July 6, 2022

News Analysis: After Apple’s Rise, a Bruising Fall

Wall Street has turned viciously on its one-time iDarling. The rout in Apple’s share price — it fell nearly 2.7 percent on Thursday, bringing the damage since late September to 44 percent — has many wondering when, and where, all of this will end.

The answer, of course, is that no one really knows. Yes, Apple is slowing, as companies inevitably do. But Apple remains enormously profitable and the envy of corporations worldwide.

And yet Apple’s decline in the stock market has been so swift and so brutal that the development has begun to change the way investors view the company. Apple no longer looks like a sure thing.

It is a remarkable turn in one of the standout stock market stories of recent years. Only seven months ago, Apple’s share price raced above $700 to a record high, making Apple the most valuable company on the planet. By Thursday, the stock had sunk to $392.05, closing below $400 for the first time since late 2011.

The proximate cause of Thursday’s decline was news this week of a glut of audio chips at one of Apple’s suppliers. That, in turn, prompted concern that sales of iPhones might fall short of expectations.

But that was just one more bit of downbeat news in what has been a downbeat few months. All told, $290 billion has been wiped off Apple’s value since September. It might seem difficult to believe, but Apple now ranks among the biggest losers in the stock market over the last seven months, right next to the J. C. Penney Company, that sick man of American department stores. The last time Apple was trading this low was in November 2011. Steve Jobs had just died and everyone wondered how Apple would carry on without its visionary leader.

Stock price aside, Apple is bigger and, by some measures, stronger today that it was then. It sells more iPhones and iPads than ever. It is expanding its global reach. And it is making so much money — analysts expect the company to report another solid quarter next week — that it has been having trouble figuring out what to do with all of its cash. Speculation is rife that Apple might pass some cash to shareholders in the form of an increased stock dividend.

On one level, the Apple story is a common one on Wall Street: what goes up also goes down. As Apple’s stock price soared in recent years, some pointed out that the company’s sales couldn’t keep growing — and its share price couldn’t keep rising — at that rapid pace forever. In hindsight, Apple’s surge above $700 strikes some as irrational, as does its precipitous plunge back below $400.

“Overexuberance on the upside leads to herd behavior and panic during the correction,” said Avanidhar Subrahmanyam, an professor of behavioral finance at U.C.L.A. “People just panic and the stress hormone kicks in.”

One issue is that Apple is a favorite stock among individual investors. The investment firm SigFig estimated last fall that 17 percent of all retail investors owned Apple stock, four times the number that owns the average stock in the Dow Jones industrial average.

Trading by retail investors can be amplified by hedge funds, who see everyday investors piling in and push in the opposite direction by shorting the stock, betting it will decline. The so-called short interest in Apple reached a peak last November, but hasn’t gone down much since then, according to data from Nasdaq.

Aswath Damodaran, professor of finance at New York University, said the enthusiasm surrounding Apple last year prompted him to sell his own holdings in the company when the stock was around $610.

“I was terrified by the kinds of investors coming into Apple’s stock,” said Mr. Damodaran. “Not only were they coming in with unrealistic expectations, they were at war with each other.”

Recently, Mr. Damodaran began buying shares again, convinced that the fears had gone too far.

“Right now, Apple is being priced as though it has no future growth,” he said.

Article source: http://www.nytimes.com/2013/04/19/technology/after-apples-rise-a-bruising-fall.html?partner=rss&emc=rss

Hollywood Labor Fight Looms as Money for Benefits Wanes

LOS ANGELES — Bitter disputes over health and pension payments to union members have created plenty of drama in states and cities this year. But do not look for a movie about it — Hollywood will be too busy dealing with a labor crisis of its own.

After three relatively peaceful years, the entertainment industry is bracing for a showdown next spring. At issue is an enormous projected shortfall in financing for some of the most jealously guarded perks in show business, the heavily gilded health and pension plans.

No one is talking of a strike yet. In fact, no one with official standing is talking publicly. Leaders of the industry’s craft and blue-collar unions and officials of the Alliance of Motion Picture and Television Producers, which represents the studios and other production companies, have all declined to discuss what will happen when several contracts expire July 31.

But in town hall meetings over the last two months, union leaders have told members that weak industry economics, a tough investment climate and, above all, sharp increases in health care outlays are expected to create a $500 million shortfall by 2015.

“We’re going to be asking for money, lots of it,” Matthew Loeb, the president of the International Alliance of Theatrical Stage Employees (I.A.T.S.E.), told a gathering at the union’s Local 80 here in late September. His union represents about 50,000 set designers, makeup artists, grips and other film workers.

To put things in perspective, the contract that in 2008 settled a three-month strike by Hollywood’s writers was estimated to include total pay and benefits increases of less than a third that amount over three years. A subsequent, hard-fought three-year deal with the Screen Actors Guild, with about 120,000 members, cost the companies only about $250 million. One person involved with the pension and health plans, who spoke on condition of anonymity because of the delicacy of the situation, called the looming half-billion dollar shortfall “staggering.”

The workers represented under the stage employees’ contracts have been known more for making deals than picking fights. In years past, the union might have been at the bargaining table a year before the contract deadline; this time talks may not start until spring. The last full-blown craft strikes occurred more than a half-century ago, and involved a different configuration of unions; Hollywood’s Teamsters, the other major union headed for a 2012 showdown, have not staged a major strike since 1988.

But the current situation is volatile, partly because the Teamsters and some allied unions who share health and pension plans with I.A.T.S.E. aligned the expiration of their contracts with those of the larger theatrical workers alliance by shortening their last contract cycle to two years.

This time, those unions are expected to bargain jointly on health and pension issues. A walkout would instantly stop film and television production in the Los Angeles area, and would affect production in New York and elsewhere, because editors, camera crews and some others are represented on a national basis.

Hollywood’s guilds largely resolved their health and pension problems, at least for now, in several agreements over the last year or two. But the craft workers and other film laborers got caught in a whipsaw that involved the financial markets, changes to federal health care law, and some features that are peculiar to the financing and benefit structure of their plans.

In some ways, Hollywood’s blue-collar health plans are more generous than those covering actors, writers and directors, who are usually regarded as being higher in the pecking order.

At the gathering in September at Local 80, John Garner, a health care consultant with Levey, Garner Isaacs, told I.A.T.S.E. members their plans matched or exceeded those of the guilds and others in deductibles, office visit co-pays, member contributions and other measures.

Article source: http://feeds.nytimes.com/click.phdo?i=e4831e551f5d34b08f06ac28ff8cc980

Spanish Construction Firm Ousts Its Chief Executive

Luis del Rivero, the ousted chairman of the Spanish construction company Sacyr Vallehermoso, learned that the hard way this week.

After failing in his months-long crusade to shake up the management and strategy of Repsol YPF, the largest oil company in Spain, he became the victim of his own boardroom coup on Thursday. The board of Sacyr voted to remove Mr. del Rivero and replace him with the company’s chief executive and his longtime partner, Manuel Manrique.

The move throws into doubt the future of a pact that Sacyr, which owns 20 percent of Repsol’s stock, had signed with another large Repsol shareholder, Pemex, the Mexican state oil monopoly, to agitate for changes at Repsol.

Under the pact struck in August, the two companies agreed to vote together on the Repsol board, where Sacyr held three seats and Pemex held one. Pemex, which held about 4.8 percent of Repsol’s shares at that time, also began increasing its stake and now owns about 9.5 percent.

Before he was fired, Mr. del Rivero had been under increasing pressure as he struggled to refinance the 4.9 billion euros ($6.8 billion) loan that Sacyr had taken on to buy the Repsol stake in 2006. That loan is due Dec. 21, and his removal makes it more likely that Sacyr will sell some of its Repsol stake, worth nearly 5.3 billion euros ($7.3 billion) at current prices, to pay back the loan.

The debt had pushed Mr. del Rivero into a public feud with Repsol’s chairman and chief executive, Antonio Brufau Niubó, as he pushed Repsol to raise its dividend payments and separate the positions of chairman and chief executive.

The Repsol board instead backed Mr. Brufau’s strategy, which has been to invest more in oil exploration. And in late September, Repsol counterattacked. It changed its bylaws in an attempt to strip Pemex and Sacyr of their seats on Repsol’s board on the grounds of conflict of interest. Repsol also mounted a legal challenge to the pact struck by Sacyr and Pemex, arguing that it breached takeover rules.

Sacyr and Pemex had hoped to gain more seats on the board without making a takeover bid for Repsol, which would have been compulsory if their combined share had reached more than 30 percent.

Shares of Repsol rose in the initial days of the battle, but fell back as the standoff dragged on.

That put more pressure on debt-burdened Sacyr to find another approach, or a new leader.

Although Mr. del Rivero owns 13 percent of Sacyr, the company’s other leading shareholders, Demetrio Carceller and Juan Abelló, lined up support to get rid of him. Mr. Manrique, who himself has 6 percent of Sacyr stock, helped tip the balance in the vote to oust Mr. del Rivero.

“The reality is that del Rivero has been pushed out by other powerful shareholders from the Abelló and Carceller families, who had been his backers in Sacyr but got fed up with his mismanagement and shenanigans,” said Luis Arenzana, a partner of Shelter Island Capital Management in Madrid, an asset management company that owns shares in Repsol.

Mr. del Rivero was part of a generation of construction engineers who rode Spanish property development to become among the country’s most powerful entrepreneurs — with ambitions stretching far beyond the sector and Spain’s borders.

Together with Mr. Manrique and two others, he founded Sacyr in 1986 and then leapfrogged some rivals by buying Vallehermoso, a property subsidiary of Banco Santander. But some of Mr. del Rivero’s subsequent bids failed, notably an attempt in 2004 to gain control over the banking group BBVA, with the blessing of the incoming Socialist government, and a takeover bid for a French rival, Eiffage.

Pemex’s role in the Repsol fight was always puzzling, and the outcome is an embarrassment for its chief executive, Juan José Suárez Coppel. A Pemex spokesman said Friday that its pact with Sacyr remained in effect, but analysts said that the partnership was likely to dissolve with Mr. del Rivero’s ouster.

Pemex had long been a passive investor in Repsol, but after it struck the pact with Sacyr, it spent $1.6 billion to nearly double its stake.

Pemex’s goals were unclear, although Mr. Suárez Coppel has recently said he had hoped to persuade Repsol to share technology and work on joint projects with his company.

Now, he will have to justify why he allowed Pemex to get involved in a boardroom battle on the wrong side.

“It looks gloomy for Suárez Coppel,” said Luis Miguel Labardini, a partner at Marcos y Asociados, an energy consulting firm in Mexico City. “People are going to look at this as a failure.”

Petróleos Mexicanos, as the company is officially called, operates in a time warp that shuts it off from investment and cutting-edge technology. Because Mexican law prohibits any kind of foreign investment in the country’s oil industry, international oil companies are virtually barred from working in Mexico.

And it is almost impossible politically for Pemex to form a joint venture outside of Mexico. Pemex’s budget is set by the Mexican Congress, and its mandate is to develop Mexico’s oil industry. Spending taxpayer money to explore outside of Mexico would set off a political storm.

But Mr. Labardini said that in the end, the decision to raise its investment in Repsol would be profitable for Pemex.

“The decision is a good one, as a financial diversification strategy, even if the agreement with Sacyr doesn’t go through,” he said.

Article source: http://feeds.nytimes.com/click.phdo?i=96ac660e9d27342f56754aa7f2b995ff

Toyota and Honda Are Rebounding After Quake

That is how many who sell Toyotas, Hondas and some other Asian brands spent the summer after the devastating earthquake and tsunami that struck Japan in March caused widespread production disruptions at plants around the world.

Seven months later, nearly all auto plants have resumed full operation, with most running overtime to compensate for the output they lost. But carmakers say it will take until early next year for their dealers to be fully restocked and sales back to normal.

“This was something we’ve never seen before and hopefully never face again,” said Michael Robinet, an analyst with the research firm IHS Automotive.

August was the first month since the disaster that Toyota and Honda dealerships received more cars and trucks than they sold, according to Edmunds

.com, a Web site that tracks the auto industry. Toyota said all of its plants were back to full operation as of September, two to three months ahead of its initial estimates.

Still, getting vehicles from plants in Japan to American dealerships takes more than a month, and even models made at plants in the United States or Canada can spend several weeks in transit, depending on their destination.

“We’ve got a ways to go,” said Mike Shum, the general manager of Toyota Sunnyvale, a large dealership in California whose sales and inventories have been cut in half since the earthquake. “I don’t have them all on the ground yet, but I can see them coming.”

In late September, when Toyota introduced a redesigned version of the Camry midsize sedan, the Sunnyvale store had just eight of the cars in stock, including the outgoing model. Normally, it stocks about 150 Camrys.

The dealership has lost at least 1,000 sales this year because of the supply shortages, Mr. Shum said. It was sold out of the Prius, a hybrid car made in Japan, for much of the summer, though truckloads have been arriving much more frequently in recent weeks.

“Our flow of products, as we speak, is very good,” Robert S. Carter, Toyota’s vice president for United States sales, said. “It was nothing short of a miracle to get the supply chain back up and running, as complex as it is.”

The disruptions mean Toyota is all but guaranteed to lose its crown as the world’s largest automaker for 2011. In the first half of the year, it fell to third place, behind General Motors and Volkswagen.

In a year when high gas prices and increased demand for fuel-efficient vehicles could have brought big gains for Toyota and Honda, their inability to keep dealerships adequately stocked made them the only major automakers whose sales declined in 2011.

They are hoping to make up some of those lost sales in the coming months, but Mr. Carter, while promising a “very significant marketing effort” in the fourth quarter to draw shoppers back in, acknowledged that Toyota would inevitably sell fewer vehicles this year than last.

The quake halted a string of record-setting sales numbers by the smaller automaker Subaru, owned by Japan’s Fuji Heavy Industries. Subaru had to limit output in Japan and at its plant in Indiana, but inventories began rising again in September.

Nissan experienced some disruptions but was not affected as severely as Toyota and Honda. In August, Nissan began highlighting its quicker recovery in a television commercial that showed a fully loaded car carrier passing an exasperated Honda salesman who had no customers.

“Unlike some car companies, Nissan is running at 100 percent,” the ad’s voiceover said, “which means the most innovative cars are also the most available cars.”

Honda was hard hit because it has two major plants on the edge of the quake zone, and many of its suppliers sustained damage or had to evacuate because of radiation concerns. The company delayed the introduction of a revamped CR-V crossover vehicle, and it struggled to build enough of its redesigned Civic compact because dealers already had sold most inventory of the outgoing version.

Article source: http://www.nytimes.com/2011/10/14/automobiles/toyota-and-honda-are-rebounding-after-quake.html?partner=rss&emc=rss