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Shedding Handsets, Nokia Looks to the Future

September 3, 2013 by

It will still exist after Microsoft buys the company’s handset business. While Microsoft is acquiring what Nokia is best known for, the Finnish company is holding on to two if its major businesses: networking and mapping.

“There’s a lot of emotion involved in this move,” Timo Ihamuotila, Nokia’s chief financial officer, said in an interview. “Nokia has been synonymous with cellphones for the last two decades. It’s hard, but Finland will have two strong technology companies that result from this deal.”

Nokia focused on cellphones in the 1990s after facing financial difficulties. By the height of the dot-com boom at the end of the 1900s, Nokia was the world’s largest cellphone maker. It attained a market value of around $250 billion. Yet a failure to develop a smartphone good enough to rival Apple’s iPhone and popular Android-based devices from Samsung Electronics collapsed the company’s market share from around 30 percent in 2009 to less than 4 percent last year, according to the research firm Gartner. In 2013, Samsung dethroned Nokia to become the largest phone maker.

While Nokia’s mobile phone business has been dwindling, the remaining segments are not laggards. Flush with Microsoft money from selling off its core businesses, the new Nokia could be well positioned to compete. It might be invisible to consumers, but Nokia’s networking business, which includes equipment it sells to telecom operators to run their wireless networks, brings in the majority of the company’s annual revenue.

Nokia’s maps technology, another part of the company Microsoft does not want, has a valuable global database of geographical information. Called Here, it can be licensed to other companies that want to build products and services around maps.

Without having to worry about making popular software and sleek phones to compete in the brutal handset industry, the new Nokia would be freed to build a profitable company from the remaining businesses. But it is unclear how well those businesses will stand on their own. And even without a mobile unit, Nokia still has to compete in a rapidly changing mobile industry that left it behind long ago.

“It’s a very odd mix at this point,” said Jan Dawson, a telecom analyst for Ovum. “There’s no other company that combines heavy network infrastructure with what’s basically a pure data and software asset, and there’s very little synergy between the two.”

Nokia’s mobile infrastructure business, which began as a joint venture with Siemens, currently generates around 85 percent of the company’s annual $18.4 billion in revenues. Nokia acquired the 50 percent stake in Nokia Siemens Networks earlier this year for $2.2 billion.

It is expected to compete against telecom suppliers like Ericsson of Sweden and Huawei and ZTE of China to win contracts from the world’s largest cellphone operators. China Mobile and Vodafone of Britain are planning to spend billions of dollars to upgrade their mobile data networks to so-called fourth-generation technology.

By the time the next generation of wireless technology arrives and vendors are upgrading their equipment, Nokia, now a smaller company, will be in a tough spot.

It may have some success in the United States and Europe, where the governments are wary of Huawei and ZTE because of security concerns about Chinese government-sponsored spying. But it will have to invest heavily to challenge Ericsson, said Tero Kuittinen, an independent analyst for Alekstra, a company that does mobile diagnostics.

“Being a small network infrastructure company, that’s a very hard business,” Mr. Kuittinen said. “Ericsson is such a giant in this industry.”

Nokia’s mapping component, Here, provides GPS services to dashboard navigation systems in many car models. The unit, which generates around $1.3 billion in annual revenue, plans to sell GPS and entertainment services to companies that do not want to build them from scratch, according to Mr. Ihamuotila, Nokia’s chief financial officer.

Nokia maps might hold some appeal to device makers because Nokia will not be competing with them. (Microsoft said it would continue to use the Nokia brand on smartphones for about 10 years.)

But the value of Nokia’s maps may decrease now that the company no longer has a device business attached to it. As smartphones became popular, digital maps became more complex and sophisticated because people were pulling up directions from the devices they carried instead of looking up directions on a computer. As they did, the mapmakers gathered information from people’s smartphones and made the maps more accurate and more useful.

Google, a rival to Nokia’s mapping services, treats the millions of smartphones using its map software as data probes to improve the thoroughness of its database.

Nokia has also retained its research and development facilities and patent portfolio, with plans to develop new products to license, or sell technologies to other companies.

However, with so many mobile devices relying on Google’s Android software, and so many smartphones relying on parts and technologies made by Samsung, the Finnish giant will have to come up with something truly compelling to stand out in stores.

Even with the remnants of Nokia, the loss of its phone business creates a void for Finland as a whole, said Mr. Kuittinen, the Alekstra analyst. Many Finnish universities offered courses in mathematics and software engineering with Nokia in mind as a future employer.

Now, they may look to other countries, like the United States, if they want to get into the business of making mobile software, one of the most popular technology sectors for engineers.

“The industry just vanished,” Mr. Kuittinen said, “and this is not something that happens very often.”

Article source: http://www.nytimes.com/2013/09/04/technology/shedding-handsets-nokia-looks-to-the-future.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Glencore Seeks Fresh Start With $7.7 Billion Hit to Xstrata Mines

August 20, 2013 by

The mining industry has been pummeled by billions of dollars in writedowns since the start of the year, with cooling prices and demand prospects denting the value of mining projects.

Glencore had been expected to follow suit once it completed the acquisition of Xstrata, and in its first post-takeover results on Tuesday it announced the figure alongside a 9 percent drop in core profit.

In absorbing the impact of a drop in commodity prices during the time it took to close the marathon takeover, Glencore wiped out all the goodwill value it had provisionally allocated to Xstrata’s mines at the time of the merger.

“We just had to value the business with a blank sheet of paper,” Chief Financial Officer Steven Kalmin said.

“There are clearly areas where we have taken a fairly conservative approach to value in the current environment, including the greenfield, early-stage projects in which Xstrata had committed spending.”

Glencore did not break down the impairment, but much of the hit is expected to be down to early-stage projects and greenfield operations, mines built from scratch which have long been unpopular with Glencore management. These include the $5 billion nickel operation Koniambo in New Caledonia.

“The magnitude of impairments sits at the top end of market expectations and will undoubtedly grab some headlines, although the market will have anticipated a wiping clean of the slate,” Liberum analyst Ash Lazenby said.

Glencore itself was not immune to falling nickel prices, though, as it took a $452 million hit on its legacy Murrin Murrin operation in Australia. Nickel is trading at almost a quarter of pre-crisis highs hit in 2007.

Glencore’s management had been reviewing Xstrata’s assets as owners over the past three months.

Asset sales are also expected to come out of that review, though Chief Executive Ivan Glasenberg is in no rush to sell. “Our major focus now is bringing down the cost,” he said.

Glencore has already flagged the start of a sale process for Peruvian copper mine Las Bambas – a sale demanded by Chinese antitrust regulators – and Glasenberg said on Tuesday that interest in the asset was “strong”.

Shares in Glencore were down 3.4 percent at 0800 GMT, underperforming a 2.7 percent drop in the wider sector, as metal prices fell and miner BHP Billiton missed its forecasts.

METALS, ENERGY LIFT MARKETING PROFIT

Glencore, following other majors, was hit by weaker prices in the first half and adjusted core profit – earnings before interest, tax, depreciation and amortization (EBITDA) – fell 9 percent to $6 billion, at the higher end of analyst estimates.

Improved output from mining operations in copper and coal helped to cushion the full impact of weaker prices, which took $2.2 billion off Glencore’s operating profit.

It also benefited from increased profit from marketing operations, with adjusted operating profit for marketing alone rising 6 percent to $1.2 billion, as metals and profits from trading oil and coal offset the impact of a weaker agricultural contribution.

There was a 39 percent drop at its industrial arm, which includes Glencore’s mines.

Net earnings came in at a little more than $2 billion, down 39 percent on the same period last year.

Glencore completed its takeover of miner Xstrata in May, ending a marathon deal for Glasenberg and the sector’s biggest acquisition to date.

It said on Tuesday that progress on the integration of the group was exceeding expectations, with achievable cost savings likely to be “materially in excess” of previous guidance of $500 million a year.

It is expected to update the market on the integration, progress and associated cost-savings on September 10.

(Editing by Andrew Callus and David Goodman)

Article source: http://www.nytimes.com/reuters/2013/08/20/business/20reuters-glencorexstrata.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Chief Leaves Barnes & Noble After Losses on E-Readers

July 8, 2013 by Leave a Comment

William Lynch Jr., the chief executive of Barnes Noble, resigned on Monday, two weeks after a devastating earnings report that accentuated the bookseller’s losing battle against powerful rivals like Amazon.

Mr. Lynch’s departure was part of a series of sweeping changes the company announced as it tries to regain its footing after a failed initiative to build up its Nook division and compete in the increasingly crowded market for e-readers. When it revealed its fourth-quarter earnings late last month, Barnes Noble said it would cease making its own color tablets, an acknowledgment that they were lagging popular brands like Amazon’s Kindle Fire and Apple’s iPad.

Instead, the company said it would form partnerships with third parties to make the color devices, while it continued to make and sell its own black-and-white versions of the Nook.

In a statement late Monday, the company said that Michael P. Huseby had been appointed chief executive of the Nook division and president of Barnes Noble. Mr. Huseby has served as chief financial officer since joining Barnes Noble in March 2012; previously he held that position at Cablevision Systems, a media company.

Max J. Roberts, the chief executive of the college division, will report to Mr. Huseby, while Mr. Huseby and Mitchell S. Klipper, the chief executive for the retail stores, will report to Leonard Riggio, the company’s chairman.

The moves on Monday appeared to be a step toward separating the digital and retail divisions, as the company has indicated it might do. Barnes Noble has been in talks over a potential sale of its digital assets, as well as its 675 bookstores.

Microsoft is one potential buyer of the Nook business; last year it invested hundreds of millions of dollars to acquire 17.6 percent of the division.

Mr. Riggio has expressed interest in taking back ownership of the physical stores that make Barnes Noble the largest bookstore chain in the country. Mary Ellen Keating, a spokeswoman for Barnes Noble, declined to provide an update on that offer.

There was no indication that a new chief executive would be named.

“Because the company is in a transition period, we have no immediate plans to name a C.E.O.,” Ms. Keating said.  

 “We thank William Lynch for helping transform Barnes Noble into a leading digital content provider and for leading in the development of our award-winning line of Nook products,” Mr. Riggio said in a statement issued Monday. “As the bookselling industry continues to undergo significant transformation, we believe that Michael, Mitchell and Max are the right executives to lead us into the future.”

The financial results for the fiscal fourth quarter underscored the urgency of the need to take action. The Nook unit showed a $177 million loss in earnings before interest, taxes, depreciation and amortization, or Ebitda, more than doubling the loss from the period a year earlier. Sales fell 34 percent, to $108 million.

The signs have been ominous for the company since the beginning of the year, when it announced that sales for the nine-week holiday period in late 2012 had declined at both its bookstores and in the Nook unit.

Mr. Lynch joined Barnes Noble in February 2009, with no previous experience in bookselling. He was executive vice president for marketing at HSN.com and also worked for Gifts.com.

At the time, his arrival was hailed as a forward-thinking move, since Mr. Lynch, a Texas native, was only 39 years old and fluent in e-commerce and technology. Within months, Barnes Noble introduced its first Nook e-reader.

To publishers, Mr. Lynch had performed a temporary miracle, helping create a product that provided a welcome competitor to Amazon’s Kindle, which dominated the market and offered e-books at a relatively inexpensive price.

The Nook was initially successful, drawing critical praise and capturing consumers who were uneasy about buying an e-reader — at the time a brand-new device — online, without testing it out in person. Barnes Noble’s hundreds of retail stores allowed potential customers to see and touch what they were buying.

But even though Barnes Noble quickly gained a sizable piece of the e-book market, it was not enough to ward off Amazon. And as black-and-white e-readers gave way to multifunctional color tablets, Barnes Noble found itself competing unsuccessfully against companies many times its size, like Amazon and Apple, that have had technology in their DNA from the start.

As chief executive, Mr. Lynch worked from the company’s Ninth Avenue office in Manhattan, across town from the Fifth Avenue building where Mr. Riggio keeps his office. Mr. Lynch threw his energies into the digital side of the business, taking far less of an interest in the retail stores, and frequently flew to Palo Alto to build up Barnes Noble’s presence in Silicon Valley, where their e-readers are designed.

Mike Shatzkin, the founder and chief executive of the Idea Logical Company, a publishing consultant, said a split of the business could help stave off the company’s decline.

“The Nook business clearly is going to need some global investment to have any kind of chance at all, and it certainly looks possible that they will be better off separate than together,” Mr. Shatzkin said. “There’s a glide path to oblivion, and you can affect the speed of the decline. Nobody’s going to bring back a robust brick-and-mortar book business.”

Article source: http://www.nytimes.com/2013/07/09/business/barnes-nobles-chief-executive-resigns.html?partner=rss&emc=rss

Filed Under: Media Business Tagged With: , ,

Solid Sales, but Growing Grumbles, for Windows 8

May 7, 2013 by Leave a Comment

Microsoft revealed Thursday that it had sold 100 million licenses for its flagship software since it was released six months ago. That was roughly the same number of licenses it sold for the well-received, previous version of the system, Windows 7, in about the same time period.

Yet Windows 8 has struck a sour note with parts of the computer-buying public. With Windows 8, Microsoft replaced the operating system’s traditional appearance with an interface that looks like a screen of tiles. The change left some customers cold, and though they could switch between the old and te new look, it apparently was not clear enough to some of them how to do it.

In an interview, Tami Reller, chief marketing officer and chief financial officer of Microsoft’s Windows division, said an update to the software, code-named Windows Blue, was coming later this year. It will include modifications that make the software easier to figure out, especially on computers without touch screens.

“The learning curve is real and needs to be addressed,” Ms. Reller said.

There was another problem. The tile look was meant for people using touch-screen computers, and there are not many of those devices running Windows yet available. IDC researchers estimate Microsoft sold only about 900,000 of its Surface tablets during the first quarter of the year, about 1.8 percent of the overall market. Other Windows tablet makers like Acer accounted for additional sales.

By comparison, Apple, with iPad sales of 19.5 million, accounted for 39.6 percent.

Much to the disappointment of PC makers like Dell and Hewlett-Packard, Windows 8 has not helped fend off competition from devices like the iPad. Global shipments of PCs fell 13.9 percent to 76.3 million units during the first quarter of the year when compared with the same period a year ago — the worst showing in two decades, according to IDC. Tablet shipments grew 142.4 percent to 49.2 million units in that same period, IDC estimates.

Windows 8 was supposed to bridge tablets and traditional personal computers with software made for touch screens that had the option to switch to the desktop interface whenever someone wanted to create a PowerPoint slide or work on an Excel spreadsheet using a keyboard and mouse.

Microsoft envisioned a bounty of new Windows 8 touch-screen devices, including laptops with displays that also respond to finger gestures.

But that has not panned out. The majority of personal computers on store shelves have been more old-fashioned keyboard-based systems.

“If you’re not going to provide the proper environment for people to understand how to use the system, you risk losing a lot of people who used the system for a decade,” said David Daoud, an analyst at IDC.

Ms. Reller said Microsoft would reveal more about the Windows 8 changes in the coming weeks, but she declined to confirm they would include an option to bypass the new tile interface at start-up, as recent reports on technology news sites have said.

Ms. Reller added that Microsoft had already trained its retail partners to remind customers that the old desktop interface still exists in Windows 8.

“We started talking about the desktop as an app,” she said. “But in reality, for PC buyers, the desktop is important.”

Microsoft’s own research on Windows 8 usage patterns showed customer satisfaction with the system was on par with that of Windows 7, if the users being analyzed have tablets or other systems with touch screens, Ms. Reller said. People with conventional PCs are not as happy.

“We need to help them learn faster,” she said.

Joshua Blood, an audio engineer in Hudson, Mass., put Windows 8 on one of his existing computers, but took it off after a few days, deciding that the software only made sense if he had a touch-screen machine. “I can do absolutely everything I need to do in Windows 7, and it’s a nice-looking O.S.,” Mr. Blood said.

While the 100 million licenses for Windows 8 sounds impressive, that figure does not indicate how many people are actually using the new operating system. That is because a significant portion of Microsoft’s Windows sales occur through multiyear contracts with business customers, who are allowed to pick which version of the operating system they run on their computers.

So while business customers who signed such deals since Windows 8 came out are counted among the licenses sold, many may have downgraded to Windows 7. Al Gillen, an IDC analyst, estimates that about 40 percent of Microsoft’s Windows sales are to customers with such downgrade rights.

Mr. Gillen said such a pattern among business customers, who tend to adopt new software cautiously, was common when new versions of Windows are released.

Article source: http://www.nytimes.com/2013/05/08/technology/solid-sales-but-growing-grumbles-for-windows-8.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

You’re the Boss Blog: The Truth About Working From Home

March 19, 2013 by Leave a Comment

From the left: Jessica Johnson, Deirde Lord, Beth Shaw, and Susan Parker.Earl Wilson/The New York Times From the left: Jessica Johnson, Deirde Lord, Beth Shaw, and Susan Parker.

She Owns It

Portraits of women entrepreneurs.

At the most recent meeting of the She Owns It business group, the owners talked about the pros and cons of allowing workers to do their jobs from home.

“I’m a huge advocate of having everyone together for the sharing of ideas and communication, but I think that, as a business owner, you need to be flexible,” said Beth Shaw, who owns YogaFit. She said she had had both successful — and unsuccessful — remote-work arrangements. Her chief financial officer worked remotely from 2002 to 2009. “It started to really not work at all to not have your main accounting person in the building,” Ms. Shaw said.

But YogaFit has found several positions can be handled effectively from outside the office. For example, the company’s hosting manager, who books YogaFit’s trainings, works from home four days a week. Additionally, the company’s conference manager and the person who manages YogaFit’s trainers work remotely.

Jessica Johnson, who owns Johnson Security Bureau, wanted to know whether Ms. Shaw required her remote workers to provide her with any sort of reporting or documentation.

“I mostly leave them to their own devices,” Ms. Shaw said, although she does require the hosting manager to report how many trainings the company has each month, how many people attend each training and how many sessions are canceled. She said these numbers provided “a really good barometer of whether she’s booking correctly.”

Susan Parker, who owns dress manufacturer Bari Jay, said the employees’ roles dictated where they could work. For example, her customer service staff must be in the office between 9 a.m and 5:30 p.m. because that’s when the phones ring. But Bari Jay’s designer has more flexibility. “If she says she needs to work from home, great, go do it,” said Ms. Parker, who added that she knew the designer would get her job done.

Additionally, Ms. Parker’s sales manager works remotely — and effectively — from Florida. “He’s calling me all day nonstop, so I know he’s working,” Ms. Parker said. “For someone to work from home, you have to trust that they’re going to do what they need to do.”

“I totally agree,” said Deirdre Lord, who owns the Megawatt Hour, an energy-related start-up. “I think it depends on the individual, your relationship with that individual, or the manager’s relationship with that individual. It’s very hard I think to set rules, but the issue is some people, if they see you making certain things work for some people, then they say, ‘What about me — why can’t I work from home?’”

That is a big concern, said Alexandra Mayzler, who owns Thinking Caps Group, which recently changed its name from Thinking Caps Tutoring — and got a new Web site. “I think there’s something to be said for set vacation days that you have to take and ‘set-ish’ hours to work because I think when you’re working from home, you start feeling like you’re working all the time,” she said.

“I’ve worked from home and had that experience,” said Ms. Shaw. In fact, she added, “I have that experience now.”

Ms. Mayzler said she struggled with setting different rules for different employees. She is currently dealing with this issue in her New York office, where she has found it can create friction when one employee has more flexibility than another. While employees may logically understand that different roles have different demands, “it’s hard to care when everybody went home and you didn’t,” she said.

She says she thinks the problem can be especially pronounced in a small business. “If you have 1,000 people, and people are coming in and out, that’s one thing,” she said. “But when you have three people, and you only have one person who’s constantly there from 9 to 5, it doesn’t feel good.”

Ms. Lord said that as her company, which has five employees, shifted from product development to sales and marketing mode, she and her colleagues were primarily working remotely. “I don’t worry about this group getting their work done, which is really nice,” she said.

Plus, Ms. Shaw pointed out, hours logged in the office are no guarantee of productivity.

Ms. Lord said her co-founder, with whom she has worked on and off since 1998, is “the definition of an effective remote worker.” He can always be reached, gets his work done, and is proactive when it comes to initiatives. “I think those people are quite unusual, to be honest,” she said.

“What I’m learning is, most people need structure,” Ms. Mayzler said — even if they think they don’t.

Ms. Johnson, who used to work in pharmaceutical sales, said the use of reporting and metrics could help provide structure. As a sales representative, she covered a large multistate territory, and her employers required daily or weekly reports from her. “They basically had a measure of security that the people in the field were doing what they were supposed to do and a level of accountability,” she said. Additionally, she and her manager reviewed metrics such as number of daily or weekly sales calls made. “You know how they say, ‘If it’s not measured, it won’t get done,’” she said.

“Right,” Ms. Lord said.

Ms. Johnson says she thinks it critical for companies that employ remote workers to determine the metrics relevant to their jobs and at least start them on some type of reporting system. While she said she disliked generalizations, she thought it was particularly important to impose structure on younger workers. “They’re so used to being independent but really don’t understand the responsibility that comes with being independent,” she said.

“I actually could not agree more,” said Ms. Lord, who recalled getting her very first job and thinking she couldn’t leave her desk for a second — not even to go to the post office. “I don’t think the world is ever going to operate that way again,” she said. “There’s a generation of people who are like, ‘I want to go kayaking. Can I kayak today, instead?’”

To harness the talent and creativity of this generation requires a hard-to-balance combination of imposed discipline and the creation of something they want to be a part of, Ms. Lord said. “I think actually that’s really what Marissa Mayer is trying to do,” she added, referring to the chief executive of Yahoo, which recently said it would require employees to work in-house. “It sounds like no one at Yahoo ever wanted to darken the doors of that place.” Which is why, she continued, Ms. Mayer “took the draconian route, and I don’t think I blame her for that.”

“Really shaking it up,” Ms. Mayzler said.

“She had to shake it up,” Ms. Lord said. “And then maybe she’ll create a culture that everyone’s really excited about — then she can give that flexibility back.”

You can follow Adriana Gardella on Twitter.

Article source: http://boss.blogs.nytimes.com/2013/03/19/the-truth-about-working-from-home/?partner=rss&emc=rss

Filed Under: Small Business Tagged With: , ,

Draghi Says Regulators Need More Power to Supervise Local Banks

February 7, 2013 by Leave a Comment

FRANKFURT — Problems at the Italian bank Monte dei Paschi di Siena show that regulators need more power to fire incompetent managers or otherwise step in when banks get in trouble, the president of the European Central Bank said Thursday.

The remarks, by Mario Draghi, came as he defended himself against criticism that he shared the blame for losses at Monte dei Paschi, or M.P.S., a centuries-old Tuscan lender.

“The Bank of Italy has done everything it should,” said Mr. Draghi, referring to the Italian central bank, where he was governor before becoming president of the E.C.B. in late 2011.

Troubles at M.P.S. have shaken Italian politics and caused jitters around the euro zone, while raising questions about the actions of Mr. Draghi, who is otherwise seen as a savior because of his efforts to contain the euro crisis.

Questions about the Bank of Italy’s role in overseeing M.P.S. come as the E.C.B. is preparing to assume responsibility for supervising all banks in the euro zone. That shift of power to the E.C.B. is supposed to increase confidence in euro zone banks and prevent national regulators from treating their home institutions too gently.

M.P.S. said late Wednesday that its losses from three questionable transactions were €730 million, or $978 million. That was only slightly higher than an estimate in October that the losses totaled €720 million.

The bank has new management since the events in question, which occurred mostly in 2008 and after. In a conference call Thursday, the M.P.S. chief financial officer, Bernardo Mingrone, sought to put the problems behind the bank. “Those are the only three operations that we found to be troublesome in the way they were accounted for,” he said.

Problems at M.P.S., which was founded in 1472, have rippled far beyond the medieval city of Siena, whose local government is also the bank’s largest shareholder.

The former prime minister Silvio Berlusconi has seized on the scandal as an issue as he tries to make a political comeback before the Italian national elections this month.

Mr. Draghi noted that the Bank of Italy lacked powers to remove managers at M.P.S. or to pursue criminal wrongdoing. The Italian central bank referred evidence of criminal activity to prosecutors, he said.

“You should certainly discount much of what you hear and read as part of the regular noise that elections produce,” Mr. Draghi said.

The Bank of Italy has insisted that it subjected M.P.S. to intense scrutiny. Last week the central bank issued a detailed account of the numerous steps it had taken since 2008 to force M.P.S. to raise capital, pressure managers to leave and deal with risks stemming from its holdings of Italian bonds, which were declining in value.

Some managers withheld critical information about the questionable trades that came to light only recently, the Bank of Italy said.

Still, the case of M.P.S. has illustrated the limits of bank supervision in Europe and called into question whether the E.C.B. would be able to do a better job than national supervisors of keeping an eye on financial institutions.

“One of the things that this story shows is that having more powers would have helped,” Mr. Draghi said.

But he rejected suggestions that the case illustrates one of the risks of giving central banks supervisory authority for banks: that it can damage central bankers’ reputations and hurt their ability to carry out monetary policy.

The problems at M.P.S., which led to a €3.9 billion bailout by the Italian government, have also led to criminal inquiries.

Prosecutors in Siena on Wednesday heard testimony from Antonio Vigni, a former chief executive of Monte dei Paschi and one of several previous managers being investigated on a series of charges including false accounting and fraud. Giuseppe Mussari, the bank’s former president, was to testify this week.

The bank’s troubles stem in part from the €9 billion purchase of Antonveneta bank in 2008, just months after the Spanish bank Santander had bought it for €6.6 billion. The Siena magistrates are also looking into allegations of bribery related to that deal.

Investigations have branched out to other Italian cities, including Trani, in Apulia, where prosecutors are looking closely at complex financial transactions carried out by Monte dei Paschi and other Italian banks as well as the role of the regulatory bodies entrusted with monitoring those banks.

Fabrizio Viola, the bank’s chief executive, said during the conference call Thursday that retail banking was now M.P.S.’s primary purpose. “Our core business is the retail,” he said, “and we manage financial operations with the transparency needed for the bank and for the markets.”

Gaia Pianigiani from Rome. Elisabetta Povoledo contributed from Rome.

This article has been revised to reflect the following correction:

Correction: February 7, 2013

An earlier version of this article misstated the Italian region where Trani is situated. It is in Apulia, not Sicily.

Article source: http://www.nytimes.com/2013/02/08/business/global/draghi-says-regulators-need-more-power-to-supervise-local-banks.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Storm and Pension Costs Leave Verizon With Bigger Quarterly Loss

January 22, 2013 by Leave a Comment

Verizon Communications is still adding plenty of customers and selling a lot of cellphones, but the impact of Hurricane Sandy and pension costs sank the company’s quarterly earnings.

In November, the hurricane knocked out wireless service for all of the big carriers in the Northeast. But Verizon, based in New York, was hardest hit.

The storm surge flooded its central offices in Lower Manhattan, Queens and Long Island, causing power failures, which disrupted a large portion of its old landline service in those areas. The company took about a week to restore most of its wireless service.

“Sandy had a dramatic effect, particularly on the wire line business, due to the heavy concentration of damage in the New York metropolitan area,” said Francis J. Shammo, chief financial officer of Verizon, on the company’s earnings conference call. “Our challenge was to restore service to customers as quickly as possible, while still managing to meet the demand for new services.”

The company reported on Tuesday a fourth-quarter loss of $4.22 billion, or $1.48 a share, more than double the loss a year ago. Damage from the hurricane cost 7 cents a share, and pension charges reduced earnings by $1.55 a share, Verizon said. Without those charges, the company would have earned 45 cents a share, lower than the 50 cents predicted by analysts surveyed by Thomson Reuters.

Revenue climbed to $30.05 billion, a 5.7 percent increase from a year ago, and slightly higher than estimates.

Verizon said its wireless business, a joint venture with Vodafone of Britain, had a strong quarter. It sold 9.8 million smartphones, compared with 7.7 million in the same quarter a year ago, and added 2.1 million contract subscribers, the most valuable type of customer, versus 1.2 million a year ago.

The iPhone was Verizon’s top-selling smartphone in the quarter, with 6.2 million sales — almost half of which were the iPhone 5, the latest model of the phone. The strong number suggests that demand for Apple’s smartphone is not weakening, despite previous reports that Apple had reduced orders for iPhone parts because sales were slower than expected.

Android phones made up a majority of Verizon’s remaining smartphone sales. Verizon said sales of Windows phones had steady but slow growth.

Chetan Sharma, an independent mobile analyst who does consulting for carriers, said it was impressive that Verizon Wireless continued to post strong phone sales while expanding its customer base. Its phone plans are generally more expensive than the competition’s, and growth of the business shows that customers have faith in Verizon’s network technology, Mr. Sharma said.

Verizon is leading the race to build out its fourth-generation network, called LTE, which is faster and more efficient than its predecessor. The company has deployed LTE in 476 cities; ATT, the second-biggest American carrier, is second with 135 cities.

“The investment they’ve made in the network is showing,” Mr. Sharma said. “When consumers think of changing operators or upgrading, they’re choosing Verizon because of what they’ve experienced, as well as what they’ve heard about the network in terms of reliability across the country.”

This year is shaping up to be another strong one for Verizon. Its new shared data plans, which allow customers to pay for one pool of data and share it across multiple smartphones, tablets and laptops, are helping it bring in more money from subscribers over all. Average monthly revenue from each account grew 6.6 percent to $146.80 in the fourth quarter. Already, 23 percent of Verizon’s accounts are on shared data plans.

The faster the network, the faster people will use their data allowance and eventually buy more. On top of that, data is getting cheaper for Verizon to deliver. The company says the 4G LTE network is five times more efficient than its predecessor, 3G. That means the more people who buy devices that connect to the newer network, like the iPhone 5, the more money the company will eventually gain.

“As more customers choose 4G LTE smartphones and devices, we expect the continued migration of data traffic from 3G to our lower-cost 4G LTE network will drive further improvements in operating and capital efficiency in 2013 and beyond,” Mr. Shammo said in the earnings call.

This month, Research in Motion is expected to release its BlackBerry 10 smartphones. Mr. Shammo said Verizon was hopeful that the new phones would be successful.

“We have very loyal BlackBerry users in our base, and we will see how that goes,” he said. “I think more choice for our customers is better for us and for the consumer and for competition.”

Article source: http://www.nytimes.com/2013/01/23/technology/storm-and-pension-costs-leave-verizon-with-bigger-loss.html?partner=rss&emc=rss

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Ex-Porsche Officials Charged With Market Manipulation

December 20, 2012 by Leave a Comment

The company’s former chief executive, Wendelin Wiedeking, was charged with making false public statements in 2008 about its plan to acquire Volkswagen.

Also charged was Holger Härter, Porsche’s former chief financial officer, who was thought to be the mastermind of the takeover plan, which involved the use of complex financial derivatives.

Prosecutors said they dropped charges of breach of trust against both men. In a joint statement Wednesday, lawyers for Mr. Wiedeking and Mr. Härter said that “after several years of investigation prosecutors have themselves recognized” that those accusations “are to the largest possible extent unfounded.”

In a statement Wednesday, prosecutors in Stuttgart, where Porsche is based, said that in at least five public declarations from March to October 2008, the company denied that it intended to raise its stake in Volkswagen. According to prosecutors, though, Mr. Wiedeking and Mr. Härter were already working to do exactly that.

When Porsche subsequently disclosed that it had raised its stake to about 75 percent of the voting shares of Volkswagen, VW’s stock soared, briefly making it the world’s most valuable company.

Investors who had bet that VW shares would fall were caught in what is called a short squeeze and lost billions of dollars.

“Despite all the risks involved in the stock market, a company is required to tell the truth,” said Claudia Krauth, a prosecutor in Stuttgart. “An untruth that impacts the stock price, leading to a manipulation of the market, is not among the normal risks that are to be expected on the stock exchange.”

The lawyers for Mr. Wiedeking and Mr. Härter said they were “astonished” that prosecutors had taken the side of investors who made “highly speculative and irrational wagers against the course of VW shares.”

Several New York hedge funds, including Elliott Associates and Black Diamond Offshore, had some of the worst losses. But their attempt to sue Porsche for $2 billion in damages was dismissed by a New York judge in 2010. Similar civil cases are still pending in Germany and Britain.

A Stuttgart state court must now determine whether to proceed to trial. If the two former executives were to be tried and found guilty, they could face up to five years in prison or a fine, the size of which would be determined by the court.

The takeover attempt was intended to bring together two German automakers whose histories had long been linked.

In 2005, the Porsche family controlled all of the voting shares in the company. That was when Porsche first acquired an 18.53 percent stake in Volkswagen and expressed its intention to further expand its acquisitions.

But after a series of bitter legal and political battles that rocked Germany’s staid business community, the tale quickly turned from David and Goliath — with Mr. Wiedeking as the scrappy underdog — into Icarus, the boy who flew too close to the sun.

Although Mr. Wiedeking is still credited for bringing Porsche back from the brink in the mid-1990s and turning it into one of the world’s best-known and most profitable sports car companies, his risky endeavor to borrow billions in an effort to take over the much larger Volkswagen nearly pushed the company into bankruptcy.

In 2009, Porsche’s supervisory board dismissed Mr. Wiedeking and Mr. Härter, months after announcing that it was abandoning its takeover plan.

Before the year was out, Volkswagen turned the tables, acquiring 49.9 percent of Porsche. In July, Volkswagen acquired the remaining 50.1 percent.

Victor Homola contributed reporting.

Article source: http://www.nytimes.com/2012/12/20/business/global/2-former-porsche-executives-charged-with-market-manipulation.html?partner=rss&emc=rss

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2 Former Porsche Executives Charged With Market Manipulation

December 19, 2012 by Leave a Comment

BERLIN — German prosecutors charged two former Porsche executives on Wednesday with market manipulation in connection with the sports car company’s failed takeover of Volkswagen.

Prosecutors in Porsche’s home city of Stuttgart said that the company’s former chief executive, Wendelin Wiedeking, and former chief financial officer, Holger Härter, made misleading statements about the company’s intentions in 2008.

A statement issued by prosecutors Wednesday accuses the pair of denying up until Oct. 2008 their intention to increase Porsche’s stake in VW despite having decided to do so six months earlier.

The prosectuors said the denials caused VW’s share price to drop at a time when Porsche was secretly preparing to buy stock in the company, which is Europe’s largest automobile maker.

Porsche’s bid for Volkswagen failed, and VW eventually turned the tables to take over Porsche instead.

Article source: http://www.nytimes.com/2012/12/20/business/global/2-former-porsche-executives-charged-with-market-manipulation.html?partner=rss&emc=rss

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Weakness in Europe Undercuts Ford’s Profit

October 31, 2012 by Leave a Comment

Ford, the second-largest American automaker, after General Motors, on Tuesday reported flat profits for the third quarter, as the sharp downturn in its European business continued to undercut its strong performance in the North American market. The company said that it earned $1.63 billion in the quarter, compared with $1.65 billion in the same period last year. Its global revenues dropped slightly to $32.1 billion, down from $33.1 billion in the third quarter of 2011.

The results underscored both Ford’s success in its home market and its festering problems in Europe, where the auto market has fallen to its lowest sales levels in nearly 20 years.

Ford said its pretax profits in North America increased to $2.32 billion in the quarter, from $1.55 billion a year ago. The results were driven by new vehicles like the Escape S.U.V. and higher transaction prices.

But its European operations floundered because of lower sales and higher incentives. Ford reported a pretax loss of $468 million in the region during the quarter, compared with a pretax loss of $306 million in the third quarter last year.

The company forecast severe economic conditions in Europe into 2013 and possibly beyond. Ford’s chief financial officer, Robert L. Shanks, said it would be up to the North American operations to provide the bulk of its income until Europe recovers.

“It has been the foundation and still is,” Mr. Shanks said of the North American market.

Ford has now lost more than $1 billion in Europe this year, and has said it expects its full-year loss to exceed $1.5 billion. Last week, the company said it would close three factories in the region and eliminate 5,700 jobs to better balance production there with shrinking demand for new vehicles.

Ford’s chief executive, Alan R. Mulally, said the automaker would continue to face stiff challenges in Europe as it restructured. “While we are facing near-term challenges in Europe, we are fully committed to transforming our business,” he said in a statement.

Other auto companies in Europe have so far resisted making large-scale overhauls like Ford’s.

“This industry has a lot of excess capacity and needs to restructure,” Mr. Shanks said. “It won’t get any better if other companies avoid the situation.”

He said the company expected “difficult and interesting” discussions with its unions in Belgium and Britain about separation agreements for factory workers.

Ford’s other regional operations contributed little to its bottom line during the quarter. The company said it earned $45 million in pretax profits in Asia, in contrast to a $43 million loss a year ago. Pretax profits in South America fell to $9 million from $276 million a year ago.

The healthy profits in North America reflect Ford’s turnaround in its home market since a financial crisis crippled the United States auto industry in 2008. Unlike its rivals General Motors and Chrysler, Ford survived without a government bailout or filing for bankruptcy.

Since then, Ford has revamped its product lineup to offer a broader range of smaller, more efficient models. The company said its operating profits in North America were its highest since 2000, and it forecast similar results through the remainder of 2012.

“Ford’s more balanced product mix, with a stronger presence in the small-car segments, enabled the company to operate at highly profitable levels in the North American and Asian markets, whereas the European operations continued to struggle,” said Jesse Toprak, an analyst with the auto-research Web site TrueCar.

Ford ended the quarter with $24.1 billion in automotive cash reserves, an improvement from $20.8 billion a year ago.

The company produced 1.36 million vehicles in the third quarter, about the same number as a year ago. Ford said it would build 1.48 million cars, trucks and S.U.V.’s in the fourth quarter, an increase of 112,000 from the same period in 2011.

General Motors, the largest American automaker, is scheduled to report its third-quarter earnings on Wednesday. Chrysler, which has little exposure in the European market, said Monday that its profits improved 80 percent during the period.

Article source: http://www.nytimes.com/2012/10/31/business/ford-sees-little-change-in-net-income.html?partner=rss&emc=rss

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