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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."
Saturday, January 31, 2009
Going Green to Make Green
By LAURA COVERSON
On a sunny winter's day in Southern California, a group of students sits in windowless classroom at Los Angeles Trade and Technical College, eyeing the contents of small bottles of alternative fuels.
Blue collar workers get help finding and training for green jobs.
"This is actually biodiesel, but this is not derived from the soy bean, this one is actually a plant," explains associate professor Jess Guerra to the group.
Guerra teaches a "Diesel Technology" class to those hoping to become part of the green work force, where she instructs the fine points of biofuels. It's a technology that could be just one of the businesses with the potential to drive the U.S. economy right out of the ditch.
Labor experts predict renewable energy and energy efficiency industries could create as many as 37 million jobs -- and students at technical colleges like this one are counting on it.
With President Barack Obama's pledge this week to renew the U.S. economy and jump-start the nation's clean energy future, it's a job outlook that's pretty bright.
On a sunny winter's day in Southern California, a group of students sits in windowless classroom at Los Angeles Trade and Technical College, eyeing the contents of small bottles of alternative fuels.
Blue collar workers get help finding and training for green jobs.
"This is actually biodiesel, but this is not derived from the soy bean, this one is actually a plant," explains associate professor Jess Guerra to the group.
Guerra teaches a "Diesel Technology" class to those hoping to become part of the green work force, where she instructs the fine points of biofuels. It's a technology that could be just one of the businesses with the potential to drive the U.S. economy right out of the ditch.
Labor experts predict renewable energy and energy efficiency industries could create as many as 37 million jobs -- and students at technical colleges like this one are counting on it.
With President Barack Obama's pledge this week to renew the U.S. economy and jump-start the nation's clean energy future, it's a job outlook that's pretty bright.
New Obama strategy could lower mortgage costs
By Amy Hoak, MarketWatch
CHICAGO (MarketWatch) -- The Obama administration will soon announce a new economic strategy that would lower mortgage costs and extend credit to small businesses, the President said in his weekly radio and Internet address on Saturday.
"Soon my Treasury Secretary, Tim Geithner, will announce a new strategy for reviving our financial system that gets credit flowing to businesses and families," President Obama said.
"We'll help lower mortgage costs and extend loans to small businesses so they can create jobs. We'll ensure that CEOs are not draining funds that should be advancing our recovery.
"And we will insist on unprecedented transparency, rigorous oversight, and clear accountability -- so taxpayers know how their money is being spent and whether it is achieving results." Read the full address.
While the financial rescue plan passed by Congress last year helped avoid a financial collapse, Obama said that "too often taxpayer dollars have been spent without transparency or accountability." He also charged that while banks have received help, others who need loans -- homeowners, students and small businesses -- have had to fend on their own.
This week, the House of Representatives passed the American Recovery and Reinvestment Plan, a stimulus that includes a combination of tax cuts for families and investments in energy dependence and infrastructure. Obama said the stimulus will save or create more than 3 million jobs over the next few years, and urged the Senate to also pass the plan.
Obama noted that the economic slowdown has already cost the country tens of thousands of jobs in January. "And the picture is likely to get worse before it gets better," he said.
In his address, Obama said that no one bill can cure the economy's problems. As jobs are created, it is also necessary to make sure the markets are stable, credit is flowing and families can keep their homes, he said.
UAE ranks No 7 in world list of toy importers
by Andy Sambidge
The UAE has moved up to seventh in a world list of toy importers as the number of companies doing business in the country has surged.
Latest figures reveal that within the last year, the number of UAE toy importers has increased by almost 4,000 to 18,017 - importing nearly 100 categories of toys.
And one of the world's largest toy stores, Hamleys, has recently opened in The Dubai Mall is the latest recognition of a growing market in the emirate.
The statistics come as international toy manufacturers seek a slice of the booming regional toy industry at the Middle East Toy Fair.
Elisabeth Brehl, managing director of organisers, Epoc Messe Frankfurt, said: "This time last year, UAE was the eighth largest nation with toy import activities, but the latest market developments have boosted it to rank seventh among the top 10 toy importing countries in the world."
Figures for Jan. 1, 2004 to the present date show the US at the top of the list, followed by the UK, China, Iran, India, Hong Kong, UAE, Canada, Thailand and Australia.
Brehl added that the positive trend for the toy industry is not just limited to the UAE, but the entire Middle East is characterised by a high population of children.
Iran at number four in the list imports nine percent of toys in 388 categories, using a total of 15,849 importers.
The Middle East Toy Fair is scheduled to take place at the Dubai International Convention and Exhibition Centre from March 23-25, 2009.
Source : ArabianBusiness.com
Saturday, January 10, 2009
Tough times dim Wall Street's honeymoon with Obama
By Herbert Lash
NEW YORK (Reuters) - Wall Street's honeymoon with President-elect Barack Obama appears to be under strain just five trading days into the New Year and putting a damper on the outlook for stocks in 2009.
After plunging to an 11-year low in November, stocks have rallied about 20 percent on enthusiasm over Obama's picks for his economic team, and hopes his planned stimulus package would end the U.S. recession by the second half of this year.
But a gloomy private sector jobs report, dire warnings from corporate America, Federal Reserve worries about deflation and a bleak U.S. budget outlook this week rekindled investor fears that the recession will be far more severe than expected.
"I think we're torn between optimism (about) the new administration and stimulus plans and the awful economic outlook," said Frank Lesh, a futures analyst and broker at FuturePath Trading LLC in Chicago.
The Dow fell but most stocks rose on Thursday as Obama sought to rally support for a massive fiscal stimulus package by warning that without bold action the U.S. recession -- already looming as the worst since World War II -- could drag on for years.
Aides have previously said they are discussing $775 billion in stimulus but Obama did not give a dollar figure in a speech on the economy at George Mason University in Washington.
The speech offered scant details about the stimulus plan and failed to meet Wall Street's expectations.
The first five trading days of January are often an early sign of how the year will end, according to the Stock Trader's Almanac.
The benchmark Standard & Poor's 500 Index .SPX -- the most widely watched index among institutional investors -- closed up 0.34 percent at 909.73 on Thursday, and is up 0.72 percent for the year.
Since the collapse of investment bank Lehman Brothers in September sent markets into freefall, stock buyers have lacked conviction in the rally's sustainability.
Many Americans are unable to tap any form of credit, fear they will be laid off from their jobs and are hunkering down, paying off debt.
U.S. gross domestic product is expected to shrink for four straight quarters ending June 30, 2009, the longest period of contraction on records dating back to 1947.
When data on last year's fourth quarter is released, the U.S. economy will likely have contracted more than 5 percent, if not more, raising a red flag for many investors. It will be the biggest drop since a 6.4 contraction in the first quarter of 1982.
"The biggest risk that we're seeing today is the potential for deflation," said Enrique Chang, chief investment officer at Kansas City, Missouri-based American Century Investments.
"There's nothing good about an environment where you have deflation. It's probably worse than when you have too much inflation."
Chang said that Obama, who will be sworn in January 20, and the new administration will do everything they can to avert deflation, a decline in prices that can lead to lower economic activity and the erosion of asset values.
"This forced level of savings at this particular time in the economy is very dangerous. So to me that doesn't bode well for any asset class. Our view on equities is cautious, our view on bonds is cautious," Chang said.
Others see a rebound in stocks by year's end.
Jim Paulsen, chief investment strategist at Wells Capital Management in Minneapolis, said periods of financial demise are more often followed by spectacular investment opportunities than examples of persistent, ongoing economic ruin.
Stocks have already priced in the bleak economic data, he said.
"It would really take amazingly terrible data to get the stock market much lower," Paulsen told Reuters on Wednesday.
The size of Obama's fiscal stimulus, along with cheaper stock valuations, lower oil prices and lots of cash seeking new investment point to a stock rally this year, said Bob Doll, vice chairman and chief investment officer of global equities at asset manager BlackRock Inc (BLK.N).
"We believe an earnings rebound is likely in 2010, the signs of which will become evident in 2009," Doll said in notes released on Wednesday with his 2009 forecast.
"Under this scenario, we believe a year-end S&P target of 1,000 to 1,050 would be reasonable," he said.
Stocks surged in December on relief the global financial system did not slide into the abyss after Lehman Brothers' failure in September, said David Joy, chief markets strategist at RiverSource Investments in Minneapolis.
Having overcome that concern, investors are now nervous about the consumer sector, he said.
"Once again people are focused on the real-time current economic strength, and the numbers are terrible," Joy said.
But he said the fiscal stimulus being thrown at the U.S. economy, especially since infrastructure spending will be "shovel-ready" and not go through banks, will spur growth in the second half of 2009.
Any signs that employment and house prices are rising will turn around consumer sentiment and point to recovery, Joy said.
Until then, RiverSource is biding its time and buying beaten-down securities, he said.
"We're more than happy to buy assets that are cheap and wait to be rewarded down the road when all this begins to dissipate," Joy said.
Source : Reuters.com
Wednesday, December 24, 2008
Best Companies to Work For (Fortune 2008) : Google
What makes it so great?
Back in our No. 1 spot, Google continued to mint millionaires as the stock cracked $700. The company gives stock options to 99% of employees. Headquarters: Mountain View, CA. 2006 revenue ($ millions): 10,605.
Google's mission is to organize the world's information and make it universally accessible and useful.
As a first step to fulfilling that mission, Google's founders Larry Page and Sergey Brin developed a new approach to online search that took root in a Stanford University dorm room and quickly spread to information seekers around the globe. Google is now widely recognized as the world's largest search engine -- an easy-to-use free service that usually returns relevant results in a fraction of a second.
When you visit www.google.com or one of the dozens of other Google domains, you'll be able to find information in many different languages; check stock quotes, maps, and news headlines; lookup phonebook listings for every city in the United States; search billions of images and peruse the world's largest archive of Usenet messages -- more than 1 billion posts dating back to 1981.
We also provide ways to access all this information without making a special trip to the Google homepage. The Google Toolbar enables you to conduct a Google search from anywhere on the web. And for those times when you're away from your PC altogether, Google can be used from a number of wireless platforms including WAP and i-mode phones.
Google's utility and ease of use have made it one of the world's best known brands almost entirely through word of mouth from satisfied users. As a business, Google generates revenue by providing advertisers with the opportunity to deliver measurable, cost-effective online advertising that is relevant to the information displayed on any given page. This makes the advertising useful to you as well as to the advertiser placing it. We believe you should know when someone has paid to put a message in front of you, so we always distinguish ads from the search results or other content on a page. We don't sell placement in the search results themselves, or allow people to pay for a higher ranking there.
Thousands of advertisers use our Google AdWords program to promote their products and services on the web with targeted advertising, and we believe AdWords is the largest program of its kind. In addition, thousands of web site managers take advantage of our Google AdSense program to deliver ads relevant to the content on their sites, improving their ability to generate revenue and enhancing the experience for their users.
To learn more about Google, click on the link at the left for the area that most interests you. Or type what you want to find into our search box and hit enter. Once you do, you'll be on your way to understanding why others say, "Google is the closest thing the Web has to an ultimate answer machine."
What's a Google?
"Googol" is the mathematical term for a 1 followed by 100 zeros. The term was coined by Milton Sirotta, nephew of American mathematician Edward Kasner, and was popularized in the book, "Mathematics and the Imagination" by Kasner and James Newman. Google's play on the term reflects the company's mission to organize the immense amount of information available on the web.
Business Overview
As with its technology, Google has chosen to ignore conventional wisdom in designing its business. The company started with seed money from angel investors and brought together two competing venture capital firms to fund its first equity round. While the dotcom boom exploded around it and competitors spent millions on marketing campaigns to "build brand," Google focused instead on quietly building a better search engine.
The word quickly spread from one satisfied user to another. With superior search technology and a high volume of traffic at its Google.com site, Google's managers identified two initial opportunities for generating revenue: search services and advertising.
Google grows and business blooms
Over time, these two business lines evolved into complementary networks. Google AdWords advertisers create ads to drive qualified traffic to their sites and generate leads. Google publishing partners deliver those ads targeted to relevant search results powered by Google AdSense. With AdSense, the publisher shares in the revenue generated when readers click on the ads.
For sites wishing to have more control over their intranet or site searches, Google developed the Google Search Appliance, a scalable and secure appliance that delivers accurate search results across any number of documents.
Google continues to think about ways in which technology can improve upon existing ways of doing business. New areas are explored, ideas prototyped and budding services nurtured to make them more useful to advertisers and publishers. However, no matter how distant Google's business model grows from its origins, the root remains providing useful and relevant information to those who are the most important part of the ecosystem – the millions of individuals around the world who rely on Google search to provide the answers they are seeking.
Back in our No. 1 spot, Google continued to mint millionaires as the stock cracked $700. The company gives stock options to 99% of employees. Headquarters: Mountain View, CA. 2006 revenue ($ millions): 10,605.
Google's mission is to organize the world's information and make it universally accessible and useful.
As a first step to fulfilling that mission, Google's founders Larry Page and Sergey Brin developed a new approach to online search that took root in a Stanford University dorm room and quickly spread to information seekers around the globe. Google is now widely recognized as the world's largest search engine -- an easy-to-use free service that usually returns relevant results in a fraction of a second.
When you visit www.google.com or one of the dozens of other Google domains, you'll be able to find information in many different languages; check stock quotes, maps, and news headlines; lookup phonebook listings for every city in the United States; search billions of images and peruse the world's largest archive of Usenet messages -- more than 1 billion posts dating back to 1981.
We also provide ways to access all this information without making a special trip to the Google homepage. The Google Toolbar enables you to conduct a Google search from anywhere on the web. And for those times when you're away from your PC altogether, Google can be used from a number of wireless platforms including WAP and i-mode phones.
Google's utility and ease of use have made it one of the world's best known brands almost entirely through word of mouth from satisfied users. As a business, Google generates revenue by providing advertisers with the opportunity to deliver measurable, cost-effective online advertising that is relevant to the information displayed on any given page. This makes the advertising useful to you as well as to the advertiser placing it. We believe you should know when someone has paid to put a message in front of you, so we always distinguish ads from the search results or other content on a page. We don't sell placement in the search results themselves, or allow people to pay for a higher ranking there.
Thousands of advertisers use our Google AdWords program to promote their products and services on the web with targeted advertising, and we believe AdWords is the largest program of its kind. In addition, thousands of web site managers take advantage of our Google AdSense program to deliver ads relevant to the content on their sites, improving their ability to generate revenue and enhancing the experience for their users.
To learn more about Google, click on the link at the left for the area that most interests you. Or type what you want to find into our search box and hit enter. Once you do, you'll be on your way to understanding why others say, "Google is the closest thing the Web has to an ultimate answer machine."
What's a Google?
"Googol" is the mathematical term for a 1 followed by 100 zeros. The term was coined by Milton Sirotta, nephew of American mathematician Edward Kasner, and was popularized in the book, "Mathematics and the Imagination" by Kasner and James Newman. Google's play on the term reflects the company's mission to organize the immense amount of information available on the web.
Business Overview
As with its technology, Google has chosen to ignore conventional wisdom in designing its business. The company started with seed money from angel investors and brought together two competing venture capital firms to fund its first equity round. While the dotcom boom exploded around it and competitors spent millions on marketing campaigns to "build brand," Google focused instead on quietly building a better search engine.
The word quickly spread from one satisfied user to another. With superior search technology and a high volume of traffic at its Google.com site, Google's managers identified two initial opportunities for generating revenue: search services and advertising.
Google grows and business blooms
Over time, these two business lines evolved into complementary networks. Google AdWords advertisers create ads to drive qualified traffic to their sites and generate leads. Google publishing partners deliver those ads targeted to relevant search results powered by Google AdSense. With AdSense, the publisher shares in the revenue generated when readers click on the ads.
For sites wishing to have more control over their intranet or site searches, Google developed the Google Search Appliance, a scalable and secure appliance that delivers accurate search results across any number of documents.
Google continues to think about ways in which technology can improve upon existing ways of doing business. New areas are explored, ideas prototyped and budding services nurtured to make them more useful to advertisers and publishers. However, no matter how distant Google's business model grows from its origins, the root remains providing useful and relevant information to those who are the most important part of the ecosystem – the millions of individuals around the world who rely on Google search to provide the answers they are seeking.
Seven Ways to Fail Big
Paul B Carroll and Chunka Mul
Lessons from The Most Inexecusable Business Failures of The Past 25 years
What causes companies to fail spectacularly ? A recent study of 750 of the biggest U.S. business disasters of the past 25 years reveals that seven popular but risky strategies are often to blame.
Drawing on that extensive research, Carroll, a journalist, and Mul, a fellow at Diamond Management & Technology Consultants, describe seven sirens that lure companies onto the rocks.
Diamond is a management and technology consulting firm. Recognizing that information and technology shape market dynamics, Diamond’s small teams of experts work across functional and organizational boundaries to improve growth and profitability. Since the greatest value in a strategy, and its highest risk, resides in its implementation, Diamond also provides proven execution capabilities. We deliver three critical elements to every project: fact-based objectivity, spirited collaboration, and sustainable results. Diamond is headquartered in Chicago, with locations in Hartford, New York, Washington D.C., London, and Mumbai. Diamond is publicly traded on the Nasdaq Global Market under the symbol "DTPI."
One is the synergy mirage hoped for but nonexistent merger synergies. Group dis ability insure Unum unwittingly pursued these when it acquired individual disability insurer Provident, assuming the units could cross sell each other's products. It turns out they had entirely different sales models and customers.
Pseudo-adjacencies aslo lead companies astray, as school bus operator Laidiaw learned when it spent billions on a move into ambulance services. The firm expected its logistics expertise to carry over but discovered ambulances were not a transportation business but a highly regulated health care business demanding skills it sorely lacked.
Faulty financial engineering,aggressive financial practices don't necessarily lead to fraud, but they can be dicey. The stakes are high-brands and reputations and entire businesses can crumbles as a consequence, and corporate officers may be exposed to massive fines and even prison.
Stubbornly staying the course, redoubling your investment in your current strategy in response to market signals is a strategy itself, and it can lead to disaster. Executives too often kid themselves into thinking that problem isn't so severe or delay any reaction until it is too late.
Bets on the wrong technology, the huge rewards for breakthrough product and services understandably inspire many companies to search relentlessly for the next Google or eBay or iPod. Still, in our research we discovered that many technology-dependent strategies were ill-conceived from the get-go. No amount of luck or sophisticated execution could have saved them. To keep pursuing the strategies that produced these failures-some quite spectacular-companies had to go to great lengths to deceive themselves.
Rushing to consolidate are all dangerous, too, as Conseco, Kodak, Motorola, and Ames can attest. Our research shows that it is sometimes better to sit back and let others fumble through consolidation. Though there's more glory in being buyer, it may be wiser to sell and pocket the cash before industry condition deteriorate.
And a rollup of almost any kind is a high-wire act in which a slight market downtum is all it takes to finish you off. Research shows that more than two-thirds of roll-ups have failed to create any value for investors.
If the executives at these companies had taken a closer look at history, they might have avoided billions in losses. But even experienced teams can fall into these traps. The best way to safeguard your company against them is to institute a formal strategy review by a devi’s advocate panel not involved in strategy development. Its members must have license to ask tough questions, say the authors, who offer guidelines to help panels focus on facts, tes assumptions, and bring to light flaws in the strategy that could lead to costly blunders. Lean more How Harvard Business Review September 2008
Source : Harvard Business Review
Lessons from The Most Inexecusable Business Failures of The Past 25 years
What causes companies to fail spectacularly ? A recent study of 750 of the biggest U.S. business disasters of the past 25 years reveals that seven popular but risky strategies are often to blame.
Drawing on that extensive research, Carroll, a journalist, and Mul, a fellow at Diamond Management & Technology Consultants, describe seven sirens that lure companies onto the rocks.
Diamond is a management and technology consulting firm. Recognizing that information and technology shape market dynamics, Diamond’s small teams of experts work across functional and organizational boundaries to improve growth and profitability. Since the greatest value in a strategy, and its highest risk, resides in its implementation, Diamond also provides proven execution capabilities. We deliver three critical elements to every project: fact-based objectivity, spirited collaboration, and sustainable results. Diamond is headquartered in Chicago, with locations in Hartford, New York, Washington D.C., London, and Mumbai. Diamond is publicly traded on the Nasdaq Global Market under the symbol "DTPI."
One is the synergy mirage hoped for but nonexistent merger synergies. Group dis ability insure Unum unwittingly pursued these when it acquired individual disability insurer Provident, assuming the units could cross sell each other's products. It turns out they had entirely different sales models and customers.
Pseudo-adjacencies aslo lead companies astray, as school bus operator Laidiaw learned when it spent billions on a move into ambulance services. The firm expected its logistics expertise to carry over but discovered ambulances were not a transportation business but a highly regulated health care business demanding skills it sorely lacked.
Faulty financial engineering,aggressive financial practices don't necessarily lead to fraud, but they can be dicey. The stakes are high-brands and reputations and entire businesses can crumbles as a consequence, and corporate officers may be exposed to massive fines and even prison.
Stubbornly staying the course, redoubling your investment in your current strategy in response to market signals is a strategy itself, and it can lead to disaster. Executives too often kid themselves into thinking that problem isn't so severe or delay any reaction until it is too late.
Bets on the wrong technology, the huge rewards for breakthrough product and services understandably inspire many companies to search relentlessly for the next Google or eBay or iPod. Still, in our research we discovered that many technology-dependent strategies were ill-conceived from the get-go. No amount of luck or sophisticated execution could have saved them. To keep pursuing the strategies that produced these failures-some quite spectacular-companies had to go to great lengths to deceive themselves.
Rushing to consolidate are all dangerous, too, as Conseco, Kodak, Motorola, and Ames can attest. Our research shows that it is sometimes better to sit back and let others fumble through consolidation. Though there's more glory in being buyer, it may be wiser to sell and pocket the cash before industry condition deteriorate.
And a rollup of almost any kind is a high-wire act in which a slight market downtum is all it takes to finish you off. Research shows that more than two-thirds of roll-ups have failed to create any value for investors.
If the executives at these companies had taken a closer look at history, they might have avoided billions in losses. But even experienced teams can fall into these traps. The best way to safeguard your company against them is to institute a formal strategy review by a devi’s advocate panel not involved in strategy development. Its members must have license to ask tough questions, say the authors, who offer guidelines to help panels focus on facts, tes assumptions, and bring to light flaws in the strategy that could lead to costly blunders. Lean more How Harvard Business Review September 2008
Source : Harvard Business Review
Wednesday, December 17, 2008
How Pixar Fosters Collective creativity
Pixar Animation Studios is an Academy Award ®-winning computer animation studio with the technical, creative and production capabilities to create a new generation of animated feature films, merchandise and other related products. Pixar's objective is to combine proprietary technology and world-class creative talent to develop computer-animated feature films with memorable characters and heartwarming stories that appeal to audiences of all ages.
Pixar Animation Studios, a wholly-owned subsidiary of The Walt Disney Company, is an Academy Award®-winning film studio with world-renowned technical, creative and production capabilities in the art of computer animation. Creator of some of the most successful and beloved animated films of all time, including "Toy Story," "Finding Nemo," "The Incredibles," "Cars," "Ratatouille," and most recently, "WALL•E." The Northern California studio has won 21 Academy Awards and its nine films have grossed more than $4.5 billion at the worldwide box office to date. The next film release from Disney•Pixar is UP (May 29, 2009).
Toy Story, released November 22, 1995, reflects more than nine years of creative and technical achievements. The film received tremendous critical acclaim and became the highest grossing film of 1995, generating $362 million in worldwide box office receipts. Toy Story's director and Disney · Pixar's chief creative officer, John Lasseter, received a Special Achievement Academy Award® for his "inspired leadership of the Pixar Toy Story team resulting in the first feature-length computer animated film."
Pixar has since released A Bug's Life, Toy Story 2, Monsters, Inc., Finding Nemo, and The Incredibles. The six films combined have grossed more than $3.2 billion at the worldwide box office, and Pixar now has six of the top grossing animated films of all time. Toy Story 2, at the time of release, broke numerous opening weekend records all over the world and won a Golden Globe award for Best Picture, Musical or Comedy in 1999.
In 2001, Pixar released the Academy Award®-winning Monsters, Inc., which reached over $100 million at the domestic box office in just 9 days, faster than any animated film in history at the time of its release. Monsters, Inc.'s opening-weekend gross of $62.6 million marked the largest 3-day opening ever for an animated film, the largest 3-day opening in the history of The Walt Disney Studios, the largest 3-day opening in the history of Pixar Animation Studios, and the sixth-largest opening in industry history - records that Monsters, Inc. held until the release of Finding Nemo.
On May 30, 2003, Pixar released Finding Nemo which broke every one of Monsters, Inc.'s opening weekend box office records that had been set only 18-months earlier. Finding Nemo generated $865 million at the global box office and received the Academy Award® for Best Animated Feature Film.
The Incredibles, released in 2004, continued Pixar's success both critically and at the box-office. The film grossed $70.2 million in its first weekend of release in the United States and performed similarly throughout the rest of the world. The film earned more than $620 million worldwide, elevating it to the second highest grossing Pixar film and amongst the 25 highest grossing film of all time. In addition to a multitude of prestigious accolades, praise for The Incredibles has culiminated in a Pixar-record: four Academy Award® nominations.
Directed by Academy Award®-winner John Lasseter, "Cars" opened in theaters on June 9, 2006. “Cars” was the 2007 Golden Globe winner for Best Animated Feature Film and received Academy Award® nominations for Best Animated Feature Film and Best Music - Original Song. The film also won the 2007 Grammy Award for Best Song Written for Motion Picture, Television or Other Visual Media. "Cars" was the #1 animated film on DVD for 2006, and the Disney•Pixar's "Cars" Original Motion Picture Soundtrack debuted in June 2006 at #8, making it the first Pixar soundtrack to enter the Billboard Top 10 and to ship gold.
Many people believe that good iesa are rarer and more valuable than good people, Ed Catmull, president of Pixar and Disney Animation Studios, couldn’t disagree more. That notion, he says, is rooted in a misguided view of creativity that exg-gerates the importance of the initial ideas in devel-opening an original product. And it reflects a profound misunderstanding of how to manage the large risks inherent in producing breakthroughs.
In filmmaking and many other kinds of complex product development, creativity involves a large number of people from different disciplines working effectively together to solve a great many inherently unforeseeable problems. The trick to fostering collective creativity. Catmull says, is threefold : Place the creative authority for product development firmly in the hands of the project learders (as opposed to corporate executives), build a culture and processes that encourage people to share their work-in-progress and support one another as peers; and dismantle the natural barriers that divide disciplines.
Mindful of the rise and fall of so many tech companies, Catmull has also sought ways to continuslly challenge Pixar’s assumptions and search for the flaws that could destroy its culture. Clear values. Constant communication, routine postmortems, and the regular injection of outsiders who will challenge the status quo are necessary but not enough to stay on the rails. Strong leadership is essential to make sure people don’t pay lip service to those standards. For example. Catmull comes to the orientation sessions for all new hires, where he ta lks about the mistakes Pixar has made so people don’t assume that just because the company is successful, everything it does is right. Learn more How Pixar Fosters Collective Creativity
Source : Harvard Business Review
Monday, December 15, 2008
Why Toyota wants GM to be saved
By Chris Isidore
Detroit's Big Three aren't the only automotive companies that want to see the government step in with some much needed financial help.
Overseas automakers, most notably Toyota Motor, all endorse some form of federal aid to keep General Motors (GM, Fortune 500), Chrysler LLC and possibly Ford Motor (F, Fortune 500) out of bankruptcy.
The Senate killed an effort to get the automakers a stopgap loan last week and now the Bush administration has said it is looking at providing the automakers help from the $700 billion approved to bailout banks and Wall Street firms.
"We support measures to help the industry," said Toyota Motor (TM) spokeswoman Mira Sleilati. "We just want a strong, competitive healthy industry."
This may seem surprising at first, especially when you consider that much of the opposition to the auto bailout was from senators from Southern states home to auto plants operated by Asian auto companies, such as Alabama and South Carolina. But the Asian automakers insist they never lobbied against such help for the Big Three.
And this makes sense once you take a closer look at the dynamics of the auto industry and how intertwined the fates of all the companies are.
Here's why Toyota, Honda Motor (HMC) and other Asian auto manufacturers clearly believe they are all better off with GM and Chrysler surviving than if they go out of business.
Collateral damage
The overseas automakers, who between them produce more than 3 million vehicles a year at U.S. plants, all worry their production would be hurt if one of the U.S. automakers went under. That's because a Big Three failure would likely lead to widespread bankruptcies in the auto parts supplier industry.
Erich Merkle, lead auto analyst with the consulting firm Crowe Horwath LLP, said there is much overlap between the automakers' suppliers. Since most parts in an automobile have only a single supplier producing them, the disruptions in production will be severe and prolonged.
"It could take months for a Toyota to work through that and resume normal production," he said.
Merkle said the current network of auto suppliers, manufacturers and dealerships have worked well for the overseas automakers, who have posted steady gains in their U.S. market share during the past few years.
Besides sharing suppliers, many dealers sell both U.S. and overseas brands. So the failure of a U.S. automaker could hurt the overseas manufacturers' dealer network and their sales as well, Merkle said.
"There would be a severe disturbance in the force," he quipped.
Economic shockwaves
A collapse of one of the Big Three would also probably cause an even more severe hit to the U.S. economy. That would further eat into demand for U.S. auto sales, which hit a 26-year low in November.
"The U.S. economy would be in shambles," Merkle said. "The robust U.S. economy that Toyota and the others depend on would suddenly not be as lucrative."
The overseas automakers agree that the last thing they need is for the U.S. economy to slow further. The U.S. is the largest market for Toyota, Honda and Nissan (NSANY). All are expected to report lower U.S. sales this year for the first time ever.
"We want to get the economy back," said Michael Stanton, CEO of the Association of International Automobile Manufacturers, which represents most of the Asian automakers with plants in the U.S. "Everyone is hurting at this level of sales. Everybody is either cutting back or shutting down."
The latest cutbacks came Monday when Toyota announced it was putting plans to open a new plant in Mississippi on hold indefinitely, even though it is about 90% complete. The plant was set to start building the first domestically produced Prius in 2011.
While the overseas automakers would be certain to eventually pick up more U.S. market share if a U.S. automaker stopped doing business, Merkle said the need to sell off the inventory of the failed automaker at fire sale prices would depress all prices in the industry in the short-term.
Enter new competition
The final concern for the overseas automakers is a longer-term problem. If a U.S. automaker fails, that could open the door for a Chinese or Indian automaker to buy up the assets of the failed automaker and create a new low-cost competitor in the U.S.
"You could open the door for foreign companies to buy distressed assets at rock bottom prices," he said. He pointed to India's Tata (TTM) and China's Geely, as two automakers in the developing world that are already on record as being interested in expanding into western markets like the United States.
"Tata and Geely would be incredibly open to brownfield sites," he said, referring to the term used to describe companies that buy discarded industrial facilities.
Toyota and Honda have already felt the effects of competition from other upstarts firsthand in the U.S.
Korean manufacturers Hyundai and Kia have eaten into the sales of Toyota's and Honda's small, inexpensive vehicles, but that growth has taken decades.
Merkle said it might take a year or more for a new competitor to get off the ground. But by grabbing U.S. automakers' assets, vehicle designs and dealerships, an incoming Indian or Chinese manufacturer could quickly become a low-cost threat much quicker than the Koreans.
The established automakers like Toyota and Honda are also unlikely to look to buy the distressed assets themselves because they have never used acquisitions or purchases of other companies' assets as a method of growing.
Instead, they have always built their own facilities from the ground up in order to expand. Merkle said that is unlikely to change, even if the more productive facilities of U.S. automakers were put up for sale by a bankruptcy court, Merkle said.
While companies such as Tata or Geely are likely to eventually enter the U.S. anyway, Merkle said the vacuum caused by the failure of GM or Chrysler could jumpstart those efforts and bring them to the market years earlier than expected.
Source : CNNMoney.com
Sunday, December 7, 2008
The Contribution Revolution: Letting Volunteers Build Your Business
Many internet superstars owe much of their success to the active and passive contributions made by countless people from outside their organizations. Think, most obviously, of Facebook profiles, eBay goods, YouTube videos, Wikipedia entries, and, less obviously, of the aggregated buying behavior underlying Amazon recommendations and the donated use of personal-computer resources underpinning Skype’s internet-based phone network.
Facebook is a social networking website launched on February 4, 2004. The free-access website is privately owned and operated by Facebook, Inc. Users can join networks organized by city, workplace, school, and region to connect and interact with other people. People can also add friends and send them messages, and update their personal profile to notify friends about themselves. The website's name refers to the paper facebooks depicting members of a campus community that some US colleges and preparatory schools give to incoming students, faculty, and staff as a way to get to know other people on campus. Mark Zuckerberg founded Facebook while he was a student at Harvard University. Website membership was initially limited to Harvard students, but was expanded to other colleges in the Ivy League. It later expanded further to include any university student, then high school students, and, finally, to anyone aged 13 and over. The website currently has more than 120 million active users worldwide.
eBay Inc. is an American Internet company that manages eBay.com, an online auction and shopping website in which people and businesses buy and sell goods and services worldwide. In addition to its original U.S. website, eBay has established localized websites in thirty other countries. eBay Inc. also owns PayPal, Skype,StubHub, Kijiji,and other businesses.The online auction website was founded in San Jose, California, on September 3, 1995, by French-born Iranian computer programmer Pierre Omidyar as AuctionWeb,part of a larger personal site that included, among other things, Omidyar's own tongue-in-cheek tribute to the Ebola virus.In 1997, the company received approximately $5 million in funding from the venture capital firm Benchmark Capital.
YouTube, LLC is a video sharing website where users can upload, view and share video clips. YouTube was created in February 2005 by three former PayPal employees.In November 2006, YouTube was bought by Google Inc. for 1.65 billion dollars, and is now operated as a subsidiary of Google. The company is based in San Bruno, California, and uses Adobe Flash Video technology to display a wide variety of user-generated video content, including movie clips, TV clips and music videos, as well as amateur content such as video blogging and short original videos. Most of the content on YouTube has been uploaded by members of the public, although media organizations including CBS and the BBC offer some of their material via the site.YouTube was founded by Chad Hurley, Steve Chen and Jawed Karim, who were all early employees of PayPal.Hurley studied design at Indiana University of Pennsylvania, while Chen and Karim studied computer science together at the University of Illinois at Urbana-Champaign.
Amazon.com, Inc.is an American electronic commerce (e-commerce) company in Seattle, Washington. It is America's largest online retailer, with nearly three times the internet sales revenue of runner up Staples, Inc.Jeff Bezos founded Amazon.com, Inc. in 1994, and launched it online in 1995. Amazon.com started as an on-line bookstore, but soon diversified to product lines of VHS, DVD, music CDs, MP3 format, computer software, video games, electronics, apparel, furniture, food, toys, etc. Amazon has established separate websites in Canada, the United Kingdom, Germany, France, China and Japan. It also provides global shipping to certain countries for some of its products (Wikipedia).
Cook, the founder of Intuit (maker of financial software products such as Quicken and TurboTax), challenges traditional companies to tap this emerging source of value by actively creating what he calls user contribution systems.
The user can be a customer, employee, sales prospect—or someone with no previous connection to the company at all. The contribution can be actively offered work, expertise, or information, as well as passive or even unknowing contributions, such as behavioral data that are gathered automatically as a by-product of a transaction or an activity. The system is the method, usually internet based, by which contributions are aggregated and made useful to others. Such a system creates value for a business as a consequence of the value it delivers to customers.
In this article, Cook describes the personal journey that led him to see the tremendous value in user contributions. He creates a taxonomy of the systems that can capture user contributions and shows the variety of ways in which companies from Honda to Procter & Gamble to Hyatt Hotels are leveraging them. And, drawing on his successes and failures in trying to put them to work at Intuit, he offers advice on how business leaders can catalyze action to create user contribution systems in their own organizations.
Source : Harvard Business Review
Facebook is a social networking website launched on February 4, 2004. The free-access website is privately owned and operated by Facebook, Inc. Users can join networks organized by city, workplace, school, and region to connect and interact with other people. People can also add friends and send them messages, and update their personal profile to notify friends about themselves. The website's name refers to the paper facebooks depicting members of a campus community that some US colleges and preparatory schools give to incoming students, faculty, and staff as a way to get to know other people on campus. Mark Zuckerberg founded Facebook while he was a student at Harvard University. Website membership was initially limited to Harvard students, but was expanded to other colleges in the Ivy League. It later expanded further to include any university student, then high school students, and, finally, to anyone aged 13 and over. The website currently has more than 120 million active users worldwide.
eBay Inc. is an American Internet company that manages eBay.com, an online auction and shopping website in which people and businesses buy and sell goods and services worldwide. In addition to its original U.S. website, eBay has established localized websites in thirty other countries. eBay Inc. also owns PayPal, Skype,StubHub, Kijiji,and other businesses.The online auction website was founded in San Jose, California, on September 3, 1995, by French-born Iranian computer programmer Pierre Omidyar as AuctionWeb,part of a larger personal site that included, among other things, Omidyar's own tongue-in-cheek tribute to the Ebola virus.In 1997, the company received approximately $5 million in funding from the venture capital firm Benchmark Capital.
YouTube, LLC is a video sharing website where users can upload, view and share video clips. YouTube was created in February 2005 by three former PayPal employees.In November 2006, YouTube was bought by Google Inc. for 1.65 billion dollars, and is now operated as a subsidiary of Google. The company is based in San Bruno, California, and uses Adobe Flash Video technology to display a wide variety of user-generated video content, including movie clips, TV clips and music videos, as well as amateur content such as video blogging and short original videos. Most of the content on YouTube has been uploaded by members of the public, although media organizations including CBS and the BBC offer some of their material via the site.YouTube was founded by Chad Hurley, Steve Chen and Jawed Karim, who were all early employees of PayPal.Hurley studied design at Indiana University of Pennsylvania, while Chen and Karim studied computer science together at the University of Illinois at Urbana-Champaign.
Amazon.com, Inc.is an American electronic commerce (e-commerce) company in Seattle, Washington. It is America's largest online retailer, with nearly three times the internet sales revenue of runner up Staples, Inc.Jeff Bezos founded Amazon.com, Inc. in 1994, and launched it online in 1995. Amazon.com started as an on-line bookstore, but soon diversified to product lines of VHS, DVD, music CDs, MP3 format, computer software, video games, electronics, apparel, furniture, food, toys, etc. Amazon has established separate websites in Canada, the United Kingdom, Germany, France, China and Japan. It also provides global shipping to certain countries for some of its products (Wikipedia).
Cook, the founder of Intuit (maker of financial software products such as Quicken and TurboTax), challenges traditional companies to tap this emerging source of value by actively creating what he calls user contribution systems.
The user can be a customer, employee, sales prospect—or someone with no previous connection to the company at all. The contribution can be actively offered work, expertise, or information, as well as passive or even unknowing contributions, such as behavioral data that are gathered automatically as a by-product of a transaction or an activity. The system is the method, usually internet based, by which contributions are aggregated and made useful to others. Such a system creates value for a business as a consequence of the value it delivers to customers.
In this article, Cook describes the personal journey that led him to see the tremendous value in user contributions. He creates a taxonomy of the systems that can capture user contributions and shows the variety of ways in which companies from Honda to Procter & Gamble to Hyatt Hotels are leveraging them. And, drawing on his successes and failures in trying to put them to work at Intuit, he offers advice on how business leaders can catalyze action to create user contribution systems in their own organizations.
Source : Harvard Business Review
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