn't rule out the possibility that it will take more money than the $700 billion Congress already has approved to complete the job.
"We don't know yet whether we're going to need additional money or how much additional money we'll need until we see how successful we are at restoring a level of confidence in the marketplace," Obama told a news conference.
(Additional reporting by David Lawder and Mark Felsenthal; Editing by James Dalgleish)
Sunday, February 8, 2009
Dubai fund not in talks to sell Barneys
By Ahmed Jadallah
DJIBOUTI (Reuters) - Dubai government investment agency Istithmar World is not in talks to sell luxury retailer Barneys New York Inc, its parent firm said.
"We have not announced nor (sought) anybody regarding Barneys," Sultan Ahmed bin Sulayem, chairman of Dubai World, told reporters at the opening of port container operator DP World's DPW.DI new terminal in Djibouti on Saturday.
Last month, Bloomberg reported Istithmar World may sell Barneys, less than two years after buying it as the fund struggles with losses and the luxury market slows.
Bloomberg said Istithmar did not want to sell the business for less than the $942 million it paid for it in 2007, and that the state-owned fund had had calls from potential buyers and would sell its entire stake.
Istithmar World is a unit of state-owned Dubai World and one of the investment agencies established by Dubai's ruler to invest the emirate's wealth abroad.
Dubai World owns of DP World, one of the world's largest container operators, whose new Doraleh terminal in Djibouti has a capacity of 1.2 million TEU (twenty foot equivalent container units) per year.
This was expected to rise to 3 million TEU "over time," DP World said in a statement.
DP World said last month it was reviewing all expansion projects, cutting costs and freezing recruitment as growth slows in 2009.
Last week, Moody's Investor Service said it was considering downgrading the debt rating of DP World along with five other Dubai firms due to the escalating global financial crisis.
But DP World's refinancing pressure was low in the near term as its debt -- most of which consists of $1.5 billion worth of Islamic bonds, sukuk, and $1.75 billion worth of bonds -- was mostly long term in nature, Standard Chartered said in a note published on Thursday.
The note also said DP World, although vulnerable to the global downturn, was expecting to post a profit of $675 million, a 33 percent increase from 2007.
DP World declined to give reporters an earnings forecast in a conference call on January 26 in which its chief financial officer gave an update on its business.
DP World DPW.DI shares have lost more than 80 percent of their value since an IPO in 2007 on NASDAQ Dubai, formerly Dubai International Financial Exchange, when it listed at $1.30 per share.
Shares closed up 5.26 percent at $0.20 per share on Sunday.
(Writing by Raissa Kasolowsky; editing by Elaine Hardcastle)
Source : Reuters
DJIBOUTI (Reuters) - Dubai government investment agency Istithmar World is not in talks to sell luxury retailer Barneys New York Inc, its parent firm said.
"We have not announced nor (sought) anybody regarding Barneys," Sultan Ahmed bin Sulayem, chairman of Dubai World, told reporters at the opening of port container operator DP World's DPW.DI new terminal in Djibouti on Saturday.
Last month, Bloomberg reported Istithmar World may sell Barneys, less than two years after buying it as the fund struggles with losses and the luxury market slows.
Bloomberg said Istithmar did not want to sell the business for less than the $942 million it paid for it in 2007, and that the state-owned fund had had calls from potential buyers and would sell its entire stake.
Istithmar World is a unit of state-owned Dubai World and one of the investment agencies established by Dubai's ruler to invest the emirate's wealth abroad.
Dubai World owns of DP World, one of the world's largest container operators, whose new Doraleh terminal in Djibouti has a capacity of 1.2 million TEU (twenty foot equivalent container units) per year.
This was expected to rise to 3 million TEU "over time," DP World said in a statement.
DP World said last month it was reviewing all expansion projects, cutting costs and freezing recruitment as growth slows in 2009.
Last week, Moody's Investor Service said it was considering downgrading the debt rating of DP World along with five other Dubai firms due to the escalating global financial crisis.
But DP World's refinancing pressure was low in the near term as its debt -- most of which consists of $1.5 billion worth of Islamic bonds, sukuk, and $1.75 billion worth of bonds -- was mostly long term in nature, Standard Chartered said in a note published on Thursday.
The note also said DP World, although vulnerable to the global downturn, was expecting to post a profit of $675 million, a 33 percent increase from 2007.
DP World declined to give reporters an earnings forecast in a conference call on January 26 in which its chief financial officer gave an update on its business.
DP World DPW.DI shares have lost more than 80 percent of their value since an IPO in 2007 on NASDAQ Dubai, formerly Dubai International Financial Exchange, when it listed at $1.30 per share.
Shares closed up 5.26 percent at $0.20 per share on Sunday.
(Writing by Raissa Kasolowsky; editing by Elaine Hardcastle)
Source : Reuters
Wednesday, February 4, 2009
The Strategy Owning the Right Risks
By Kevin Buehler, Andrew Freeman, and Ron Hulme
In the 1970 a revolution occurred in the field of corporate strategy. A boom in mergers and acquisitions launched new professions in M & A banking, M & A law, and strategy consulting, and companies started to focus on owning businesses in which they had a competitive advantage. At the same time, another revolution occurred in how financial services companies understood, bought, and sold risk – described in the authors’ compaion article in the issue, “The New Arsenal of Risk Management.” Now these two revolutions are coming together to trigger e third in the corporate approach to risk management.
Engineering and dynamically managing a company’s risk portfolio has become the organizing principle for strategic choice. When companies focus on the risks for which they are naturally advantaged, they can typically support higher debt levels and save on operating cocts. McKinsey’s Buehler, Freeman, and Hulme describe five steps to help corporate managers adjust to the third revolution: 1) dentify and ubderstand your major risks; 2) decide which risks are natural; 3) determine your capacity and appetite for risk; 4) embed risk in all decisions and processes, including investment, commercial, financial, and operational, and 5) align govermance and organization around risk.
TXU is one company that has already successfully adapted. Following the 2002 deregulation of wholesale and retail electricity markets in the U.S. state of Texas, TXU embarked on an ambitious risk-return restructuring program that relied on sophisticated risk-management tools to quantify its risk capacity. The program led to share price increases that created more than $32 billion in value before the company was taken private in the largest leveraged buyout in history
Source : Harvard Business Review
In the 1970 a revolution occurred in the field of corporate strategy. A boom in mergers and acquisitions launched new professions in M & A banking, M & A law, and strategy consulting, and companies started to focus on owning businesses in which they had a competitive advantage. At the same time, another revolution occurred in how financial services companies understood, bought, and sold risk – described in the authors’ compaion article in the issue, “The New Arsenal of Risk Management.” Now these two revolutions are coming together to trigger e third in the corporate approach to risk management.
Engineering and dynamically managing a company’s risk portfolio has become the organizing principle for strategic choice. When companies focus on the risks for which they are naturally advantaged, they can typically support higher debt levels and save on operating cocts. McKinsey’s Buehler, Freeman, and Hulme describe five steps to help corporate managers adjust to the third revolution: 1) dentify and ubderstand your major risks; 2) decide which risks are natural; 3) determine your capacity and appetite for risk; 4) embed risk in all decisions and processes, including investment, commercial, financial, and operational, and 5) align govermance and organization around risk.
TXU is one company that has already successfully adapted. Following the 2002 deregulation of wholesale and retail electricity markets in the U.S. state of Texas, TXU embarked on an ambitious risk-return restructuring program that relied on sophisticated risk-management tools to quantify its risk capacity. The program led to share price increases that created more than $32 billion in value before the company was taken private in the largest leveraged buyout in history
Source : Harvard Business Review
Cisco profit beats expectations
NEW YORK (Reuters) - Cisco Systems Inc posted higher-than-expected quarterly earnings as the network equipment maker managed to contain costs, even as revenue fell for the first quarter in more than five years.
Shares of Cisco rose nearly 2 percent in cautious trade ahead of the company's earnings conference call, where Chief Executive John Chambers is expected to outline his outlook.
Chambers said in a statement that Cisco intends to "accelerate the alignment of our resources" and gradually decrease operating expenses.
Net profit for the fiscal second quarter ended January 24 fell to $1.5 billion, or 26 cents per share, from $2.1 billion, or 33 cents a share.
Profit excluding items fell to 32 cents a share from 38 cents, exceeding the market's average forecast of 30 cents a share according to Reuters Estimates.
"The numbers look pretty good, all things considered in the tough environment. The EPS beat shows strong cost containment in an environment of reduced demand," said Mark Sue, analyst at RBC Capital.
Revenue fell 7.5 percent to $9.1 billion, the first year-on-year decline since 2003, as the economic downturn forced companies to cut back on technology spending.
Wall Street analysts on average had expected revenue of $9.0 billion, according to Reuters Estimates. In November, Cisco forecast a 5 to 10 percent year-on-year decline.
The results and outlook are closely watched as an early indicator of changes in technology spending. Cisco is one of the first high-tech companies to report results that include most of January.
Tighter credit and a hazy economic outlook has made it harder for companies to invest in big-ticket technology items such as Cisco's routers. A Cisco CRS-1, for example, costs around $500,000 to $1 million.
Cisco and other network equipment makers have said until recently that growing use of the Internet, particularly online video, would help shelter them from the recession.
Some vendors had hoped that network upgrades by phone companies would help buffer the impact of declining corporate spending, but tight credit and sluggish consumer spending has hit U.S. phone and cable service providers much harder than many expected.
Top U.S. phone companies AT&T Inc and Verizon Communications Inc have said they are trimming capital spending in 2009. AT&T expects to cut spending by 10 to 15 percent from 2008.
Cisco shares rose to around $16.20 in after-hours trade, after closing up 1.41 percent at $15.84.
(Reporting by Ritsuko Ando; editing by Richard Chang)
Source : Reuters
The Concert Business: Why Live Nation Wants To Merge
By David K. Randall
A combined company could become the Microsoft of the entertainment industry. Published reports have Live Nation, the world's largest concert promoter, in talks to merge with either Ticketmaster Entertainment or AEG Worldwide. The company is reportedly closer to making a deal with Ticketmaster.
It's easy to see why. Live Nation (nyse: LYV - news - people ) and Ticketmaster are set to square off directly for the first time. Live Nation debuted its own ticketing service in January, which Ticketmaster estimated would take approximately 20% of its business. Ticketmaster countered by acquiring Front Line Management to help it compete with the string of deals Live Nation signed with Madonna, Jay-Z and U2 last year.
The $200 million Live Nation spent on those deals, which give it a slice of each artist's concert, album and merchandise revenue, may be the catalyst for it to seek a merger. A larger combined company without any additional debt may be better able to handle Live Nation's deals with talent, said Alan Gould, an analyst at Natixis Bleichroeder in New York.
"We have watched the two sides playing a game of mutually assured destruction over the last year, with both stocks seemingly going down with each move," he said.
A spokesman Live Nation declined to comment on the reported merger. Representatives from AEG (other-otc: AEGXY.PK - news - people ) Worldwide and Ticketmaster Entertainment did not respond to calls for comment.
The concert business faces a tough economic climate, as consumers pare back spending on entertainment. High ticket prices may reduce consumers' ability to spend money on high-margin areas like beer and food sales once they reach the venue, a profitable area that accounts for more than 40% of Live Nation's total revenue. It will also be difficult to grow sponsors, Gould notes, which currently account for 24% of Live Nation's overall revenue.
Despite the introduction of its own ticketing service, Live Nation projected Ticketmaster would still sell tickets for approximately 60% of its events. Bringing ticket sales and promotion under one roof would reduce costs and boost margins.
The market reacted strongly to the news, pushing the stock of both companies up nearly 15% in early trading.
But investor enthusiasm is premature. A combined Live Nation-Ticketmaster will face high-profile headwinds from an Obama Justice Department inquiry into whether the new company would constitute a monopoly in the struggling music industry.
If AEG does not merge with Live Nation, it will argue that bringing the nation's largest ticketing system, the majority of arenas and amphitheaters and an artist management division responsible for top acts like Guns N' Roses, Jimmy Buffett and Miley Cyrus under one roof will reduce its ability to compete. They'd be right.
Source : Forbes.com
A combined company could become the Microsoft of the entertainment industry. Published reports have Live Nation, the world's largest concert promoter, in talks to merge with either Ticketmaster Entertainment or AEG Worldwide. The company is reportedly closer to making a deal with Ticketmaster.
It's easy to see why. Live Nation (nyse: LYV - news - people ) and Ticketmaster are set to square off directly for the first time. Live Nation debuted its own ticketing service in January, which Ticketmaster estimated would take approximately 20% of its business. Ticketmaster countered by acquiring Front Line Management to help it compete with the string of deals Live Nation signed with Madonna, Jay-Z and U2 last year.
The $200 million Live Nation spent on those deals, which give it a slice of each artist's concert, album and merchandise revenue, may be the catalyst for it to seek a merger. A larger combined company without any additional debt may be better able to handle Live Nation's deals with talent, said Alan Gould, an analyst at Natixis Bleichroeder in New York.
"We have watched the two sides playing a game of mutually assured destruction over the last year, with both stocks seemingly going down with each move," he said.
A spokesman Live Nation declined to comment on the reported merger. Representatives from AEG (other-otc: AEGXY.PK - news - people ) Worldwide and Ticketmaster Entertainment did not respond to calls for comment.
The concert business faces a tough economic climate, as consumers pare back spending on entertainment. High ticket prices may reduce consumers' ability to spend money on high-margin areas like beer and food sales once they reach the venue, a profitable area that accounts for more than 40% of Live Nation's total revenue. It will also be difficult to grow sponsors, Gould notes, which currently account for 24% of Live Nation's overall revenue.
Despite the introduction of its own ticketing service, Live Nation projected Ticketmaster would still sell tickets for approximately 60% of its events. Bringing ticket sales and promotion under one roof would reduce costs and boost margins.
The market reacted strongly to the news, pushing the stock of both companies up nearly 15% in early trading.
But investor enthusiasm is premature. A combined Live Nation-Ticketmaster will face high-profile headwinds from an Obama Justice Department inquiry into whether the new company would constitute a monopoly in the struggling music industry.
If AEG does not merge with Live Nation, it will argue that bringing the nation's largest ticketing system, the majority of arenas and amphitheaters and an artist management division responsible for top acts like Guns N' Roses, Jimmy Buffett and Miley Cyrus under one roof will reduce its ability to compete. They'd be right.
Source : Forbes.com
Tuesday, February 3, 2009
The Tools The New Arsenal of Risk Management
By Kevin Buehler, Andrew Freeman, and Ron Hulme
The global banking system is facing a severe liquidity crises. In the first half of 2008, major financial institutions wrote off nearly $400 billion, causing banks around the world to initiate emergency measures. Similar crises have occurred within recent memory. Think of S & Ls, the dot-com bust, and Enron. Risk is quite simply, a fact of corporate life-but because risk-management research has increasingly emphasized mathematical modeling, managers may find it incomprehensible and thus shy away from powerful tools and markets for creating value.
Buehler, Freeman, and Hulme, all with McKinsey, describe the evolution of risk management since the 1970s, show how new markets have changed the land-scape in both financial services and the energy sector, and explain what it takes to compete in the current environment, To demonstrate how significant a factor risk can be when incorporated into strategy and oeganization, they take the case of Goldman Sachs-which, despite its reliance on highly volatile trading revenues, has so far avoided the big write-offs that have afficted its leading cometitors. The authors belive that this is because Goldman takes the antithesis of the typical corpate approach-its culture embraces rather than avoids risk. And they say, Goldman very efficiently employs all four of the follwing factors : quantitative professionals, strong oversight, partnership investment, and a clear statement of business principles, with emphasis on preserving the company’s reputation.
Staying on the sidelines of risk management may have shielded some companies from crisis, but it has also prevented them from growing as quickly as they might have. In their companion article, “Owing the Right Risks,” the authors outline a process that will enable executive in any company to incorporate risk into their strategy decision making
The global banking system is facing a severe liquidity crises. In the first half of 2008, major financial institutions wrote off nearly $400 billion, causing banks around the world to initiate emergency measures. Similar crises have occurred within recent memory. Think of S & Ls, the dot-com bust, and Enron. Risk is quite simply, a fact of corporate life-but because risk-management research has increasingly emphasized mathematical modeling, managers may find it incomprehensible and thus shy away from powerful tools and markets for creating value.
Buehler, Freeman, and Hulme, all with McKinsey, describe the evolution of risk management since the 1970s, show how new markets have changed the land-scape in both financial services and the energy sector, and explain what it takes to compete in the current environment, To demonstrate how significant a factor risk can be when incorporated into strategy and oeganization, they take the case of Goldman Sachs-which, despite its reliance on highly volatile trading revenues, has so far avoided the big write-offs that have afficted its leading cometitors. The authors belive that this is because Goldman takes the antithesis of the typical corpate approach-its culture embraces rather than avoids risk. And they say, Goldman very efficiently employs all four of the follwing factors : quantitative professionals, strong oversight, partnership investment, and a clear statement of business principles, with emphasis on preserving the company’s reputation.
Staying on the sidelines of risk management may have shielded some companies from crisis, but it has also prevented them from growing as quickly as they might have. In their companion article, “Owing the Right Risks,” the authors outline a process that will enable executive in any company to incorporate risk into their strategy decision making
In Recession, Business Keeps Going Green
by Joel Makower
Given all that's been going on—the global economic meltdown and the tectonic political shifts—going green should be the last thing on the mind of any CEO. In such challenging times, "saving the Earth" should rightfully take a back seat to "saving the business."
Or, maybe it need not? Consider these announcements—all since Nov. 4, Election Day:
• Bank of America (BAC) plans to phase out loans to companies that use mountaintop extraction as their primary means of coal production. It also will give $1 million to Harvard to study the implications of capturing the greenhouse gas emissions generated by burning coal.
• Clorox (CLX) has expanded its year-old Green Works line of eco-friendly cleaners, which has met with such success that the company raised its sales projections six times in 12 months.
• Coca-Cola Enterprises (CCE), the largest bottler of Coke beverages, will more than double the size of its fleet of hybrid vehicles. It will soon have 327 green trucks on the road in the U.S. and Canada.
• Heinz (HNZ), Sodexo (EXHO.PA), Sysco (SYY), and Unilever (UN) are among 30 large growers, food buyers, and environmental groups that formed the Stewardship Index for Specialty Crops, a coalition to incorporate sustainability from the field to the table for specialty crops.
• Wal-Mart (WMT) plans to partner with the World Environment Center to help more than two dozen suppliers in El Salvador and Guatemala improve energy and water savings and reduce waste, raw material use, and emissions.
I could go on.
Only Nudging the Needle
In good times and bad, the greening of mainstream business marches on. Although the people—and their political representatives—have only recently taken notice, companies have been integrating environmental thinking into their operations increasingly for years.
It's all good, but it's not good enough. It's true that more companies are doing more things to correct years of environmental neglect. But all these efforts collectively move the needle of environmental progress only slightly, if at all.
To be sure, there's much to celebrate. We're using an ever-shrinking amount of energy, water, and toxic materials to produce a unit of gross domestic product. Green building is on the rise, spurring technologies that save energy and money while creating more healthful workplaces. There is a green race taking place in the automobile industry, with every major manufacturer planning to introduce electric vehicles. The leading consumer product companies and retailers are starting to rigorously assess the environmental impact of their products using sophisticated metrics, sending signals along the supply chain that tomorrow's products will need to hew to higher levels of environmental responsibility.
An Issue of Scale
But on balance, despite a growing chorus of corporate commitments and actions, I'm less optimistic that these activities, in aggregate, are addressing planetary problems at sufficient scale and speed. President Obama's stimulus plan will help create demand for some green technologies, but they won't necessarily move companies to transform their operations in ways that dramatically improve efficiencies and reduce pollution and waste.
Source : Businessweek.com
Given all that's been going on—the global economic meltdown and the tectonic political shifts—going green should be the last thing on the mind of any CEO. In such challenging times, "saving the Earth" should rightfully take a back seat to "saving the business."
Or, maybe it need not? Consider these announcements—all since Nov. 4, Election Day:
• Bank of America (BAC) plans to phase out loans to companies that use mountaintop extraction as their primary means of coal production. It also will give $1 million to Harvard to study the implications of capturing the greenhouse gas emissions generated by burning coal.
• Clorox (CLX) has expanded its year-old Green Works line of eco-friendly cleaners, which has met with such success that the company raised its sales projections six times in 12 months.
• Coca-Cola Enterprises (CCE), the largest bottler of Coke beverages, will more than double the size of its fleet of hybrid vehicles. It will soon have 327 green trucks on the road in the U.S. and Canada.
• Heinz (HNZ), Sodexo (EXHO.PA), Sysco (SYY), and Unilever (UN) are among 30 large growers, food buyers, and environmental groups that formed the Stewardship Index for Specialty Crops, a coalition to incorporate sustainability from the field to the table for specialty crops.
• Wal-Mart (WMT) plans to partner with the World Environment Center to help more than two dozen suppliers in El Salvador and Guatemala improve energy and water savings and reduce waste, raw material use, and emissions.
I could go on.
Only Nudging the Needle
In good times and bad, the greening of mainstream business marches on. Although the people—and their political representatives—have only recently taken notice, companies have been integrating environmental thinking into their operations increasingly for years.
It's all good, but it's not good enough. It's true that more companies are doing more things to correct years of environmental neglect. But all these efforts collectively move the needle of environmental progress only slightly, if at all.
To be sure, there's much to celebrate. We're using an ever-shrinking amount of energy, water, and toxic materials to produce a unit of gross domestic product. Green building is on the rise, spurring technologies that save energy and money while creating more healthful workplaces. There is a green race taking place in the automobile industry, with every major manufacturer planning to introduce electric vehicles. The leading consumer product companies and retailers are starting to rigorously assess the environmental impact of their products using sophisticated metrics, sending signals along the supply chain that tomorrow's products will need to hew to higher levels of environmental responsibility.
An Issue of Scale
But on balance, despite a growing chorus of corporate commitments and actions, I'm less optimistic that these activities, in aggregate, are addressing planetary problems at sufficient scale and speed. President Obama's stimulus plan will help create demand for some green technologies, but they won't necessarily move companies to transform their operations in ways that dramatically improve efficiencies and reduce pollution and waste.
Source : Businessweek.com
China: The new wind superpower
The numbers are in, and as expected 2008 set a record year for the worldwide wind industry as new wind farms generating a total of 27,000 megawatts of greenhouse gas-free electricity came online, according to the Global Wind Energy Council.
The quick-click headline was that the United States overtook the world’s green superpower, Germany, by installing 8,358 megawatts in 2008 - a 50% jump from the previous year and enough wind energy to power two million American homes. But the big story this year will be China’s rapid emergence as the next global wind power.
China last year doubled its wind energy capacity - for the fourth straight year - adding 6,300 megawatts of new electricity generation for a total capacity of 12,210 megawatts. A third of the world’s new wind capacity last year was installed in Asia, with China accounting for 73% of that power. China reached its 2010 target of generating 5,000 megawatts of wind-powered electricity in 2007 and is expected to hit its 2030 goal of 30,000 megawatts years early.
“In 2009, new installed capacity is expected to nearly double again, which will be one third or more of the world’s total new installed capacity for the year,” Li Junfeng, Secretary General of the Chinese Renewable Energy Industry Association, said in a statement.
Of course, 30,000 megawatts of wind is but a flicker in a country with more than 300,000 megawatts of coal-fired energy online but it’s huge by world standards and has spawned both a burgeoning domestic wind industry and growing investment by overseas companies. Denmark’s Vestas, the world’s largest turbine maker, will open its fifth factory in China this year and it received orders for another 200 megawatts’ worth of turbines at the end of 2008. General Electric (GE), one of only two U.S. turbine makers, also operates a factory in China and in January the company announced a joint venture with China’s A-Power Energy Generation to make turbine gearboxes. In a separate deal with A-Power, GE will supply the company with 900 turbine gearboxes starting next year.
As the financial crisis slows growth in the U.S. and Europe, India is another potential wind power. It ended 2008 with 9,645 megawatts of wind energy and added more capacity that year - 1,800 megawatts - than former world leaders Germany and Spain. Indian turbine maker Suzlon also has been moving onto European turf, relocating its international headquarters to Denmark and acquiring German turbine manufacturer REPower.
Installed global wind capacity now stands at 120.8 gigawatts with the 2008 turbine market worth $47.5 billion, according to the Global Wind Energy Council.
Source : CNNMoney.com
Monday, February 2, 2009
Google unveils software to explore world's oceans
By Paul Rogers, Mercury News
Starting today, if you want to explore the world's oceans — from the bottom of Monterey Bay to Australia's Great Barrier Reef — you won't need a scuba tank or submarine, only a home computer and Internet connection.
Expanding its popular Google Earth software, Mountain View-based Google on Monday unveiled an aquatic component, Google Ocean, that the company said "aims to turn everyone into Jacques Cousteau.''
The new feature, rolled out at a news conference in San Francisco attended by oceanographers and former Vice President Al Gore, combines satellite imagery, underwater photographs, video and scientific data to allow users to see 3-D images of the ocean floor, along with features like the location of shipwrecks and coral reefs.
Marine scientists predicted that the free software will become an important new tool in expanding the public's understanding of the oceans and the environmental challenges facing them. They also said it would be widely embraced by scientists, who are expected to embed massive amounts of data onto the maps.
"Not just sober scientists but the whole world can use this as a way to know the whole world,'' said oceanographer Sylvia Earle, National Geographic explorer-in-residence. "It took a long time for me to be able to see a turtle underwater, now any little kid can do it,'' Earle said.
Google assembled the new software after meeting last year with many of the world's top marine scientists.
The final product — an automatic download with latest version of Google Earth 5.0 — also includes 20 massive data sets including photos and video of marine animals, the boundaries of the world's marine protected areas, daily sea surface temperature changes and arctic sea ice.
The primary information to create the images came from the U.S. Navy, the National Oceanic and Atmospheric Administration and the Scripps Institution of Oceanography in San Diego.
Like Google Earth, which was launched in June 2005, officials expect Google Ocean to offer increasingly detailed information over time as people add new photos and data. The resulting information will not only allow people to see the world, but how it's changing.
During the news conference, Gore talked about his visit to Glacier National Park in the 1990s. While Google Earth images zoomed in on Grinnell Glacier, Gore noted how much it has melted in the past two decades. The new software also features historic information that shows the glacier's size shrinking since 1991.
"It's practically not even a glacier anymore," Gore said. "When I was there not long ago I walked where that pool of water has formed. This is an extremely powerful new tool.
"One of my fondest hopes is that people around the world will use Google Earth to see for themselves the reality of what is happening because of the climate crisis."
Monday's event, a veritable lovefest of ocean leaders, also featured singer Jimmy Buffett, who has worked to protect manatees and other species in Florida. "I play by the water a lot — I don't know who on the planet wouldn't want to go to a tropical climate, particularly this time of year,'' Buffett said as Google Earth images on the screen behind him zoomed around the ocean floor and mountains on the Hawaiian Islands while his song "Margaritaville'' played. "When people go on exhibitions they come back as conservationists.''
Google Earth basically works by creating maps that combine satellite photograph, aerial photography and GIS data to build 3-D images so that computer users can "fly" anywhere like in a video game, from above the Earth down to view mountains, coastlines, cities, even streets and houses. In earlier versions of the software, users could see oceans with some data, but only in two dimensions.
The project is only a first step however. Oceans cover 70 percent of the world's surface, and detailed, high-resolution photographs don't exist for much of the bottom.
Taking high-resolution photographs of every square foot, along with detailed sonar images, will require great investments in time and money.
"It would take billions of dollars. You'd need fleets of unmanned underwater vehicles operating in formation, and some countries wouldn't even let you explore their territorial waters," said Marcia McNutt, president of Monterey Bay Aquarium Research Institute based in Moss Landing. "It would take at least 25 years."
But previous generations have explored the land and the moon and perhaps the coming generation will focus on the oceans, several scientists said today.
"Sometimes it is tempting for us to think we have explored every thing we have to explore," said Terry Garcia, executive vice president of the National Geographic Society. "A tourist can fly to nearly everywhere on the planet, and satellites have mapped nearly every square inch, but there are still places not explored, mysteries still to be answered."
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