April 1, 2023

Challenges Facing New Chief of Anglo American

Anglo American on Tuesday said Mr. Cutifani, the chief executive of the South African gold producer AngloGold Ashanti, would succeed Cynthia Carroll as chief executive in April. Ms. Carroll announced her resignation from the company in November after more than five years in the job.

The appointment of Mr. Cutifani won the approval of some analysts. They said he had the operational experience to improve earnings by reducing costs and increasing production, and that he had the political connections in South Africa to be able to navigate contentious topics like the reduction of mining jobs.

The questions are whether Anglo American’s powerful board of directors will allow him to push through his strategy and whether he will have enough time to do so before its distressed share price makes it a takeover target, said Paul Gait of Bernstein Research.

Mr. Cutifani has the “operating capability and he speaks very comfortably around technical issues at mining,” Mr. Gait said. But “is he going to have the license to do what he wants to do?”

The list of Anglo American’s challenges has grown over the past few years. Minas-Rio, a large iron ore project in Brazil and one of Ms. Carroll’s initiatives, is struggling with rising costs and delays because of licensing problems. In South Africa, the company has been affected by strikes over pay and working conditions. The activities, which had halted production, escalated in August when 34 miners died after the police opened fire at Lonmin’s Marikana mine.

Anglo American also embarked on a review of its platinum business, which accounts for about 40 percent of global production but faces increasing costs, including wages. Shrinking the business might be welcomed by investors and analysts but would undoubtedly stir some political objection. As the largest supplier of platinum, Anglo American is an important employer in South Africa, which has the world’s largest reserves of platinum. The company is to present the results of its review in the coming weeks.

Faced with a share price lagging behind that of rivals, some shareholders have demanded it separate its South African business. Anglo would not be the first company to consider such a move. In November, GoldFields said it would spin off its South African operation, partly because recent strikes had made it more costly.

But for analysts at Credit Suisse and Citi, the appointment of Mr. Cutifani makes a breakup less likely.

“With his strong operational and South African background, his appointment likely means a commitment to South Africa remains,” a group of Credit Suisse analysts wrote in a note to investors.

In a statement, Mr. Cutifani said Tuesday that he was “delighted to have the opportunity to lead Anglo American at this important stage in its journey, to unlock the company’s very considerable value potential.”

Anglo American’s share price rose 2.8 percent in London on Tuesday.

Mr. Cutifani became chief executive at AngloGold in 2007; before that he was chief operating officer of the Canadian nickel company CVRD. He is also president of South Africa’s Chamber of Mines group.

At AngloGold, Mr. Cutifani is credited with improving the company’s performance despite a raft of problems besetting the South African gold sector in general and AngloGold in particular. Like Anglo American’s platinum mines, AngloGold’s South African mines have become more and more expensive to operate.

For years workers have demanded higher-than-inflation pay raises, and the mines — some of which are a century old — must go deeper and deeper to find gold. He successfully fought to keep cost increases within a manageable range. Last year he used the bully pulpit of the Chamber of Mines to help coordinate the sector’s response to South Africa’s labor challenges.

Mr. Cutifani accelerated the company’s development of mines outside South Africa to reduce its exposure to the country. Among investors he is also famous for ridding AngloGold of a disastrous book of hedge contracts that it had inherited from a merger. Liquidating the hedge book strained the company’s finances for a period, but later allowed the company to reap higher gains from gold.

AngloGold and Anglo American share a common history. AngloGold was spun off from Anglo American in 2005. Anglo American was once South Africa’s largest conglomerate and the source of the fortunes of the country’s Oppenheimer family.

AngloGold said Tuesday that it had started a formal search to replace Mr. Cutifani. Srinivasan Venkatakrishnan, the firm’s finance chief, and Tony O’Neill, vice president for business and technical development, were named as joint interim chief executives.

William MacNamara contributed reporting.

Article source: http://www.nytimes.com/2013/01/09/business/global/challenges-facing-new-chief-of-anglo-american.html?partner=rss&emc=rss

Retrial Planned for Officer Linked to Post-Katrina Shootings

United States Attorney Jim Letten made the announcement late Friday but declined to provide further comment.

Earlier Friday, Judge Kurt Engelhardt of Federal District Court declared a mistrial in the case of the former police officer, Gerard Dugue, ruling that the Justice Department prosecutor, Bobbi Bernstein, may have tainted the jury hearing the trial by mentioning the name of a man who was beaten to death by a New Orleans police officer in a case unrelated to Mr. Dugue’s.

Mr. Dugue was on trial for charges that he wrote a false report on the shootings of unarmed residents on the Danziger Bridge, less than a week after the August 2005 hurricane. He was the last of 20 New Orleans police officers who were charged by the Justice Department’s civil rights division to go on trial, and the case was expected to go to the jury early this week.

Ms. Bernstein argued that merely mentioning the unrelated victim’s name could not amount to any prejudice against Mr. Dugue. Mr. Dugue was not charged in the other case, but Judge Engelhardt said it was impossible to know if any jurors had heard the remark and reached any negative conclusions.

“That’s a chance that I’m not willing to take,” he said, adding that a mistrial was “the last thing in the world I want to do.”

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I.B.M.’s Profit Beats Forecast

The I.B.M. formula continues to pay off.

Profits, more than sales growth, have been the big technology company’s focus in recent years. And predictably, I.B.M. delivered a steady performance in the fourth quarter of 2011, reporting profits that easily surpassed Wall Street forecasts. Sales were just below analysts’ estimates, weighed down by a slowdown in mainframe sales, compared with the previous year when new models were introduced.

The company reported that its net income rose 4 percent, to $5.5 billion. But its operating earnings per share rose 11 percent to $4.71 a share. There were far fewer outstanding shares than a year earlier after I.B.M. spent billions to buy back shares in 2011.

The quarterly result was well above the $4.62-a-share average estimate of Wall Street analysts, as compiled by Thomson Reuters.

“The quarter was typical I.B.M.,” said A. M. Sacconaghi, an analyst at Sanford C. Bernstein Company.

I.B.M.’s revenue rose 2 percent to $29.5 billion, but it fell short of analysts’ forecast of $29.7 billion. Analysts expect that the faltering economy in Europe and the stronger dollar will curb reported sales for major technology companies like I.B.M., who derive the majority of their revenue from abroad.

Virginia M. Rometty, I.B.M.’s chief executive, called the quarterly performance a “strong” finish to a year of record earnings per share, revenue and profit.

I.B.M. also expressed its confidence in the current year, saying it anticipated earnings for 2012 of “at least $14.85 a share.” That is above the Wall Street consensus of $14.76 a share, according to FactSet Research.

In after-hours trading, I.B.M. shares rose $4.50 a share, or 2.5 percent, to reach $185.05.

I.B.M. is the largest single supplier of information technology to corporations worldwide, selling more than $100 billion a year in services, software and hardware to businesses and governments. As a result, the company’s results are closely watched as a barometer of corporate spending and confidence. In that respect, analysts say, the company’s performance is reassuring.

Recent reports suggest that corporate technology buyers will restrain spending this year, given the uncertain global economy. A survey of more than 2,300 chief information officers in 45 countries, conducted by the research firm Gartner and released on Wednesday, found that technology budgets would be flat this year and would decline in North America and Europe. But I.B.M., analysts note, has become more resilient to swings in economic cycles than most corporate technology suppliers.

In recent years, I.B.M. has shed more cyclical hardware businesses like personal computer and disk drives, while stepping up its investment in more stable services and software businesses. It has been aggressive in tapping fast-growing markets abroad, while developing new businesses, like analytics software that helps companies sift through data for insights about how to cut costs and help sales.

“I.B.M is uniquely positioned to sell higher-value software and services,” said Ben Reitzes, an analyst at Barclays Capital.

The company got strong performances from businesses its top management had singled out as particularly important to its future. Revenue from fast-growing markets abroad including China, India and Brazil, and dozens of smaller ones, increased 16 percent. These designated growth markets now account for 22 percent of I.B.M. business, Mark Loughridge, the chief financial officer, said in conference call. Its “smarter planet” business — which combines research, specialized skills and sophisticated technology — grew by 47 percent. The initiative, which was started in 2008, has more than 2,000 projects, like creating more efficient systems for utility grids, food distribution, water conservation and health care.

But the hardware business held back growth. In the year-earlier quarter, hardware sales surged because new models of I.B.M. mainframes had recently been introduced. In the fourth quarter of 2011, without a new model, mainframe revenue dropped 31 percent from the previous year.

Software revenue grew 9 percent to $7.6 billion in the quarter, and the big services business added 3 percent to $10.5 billion. The growth in services revenue was restrained by Japan, where I.B.M. has a large services business and the economy is weak.

Still, profit margins in the services business are rising, and new contracts signed — a signal of future revenue — were $20.4 billion, above analysts’ estimates.

“We have a good hand as we enter 2012,” Mr. Loughridge said.

This article has been revised to reflect the following correction:

Correction: January 19, 2012

An earlier headline and summary on this article misstated I.B.M.’s sales trend for the quarter. Revenue was up, not down, by 2 percent.

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AT&T Profit Is Hit by Slowing iPhone Demand

ATT, the nation’s biggest telecommunications company, reported third-quarter results Thursday that just met analysts’ expectations, amid growing competition from rival wireless carriers Verizon and Sprint. The company posted a profit of $3.6 billion, or 61 cents a share, compared with a profit of $12.3 billion, or $2.07 a share, during the same quarter a year earlier, although the 2010 figures were bolstered significantly by the sale of assets. Analysts had expected ATT to earn 61 cents a share.

The company said that it activated only 2.7 million iPhones during the quarter. That number is the lowest the company has reported in several quarters, signaling that ATT is beginning to feel the competitive threat of rival carriers who are now also selling the iPhone. In addition, many wireless customers were probably waiting for the release this month of the next-generation iPhone.

Investors seemed slightly disappointed by the earnings, as shared dipped 2 percent in pre-market trading. Analysts say that the wireless industry is struggling for growth amid growing saturation.

“This may be the new normal,” said Craig Moffett, an analyst with Sanford C. Bernstein who follows the telecommunications industry. “It looks more and more like ATT is going to have to depend on organic growth and unfortunately, there isn’t any. The wireless industry just isn’t a growth industry anymore.”

ATT said, however, that during the quarter it sold 4.8 million smartphones, which made up nearly two-thirds of all device sales during that period. The company also said that the sale of Android devices more than doubled year over year.

“Mobile broadband growth continues to be robust, execution was strong across the business, and we delivered another solid quarter,” said Randall L. Stephenson, the chairman and chief executive of the company, in the statement. “The next waves in the mobile Internet revolution represent tremendous growth potential, and we are laying the groundwork required for that future.”

The company said that it added 319,000 wireless customers during the quarter. The company has faced greater competition from rival carriers who are also selling portfolios of smartphones and mobile devices.

ATT’s operating revenue slipped to $31.48 billion during the quarter, compared with $31.58 billion a year ago. Analysts surveyed by Thomson Reuters had expected the company to report operating revenues of $31.60 billion.

The operator is still looking for regulatory approval to move forward in its acquisition of T-Mobile, although Mr. Moffett said it is looking more and more like that deal may disintegrate under government scrutiny.

Mr. Stephenson said that ATT was still working “toward a successful completion of our planned T-Mobile USA merger.”

Article source: http://feeds.nytimes.com/click.phdo?i=f173712974b234e0a9067996a6b9521e

Wal-Mart Posts a Profit Despite Struggles in the U.S.

Job security replaced gas prices as the top concern for customers at Wal-Mart, the nation’s biggest retailer, in the second quarter.

Shoppers at the low end of the market are under as much pressure as ever, Wal-Mart executives said Tuesday.

“Our core customer continues to be strained, and we still see what we call the paycheck cycle as pronounced as ever, and of course the volatility in the headlines, the volatility caused last week, doesn’t help the customer,” said Charles M. Holley Jr., Wal-Mart’s chief financial officer, in a call with reporters. “We haven’t seen any relief,” he said, and “we’re starting to see jobs as the number one concern among our customers at Wal-Mart.”

Those worries among customers contributed to the ninth consecutive quarter of declining same-store sales at Wal-Mart’s United States stores. The decline, 0.9 percent, was worse than analysts’ forecasts for a 0.6 percent decline.

Net income at the company increased 5.7 percent to $3.8 billion, or $1.09 a share, a penny better than analysts had projected. Its revenue rose 5.4 percent to $109.3 billion.

Analysts said the company’s better-than-expected profit and its brisk international growth were good, but that the United States stores remained problematic. Wal-Mart removed products from its shelves during the recession to appeal to more upscale customers with cleaner aisles. When sales were hurt, it reversed that decision, and is now adding back merchandise to its stores.Executives “noted that trends improved sequentially each month of the quarter. However, second-quarter comps showed little improvement versus the 1.1 percent decline in the first quarter, particularly given expected benefits” from Wal-Mart’s adding back merchandise, and from inflation, said a Sanford C. Bernstein Company analyst, Colin McGranahan, in a note to clients. “Results were relatively uninspiring.”Even within Wal-Mart, there seems to be a divide between rich and poor. Wal-Mart’s Sam’s Club warehouse division had a 5.0 percent increase in same-store sales, excluding the effect of fuel prices; including fuel prices, that rise was 9.6 percent. It was the sixth quarter of improving same-store sales at Sam’s.

Mr. Holley said that while Sam’s executives had been doing a good job, the difference in results was also attributable to the customer profile.

“Sam’s does have a member that has a higher income level than Wal-Mart in the U.S.,” he said.

Meanwhile, the Wal-Mart shoppers in the United States are having a tough time of it.

“The unemployment is actually a lot higher for people who have less education and had less income to begin with — it’s much more severe as you go down the economic scale,” Mr. Holley said. “Negative headlines don’t help consumer sentiment at any level of income, but our customer, also just from a job perspective and a real income perspective, is really stretched. Gas prices have eased a little bit over the quarter, and that has helped our core customer. At the same time, having negative headlines does not help consumer sentiment.”

And William S. Simon, who oversees Wal-Mart’s United States stores, told investors, “We also have seen an increase in the number of customers relying on government assistance for food and necessities for their family” in the quarter.

“They have to be very careful what they spend their money on. They’re buying necessities; they’re not buying discretionary items,” Mr. Holley said of shoppers using public assistance programs.

Wal-Mart executives said it continued to address its customers’ reluctance to spend by adding back in merchandise in a range of product sizes and prices. Mr. Holley said that in the first categories Wal-Mart had done this in — food, health and wellness — it had registered positive comparable-store sales, “so we feel like it’s definitely working.”

Home Depot, which also reported quarterly results on Tuesday, said that despite a lackluster housing market, its profit and sales were strong.

“We saw strength across the store,” Carol B. Tomé, Home Depot’s chief financial officer, said in an interview. That was a result of “storm damage related sales, the garden business coming back as weather improved, the heat we saw across the country which meant we sold a lot of air movement,” she said.

The company said its profit increased by 14.3 percent from a year earlier, to $1.36 billion, or 86 cents a share, three cents higher than what analysts expected. Sales increased 4.2 percent to $20.2 billion, and same-store sales were up 4.3 percent.

The company increased its full-year earnings projections by 10 cents, to $2.34 a share.

Ms. Tomé said that the company’s sales so far in August were in line with what Home Depot had projected.

“We don’t see that our customers are immediately reacting to the stock market,” she said.

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Verizon’s Bet on iPhones Brings a Slow Return

That has not quite happened, at least not yet.

On Friday, while reporting its quarterly earnings results, Verizon said it activated 2.3 million iPhones during the company’s second quarter. That is a hefty figure, because the device has been available on Verizon for only a few months, but it paled in comparison to ATT’s iPhone activations for the same quarter. On Thursday, ATT reported that it had activated 3.6 million iPhones on its network, and that nearly a quarter of them were for new customers to ATT.

And activations on ATT’s network have held steady over the last three months, surprising analysts who thought that most customers would wait for the fifth-generation iPhone, widely rumored to be released sometime later this year.

“People overestimated the potential for customers to jump ship for Verizon,” said Phil Cusick, a wireless industry analyst at JPMorgan Chase. “It’s just not at that level.”

Verizon has been selling the iPhone since February, but the second-quarter reports reflect the first full financial period during which the two companies were selling the device in direct competition with one another.

Analysts say several factors favor ATT, including the company’s decision to begin selling a low-cost version of the iPhone, the 3GS, for $50 earlier this year.

In addition, ATT was able to successfully lock customers into one- or two-year contract plans before it lost exclusive rights to sell the iPhone in the United States earlier this year.

Still, analysts said, Verizon is outpacing the entire wireless industry in terms of adding subscribers, even compared with ATT.

Craig Moffett, a wireless analyst at Sanford C. Bernstein Company, said, “Verizon’s wireless business has pretty good momentum right now.”

Over all, Verizon’s earnings were solid, beating Wall Street’s expectations for the company. The company reported net income of $1.61 billion, or 57 cents a share, in contrast to a loss of $1.19 billion during the same period a year earlier. Analysts polled by Thomson Reuters had expected the company to report a profit of 55 cents a share.

Revenue rose 2.8 percent, to $27.54 billion, up from $26.77 billion a year ago. Analysts had expected revenue of $27.4 billion.

Verizon was betting heavily on the arrival of an iPhone in early summer, executives said in a conference call with analysts and investors on Friday. The company had hoped it would nudge the number of subscribers that had smartphones closer to 50 percent.

Historically, Verizon has lagged behind its rivals in pushing its customers toward mobile devices like smartphones, wireless modems and tablets, and the lucrative data packages that come with them. This push will become especially crucial as Verizon, along with its competitors, move from the decaying landline and voice business and increasingly look toward data services for the bulk of their revenue.

Already, Verizon’s wireless business accounts for 60 percent of the company’s total revenue. Money generated from selling mobile data services is close to 40 percent of Verizon’s wireless revenue.

Lowell McAdam, the chief executive of Verizon Wireless, who will succeed Ivan Seidenberg as chief executive of the parent company on Aug. 1, acknowledged that the company was “maybe a quarter behind what we talked about in January.”

But he expressed confidence that the outlook would sharply improve over the coming months, particularly when the next version of the iPhone was released.

“We don’t know when the next one is going to come out,” Mr. McAdams said. “But we expect that probably sometime in the fall, and I think you will see a significant jump there when we get to that point.”

Investors may not have been as optimistic. Shares of the company dipped slightly, down 83 cents, or 2.21 percent, to $36.74.

One issue with the introduction of the iPhone to Verizon was whether the carrier would buckle under the crush of the new data-intensive users. It has not, which analysts attributed to the fact that Verizon had several years to upgrade its network and infrastructure while watching ATT struggle with this problem. “Verizon was better prepared thanks to ATT,” said Chetan Sharma, an independent wireless analyst.

But even ATT’s network, long the source of complaints from beleaguered users who said they got poor cellular reception and suffered from dropped calls, has improved over all, Mr. Sharma said.

Verizon’s results were lifted by strong growth in the company’s wireless arm, which is 45 percent owned by Vodafone. The company reported a sharp increase — 1.3 million — in net new subscribers in the quarter. Smartphones accounted for 36 percent of Verizon Wireless’s postpaid subscriber phone base, up from 32 percent in the first quarter of the year. Verizon recently began rolling out its fourth-generation wireless network, which uses a fast wireless technology called LTE, and is heavily marketing tablets and smartphones that are compatible with that new technology.

Verizon’s earnings might also shed some light into the brewing rivalry between Apple and Google and both look to dominate the smartphone and tablet industry. Although Verizon continued to achieve sales from its catalog of Android and 4G devices, the company sold far fewer of those devices than they did iPhones. For the quarter, the company reported sales of 1.2 million LTE and Android devices, which includes tablets, smartphones and wireless modems.

“Verizon’s had Android for a long time,” said Mr. Sharma, who keeps a close eye on the industry. “This was the first real test between an iPhone and Android and consumers still gravitate towards the iPhone.”

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