March 1, 2024

Wealth Matters: What to Do When a Friend Pitches an Investment Idea

“It’s Question 1 at the cocktail party,” he said. “If someone like me doesn’t ask this question, they’re silly.”

Mr. Liss is a founder of Closeline, a nationwide title insurance company. He is wealthy, so people think he has money to invest in their ideas. He has learned that how he responds to them takes more than a little thought.

He said he knew not to turn down a request on the spot. He sees no reason to offend the person and he has had success with investments that have come to him through friends. Yet Mr. Liss has also lost friends and money in investments that fell at his feet, so he has grown more circumspect in the two decades since he started his company.

Others have learned the same lesson. “The first thing I tell clients is, ‘One of the things that happens when you’re successful is somehow, some way, someone is going to ask you for money, and it’s going to be someone you know,’ ” said Jeff Leventhal, a managing director at HighTower Bethesda, who has focused his advisory practice on working with entrepreneurs.

The decision to decline or invest, say those with deep pockets, requires as much an analysis of the offer and the person making it as an assessment of the pain of losing a friend if the investment turns sour.

PARRY THE PITCH Chat Reynders, chief executive of Reynders McVeigh Capital Management, said he had grown cautious of the typical party pitch since the 2008 financial crisis. They seem to be thinner.

“More often than not what you have is a situation where someone is reinventing himself or trying to get their feet beneath them, and they have an idea,” he said. Most times, he said, the person doesn’t understand how hard it will be to bring that idea to fruition.

He speaks from experience. He is now a successful investor in and producer of Imax films like “Whales”and “To the Arctic,” but he had a tough start. “I got the tar beaten out of me,” he said. “The difficulty was in learning what I didn’t know. I learned a lot about how hard it is to be an entrepreneur.”

The one investment in a friend’s idea that still haunts Mr. Liss was far easier to grasp than an Imax movie. It was an investment in a store that sold bedroom furniture for teenagers, and the friend had some experience in retail. Mr. Liss believed in him and trusted that he would treat him well.

“It wasn’t completely harebrained, but looking back, the business was completely weak,” he said. “We lost it all.”

The friendship also ended, but not because of the investment. Mr. Liss said it was his friend’s reaction to failure, which as an entrepreneur he knew was possible.

Then there are pitches that require a stone-faced adviser to hear out, like one for the mobile electrolysis machine. “They would come to your home to conduct electrolysis,” said John P. Rompon, managing partner at McNally Capital. “I get it conceptually, but from a business perspective, that dog don’t hunt.” His firm was charged with letting the person down gently.

DEVELOP A PROCESS Many pitches are for something an investor may actually need. Amy Renkert-Thomas, managing director of Withers Consulting Group, for 12 years ran Ironrock, her family’s paving stone company in Ohio, which was founded in 1866.

When she took over, as a member of the fifth generation to run the company, she found processes in place to evaluate direct pitches for investments. But when an uncle approached her, seeking to sell insurance, it was more difficult.

She said she fell back on the company’s processes to assess all investments. She went with a different insurer, and her uncle understood, she said. More important, he is still happy to see her at Thanksgiving.

“What saves a family is having a policy we follow,” she said. “Most family members are not that offended when you tell them that. If you said, ‘I don’t like you,’ that wouldn’t work as well.”

Drew McMorrow, president of Ballentine Partners, said a strict set of guidelines on when and under what conditions they would make additional investment could also save people from investing more than they wanted. One strategy, he said, was to have all investments pegged to a percentage of what the person could raise from other investors — for example, putting in 20 percent of every outside dollar raised.

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Warner Brothers Studio Chief Said to Be Weighing Exit

News of Mr. Robinov’s impending exit, according to these people, who spoke on condition of anonymity, blindsided Warner executives, many of whom were still celebrating the studio’s box-office win last weekend with “Man of Steel.”

Mr. Robinov did not return calls. Warner representatives declined to comment.

For months, Hollywood has speculated that Mr. Robinov would not survive a broader leadership shake-up at the studio. A brooding, mercurial executive who has strong relationships with filmmakers, Mr. Robinov was publicly passed over in January for Warner’s top job; a two-year competition to replace Barry M. Meyer as chief executive ended with the selection of Kevin Tsujihara, the studio’s former home entertainment president.

Another spurned candidate for Mr. Meyer’s job, the TV executive Bruce Rosenblum, left Warner last month.

Mr. Robinov’s selection of movies often kept Warner in first place among Hollywood’s major studios. Last year, Warner’s films took in $1.7 billion at the North American box office, powered by hits like “The Hobbit: An Unexpected Journey.” Mr. Robinov was also behind the “Dark Knight” and “Hangover” franchises.

Warner’s “Argo” won best picture at the most recent Oscars.

But Mr. Robinov also failed to create a clear strategy for mining the studio’s DC Comics division, even as Marvel introduced one superhero smash hit after another. Disappointments included “Jack the Giant Slayer” and films from the Wachowski siblings, whom he once represented as an agent.Mr. Robinov has also had a tense relationship with Legendary Pictures, a major partner.

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DealBook: Sony Rebuffs New Call to Sell Entertainment Unit

Kazuo Hirai, chief of Sony, at a corporate strategy presentation in Tokyo on Wednesday.Kimimasa Mayama/European Pressphoto AgencyKazuo Hirai, chief of Sony.

TOKYO – Sony’s chief executive, Kazuo Hirai, reiterated on Thursday that the company’s music and movie businesses were not for sale, striking a cautious tone on a renewed push by the American activist investor Daniel S. Loeb to break up Sony’s sprawling empire. He added that the company’s board would continue to study the matter.

Speaking to shareholders at Sony’s annual general meeting in Tokyo, Mr. Hirai said that movies and music were an indispensable part of Sony’s growth strategy. Mr. Loeb’s firm, Third Point, which claims to be one of Sony’s biggest shareholders, has proposed that Sony should partially spin off its entertainment arms and invest the proceeds in its struggling electronics business.

“The entertainment business plays an important role in Sony’s future growth,” Mr. Hirai told investors, saying it added critical value to the company and should not be let go. “This proposal strikes at the heart of what kind of company Sony ultimately will become in the future. We intend to take our time in discussing it.”

Mr. Hirai’s remarks came after Mr. Loeb upped the ante in what is a rare bid to shake up one of Japan’s most storied companies. In a letter sent to Sony’s board on Tuesday morning, Mr. Loeb disclosed that Third Point had raised its stake to about 7 percent, or about 70 million shares, from 6.5 percent last month, and urged Mr. Hirai to take his proposal seriously.

On top of raising capital to help bolster Sony’s electronics strategy, Mr. Loeb argues that giving the entertainment business its own board would provide stronger oversight of revival efforts and spending plans. Third Point has also requested a seat on Sony’s board.

But some analysts have questioned the wisdom of spinning off some of Sony’s profitable content businesses — which could cut off much of the company’s access to their profits — while keeping its unprofitable electronics divisions. Over the last 10 years, Sony made most of its operating profit from its content and insurance arms, while the electronics operations lost money.

Sony’s cumulative operating profit over the last decade would have been almost twice as high if not for its ailing electronics business, according to Atul Goyal, technology analyst at Jefferies Company.

“Sony should spin off electronics instead of content,” Mr. Goyal wrote in a report released ahead of the shareholders meeting.

The funds raised, he added, could be used to finance growth of Sony’s already- lucrative content business. Such a move, he said, would “add significantly more value for investors.”

An official decision on Mr. Loeb’s proposal rests with Sony’s new board, which added three new members on Thursday: Joichi Ito, director of the Media Lab at the Massachusetts Institute of Technology; Eiko Harada, chairman of McDonald’s Japan; and Tim Schaaff, former head of Sony Network Entertainment. Mr. Ito also sits on the board of The New York Times Company.

Shareholders present at Thursday’s meeting in Tokyo appeared to side with Mr. Hirai’s cautious stance on Mr. Loeb’s proposal. They appeared to be banking on assurances by Mr. Hirai that he could bring Sony’s electronics back to profitability this year.

“I’m glad he made it clear that breaking Sony up is not something he feels is good for the company,” said Masayuki Suzuki, 60, a longtime Sony shareholder who runs a building maintenance company in Tokyo. “There’s only one way Sony can revive, and that’s by making great gadgets. Just look at Apple.”

Sony looks set for some successes in electronics. Its sleek Xperia Z smartphone is a best seller in Japan and could soon be available in the United States.

Investors are also excited about Sony’s upcoming PlayStation 4 home game console, which won emphatic praise from gamers at the E3 conference last week in Los Angeles. It is also a more powerful machine and less expensive than Microsoft’s Xbox One; analysts have said Sony stands a good chance of winning the next-generation console wars.

Some shareholders seemed skeptical of Mr. Loeb’s intentions.

“I don’t get the impression that he’s interested in Sony in the long term,” said Akihisa Ishikawa, 31, who works in publishing in Tokyo and bought Sony shares about six years ago, but has since seen them decline in value. “Is he just out to make a quick buck? If so, Sony is right not to show interest.”

It was not immediately clear if Mr. Loeb or any other representatives from Third Point were present at the Tokyo meeting. None of the shareholders who asked questions appeared to be from Third Point, or identified themselves as such. Reuters reported late on Wednesday that Mr. Loeb would not be attending. Third Point officials were not immediately reachable for comment.

Shares in Sony climbed 150 percent from mid-November to late May, propelled by a weak yen and high hopes for an economic recovery brought about by the new economic policies of Prime Minister Shinzo Abe. Share prices rose at an especially rapid clip after May 14, when Mr. Loeb first lodged his proposal with Sony in an open letter, jumping 7 percent in a week.

But the company’s shares have since fallen back somewhat, as the yen has strengthened and the company has given few signs of actively considering Mr. Loeb’s suggestions.

Sony shares closed at 2,013 yen in Tokyo on Thursday, down 0.1 percent from a day earlier.

A version of this article appeared in print on 06/20/2013, on page B8 of the NewYork edition with the headline: Sony Rejects Call to Divide Its Businesses.

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Wealth Matters: Upstart Matches Young People With Investors

Without venture backing and unwilling to ask her family for help, she used money from her day job as a music composer and singer to pay people to create the app, a process she found frustrating.

Then, last summer, after introducing the app in early 2012, she realized she needed to rewrite all the code herself. The only problem was she didn’t know how to do it or have the money to learn.

That was when she stumbled upon a new site called Upstart that pairs investors and people who finished college or graduate school after 2008. The Upstarts, as they are called, are looking for relatively small amounts of money, about $25,000 on average, to finance their idea or even pay off debt.

Ms. Kumar Friesen, whose father is an inventor, wanted to raise $70,000 through Upstart to learn to write code, pay legal bills from an offer she ultimately turned down and push through her patent application.

Last week, I wrote about how parents should think about lending to their children. But for many young adults, parents are not a source of financing. This is where a site like Upstart comes in.

The investors, or backers as they are called, receive a percentage of the young person’s income for 10 years, regardless of whether the idea they backed is successful. If the person is paid less than $30,000 a year, the period extends for a year to a maximum of 15 years. If the person tries to avoid repaying the investment – as opposed to earning too little money – that investment converts into a loan with a staggering annual interest rate of 15 percent.

Dave Girouard, founder and chief executive of Upstart, said that to ensure borrowers do not regret the deal, the amount a person could borrow is limited to 7 percent of future earnings and the payback is capped at five times the loan amount. That limits the upside on the few people who succeed financially.

“People might be paying more than they would on their fixed-rate loan,” Mr. Girouard said. But, he added, the people who have gotten financing so far were comfortable with the possibly of paying back a higher amount than on a loan because it would mean their idea had succeeded.

What I wanted to know was: What did investors want to get out of this and how did they select young people who would agree to give them a percentage of their income for a decade?

Backers on Upstart have to be accredited investors, which means having an annual income greater than $200,000 or a net worth above $1 million. They can invest any amount they want, though their offer has to be accepted. They can also sign on to be a mentor.

For connecting borrowers and lenders, Upstart takes 3 percent of the money young people raise, and 0.5 percent annually of the amount a backer has invested. Mr. Girouard said the company is close to signing an agreement with a student loan processor to act as a backup if Upstart goes out of business and can no longer collect payments owed investors.

David Croson, a professor of entrepreneurship at the Cox School of Business at Southern Methodist University, said he had invested between $100 and $10,000 in about two-dozen young entrepreneurs over the last month through Upstart. He did so after talking to his wife, also a business professor, about how hard it was for young entrepreneurs to get started.

“We were discussing the problem of people who had been relieved of all of their money by educational institutions,” he said. “That doesn’t matter much for people going into traditional professions, but it does for an entrepreneur who has a negative $100,000 net worth.”

He said he does not have high expectations for a return – — about in line with his bond portfolio – — but he was hoping there would be the additional upside of one or two people succeeding wildly. “It’s almost like being on the board of directors of these companies,” he said. “All it takes is for one of these people to succeed for it to work out.”

(Mr. Girouard said he projected about an 8 percent annual return after fees.)

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Career Couch: Before the Job Interview, Do Your Homework

A. Research the company and the industry, says Adrien Fraise, founder of Modern Guild, which provides online career coaching to college students and high school seniors. “Know the major industry trends and news,” he says, and be able to talk about how they could affect the company.

Find out who runs the company and how they got there. “Look at their profiles on LinkedIn and see if you find a common bond,” says David Lewis, the chief executive of OperationsInc., a human resources outsourcing and consulting firm in Norwalk, Conn. “If you are able to say, ‘I went to the same college as you’ or ‘I also majored in psychology,’ that demonstrates you really did your homework.”

Familiarize yourself with the company’s products or services and look for ways, even small ones, to possibly expand or add value. Note the positives, then talk about opportunities you see, says Moses Lee, C.E.O. of Seelio, a platform that lets students and recent college graduates post samples of their work and search for jobs.

“Let’s say you are talking about a recent marketing campaign,” he says. “You could say, ‘I enjoyed that campaign and if I had the opportunity to work on it, I might frame it so it resonated with millennials, too.’ ”

Q. What questions can you expect, and how can you prepare to answer them?

A. You may be asked to walk the interviewer through your résumé, so prepare concise, articulate anecdotes to illustrate what you did or learned in each experience you’ve listed, Mr. Fraise says. Highlight what you achieved and the skills you used — and how you want to keep using them. “Rehearse in front of the mirror and then in front of others,” he says. “Be so comfortable with it, it doesn’t sound scripted.”

Interviewers often ask questions like “Can you give me an example of when you had to work as part of a team or learned something new quickly?” Mr. Lewis says your examples might come from experiences in a club, fraternity or sorority. “Did you organize a membership push? Plan events? Do recruiting?” he says.

If you’re asked a question like “Why did you choose your college major?” be complete in your answer. “Don’t just say ‘because I really like psychology,’ “ Mr. Lewis advises. Instead, note from a business perspective why you liked the subject. “Maybe you found the classes to be informative about human behavior, which is a key to success in anyone’s business,” he says.

Take along samples of your work — whether from an internship, a class or an extracurricular activity — in a folder or on a laptop computer or tablet.

And always prepare questions to ask at the end of the interview, says Alexa Hamill, American campus recruiting leader for PricewaterhouseCoopers in Philadelphia. Questions on the interviewer’s own career progress are a way to conclude, she says: “What opportunities have been presented to them? How were they trained and developed? This shows you are looking at the job as something potentially long term.”

Q. You want to exude confidence and maturity. What are some ways to bolster your confidence before an interview?

A. Develop a personal elevator pitch — a 30-second to one-minute summary of your academic career, your interests and what you did outside school — and correlate that to the job you want, Ms. Hamill says. PricewaterhouseCoopers offers a free tool on its site to help think through those questions, she says.

Q. What are some basic interview etiquette rules, in terms of dress and behavior?

A. Turn off your cellphone before walking into the company’s offices, and don’t take it out during your interview. “Don’t remind me you’re a 22-year-old,” Mr. Lewis says. “Have a firm handshake, maintain eye contact and don’t fidget.”

Remember not to talk about inappropriate topics like a recent fraternity party or something you saw on Facebook, Ms. Hamill says. When speaking to interviewers, “face them with your knees pointing toward them, sit up straight and stay engaged,” she says. After the interview, send a thank-you e-mail and include a link to your online portfolio or Web site if you have one.

Unless the company recommends dressing casually or informally for the interview, men should wear a suit and tie and women should wear a suit or skirt and blouse, Mr. Lewis says. You may be the only one in the office dressed that way, he says, but it’s usually better not “to walk into an interview dressed as if you are already part of the team.”

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DealBook: HSBC Profit Surges as Restructuring Plan Gains Traction

A branch of HSBC in London.Andy Rain/European Pressphoto AgencyA branch of HSBC in London.

8:42 a.m. | Updated

LONDON – Job cuts, asset sales and other cost reductions paid off for the British bank HSBC as it posted first-quarter earnings on Tuesday that beat analysts’ expectations.

Earnings at the bank rose almost 50 percent, to $8.43 billion, compared with the $4.32 billion the bank reported in the period a year earlier. Analysts polled by Thomson Reuters had expected a pretax profit of $8.1 billion.

“We’re moving into calmer waters but there are still challenges ahead,” HSBC’s chief executive, Stuart T. Gulliver, said during a conference call with reporters.

Like other banks, HSBC has embarked on a far-reaching cost-reduction program. Mr. Gulliver said that cost-cutting would remain on the top of the agenda this year, as the bank aimed to find an additional $1 billion in annual savings.

Operating expenses fell 11 percent, to $9.3 billion, from $10.4 billion in the first quarter of 2012, HSBC said in a statement. HSBC plans to update investors next week about its strategy and the progress it has made with its cost-reduction program.

Mike Jennings, chief investment officer of Premier, an investment firm in Britain, described the earnings as “good,” adding that the bank’s efforts to reduce costs had been better than expected. “They should be able to maintain a good rate of growth compared to competitors,” said Mr. Jennings, who holds HSBC stock as part of his portfolio.

Since it began a revamp in 2011, the bank has reduced costs by $4 billion, sold its unit in Panama to Bancolombia for $2.1 billion and its stake in the Chinese insurer Ping An for $9.4 billion. Last month, HSBC said it would eliminate about 1,150 jobs at branches in Britain, adding to the reduction of 30,000 positions two years ago.

A decline in bad debts also helped results. The bank had to set aside $1.2 billion for bad loans and other credit risks in the first quarter, half the $2.4 billion it did in the period a year earlier. The overall quality of the loans improved, especially in the United States and Europe, HSBC said.

Mr. Gulliver said on Tuesday that he could not rule out additional job cuts, as the economies in Britain and the rest of Europe continued to struggle. After a slower-than-anticipated start to the year, Mr. Gulliver said he expected economic growth in mainland China to gather speed in 2013.

HSBC’s first-quarter earnings were helped by its business in Asia, where it generates more than half of its profit. It also recorded better performance in Europe, swinging to a profit after posting a loss in the first quarter of last year. Going forward, however, Mr. Gulliver said he expected the euro zone would contract but that the United States economy would “continue to outperform its peers.”

Shares of HSBC rose 2.9 percent in London on Tuesday. The shares have gained 13 percent this year, less than shares in Barclays but more than those of Standard Chartered, which also generates most of its profit outside of Europe.

HSBC is recovering from a set of blunders that have weighed on its earnings and reputation. Last year, it agreed to pay a $1.92 billion fine to settle charges by American authorities that the bank broke money laundering rules. The case included charges that HSBC handled money transfers worth billions of dollars for countries under United States sanctions.

The bank has also set aside more than $2 billion to compensate customers who were improperly sold some financial products.

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Royalty Exchange Lets Musicians Sell Royalty Income to Investors

As a songwriter and producer for stars like Natalie Cole, Aretha Franklin and Whitney Houston, Preston Glass receives a comfortable stream of music royalties. But when he needed to make a substantial investment to embark on the next phase of his career — as a performing artist in his own right — he had few options to raise the money, he said.

“Me and most writers can’t walk into a bank,” Mr. Glass said in an interview from his home studio in Los Angeles. “Banks don’t understand how songwriting works, how the whole business of royalties works.”

So Mr. Glass turned to the Royalty Exchange, a Web site where musicians can sell parts of their royalty income to investors. He put 15 of his songs on the block — including “Miss You Like Crazy,” a Top 10 hit for Ms. Cole in 1989, of which Mr. Glass was a co-writer — and raised $158,000. Mr. Glass retains most of his rights to those songs, but will now share part of the income with an investor whenever they are played on the radio or streamed online.

Since it was founded two years ago, the Royalty Exchange, based in Raleigh, N.C., has held 18 auctions, raising about $750,000. But Sean Peace, the company’s chief executive, envisions it as a robust marketplace where musicians can capitalize on their work and investors can find a somewhat exotic asset that could still bring in steady earnings.

“Most musicians have no idea that they can take their royalties and reinvest in themselves,” Mr. Peace said. “If they could get $80,000 up front for selling 50 percent of their royalties, that can be game-changing.”

The music industry is full of bitter stories of musicians who have given up royalty rights for a fraction of their future value. Eli Ball, the founder of Lyric Financial, a competing service that gives musicians short-term advances on their royalties in exchange for a fee, thinks that musicians should not sell their rights.

“It’s too easy for songwriters to sell off an asset that took you a career to build and is going to be gone forever,” Mr. Ball said.

But Mr. Glass said he liked the Royalty Exchange because he could define exactly which rights to sell and which to retain. His sale involved what is known as the songwriter’s share of public performance; it does not cover sales of CDs or downloads, and it does not involve any change to the song’s actual copyright. (He also is a national artist representative for Lyric Financial.)

The intricacies of royalties can be confusing even to many in the industry. But Mr. Peace said his buyers are told what they will and will not receive, and are given at least three years of back earnings reports. For a collection of songs written for RB acts like Usher and TLC that was up for auction recently, bidders saw that most of the $22,975 in annual earnings was generated by three tracks.

The company takes a 2.5 percent fee from the buyer and anywhere from 5 percent to 12.5 percent from the seller, depending on the size of the deal. It also takes 2.5 percent of future earnings from the buyer, as an administration charge.

Mr. Peace, whose background is in technology, started the Royalty Exchange in 2011 with two others after first trying a similar idea with SongVest, which sold interests in songs as high-priced memorabilia items for fans. But that model tended to work only with big artists, he said, so the Royalty Exchange instead aims at investors with bundles of songs.

The idea of royalties as a salable asset has a mixed record. In 1997, David Bowie raised $55 million by selling a 10-year bond in some of his royalties, with a fixed interest rate. But by 2004 they were downgraded amid industry tumult, and lawsuits over administration fees and other issues marred similar bonds.

The complexity of music royalties is another concern. Michael S. Simon, the chief executive of the Harry Fox Agency, one of the industry’s primary royalty-collecting groups, said that a potential investor needed considerable sophistication.

“You need to understand life of copyright, you need to understand the potential ramifications of legislation that could affect life of copyright, and you need to understand termination rights,” Mr. Simon said. “Those are three things that most people don’t understand, let alone how to predict revenue in the music business.” (Termination rights let authors recover copyrights to their works from third parties after a certain period.)

Martin Diessner, an investor who lives in South Africa who bought about half of Mr. Glass’s offering, said that being an outsider allowed him to spot a good investment where others might see risk.

“The reason why I think it’s less risky is probably because I don’t understand the music industry,” said Mr. Diessner, who is now on the Royalty Exchange’s advisory board. “Everyone who is in the industry sees it from the inside out, while I see it from the outside and maybe don’t have a negative perception.”

Most of the Royalty Exchange’s sales have dealt with the publishing rights of songs, which have to do with songwriting, as opposed to their recordings, which are controlled by a separate copyright. Publishing income has been seen as more stable, but it is also subject to shifts. Last year Ascap and BMI signed a new deal changing the method for how radio companies pay royalties. According to BMI’s most recent annual report, the change has already resulted in a 3 percent drop in revenues.

Mr. Peace said that like any investment, royalties involved risk, and that its buyers were given a significant amount of information for evaluation.

As for Mr. Glass, the sale has helped him buy new equipment for his studio, including a sitar and various vintage instruments, that will help him as he starts a new phase in his career.

“I wanted to be competitive, not only as a producer and writer but as an artist, too,” he said. “I wanted to invest in myself, to be able to use some of the royalties that I have built up, almost like real estate.”

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You’re the Boss Blog: Does Your Business Face Foreign Currency Exposure?

Jean-Paul Tennant of Geographic Expeditions said foreign-currency fluctuations “can totally kill a company like ours.’’Peter DaSilva for The New York Times Jean-Paul Tennant of Geographic Expeditions said foreign-currency fluctuations “can totally kill a company like ours.’’

Today’s Question

What small-business owners think.

Jean-Paul Tennant is chief executive of a travel company, Geographic Expeditions, that specializes in arranging ambitious trips to exotic lands. In late 2006 — as explained in our just-published small-business guide to handling foreign-currency exposure — Mr. Tennant booked travel for eight clients who wanted to explore northern India.

And then the rupee began a double-digit climb against the dollar, which prompted one Indian supplier who had already agreed to fees for hotel rooms, guides and drivers to say he needed to raise his prices. Suddenly a trip costing Geographic Expeditions $7,500 per person was going to jump to $9,000. “As soon as we commit to a price, we are heavily exposed if we don’t know what our costs will be,’’ Mr. Tennant said. “It can totally kill a company like ours.’’ Mr. Tennant quickly canceled the contract and found another supplier that agreed to a firm quote.

And then he looked for some better ways to handle currency risk. Please read the guide and tell us whether your company faces similar exposure and how you have learned to mitigate it.

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DealBook: Shares in Bank of America Fall as Earnings Miss Forecasts

A Bank of America branch in Manhattan.Andrew Gombert/European Pressphoto AgencyA Bank of America branch in Manhattan.

10:22 a.m. | Updated

Bank of America reported first-quarter earnings on Wednesday that fell well short of Wall Street’s expectations but were substantially higher than in the period a year earlier.

The bank made 20 cents a share in the first quarter, compared with 3 cents in the year-ago period. Analysts were expecting a profit of 23 cents a share. Bank of America, the nation’s second-largest lender when measured by assets, had revenue of $23.5 billion in the first quarter.

The company’s shares fell nearly 4 percent in morning trading, to $11.80.

Since the financial crisis, Bank of America’s performance has been hurt by large mortgage-related losses, but in recent months investors have been betting the bank would regain its footing. Its shares have risen nearly 40 percent in the last 12 months. Earlier this year, regulators approved the bank’s plan to buy back stock, a clear sign they felt the lender was on firmer ground.

In a statement, Brian T. Moynihan, Bank of America’s chief executive, said, “Our strategy of connecting our customers to all we can do for them is working.”

The question now is how the latest earnings will affect the recent optimism surrounding the bank, which lends to individuals and companies and has a large Wall Street presence through its Merrill Lynch unit.

Other large banks have reported earnings that exceeded analysts’ estimates this quarter, so Bank of America’s failure to do so may unnerve some investors. The debate will be over whether the bank fell short because of deeper issues that will be hard to resolve, or because of items that will have less of a negative effect as time passes.

Much uncertainty surrounds the cost of litigation relating to bad mortgages. Most of these troubled loans were made by Countrywide Financial, which Bank of America acquired in 2008. Bank of America has settled several big mortgage lawsuits, including one on Wednesday for $500 million, which was led by the Iowa Public Employees’ Retirement System. In the first quarter, Bank of America had litigation expenses of $881 million.

Some analysts wonder whether the bank has set aside enough money to cover future settlements. In particular, they say that litigation expenses could be far higher if a pending settlement with Bank of New York Mellon does not gain court approval.

“We have established significant reserves for settlements with various counterparties, including 22 of the world’s largest investors, Fannie Mae, Freddie Mac and others,” said Jerome F. Dubrowski, a spokesman for Bank of America. “We believe we are appropriately reserved for the exposures we face, and we have provided investors with a range of possible loss estimates that could go beyond those reserves.”

The first-quarter results also revealed a mixed performance in Bank of America’s current mortgage business. Initially, the bank did not participate in the mortgage refinancing boom as strongly as rivals like Wells Fargo. But in recent months it has jumped back in.

In the first quarter, Bank of America originated $23.9 billion of mortgages, well up from $15.2 billion a year earlier. But revenue from writing new mortgages actually fell to $815 million from $928 million in the period a year earlier. This shows that profit margins in the new mortgage business have fallen as Bank of America has stepped up activity.

The quarter contained bright spots for shareholders. The bank said it made headway in cutting expenses, something investors are watching closely. As banks struggle to increase revenue, they can improve earnings by reducing costs.

“There were many examples of progress this quarter,” Bruce R. Thompson, Bank of America’s chief financial officer, said in a statement. “We reduced noninterest expense by nearly $1 billion year-over-year.”

In addition, Bank of America set aside significantly less money for its reserve against bad loans, which gave earnings a big boost.

Bank of America’s Wall Street operations were also mixed. Trading revenue was $4.5 billion, excluding accounting adjustments related to the bank’s own debt. The bank reported trading revenue of $5.2 billion in the first quarter of 2012.

Investment banking fees were up, however, and the wealth management unit, which includes the Merrill Lynch brokerage, had a strong quarter. Revenue in the unit rose to $4.4 billion from $4.1 billion in the period a year earlier.

One of the criticisms of banks since the financial crisis is that, as they work through their difficulties, they have failed to lend enough. Bank of America had on its books a smaller amount of loans to individuals in the first quarter. The figure was down to $551 billion from $599 billion. But the bank’s loans to companies rose to $355 billion from $315 billion in the year-earlier period.

While Bank of America’s earnings per share increased a lot when measured using generally accepted accounting principles, it was actually down on a measure that investors often look at. This nonstandard metric excludes arcane accounting charges. Absent those charges in the first quarter of 2012, the bank made 31 cents a share.

This year’s first quarter contained very little effect from such charges, so the 20 cents a share the bank reported Wednesday should be compared with the 31 cents a share from the period a year earlier. In effect, under this approach, Bank of America’s earnings fell by more than a third.

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Box, a Data Storage Company, Prepares to Expand in Europe

Aaron W. Levie, 28, chief executive of the privately held company, said he planned to hire about 100 people in sales, marketing and product development in Paris and Munich by the end of the year, creating a base to capture other fast-growing markets for cloud-based data storage, including Japan, Singapore, Australia and Brazil.

In cloud computing, computer servers are linked to handle many tasks, like simplifying the filing and sharing of data online for companies and governments that rent them for far less than it would cost to build their own infrastructure. Box, on the smaller side of the industry, owns 10 data centers around the world and plans to add more.

Box, based in Los Altos, Calif., is in a crowded field: Amazon Web Services is the leader, while Microsoft, I.B.M., Hewlett-Packard and Google are major players.

The company raised $150 million from investors last year to finance efforts to expand internationally to compete with prominent rivals like DropBox, based in San Francisco, which opened its first overseas office last year in Dublin.

“Right now we’re in aggressive expansion mode because international expansion is really key to our strategy,” Mr. Levie said in an interview in London, where he announced the plans for Europe.

While he would not provide numbers, Mr. Levie said business was increasing significantly in “Europe and beyond.”

The planned expansion to Paris and Munich, he said, was part of preparations for an anticipated initial public offering in 2014. Although the company does not disclose profit figures, Mr. Levie said that he valued the company at about $1 billion.

Box, which employs about 700 in its American offices, recruited 40 more people last June for its operation in London. In September, it hired David Quantrell, a former executive at McAfee and Hewlett-Packard, to lead its business in Europe, the Middle East and Africa.

Box says it has 150,000 business clients, and 10 million other users, charging them as little as $15 a month.

No more than 15 percent of Box’s revenue comes from overseas, Mr. Levie said, a figure he hopes to double in the next couple of years.

Box said recently that it had signed its biggest contract yet, with the French engineering company Schneider Electric, which will use Box exclusively for its 50,000-member work force.

Other Box clients include EMI Music, Volkswagen, the digital music service Spotify and Heathrow Airport Holdings, which operates Heathrow Airport.

Box says its services allow business clients’ employees to organize their work on multiple devices like tablets and cellphones while integrating other software like Google Docs or, a Web application that helps handle large amounts of customer data.

Hervé Coureil, chief information officer at Schneider Electric, said that cloud-based storage could help companies that operate globally by cutting costs, and by providing a centralized way of tracking how they share files internally and externally.

American businesses have been faster to embrace the cloud, according to the market research company IDC, with Europe lagging because of worries about data security, regulations and legal jurisdictions.

IDC also said that the market for cloud-based services in the 27-member European Union was expected to grow to 10.9 billion euros, or about $14 billion, by 2014, from 4.6 billion euros in 2011.

While the size of the market is still small when measured by revenue and number of users, demand is “hot and growing,” said Alys Woodward, an analyst at IDC who covers software and services in Europe.

“It’s where an easy-to-use cloud service is going to cannibalize huge, more complex services like Microsoft’s SharePoint,” she added. SharePoint is a Web platform that helps people collaborate and share information over a corporate network.

About two-thirds of European companies use cloud-based computing for at least some of their needs, primarily to handle e-mail traffic, according to an IDC survey of 1,056 companies last year.

But Box sees an opportunity because those companies are not yet using the cloud to run the bulk of their businesses, including so-called content management services, the segment in which Box is aiming to grow.

While businesses are unlikely ever to switch completely to the cloud and are expected to retain data on proprietary hardware devices, “over time it will be a nice enhancement,” said Alan Pelz-Sharpe, a research director at 451 Research.

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