slump

Japan’s Economy Growing at 3.5% Annualized Rate

May 15, 2013 by NewsMaker Leave a Comment

TOKYO — Japan’s economy grew at a robust annualized pace of 3.5 percent in the first quarter, preliminary data showed, the first sign that the bold monetary and economic policies of Prime Minister Shinzo Abe were starting to bear fruit.

Japanese growth came to 0.9 percent for the January-to-March period compared with a year ago, driven by higher household consumption and exports, government data showed. That beat market expectations of 0.7 percent for the quarter, or 2.8 percent for the annualized pace.

Exports grew 3.8 percent, pushed higher by strong shipments of cars and other manufactured goods to the United States on the back of a weaker yen, offsetting a slump in exports to China and Europe.

Personal consumption, which makes up the largest part of Japan’s gross domestic product, grew 0.9 percent, as consumer sentiment brightened amid signs of an economic recovery.

The solid pace, which came after two quarters of contraction and a quarter of just 0.2 percent growth, appeared to point to the beginnings of a long-awaited turnaround in the world’s third-largest economy, after the United States and China. “It is a sign that the Abe administration’s economic policies are starting to show results,” the economics minister, Akira Amari, said.

The latest numbers have come as early validation for Mr. Abe, who took office in December, and has used what has been called a three-arrowed bid to lift Japan out of its long deflationary slump. He has focused on an aggressive monetary policy that has flooded the economy with cheap money, major fiscal spending and reforms to make the economy more competitive.

Under Mr. Abe, the central bank has sought to double its monetary base and to generate inflation of 2 percent by 2014. This first arrow has been accompanied by a devaluation of the yen by some 20 percent in the last six months, which has been a boon for exporters. Exporters from Toyota to Sony have reported a rebound in profit in the first quarter of 2013, thanks in good part to the policy.

In recent days, however, concerns have grown over rising interest rates in the government bonds market, which could threaten Japan’s monetary policy. Japan is vulnerable to rising borrowing because of its high public debt burden, which is twice the size of its economy.

Still, investors have piled into Japan’s stock market, emboldened by expectations of rosy corporate profits and an economic recovery. The Nikkei stock index has risen by an astonishing 46 percent since Mr. Abe took office.

Japan is also getting a boost from the second arrow, more fiscal spending. Mr. Abe pushed through an emergency stimulus package of 10 trillion yen in February, and has followed up with a 92.6 trillion yen initial budget for 2013, which Japan’s Parliament approved late Wednesday.

Economists say that for the economy to keep growing, the third arrow will be crucial: mainly structural reforms that aim to make the economy more competitive, for example by making Japan’s labor market more flexible and lowering barriers to trade.

“For the rally to continue and be fundamentally driven, Abe must convince the market that his ‘third arrow’ will benefit Japan’s underlying economy,” the UBS economists Daiju Aoki and Toru Ibayashi said.

Article source: http://www.nytimes.com/2013/05/16/business/global/japans-economy-growing-at-3-5-annualized-rate.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: economic policies, monetary base, slump

Staying Alive: My Search for a Credit Card Processor

March 27, 2013 by NewsMaker Leave a Comment

Staying Alive

The struggles of a business trying to survive.

At the conclusion of Tuesday’s post, I had just applied for cheaper credit card processing from Emerald World, and I had received an unsettling phone call about the status of my application. The events I am about to describe took place in June 2012, at a time when my business was experiencing a sales slump. We were about to come out of it, but I didn’t know that at that time. Cash was tight, and the prospect of saving money on my credit card processing was very attractive.

I have been in sales for 25 years. It has been my main job, with all the other tasks involved in being the boss playing second fiddle. So I appreciate it when I am buying instead of selling and find a real pro on the other side of the deal. Kelly Nelson at Emerald World, who had opened my eyes to the high prices I had been paying PNC for processing, had done everything right. He had taken the time to educate me about something I didn’t know. He had proven that his solution was better for me than my current situation. He had outlined a deal that was very low risk for me: my fixed costs were low, and I could back out whenever I wanted. And he was patient while I was distracted with my trips to Germany and Dubai, and he was able to remind me that he was still around without being annoying.

So when I finally pulled the trigger and filled out the application, I wasn’t expecting further delays. The application demanded information much like the one I had filled out years earlier for PNC: anticipated annual sales volume, average transaction, highest single transaction and percentage of sales over the phone (as opposed to transactions with a swiped card). And there was a fair amount of routine company info: tax identification number, years in business, partnership structure. Here and there were dense blocks of text, waiting for my signature to confirm that I had read this and agreed to that. Typical corporate sales contract. I had nothing to hide; I was coming off a very profitable year, I still had a good amount of cash in the bank, and I had been accepting cards for many years without any problems. What could possibly go wrong?

I would soon learn that Mr. Nelson, like many salesmen, particularly those who represent large organizations, had been emphasizing the benefits and glossing over the potential difficulties in the application process. Emerald World, it turned out, does not perform the function of acquiring bank. That is done by another company, National Processing Corporation, and final approval for the deal would have to come from it, specifically from its underwriting department. And the underwriters wanted more information.

They wanted to see my balance sheet and a profit-and-loss statement. They wanted to know whether we would use credit cards to take deposits or only when we delivered goods (we do both). They wanted to know the typical length of time between a deposit payment and final payment (six to 12 weeks). I provided all of that, and then I asked Mr. Nelson what this was all about. And from him I learned how National Processing saw me — not so much as a good client with a solid gold track record but more as a potential fraudster or failure that the company might not want to work with.

In my application, the underwriters would see lots of what they would consider red flags. For example, we do all of our transactions over the phone for large amounts of money, and we enter the card data into our terminal manually — we never swipe. Plus, there is a significant time lag between the receipt of the payment and the delivery of the goods. And my type of business, or MCC category, does not get a lot of respect from credit card companies. Furniture seems to be a difficult product for them. Apparently there tends to be a lot of damage in shipment and a lot of dissatisfaction even with products that arrive in one piece, which can lead to a lot of chargebacks (money returned to a customers when a transaction is disputed).

Of all those red flags — card not present, big ticket, delayed delivery and big chargeback rate — I concede I am guilty of the first three. But I can proudly claim that never once, not one single time in the 18 years that I have accepted credit cards have I had a chargeback. Zero. Zilch. Nada. That’s a reflection of the commitment we make to our customers to keep them happy, no matter what. We also are careful about our shipping practices and how we handle installation. I guess that some of my fellow furniture makers and dealers aren’t so fastidious, and I have been tarred with the same brush.

I provided all of the supplemental information and waited. Mr. Nelson got back to me a week later. National Processing was willing to go forward with the deal but on one condition — it wanted to establish a reserve account to guarantee that it wouldn’t be left holding the bag in case of an unresolved chargeback. It would withhold 10 percent of the first incoming payments until it had set aside $10,000 in the reserve account. And it would review the case after six months.

I had never heard of this before, and frankly, I was a little insulted. I asked Mr. Nelson whether this was common, and he told me that it happens now and then — when underwriters have doubts about a merchant. Now, I was really insulted. But leaving feelings aside, was this such a good deal?

The price of each transaction, interchange plus .98 percent, was still much better than I had been paying. But the format of the reserve — taking 10 percent off of incoming payments — would complicate the accounting of commissions I was paying to my salesmen. And for me, the cash itself was a problem. I had started the year with more than $180,000 in working capital, but our long sales slide had depleted that. By the beginning of the summer, I was operating with $60,000 to $100,000 on hand and spending, on average, $40,000 a week.

The savings in costs represented a reasonable return on a $10,000 investment. But I didn’t want my cash tied up. So I told Mr. Nelson that I would not go forward with the deal.

Thursday: The big banks come knocking.

Paul Downs founded Paul Downs Cabinetmakers in 1986. It is based outside Philadelphia.

Article source: http://boss.blogs.nytimes.com/2013/03/27/my-search-for-a-credit-card-processor-part-2/?partner=rss&emc=rss

Filed Under: Small Business Tagged With: credit card processing, kelly nelson, slump

Euro Watch: European Commission Offers Grim Forecast for Economy

February 22, 2013 by NewsMaker Leave a Comment

BRUSSELS — A top E.U. official warned Friday that the economy of the euro area would shrink for the second year in a row and that countries like France and Spain would miss fiscal targets meant to ensure the stability of the common currency.

Olli Rehn, the European commissioner for economic and monetary affairs, forecast growth across the 27-nation European Union of just 0.1 percent this year and a contraction of 0.3 percent among the 17 countries in the euro zone.

Mr. Rehn’s presentation signaled “another year of falling output and rising unemployment in store in 2013,” said Tom Rogers, a senior economic adviser at Ernst Young.

Prospects for growth in many parts of the Union were “very disappointing,” Mr. Rehn acknowledged at a news conference, where he presented a so-called winter economic forecast prepared by his department at the European Commission, the Union’s administrative arm.

“The ongoing rebalancing of the European economy is continuing to weigh on growth in the short term,” Mr. Rehn said.

Just three months ago, the commission forecast that the euro area economy would grow by 0.1 percent this year.

Mr. Rehn said the European economy should resume expanding in 2014, with growth reaching 1.6 percent across the Union and 1.4 percent in the euro area.

But the downbeat forecast, coming a day after data showed that a slump in business activity in the euro area worsened unexpectedly this month, added to perceptions that Europe continues to struggle to stimulate growth while cutting spending to pare deficits.

The commission also forecast that unemployment would continue to rise in the euro area this year, to 12.2 percent, up from 11.4 percent in 2012.

In Spain, the commission said it expected joblessness to hit 26.9 percent, up from 25 percent last year. In Greece, the forecast was for unemployment to leap to 27 percent from 24.7 percent a year earlier.

Even in buoyant Germany, which is expected to grow this year by 0.5 percent, unemployment was seen nudging up slightly this year to 5.7 percent from 5.5 percent in 2012.

The litany of grim figures will add fuel to a furious debate over whether an insistence on austerity is creating a self-perpetuating cycle where cuts to state spending to meet E.U. targets diminish demand, weakening tax revenue and further straining government finances.

Yet blaming the effects of belt-tightening for Europe’s continued economic woes, particularly in the case of Spain, is too simplistic, said Guntram B. Wolff, the deputy director of Bruegel, a research organization.

“Perhaps the real reason for the deterioration in the economic situation in Europe was the massive drop in confidence of international investors in the ability of the euro area to overcome its more systemic problems,” Mr. Wolff wrote in a blog posting shortly after Mr. Rehn’s news conference.

The commission said Spain’s deficit was expected to fall to 6.7 percent of gross domestic product this year, down from 10.2 percent in 2012, partly because of tax increases and a sharp reduction in year-end bonuses for public-sector workers. But that still fell wide of the official target of 4.5 percent, and the commission warned that Spain’s deficit could rise to 7.2 percent in 2014.

In the case of France, the commission attributed economic stagnation to declining household spending linked to rising unemployment — which the report said was expected to reach 10.7 percent in 2013, then climb to 11 percent in 2014, up from an estimated 10.3 percent in 2012. In addition, the report cited a drop in confidence among French entrepreneurs.

The report forecast that the French budget deficit for 2013 would be 3.7 percent of G.D.P., down from an estimated 4.6 percent in 2012, but well above the government’s official target of 3 percent. The commission also warned that the deficit could rise to 3.9 percent in 2014.

In a sign of flexibility, Mr. Rehn said deadlines for meeting budgetary targets could be extended in the cases of France and Spain, assuming their governments could demonstrate progress in implementing fiscal reforms despite the unexpectedly tough economic environment.

Article source: http://www.nytimes.com/2013/02/23/business/global/daily-euro-zone-watch.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: fiscal targets, perceptions, slump

As PC Slump Continues, Dell Posts Lower Earnings

February 19, 2013 by NewsMaker Leave a Comment

The proposed buyout, announced just two weeks ago, diminished the importance of the numbers released Tuesday.

The fourth-quarter report became even less significant when the company said its chief executive, Michael S. Dell, would not participate in a previously scheduled conference call to discuss the financial results with analysts.

Mr. Dell, who founded the company 29 years ago, is leading the buyout, which is facing opposition from two of Dell’s biggest shareholders.

The company, which is based in Round Rock, Tex., declined to field questions about the deal or the shareholder efforts to gain a bid above the currently agreed upon price of $13.65 a share.

Southeastern Asset Management and T. Rowe Price, the company’s two largest shareholders after Mr. Dell, have said they will vote against the deal unless the offer is sweetened. The company’s board so far has argued that the deal negotiated with Mr. Dell and a group of investors led by Silver Lake is a fair one.

If the deal closes, it will end Dell’s 25-year history as a publicly traded company.

Mr. Dell and his backers are betting that the company will be better able to diversify beyond the PC business without having to cater to the stock market’s demands for higher profits from one quarter to the next.

Dell’s slump stems from weakening demand for PCs as more technology spending shifts toward smartphones and tablet computers.

The most recent quarter showed Dell was still losing ground, although the drop-off was not quite as bad as analysts anticipated.

Dell earned $530 million, or 30 cents a share, for its fiscal fourth quarter, which ended Feb. 1. That was a 31 percent decline from $764 million, or 43 cents a share, in the quarter a year earlier.

Excluding acquisition- and severance-related charges, earnings were 40 cents a share. That was a penny above the average forecast of analysts polled by FactSet.

Revenue totaled $14.3 billion, down 11 percent from a year ago. It beat analysts’ expectations at $14.1 billion.

Shares of Dell gained 0.4 percent in extended trading after the financial results were released. They ended regular trading at $13.81.

Article source: http://www.nytimes.com/2013/02/20/business/as-pc-slump-continues-dell-posts-lower-earnings.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: pc business, silver lake, slump

Worry Over Sales Spurs Talk of Cheaper iPhones

January 16, 2013 by NewsMaker Leave a Comment

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

Filed Under: Global Business Tagged With: enough money, slump, tero kuittinen

DealBook: Weak Quarter Weighs on JPMorgan’s 2011 Profit

January 13, 2012 by NewsMaker Leave a Comment

Justin Sullivan/Getty ImagesJPMorgan Chase’s credit card business and commercial lending operation showed signs of improving.

JPMorgan Chase kicked off bank earnings season on Friday with news that its quarterly profit dropped 23 percent last year, results that weighed on the full-year profit.

The bank turned a $19 billion profit in 2011, up 9 percent from $17.4 billion a year earlier, as its credit card business and commercial lending operation showed signs of improving. The results amounted to $4.48 a share, up from $3.96 a share last year.

But the profit engine stalled in the fourth quarter, when JPMorgan earned $3.7 billion, or 90 cents a share, down 23 percent from the same quarter a year earlier. The results matched analysts’ estimates for the period.

The fourth-quarter slump was owed in part to declining revenue and a slowdown in JPMorgan’s sprawling investment bank, which suffered from the sluggish economic recovery in the United States and concerns that the European debt crisis would sweep across the Continent.

The investment bank booked a $567 million accounting loss in the fourth quarter tied to the perceived riskiness of its own debt, reversing a one-time gain from the previous quarter that propped up earnings across Wall Street. In all, the unit’s profit sank 52 percent to $726 million in the fourth quarter.

Shares of JPMorgan were down more than 3 percent, to about $35.55, in morning trading.

Despite the turmoil in the fourth quarter, Jamie Dimon, JPMorgan’s chairman and chief executive, highlighted the firm’s gradual progress since the financial crisis. He also sounded a note of cautious optimism about the broader economic recovery.

“We have a mild recovery that might actually be strengthening,” Mr. Dimon said in a conference call with reporters, adding that the comeback appears to be “broad.”

The bank’s earnings report comes a day after Mr. Dimon announced the second major shuffling of his management team in a year. Among the changes, Jay Mandelbaum, head of strategy and business development, will leave the bank. And Barry Zubrow, JPMorgan’s risk management chief who guided the bank through the financial crisis, will now head corporate regulatory affairs.

With the steady growth in profit last year, JPMorgan has emerged from the crisis as one of Wall Street’s most dominant firms. In 2011, JPMorgan stripped Bank of America of its title as the nation’s biggest bank by assets. Bank of America is still struggling to shed the legacy of the subprime mortgage mess.

“JPMorgan is in the best position for no other reason than they don’t have the troubles that Bank of America has,” said Jim Sinegal, an analyst with the research firm Morningstar.

While JPMorgan had some recent bright spots in its core businesses, the gains were padded by the bank’s decision to set aside $730 million in fewer reserves for loan losses. Additions to the reserve are an expense.

Much of the change came from reserves held for the bank’s credit card portfolio, which has steadily improved. The move also benefited Chase Retail Financial Services, the bank’s consumer banking arm that offers everything from mortgages to checking accounts. The unit earned $533 million in the fourth quarter, up from $459 million a year earlier.

Commercial lending was a particular strong point for the bank. The unit’s profit rose to a record $643 million, a 21 percent increase from the prior year, as lending to corporations grew for the sixth consecutive quarter.

“I believe that you are seeing real loan growth,” Mr. Dimon said on the conference call. “And I think that will continue.”

But his bank’s earnings improvement last year was overshadowed by the fourth-quarter woes and a drop in revenue. Revenue fell to $99.8 billion, down from $104.8 billion last year, as new federal rules reined in fees tied to overdrafts and debit cards. The $567 million accounting loss also weighed down revenue.

The revenue struggles are not unique to JPMorgan, a diversified bank seen as a gauge for the performance of Wall Street. When the nation’s other big banks — Goldman Sachs, Morgan Stanley, Citigroup and Bank of America — report earnings next week, most are expected to detail similar slowdowns in revenue.

“It’s hard to think of a bright spot on the revenue side,” Mr. Sinegal said. “That issue is going to linger.”

Article source: http://feeds.nytimes.com/click.phdo?i=d710d9b241fa91b827c3b950d0151213

Filed Under: Business News Tagged With: earnings season, slowdown, slump

DealBook: BNP Paribas Writes Down Greek Debt as Earnings Slump

November 4, 2011 by NewsMaker Leave a Comment

Chris Ratcliffe/Bloomberg NewsA BNP Paribas branch in Paris.

PARIS — BNP Paribas, the largest French bank, announced a sharp decline in third-quarter profit on Thursday and said it was writing off 60 percent of the value of its holdings of Greek debt, a belated acknowledgement that the loans were largely unrecoverable.

The bank, based in Paris, said it was setting aside about 2.1 billion euros ($2.9 billion) of the value of its Greek sovereign debt, while also writing down about 116 million euros of exposure to Greek corporate bonds.

The bank said it had also moved to address its exposure to the debt of other troubled governments in the euro zone, selling 1.9 billion euros worth of Greek sovereign debt, 8.2 billion euros of Italian debt and 2.5 billion euros of Spanish debt.

Central Banks Take Different Tacks on Europe’s Economy

October 7, 2011 by NewsMaker Leave a Comment

The E.C.B.’s restraint came in contrast to the action of the Bank of England, which announced another round of bond buying to support the slowing British economy. The pound fell against all major currencies after the announcement; the euro rose against the dollar.

As a slump in German factory orders provided the latest sign of a looming recession, the E.C.B. left its benchmark rate unchanged, at 1.5 percent. The Bank of England also left its main rate unchanged, at 0.5 percent.

During his last news conference as E.C.B. president, Jean-Claude Trichet said that members of the central bank’s governing council had discussed a rate cut before concluding “by consensus” that inflation in the euro area — at 3 percent — was still too high. The statement, and a subdued assessment of the euro zone economy, suggested the bank will be open to cutting rates in coming months, as many analysts expect.

Mr. Trichet said the central bank expected “very moderate” growth ahead in “an environment of particularly high uncertainty.”

Janet Henry, chief European economist at HSBC, wrote in a note to clients that the E.C.B. “has clearly left the door open to a cut, possibly as soon as November.” She said that Mr. Trichet may have been reluctant to send any stronger signals on E.C.B. intentions that might constrain his successor, Mario Draghi, now governor of the bank of Italy. Mr. Draghi will take office Nov. 1.

Mr. Draghi brings a similar outlook and background as Mr. Trichet and is not expected to radically alter monetary policy. But he may find it hard to move boldly at the beginning of his term, given that he may feel it necessary to establish his anti-inflation credentials. He has kept an extraordinarily low profile in the final months of Mr. Trichet’s tenure and his intentions are largely a mystery.

The E.C.B. did respond to signs that banks are reluctant to lend to each other because of fears about their exposure to shaky government debt.

Those fears were intensified by the woes of the French-Belgian bank Dexia, which is seeking its second taxpayer-financed bailout in three years and said Thursday that it was close to selling its Luxembourg unit.

The central bank will spend €40 billion, or $53.6 billion, in the coming year buying so-called covered bonds, a form of debt secured by payments received on assets like packages of loans.

Covered bonds are one of the main ways that European banks raise money. The E.C.B. also bought covered bonds in 2009 to alleviate the bank financing squeeze that followed the collapse of the U.S. investment firm Lehman Brothers in 2008.

The E.C.B. measure, however, was dwarfed by the Bank of England’s plans to widen its so-called quantitative easing program to £275 billion from £200 billion.

“Vulnerabilities associated with the indebtedness of some euro area sovereigns and banks have resulted in severe strains in bank funding markets and financial markets more generally,” the Bank of England’s governor, Mervyn A. King, wrote in a letter to the British Treasury explaining the bank’s decision.

The E.C.B. does not have the power to save ailing banks like Dexia or address deeper problems in the banking system, officials insist, caused by banks’ exposure to sovereign debt and reserves that are too thin to absorb potential losses. That task belongs to governments.

Angela Merkel, the chancellor of Germany, suggested Thursday that Europe was moving closer to a coordinated effort to bolster European banks and address the longer-term problems.

While cautioning that more expert advice was needed, she said, “If the conditions are there we shouldn’t hesitate.” Mrs. Merkel appeared at a news conference in Berlin that also included Christine Lagarde, president of the International Monetary Fund, and Robert B. Zoellick, president of the World Bank.

Her comments were similar to what she said Wednesday during a visit to Brussels and in line with remarks made Thursday by José Manuel Barroso, president of the European Commission, the executive arm of the European Union.

Article source: http://feeds.nytimes.com/click.phdo?i=48b47cb9c1bb2f912668917d70f11409

Filed Under: Business News Tagged With: news conference, nov 1, slump

Income Slips For Yahoo, But Ads Show Some Promise

April 20, 2011 by NewsMaker Leave a Comment

SAN FRANCISCO — Carol A. Bartz, Yahoo’s chief executive, still has work ahead to lift her company out of its slump.

That reality was underscored on Tuesday when Yahoo reported its first-quarter earnings, which showed promising signs in the company’s main business — display advertising — but troubles in search. The mixed results do little to appease critics of Ms. Bartz’s turnaround plan, which she put in place soon after joining Yahoo two years ago.

Ms. Bartz is trying cut costs and build on the company’s strength in online editorial content. But it continues to trail faster-growing rivals like Google and Facebook.

The center of her turnaround effort, Yahoo’s display advertising business, grew 10 percent, to $471 million, compared with the quarter a year ago. The sector, which includes banner ads, is one of the company’s bright spots.

On a conference call with analysts, Ms. Bartz said Yahoo was making “tangible progress,” and that “over all, our turnaround is proceeding on schedule.” She cited higher traffic to a number of Yahoo’s media properties like its news blogs, and its coverage of the Academy Awards.

But Yahoo’s other businesses contracted, particularly search, which is operated by Microsoft through a partnership. Revenue from search, after payments to Microsoft and others, fell 19 percent, to $357 million.

Ms. Bartz acknowledged in the call that the Microsoft partnership, a prominent deal when it was announced two years ago, has not met expectations. Technical complications have made the revenue the two partners collect per search decline since their search engines were combined.

Still, Yahoo said it would receive a guaranteed minimum payment from Microsoft for the next year in the United States, regardless of how search advertising performs. After that, the payments may decline if the problems are not fixed. “We are working very close with Microsoft on these issues,” Ms. Bartz said.

Yahoo’s net income in the quarter fell 28 percent, to $223 million, or 17 cents a share, compared with $312 million, or 22 cents, in the year-ago quarter. The comparison is complicated by the sale last year of Zimbra, an e-mail company, which had lifted Yahoo’s 2010 first-quarter profit.

Yahoo said revenue in the quarter fell 24 percent, to $1.21 billion, from $1.6 billion. Selling and discontinuing some products as well as outsourcing search businesses to Microsoft contributed to the decline.

Excluding commissions paid to advertising partners, revenue was $1.06 billion, matching what analysts had expected.

For its part, Google reported a 27 percent increase in first-quarter revenue.

Yahoo is losing ground in online ad spending. Its share is expected to drop 1.5 percentage points to 11.9 percent this year, according to eMarketer.

Yun Kim, an analyst with Gleacher Company, said he was happy Yahoo at least matched expectations and did not issue a disappointing forecast. There may be a lot of focus on Yahoo’s troubles with search, he said, but its future depends on its ability to entice advertisers into long-term deals for display ads.

“There’s still a lot of work to be done there,” Mr. Kim said. “The inflection point whether they are going to make things happen will come in the second half of the year.”

A major area of concern is the Americas, Yahoo’s biggest source of revenue, Mr. Kim said. Revenue in the region excluding payments to partners has declined for nearly two and half years, and that erosion accelerated in the first quarter, to 11 percent, compared with single digits in recent quarters, he said.

Ms. Bartz, who has laid off hundreds of employees and ended several products that failed to catch on, has kept operational expenses in check. They fell 8 percent, to $647 million.

Last week, investors punished Google for letting operational expenses grow 55 percent in the first quarter, from newly hired employees and salary increases for its entire work force.

Shares of Yahoo rose 1.7 percent, to $16.40, in after-hours trading on Tuesday after its results beat the low expectations set by analysts. During regular trading, shares fell 1.4 percent, to $16.12.

For the second quarter, Yahoo said it expected that revenue excluding payments to advertising partners would be $1.075 billion to $1.125 billion. Income excluding certain items is expected to be $160 million to $190 million.

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Filed Under: Business News Tagged With: promising signs, slump, turnaround plan