March 28, 2024

Worry Over Sales Spurs Talk of Cheaper iPhones

That is the problem Apple faces. Analysts say it must decide whether to keep catering to the high end of the phone market, reaping fat profits from relatively fewer sales, or offer something cheaper to compete with lower-cost alternatives like Samsung’s phones.

Worries about low-cost competition weighed on Apple’s stock on Monday after reports that the company had reduced orders of screens for the iPhone 5, suggesting that demand for the phone could be weaker than expected. The company’s shares dropped 3.6 percent for the day to close at $501.75; they have slid 29 percent from their high in September.

The long slump in the stock price has increased the pressure on the company to produce a solid earnings report next Wednesday, when investors will be looking closely to see how strong iPhone sales were.

The iPhone is still a top seller in the American market. But it has a tougher time competing in other markets, where consumers buy phones without a subsidy from a wireless carrier. In countries like Brazil, Germany and Spain, the iPhone 5 can cost $650.

And even the cheaper iPhones, like the 4 and 4S, are more expensive than the cheapest Android phones, said Tero Kuittinen, an independent mobile analyst and vice president of Alekstra, a company that helps people manage their cellphone bills.

“The people buying their first smartphones now are lower-income households,” Mr. Kuittinen said. “They don’t have enough money to have $650 to pay for a smartphone.”

Analysts say that in the earnings report, they will pay special attention to the average selling price of iPhones to determine whether the iPhone 5 is still the hot seller or whether cheaper models are making up a majority of sales. The trend might help determine whether Apple will eventually introduce a new lower-end iPhone.

Apple does appear to be cutting back on orders for its latest iPhone from its manufacturing partners, as Nikkei of Japan and The Wall Street Journal reported earlier. Paul Semenza, an analyst at NPD DisplaySearch, a research firm that follows the display market, said that for January, Apple had expected to order 19 million displays for the iPhone 5 but cut the order to 11 million to 14 million. Mr. Semenza said these numbers came from sources in the supply chain, the companies that make components for Apple products.

The reduction in orders for screens could be related to excess inventory, or because consumer demand for the iPhone 5 just was not as strong as Apple had predicted, Mr. Semenza said. “Certainly, demand from Apple to the display makers seems to have been corrected pretty significantly,” he said.

Natalie Kerris, an Apple spokeswoman, declined to comment.

Laurence I. Balter, an analyst at Oracle Investment Research, said one reason Apple’s stock had been hurting was that analysts often overshoot with their predictions for how many devices Apple will sell each quarter. He said that might explain some of Monday’s sharp drop: “Everybody got a little too aggressive and optimistic.”

Mr. Balter said there was plenty of room left for Apple to grow and China was a particularly important market. The iPhone is available there for China Unicom, a major wireless network. But Apple has yet to strike a deal with China’s bigger cellphone carrier, China Mobile, which has a whopping 600 million subscribers — about six times as many as ATT. That is Apple’s opportunity for huge growth, Mr. Balter said.

“In China, the Apple brand on the iPhone is a status symbol,” he said. “You’re going to have the Samsung device, which is a nice phone, or you’ll show your friends you have an Apple device. It’s like wearing a pair of Levi’s versus a Costco brand.”

Mr. Balter said he thought Apple’s strategy for growth would be to go after more price-conscious consumers, because once they become customers, they are likely to keep buying other Apple products. Perhaps the key to that strategy will be a cheaper iPhone, he said.

But even if Apple were to offer a cheaper iPhone, it is unlikely it would be dirt cheap, Mr. Kuittinen said. If it chose to play more aggressively in foreign markets, Apple would more likely introduce a midprice model that is cheaper than the newest iPhone but more expensive than the cheapest phones on the market, he said. That would be similar to its approach with the iPad Mini, which is more expensive than the smaller tablets sold by Google and Amazon but much cheaper than the full-size iPad.

This article has been revised to reflect the following correction:

Correction: January 16, 2013

Because of an editing error, an earlier version of this article misstated the day that Apple is scheduled to report its quarterly earnings. It is Jan. 23, not Jan. 16.

Article source: http://www.nytimes.com/2013/01/15/technology/worry-over-sales-spurs-talk-of-cheaper-iphones.html?partner=rss&emc=rss

Bucks: The Over-The-Wall Portfolio for Excess Cash

Carl Richards

Carl Richards is a financial planner in Park City, Utah, and is the director of investor education at the BAM Alliance. His book, “The Behavior Gap,” was published this year. His sketches are archived on the Bucks blog.

If you’re an entrepreneur, you’ll spend years pouring everything — time, money, passion — into your businesses with the hope that someday it will pay off. If things go well, you’ll wake up one morning and find yourself with excess time, energy and, of course, cash.

Great! But now you have to figure out what do with that cash, and this is when things can get dangerous, fast.

Most entrepreneurs get twitchy at the thought of idle money. They’re used to taking big chances and are comfortable with risk. So, there’s a temptation to assume the same approach to controlled risk when investing outside their business.

One of the smartest guys I know runs an incredibly successful company but provided a textbook example of this approach. As the business matured and started throwing off excess cash, he began thinking about what to do with it. He invested in some pretty strange ventures. He backed a doctor with a new toothbrush design, a car wash and a company that made kayak paddles.

He knew nothing about any of these businesses. Not surprisingly, he lost that money.

Instead of sticking to what he knew to make money and protecting the profits, he made the classic mistake of thinking he could do more. He took risks with money that he promised himself he would never lose.

It’s like what Warren E. Buffett said about the super-smart and incredibly wealthy founders of Long-Term Capital Management, who ended up doing something really dumb: “To make money they didn’t need, they risked what they did have and did need, and that’s foolish.”

Don’t be foolish. If you’re fortunate to have enough money to last for a good long while, the game can, and should, change. Of course you can still focus on growing your business. Or, if you’re a serial entrepreneur, you can build the next one. But at the same time, you can start building a portfolio to protect your future.

One thing I have heard over and over when interviewing successful entrepreneurs is the idea of what I call the Over-the-Wall Portfolio. Of course, the entrepreneurs didn’t call it that. They often referred to it as the safe money or the money they promised their spouse they’d never lose.

Whatever you call it, the concept is pretty simple: You take the excess cash your business generates, or the lump sum from the sale of a business, and throw it over the wall into stable (and probably boring) investments.

Then you forget about it.

The allocation of an Over-the-Wall Portfolio will vary, but here are a few general guidelines to consider:

  • Boring. Remember: excitement comes from being an entrepreneur (or the movies), not your over-the-wall money.
  • Liquid. If something goes wrong, you want to be able to get to the money.
  • Diversified. You can get rich by putting all your eggs in one basket, but you stay wealthy by being diversified.
  • Passive. The Over-the-Wall Portfolio can’t depend on you for day-to-day management. You’re too busy with your business and having a life. The last thing you should be doing at night is logging into your day-trading account.

The best part of this strategy? It lets you get back to doing what you do best — running your business. But you get the added comfort of knowing that if your business fails, you’ll be O.K.

Eventually, my entrepreneur friend recognized his problem. One day, he told me, “Carl, I finally figured it out. My job is to stay focused on my business and make money. And with the money I make, I have to be sure I never lose any of it.”

I couldn’t have said it better myself.

Article source: http://bucks.blogs.nytimes.com/2012/12/17/the-over-the-wall-portfolio-for-excess-cash/?partner=rss&emc=rss

Economic Scene: More Than Taxing the Rich Is Needed to Fight Economic Inequality

What’s more, raising more money from the wealthy might go a long way toward righting our lopsided economy — which delivered 93 percent of our income growth in the first two years of the economic recovery to the richest 1 percent of families, and only 7 percent to the rest of us.

Yet while raising more taxes from the winners in the globalized economy is a start, and may help us dig out of our immediate fiscal hole, it is unlikely to be enough to address our long-term needs. The experience of many other developed countries suggests that paying for a government that could help the poor and the middle class cope in our brave new globalized world will require more money from the middle class itself.

Many Americans may find this hard to believe, but the United States already has one of the most progressive tax systems in the developed world, according to several studies, raising proportionately more revenue from the wealthy than other advanced countries do. Taxes on American households do more to redistribute resources and reduce inequality than the tax codes of most other rich nations.

But taxation provides only half the picture of public finance. Despite the progressivity of our taxes, according to a study of public finances across the industrial countries in the Organization for Economic Cooperation and Development, we also have one of the least effective governments at combating income inequality. There is one main reason: our tax code does not raise enough money.

This paradox underscores two crucial lessons we could learn from the experience of our peers around the globe. The first is that the government’s success at combating income inequality is determined less by the progressivity of either the tax code or the benefits than by the amount of tax revenue that the government can spend on programs that benefit the middle class and the poor.

The second is that very progressive tax codes are not very effective at raising money. The corollary — suggested by Peter Lindert of the University of California, Davis in his 2004 book “Growing Public” — is that insisting on highly progressive taxes that draw most revenue from the rich may result in more inequality than if we relied on a flatter, more “regressive” tax schedule to raise money from everybody and pay for a government that could help every American family attain a decent standard of living.

Consider government aid for families. According to the O.E.C.D. study, our Temporary Assistance for Needy Families is the most progressive program of cash benefits for families among 22 advanced countries, accurately targeted to serve the poor.

But American family cash benefits are the least effective at reducing inequality. The reason is that they are so meager. The entire budget for cash assistance for families in the United States amounts to one-tenth of 1 percent of the nation’s economic output. The average across the O.E.C.D. nations is 11 times bigger. Even including tax breaks and direct government services, we spend a much smaller share of our economic output on family assistance than almost any other advanced nation.

The same pattern can be found across a range of government programs. The reason is always the same: their relatively small size. Over all, government cash benefits in the United States — including pensions, disability, unemployment insurance and the like — contribute about 10 percent to household income, on average, according to the study. The average across industrial nations is twice that.

Our budget reveals a core philosophical difference with other advanced countries. In the big-government social democracies like those of Western Europe, government is expected to guarantee a set of universal public services — from health care to child care to pensions — that are considered basic rights of citizenry. To pay for this minimum welfare package, everybody is expected to contribute proportionately into the pot.

Government in the United States has a different goal. Benefits are narrower. Social Security and Medicare follow a universal service template, but only for older Americans. Other social spending is aimed carefully to benefit the poor. Financed through a more progressive tax code, it looks more like charity than a universal right. On top of that, our philosophical stance virtually ensures a small government.

Progressive taxes make it hard to raise money because they distort people’s behavior. They encourage taxpayers to reduce their tax liability rather than to increase their pretax income. High corporate taxes encourage companies to avoid them. High taxes on capital income also encourage avoidance and capital flight. High income tax rates on top earners can discourage work and investment, too. So trying to raise a lot of money with our progressive tax code would probably not achieve the goal and could damage economic growth.

Big-government social democracies, by contrast, rely on flatter taxes to finance their public spending, like gas taxes and value-added taxes on consumption. The Nordic countries, for instance, have very low tax rates on capital income relative to income from work. And they have relatively high taxes on consumption. In Denmark, consumption tax revenue amounts to about 11 percent of the nation’s economy. In the United States, sales taxes and excise taxes on cigarettes and other items amount to roughly 4 percent.

Liberal Democrats have long opposed them because they fall much more heavily on the poor, who spend a larger share of their incomes than the rich. But these taxes have one big positive feature: they are difficult to avoid and produce fewer disincentives to work or invest. That means they can be used to raise much more revenue.

Public finances are under strain today on both sides of the Atlantic, as governments struggle to cope with our long global recession and the aging of the baby boom generation. In Southern Europe, the pressure to pare back universal welfare systems is intense. In the United States, political leaders on both sides of the partisan divide have realized that even our relatively meager package of social goods cannot be sustained with our slim tax take.

But the United States has one option that most of Europe’s flailing economies do not. Its tax revenue is so low, comparatively, that it has more space to raise it. A more efficient, flatter tax schedule would allow us to do so without hindering economic activity.

Bruce Bartlett, a tax expert who served in the administrations of Ronald Reagan and George H. W. Bush, told me last week that he thought federal tax revenue could increase to 22 percent of the nation’s economic output, well above its historical average of 18.5 percent, without causing economic harm. If President Obama tries to go down this road, however, he may have to build a flatter tax code.

“We should reform the tax system, no question,” William Gale, a tax policy expert at the Brookings Institution and co-director of the nonpartisan Tax Policy Center, wrote in an e-mail. “We are going to need to move beyond the current set of tax instruments to raise the needed revenues — a VAT and or a carbon tax seem like the obvious ways to go.” And Mr. Bartlett, who writes a column for The New York Times’s Economix blog, also pointed out: “We can’t get all the revenue we need from the rich. Eventually, everyone will have to pay more.”

E-mail: eporter@nytimes.com;

Twitter: @portereduardo

Article source: http://www.nytimes.com/2012/11/28/business/combatting-inequality-may-require-broader-tax.html?partner=rss&emc=rss

You’re the Boss Blog: Why I’m (Still) Reluctant to Hire

Thinking Entrepreneur

An owner’s dispatches from the front lines.

The August jobs report that came out last week showed no job growth, and now President Obama and lots of other politicians are talking about how to create jobs. But I’m not sure they fully understand what prompts a business owner to hire someone — and why so many owners are still reluctant to hire, even if they think business might be improving.

Jobs are created when businesses get busy enough to need more workers. Businesses get busier when people buy things. People buy things when they need or want them and have enough money. And this is where the problem lies. Many people do not have enough money right now — for all kinds of reasons. Some have seen the value of their homes fall precipitously which may keep them from moving or from improving their house. Moving and improving generates business.

Zero job growth last month does not necessarily mean that business activity has slowed. In some cases, even business owners whose businesses have improved have decided not to hire, but to use overtime, build a backlog, or remain understaffed — even though each of these steps can be painful. Paying overtime costs more money. Delaying shipments or being understaffed can give your competitors an edge. Why would business owners do these things? Because these steps are safer than adding someone to the payroll, and these days safer feels better.

Right now, given the stock market fluctuations, the constant stream of scary news about the economy, and the even scarier politics we see in Washington, business owners are slow to hire new people unless there’s a very strong need. Think about what the owner faces if the business doesn’t materialize to justify the hire — like the horrendous task of laying people off, which scares the staff members who remain and produces a series of other costs. Many of us are just now recovering from our last round of layoffs, both emotionally and financially.

I sell home furnishings, custom picture framing and art. Although all of these industries have been affected, my business has been improving, and I’ve hired a few people this year. But I’m moving slowly. I can tell you one thing that is not going to get me to move faster: a payroll tax break. Why would anyone take on a new employee because of a one-year break on payroll taxes? Some owners might say they would do it — after all, who doesn’t want a tax break? — but the reality is that in most instances the owner would have hired that person anyway. Either you need someone or you don’t. If the government is going to spend money on jobs, I’d rather see it fix the streets and bridges, which really does create jobs (and inject money into the economy) — although whether that’s a good idea right now and whether the politics are plausible is another matter.

To make sense of this, you have to understand why even an owner who sees business improving might be hesitant to hire. Consider this situation:

You interview someone who has been out of work for 11 months. Let’s say he was in his previous job for 20 years, and now he’s regularly being told by job screeners that he is overqualified for the available position. In a good market, this person would not be available. You think it might actually be a good opportunity to bring someone valuable to your company — even though, because of his experience, you will have to pay him more money than you are accustomed to paying. You think it might be worth the shot, but your company is still in a precarious situation after the last few years. What do you have to lose, beyond the salary? Actually, you have quite a lot to lose. In fact, if it doesn’t work out, you could easily end up paying more in unemployment compensation than you do in salary.

If the new hire spends more than 30 working days with you but you have to let him go either because it’s not a good fit or because you were overly optimistic about the economy, he is eligible to collect unemployment. That, at least, is how it works in Illinois; the rules vary by state. Many people don’t realize that the government is not paying the bill for most of that compensation; companies are. The more people a company lays off, the more it pays in unemployment premiums. (I explained how this works in a previous post.)

In the above example, taking a chance on this person could cost a company $20,000 in increased unemployment premiums over the following three years. It makes sense for an employer to pay that kind of money for an employee who has been there for years. I understand and appreciate that unemployment compensation is an important lifeline for people who lose their jobs. But for 30 days? That’s a lot to ask — and it might even be counterproductive. In this environment, it just might be the difference in a decision not to hire someone. Business is about evaluating risks and rewards.

But that’s not all. After you let this employee go, he can go to the Equal Employment Opportunity Commission and file a complaint that he was fired because of his age. You will have to hire a lawyer. His lawyer will call your lawyer to try to settle. You will think, settle for what? For giving someone a chance? You will probably win, but that could take years and thousands of dollars in legal fees. This is why it’s safer — remember, safer is in — to not hire anyone and to continue working with a short staff. Is this good for the unemployed? The economy? The businesses? Anyone?

So what could the government do to encourage hiring? Here are two small suggestions:

First, stop punishing businesses for giving someone a chance. How about giving employers a six-month window before the company becomes liable for someone’s unemployment compensation? How about five months? Or four? But not 30 days. Of course, employees shouldn’t be punished either. If they are already collecting unemployment when they take a job, they should be able to resume collecting it if the job doesn’t work out –- but not at the expense of the business that gave them another chance.

And second, make the E.E.O.C. dismiss frivolous claims quicker. We all know that there are bad bosses doing things that need to be dealt with, but the example I’ve given is not uncommon — and it puts an unnecessary strain on small businesses that don’t have a legal department or even a human resources person for that matter.

This is my short list. Will these steps solve the problem and ignite a storm of hiring? No. But they will create a more hiring-friendly atmosphere while we wait for what we really need — an economy with people ready to spend money.

Jay Goltz owns five small businesses in Chicago.

Article source: http://feeds.nytimes.com/click.phdo?i=fa161c489670eb48b420f4caf954bed5

Small City, Big Debt Problems

“This is not simply a Central Falls issue — this is a statewide issue and even a national issue,” said Rhode Island’s governor, Lincoln D. Chafee, an independent, who as a senator was the only Republican to vote against the invasion of Iraq. “We have to match our revenue to our expenditures.”

Central Falls got into trouble, above all, by promising its police and firefighters generous retirement benefits without setting aside enough money to pay for them. The benefits were often determined by outside arbitrators, who were intent on resolving disputes rather than assessing whether towns could afford their promises. Weak accounting rules helped mask the scale of the problem for years.

Now Rhode Island’s smallest city has the same problem as Washington — the biggest overruns are in the programs hardest to cut, pensions and retiree health care.

After asking its retired police officers and firefighters for weeks to accept reduced benefits, Central Falls intends to impose its will in bankruptcy court. The retirees will get smaller pension checks, so small in some cases that the city is creating “circuit breakers” to make sure no one falls below $10,000 a year. Retirees will also have to pay a portion of their health care premiums.

Meanwhile, Central Falls’s bondholders appear to be unscathed, because a state law adopted last month asserts that general obligation bonds will pay even in bankruptcy.

The conundrum of Central Falls in dealing with its debt is much like the one in Washington and Europe: how far to extend the principle of shared sacrifice, and how much pain, if any, to inflict on various stakeholders, including workers, retirees, taxpayers and investors.

Rhode Island’s decision to protect its bondholders, intended to allay market fears and make sure the state’s cities can sell their bonds readily to finance their operations, will most likely be repeated by some other states and cities across the country.

Already, the mayors of three other cities in Rhode Island have said they expect to have to reduce the checks they now send retirees to bring their finances back into balance. And the state treasurer, Gina M. Raimondo, is calling for a restructuring of the state pension system that would affect both retirees and current workers.

Municipal bankruptcy filings have been rare, mostly involving small single-purpose districts, rather than cities or counties. But a number of cities continue to struggle with reduced property tax receipts, state cuts in aid, and dwindling federal expenditures for programs at the local level. Jefferson County, Ala., has said it will decide this week whether to declare bankruptcy, and Vallejo, Calif., has been in Chapter 9 for a grueling three years.

Elsewhere, cities like Harrisburg, Pa., have sought relief in special state programs that offer some of the same tools as the federal bankruptcy law. Rhode Island created such a program last year, and several mayors say they are considering it, because even after raising taxes, laying off workers and selling public assets, they cannot get ahead.

“Services have been cut to the bone,” said Robert G. Flanders, the state-appointed receiver for Central Falls who spoke Monday beside Governor Chafee. “Taxes have been raised to the maximum level allowable.”

Across the country, municipal dollars are increasingly being dedicated to retirement benefits at the expense of retaining current workers and providing services, he added. A handful of men in firefighters’ union T-shirts attended the Monday meeting, held in the sweltering City Council chambers, but declined to discuss their situation. Some said they were too angry to talk. The president of the firefighters’ union, Michael Andrews, said the union needed to review the details with its lawyers before commenting.

Sharp cuts in the pensions of people who have already retired are rare. Even in the private sector, a federal pension law prohibits pension cuts unless a company goes bankrupt. The federal government then takes over and covers many retirees’ benefits in full.

Those laws do not cover state or local workers, who generally consider their pensions protected under state law. They point to statutes and court decisions that indicate once a worker has a government job, his pension plan cannot be changed for the duration of his employment.

Elected officials have been reluctant to challenge this line of thinking, because state and local pensions have become a third-rail issue, much the way Social Security has for federal politicians.

Mr. Flanders said Central Falls had no choice. The pension fund for police and firefighters is expected to run out of money in October, and the city cannot afford to pay the current benefits out of its general fund.

Central Falls had “reached a critical fork in the road,” he said.

Article source: http://feeds.nytimes.com/click.phdo?i=68a6823134917c647eb44ea1241c09da

S.E.C. Leased Unneeded Space, Report Says

WASHINGTON — The Securities and Exchange Commission leased $556 million worth of office space last year based on a “deeply flawed and unsound analysis” of its needs, without competitive bids and using backdated approval forms to justify its rushed attempt to rent the offices, according a report by the agency’s inspector general released Tuesday.

The report, dated May 16 and posted Tuesday on the commission’s Web site, concludes that the S.E.C. may have violated federal law by committing the agency to lease office space before Congress had appropriated enough money to pay for the 10-year contract.

The actions “represent another in a long history of missteps and misguided leasing decisions made by the S.E.C. since it was granted independent leasing authority by Congress in 1990,” H. David Kotz, the S.E.C. inspector general, wrote in the report.

John Nester, an S.E.C. spokesman, said in a statement that the agency was “currently reviewing” the report. But it already has instituted some changes, he said. The changes include requiring leasing decisions to be approved by the agency’s chief operating officer, a recently created position, and acquiring a system that automates the square footage needs of the agency, “so that management is better able to calculate spacing.”

The leases for more than 900,000 square feet of office space, plus an option on 500,000 square feet more, came after Congress passed the Dodd-Frank act, which greatly expanded the S.E.C.’s role in financial regulation. The agency estimated that it would need to hire 800 staff members over the next two years to put into effect the new regulations required by the law.

Congress authorized a doubling of the S.E.C.’s budget over the next five years to pay for the additional duties, but it didn’t appropriate the money. Nevertheless, officials in the S.E.C.’s Office of Administrative Services leased the space.

In October, less than three months after signing the lease, the S.E.C. tried to give back two-thirds of the space, and in March of this year, it said it was trying to sublease the remainder of the offices. The owner of the building has asserted that the S.E.C. owes nearly $100 million in damages for its actions, which the S.E.C. disputes.

Part of the supporting documentation justifying the signing of a lease without competition was falsified, the inspector general found. A “justification and approval report” was not completed until a month after the lease was signed, but documents were pre-signed or altered to make it appear that the leasing authority was in place, the report said.

Article source: http://feeds.nytimes.com/click.phdo?i=496d53ae76fa638f9c86a6b8ff29bfab

Economix: Profits, Not Payrolls, Are Growing

As we’ve noted before, today’s job market woes are no longer because of layoffs. Layoffs, in fact, are at a record low. The problem today is that no one is hiring those people who were already laid off.

A case in point from the Associated Press:

TAUNTON, Mass. (AP) — A Massachusetts employment organization has canceled its annual job fair because not enough companies have come forward to offer jobs.

Richard Shafer, chairman of the Taunton Employment Task Force, says 20 to 25 employers are needed for the fair scheduled for April 6, but just 10 tables had been reserved. One table was reserved by a nonprofit that offers human services to job seekers, and three by temporary employment agencies.

Shafer tells the Taunton Daily Gazette the lack of employers means the task force won’t have enough money to properly advertise the fair.

The task force has been organizing the job fair nearly every year since 1984.

Shafer says the cancellation reflects the current economy — even though things are getting better, companies are still cautious about hiring full-time workers.

This abundance of caution is hardly unique to Taunton. Across the country companies are still reluctant to hire — even though they’ve been doing quite well financially.

According a report today from the Bureau of Economic Analysis, corporate profits rose 29.2 percent in 2010. That is the fastest growth in over 60 years.

Article source: http://feeds.nytimes.com/click.phdo?i=38e825c8de26e3184e26d3c8c115eb31