Sept. 10 (Bloomberg) -- Japan’s economy slowed less than initially estimated in the second quarter as companies boosted capital spending, indicating the nation’s recovery was intact before a surge in the yen threatened to stunt export gains.
Gross domestic product grew an annualized 1.5 percent, faster than the 0.4 percent reported last month, after the first quarter’s 5 percent, the Cabinet Office said today in Tokyo. Unadjusted for changes in prices GDP shrank 0.6 percent compared with January to March.
“The upward revision could get rid of concern over a double-dip recession for now,” Takahide Kiuchi, chief economist at Nomura Securities Co. in Tokyo, said before the report. “Still, Japan’s economy may face a moment of truth in the fourth quarter to the first quarter of next year.”
Prime Minister Naoto Kan today unveiled details of a 920 billion yen ($11 billion) stimulus package today, his first since taking office in June, to shelter the economy from slower global growth and the yen’s climb to a 15-year high against the dollar. Japan’s central bank has also pledged to take additional measures as needed to sustain the recovery.
The revised real growth figure puts Japan’s expansion in line with the U.S., though nominal American GDP is rising because the country isn’t yet affected by deflation. The new figure matched the median of 21 estimates in a Bloomberg survey of economists.
Yen’s Gain
The yen traded at 84.21 per dollar at 10:35 a.m. in Tokyo from 83.99 before the report was published. It has risen more than 10 percent against the U.S. currency this year.
Japan’s economic output totaled $1.295 trillion in the second quarter, less than China’s $1.337 trillion, according to the Cabinet Office’s calculation. Japan remained bigger in the first half of 2010, the government agency said.
Capital investment advanced 1.5 percent from the previous quarter, faster than the 0.5 percent initially reported, today’s data showed. Net exports, or shipments minus imports, added 0.3 percentage point to growth, unchanged from the initial estimate.
Consumer spending, which accounts for about 60 percent of the economy, was unchanged from the previous quarter, the same reading as last month. Spending has been cooling as government stimulus measures aimed at encouraging consumers to buy electronics and cars fade.
Eye on Currency
“The report confirmed the economic recovery was sustained in the second quarter,” Keisuke Tsumura, a parliamentary secretary at the Cabinet Office, told reporters in Tokyo. “We need to monitor the strong yen and a slowdown in the global economy as possible downside risks.”
The Bank of Japan bolstered a credit program and Prime Minister Naoto Kan pledged fresh stimulus to help avoid the nation’s recovery from faltering on Aug. 30, two weeks after the preliminary GDP data showed growth was less than a fifth of the pace economists estimated.
The central bank kept liquidity injections unchanged on Sept. 7 after expanding a bank-loan program by 10 trillion yen ($119 billion) at an emergency meeting last week. BOJ Governor Masaaki Shirakawa said this week that the bank is ready to take more action if needed and he is “well aware” the yen may hurt business sentiment. Prime Minister Kan pledged to channel 920 billion yen to buttress domestic demand last week.
BOJ Outlook
“Chances for further easing will likely increase toward the year-end when the government may intensify its debate over whether to compile another stimulus and extra budget,” said Junko Nishioka, chief economist at RBS Securities Japan Ltd. in Tokyo. “The biggest trigger for the BOJ may be a combination of stronger yen and weaker stocks.”
The stronger currency is driving investment abroad as exporters protect profits. Nissan Motor Co., Japan’s third- largest automaker, is bolstering overseas investment in countries including Indonesia as it moves production out of Japan. It has said it is investing more than $20 million at a plant in Indonesia to double capacity in the country to 100,000 vehicles a year by 2013.
The GDP deflator, a gauge of price trends, fell 1.7 percent from a year earlier, narrowing from 1.8 percent first reported. Private inventory subtracted 0.1 percentage point from growth, less than the 0.2 point cut initially estimated.
While a slowdown is expected “the question is how deep and how long deceleration will be,” said Naomi Hasegawa, a senior debt strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo. “There are few reasons for us to be optimistic about the outlook.”
Thursday, September 9, 2010
Ron Bloom Is Obama’s Manufacturing Emissary
Not since Ronald Reagan has an American president spoken so emphatically about the importance of manufacturing. “We’ve got to go back to making things,” Barack Obama says, embedding that view in his oratory. Yet manufacturing’s presence in the American economy continues to shrink, defying the administration’s attempts to reverse that trend.
The president has named Ron Bloom, a Harvard M.B.A. who has worked both on Wall Street and in the labor movement, as a special adviser to help tackle the problem. Mr. Bloom’s tools, however, are limited. Apart from his persuasiveness, they have consisted mainly of tax credits and subsidies, many of them flowing to new industries, like the production of wind turbines, solar panels and auto batteries powerful enough to replace gasoline engines.
The goal is to invigorate private sector initiatives in these industries, then in a host of supplier companies and eventually throughout manufacturing. That, in a nutshell, is the administration’s manufacturing strategy.
But some, including the United Steelworkers union, say it is not enough. The union is pressing the administration to challenge China over what it calls unfair subsidies for its clean energy industries.
“The president has been very clear and articulate that we believe the nation’s trade laws must be respected,” Mr. Bloom said in an interview. Although he declined to comment on the complaint filed Thursday by the steelworkers, claiming that Chinese subsidies violated World Trade Organization rules, he noted that the administration had imposed tariffs on tubular steel and tires once the private sector successfully brought antidumping cases against China.
“Our policies assume that the dominant role in manufacturing will continue to be played by the private sector,” Mr. Bloom said. “We are not willing to accept manufacturing’s decline, but it is simply not feasible to make the government the principal actor in its revival.”
No other sector has lost so much ground relative to the rest of the economy. Manufacturing’s share of gross domestic product topped out at nearly 30 percent in the 1950s. It is 11 percent today. The fall has accelerated since 2007, with the recession a contributing factor.
The president reiterated the need for manufacturing in a speech on Wednesday in Cleveland. “We see a future where we invest in American innovation and American ingenuity; where we export more goods so we create more jobs here at home; where we make it easier to start a business or patent an invention; where we build a homegrown clean energy industry, because I don’t want to see new solar panels or electric cars or advanced batteries manufactured in Europe or in Asia. I want to see them made right here in the U.S. of A. by American workers.”
The Obama administration argues, often through Mr. Bloom, that the United States cannot sustain itself as a global economic power without a thriving manufacturing sector. Too much research and development, too many well-paid jobs and too many exports flow from manufacturing.
Mr. Bloom, speaking more forcefully than others in the administration, challenges the idea that research and development can be pursued entirely separate from production. In his view, Americans cannot excel at high-end innovation while factory production continues to decline or to slip overseas. “I am deeply afraid that if you lose the ability to make things,” he said, “all the intellectual activity involved in innovation and design will over time erode as well.”
Grumbling by American manufacturers is fairly constant on Mr. Bloom’s trips to the heartland as the president’s senior counselor for manufacturing, his official title. On his most recent trip, to Cleveland — he has visited nearly two dozen cities since his appointment a year ago — more than 60 executives and factory owners in northeastern Ohio listened, and then had their say. In some cases, they called for a more expansive government role in manufacturing, along the lines of China, Germany or Japan.
“We don’t have to reinvent the wheel,” said Andre Morrison, an executive at Green Mill Global, which makes lighting products. “But why can’t we model our policies on those of other countries, where government and private industry are in bed together?”
Mr. Morrison’s biggest complaint was credit. He said he knew five or six established companies that wanted to expand within the United States but could not get loans from commercial banks. He asked, in effect, that the federal government expand its support for such loans, and Mr. Bloom replied that the administration was doing just that, but with a caveat. “It is not government’s role to direct banks to lend to particular companies or industries,” he explained.
That unwillingness to interfere with the private sector is characteristic of the administration’s industrial policy. Shunning even the term, Mr. Bloom prefers to call it a “manufacturing strategy.”
Still, some of the Ohio executives pushed for more intervention. Several seemed to nod in agreement when William N. McCreary, a vice president of the NSG Group, said that private equity firms and other financiers frequently asked for an American manufacturer’s “China strategy,” meaning that having an operation in China made a company more worthy of financial support.
The NSG Group, which makes flat glass of the sort used in auto windshields, operates in many countries, including China, and is based in Japan. Even so, Mr. McCreary, who is based in Toledo, Ohio, sounded perplexed by this lack of faith in American producers.
“The private equity world is heavily on the side that you have to be in China,” he said. “It thinks the U.S. is not a place you make things.”
The president has named Ron Bloom, a Harvard M.B.A. who has worked both on Wall Street and in the labor movement, as a special adviser to help tackle the problem. Mr. Bloom’s tools, however, are limited. Apart from his persuasiveness, they have consisted mainly of tax credits and subsidies, many of them flowing to new industries, like the production of wind turbines, solar panels and auto batteries powerful enough to replace gasoline engines.
The goal is to invigorate private sector initiatives in these industries, then in a host of supplier companies and eventually throughout manufacturing. That, in a nutshell, is the administration’s manufacturing strategy.
But some, including the United Steelworkers union, say it is not enough. The union is pressing the administration to challenge China over what it calls unfair subsidies for its clean energy industries.
“The president has been very clear and articulate that we believe the nation’s trade laws must be respected,” Mr. Bloom said in an interview. Although he declined to comment on the complaint filed Thursday by the steelworkers, claiming that Chinese subsidies violated World Trade Organization rules, he noted that the administration had imposed tariffs on tubular steel and tires once the private sector successfully brought antidumping cases against China.
“Our policies assume that the dominant role in manufacturing will continue to be played by the private sector,” Mr. Bloom said. “We are not willing to accept manufacturing’s decline, but it is simply not feasible to make the government the principal actor in its revival.”
No other sector has lost so much ground relative to the rest of the economy. Manufacturing’s share of gross domestic product topped out at nearly 30 percent in the 1950s. It is 11 percent today. The fall has accelerated since 2007, with the recession a contributing factor.
The president reiterated the need for manufacturing in a speech on Wednesday in Cleveland. “We see a future where we invest in American innovation and American ingenuity; where we export more goods so we create more jobs here at home; where we make it easier to start a business or patent an invention; where we build a homegrown clean energy industry, because I don’t want to see new solar panels or electric cars or advanced batteries manufactured in Europe or in Asia. I want to see them made right here in the U.S. of A. by American workers.”
The Obama administration argues, often through Mr. Bloom, that the United States cannot sustain itself as a global economic power without a thriving manufacturing sector. Too much research and development, too many well-paid jobs and too many exports flow from manufacturing.
Mr. Bloom, speaking more forcefully than others in the administration, challenges the idea that research and development can be pursued entirely separate from production. In his view, Americans cannot excel at high-end innovation while factory production continues to decline or to slip overseas. “I am deeply afraid that if you lose the ability to make things,” he said, “all the intellectual activity involved in innovation and design will over time erode as well.”
Grumbling by American manufacturers is fairly constant on Mr. Bloom’s trips to the heartland as the president’s senior counselor for manufacturing, his official title. On his most recent trip, to Cleveland — he has visited nearly two dozen cities since his appointment a year ago — more than 60 executives and factory owners in northeastern Ohio listened, and then had their say. In some cases, they called for a more expansive government role in manufacturing, along the lines of China, Germany or Japan.
“We don’t have to reinvent the wheel,” said Andre Morrison, an executive at Green Mill Global, which makes lighting products. “But why can’t we model our policies on those of other countries, where government and private industry are in bed together?”
Mr. Morrison’s biggest complaint was credit. He said he knew five or six established companies that wanted to expand within the United States but could not get loans from commercial banks. He asked, in effect, that the federal government expand its support for such loans, and Mr. Bloom replied that the administration was doing just that, but with a caveat. “It is not government’s role to direct banks to lend to particular companies or industries,” he explained.
That unwillingness to interfere with the private sector is characteristic of the administration’s industrial policy. Shunning even the term, Mr. Bloom prefers to call it a “manufacturing strategy.”
Still, some of the Ohio executives pushed for more intervention. Several seemed to nod in agreement when William N. McCreary, a vice president of the NSG Group, said that private equity firms and other financiers frequently asked for an American manufacturer’s “China strategy,” meaning that having an operation in China made a company more worthy of financial support.
The NSG Group, which makes flat glass of the sort used in auto windshields, operates in many countries, including China, and is based in Japan. Even so, Mr. McCreary, who is based in Toledo, Ohio, sounded perplexed by this lack of faith in American producers.
“The private equity world is heavily on the side that you have to be in China,” he said. “It thinks the U.S. is not a place you make things.”
Asian Stocks Gain on Fewer U.S. Jobless Claims, Japanese Growth
Sept. 10 (Bloomberg) -- Asian stocks rose, lifting the MSCI Asia Pacific Index higher for a second week, as fewer people than estimated applied for jobless benefits in the U.S. and Japan’s economy grew faster than anticipated.
Toyota Motor Corp., the world’s largest automaker, gained 1.5 percent in Tokyo. Samsung Electronics Co., Asia’s biggest maker of chips, flat screens and mobile phones, advanced 1.9 percent in Seoul. Canon Inc., the world’s largest camera maker, jumped 4.8 percent after the company announced a share buyback.
The MSCI Asia Pacific Index gained 0.5 percent to 121.13 as of 10:42 a.m. in Tokyo, with more than five stocks rising for each one that fell. The measure has climbed 5.4 percent from a one-month low on Aug. 25 amid speculation the U.S. economy will avoid slipping back into recession. The gauge advanced 1.8 percent this week.
A “recovery in corporate earnings in the U.S. is driving an increase in employment in the private sector,” said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc. “Concern about the economy has eased.”
Japan’s Nikkei 225 Stock Average climbed 1.9 percent as Prime Minister Naoto Kan unveiled details of a 920 billion yen ($11 billion) stimulus plan to boost consumption and create jobs.
South Korea’s Kospi index climbed 1.2 percent, while Australia’s S&P/ASX 200 Index rose 0.2 percent. China’s Shanghai Composite Index advanced 0.2 percent.
U.S. Jobless Claims
Futures on the Standard & Poor’s 500 Index were little changed. The U.S. index gained 0.5 percent yesterday as a government report showed initial claims for unemployment benefits dropped by 27,000 to 451,000 last week, lower than the median estimate of 470,000 in a Bloomberg survey of economists. A separate report showed the U.S. trade deficit narrowed in July by the most since February 2009.
In Japan, a Cabinet Office report showed that gross domestic product grew at an annualized 1.5 percent rate in the three months ended June 30, faster than the 0.4 percent reported last month. The figure matched the median of 21 estimates in a Bloomberg News survey of economists.
Consumer discretionary companies and technology stocks, such as Toyota and Canon, were the biggest contributors to the MSCI Asia Pacific Index’s advance among the 10 industry groups, according to data compiled by Bloomberg.
Toyota climbed 1.5 percent to 2,973 yen. Honda Motor Co., a carmaker that gets more than 80 percent of its revenue abroad, rose 0.9 percent to 2,802 yen. Samsung Electronics, which receives about 85 percent of its sales outside of South Korea, gained 1.9 percent to 770,000 won in Seoul.
Canon rose 4.8 percent to 3,720 yen. The company said yesterday it will buy back as much as 1.2 percent of its outstanding shares for as much as 50 billion yen ($598 million).
Improved prospects for the U.S. economy also caused the dollar to strengthen versus the yen, boosting the value of sales generated overseas in local terms for Japanese companies. The dollar appreciated to 84.14 yen from 83.64 at the close of stock trading in Tokyo yesterday.
Toyota Motor Corp., the world’s largest automaker, gained 1.5 percent in Tokyo. Samsung Electronics Co., Asia’s biggest maker of chips, flat screens and mobile phones, advanced 1.9 percent in Seoul. Canon Inc., the world’s largest camera maker, jumped 4.8 percent after the company announced a share buyback.
The MSCI Asia Pacific Index gained 0.5 percent to 121.13 as of 10:42 a.m. in Tokyo, with more than five stocks rising for each one that fell. The measure has climbed 5.4 percent from a one-month low on Aug. 25 amid speculation the U.S. economy will avoid slipping back into recession. The gauge advanced 1.8 percent this week.
A “recovery in corporate earnings in the U.S. is driving an increase in employment in the private sector,” said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc. “Concern about the economy has eased.”
Japan’s Nikkei 225 Stock Average climbed 1.9 percent as Prime Minister Naoto Kan unveiled details of a 920 billion yen ($11 billion) stimulus plan to boost consumption and create jobs.
South Korea’s Kospi index climbed 1.2 percent, while Australia’s S&P/ASX 200 Index rose 0.2 percent. China’s Shanghai Composite Index advanced 0.2 percent.
U.S. Jobless Claims
Futures on the Standard & Poor’s 500 Index were little changed. The U.S. index gained 0.5 percent yesterday as a government report showed initial claims for unemployment benefits dropped by 27,000 to 451,000 last week, lower than the median estimate of 470,000 in a Bloomberg survey of economists. A separate report showed the U.S. trade deficit narrowed in July by the most since February 2009.
In Japan, a Cabinet Office report showed that gross domestic product grew at an annualized 1.5 percent rate in the three months ended June 30, faster than the 0.4 percent reported last month. The figure matched the median of 21 estimates in a Bloomberg News survey of economists.
Consumer discretionary companies and technology stocks, such as Toyota and Canon, were the biggest contributors to the MSCI Asia Pacific Index’s advance among the 10 industry groups, according to data compiled by Bloomberg.
Toyota climbed 1.5 percent to 2,973 yen. Honda Motor Co., a carmaker that gets more than 80 percent of its revenue abroad, rose 0.9 percent to 2,802 yen. Samsung Electronics, which receives about 85 percent of its sales outside of South Korea, gained 1.9 percent to 770,000 won in Seoul.
Canon rose 4.8 percent to 3,720 yen. The company said yesterday it will buy back as much as 1.2 percent of its outstanding shares for as much as 50 billion yen ($598 million).
Improved prospects for the U.S. economy also caused the dollar to strengthen versus the yen, boosting the value of sales generated overseas in local terms for Japanese companies. The dollar appreciated to 84.14 yen from 83.64 at the close of stock trading in Tokyo yesterday.
Wednesday, September 8, 2010
Debtors Feast at the Expense of the Frugal
Households and corporations alike are refinancing their loans in droves to take advantage of interest rates that seem impossibly cheap. But those same low rates come with a flip side, driving down the income of retirees and others who live off their savings.
It is a side effect of a government policy meant to push down interest rates to a point that businesses and consumers are compelled to borrow and spend again, and yet it is hurting anyone with a savings account.
With the regulated rate that financial institutions can borrow from one another at almost zero, banks are paying savers next to nothing. The average returns on interest-bearing deposit accounts slipped to 0.99 percent in July, according to Market Rates Insight, which tracks bank rates. It is the first time its measure has dipped below 1 percent since the 1950s, when its data begins.
As a result, the amount of money on deposit at United States bank branches fell during the first half of 2010, Market Rates Insight reported this week. It was the first time that had happened in nearly two decades, indicating that people are dissatisfied with how little interest they are earning from their bank accounts.
Perversely, coming after a devastating financial crisis caused by companies and households that feasted on borrowing, ultralow interest rates are penalizing people who have paid down their debt and are now trying to save. It is also punishing those who rely on the proceeds of their nest eggs to pay the bills.
“It’s the whole point of low rates, to entice borrowing and discourage saving, but it means a massive wealth transfer from savers to borrowers,” said Greg McBride, a senior financial analyst at Bankrate.com. “It is a trend on steroids now because interest rates have been cut to the bone.”
For example, anyone keeping $500,000 in a 12-month certificate of deposit earning a rate of 1.5 percent annually — one of the best savings rates available nationally these days — would earn $7,500 a year, hardly enough to live on. Just three years ago, that same investment would have generated $26,250.
The new low interest rates are having a personal impact. Take William D’Alessandro, 62, an editor of corporate sustainability newsletters in Amherst, N.H. He has moved from job to job and has no pension but planned to live on savings when he retired.
Now, year by year, Mr. D’Alessandro has had to put off his retirement until he can afford to buy, among other things, health insurance for himself and his wife, to supplement Medicare when he gets it.
“It is fearful,” he said. “We have been saving all these years, and now we want to go into retirement we can’t. We have been traveling less. What am I going to do if I live to 82 — or 99 like my grandfather?”
Now, savers are searching desperately for a better return on their money. “All of our clients are struggling with this,” said Cary Carbonaro, a financial planner who works in New York City and Long Island. “It has never been as bad.”
With the jittery stock market posing too much risk for many people, they have rushed to Treasury bonds, which generate higher rates than regular bank accounts or short-term C.D.’s.
But so much money flowing into Treasuries has served only to depress the rate of return on those bonds, to a dismal 2.7 percent a year for a 10-year note; shorter-term bond rates are below 1 percent. Anyone investing $500,000 in 10-year Treasuries at current yields would earn $13,500 a year.
Some savers have begun to pour more of their cash into the corporate bond market, where big companies sell bonds to raise money, usually at a slightly higher return in exchange for modestly higher risk.
As demand for such bonds has soared, it has prompted corporations like PepsiCo and Wal-Mart to issue more bonds at bargain-basement rates of interest. Such companies sold $563.4 billion to United States investors last year, a record, and have sold $238.8 billion more so far in 2010, according to Dealogic, a financial data provider. Yet, economists complain that apart from a few notable corporate acquisitions that were financed largely with pent-up cash, many businesses are sitting on their money rather than spending it. For now, that would seem to undermine the purpose of low interest rates, which is to get companies and consumers spending again.
Nonfinancial corporations were holding about $1.8 trillion in liquid assets in the first quarter of this year, according to the Federal Reserve, a level that has been steadily rising and compares with $1.5 trillion at the start of 2009.
“They don’t need the cash,” said Bernard Baumohl, an economist at the Economic Outlook Group, but they are borrowing anyway because it is so cheap at the moment.
Once again, though, the unusually high demand for blue-chip corporate bonds is driving down the rate of return on those bonds. When I.B.M. sold $1.5 billion of three-year bonds in August, investors received only a 1 percent return.
It is a side effect of a government policy meant to push down interest rates to a point that businesses and consumers are compelled to borrow and spend again, and yet it is hurting anyone with a savings account.
With the regulated rate that financial institutions can borrow from one another at almost zero, banks are paying savers next to nothing. The average returns on interest-bearing deposit accounts slipped to 0.99 percent in July, according to Market Rates Insight, which tracks bank rates. It is the first time its measure has dipped below 1 percent since the 1950s, when its data begins.
As a result, the amount of money on deposit at United States bank branches fell during the first half of 2010, Market Rates Insight reported this week. It was the first time that had happened in nearly two decades, indicating that people are dissatisfied with how little interest they are earning from their bank accounts.
Perversely, coming after a devastating financial crisis caused by companies and households that feasted on borrowing, ultralow interest rates are penalizing people who have paid down their debt and are now trying to save. It is also punishing those who rely on the proceeds of their nest eggs to pay the bills.
“It’s the whole point of low rates, to entice borrowing and discourage saving, but it means a massive wealth transfer from savers to borrowers,” said Greg McBride, a senior financial analyst at Bankrate.com. “It is a trend on steroids now because interest rates have been cut to the bone.”
For example, anyone keeping $500,000 in a 12-month certificate of deposit earning a rate of 1.5 percent annually — one of the best savings rates available nationally these days — would earn $7,500 a year, hardly enough to live on. Just three years ago, that same investment would have generated $26,250.
The new low interest rates are having a personal impact. Take William D’Alessandro, 62, an editor of corporate sustainability newsletters in Amherst, N.H. He has moved from job to job and has no pension but planned to live on savings when he retired.
Now, year by year, Mr. D’Alessandro has had to put off his retirement until he can afford to buy, among other things, health insurance for himself and his wife, to supplement Medicare when he gets it.
“It is fearful,” he said. “We have been saving all these years, and now we want to go into retirement we can’t. We have been traveling less. What am I going to do if I live to 82 — or 99 like my grandfather?”
Now, savers are searching desperately for a better return on their money. “All of our clients are struggling with this,” said Cary Carbonaro, a financial planner who works in New York City and Long Island. “It has never been as bad.”
With the jittery stock market posing too much risk for many people, they have rushed to Treasury bonds, which generate higher rates than regular bank accounts or short-term C.D.’s.
But so much money flowing into Treasuries has served only to depress the rate of return on those bonds, to a dismal 2.7 percent a year for a 10-year note; shorter-term bond rates are below 1 percent. Anyone investing $500,000 in 10-year Treasuries at current yields would earn $13,500 a year.
Some savers have begun to pour more of their cash into the corporate bond market, where big companies sell bonds to raise money, usually at a slightly higher return in exchange for modestly higher risk.
As demand for such bonds has soared, it has prompted corporations like PepsiCo and Wal-Mart to issue more bonds at bargain-basement rates of interest. Such companies sold $563.4 billion to United States investors last year, a record, and have sold $238.8 billion more so far in 2010, according to Dealogic, a financial data provider. Yet, economists complain that apart from a few notable corporate acquisitions that were financed largely with pent-up cash, many businesses are sitting on their money rather than spending it. For now, that would seem to undermine the purpose of low interest rates, which is to get companies and consumers spending again.
Nonfinancial corporations were holding about $1.8 trillion in liquid assets in the first quarter of this year, according to the Federal Reserve, a level that has been steadily rising and compares with $1.5 trillion at the start of 2009.
“They don’t need the cash,” said Bernard Baumohl, an economist at the Economic Outlook Group, but they are borrowing anyway because it is so cheap at the moment.
Once again, though, the unusually high demand for blue-chip corporate bonds is driving down the rate of return on those bonds. When I.B.M. sold $1.5 billion of three-year bonds in August, investors received only a 1 percent return.
Asian Stocks Gain as Europe Concerns Ease, Japan’s Yen Weakens
Sept. 9 (Bloomberg) -- Asian stocks rose, driving the MSCI Asia Pacific Index higher for the first time in three days, as concern eased that the European deficit crisis will stall global economic growth and the yen weakened.
Canon Inc., a maker of consumer electronics that gets more than 80 percent of its sales outside Japan, gained 1.6 percent in Tokyo. Toyota Motor Corp., which counts North America as its biggest market outside Japan, rose 2.1 percent. BHP Billiton Ltd., the world’s biggest mining company, climbed 0.8 percent in Sydney after oil and metal prices gained.
“There is a sense of relief about Europe, so there is a temporary pause in risk aversion” said Mitsushige Akino, who oversees about $450 million in Tokyo at Ichiyoshi Investment Management Co. “Exporters may be bought as they were heavily sold yesterday.”
The MSCI Asia Pacific Index gained 0.5 percent to 121.08 as of 9:27 a.m. in Tokyo. The gauge slumped 1.1 percent yesterday as a stronger yen deepened concerns over Japan’s recovery and caution spread ahead of a Federal Reserve survey. The Fed said yesterday the U.S. economy maintained its expansion while showing “widespread signs of a deceleration” in mid-July through the end of August, according to a survey by 12 regional Fed banks.
Japan’s Nikkei 225 Stock Average climbed 1.1 percent and South Korea’s Kospi index advanced 0.6 percent. Australia’s S&P/ASX 200 Index rose 0.7 percent. New Zealand’s NZX 50 Index dropped 0.5 percent.
Demand For Bonds
Futures on the Standard & Poor’s 500 Index added 0.2 percent. The gauge gained 0.6 percent yesterday as Europe concerns eased on improved demand for Portuguese and Polish bonds.
Canon increased 1.6 percent to 3,565 yen, while Toyota climbed 2.1 percent to 2,936 yen. The yen depreciated to as much as 84.03 against the dollar today, compared with 83.46 at the close of stock trading in Tokyo yesterday. Against the euro, it fell to 106.95 from 106.15. A weaker yen increases overseas income at Japanese companies when converted into their home currency.
BHP advanced 0.8 percent to A$38.23, while Rio Tinto Group, the world’s third-largest mining company, increased 0.8 percent to A$74.05. The London Metal Exchange Index of six metals including copper and zinc gained 0.9 percent. Crude-oil futures in New York rose 0.6 percent in after-hours trading, adding to yesterday’s 0.8 percent climb.
Kia Motors Corp. rose 1 percent to 34,500 won in Seoul after saying it will buy back 3.9 million of its own shares and give them to employees. Separately, the company denied a MoneyToday report that the South Korean automaker will begin construction on a third plant in China next year.
China Unicom (Hong Kong) Ltd. may be active in Hong Kong today after Telefonica SA, Europe’s second-biggest phone company, said a plan to boost its stake in Unicom is unaffected by Vodafone Group Plc’s sale of its China Mobile Ltd. holding.
Canon Inc., a maker of consumer electronics that gets more than 80 percent of its sales outside Japan, gained 1.6 percent in Tokyo. Toyota Motor Corp., which counts North America as its biggest market outside Japan, rose 2.1 percent. BHP Billiton Ltd., the world’s biggest mining company, climbed 0.8 percent in Sydney after oil and metal prices gained.
“There is a sense of relief about Europe, so there is a temporary pause in risk aversion” said Mitsushige Akino, who oversees about $450 million in Tokyo at Ichiyoshi Investment Management Co. “Exporters may be bought as they were heavily sold yesterday.”
The MSCI Asia Pacific Index gained 0.5 percent to 121.08 as of 9:27 a.m. in Tokyo. The gauge slumped 1.1 percent yesterday as a stronger yen deepened concerns over Japan’s recovery and caution spread ahead of a Federal Reserve survey. The Fed said yesterday the U.S. economy maintained its expansion while showing “widespread signs of a deceleration” in mid-July through the end of August, according to a survey by 12 regional Fed banks.
Japan’s Nikkei 225 Stock Average climbed 1.1 percent and South Korea’s Kospi index advanced 0.6 percent. Australia’s S&P/ASX 200 Index rose 0.7 percent. New Zealand’s NZX 50 Index dropped 0.5 percent.
Demand For Bonds
Futures on the Standard & Poor’s 500 Index added 0.2 percent. The gauge gained 0.6 percent yesterday as Europe concerns eased on improved demand for Portuguese and Polish bonds.
Canon increased 1.6 percent to 3,565 yen, while Toyota climbed 2.1 percent to 2,936 yen. The yen depreciated to as much as 84.03 against the dollar today, compared with 83.46 at the close of stock trading in Tokyo yesterday. Against the euro, it fell to 106.95 from 106.15. A weaker yen increases overseas income at Japanese companies when converted into their home currency.
BHP advanced 0.8 percent to A$38.23, while Rio Tinto Group, the world’s third-largest mining company, increased 0.8 percent to A$74.05. The London Metal Exchange Index of six metals including copper and zinc gained 0.9 percent. Crude-oil futures in New York rose 0.6 percent in after-hours trading, adding to yesterday’s 0.8 percent climb.
Kia Motors Corp. rose 1 percent to 34,500 won in Seoul after saying it will buy back 3.9 million of its own shares and give them to employees. Separately, the company denied a MoneyToday report that the South Korean automaker will begin construction on a third plant in China next year.
China Unicom (Hong Kong) Ltd. may be active in Hong Kong today after Telefonica SA, Europe’s second-biggest phone company, said a plan to boost its stake in Unicom is unaffected by Vodafone Group Plc’s sale of its China Mobile Ltd. holding.
Vodafone loses $2bn India tax challenge
Vodafone has lost a landmark legal battle against the Indian tax authorities in a case that lawyers warn will have implications for future cross-border deals in the country.
The Mumbai High Court ruled on Wednesday that the UK telecoms group must pay capital gains tax into the Indian coffers for its $11bn acquisition of a controlling stake in Hutchison Essar, a domestic mobile phone operator, completed three years ago. The UK mobile operator could face a total tax bill of more than $2bn.
It is the first time an Indian court has ruled that the country’s tax department can charge a foreign company over a transaction that occurred outside India.
The decision, which follows a complex three-year long legal dispute, has been closely watched by foreign companies because it will set a precedent for other international merger and acquisition deals in India.
Vodafone bought a 67 per cent stake in Hutchison Essar, now known as Vodafone Essar, from Hutchison of Hong Kong in 2007. The transaction was made via a Dutch company controlled by Vodafone that paid $11bn to a Cayman Islands entity run by Hutchison Whampoa, the seller, for another Cayman Islands group that indirectly held a controlling stake in the India-based mobile operator.
“As it stands, today’s verdict is a landmark decision because there are several other similar offshore transactions waiting to be executed, which have been in the limbo for some time, and this decision at least lends some level of clarity about M&A tax policy in India,” said Mukesh Butani, a partner at BMR Advisors law firm.
Vodafone is expected to appeal against the verdict to India’s highest judicial body, the Supreme Court in New Delhi, as it argues the transaction should not be taxable in India because it took place overseas.
Des Webb, global tax executive at Vodafone, said it would take the Indian tax department “eight weeks before they pass any order or demand for tax”.
“We need to consider our options. We have to look at the judgment in detail, we will be discussing it with our advisers . . . but we are seriously considering to make an appeal to the Supreme Court,” he said.
“We continue to believe strongly that this transaction is not taxable in India and will continue to defend our position.”
However, the court ruled that the deal should have been subject to Indian capital gains tax because the operating assets of Hutchison Essar were in India.
“The Indian tax authority’s order can’t be held to lack jurisdiction,” one of the judges said.
Other foreign companies have monitored the case closely because of the similarity of Hutchison’s sale to several other deals, including the sale of a stake in Genpact India, an outsourcing company, by General Electric in 2004.
“My clients are very concerned about the outcome of this legal battle, as it will determine whether they want to invest or not in India,” said one person advising foreign companies operating in India.
The Mumbai High Court ruled on Wednesday that the UK telecoms group must pay capital gains tax into the Indian coffers for its $11bn acquisition of a controlling stake in Hutchison Essar, a domestic mobile phone operator, completed three years ago. The UK mobile operator could face a total tax bill of more than $2bn.
It is the first time an Indian court has ruled that the country’s tax department can charge a foreign company over a transaction that occurred outside India.
The decision, which follows a complex three-year long legal dispute, has been closely watched by foreign companies because it will set a precedent for other international merger and acquisition deals in India.
Vodafone bought a 67 per cent stake in Hutchison Essar, now known as Vodafone Essar, from Hutchison of Hong Kong in 2007. The transaction was made via a Dutch company controlled by Vodafone that paid $11bn to a Cayman Islands entity run by Hutchison Whampoa, the seller, for another Cayman Islands group that indirectly held a controlling stake in the India-based mobile operator.
“As it stands, today’s verdict is a landmark decision because there are several other similar offshore transactions waiting to be executed, which have been in the limbo for some time, and this decision at least lends some level of clarity about M&A tax policy in India,” said Mukesh Butani, a partner at BMR Advisors law firm.
Vodafone is expected to appeal against the verdict to India’s highest judicial body, the Supreme Court in New Delhi, as it argues the transaction should not be taxable in India because it took place overseas.
Des Webb, global tax executive at Vodafone, said it would take the Indian tax department “eight weeks before they pass any order or demand for tax”.
“We need to consider our options. We have to look at the judgment in detail, we will be discussing it with our advisers . . . but we are seriously considering to make an appeal to the Supreme Court,” he said.
“We continue to believe strongly that this transaction is not taxable in India and will continue to defend our position.”
However, the court ruled that the deal should have been subject to Indian capital gains tax because the operating assets of Hutchison Essar were in India.
“The Indian tax authority’s order can’t be held to lack jurisdiction,” one of the judges said.
Other foreign companies have monitored the case closely because of the similarity of Hutchison’s sale to several other deals, including the sale of a stake in Genpact India, an outsourcing company, by General Electric in 2004.
“My clients are very concerned about the outcome of this legal battle, as it will determine whether they want to invest or not in India,” said one person advising foreign companies operating in India.
India’s state banks underpay, says official
India’s central bank governor urged the government to revise the pay of executives in state-controlled banks, a call in stark contrast with the finance and corporate affairs ministry’s proposal to cap salaries.
Duvvuri Subbarao, governor of the Reserve Bank of India, warned that India’s public-sector banks, which make up about 70 per cent of the entire industry, risked losing competitiveness and talent if they refused to increase wages.
“The executive compensation in the public sector is lower than the private sector. Notwithstanding the historical reasons for this there is perhaps a good reason to revisit this,” Mr Subbarao said at a bankers’ conference in Mumbai. “If public-sector banks are required to compete with private banks on a level playing field there is good case for compensating them on a competitive base. There is also the risk that if public-sector banks’ compensation is not improved, the public sector may lose talent to the private sector,” Mr Subbarao added.
The debate over executive pay has been at the heart of the so-called Basel III global regulatory overhaul that followed the credit crisis and that has put under scrutiny remuneration mechanisms that encouraged risk-taking.
Bankers’ pay and bonuses in the aftermath of the crisis triggered a political firestorm in the US and Europe as the institutions that emerged from the crash began reporting big profits in an apparent return to “business as usual”.
However, the debate in India is significantly different as bankers’ salaries are low compared with those in developed markets.
Executives of state-controlled banks get salary packages that are lower than those of their private-sector counterparts. Chanda Kochhar, head of ICICI Bank, the country’s largest private-sector bank, received a remuneration of about Rs17.5m ($375,000) in the year ending in March 2010, more than six times the Rs2.65m netted by OP Bhatt, chairman of State Bank of India, the nation’s biggest state-run bank.
Compensation packages for public-sector bankers are set by the government, while pay for executives working in private-sector banks is set semi-autonomously – clearance is obtained from the RBI.
“A pay rise would be very much welcomed in the public sector, but it will take time for this to happen,” said TM Bhasin, chairman and managing director of state-owned Indian Bank.
The chairman of SBI warned that the nation’s double-digit and inclusive growth ambitions risked being quashed by a lack of skills in the banking sector.
“That is the major challenge that we have; it’s a huge challenge,” said Mr Bhatt.
“I think it is a necessary challenge because if we do not meet this challenge [this entire] growth story that we are talking about may stop.”
Duvvuri Subbarao, governor of the Reserve Bank of India, warned that India’s public-sector banks, which make up about 70 per cent of the entire industry, risked losing competitiveness and talent if they refused to increase wages.
“The executive compensation in the public sector is lower than the private sector. Notwithstanding the historical reasons for this there is perhaps a good reason to revisit this,” Mr Subbarao said at a bankers’ conference in Mumbai. “If public-sector banks are required to compete with private banks on a level playing field there is good case for compensating them on a competitive base. There is also the risk that if public-sector banks’ compensation is not improved, the public sector may lose talent to the private sector,” Mr Subbarao added.
The debate over executive pay has been at the heart of the so-called Basel III global regulatory overhaul that followed the credit crisis and that has put under scrutiny remuneration mechanisms that encouraged risk-taking.
Bankers’ pay and bonuses in the aftermath of the crisis triggered a political firestorm in the US and Europe as the institutions that emerged from the crash began reporting big profits in an apparent return to “business as usual”.
However, the debate in India is significantly different as bankers’ salaries are low compared with those in developed markets.
Executives of state-controlled banks get salary packages that are lower than those of their private-sector counterparts. Chanda Kochhar, head of ICICI Bank, the country’s largest private-sector bank, received a remuneration of about Rs17.5m ($375,000) in the year ending in March 2010, more than six times the Rs2.65m netted by OP Bhatt, chairman of State Bank of India, the nation’s biggest state-run bank.
Compensation packages for public-sector bankers are set by the government, while pay for executives working in private-sector banks is set semi-autonomously – clearance is obtained from the RBI.
“A pay rise would be very much welcomed in the public sector, but it will take time for this to happen,” said TM Bhasin, chairman and managing director of state-owned Indian Bank.
The chairman of SBI warned that the nation’s double-digit and inclusive growth ambitions risked being quashed by a lack of skills in the banking sector.
“That is the major challenge that we have; it’s a huge challenge,” said Mr Bhatt.
“I think it is a necessary challenge because if we do not meet this challenge [this entire] growth story that we are talking about may stop.”
Monday, September 6, 2010
Indonesia Seeking to Avoid Rate Rise, Governor Nasution Says
Sept. 7 (Bloomberg) -- Indonesia’s central bank chief said he wants to avoid increasing interest rates, counting on lending and reserve rules for banks to contain inflation and stoke growth in Southeast Asia’s biggest economy.
“As long as we still can manage our monetary variables by other instruments, we will try to avoid changing the interest rate,” Governor Darmin Nasution said in an interview in Jakarta. By raising the amount banks must hold in reserve and setting loan-to-deposit ratio guidelines, officials can bolster economic expansion and keep consumer price gains within target, he said.
Nasution’s comments late yesterday indicate Indonesia isn’t ready to join Asian counterparts in raising borrowing costs from world-recession lows as the region leads the recovery. At stake is reining in a 16-month high inflation rate that’s eroding purchasing power in the world’s fourth most populous nation.
“We see greater risk of delayed hikes” in rates, Citigroup Inc. analysts Johanna Chua and Brian Tan said in a report after Bank Indonesia left its benchmark at a record-low 6.5 percent on Sept. 3. “Recent policy action is a bit of a mixed bag, more hawkish on the reserve requirement, but downplaying the need to adjust rates.”
Bank Indonesia has kept the main rate unchanged for more than a year as President Susilo Bambang Yudhoyono has focused on bolstering growth, targeting an average 6.6 percent annual expansion rate through the end of his term in 2014.
Faster Growth
Nasution, speaking in his office in his first interview since assuming the post this month, said gross domestic product may climb by 6.2 percent this year, in part as banks bring their loan portfolios into line within the new ratio guidelines. Growth has met or exceeded that pace only once since 1996, according to the International Monetary Fund.
He also predicted that consumer prices, which surged 6.44 percent in August from a year before, will rise within BI’s 4 percent to 6 percent target range in 2011 as liquidity is mopped up by a boost in banks’ reserve requirements.
Indonesia’s Jakarta Composite Index of stocks has gained 34 percent in dollar terms so far this year, outstripping the 2.5 percent advance for the MSCI Emerging Market Asia Index, as economic growth picked up.
The rupiah has risen 4.5 percent against the U.S. currency in that time, the third-best performer in Asia outside Japan, behind Malaysia and Thailand, which have both raised rates.
Policy Outlook
“In the past we rarely used the reserve requirement in our monetary policy,” said Nasution, 61, who headed the country’s tax office before joining the central bank as a deputy governor last year. Going forward, “our response will not only be the interest rate. We will often use the reserve requirement.”
The central bank said last week lenders will be required to set aside 8 percent of their deposits as primary reserves starting Nov. 1, from 5 percent previously.
Bank Indonesia also said it will introduce in March an additional reserve requirement that’s linked to the share of funds that a lender gives out in loans. Officials will impose a penalty on banks whose loan-to-deposit ratio is below 78 percent or more than 100 percent.
When Bank Indonesia determines liquidity is at a desired level, it will return 2.5 percentage points of the additional 3 percentage points of primary reserve requirement to the lenders, it said last week.
Beating Expectations
Indonesia’s $540 billion economy expanded at a faster-than- projected 6.2 percent pace in the second quarter as investment rose. Stronger growth has helped boost profit at companies including builder PT Wijaya Karya and PT Bank CIMB Niaga.
Bank Indonesia estimates bank lending this year may rise about 13 percent to 20 percent, based on the current volume of loans being made, Nasution said. Larger credit expansion is needed to support economic expansion of 6.2 percent, he said.
“We will monitor the lending rate of banks,” he said. “We need lower lending rates to encourage credit growth,” Nasution added, referring to the cost of loans.
The country’s inflation accelerated in August as the world’s most populous Muslim nation observed the fasting month of Ramadan and families began preparations for the Eid-ul-Fitr celebration. Higher electricity costs also boosted prices.
Consumer prices may climb by more than the central bank’s target of 4 percent to 6 percent this year, Nasution said last week.
Elsewhere in the region, Malaysia left rates unchanged last week after three increases this year. The Bank of Thailand raised its benchmark on Aug. 25 and signaled further moves to come after the economy overcame political unrest to grow faster than estimated last quarter.
Nasution, who has a doctorate in economics from University of Paris, Sorbonne, France, became governor on Sept. 1, the 14th in the central bank’s 57-year history. He became acting governor after Vice President Boediono resigned as central bank chief in May 2009 to become President Yudhoyono’s running mate in last year’s presidential election.
“As long as we still can manage our monetary variables by other instruments, we will try to avoid changing the interest rate,” Governor Darmin Nasution said in an interview in Jakarta. By raising the amount banks must hold in reserve and setting loan-to-deposit ratio guidelines, officials can bolster economic expansion and keep consumer price gains within target, he said.
Nasution’s comments late yesterday indicate Indonesia isn’t ready to join Asian counterparts in raising borrowing costs from world-recession lows as the region leads the recovery. At stake is reining in a 16-month high inflation rate that’s eroding purchasing power in the world’s fourth most populous nation.
“We see greater risk of delayed hikes” in rates, Citigroup Inc. analysts Johanna Chua and Brian Tan said in a report after Bank Indonesia left its benchmark at a record-low 6.5 percent on Sept. 3. “Recent policy action is a bit of a mixed bag, more hawkish on the reserve requirement, but downplaying the need to adjust rates.”
Bank Indonesia has kept the main rate unchanged for more than a year as President Susilo Bambang Yudhoyono has focused on bolstering growth, targeting an average 6.6 percent annual expansion rate through the end of his term in 2014.
Faster Growth
Nasution, speaking in his office in his first interview since assuming the post this month, said gross domestic product may climb by 6.2 percent this year, in part as banks bring their loan portfolios into line within the new ratio guidelines. Growth has met or exceeded that pace only once since 1996, according to the International Monetary Fund.
He also predicted that consumer prices, which surged 6.44 percent in August from a year before, will rise within BI’s 4 percent to 6 percent target range in 2011 as liquidity is mopped up by a boost in banks’ reserve requirements.
Indonesia’s Jakarta Composite Index of stocks has gained 34 percent in dollar terms so far this year, outstripping the 2.5 percent advance for the MSCI Emerging Market Asia Index, as economic growth picked up.
The rupiah has risen 4.5 percent against the U.S. currency in that time, the third-best performer in Asia outside Japan, behind Malaysia and Thailand, which have both raised rates.
Policy Outlook
“In the past we rarely used the reserve requirement in our monetary policy,” said Nasution, 61, who headed the country’s tax office before joining the central bank as a deputy governor last year. Going forward, “our response will not only be the interest rate. We will often use the reserve requirement.”
The central bank said last week lenders will be required to set aside 8 percent of their deposits as primary reserves starting Nov. 1, from 5 percent previously.
Bank Indonesia also said it will introduce in March an additional reserve requirement that’s linked to the share of funds that a lender gives out in loans. Officials will impose a penalty on banks whose loan-to-deposit ratio is below 78 percent or more than 100 percent.
When Bank Indonesia determines liquidity is at a desired level, it will return 2.5 percentage points of the additional 3 percentage points of primary reserve requirement to the lenders, it said last week.
Beating Expectations
Indonesia’s $540 billion economy expanded at a faster-than- projected 6.2 percent pace in the second quarter as investment rose. Stronger growth has helped boost profit at companies including builder PT Wijaya Karya and PT Bank CIMB Niaga.
Bank Indonesia estimates bank lending this year may rise about 13 percent to 20 percent, based on the current volume of loans being made, Nasution said. Larger credit expansion is needed to support economic expansion of 6.2 percent, he said.
“We will monitor the lending rate of banks,” he said. “We need lower lending rates to encourage credit growth,” Nasution added, referring to the cost of loans.
The country’s inflation accelerated in August as the world’s most populous Muslim nation observed the fasting month of Ramadan and families began preparations for the Eid-ul-Fitr celebration. Higher electricity costs also boosted prices.
Consumer prices may climb by more than the central bank’s target of 4 percent to 6 percent this year, Nasution said last week.
Elsewhere in the region, Malaysia left rates unchanged last week after three increases this year. The Bank of Thailand raised its benchmark on Aug. 25 and signaled further moves to come after the economy overcame political unrest to grow faster than estimated last quarter.
Nasution, who has a doctorate in economics from University of Paris, Sorbonne, France, became governor on Sept. 1, the 14th in the central bank’s 57-year history. He became acting governor after Vice President Boediono resigned as central bank chief in May 2009 to become President Yudhoyono’s running mate in last year’s presidential election.
Hurd Joins Oracle as Co-President
SAN FRANCISCO — In naming Mark V. Hurd, the former chief executive of Hewlett-Packard, as Oracle’s new co-president, Lawrence J. Ellison, Oracle’s chief executive and largest shareholder, has put his money where his controversial mouth is.
Late on Monday, Oracle announced that Mr. Hurd had joined the company as a president and a director. Mr. Hurd resigned from H.P. one month ago, after an investigation by the board into a personal relationship with a contractor turned up questionable expense reports.
Mr. Ellison, a personal friend of Mr. Hurd’s, criticized H.P.’s board last month in an e-mail message to The New York Times, saying it was “the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago.”
Now, Oracle intends to capitalize on H.P.’s mistake, Mr. Ellison said.
“Mark did a brilliant job at H.P., and I expect he’ll do even better at Oracle,” Mr. Ellison said in the statement. “There is no executive in the I.T. world with more relevant experience than Mark.”
Oracle already had a crowded management suite, with Charles E. Phillips Jr. and Safra A. Catz serving as co-presidents under Mr. Ellison.
Mr. Phillips, however, has resigned and given up his seat on the board, making room for Mr. Hurd.
In his statement, Mr. Ellison said that Mr. Phillips had asked to leave the company in December. “We will miss his talent and leadership, but I respect his decision,” Mr. Ellison said.
This year, Mr. Phillips acknowledged having an affair after a woman he had been seeing put up a Web site and billboards detailing his extramarital relationship.
Oracle’s decision to hire Mr. Hurd presents Silicon Valley with a true soap opera, filled with fierce business dealings and saucy relationships.
H.P. has long been one of Oracle’s largest partners in the business computing market. H.P. sells the computer servers and storage systems that customers use to run Oracle’s database software. But Oracle has just acquired Sun Microsystems, one of H.P.’s longtime rivals in the hardware market.
Mr. Hurd will bring his expertise running the largest computer hardware business on the planet to Oracle, where he may be able to revive the fortunes of Sun’s products at H.P.’s expense.
Oracle has, in particular, used Sun’s technology to build a new line of data warehousing systems that can sort through huge volumes of information like sales trends, pricing and inventory levels.
Before joining H.P. as its chief executive in 2005, Mr. Hurd was chief executive of NCR, which had the leading data warehousing technology.
Mr. Hurd also oversaw a number of large acquisitions at H.P., so he should feel right at home at Oracle, one of the most active buyers of companies in the technology industry.
“As Oracle continues to grow we need people experienced in operating a $100 billion business,” Ms. Catz said in a statement.
Oracle’s main database rival is I.B.M., which, like H.P., sells more than $100 billion in equipment and services a year.
Mr. Hurd arrived in Silicon Valley five years ago, seeking to prove himself as a chief executive on the biggest stage.
He succeeded in that respect by pushing H.P. past I.B.M. as the largest technology company and turning in some of the most consistent financial results in the industry.
But Mr. Hurd’s time at the top came crashing down after H.P.’s board began investigating sexual harassment claims presented by Jodie Fisher, a former contractor.
The company discovered that Mr. Hurd authorized paying Ms. Fisher, a 50-year-old former actress in sexually charged films who had also posed for Playboy in college, to attend gatherings with H.P.’s top customers.
H.P. found no evidence of sexual harassment, but said Mr. Hurd had tried to conceal a personal relationship with Ms. Fisher by removing her name from his expenses for meals.
Mr. Hurd settled with Ms. Fisher for an undisclosed sum and fought H.P.’s decision to make the sexual harassment claims public.
The senior ranks of Oracle, run by Mr. Ellison since he founded it 30 years ago, are anything but stable. Well-regarded executives like Ray Lane, now a managing partner at the venture capital firm Kleiner Perkins Caufield & Byers, and Marc Benioff, now the chief executive of Salesforce.com, have left high-ranking positions at Oracle.
Their departures were often portrayed as a response to Mr. Ellison’s well-entrenched position as chief executive and his personality.
Ms. Catz will continue to oversee Oracle’s finance, legal and merger and acquisition operations, while Mr. Ellison will oversee engineering. Mr. Hurd will manage sales, marketing and software support.
In a statement, Mr. Hurd said he looked forward to tackling Oracle’s rivals: “I’m excited to be a part of the most innovative technology team in the I.T. industry.”
Late on Monday, Oracle announced that Mr. Hurd had joined the company as a president and a director. Mr. Hurd resigned from H.P. one month ago, after an investigation by the board into a personal relationship with a contractor turned up questionable expense reports.
Mr. Ellison, a personal friend of Mr. Hurd’s, criticized H.P.’s board last month in an e-mail message to The New York Times, saying it was “the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago.”
Now, Oracle intends to capitalize on H.P.’s mistake, Mr. Ellison said.
“Mark did a brilliant job at H.P., and I expect he’ll do even better at Oracle,” Mr. Ellison said in the statement. “There is no executive in the I.T. world with more relevant experience than Mark.”
Oracle already had a crowded management suite, with Charles E. Phillips Jr. and Safra A. Catz serving as co-presidents under Mr. Ellison.
Mr. Phillips, however, has resigned and given up his seat on the board, making room for Mr. Hurd.
In his statement, Mr. Ellison said that Mr. Phillips had asked to leave the company in December. “We will miss his talent and leadership, but I respect his decision,” Mr. Ellison said.
This year, Mr. Phillips acknowledged having an affair after a woman he had been seeing put up a Web site and billboards detailing his extramarital relationship.
Oracle’s decision to hire Mr. Hurd presents Silicon Valley with a true soap opera, filled with fierce business dealings and saucy relationships.
H.P. has long been one of Oracle’s largest partners in the business computing market. H.P. sells the computer servers and storage systems that customers use to run Oracle’s database software. But Oracle has just acquired Sun Microsystems, one of H.P.’s longtime rivals in the hardware market.
Mr. Hurd will bring his expertise running the largest computer hardware business on the planet to Oracle, where he may be able to revive the fortunes of Sun’s products at H.P.’s expense.
Oracle has, in particular, used Sun’s technology to build a new line of data warehousing systems that can sort through huge volumes of information like sales trends, pricing and inventory levels.
Before joining H.P. as its chief executive in 2005, Mr. Hurd was chief executive of NCR, which had the leading data warehousing technology.
Mr. Hurd also oversaw a number of large acquisitions at H.P., so he should feel right at home at Oracle, one of the most active buyers of companies in the technology industry.
“As Oracle continues to grow we need people experienced in operating a $100 billion business,” Ms. Catz said in a statement.
Oracle’s main database rival is I.B.M., which, like H.P., sells more than $100 billion in equipment and services a year.
Mr. Hurd arrived in Silicon Valley five years ago, seeking to prove himself as a chief executive on the biggest stage.
He succeeded in that respect by pushing H.P. past I.B.M. as the largest technology company and turning in some of the most consistent financial results in the industry.
But Mr. Hurd’s time at the top came crashing down after H.P.’s board began investigating sexual harassment claims presented by Jodie Fisher, a former contractor.
The company discovered that Mr. Hurd authorized paying Ms. Fisher, a 50-year-old former actress in sexually charged films who had also posed for Playboy in college, to attend gatherings with H.P.’s top customers.
H.P. found no evidence of sexual harassment, but said Mr. Hurd had tried to conceal a personal relationship with Ms. Fisher by removing her name from his expenses for meals.
Mr. Hurd settled with Ms. Fisher for an undisclosed sum and fought H.P.’s decision to make the sexual harassment claims public.
The senior ranks of Oracle, run by Mr. Ellison since he founded it 30 years ago, are anything but stable. Well-regarded executives like Ray Lane, now a managing partner at the venture capital firm Kleiner Perkins Caufield & Byers, and Marc Benioff, now the chief executive of Salesforce.com, have left high-ranking positions at Oracle.
Their departures were often portrayed as a response to Mr. Ellison’s well-entrenched position as chief executive and his personality.
Ms. Catz will continue to oversee Oracle’s finance, legal and merger and acquisition operations, while Mr. Ellison will oversee engineering. Mr. Hurd will manage sales, marketing and software support.
In a statement, Mr. Hurd said he looked forward to tackling Oracle’s rivals: “I’m excited to be a part of the most innovative technology team in the I.T. industry.”
Most Asian Stocks Fall as Yen, Oil Overshadow Obama Stimulus
Sept. 7 (Bloomberg) -- Most Asian stocks fell as a stronger yen and declines in oil prices overshadowed a stimulus plan proposed by President Barack Obama to help boost the U.S. economy.
Nissan Motor Co. sank 1.5 percent in Tokyo on concern the yen’s strength will reduce the value of overseas revenue. Mitsubishi Corp., Japan’s largest commodities trader, lost 0.8 percent after crude-oil futures dropped in New York. Posco, the world’s third-biggest steelmaker, climbed 3.6 percent in Seoul on speculation Obama’s plan will boost demand for the material.
More than two stocks dropped for each one that advanced in the MSCI Asia Pacific Index, which lost 0.2 percent to 121.65 as of 9:50 a.m. in Tokyo. The gauge rallied 4.6 percent in the past four days amid optimism the U.S. economy will avoid falling back into a recession.
“Expectations the economy will not fall into a double-dip recession increased after Obama announced a stimulus plan for the U.S.,” said Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co. “As the yen is an important element that moves the market, its gain may weigh on Japanese stocks.”
Japan’s Nikkei 225 Stock Average dropped 0.6 percent, while Australia’s S&P/ASX 200 Index declined 0.1 percent. South Korea’s Kospi Index rose 0.1 percent.
Futures on the Standard & Poor’s 500 Index lost 0.1 percent. U.S. markets are due to resume trading later today after a holiday yesterday. At a rally for Labor Day, President Obama proposed spending at least $50 billion to fix roads, railways and runways, and to modernize the air-traffic control system to help spur an economy that’s lost jobs for three straight months.
Nissan Motor Co. sank 1.5 percent in Tokyo on concern the yen’s strength will reduce the value of overseas revenue. Mitsubishi Corp., Japan’s largest commodities trader, lost 0.8 percent after crude-oil futures dropped in New York. Posco, the world’s third-biggest steelmaker, climbed 3.6 percent in Seoul on speculation Obama’s plan will boost demand for the material.
More than two stocks dropped for each one that advanced in the MSCI Asia Pacific Index, which lost 0.2 percent to 121.65 as of 9:50 a.m. in Tokyo. The gauge rallied 4.6 percent in the past four days amid optimism the U.S. economy will avoid falling back into a recession.
“Expectations the economy will not fall into a double-dip recession increased after Obama announced a stimulus plan for the U.S.,” said Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co. “As the yen is an important element that moves the market, its gain may weigh on Japanese stocks.”
Japan’s Nikkei 225 Stock Average dropped 0.6 percent, while Australia’s S&P/ASX 200 Index declined 0.1 percent. South Korea’s Kospi Index rose 0.1 percent.
Futures on the Standard & Poor’s 500 Index lost 0.1 percent. U.S. markets are due to resume trading later today after a holiday yesterday. At a rally for Labor Day, President Obama proposed spending at least $50 billion to fix roads, railways and runways, and to modernize the air-traffic control system to help spur an economy that’s lost jobs for three straight months.
Sunday, September 5, 2010
Asian Stocks Rise as U.S. Jobs Report Eases Growth Concerns
Sept. 6 (Bloomberg) -- Asian stocks rose, driving the MSCI Asia Pacific Index to the highest level in four weeks, as better-than-estimated jobs data in the U.S. eased concern that global economic growth is faltering.
Samsung Electronics Co., which gets a fifth of its sales in America, gained 1.4 percent in Seoul. Canon Inc., a camera maker that gets 28 percent of its revenue in the Americas, increased 1.3 percent in Tokyo. BHP Billiton Ltd., the world’s largest mining company, advanced 1.3 percent on speculation economic growth will bolster metals demand.
“There is a temporary sense of security after the better- than-expected jobs data,” said Kiyoshi Ishigane, a strategist in Tokyo at Mitsubishi UFJ Asset Management Co., which oversees about $65 billion. “The market had been too pessimistic about the U.S. economy.”
The MSCI Asia Pacific Index gained 0.6 percent to 120.76 as of 10:43 a.m. in Tokyo, taking its four-day advance to 3.6 percent. The gauge is set to close at the highest level since Aug. 10. Japan’s Nikkei 225 Stock Average climbed 1.5 percent, while Australia’s S&P/ASX 200 Index gained 0.3 percent.
New Zealand’s NZX 50 Index increased 0.7 percent, led by building-related companies on speculation work tied to the clean-up of an earthquake in Christchurch will boost profits.
Futures on the Standard & Poor’s 500 Index gained 0.2 percent. The gauge rose 1.3 percent on Sept. 3 after a government report showed private payrolls climbed by 67,000 in August, more than the median forecast for an increase of 40,000 in a Bloomberg economist survey.
Samsung, Canon
Samsung Electronics, Asia’s biggest maker of chips, flat screens and mobile phones, added 1.4 percent to 772,000 won. The company said it may invest 30 trillion won ($25.6 billion) next year to expand its business.
Canon, which derives 28 percent of its sales in the Americas, advanced 1.3 percent to 3,595 yen in Tokyo. James Hardie Industries SE, the biggest seller of home siding in the U.S., rose 1.5 percent to A$5.47.
“The market will react to the jobs report positively because earlier forecasts were negative,” said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo. “I see risk-taking movements.”
BHP Billiton gained 1.3 percent to A$38.34, while Fortescue Metals Group Ltd. climbed 1.9 percent to A$4.89. Copper futures in New York rose 0.3 percent in electronic trading, the fourth straight day of gains.
Macquarie Group Ltd., Australia’s biggest investment bank, tumbled 4 percent to A$35.53 after saying first-half profit will fall 25 percent as faltering markets sap the flow of deals. The stock had the second-largest drop in the MSCI Asia Pacific Index.
Samsung Electronics Co., which gets a fifth of its sales in America, gained 1.4 percent in Seoul. Canon Inc., a camera maker that gets 28 percent of its revenue in the Americas, increased 1.3 percent in Tokyo. BHP Billiton Ltd., the world’s largest mining company, advanced 1.3 percent on speculation economic growth will bolster metals demand.
“There is a temporary sense of security after the better- than-expected jobs data,” said Kiyoshi Ishigane, a strategist in Tokyo at Mitsubishi UFJ Asset Management Co., which oversees about $65 billion. “The market had been too pessimistic about the U.S. economy.”
The MSCI Asia Pacific Index gained 0.6 percent to 120.76 as of 10:43 a.m. in Tokyo, taking its four-day advance to 3.6 percent. The gauge is set to close at the highest level since Aug. 10. Japan’s Nikkei 225 Stock Average climbed 1.5 percent, while Australia’s S&P/ASX 200 Index gained 0.3 percent.
New Zealand’s NZX 50 Index increased 0.7 percent, led by building-related companies on speculation work tied to the clean-up of an earthquake in Christchurch will boost profits.
Futures on the Standard & Poor’s 500 Index gained 0.2 percent. The gauge rose 1.3 percent on Sept. 3 after a government report showed private payrolls climbed by 67,000 in August, more than the median forecast for an increase of 40,000 in a Bloomberg economist survey.
Samsung, Canon
Samsung Electronics, Asia’s biggest maker of chips, flat screens and mobile phones, added 1.4 percent to 772,000 won. The company said it may invest 30 trillion won ($25.6 billion) next year to expand its business.
Canon, which derives 28 percent of its sales in the Americas, advanced 1.3 percent to 3,595 yen in Tokyo. James Hardie Industries SE, the biggest seller of home siding in the U.S., rose 1.5 percent to A$5.47.
“The market will react to the jobs report positively because earlier forecasts were negative,” said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo. “I see risk-taking movements.”
BHP Billiton gained 1.3 percent to A$38.34, while Fortescue Metals Group Ltd. climbed 1.9 percent to A$4.89. Copper futures in New York rose 0.3 percent in electronic trading, the fourth straight day of gains.
Macquarie Group Ltd., Australia’s biggest investment bank, tumbled 4 percent to A$35.53 after saying first-half profit will fall 25 percent as faltering markets sap the flow of deals. The stock had the second-largest drop in the MSCI Asia Pacific Index.
Jubilant Energy to raise exploration cash
Jubilant Energy, the oil and gas exploration arm of India’s Jubilant Group, hopes to raise up to $160m from London’s Alternative Investment Market in the coming months to help finance energy prospecting in north-eastern India.
The company – part of a New Delhi-based conglomerate with interests ranging from pharmaceuticals to pizza – holds exploration rights to three large blocks in the gas-rich Assam-Arakan Basin, where significant gas finds have already been made in neighbouring Burma and Bangladesh.
“This is a great opportunity to invest – it’s an India growth story,” said Hari Bhartia, Jubilant’s co-chairman.
“India’s energy requirement will continue to grow. Whoever has bet in this area has been successful.”
The proposed offer comes on the heels of British oil explorer Cairn Energy’s decision to cash in on its Indian venture – which made the largest on-shore oil find in two decades in Rajasthan – in a $9.6bn sale to mining group Vedanta.
Ajay Khandelwal, Jubilant chief executive, said the company planned to spend $100m to $125m annually for the next two to three years exploring its three north-eastern blocks, and also aimed to acquire at least three new blocks in upcoming auctions.
Proceeds from the London share offering – which will be all new equity – will help finance the work.
This year, Jubilant, which has already invested about $300m, is projecting revenues of just $15m from its 25 per cent stake in the small Kharsang Field, near the India-Burma border, which is producing about 2,000 barrels of oil a day.
But the company expects revenues to pick up sharply in 2012, when its block in the hydrocarbon rich Krishna-Godavari Basin, in which it holds a 10 per cent stake, goes into production, led by the operator, the Gujarat State Petroleum Corp. “Depending on the gas price, my expectation is that Jubilant will be a self-sufficient exploration company by 2014,” Mr Khandelwal said.
Geologically, India’s remote and strife-prone north-east – wedged between Burma and Bangladesh – has some of the country’s highest hydrocarbon potential.
However, it is also fraught with political and logistical complexities, including some of India’s frailest infrastructure. Jubilant is already moving to dig appraisal wells in promising Tripura, but the area is far from potential gas customers.
“Everybody knows Tripura is floating on gas,” said industry analyst Deepak Mehta, director of Petrowatch. “But getting it out is tricky.”
Another two of Jubilant’s north-eastern blocks are in troubled Manipur state, which borders Burma and has wrestled for years with insurgency and conflict between ethnic groups.
Jubilant Energy is being advised by Evolution Securities and Renaissance Capital.
The company – part of a New Delhi-based conglomerate with interests ranging from pharmaceuticals to pizza – holds exploration rights to three large blocks in the gas-rich Assam-Arakan Basin, where significant gas finds have already been made in neighbouring Burma and Bangladesh.
“This is a great opportunity to invest – it’s an India growth story,” said Hari Bhartia, Jubilant’s co-chairman.
“India’s energy requirement will continue to grow. Whoever has bet in this area has been successful.”
The proposed offer comes on the heels of British oil explorer Cairn Energy’s decision to cash in on its Indian venture – which made the largest on-shore oil find in two decades in Rajasthan – in a $9.6bn sale to mining group Vedanta.
Ajay Khandelwal, Jubilant chief executive, said the company planned to spend $100m to $125m annually for the next two to three years exploring its three north-eastern blocks, and also aimed to acquire at least three new blocks in upcoming auctions.
Proceeds from the London share offering – which will be all new equity – will help finance the work.
This year, Jubilant, which has already invested about $300m, is projecting revenues of just $15m from its 25 per cent stake in the small Kharsang Field, near the India-Burma border, which is producing about 2,000 barrels of oil a day.
But the company expects revenues to pick up sharply in 2012, when its block in the hydrocarbon rich Krishna-Godavari Basin, in which it holds a 10 per cent stake, goes into production, led by the operator, the Gujarat State Petroleum Corp. “Depending on the gas price, my expectation is that Jubilant will be a self-sufficient exploration company by 2014,” Mr Khandelwal said.
Geologically, India’s remote and strife-prone north-east – wedged between Burma and Bangladesh – has some of the country’s highest hydrocarbon potential.
However, it is also fraught with political and logistical complexities, including some of India’s frailest infrastructure. Jubilant is already moving to dig appraisal wells in promising Tripura, but the area is far from potential gas customers.
“Everybody knows Tripura is floating on gas,” said industry analyst Deepak Mehta, director of Petrowatch. “But getting it out is tricky.”
Another two of Jubilant’s north-eastern blocks are in troubled Manipur state, which borders Burma and has wrestled for years with insurgency and conflict between ethnic groups.
Jubilant Energy is being advised by Evolution Securities and Renaissance Capital.
Former H.P. Chief May Move to Oracle
Mark V. Hurd, who was forced to resign as Hewlett-Packard’s top executive last month after an investigation into a sexual harassment charge found that he had manipulated his expenses, is in talks with Oracle about a top executive position there, according a person briefed on the matter.
Mr. Hurd, who is close to Lawrence J. Ellison, Oracle’s founder and chief executive, was not expected to replace him, though it was uncertain what any role at Oracle might be. Mr. Hurd and Oracle are close to reaching an agreement, but no deal has been completed, said the person briefed on the talks, who agreed to speak on the condition of anonymity because the discussions were supposed to remain confidential.
Oracle did not respond to requests for comment. A spokesman for Mr. Hurd declined to comment.
For Mr. Hurd, 53, landing a top role at Oracle would be a quick rebound after his tumultuous exit from H.P. in early August. Mr. Hurd was forced out by the board after he settled charges of sexual harassment brought by Jodie Fisher, a 50-year-old actress who worked as a marketing consultant for the company.
Both Mr. Hurd and Ms. Fisher denied having a sexual relationship, and an H.P. investigation failed to find any evidence of sexual misconduct by Mr. Hurd.
But the company has said that Mr. Hurd’s resignation was a result of a break in trust caused by his falsifying expense reports possibly to conceal the relationship.
Shortly after Mr. Hurd was forced out, Mr. Ellison made an unusual and passionate defense of him. In an e-mail to The New York Times, Mr. Ellison called the H.P. board’s action “the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago.”
The talks between Mr. Hurd and Oracle were first reported on the Web site of The Wall Street Journal on Sunday.
Oracle, which Mr. Ellison founded 30 years ago, is the world’s largest database software maker; Mr. Ellison has been its only chief executive. For years, the company has been a close partner with H.P., which sells computing systems and services to corporations. But since Oracle’s acquisition of Sun Microsystems, in a deal that closed early this year, Oracle and H.P. have become competitors in the market for computer hardware.
The purchase of Sun caught a number of Oracle’s investors off guard, since the company had avoided the hardware market in the past.
At H.P., Mr. Hurd helped steer mammoth computer server, storage and services businesses. Such expertise could come in handy as Oracle continues to try to digest Sun. In particular, Mr. Hurd built a reputation as a cost-cutting whiz and could apply those skills to bringing the Sun business in line.
Sun also has a number of large campuses and an extensive research and development operation. At H.P., Mr. Hurd pared back such expenses.
While running the company, Mr. Hurd passed on trying to acquire Sun, leaving Oracle and I.B.M. to bid for it.
Mr. Ellison remains heavily involved in Oracle, but the day-to-day operations are largely overseen by two presidents, Safra A. Catz and Charles E. Phillips Jr. It was unclear how Mr. Hurd would fit into the existing, crowded triumvirate.
Mr. Hurd took over the top job at H.P. in 2005, succeeding Carly Fiorina, who had been unable to increase profitability after the company’s $19 billion acquisition of Compaq in 2002.
His tenure was widely seen as a success. Mr. Hurd brought tight fiscal discipline to the computer giant and turned it into one of the most reliable performers in the technology sector. During his tenure, H.P. surpassed I.B.M. as the No. 1 technology company, as revenue increased to $115 billion a year, from $80 billion.
Mr. Hurd, who is close to Lawrence J. Ellison, Oracle’s founder and chief executive, was not expected to replace him, though it was uncertain what any role at Oracle might be. Mr. Hurd and Oracle are close to reaching an agreement, but no deal has been completed, said the person briefed on the talks, who agreed to speak on the condition of anonymity because the discussions were supposed to remain confidential.
Oracle did not respond to requests for comment. A spokesman for Mr. Hurd declined to comment.
For Mr. Hurd, 53, landing a top role at Oracle would be a quick rebound after his tumultuous exit from H.P. in early August. Mr. Hurd was forced out by the board after he settled charges of sexual harassment brought by Jodie Fisher, a 50-year-old actress who worked as a marketing consultant for the company.
Both Mr. Hurd and Ms. Fisher denied having a sexual relationship, and an H.P. investigation failed to find any evidence of sexual misconduct by Mr. Hurd.
But the company has said that Mr. Hurd’s resignation was a result of a break in trust caused by his falsifying expense reports possibly to conceal the relationship.
Shortly after Mr. Hurd was forced out, Mr. Ellison made an unusual and passionate defense of him. In an e-mail to The New York Times, Mr. Ellison called the H.P. board’s action “the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago.”
The talks between Mr. Hurd and Oracle were first reported on the Web site of The Wall Street Journal on Sunday.
Oracle, which Mr. Ellison founded 30 years ago, is the world’s largest database software maker; Mr. Ellison has been its only chief executive. For years, the company has been a close partner with H.P., which sells computing systems and services to corporations. But since Oracle’s acquisition of Sun Microsystems, in a deal that closed early this year, Oracle and H.P. have become competitors in the market for computer hardware.
The purchase of Sun caught a number of Oracle’s investors off guard, since the company had avoided the hardware market in the past.
At H.P., Mr. Hurd helped steer mammoth computer server, storage and services businesses. Such expertise could come in handy as Oracle continues to try to digest Sun. In particular, Mr. Hurd built a reputation as a cost-cutting whiz and could apply those skills to bringing the Sun business in line.
Sun also has a number of large campuses and an extensive research and development operation. At H.P., Mr. Hurd pared back such expenses.
While running the company, Mr. Hurd passed on trying to acquire Sun, leaving Oracle and I.B.M. to bid for it.
Mr. Ellison remains heavily involved in Oracle, but the day-to-day operations are largely overseen by two presidents, Safra A. Catz and Charles E. Phillips Jr. It was unclear how Mr. Hurd would fit into the existing, crowded triumvirate.
Mr. Hurd took over the top job at H.P. in 2005, succeeding Carly Fiorina, who had been unable to increase profitability after the company’s $19 billion acquisition of Compaq in 2002.
His tenure was widely seen as a success. Mr. Hurd brought tight fiscal discipline to the computer giant and turned it into one of the most reliable performers in the technology sector. During his tenure, H.P. surpassed I.B.M. as the No. 1 technology company, as revenue increased to $115 billion a year, from $80 billion.
Subscribe to:
Posts (Atom)
Posts
