Month: October 2004

Pru cash-call is legacy of overambitious strategy

22 Oct 2004

Under CEO Jonathan Bloomer, Prudential s empire has grown at an impressive pace. But this month's surprise rights issue suggests that the strategy was too great a stretch for the UK insurer's capital base.

Another head rolls at MG Tech

22 Oct 2004

Stark is the second CEO in 18 months to quit after a row with the German engineering group s largest shareholder, Happel. It will be hard for MG Tech to find anyone that suits Happel. The latter s influence is destabilising the group.

Ericsson’s astounding run on last legs

22 Oct 2004

Shares in the Swedish group have soared over the past year on recovery in the telecom infrastructure market. But wireless carriers have now caught up on delayed projects. Earnings growth looks set to slow or reverse.

Pharma gloom deepens with patent ruling

21 Oct 2004

With nearly all the big drugs companies reporting on the same day, investors may have missed the most important story. One of the last areas impervious to cheap generic drugs may have fallen man made proteins.

STMicro capex cuts may not be enough

21 Oct 2004

The FrancoItalian chipmaker has bowed to reality and cut capital expenditure this year and next. But the group still hasn t recovered from past overinvestment. And the chip market could worsen.

Cintra shouldn’t be greedy at IPO

21 Oct 2004

In theory, the toll road operator should be easy to value. But the Spanish group isn't a runofthe mill operator. Cintra is aiming for growth rather than yield. The price range reflects the risks, but not by a wide margin.

Morrison starts to turn Safeway around

21 Oct 2004

The UK grocer has managed to get a 13% sales uplift on the Safeway stores that it has so far converted to its own brand. Getting Safeway's sales up to Morrison's standards was the rationale behind the takeover. So this is an encouraging sign.

UK’s budget deficit could soar

21 Oct 2004

This rather than the wellpublicised threat that Gordon Brown will breach his "golden rule" on fiscal prudence is the real risk. If the government's finances are so weak at a time of economic strength, they could deteriorate sharply in a downturn.

US airlines suffer from government interference

20 Oct 2004

Operating in bankruptcy, expensive pensions and high subsidies it sounds almost like Europe. But the US government is causing the trouble. The economics are not that complicated. Supply should be cut to match demand. The US government could help keep planes on the ground.

JP Morgan slips up in the bond market

20 Oct 2004

Maiden results from the newlymerged bank were sullied by poor trading results from fixedincome trading. Jamie Dimon s prowess as a costcutter is not in doubt. But the future CEO may need to brush up on risk management to run this monster.

Citigroup axes Maughan over Japan

20 Oct 2004

Sir Deryck was Citi s senior international boss and top Japan hand. The bank had to put a new face forward in its dealings with regulators. But the ouster of two other senior executives suggests Citi has at last woken up to the risks reputational damage inflicts on its business.

EDF partially fills pension hole

20 Oct 2004

The French government and EDF both gain from the state s takeover of the utility s unfunded pensions. But if you think the electric group has made a big step towards privatisation, think again.

Electrolux cuts 2004 outlook

20 Oct 2004

But there are doubts about how radical these will be. And Electrolux s strong balance sheet may ensure survival but delay reform. The homeappliance maker plans some changes to deal with fierce competition and soaring raw materials costs.

Investors should not jump the gun on Reuters

19 Oct 2004

The information services provider has benefited from an uptick in hiring in the investment banking industry earlier this year. But the outlook for jobs has since soured. That s what matters most for Reuters sales and its share price next year.

Kerry’s options constrained by Bush legacy

19 Oct 2004

The legacy is likely to prove durable. Kerry would find it hard to raise taxes and harder to find a good way forward in Iraq. Not to mention health care expense and the trade deficit. Political reality hems in any US president.

Pru’s £1bn rights lacks credibility

19 Oct 2004

It s hard to take seriously the insurer s stated reasons: funding UK growth and meeting new solvency requirements. The Pru itself said the UK was dull just months ago, and the solvency regime is hardly news. It looks as if it s filling an Eggshaped hole.

Merrill suspends two Sainsbury analysts

19 Oct 2004

Andrew Fowler and John Kershaw have been suspended after a note said the UK retailer had helpfully pointed out their numbers were high. This looks bizarre. If it has to do with the possibility they were selectively briefed, it isn t clear why they should be suspended.

IBM services growth stalls

19 Oct 2004

Services now account for about half of all revenues for the US computing giant. But with new orders, backlog and margins falling, the business is hardly the growth engine it once was.

Mondavi gets $1.3bn wine bid

19 Oct 2004

Why Mondavi the godfather of California s wine trade would not recommend the offer is staggering. Maybe it is something in the drink. Constellation is willing to overpay massively to own the iconic vineyard.

Sainsbury’s turnaround plans look ambitious.

19 Oct 2004

The retailer is promising £2.5bn of sales increases over the next three years from about £1bn of cost cuts and quality investments. Either it's very confident in its retailing prowess or it doesn't want to scare investors by warning that even deeper cuts will be needed.

Sky payback can wait another year

18 Oct 2004

Investors fear a proposed buyback would allow News Corp to take creeping control of the UK pay television group. Those fears look overdone. But it comes down to whether investors trust the Murdochs. And after last year s events, it is too early to be asking for a trust me" vote.

Russians back all-paper bid for Gold Fields

18 Oct 2004

Norilsk is offering its 20% of Gold Fields to upstart Harmony, mainly because it wants a safer haven outside of Russia. But other Gold Fields shareholders might be less enthusiastic. They have to believe that Harmony management offers a big improvement.

Whole business securitisations don’t always work

18 Oct 2004

Take two recent cases: Welcome Break and Marne et Champagne. Both were found to have big loopholes in the structure when they went wrong. That doesn t mean securitisation doesn t work full stop. But investors should be aware that deals aren t always legally watertight.

Pharma may lose no matter whom wins US election

18 Oct 2004

The Democrats will lower drug prices, but California governor Schwarzeneggar s actions suggest the Republicans will too. Imposing bulk purchasing of drugs for Medicare could reduce US sales by 5% over the next ten years. And that s the optimistic case. Imposing bulk purchasing of drugs for Medicare could halve big pharma's US sales growth over the next ten years. The Democrats will lower drug prices, but California governor Schwarzenegger s actions suggest the Republicans will too.

BOC and Linde reportedly in line for merger

17 Oct 2004

While a E15bn deal may not be imminent, the two sides have had talks, and the stars are moving into alignment. There would be industrial logic in merging the gas businesses. A deal could also further the deconglomeration of corporate Germany.

Airbus provocation looks gratuitous

15 Oct 2004

The European aircraft maker is asking for more subsidies smack in the middle of the biggest transatlantic trade war ever. Airbus boss may take pleasure in tweaking rival Boeing s tail. But this isn t the best way to cool tempers.

Fight for Man Utd not over

15 Oct 2004

Talks between the UK football club's largest shareholders and Malcolm Glazer may have broken off. The sticking point seems to have been whether the US tycoon had the cash. If Glazer can show he's good for the money, talks may resume.

Havas should resist Bollore

15 Oct 2004

Just because the corporate raider owns 20% of the French advertising company doesn t mean he automatically deserves seats on the board. Havas could use some shaking up, and Bollore may be the man for the job. But he needs to convince the board this is the case.

Marsh & McLennan Spitzered again

15 Oct 2004

If Eliot Spitzer s latest accusations are proven, it will be hard to deny there is something amiss in Marsh's DNA requiring regime change. Like the scandal its Putnam unit paid $110m to settle in April, the latest allegations suggest a profound betrayal of client trust.

German reforms enter high-risk zone

15 Oct 2004

The pain of job cuts at the likes of GM and Karstadt is all too sharp. But the gains from flexible labour markets are not yet visible. Add in unemployment benefits cuts, and the political backlash could derail the whole plan. That would just store up trouble.