Money talks: May 24th 2013
Rolling back the expectations
THIS week our correspondents discuss an overdue correction in the markets, the IMF's visit to Britain and a European Union proposal for tax transparency
THIS week our correspondents discuss an overdue correction in the markets, the IMF's visit to Britain and a European Union proposal for tax transparency
ARE China's state secrets no longer sacrosanct? American regulators and their Chinese counterparts have been at loggerheads for some time over American demands to review the working papers of firms that audit Chinese companies listed on American stock exchanges. The snag, as the Chinese divisions of the Big Four accountancies have noisily complained, is that the Chinese government forbids them from turning over the working documents demanded by America's Public Company Accounting Oversight Board (PCAOB) and the Securities and Exchange Commission (SEC).
LAST November, Bob McDonald, the embattled boss of Procter & Gamble, invited three of his predecessors, Alan Lafley, John Pepper and Ed Artzt, to address a gathering of 250 senior managers as they wrestled with the challenges facing the world’s biggest consumer-goods company. In some respects, that was a remarkable act of self-confidence by an incumbent chief executive fighting for his job, who joined in the standing ovation that each man got after talking about the “enduring qualities of P&G” and sharing his own experiences of leading the firm through difficult times. With hindsight, however, it may simply have served to remind P&G’s top people of someone they missed.
GOOGLE’S lawyers and lobbyists in Washington rarely have an idle moment. According to a report by Bloomberg on May 23rd, America’s Federal Trade Commission (FTC) has opened a preliminary investigation into whether the internet behemoth has abused its clout in display advertising to give it an unfair advantage over competitors. There is no guarantee that this will turn into a formal investigation, but it is yet another example of how Google is coming under intense scrutiny from regulators.
WATCHING makers of Italian furniture at work is a welcome reprieve from these disembodied digital times. They caress wood as if it were a living being and treat it with essences from the far corners of the world. Carefully, they cut leather for a couch. But Italy's furniture industry could do with some polishing. The domestic market is smaller than it once was and manufacturers are trying to enter emerging economies. The firms boast exactly the kind of workmanship and attention to detail coveted around the world, but many are family-owned and lack the size and the skills to sell abroad.
COMPANIES such as Apple and Google are renowned for their ground-breaking technological innovations. They have also put a great deal of effort into reducing the amount of tax they pay on the mountains of cash those innovations produce. Their tactics are now attracting the attention of governments, who have been putting tech firms’ tax strategies under a microscope. Last week, Google came under fire from British politicians, one of whom publicly accused the internet giant of using unethical methods to avoid paying its fair share of tax. The company says it has done nothing wrong.
OUR correspondents discuss "offset agreements" in the defence industry, the supposed weakening of China's love for luxury goods and the power of advertising in the age of social media
AT A recent conference, Ken Goldman, the chief financial officer of Yahoo, admitted that the internet giant had an ageing audience and was looking for things to “make us cool again”. The firm's senior executives appear to think Tumblr can give it a shot at rejuvenation. According to various media reports, Yahoo is likely to announce tomorrow that it is paying $1.1 billion for the popular blogging service. (Editor's update (May 20th, 12pm GMT): Yahoo announced the deal on Monday morning.) Other companies like Facebook are said to be interested in Tumblr, but Yahoo is thought to be the preferred bidder.
FIVE days earlier than first planned, Dell published its first-quarter results on May 16th. The figures, which cover the three months to May 3rd, make cheerless reading: once again, the computer-maker’s numbers reflect the dismal state of the market for desktops and laptops, which accounted for almost half of its revenue. However, Michael Dell, the company’s founder and chief executive, may find some comfort in them. Disappointing figures at least make the offer he made in February, with Silver Lake, a private-equity firm, to take the company private for $13.65 a share, look more attractive. After hours, the price of Dell’s shares was little changed, at $13.40-odd.
ONCE illustrated with pictures of happy village women engaged in lending circles, and celebrated as an ideal charitable activity that helps people earn their way out of poverty, in recent years microcredit has become increasingly controversial. Critics have argued that giving poor people a small affordable loan is not in fact an effective way to help them escape from poverty. And the growth in loan volume has been driven lately by a bunch of for-profit microlenders who their critics say have motives that are anything but charitable.
The most successful of these for-profit lenders is a case in point.
THE official death toll from the collapse of the Rana Plaza clothing factory complex (pictured) on the outskirts of Dhaka is now over 1100, making it probably the deadliest industrial accident ever after Bhopal. Although the factory owners and the government officials who failed properly to regulate them are the main culprits, anger both in Bangladesh and internationally has stung into action many of the big multinational firms who have clothes made there. Ambitious plans have been announced to ensure that such a disaster will never happen again or, if it does, that they will not be credibly held to blame.
GIVEN that oil is a vital source of energy and its price has ramifications for every economy on the planet, it is not surprising that regulators keep an eye on the way it is set. Europe’s antitrust watchdogs clearly believe something is amiss. On May 14th the European Commission said that it had carried out “unannounced inspections” at big oil and biofuel companies which it suspects of having colluded to manipulate prices in the physical market.
Some big names are involved: Shell, BP, Norway’s Statoil, and Platts, the world's leading price reporting agency that surveys buyers and sellers to set prices for crude and oil products.
GOODWILL write-offs are confusing. When they happen, the managers of firms insist they do not matter. Goodwill is the excess paid for an asset over its book value. Writing it down is a mere accounting adjustment, bosses tend to say. Yet those same bosses go to inordinate lengths to delay recognising such supposedly irrelevant, non-cash losses. On May 13th Tata Steel, an Indian firm, announced a $1.6 billion impairment, mainly of its $13 billion takeover of Corus, a British steelmaker. The deal happened six years ago. It has been clear for at least four years that it has been a financial disaster. Why recognise that now?
WOLFGANG SCHÄUBLE backs a European banking union, global markets climb and a handful of English shops open in China, where some are snatching up luxury goods
IT HAS not been a good year for the electric-car industry, considering the bankruptcy of little Coda and the all-but-certain collapse of the once-promising Fisker Automotive. Even well-established carmakers such as General Motors and Nissan have been struggling to entice buyers (though Nissan’s Leaf battery car has begun to develop a little bit of momentum after missing its sales target for the second year in a row).
So it is perhaps no surprise that 42% of the shares in Tesla Motors, a maker of electric cars based in Silicon Valley, are now held by short-sellers. They got a rude awakening, however, when the ever-optimistic Elon Musk, Tesla’s boss and the man behind the Space X commercial launch and other entrepreneurial feats, gave word that after ten years in the red, his start-up had turned a profit of $11.2m in the first quarter on unexpectedly strong demand for its new Model S sedan (pictured above). The results were well above the forecasts of even the most optimistic analysts; Tesla made a profit despite repaying $13m of the $465m it has borrowed from America’s Department of Energy.
Our Schumpeter columnist and his colleagues consider business, finance and management, in a blog named after the economist Joseph Schumpeter
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