Top line shrinkage catches up with IBM 16 Apr 2014 For two decades, Big Blue’s profit increased faster than revenue through buybacks, cost cuts, and M&A deals. But eight quarters of declining sales mean earnings and free cash flow are now ebbing away. IBM, already reborn in the 1990s, needs a new turnaround plan – and fast.
Exxon tries to make $133 mln of CEO pay invisible 16 Apr 2014 The U.S. oil giant says Rex Tillerson takes home less than peers – and far less than shown in SEC filings. Yet including stock he knows he’ll get later, he’s in the top spot. While delaying pay by up to 10 years is shareholder-friendly, claiming the CEO doesn’t receive it is not.
Count one unhappy partner among Moelis ranks 16 Apr 2014 Most of them will be thrilled at the IPO, even though to get it away the boutique adviser slashed the price and number of shares. The debut values Moelis at $1.3 bln, however, below Sumitomo’s 2012 buy-in. Greenhill, Lazard and Evercore all would have been better bets.
Detroit finds right gear in wild bankruptcy ride 16 Apr 2014 The city’s deals with pensioners, bond insurers and swap counterparties should make a jarring process run smoother and faster. Deft haggling, a bold judge and a sense of urgency helped Motown avoid potholes that rattled other insolvent U.S. cities. Hazards lie ahead, though.
BofA loss provides valuable mega-bank perspective 16 Apr 2014 Some $6 bln of legal costs chewed up all the U.S. bank’s Q1 profit. It took half as much again to cause a quarterly loss at JPMorgan last year. BofA’s bad results, however, probably will leave Citi boss Mike Corbat wondering why his better-performing bank got stiffed by the Fed.
Edward Hadas: Don’t bother with share-based pay 16 Apr 2014 Coca-Cola’s controversial share award scheme takes a bad idea to a foolish extreme. Paying workers in their employer’s paper makes no sense. The share price has too little to do with corporate performance, and the work of any single employee has little effect on the share price.
Is this the last time Yahoo’s earnings matter? 15 Apr 2014 The company’s stagnant U.S. business plays second fiddle to its overseas holdings. Yahoo’s 24 pct stake in Alibaba accounts for almost 60 pct of its market value. The Chinese internet giant’s upcoming IPO strips investors of their biggest reason to follow the stock.
Corporate speech ruling deaf to investor concerns 15 Apr 2014 A U.S. court says a regulation forcing firms to disclose their use of African minerals is unconstitutional. The rule’s merits aside, the opinion weakens the public’s right to good information. Given the Supreme Court’s pro-business tilt, transparency could be in real trouble.
Inflation still the risk in tighter US jobs market 15 Apr 2014 Wages represent 52 pct of GDP, and until they accelerate inflation won’t take hold. A leading think tank is even still worrying about deflation. But there are early hints that employees are beginning to regain some bargaining power. Higher prices could follow in 2015-16.
From Ally to Zoe’s, IPOs hint at back to basics 15 Apr 2014 Investors had an appetite for most any new issue until last week. Six of 10 offerings couldn’t fetch the desired price and six were yanked as fear again mingled with greed. A fresh crop of sellers, including Moelis and Weibo, may encounter a more rational market than expected.
Activists’ Walgreen tax push backs wrong horse 15 Apr 2014 Some shareholders want the pharmacy chain to move its HQ to Europe to cut its tax bill. That’d boost earnings, but fly in the face of popular sentiment and a growing official international consensus against the tactic. Investors would do better to put their weight behind reform.
LBO shop’s fancy footwork salvages Nuveen deal 14 Apr 2014 Madison Dearborn is getting $6.25 bln for the money manager it bought in the bubble. It should be a loss. But a mix of refinancing debt, buying a partner’s stake on the cheap and lucrative side investments helped the private equity firm break even. In this case, that’s a victory.
U.S. stalls IMF reforms at risk of own ambitions 14 Apr 2014 Finance ministers meeting in DC blasted Congress’ refusal to back more lending power for the fund and a bigger voice for the likes of China and Brazil. Harsh words alone won’t do much. But votes against Ukraine loans and other plans would inflict a high price on foot-dragging.
Citi looks perfectly priced – for more mediocrity 14 Apr 2014 The mega-bank beat earnings and revenue estimates in the first quarter. Its bad bank is no longer much of a drag, and Citi tapped some of its substantial tax breaks. But with subpar asset returns and no chance of returning capital soon, trading above book value will be a stretch.
Comcast’s $45 bln deal warrants some utility logic 11 Apr 2014 These days it isn’t a big stretch to liken pipes carrying internet access to those carrying water or electricity. When utilities merge, though, regulators want consumers to share the spoils. If approached that way, Comcast’s Time Warner Cable takeover might raise fewer hackles.
JPMorgan’s clean sheet already looks off-white 11 Apr 2014 For the first time in years, the U.S. mega-bank’s results weren’t cluttered with special items like whale-trade losses or legal costs. JPMorgan’s $5.3 bln in Q1 earnings fell short of expectations anyway. Boss Jamie Dimon will be hoping to make more of the fresh start.
Flagging asset rally poses diversification dilemma 11 Apr 2014 A hunt for yield has pushed investors further out the risk spectrum, lifting stocks, bonds and credit. The result: the fortunes of many asset classes have become more intertwined again. That’s a problem for investors trying to construct a portfolio ready for tougher times.
Europe’s banks lose their cover on leverage ratio 11 Apr 2014 European lenders used to defend their lowball equity-to-assets ratios by claiming U.S. rules were more lax. But new American proposals would use fundamentally the same methodology, with a higher pass mark. Tougher standards for EU banks are now much more likely.
Africa’s growth spurt challenged by twin deficits 10 Apr 2014 The IMF and World Bank are basking in Africa’s success – devoting much of their meeting this week to discussing the region. Sub-Saharan Africa is enjoying the fastest growth since independence in the 1960s. But profligate spending and current account deficits could spoil the party.
Arbitration arbitrage whipsaws investors 10 Apr 2014 The likes of Goldman and Citigroup typically favor industry-run proceedings as cheaper than lawsuits and easier to win. With reforms eroding their edge, however, they’re now demanding to go to court. Allowing banks and not investors to pick the forum makes the system look rigged.