Lenovo deals need cost control spark to compute 25 Nov 2014 The Chinese PC maker has just completed the purchases of IBM’s low-end servers and Motorola phones for a combined $5 bln. With few cost synergies on offer, Lenovo needs to jolt revenue growth and rein in overheads. Even then, earning a return on its outlay will be tricky.
U.S. spectrum auction raises ghost of 3G sales past 24 Nov 2014 Bidding on a big chunk of U.S. bandwidth has passed $35 bln – and the sum is still climbing. The previous biggest total was $19 bln. The auctions’ cloaked nature makes it hard to tell exactly what’s driving prices. But history suggests the frenzy could bring a financial hangover.
AT&T scrambles signals on smartphone privacy 24 Nov 2014 The U.S. telco wants clearer limits on government access to location data but won’t push for a requirement that enforcers get warrants. The mixed message matches the regulated firm’s history of cooperating with Washington. As tech rivals resist Uncle Sam, though, AT&T looks weak.
BT is in strong position for mobile M&A 24 Nov 2014 The fixed-line telco has shaken up UK communications by pushing into TV and now mobile. The reward is that BT has a choice of two mobile networks to buy, O2 or EE, and few likely counter-bidders. A 10 bln stg deal would help lift sales and protect BT’s broadband business.
Brazil’s epic water crisis a global wake-up call 24 Nov 2014 Sao Paulo, a city of 20 mln, is running out of H2O thanks to creaky infrastructure, political battles, a record drought and Amazon deforestation. The humanitarian and economic cost would be immense if supplies dried up. The fiasco should drive other metropolises to action.
Aviva pays high price for Friends leak 24 Nov 2014 A fall in the UK insurer’s shares has cut the value of its possible paper offer for domestic peer Friends Life. The premium is now well below the 15 pct first mooted. Forced early disclosure means Aviva has to set out the key strategic and financial details of a tie-up – fast.
Telefonica grappling with strategic puzzle in UK 24 Nov 2014 The Spanish telco’s British mobile unit O2 is doing fine, but it will struggle to compete if customers turn to bundled offers. Buying a fixed-line player like TalkTalk would be a stretch. Best would be an outright cash sale to incumbent BT – but a stake swap is more realistic.
Hugo Dixon: What to do about populism? 24 Nov 2014 The spectre of populism is haunting Europe. While the established political order is largely to blame, the cure of populism is worse than the disease. The best way of combatting the phenomenon is to fix the economy and put integrity centre stage in politics.
China monetary policy enters difficult adolescence 24 Nov 2014 Cutting rates, as the central bank just did, is far less simple than when China’s economy was in its pliant infancy. New ways to save, borrow and arbitrage have sprouted, and don’t all respond predictably to orders. It will take more to alleviate private sector growing pains.
Indian bank M&A looks hard to copy 24 Nov 2014 Kotak Mahindra’s $2.4 billion all-share offer for ING Vysya is a rare example of consolidation amongst India’s sizeable private banks. Founder Uday Kotak needs to reduce his stake. Dutch group ING’s willingness to accept a smaller shareholding in a larger group is also key.
Certain gridlock offsets Obama’s immigration move 21 Nov 2014 Coaxing 5 million undocumented immigrants out of the shadows could provide an economic boost, generating tax revenue and jobs. But the executive action virtually ensures Republicans won’t compromise on other priorities like tax reform, infrastructure and trade. It’s a wash.
Aviva’s Friends tie-up is far from done 21 Nov 2014 The UK insurer wants to buy its peer for 5.6 bln stg in shares, bulking up in its challenged home market. For a 15 pct premium, Friends would get a surer future. Aviva gets some cash flow. Yet Friends’ entrepreneurial backers add complexity - and it may attract an interloper.
Sotheby’s CEO exit more scream than car crash 21 Nov 2014 Two artworks with those names are together worth about the $220 mln that Bill Ruprecht’s pending departure has added to the auctioneer’s value. The scream comes from board members like Dan Loeb, dissatisfied with the firm’s performance. By acting now, they may avoid a car crash.
Boris should pay up but not shut up over U.S. tax 21 Nov 2014 The London mayor, an American citizen, objects to paying a U.S. capital gains levy on his UK residence. Uncle Sam’s ex-pat tax laws are worthy of reform. But if Johnson really cares about that, the way to show it is to clear his debt and then campaign for change.
Review: Congo’s problems run deeper than oil 21 Nov 2014 Virunga Park sits on top of reserves and between hostile states inhabited by warring militias. A new documentary casts UK oil firm Soco as the park’s top threat. Unethical exploiters are just one symptom of a nation whose institutions are too weak to assure economic stability.
China’s rate cut shows depth of growth concern 21 Nov 2014 The first cut to lending rates since 2012 shows the limits of Beijing’s tolerance of slowdown. It should save some riskier loans from going bad, and breathe some life into a zombified property market. But huge adjustments remain, and long-suffering savers will still be left worse off.
Draghi’s anti-deflation war requires fiscal help 21 Nov 2014 The ECB president has gone further than ever before by pledging to raise inflation “as fast as possible.” His is a lonely fight and the central bank will soon reach the limits of what it can do. Draghi can only succeed if governments embark on more fiscal stimulus.
Time for ECB to overhaul its secret weapon 21 Nov 2014 Leaked central bank correspondence from the recent Cypriot crisis underlines how emergency liquidity assistance to weak banks had become ad hoc and political. Now that the ECB is supervising euro zone banks, it should take over - with ELA risks shared by all member states.
Endesa’s 3 bln euro quasi-IPO bucks a tough market 21 Nov 2014 The second half of 2014 has been rocky for share sales, particularly in Spain. A secondary offering of 22 pct of Spanish utility Endesa succeeded because vendor Enel wasn’t greedy. It treated the deal like a new issue. That will help if Enel wants to sell more in future.
Pru’s lesson for investors: trust animal spirits 21 Nov 2014 The UK insurer’s stock hit a record this week, leaving rival Aviva trailing in its wake. It is a painful reminder of how Aviva lost out by failing in its attempt to buy Pru in 2006. The main reason there was no deal? The bidder lacked investor support to pay a fair premium.
Alibaba’s huge finance arm is a mystery to most 21 Nov 2014 It’s one of the Chinese e-commerce group’s crown jewels. Yet public investors don’t control it, and can’t reliably estimate its worth. Only select Alibaba executives see the affiliate’s inner workings. Since they own most of its shares, there is room for interests to diverge.
U.S. Senate commodities probe gets bank risk right 20 Nov 2014 The two-year investigation into Wall Street’s ownership of oil and other physical holdings is bigger on assertions than new evidence. But its warnings about capital shortfalls and systemic hazards ring true. They’re problems that need fixing regardless of the type of asset.
Apollo, TPG dabble in Caesars sleight-of-hand 20 Nov 2014 The casino’s private equity owners are haggling with creditors. One idea is to split a key unit into operating and property arms, as rivals have. Such financial engineering would fit well with Apollo and TPG’s earlier moves to turn this top-of-the-market LBO into a decent bet.
Iran’s reintegration is a prize worth working for 20 Nov 2014 Nuclear negotiations with six world powers remain contentious. Just talking reduces geopolitical risk, but bringing Iran back into the international fold would repay the effort. A newly unfettered economy, bigger than Singapore or Greece, would move the global needle.
Dizzying revolving door risks overdone response 20 Nov 2014 Going from a U.S. government job to the private sector raises conflicts, as shown by events at Goldman. And a banker’s possible role at the Treasury is under fire. Such moves warrant clear rules, but cross-fertilization is valuable. It would be a shame to make it too hard to do.
Edward Hadas: FX should be the last home for scandal 20 Nov 2014 Failings in the foreign exchange markets should be surprising, and not only because cheating was hard. But when process-driven clients met the hard-to-repress urge to speculate, tempted traders crossed some ethical lines. The cure? Ensure financial markets make economic sense.
London gets closer to harsh bonus cap reality 20 Nov 2014 An adviser to the European Court of Justice has quashed UK legal arguments contesting EU pay limits. A ruling against Britain is now more likely next spring. Base salaries will rise, and industry pay could remain high. It’s a blow to the BoE, but the banks brought it on themselves.
ThyssenKrupp recovery is credible but priced in 20 Nov 2014 After three years of losses, the German engineer’s annual results showed 195 mln euros of earnings. Cost-cutting is ahead of plan, orders are up and debt is down. A surprise dividend shows new confidence. On a rough 30 pct premium, the shares optimistically expect more good news.
BBVA’s timing in Turkey looks odd 20 Nov 2014 The Spanish bank is raising 2 bln euros to buy an extra 14.9 percent stake in Garanti. BBVA gets a larger share of growing earnings and board control. But it could have achieved the latter by 2016 – at a much lower cost. And Turkey’s attractions come with obvious risks.
China great wall of content could be more than fad 20 Nov 2014 Smartphone maker Xiaomi and e-commerce giant Alibaba are stretching their business models by investing in online TV programming. If viewers pay up content might turn fickle ad revenues and one-off sales of hardware into predictable revenue streams.