rivals

Spirit Airlines Banks on Few Frills, and More Fees

May 31, 2013 by NewsMaker Leave a Comment

No one has tried that — at least not yet — but one small airline has led the way in the United States when it comes to passenger fees: Spirit Airlines, the no-frills carrier that prides itself for offering the lowest fares, then charging passengers for everything else.

Need an agent to print out a boarding pass at the airport? That’s $10. Want some water? That’s $3. Rolling a bag on board? The tag costs $35 from home and $50 at the airport. In all, there are about 70 fees enumerated in dizzying detail on Spirit’s Web site for customers to navigate.

To the millions of travelers flying on vacation this summer, the fees can be infuriating, but Spirit makes no apologies. In an age of consolidation in the airline industry, Spirit, with about 1 percent of the nation’s passenger traffic, has managed to succeed by going it alone, scraping for every dollar and scrimping on every cost.

“Spirit does everything it can to make or save a buck,” said Henry Harteveldt, a travel analyst with Hudson Crossing. “To its credit, Spirit doesn’t promise passengers that they’ll be coddled. Its customer service standards are terrible, and the airline’s actions have shown it doesn’t care about being liked or respected.”

The driving force behind that strategy is Spirit’s chief executive, Ben Baldanza, 51, an industry veteran who arrived at Spirit eight years ago with no experience at a no-frills airline. Along with an obsessive attention to keeping costs low, Mr. Baldanza argues that the cornucopia of fees allows the airline to keep its fares lower than rivals. The airline, known for its tasteless ads (during the presidential election, one ad talked of Spirit having “binders full of sales. Women will love them!”) is modeled after Ryanair, which charges low fares for flights throughout Europe with a minimalist approach to customer service.

“I cringe a little when people say I don’t care about customers,” said Mr. Baldanza, who brims with missionary zeal. “We care about the thing that customers tell us they care the most about, and that’s offering the lowest possible fares. The customers who fly Spirit absolutely understand the trade-off.”

On a recent day at La Guardia Airport, passengers seemed to be taking the fees in stride. Two students forgot about the fee that Spirit charges for carry-on bags. That did little to reduce their enthusiasm to fly to Las Vegas despite the early loss. Kevin Reed, a photographer flying to Myrtle Beach, S.C., paid an extra $10 on top of a $35 checked-bag fee because he failed to do so when he bought his ticket.

“They got me there,” he said, shrugging. “But I’m still saving $400 over flying with Delta.”

Not every customer has the same reaction, though. Spirit is routinely rated as the nation’s worst airline because some travelers deem the fees unfair. The Transportation Department receives far more complaints about Spirit than other carriers, with 6 to 8 complaints per 100,000 passengers compared with the industry average of 1.4. And Spirit’s on-time record is similarly abysmal, at 68.8 percent compared with 80 percent for the industry average. The best airlines are in the mid-90s.

Critics point out that the inflation of air travel fees makes it increasingly difficult to compare the cost of travel between airlines.

“The fee-for-everything technique allows airfares to be advertised as much lower than the overall cost,” said Paul Hudson, the president of FlyersRights.org, a consumer group.

Mr. Baldanza acknowledged that the process can be tricky. “You can’t sleepwalk through the process,” he said.

But the model has allowed Spirit to offer cheap tickets. Since 2008, Spirit’s airfare has dropped by 20 percent, averaging $75 in 2012 compared with $94 in 2008. The difference often jumps out at a customer searching for flights. On Friday, Spirit was offering a nonstop flight from Oakland, Calif., to Portland, Ore., in mid-July for $156; the same trip was $296 on Delta.

Because of its growing list of fees, however, nonticket revenues grew to $51.39 in 2012, from $18.61 in 2008. As a result, while fares fell, Spirit’s total revenue per passenger grew by 12 percent from 2008 to 2012, reaching $126.50. Fees now account for 41 percent of Spirit’s revenues, an industry record.

Article source: http://www.nytimes.com/2013/06/01/business/spirit-airlines-banks-on-few-frills-and-more-fees.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: cornucopia, driving force, rivals

F.T.C. Said to Have Begun New Inquiry on Google

May 24, 2013 by NewsMaker Leave a Comment

People who have been contacted in connection with the inquiry said that the F.T.C. had begun asking questions about Google’s practices, specifically whether the company was bundling advertising services together in a way that prohibited rivals from competing for the business of advertisers.

The F.T.C. said in December 2007 that it would monitor Google’s practices in that area. At that time, the commission found that Google’s proposed acquisition of DoubleClick, an online advertising company that specialized in display ads, was “unlikely to substantially lessen competition.”

“We want to be clear, however,” the F.T.C. wrote at the time, “that we will continue to watch these markets and, should Google engage in unlawful tying or other anticompetitive conduct, the commission intends to act quickly.”

Officials at the F.T.C. and Google declined to comment Friday on the possibility of a new inquiry, which was first reported Thursday evening by Bloomberg News. One person close to the matter, who spoke on the condition of anonymity because the inquiry is in its early stages, said the F.T.C. had not yet contacted Google about a new antitrust inquiry.

Another person who has been briefed on the F.T.C.’s work said that the commissioners themselves had not approved the issuance of subpoenas or civil investigative demands, which would be part of any formal investigation.

The F.T.C. closed an antitrust investigation of Google’s search business less than five months ago, voting unanimously not to proceed with an antitrust case after months of pressure from Google’s rivals.

That investigation focused on how Google’s search engine presented results of consumer queries, and whether the company purposely gave higher rankings and more prominent display to results that featured its own businesses.

In the new inquiry, according to a person in the advertising business who said he was contacted by the F.T.C., commission staff members asked about Google’s practices in providing, or serving, advertisements to customers’ Web sites and about the practices of its Ad Exchange, where companies bid on opportunities to aim at certain consumers with ads.

F.T.C. officials were interested in whether Google was tying one application to another by offering below-cost pricing in exchange for a customer’s guarantee not to buy ads through Google’s competitors, the person said.

At the time it approved the DoubleClick deal, the F.T.C. said it also would monitor issues concerning consumer privacy, including whether the collection of information from one part of Google’s business – for example, its search operation – was being used in its other units to unfairly exploit its size and drive rivals from the market.

Article source: http://www.nytimes.com/2013/05/25/technology/ftc-said-to-have-begun-new-inquiry-on-google.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: doubleclick, issuance, rivals

F.T.C. Is Said to Have Begun a New Inquiry on Google

May 24, 2013 by NewsMaker Leave a Comment

At the time it approved the DoubleClick deal, the F.T.C. said it also would monitor issues concerning consumer privacy, including whether the collection of information from one part of Google’s business — for example, its search operation — was being used in its other units to unfairly exploit its size and drive rivals from the market.

Article source: http://www.nytimes.com/2013/05/25/technology/ftc-said-to-have-begun-new-inquiry-on-google.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: advertising services, doubleclick, rivals

Britain Accuses GlaxoSmithKline of Conspiring With Rivals

April 19, 2013 by NewsMaker Leave a Comment

The Office of Fair Trading alleged that GlaxoSmithKline had abused its dominant position in the market, kept prices artificially high and denied “significant cost savings” to Britain’s state-run health provider, the National Health Service.

The case centers on efforts by three companies, Alpharma, Generics (U.K.) and Norton Healthcare, to market an alternative to Seroxat, GlaxoSmithKline’s brand of paroxetine.

The three were warned by GlaxoSmithKline that their generic equivalents would infringe a patent. To resolve the dispute, each of the rivals concluded one or more agreements with GlaxoSmithKline, the Office of Fair Trading said.

“The O.F.T.’s provisional view is that these agreements included substantial payments from GlaxoSmithKline to the generic companies in return for their commitment to delay their plans to supply paroxetine independently,” the regulator said. The agreements with the three companies collectively spanned the years 2001 to 2004, it said.

GlaxoSmithKline said it believed “very strongly” that it had “acted within the law, as the holder of valid patents for paroxetine, in entering the agreements under investigation.”

“These arrangements resulted in other paroxetine products entering the market before GSK’s patents had expired,” the company said. “We have cooperated fully with the Office of Fair Trading in this investigation.”

The company noted that European Union regulators had reviewed the agreements twice and decided to take no action.

At the time Seroxat was one of GlaxoSmithKline’s best-selling drugs and was used to treat, among other conditions, depression and anxiety disorders, the Office of Fair Trading said.

“The introduction of generic medicines can lead to strong competition on price, which can drive savings for the N.H.S., to the benefit of patients and, ultimately, taxpayers,” said Ann Pope, senior director of services, infrastructure and public markets at the Office of Fair Trading. “It is therefore particularly important that the O.F.T. fully investigates concerns that independent generic entry may have been delayed in this case.”

The action Friday was the first step in formal proceedings: the issuance of a Statement of Objections. The parties involved, which include the three generic companies, can then make written and oral responses.

“No assumption should be made at this stage that there has been an infringement of competition law,” Ms. Pope said. “We will carefully consider the parties’ representations to the Statement of Objections before deciding whether competition law has in fact been infringed.”

If ultimately found to be in breach of antitrust law, a company can in theory be fined up to 10 percent of its worldwide revenue, though financial penalties rarely reach those sorts of levels.

Article source: http://www.nytimes.com/2013/04/20/business/global/britain-accuses-glaxosmithkline-of-conspiring-with-rivals.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: generics, national health service, rivals

DealBook: At Banks, Board Pay Soars Amid Cutbacks

April 1, 2013 by NewsMaker Leave a Comment

Manny Ceneta/Agence France-PresseStephen Friedman, President Bush’s former economic adviser, is one of the top earners on Goldman’s board, making $503,287 in 2011.

Wall Street pay, while lucrative, isn’t what it used to be — unless you are a board member.

Since the financial crisis, compensation for the directors of the nation’s biggest banks has continued to rise even as the banks themselves, facing difficult markets and regulatory pressures, are reining in bonuses and pay.

Take Goldman Sachs, where the average annual compensation for a director — essentially a part-time job — was $488,709 in 2011, the last year for which data is available, up more than 50 percent from 2008, according to Equilar, a compensation data firm. Some of the firm’s 13 directors make more than $500,000 because they have extra responsibilities.

And those numbers are likely to skyrocket for 2012 because the firm’s shares rose more than 35 percent last year and its directors are paid in stock. Goldman Sachs is expected to release fresh pay data in the coming weeks.

Goldman’s board is the best compensated of any big American bank and the fifth-highest paid of any company in the country, according to Equilar. Some of its rivals are not that far behind. The nation’s biggest banks paid their directors over $95,000 a year more on average in 2011 than what other large corporations paid.

Goldman defends the board’s pay, saying that the bulk of the compensation is in stock that directors cannot touch until after they have left the board.

That arrangement, the firm says, aligns directors’ interests with those of shareholders.

“The board’s pay is set at a level that reflects the firm’s long-term performance as well as directors’ substantial time commitment and the increased demands placed on them in recent years by new laws and regulations,” said David Wells, a Goldman spokesman.

More broadly, banks and compensation experts say, financial firms must now pay a premium to entice and keep qualified directors.

After the financial crisis, some financial firms’ boards were criticized for being asleep at the wheel and not understanding the risks being taken. Recruiters say banks are redoubling efforts to recruit directors with more financial expertise who can exercise better oversight.

Yet it is also a balancing act, because too much pay may end up giving boards an incentive to not rock the boat.

Some Wall Street insiders also question the need to pay bank directors more than their counterparts at other big corporations, arguing that the increased regulation has actually limited bank boards’ ability to perform important tasks, like raising capital and issuing dividends. Even when it comes to paying senior executives, boards have less leeway because regulators have pressured boards to bring down executive pay.

“About the only thing bank directors have more of these days is meetings,” joked one senior Wall Street executive who has frequent interaction with his board but spoke on the condition he not be named because he was not authorized to speak on the record.

“Regulators have all but stripped boards of the main powers they had before the crisis.”

After Goldman, Morgan Stanley’s director pay is the second highest on Wall Street, with an average of $351,080, roughly the same as it was in 2008 but much higher than the pay at bigger and more complicated rivals like JPMorgan Chase and Citigroup.

Board pay at Morgan Stanley has drawn criticism from Daniel S. Loeb’s hedge fund, Third Point, which recently bought 7.8 million shares, or a 0.4 percent stake, in the firm. While praising Morgan Stanley and its management, Mr. Loeb said in a letter to investors how “surprised” he was about how much its directors received.

“We hope Morgan Stanley will show that its reinvention begins at the top and set an example for the company by quickly revising its board practices,” he wrote.

At Citigroup, directors make an average of $315,000 a year, according to Equilar, up 64 percent from 2008. The value of the annual cash retainer and deferred stock award Citigroup directors receive has not changed since 2005, but the pay for additional work, like leading a committee, has risen.

Of the five financial institutions to have reported director pay for 2012, JPMorgan is the biggest, but it gives its directors compensation, on average, worth $278,194 each. Only Bank of America, where directors are paid $275,000 each, pays less.

All told, the average compensation for a director at one of the six biggest banks in 2011 was $328,655, according to Equilar. This compares with $232,142 at almost 500 publicly traded companies analyzed in a study by the executive search firm Spencer Stuart. In 2012, that number rose to $242,385.

“I get you have to pay up for sophisticated board, but what is that complexity worth?” said Timothy M. Ghriskey, co-founder of the Solaris Group, a financial services shareholder that voted in 2011 to reject a pay plan for top executives at Citigroup. “Does it take $200,000 or $500,000? The discrepancy between a board like JPMorgan and Goldman is confusing.”

This spring, the big banks will hold shareholder meetings. While executive pay is often a hot-button issue, Mr. Ghriskey said it was unlikely that there would be a shareholder revolt on board pay this year, in part because the numbers aren’t that big on an individual basis.

Still, Lynn Joy, a senior adviser with the executive pay consulting firm Exequity, said board pay deserved more attention, especially at financial firms, which are looking to cut costs.

Shareholders, she said, should look at the total cost of operating a board. In the case of Goldman, its 11 independent directors make roughly $5 million, and the cost of holding board meetings, sometimes overseas, can run many millions more. “It adds up,” she said.

Shareholders vote on directors, but a board almost always sets director pay packages, in consultation with compensation experts.

For any director, the work comes in fits and starts. Bank boards met more frequently during the financial crisis to plot strategy, and Citigroup’s directors put in extra time last year in their discussions over whether to replace Vikram S. Pandit, the bank’s chief executive.

While board pay has increased at every major bank, the rise is most pronounced at Goldman, in part because directors’ compensation is driven by the value of the firm’s stock, which closed on Thursday at $147.15.

While compensation for Goldman directors is up substantially from 2008, it is actually down from 2007, when the stock price was higher and directors were paid an average of $670,292 each, according to Equilar.

In 2011, Goldman directors were each granted 2,500 shares, with a value of more than $250,000. This is on top of an annual retainer of stock valued at $75,000. A director who is a chairman of a board committee is paid more.

Goldman’s directors met 15 times in 2011, and there were more meetings that involved only the firm’s independent directors.

Stephen Friedman and James A. Johnson are the top earners on Goldman’s board, each making $503,287 for their service that year, according to Equilar.

In 2009, during the height of the financial crisis, Goldman directors decided to take no compensation for their service.

Other banks pay some cash and grant stock up to a certain dollar amount, limiting the value. At JPMorgan, for example, directors are compensated for extra duties, but the value of their main share grant cannot exceed $170,000.

In a regulatory filing explaining the pay of its board, Goldman noted that directors could not sell the stock grants until they left the board, and even then there was a waiting period. The firm also said independent directors did not get paid to attend meetings, a practice on some other boards.

“While the Goldman pay is high, the directors are paid all in equity that cannot be cashed until they leave the board,” added Lucian A. Bebchuk, a professor at Harvard Law School. “These features are beneficial for shareholders but reduce the value of the compensation for the directors.”

Investment Bank Director Pay

A version of this article appeared in print on 04/01/2013, on page A1 of the NewYork edition with the headline: Pay for Boards At Banks Soars Amid Cutbacks.

Article source: http://dealbook.nytimes.com/2013/03/31/pay-for-boards-at-banks-soars-amid-cutbacks/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: equilar, new laws, rivals

Auto Turnaround Is a Boon for Ford Chief

March 15, 2013 by NewsMaker Leave a Comment

Ford said on Friday that it paid Alan R. Mulally, the chief executive, about $21 million last year, and paid $14.8 million to its executive chairman, William C. Ford Jr.

Mr. Mulally’s bonuses dropped to $4 million, from $5.4 million in 2011, with a steep drop in his stock awards and other compensation to about $15 million last year, from about $22 million the year before. Those reductions were based on the company’s falling short of overall performance targets, especially cash flow goals.

Despite the decrease, he remains among the highest-paid auto executives in the world, earning at least $20 million for a third consecutive year for his role in streamlining the nation’s second-largest carmaker and returning it to consistent profitability.

Over all, the company earned $5.67 billion in profits last year, a 5 percent drop from 2011 excluding one-time valuation changes.

Its profits were hurt last year by big losses in the troubled European market, but Ford continued to post record pretax profits in its core North American market. The company also was returned to investment grade by ratings agencies, and it reinstated its dividend.

Mr. Mulally, who is 67, was recruited to Ford in 2006 just as the Detroit automakers were tumbling into a financial crisis that would force the company’s two main rivals, General Motors and Chrysler, to seek government bailouts and file for bankruptcy.

Ford survived without federal help and has thrived since, posting pretax profits for 14 consecutive quarters through the end of 2012, while improving revenue and market share.

G.M., the largest American car company, paid Daniel Akerson, its chairman and chief executive, about $11 million last year.

The company has not yet revealed its compensation data for 2012, but last month submitted documents to Congress that said it was proposing to pay Mr. Akerson $11.1 million this year.

G.M. said that figure was the same level as Mr. Akerson received in 2012, making his compensation among the highest for seven bailed-out companies that remain under pay restrictions imposed by the Treasury Department.

Chrysler’s chief executive, Sergio Marchionne, received $1.2 million in compensation in 2012. That does not include his pay as chief executive of Chrysler’s parent company, the Italian automaker Fiat.

The pay levels at G.M. and Ford far exceed what the companies were paying their executives a few years ago, when the automakers were losing billions of dollars, shutting factories and eliminating thousands of hourly and salaried jobs.

In 2005, for example, Mr. Ford, who then served as chief executive and chairman of Ford, agreed to take no compensation until the company became profitable again.

He then recruited Mr. Mulally from the aircraft company Boeing, a move that started Ford’s revival.

Since joining Ford, Mr. Mulally has earned more than $160 million in compensation. He also has been given stock awards totaling about $126 million, according to figures compiled by Bloomberg News Service.

“We believe our 2012 performance clearly shows our management team performed exceedingly well in a difficult environment,” Ford said in a statement.

Mr. Mulally has indicated that he will retire from Ford by 2014. The odds-on choice to succeed him is Mark Fields, who was promoted to chief operating officer in December after leading the company’s Americas division for several years.

Mr. Fields earned about $8.6 million in total compensation from Ford in 2012, a slight increase from the previous year.

The healthy pay packages come as Ford and other automakers anticipate another strong year in the revitalized American car market.

Sales of all new vehicles have risen 8 percent through February, compared with the same period a year ago. The industry is on track to sell more than 15 million new cars and trucks in 2013 — the first time that level has been reached since 2007.

While Ford’s executives are enjoying the rewards of the company’s comeback, so are its workers.

Because of its hefty earnings last year in North America, Ford will pay an average of $8,300 in profit-sharing checks to each of its 45,000 union workers in the United States.

Article source: http://www.nytimes.com/2013/03/16/business/another-lucrative-year-for-car-executives.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: compensation data, general motors, rivals

DealBook: Avis to Buy Zipcar for $500 Million

January 2, 2013 by NewsMaker Leave a Comment

4:27 p.m. | Updated

The Avis Budget Group said on Wednesday that it had agreed to acquire the car-sharing pioneer Zipcar for $500 million in cash.

The deal represents a new direction for Avis in the fiercely competitive car rental market. Rivals Hertz Global and Enterprise each have hourly rental operations that compete with Zipcar. These rentals tend to have younger, more urban customers than traditional business or leisure travelers. And the Zipcar acquisition comes just months after Hertz clinched a takeover of Dollar Thrifty Automotive group.

Ronald L. Nelson, Avis’s chief executive, acknowledged the change in a conference call with analysts on Wednesday morning, saying: “As some of you may recall, I’ve been somewhat dismissive of car sharing in the past, but what I’ve come to realize is that car sharing, particularly on the scale that Zipcar has achieved and will achieve, is complementary to our traditional business — traditional car rental model. It substantially expands our addressable market by enabling us to capture new transportation usage occasions not well served by our traditional model. It enables us to serve new, younger, more wired consumers that our existing brands don’t always connect with.”

Shares of Zipcar closed up nearly 48 percent, at $12.18. Shares of Avis also gained, rising nearly 5 percent, to $20.77.

Avis’s offer of $12.25 a share represents a premium of 49 percent over Zipcar’s closing stock price of $8.24 at the end of 2012. The company, based in Cambridge, Mass., rents vehicles by the hour or the day, and it went public in April 2011 at $18 a share.

Founded in 2000, Zipcar says it has more than 760,000 members, referred to as Zipsters. It is in 20 metropolitan areas in the United States, Canada and Europe, as well as located near many college campuses.

In November, Zipcar said that it expected to end its fiscal year with a profit of as much as $4 million — its first annual profit. That forecast came as the company reported a 15 percent gain in third-quarter revenue, to $78 million, from the year-ago period.

Avis said it expected to reap significant cost reductions in acquiring Zipcar, including savings on its fleet. It also said Avis’s fleet could meet more of Zipcar’s heavy weekend demand. Avis said it expected annual “synergies” of $50 million to $70 million.

When the deal is completed, Zipcar will operate as a subsidiary of Avis in new headquarters in Boston. Scott W. Griffith, Zipcar’s chief executive, and Mark D. Norman, its president and chief operating officer, are expected to stay on.

The venture capital firms Benchmark Capital, Greylock Partners and the AOL co-founder Stephen Case’s Revolution have been among Zipcar’s backers. Revolution is currently its largest shareholder, with a 17.1 percent stake.

In 2007, Zipcar had merged with a car-sharing rival, Flexcar.

Citigroup and the law firm Kirkland Ellis is advising Avis Budget. Morgan Stanley and the law firm Latham Watkins is advising Zipcar.

Article source: http://dealbook.nytimes.com/2013/01/02/avis-to-buy-zipcar-for-500-million/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: dollar thrifty automotive group, rental model, rivals

Hitachi’s Revival Isn’t So Good for the City of Hitachi

December 29, 2012 by NewsMaker Leave a Comment

Since its 787 billion yen, or $9.2 billion, loss in 2009, Hitachi has staged an impressive turnaround, booking a record 347 billion yen ($4 billion) in net profit in the year through March 2012, while rivals like Sony, Sharp and Panasonic continue to struggle.

But in Hitachi, a city of 190,00 and the company’s longtime production hub, there is little celebrating. Instead, the deserted streets and shuttered workshops speak of the heavy toll levied by the aggressive streamlining, cost-cutting and offshoring that has underpinned Hitachi’s recovery.

The divergent fortunes of Hitachi and its home city highlight an uncomfortable reality: The bold steps that could revive Japan’s ailing electronics giants are unlikely to bring back the jobs, opportunities and growth that the country desperately needs to revive its economy.

The way forward for Japan’s embattled electronics sector, for now, is a globalization strategy that shifts production and procurement from high-cost Japan to more competitive locations overseas. As Japan’s manufacturing giants become truly global, a country that has so depended on its manufacturers for growth must look to other sources of jobs and opportunity, like its nascent entrepreneurs — a transformation far more easily said than done.

“Closing plants in Japan is a big deal, and we don’t take cutbacks lightly,” Hiroaki Nakanishi, Hitachi’s president and chief executive, said in a year-end interview in Tokyo. “But to return to growth, we have to cut loose what doesn’t bring profit. We have to be decisive.”

Japan is still grappling with the fallout from a decade-long, seemingly unstoppable decline of its electronics sector, once a driver of growth and a bedrock of its economy. Japan’s two biggest electronics companies, Hitachi and Panasonic, each have more in sales than the country’s entire agricultural sector, and other big electronics firms come close.

But for more than a decade, these technology companies have experienced little growth. Annual sales growth over the last 15 years at Japan’s top eight tech companies averages around zero, according to Eurotechnology Japan, a research and consulting company in Tokyo.

To blame are plunging prices across the board for their products, brought about by intense competition from rivals in South Korea and Taiwan as electronics increasingly become widely interchangeable. Overstretched and unfocused, Japan’s tech giants also ceded much of their cutting edge to more innovative companies like Apple. Japan’s failure to keep up with a shift in the industry to software and services has compounded those woes.

Above all, the high costs of operating in Japan, made worse by a strong yen, weighs heavily on exporters’ finances. In the year through March 2012, Panasonic, Sony and Sharp lost a combined $19 billion — more than the gross domestic product of Jamaica.

Still, even among its peers, Hitachi stood out for the depth of its losses. After a decade of little or negative growth, Hitachi fell first and hardest, booking its big loss at the height of the global financial crisis because of large write-downs and losses in its electronics businesses.

Local media went into a frenzy over what it called “Hitachi shock,” while the company’s shares slumped to a third of precrisis levels. Hitachi executives warned the company’s future was on the line.

“Can a massive elephant, one that has always sat on its behind instead of changing, hope to change now?” an editorial in the Nikkei business daily wondered at the time.

Hitachi’s appraisal of its operations since then, and its willingness to wield the ax to money-losing businesses, has surprised even the most dismissive of analysts.

Hitachi once had almost 400,000 employees at a thousand often overlapping and competing groups, making products as diverse as televisions, hard disk drives, chips, heated toilet seats, elevators and nuclear reactors. Under the leadership of Mr. Nakanishi, who took the helm in 2010, the company has substantially shrunk or sold money-losing businesses, including those making chips, flat-panel TVs, liquid crystal displays, mobile handsets and personal computers.

Makiko Inoue contributed research from Tokyo.

Article source: http://www.nytimes.com/2012/12/29/business/hitachis-revival-isnt-so-good-for-the-city-of-hitachi.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: fallout, globalization strategy, rivals

Bits Blog: Microsoft Surface to Start at $500

October 16, 2012 by NewsMaker Leave a Comment

David Mcnew/Reuters The Surface tablet, as displayed by Microsoft in June.

As the days tick down to Microsoft’s introduction of its Surface tablet, the company has revealed how it plans to price the product — more like Apple than Amazon.

Instead of adopting Amazon’s lower pricing on the Kindle Fire, Microsoft said it would sell Surface for a starting price of $500, the same starting price as the current generation of Apple’s iPad. People who buy that Surface model will get some extra perks though, including 32 gigabytes of storage — twice the amount of the cheapest third-generation iPad — and a 10.6-inch display, rather than the iPad’s 9.7-inch display.

Microsoft said it would sell a 32-gigabyte Surface bundled with a black Touch Cover, a keyboard that doubles as a protective shield for the tablet, for $600. A similar bundle with a 64-gigabyte Surface will cost $700. Microsoft will sell Touch Covers separately in a wider assortment of colors for $120, and a different type of keyboard cover with moving keys, called Type Cover, will sell for $130.

It’s clear Microsoft is aiming Surface at what is shaping up to be the premium portion of the tablet market, which Apple currently dominates. Amazon, in contrast, seems intent on using price as a weapon to gain market share against its rivals. The company recently introduced an 8.9-inch-screen Kindle Fire that starts at $300.

Microsoft has not yet said whether it will bring out a version of Surface that competes in the small-screen tablet category. Google’s Nexus 7 tablet starts at $200, while Amazon’s seven-inch Kindle Fire starts at $160. Apple is expected to announce a new, smaller iPad next week.

Surface will go on sale Oct. 26 in Microsoft retail stores in the United States and Canada. The company said the product would be sold online in Britain, China, France, Germany and several other countries. Microsoft said a limited quantity will be available for ordering on Tuesday at noon Eastern time.

The company also began showing a new Surface television commercial on Monday evening, featuring an odd collection of foot-stomping girls in school uniforms and dancers using their Surface tablets as percussion instruments.

Article source: http://bits.blogs.nytimes.com/2012/10/16/microsoft-surface-to-start-at-499/?partner=rss&emc=rss

Filed Under: Business News Tagged With: assortment, google, rivals

DealBook: TD Ameritrade and Scottrade Resume Sending Orders to Knight

August 4, 2012 by NewsMaker Leave a Comment

Two major brokerage firms said on Friday afternoon that they had resumed sending client orders to the Knight Capital Group, in a potential boost of confidence for the beleaguered trading firm.

TD Ameritrade and Scottrade said separately that they were again routing trades to Knight, after having pulled their business from the firm on Thursday. Many of Wall Street’s biggest brokerage firms had withdrawn, unsure of the firm’s state after it disclosed a $440 million loss tied to a trading software glitch.

“After considerable review and discussion, we are resuming our order routing relationship with Knight,” Fred Tomczyk, TD Ameritrade’s chief executive, said in a statement. “Our priority has always been the interests of our clients, their trades and their assets. Knight is one of many order routing destinations for us and has long been a good and trusted partner.”

Whitney Ellis, a spokesman for Scottrade, said his firm had begun sending orders to Knight around 12:35 p.m. on Friday.

It is not clear whether other clients have returned as well. Earlier on Friday, representatives for Vanguard and E*Trade said that they had had not.

On Thursday, Knight had asked some of its clients to stop sending it orders, while it retested its systems. But on Friday, firm executives called other trading shops, assuring them that it had locked up financing to operate throughout the day and asking them to resume routing client orders.

Timeline: Trading Errors

The firm has contacted a number of potential buyers for at least some of its businesses, as it races to stabilize its finances through the weekend. Knight and its advisers have been soliciting potential suitors for various parts of its businesses, including rivals like Citadel and Virtu Financial, according to people briefed on the matter.

Shares in Knight were up by 62 percent as of midafternoon trading, at $4.15. They had plummeted 75 percent between Wednesday, when its trading software broke down, and Thursday, when it disclosed the $440 million loss.

Article source: http://dealbook.nytimes.com/2012/08/03/td-ameritrade-and-scottrade-resume-sending-orders-to-knight/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: rivals, td ameritrade, wall street

A version of this article appeared in print on 04/01/2013, on page A1 of the NewYork edition with the headline: Pay for Boards At Banks Soars Amid Cutbacks.

Timeline: Trading Errors

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