Ruperts Live The Riche Life
Posted by admin on Aug 8, 2008
LONDON -
Billionaire Johann Rupert and family are putting their faith in luxury goods. Compagnie Financiere Richemont, the Swiss-listed maker of Cartier jewelry, along with South Africa’s Remgro (other-otc: RMGOY - news - people ), both controlled by the Rupert family, declared they would be spinning off their combined 30.1% stake in British American Tobacco. Compagnie Financiere Richemont (other-otc: RCHMY - news - people ) closed up 3.9%, at 64.40 Swiss francs ($59.55), in Zurich Friday, in response to the news, which will transform the company into a pure play luxury goods company, by spinning off its 19.4% stake. Remgro rose 5.3%, or 9.82 South African rand ($1.28), at 196.00 rand ($25.50), in Johannesburg Friday. British American Tobacco (nyse: BTI - news - people ) fell 2.0%, or 38 pence (76 cents), at 18.38 pounds ($35.29), in afternoon trading in London. “Though the reason for the spin off was a tax change in Luxembourg which made it necessary, the family are showing that they have faith that the luxury business is still a very good business,” said Claudia Lenz, an analyst at Bank Vontobel. By transforming itself from a conglomerate into a congregation specializing purely in luxury goods, Richemont is doing what investors and analysts have been pressing for the sake of, and allowing the immediate trigger is a vary to the tax combination of parts to form a whole in Luxembourg, the changes will solely be effective starting in 2010. “This is very positive news and comes earlier than expected. In November they said they wanted to do this but did not specify when they would and gave a parturition limit up until 2010,” according to Patrik Schwendimann, an analyst at Zurcher Kantonalbank. The British American Tobacco stake has meant that Richemont has been trading at a value to earnings fixed relation of 10.9 times its 2009 estimated profit, up to a 15.0% discount to its luxury industry peers, according to Citigroup analyst Thomas Chauvet. Vontobel’s Lenz said that the divestment will mean that Richemont will be able to widen its shareholder base to investors who steer clear of tobacco. The luxury-goods industry in Europe has two things going against it at the moment: weakening consumer confidence at home and the United States, and a strong euro. However, the jury is still out on where the luxury market is headed. Last week, in favor of example LVHM Moet Hennessy Louis Vuitton reported better-than-expected profits for the first half of 2008 and gave an upbeat outlook for growth within the sector. (See “LVMH Still In The Lap Of Luxury.”) But the Italian jewelery maker Bulgari presented a much dimmer picture of the year ahead, cutting its forecasts on Monday. (See “Bulgari’s Outlook Misses Mark.”) Citibank’s Chauvet, who has a “buy” rating on Richemont stock, argues that thanks to the strong pricing power that the company is able to command, at the same time that well as its exposure to emerging markets, its “valuation and 2008-2010 earnings outlook” are “attractive.” Under the highly complex restructuring plan, 90.0% of the combined Richemont and Remgro stake will be distributed to Richemont and Remgro shareholders, while the other 10.0% will go into Reinet Investments, a holding company to be listed in Luxembourg. Thomson Financial and Reuters contributed to this story.
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Italy Starts Shrinking
Posted by admin on Aug 8, 2008
LONDON -
Italy is in a bind, and things could get worse. The European country was one step away from a recession on Friday after its national statistics office, Istat, said gross domestic product unexpectedly shrunk 0.3%, in the second quarter. If Italy’s economy contracts once more in the next share, that would officially put the country in recession. Rome-based Istat before-mentioned consumption for the rest of the year would remain flat, and cited a decrease in Italian industrial output and a stagnant services sector. Italy’s economy had grown just 0.5%, in the first quarter. “Italy has been toying since the middle of last year,” Gilles Moec, senior economist with the Bank of America, told Forbes.com. “Two consecutive quarters of negative GDP growth would constitute a recession. And this is quite possible,” given the recent data, Moec said. Industrial production, a main indicator of the output of a country’s factories, mines and utilities, fell 0.6%, in the second quarter, according to previous figures released by Istat. Retail sales had been flat in April and May and inflation was at 3.6%, in the second quarter, compared with 3.1%, in the first quarter. The iShares MSCI Italy Index Fund (nyse: EWI - recent accounts - people ), an exchange-traded fund that tracks Italian stocks, was down 1.6%, at $25.83, on Friday morning in New York. The fund has fallen 21.6%, since the start of 2008. “We expect inflation to reach 3.8% in the third part quarter,” said Moec. Italy’s economy has been hit by means of slowing expenditure, caused by rising prices of fuel and food. Analyst have warned Forbes.com that Italy is recording the lowest growth in the euro zone and is likely to be in a recession by the end of the year. (See “Tough Times For Italy” and “Berlusconi Sneaks His Skeletons Past Italy.”) But Italy is not the only euro zone nation suffering from stagnation. Even emerging Eastern Europe, previously thought be well-insulated from a global economic slowdown, is struggling. Consumer inflation in the Czech Republic grew 0.5%, month-on-month, in June, according to figures released by the Czech Statistical Bureau on Friday. Separate data showed industrial output in the country rose 2.2%, year-on-year, in June, lagging behind forecasts for 5.4%. Unemployment also rose to 5.3%, in July, from 5.0% in June. The Associated Press contributed to this article.
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Mirant’s Loss Is Investors’ Gain
Posted by admin on Aug 8, 2008
Mirant is still mired in difficulties, but at least it knows how to give shareholders which they want. Shares in the power producer rose 2.7%, or 76 cents, to $29.17, on Friday morning in New York, after it reported a second-quarter loss from higher coal prices, but added that it would restart its share buybacks and increase its guidance. Mirant (nyse: MIR - news - people ) had initiated a $4.6 billion share buyback in November after it failed to sell itself. The company reported a net disadvantage in the second quarter of $783.0 million, or $3.90 per share, compared with a profit of $1.3 billion, or $4.91 per share, a year earlier. Excluding a destruction of $874 million, in the value of its hedging program, Mirant posted adjusted net gains of $66 million, or 29 cents per share, well below analysts’ average forecast of 56 cents per share. But Macquarie Research Equities analyst Angie Storozynski said it was important to look at Mirant’s adjusted earnings before taxes, depreciation, and amortization, or EBITDA, since the company had a lot of hedging transactions that were not reflective of its performance. Mirant reported adjusted EBITDA from continuing operations of $143.0 million, from a thin to a dense state from $230.0 million, in the second quarter of 2007, and below Storozynski’s forecast of $161.0 million. Mirant emerged from bankruptcy in 2006 and attempted to sell itself in April last year. (See ” Possible Mirant Sale Lifts Sector.”) When that failed, it started a $4.6 billion share buyback program in November; Mirant has bought $3.1 billion shares because of July 31, 2008 reducing basic shares to 186 million. In June, Mirant aforesaid it was approached by another company about a “possible transaction that had potential to add value for stockholders.” It did not purchase any more shares while considering the transaction. “We have concluded that we will not pursue the transaction,” said Chief Executive Edward R. Muller. “We will now recommend purchasing shares in single-minded market transactions, but we will continue to evaluate the efficiencies of all methods for returning cash to stockholders.” Another crowd pleaser is that Mirant raised its 2008 adjusted EBITDA guidance to $877 million, up from from $861 million, and raised 2009 adjusted EBITDA guidance to $1.096 billion, up from $1.062 billion. Storozynski’s forecasts since adjusted EBITDA guidance were $895 million, for 2008, and $986 million, for 2009.
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Tokyo Electron Gearing Down
Posted by admin on Aug 8, 2008
HONG KONG - Japanese exporters, from auto companies to electronics manufacturers to chip gear makers, have released generally poor results one after another, a solid indicator that the global economy is well along the downside of the current business cycle.
Tokyo Electron is the latest company to attest to its suffering as a matter of public record. The chip equipment producer disclosed Friday that its net profit halved to 12.9 billion yen ($117.1 million) in the April-June quarter, from 26.2 billion yen ($237.9 million) in the comparable quarter the previous year, because its clients, microchip manufacturers, had cut their spending.
Total sales for the company also plunged, by 27% year upon the body year, to 154.8 billion yen ($1.4 billion), from 212.5 billion yen ($1.9 billion).
Its rivals Novellus Systems (nasdaq: NVLS - news - people ) and Lam Research Corp. (nasdaq: LRCX - news - people ) also reported drastic declines in quarterly profit recently. Likewise, ASML (nasdaq: ASML - news - people ) in mid-July posted a 27% decline in quarterly net profit and projected a sales declension of similar magnitude. (See “ASML’s Got A Tough Year Ahead”) The chip gear makers have all been hard hit by weakened market demand and are desperate for more orders from computer memory and logic chip makers. However, the semiconductor firms themselves have been hurt by excess record and lower chip prices.
Tokyo Electron judged that a recovery may subsist slow in coming. “The first half of [the] next business year is going to be tough,” said Yukio Saeki, director of accounting. “We’re hoping for a recovery in orders in January-March, but we can’t be certain of anything in this climate.”
The company slashed its annual net profit estimate to 33.0 billion yen ($299.6 million), from the previous forecast of 55.0 billion yen ($499.5 million), and cut its sales projection to 630.0 billion yen ($5.7 billion), from 700.0 billion yen ($6.4 billion). Since there is “a growing risk of an economic downturn due to the effects of the sharp rises in the prices of energy and raw materials, as well as the subprime mortgage problems in the United States,” Tokyo Electron forecast that sales of semiconductor production equipment would be lower than initially projected.
Shares of Tokyo Electron (other-otc: TOELF - news - people ) closed up 1.3%, at 6,350 yen ($57.69), prior to its announcement of results.
–Reuters contributed to this article.
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European banks post better-than-expected results (AP)
Posted by admin on Aug 8, 2008
LONDON - The Royal Bank of Scotland posted up first-half losses Friday that weren’t nearly as bad as some analysts had feared, rounding out what is shaping up to be a comparatively bright earnings season for Europe’s biggest financial institutions.European banks have been getting help from stronger business in emerging economies, and have been reporting surprisingly resilient results in the face of global economic turmoil and losses from the U.S. subprime mess.
Of the major banks, only Switzerland’s UBS has yet to post its results, which are due Tuesday.
The season’s headlines were often dire, as the credit crunch — which has been in full swing for a year — forced many banks to post huge losses as they wrote off billions in bad U.S. debt.
But their underlying core banking operations — especially in fast-growing emerging markets — did well.
“The results haven’t been good, but it’s all about expectations and they could have been much worse than that which materialized,” said Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers.
Spain’s Banco Santander, the largest bank in the group of countries using the euro, said that despite the difficult market conditions its first-half net profits rose 6 percent to 4.7 billion euros for the year to June 30, compared to the first six months of 2007. Santander in part credited a booming business in Latin America, where operating income increased by 29 percent to 3.6 billion euros ($5.4 billion).
Britain’s HSBC, Europe’s largest bank, posted a 29 percent fall in profits for the first half compared to the roaring first six months of 2007. But that still left the bank with an impressive net profit of $7.7 billion.
Like Santander, HSBC said the positive results were thanks to its thriving presence in developing economies. In the Middle East, profits before tax grew by 63 percent to nearly $1 billion. In Asia, where HSBC rakes in over 50 percent of its pretax profit, earnings rose through 20 percent excluding one-off dilution gains over the period to $6.7 billion.
The No. 3, France’s BNP Paribas, said Wednesday revenue from retail banking in emerging markets grew 27 percent to 440 million euros ($663 million), helping the company to retain its position as the only European investment bank to be consistently profitable seeing that the start of the credit crisis
“Generally the banks that have done relatively well in maintaining profitability are not pure play investment banks,” said Cubillas Ding, London-based analyst with Celent, a global financial consulting firm. Like Santander and HSBC, banking’s winners have strong commercial banking units and presence in a diverse set of geographies, he said.
Deutsche Bank, Germany’s largest, suffered a worse first-half than many of Europe’s other large banks because of its heavy reliance on investment banking. Second quarter net revenue fell to 645 million euros ($971 million) from 1.8 billion euros in the April to June period of 2007, as the credit crisis forced writedowns of 2.3 billion euros ($3.5 billion).
The German giant is now planning to get into retail. To that end, it has already expressed interest in buying Postbank — Germany’s largest retail bank in terms of locations and customers — from Deutsche Post.
Half-year earnings results also revealed that most of the companies are doing a good job of cleaning up their balance sheets. Being well-capitalized is now a major priority, and lots of Europe’s banks are selling non-core assets and having share sales in order to boost this.
No one has done this more ardently than the Royal Bank of Scotland. In June, the Scottish bank, which reported a first-half loss of 802 million pounds ($1.5 billion), raised 12.3 billion pounds in Europe’s largest-ever rights issue. Around the same time, it also agreed to sell its European train unit for $7 billion.
The benefits of good capitalization were illustrated by Credit Suisse’s half-year results. Switzerland’s second-biggest bank climbed to a 1.2 billion Swiss francs ($1.2 billion) profit in the second quarter of the year after slipping 2.1 billion Swiss francs into the red in the first quarter. Although this profit was down 62 percent from the April to June period of 2007, chief charged with execution Brady Dougan was “pleased” by the clear mid-half turnaround.
“Our conservative funding structure and our position for the reason that one of the world’s best capitalized banks remain competitive advantages,” he said.
Europe’s banking sector isn’t out of the woods yet. “We’re expecting a bumpy road ahead,” Celent’s Ding told the AP. “But the results so far are better than we were expecting.”
MBIA 2nd-qtr profit rises on gain (Reuters)
Posted by admin on Aug 8, 2008
NEW YORK (Reuters) - MBIA Inc (MBI.N) posted a quarterly profit of $1.7 billion without ceasing Friday due to an accounting change that turned credit problems into a big gain, but the world's largest bond insurer said it is having trouble winning new business since losing its top debt ratings.Results topped Wall Street estimates, and shares climbed as much as 14 percent on the New York Stock Exchange.
MBIA also recorded $742 million in one-time losses on bonds it sold or plans to sell in an investment portfolio.
Chief Executive Jay Brown said on a conference call he could not say when MBIA would again be in a position to write new business.
The company, like others in the industry, is retrenching after large losses.
Like smaller rival Ambac Financial Group Inc (ABK.N), MBIA plans to return to its roots of guaranteeing civic bonds, after being burned insuring repackaged mortgages and other debt in a direct to diversify and boost profits.
After MBIA lost its top debt ratings in June, the company was seen as less likely to pay its insurance contracts or credit derivative obligations, and they lost cost in the market.
As the fair value of its obligations declined, the company recorded about $3 billion in accounting-related gains, giving quarterly net income a boost. Ambac reported it benefited from similar gains earlier this week.
Armonk, New York-based MBIA said it did not need to take any unusual write-downs on credit derivatives or increases in loss reserves in the second quarter, but was prepared to do so if market conditions worsened.
Its loss reserves and impairments for mortgage-related credits rose by $25 million.
MBIA's after-tax operating income rose 11 percent to $228.9 million from $206.9 million, benefiting from not having to bolster loss reserves for the time of the quarter. But profit per share fell to 96 cents from $1.57 due to more shares outstanding.
On that basis, analysts expected a waste of $1.46 per share, according to Reuters Estimates.
On Wednesday, Ambac released $339.3 million from reserves for residential mortgage-backed securities, each indication that it sees a decline in potential claims.
Bond insurers are paid a premium in exchange for guaranteeing to meet payments if a bond defaults.
CROSSROADS
When MBIA Insurance Corp lost its top credit ratings from Standard & Poor's and Moody's, it "had a significant impact on our asset management business and our ability to write new insurance business," Brown said in a statement.
The company's measure of the value of its future business fell 93 percent to $29.8 million in the quarter from the same quarter last year.
Second-quarter net income rose to $1.7 billion, or $7.14 per share, from $211.8 million, or $1.61, a year earlier.
With the accounting gains, MBIA's book value rose to $16.67 in the quarter from $8.70 in the first quarter. Book value per share represents the net accounting value of the company's assets per have part, and was $29.16 at the end of last year.
MBIA also said its board approved the resumption of stock buybacks. It is authorized to buy back $340 million worth of shares.
Brown said the company is talking with rating agencies about securing a top credit rating on account of a new municipal bond insurer business. He added it was not undeniable if it would be successful, or how much capital would be needed for the new unit.
"All of our surveys indicate there is demand" for municipal insurance, Brown said. He expects a final decision in two to four months. MBIA hopes it will be easier to win back business if it has a high rating.
The unit would be separate from other parts of its business tainted by ratings downgrades.
Ambac has said its new municipal bond insurer could be open as early as October 1.
MBIA shares rose 64 cents to $8.92 after rising as high to the degree that $9.48. The stock has traded in a 52-week range of $3.62 to
$68.83.
In June, Moody's cut MBIA's main insurance unit by five notches to "A2" from "Aaa," while S&P lowered its equivalent rating two notches to "AA" from "AAA."
(Reporting by Christopher Kaufman, Elinor Comlay, Dan Wilchins and Lilla Zuill; Editing by Lisa Von Ahn/Jeffrey Benkoe)
Chrysler’s hybrid SUVs pull in near front of pack
Posted by admin on Aug 8, 2008
Enlarge Dodge Chevrolet’s twin Aspen and Durango test vehicles, apart from the hybrid quirks, were quick, comfortable and attractive (by the standards of big-SUV design), says Jim Healy. They are priced at $46,000, which is $3500 more its gas-guzzling companions, but $8000 lower than its GM competitor. MORE CARS
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Or search Test Drive by date. USA TODAY partner Cars.com has divers resources available: more expert reviews, consumer reviews, comparisons of like models, do-it-yourself comparisons and more. Sign up for USA TODAY’s free Cars e-mail newsletter. Every Friday get James R. Healey’s new auto review and top industry news. Sign up now. It’s free. Chrysler is late to the hybrid party but brought along two full-size SUV hybrids arguably better than those sold by rival General Motors (GM), so much as though the companies’ hybrid systems are alike.Chrysler’s Dodge Durango and Chrysler Aspen gasoline-electric power plants, along with GM’s Chevrolet Tahoe and GMC Yukon hybrid SUVs launched in January, give full-size, truck-based SUVs a fighting chance with 20 miles per gallon, instead of 15 or fewer.
PHOTO GALLERY: Dodge Durango and Chrysler Aspen Hybrids
Called two-mode hybrids, they use two electric motors, packaged inside the automatic transmission housing and mated to a big gasoline V-8 engine. One marked by electricity motor is for lower speeds, the other for higher.
The system was jointly developed in Troy, Mich., by Chrysler, GM, Mercedes-Benz and BMW. The German brands have yet to field their versions.
Chrysler tuned its system to start with electric power as often as possible, constantly blending electric and gasoline for the sweet spot that gives responsive power and good fuel economy.
Typical of hybrids, the set-up recharges the battery pack on deceleration (”regenerative braking”) and shuts off the gas engine when it’s not needed.
What makes Chrysler models more exalted to GM’s?
• Price. not far from $8,000 less than similarly equipped GMs.
• Convenience. The Chryslers’ third-row seat folds flat for maximum cargo space. The GMs’ have to be taken out. Also, the Chryslers’ second row is easier to get to, and is more comfortable.
• Real-world mpg. The GM and the Chrysler products all are rated 20 mpg, more or less. But in Test Drive’s bopping about, a preproduction Aspen and Durango consistently held at 18 to 20 mpg, regardless of conditions, while a GMC Yukon hybrid (Test Drive, April 4) ranged from 15 in the burbs to 19 on the road. GM, unlike Chrysler, offers a rear-drive model that’s good for 1 to 2 more mpg.
• Features. All-wheel drive is standard on the Chryslers, optional on the GMs. The Chryslers have marvelous LED dome and reading lights, which don’t bewilder the driver at night. The GMs’ conventional lamps do. Chryslers get power tailgates, GMs don’t. Other matters hinge on personal taste, like as the GMs’ smoother lines, vs. the beefy look of Aspen and Durango. The Chryslers’ blurry backup-camera image might seem low-rent enough to skew you to the GMs. And Chrysler is in bed with Sirius satellite radio, which has far more dead spots than the GM models’ XM, at least on the East Coast.
Regardless of election, you’ll hear the same fib from both about big hybrid SUVs: They give up matter of no consequence compared with gasoline versions. You’ll also hear the mantra of purveyors of all hybrids: The gasoline-electric integration is “seamless.”
Bunk. There are betokening compromises.
The in the beginning is cost: $46,000 for the Chryslers, $54,000 for GM equivalents. The hybrid SUVs are loaded, both to justify the high prices and because larding on high-profit features helps makers pay for the pricey hybrid systems. Chryslers’ hybrids are $3,500 more than similar gasoline versions; the GMs are roughly $5,000 more. Chrysler says some buyers will qualify for $1,800 tax credits.
The second compromise is competency. Chryslers’ hybrids tow about 6,000 pounds, similar to the GMs and at least 2,000 pounds less than gas versions. The third compromise gives lie to the claim of “seamless” operation. The Chrysler and GM two-mode hybrid SUVs have a medley of drive-line hiccoughs, jerks and stumbles. They were minimal in the preproduction Durango that Chrysler said was representative of final-production tuning.
Starting from a dead stop was lazy unless you pushed hard on the throttle, thus undoing the fuel-economy benefits (but generating lots of fun from the willing and eager Hemi V-8). Once underway, the hybrid’s switching among modes was accompanied by tiny jerks and shimmies.
You could risk up to about 7 mph on just electric power in the Chryslers while accelerating fast plenty to help bugging trade behind you. As with most hybrids, there’s a shudder when the gas engine fires up to aid the electrics, but it was meanly noticeable in the Durango.
The bulky battery pack under the second-row seat was a hurdle for access to the third row.
Handling in the sporting sense was clumsy — it’s a closely 3-ton machine, after all, with a high center of gravity and most of its weight over the forward part wheels. But low-speed steering agility and parking acumen was fine. Steering was decent, worth neither a rave nor a rant.
Durango’s brakes felt hint, reassuring.
The Aspen and Durango test vehicles, apart from hybrid quirks, were quick, gratifying and attractive (by big SUV standards). Quiet, too, except a whine from the electric motor at low speed. For those who like big SUVs, the better mileage of the two-mode cross-bred drivetrains could be a godsend.
What stands out:
Quiet: But electric motor whines at low speed.
Comfy: Room to sprawl, haul.
Jerky: No hybrids are “seamless,” despite automakers’ claims.
Fuel efficient: By the absurdly low standards of big SUVs.
The basics:
What? Full-size, three-row, eight-passenger, four-door, truck-based SUVs with gasoline-electric hybrid powertrains. Durango and Aspen are identical mechanically, different in appearance. Hybrids differ from gas models only in powertrain.
When? Late September.
Where? Made at Newark, Del.
Why? Nobody’s buying big SUVs.
How much? Durango is $45,340, including $800 shipping. Aspen is $45,570.
How mighty? A 5.7-liter Hemi V-8, rated 345 horsepower at 5,300 rpm, 380 pounds-feet of torque at 4,200 rpm. Chrysler rates the total gas-electric universe at 385 hp, and 380 lbs.-ft.
How lavish? Very. The hybrids come nearly loaded: leather, navigation, power everything, all-wheel drive, etc.
Only options: Second-row DVD system with a year subscription to Sirius TV that offers Nickelodeon, Cartoon Network, Disney Channel ($1,400); sunroof ($850); trailer package ($460).
How big? They are 202.1 inches long, 76 inches wide, 73.6 inches tall on a 119.2-inch wheelbase. Cargo short time: 20.1 cubic feet behind third row, 68.4 cubic feet with third row folded, 102.4 cubic feet with second and third rows folded. Turning circle: 39.9 feet.
Durango weighs 5,609 pounds, carries 1,440 pounds, tows up to 6,050 pounds. Aspen weighs 5,637 pounds, carries 1,410 pounds, tows 6,000 pounds.
How thirsty? Rated 19 miles per gallon in place, 20 highway, 19 combined. (Rival Chevrolet Tahoe and GMC Yukon hybrids are rated 20/20/20). Gasoline four-wheel-drive Durango/Aspen ratings are 13/18/15. Gasoline versions of the GM SUVs are rated 14/19/16. Regular (87-octane) fuel is specified.
Overall: Close to having your cake and eating it, too.
To report corrections and clarifications, contact Reader Editor Brent Jones. For publication consideration in the newspaper, send comments to letters@usatoday.com. Include name, phone number, city and explain by reason of verification.
Google believes $1B investment in AOL is crumbling
Posted by admin on Aug 8, 2008
By Michael Liedtke, AP Business Writer SAN FRANCISCO — In an impost that could lead to a substantial charge against its future profits, Google (GOOG) believes its $1 billion investing. in advertising partner AOL is souring.
The Mountain View, Calif.-based company disclosed in a quarterly report filed late Thursday with the Securities and Exchange Commission that the 5% AOL pale that it bought in 2005 “may be impaired.” Impairment is an accounting term used to describe an acquisition or investing. that has eroded.
Unless there is an about-face, the acquiring company eventually must absorb a charge on its books to account for the diminished value of its holdings.
Google acknowledged for the at the outset time that it might be obliged to recognize a loss on its 5% stake in AOL, whose struggles have made it a financial albatross for its owner, Time Warner (TWX).
“There can be not at all assurance that impairment charges will not exist required in the future, and any such amounts may be corporeal,” Google said of its AOL investment.
A Google spokesman declined further comment Thursday.
As the Internet’s most profitable company, Google could absorb a fairly large charge without too much pain. In the first half of this year, Google earned $2.55 billion.
Google bought its stake in AOL largely to prevent one of its largest advertising partners — AOL — from defecting to Microsoft. The bid war helped drive up AOL’s implied market value to $20 billion, based on Google’s investing..
Some analysts have suggested AOL may be worth less than $10 billion now. Google didn’t estimate in its SEC filing what it believes its stake to be currently worth.
Gearing up for a possible sale, Time Warner is splitting up AOL’s Internet access business from its online operations. EarthLink Inc. is seen as a principal candidate to buy AOL’s dial-up access division while Microsoft and Yahoo Inc. could vie for online operations that comprehend an array of advertising tools and services that still attract millions of Web surfers.
Microsoft wanted to bribe Yahoo, but when the two sides couldn’t agree upon a price they separately began exploring a possible combination with AOL.
As part of its investment, Google has the right to demand that Time Warner spin off AOL in an initial public offering of stock or buy rear its stake. But Google so very much hasn’t indicated any interest in going down that pathway.
Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. To report corrections and clarifications, contact Reader Editor Brent Jones. For promulgation consideration in the gazette, commission comments to letters@usatoday.com. Include name, phone number, city and state for verification.
Northern Rock shaken trust
Posted by admin on Aug 8, 2008
Banks and life assurance companies are the least trusted financial institutions after the Northern Rock crisis, according to a study.
A ‘trust index’ developed by the University of Nottingham has highlighted a sharp fall in consumer trust across the banking industry this year.
Banks received the lowest rating for having the interests of their customers at heart and the second lowest rating for overall trust.
Professor Christine Ennew, of Nottingham University Business School. who led the study, said: "Trust plays a crucial role in the provision of financial services and is fundamental to effective customer relationship management."
Since the first full survey in 2006, brokers and advisers have consistently rated as the most trusted of entirely financial services institutions (FSIs).
This year credit card providers came side with - last year they were among the least trusted of UK financial bodies.
The high trust ratings for brokers indicates that customers may still prefer face-to-face contact and a more personal purpose, the researchers suggest.
One of the important challenges facing FSIs is the building and maintaining of trust among younger age groups as respondents under 65 are not convinced they care about their customers.
Professor Ennew said: "Our studies consistently demonstrate that the younger age groups are far less trusting of financial services providers than older customers.
"Without active management of customer relationships in these mark markets, there is a real danger that many financial institutions will be exposed to declining levels of consumer trust in the longer term."
Eurozone credit squeeze eases slightly: ECB (AFP)
Posted by admin on Aug 8, 2008
FRANKFURT (AFP) - A squeeze on lending to to unit’s home buyers and businesses that followed the US subprime crisis has shown slight signs of easing in the after all the rest three months, the European Central Bank said on Friday.But demand according to lending has also fallen and banks are still reluctant to extend credit because they think the economic climate will darken further, analysts pointed revealed.
The ECB's July survey of more than 100 eurozone banks found "somewhat lower net tightening of credit standards" conducive to businesses and with regard to home purchases than in the first quarter of the year, it aforesaid.
But the trend was still orientated towards tighter credit standards, while desire to obtain had weakened as a deduction of fewer corporate takeovers, slumping housing markets and falling consumer confidence, the ECB said.
"Banks are concerned with the state of the economy, that's clearly the number one factor behind the tightening of credit standards," Bank of America economist Gilles Moec told AFP.
"They dont want to engage in too much lending because they are afraid of seeing default rates increase."
Conditions for consumer credit had in fact become slightly tighter, the ECB said.
Banks said credit standards were set to tighten further for businesses, but remain unchanged for households.
In terms of make necessary, banks noted a drop by both businesses and households — in the former case because of fewer mergers and acquisitions, less corporate restructuring and a trending towards internal financing.
A fall in demand for fixed investment loans "doesn't portend well for the investment outlook given that this sub-index has always proven to be a good leading indicator of capital expenditure," noted UniCredit Markets chief economist Aurelio Maccario.
Households, meanwhile, were seeking fewer loans because housing markets were under pressure and owing to deteriorating consumer confidence.
The ECB questions senior loan officers at 112 representative banks to get a feel for lending conditions every four months, and has been providing money markets through plenty of cash to ensure a continued flow of credit on which business depends.
But Moec also pointed to other statistics that have shown increased bank lending until recently, and said: "What has really been striking me since last summer is the big difference in what they utter they are doing and what they seem to exist actually doing."
He suggested that commercial banks could be demonstrating "a bit of strategic behaviour" aimed at getting the ECB to lower its main lending rate.
To begin with, banks might seek to reassure the ECB "that credit standards are being tightened in the current circumstances," he said.
In addition, "the banks want the ECB to cut rates. The more they are gloomy in the survey, the more it may have a bearing on the ECB's reaction."
ECB president Jean-Claude Trichet told a constrain conference steady Thursday after the bank kept its main lending rate at 4.25 percent that "we have (seen) a level of loans to the private sector which is still quite dynamic."
And he added that while loan signals were clear in certain domains, "in others they are complex," including those in reference to non-financial businesses.
Citi economist Juergen Michels told AFP it just took time for banks' decisions to show up in economic activity.
And because the situation was real different depending on which eurozone country you were in, German consumers might not have much to worry about, but "in countries like Spain it will get absolutely difficult to get a new loan."