Ad agencies wrestle with talent shortage

AS MANY as 10 per cent of mid-level positions at advertising agencies are vacant at any one time, the first study of its kind has revealed.
Of the agencies surveyed, 80 per cent say they struggle with chronic talent shortages, particularly in account management and creative and digital roles. The shortage is most prevalent in junior (one to four years) and mid-level (four to seven years) positions.
Ninety-two per cent of agencies said that up to 10 per cent of positions remained vacant at any one time as they were unable to find suitably experienced staff.

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The survey of about 20 per cent of the industry was conducted by the Communications Council in recent weeks and helps to explain why the ad industry is widely known for ruthless poaching.
Some staff hand in their notices and walk into more senior roles with competitors that offer up to $30,000 a year more, despite being underqualified for the jobs.

Times changing in race for survival

IS THE newspaper business in such bad shape that even The New York Times, that great American journalistic institution, will inevitably be forced out of business?
The director of a new documentary on the paper, Andrew Rossi, thought its death was a definite chance when he started filming in late 2009.
''Two weeks after I started shooting, the Times underwent historic lay-offs, eliminating 100 positions in their newsroom,'' he says. ''There was a sense of apocalypse.''

 

Changing newsroom ... a scene from Page One: A Year Inside the New York Times which examines the news business.

Rossi, a former digital cameraman and reporter with the New York Post and the TV news channel NY1, was given access to the newspaper's media team for Page One: A Year Inside The New York Times.

Bloggers must choose to be either constructive or cowardly

A few weeks ago, I wrote a column comparing two campaigns. I was interested in celebrating the one I thought was good. But in so doing, I was also critical of the other. I received a lot of feedback from people telling me they agreed, but I was also criticised by some for my criticism.
It made me reflect on the ''code of ethics'' (mine, and in general) for the review and commentary of the creative work of others.
When it comes to the creative side of our business it is all about opinion, so having a point of view is the lifeblood of what we do. But with this comes subjectivity - anyone can have an opinion, qualified or not. I cannot tell you how many times as a child I would listen to my dad providing a narrative on the ad breaks, telling anyone within earshot he could do better himself.

 

What are the rules for sharing our opinions on the work of others?
We could keep them to ourselves. Or share them only when we wanted to praise. It would reduce some of the negative energy on the planet. But might it also create a slightly anodyne world, a touch too sweet or, worse still, censored?

Bank of America may lop 40,000 jobs: report

Bank of America Corp officials have discussed slashing roughly 40,000 jobs during the first wave of a restructuring, the Wall Street Journal said, citing people familiar with the plans.
The number of job cuts are not final and could change. The restructuring aims to reduce the bank's workforce over a period of years, the Journal said.
The newspaper said BofA executives met Thursday in Charlotte and will gather again Friday to make final decisions on the reductions, putting the finishing touches on five months of work.

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Bank of America could not immediately be reached for comment by Reuters outside regular US business hours.
Banks are shedding jobs worldwide as stricter regulations and a tough second quarter for trading income take their toll on investment banking units in particular.
Reuters

China inflation slows, eases pressure to cool demand

China's annual consumer price inflation cooled slightly to 6.2 per cent in August from July's three-year high, raising expectations that the central bank will hold off on further policy tightening amid worries about a global economic slowdown.
The consumer price index rose 0.3 per cent in August from the previous month, after a 0.5 per cent rise in July. The figure is not seasonally adjusted.
Giving a more detailed breakdown of the index, the bureau said food prices rose 13.4 per cent in the year to August, with non-food prices up 3.0 per cent.

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In month-on-month terms, food prices rose 0.6 per cent, while non-food prices were up 0.2 per cent.
The producer price index rose 7.3 per cent in the year to August and was up 0.1 from July.
Reuters

Japan's economy shrinks as strong yen hurts

Japan's economy contracted more than the government initially estimated in the second quarter, adding to concern the stronger yen may derail the nation's recovery from the March 11 earthquake.
Gross domestic product shrank at an annualised 2.1 per cent rate in the three months ended June 30, more than the 1.3 per cent contraction reported last month, the Cabinet Office said today in Tokyo. The reading was in line with the median forecast of 21 economists surveyed by Bloomberg News.
Reports in the past week indicate growth in the world's third-largest economy may stall toward the end of the year.

Machinery orders, a leading indicator of capital spending, fell the most in 10 months in July and companies are also struggling with a yen near a postwar record, risking an erosion of oversea profits when they're repatriated.

Wealth fund would preserve golden era

It is maybe a considerable blow to our national pride that the Philippines boasts the world's biggest crocodile, but when it comes to the national accounts Australia can stand tall.
While other Western economies are ailing, ours is plodding along quite nicely at 1.2 per cent, according to the second-quarter gross domestic product numbers.
Mind you, that's well below the 3.2 per cent trend, and it's before August ructions on global markets and the recent slather of downgrades in Europe and the US.

 

Still, it surpassed expectations and sparked the strongest rise in the sharemarket in a year. Here was evidence, against the prevailing and bearish tide of economic punditry, that things were not too bad.
Really, not too much to whinge about - and certainly a superior performance to that of our peers.
It seems the clamour by sections of the media and business designed to talk down the economy and skewer the Gillard government had become a tad too infectious.
On the consumer front, the message from the numbers is don't expect a rate cut too soon, unless perhaps the global market ructions turn into a violent rout. The next relevant data point comes in late October with the consumer price index. Meantime, the jury is entirely out.

Clockwatching: the threat in hours worked

Quarterly GDP hours worked trend. Source: ABS

Amidst the mostly good news in yesterday's national accounts figures, there was one potentially worrying chart - the history of quarterly GDP movements plotted against the trend figure for hours worked.
Given today's uptick in unemployment, it was a very timely reminder of the labor force implications of even a mildly slower rate of economic growth.
Superficially, the chart above confirms what everybody knows about employment being a lagging indicator, but a closer look shows it's a little more complicated than that. Employment (or at least hours worked) lags more on the upside than it does on the down.

 

In the two major downturns this century, growth in hours worked dived pretty much in unison with GDP growth slowing and then overshot GDP into negative territory, taking several months to get back into the positive.

Beware those bearing property investment advice

Anyone, regardless of their experience and qualifications, can give you advice on how to spend a considerable amount of money to buy an investment property - and you could be left totally unprotected.
That’s the warning from Margaret Lomas, who heads up the Property Investment Professionals of Australia.
These people can also make a commission from the sale and charge you for their advice, but there is currently no legislation that offers any protection against shonky advisors.
By contrast, the finance investment industry is arguably over regulated.

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“If you have $20,000 cash to invest, your financial planner will be regulated to the wall in regards to how they can advise you on its investment, but mention you are looking to buy $500,000 worth of property and every shonky man and his dog will come out of the woodwork to help you part with it – and you will be left stranded when it falls in a heap,’’ Ms Lomas said

Doing the biz in manufacturing and fast food

Once again it seems the small cap world provides a ray of light for investors with a tiny niche player roaring, or at least shouting, on the world stage.
It is hard to argue that there's a more troubled industry than steel manufacturing in the wake of BlueScope's announcement that it is shedding more than 1000 workers from its Port Kembla and Western Port operations, which makes the company's share price slide of almost 60 per cent in the past four months.
In contrast, the shares of Bisalloy Steel Group, another steel manufacturer, have climbed about 67 per cent over the same period. The rise is primarily due to investor optimism about a joint venture the company announced to manufacture its Bisplate steel technology in China with Shandong Iron and Steel, and then to sell directly into that market.

Bisalloy uses German technology and feed stock from the likes of BlueScope to make high-tensile quenched and tempered steel plate, or “Bisplate”, at Unanderra, south of Wollongong in NSW. It's a high-strength, lightweight steel that's used in the manufacture of things like large dump trucks, dragline buckets and cranes – all used in, you guessed it, mining.

Asian stocks inch up after China CPI

Asian stocks edged up as Chinese consumer price data soothed fears over inflationary pressures building in the world's No.2 economy, but the mood was cautious after Western central banks failed to offer any fresh stimulus plans to revive their sputtering economies.
The US dollar eased against a basket of currencies and US Treasuries slipped as markets reacted coolly to a $US447 billion jobs package plan from US President Barack Obama, who faces a fierce battle to win over Republicans which could revive fears of political paralysis in Washington.
Global markets have been dominated in recent weeks by fears of a US relapse into recession and Europe's snowballing debt crisis. Citigroup analyst Jonathan Stubbs said in a note on Friday that "recession appears to be a more likely outcome now in Europe and/or the US than 3-6 months ago".

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Worries about the darkening outlook for the developed world prompted Asian central banks including South Korea and Indonesia to hold interest rates steady on Thursday, following similar moves by Australia, Canada, Japan and Sweden this week.
China's annual inflation moderated slightly to 6.2 per cent in August from July's three-year high, in line with market expectations and raising expectations that Beijing too will hold off from further policy tightening which could dampen its demand for commodities and other imported materials.
The MSCI's broadest index of Asia Pacific shares outside Japan rose 0.3 per cent, with the biggest regional gains in Australia and Taiwan , both heavily influenced by demand from China.

Global investors lukewarm on Obama plan

European stock index futures fell on Friday, following Asian markets lower, as a $USUS447 billion jobs package from US President Barack Obama failed to entice investors back into equities amid concerns that it could be hamstrung by political wrangling.
The euro languished near a two-month low against the US dollar reached on Thursday after the region's deepening debt crisis forced the European Central Bank to drop its tightening policy bias, a key driver in the single currency's rally this year.
Euro STOXX 50 index futures fell 1.1 per cent, with DAX and CAC-40 futures also in the red, and spreadbetters called the FTSE 100 to open down 0.3 per cent.

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Asian markets were down around half a per cent, after see-sawing between gains and losses, while S&P 500 futures surrendered early gains and slipped 0.2 per cent.
"Obama's plan was in line with expectations, and US stocks are unlikely to rally on it," said Takashi Ushio, head of investment strategy at Marusan Securities Co. in Tokyo. "Uncertainty about the direction of the US economy remains."
Market confidence had been fragile after Western central banks failed to offer any clues on fresh stimulus plans this week, with a looming deadline for bond holders to decide on Greece's swap offer also adding to the nervousness.

German inflation at 2.4% in August

AFP
Inflation in Germany, the biggest European economy, stood at 2.4 per cent in August, driven up by higher energy costs, the national statistics office said on Friday.
Initial figures released late last month put the figure at 2.3 per cent, a 0.1 per cent drop on July.
The statistics office said that without increased energy costs, inflation would have stood at just 1.4 per cent for the month.
Source: The Age

Shell announces Guiana oil find

AFP
Shell has announced it has discovered oil about 150 kilometres off the coast of French Guiana.
The Anglo Dutch energy giant said in a statement on Friday that it was too early to put a figure on the reserves but said that the first results were "encouraging".
French Guiana is an overseas region of France located on the northeast coast of South America.

Source : The Age

In Unity on matters healthy, wealthy and wise

Australian Unity: the healthiest stakeholders are the directors.

HEALTH fund Australian Unity's first-ever remuneration report shows that it is certainly looking after the well-being of directors and senior executives.
Not that the mutual's earnings performance in the past year was shabby, or that it is not paying out ever-increasing amounts to its premium-paying members.
Australian Unity is also technically not required to even produce the numbers because it is not listed on the ASX. Chairman Alan Castleman and his board, however, have adopted ASX governance principles - which not only means a nice track record should the group actually decide to take the plunge, but Australian Unity gets an elephant stamp from Insider for electing to be more transparent than required.

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Still, strip out the $1.2 million a year picked up by non-executive directors, and the total tossed to its five nominated senior management personnel rose from $2.9 million to $5.6 million - which is getting close to a near doubling in anyone's books.

America prepares for pain

Workers adjust beams of the Tribute in Lights on the tenth anniversary of the September 11 terrorist attacks. Photo: Getty Images

ANNIVERSARIES are hard to resist for most media outlets. The stories are evergreen, the advertising potential plentiful. But in documenting the 10th anniversary of the terrorist attacks of September 11, 2001, there is a fine line between commemoration and exploitation.
Mindful of this, television networks, magazines and others planning special coverage of the anniversary have weighed issues such as how much American audiences can stomach, and how much such a solemn occasion should be viewed as a business opportunity.
There are no uniform answers, and media outlets are approaching it differently.

The Joy of Cash

You’ve probably heard of a "black swan," the catchphrase coined from the 2007 book by author and investor Nassim Nicholas Taleb. A black swan for investors is essentially an outlier event that dramatically affects the economy and markets. For example, the 1998 Russian debt default that unexpectedly took down the Long Term Capital Management hedge fund and the 2008 global financial free fall when Lehman Brothers imploded.
It doesn’t take much imagination to see black swans lurking throughout the global economy. Europe’s crisis with the sovereign debt of the euro zone’s periphery nations threatens the health of major banks in the European Union. The fear of contagion from a European sovereign debt restructuring is strong, pushing up rates on Greek, Irish, Portuguese, Italian, and Spanish government loans. China on July 6 hiked its benchmark interest rate for the third time this year as the government attempts the difficult maneuver of cooling down inflation without sending the economy into a hard landing. There’s the bitter talk in Washington by high-profile politicians welcoming the risk of default if a budget deal isn’t reached before an Aug. 2 debt ceiling deadline. Less immediate, but no less disturbing for investors, is the prospect of rising inflation in the U.S.
Nervous? You’re far from alone. "There is risk all over the place," says Campbell Harvey, a professor of international business at Duke’s Fuqua School of Business and a consultant to Man Group, one of the world’s largest managers of hedge funds. "This is the time to think about downside protection."
Question is, where to seek safety in coming months? The market for insurance products against catastrophe is exploding. Wall Street rocket scientists are busy coming up with an array of strategies and products—mostly based on fixed-income, equity, and currency derivatives—that offer "tail risk" protection. Fixed-income investors can buy credit default swap indexes on investment-grade issuers and high-yield debt.

VOLATILITY PLAYS

Equity investors can turn to such products as Deutsche Bank’s ELVIS index, which is constructed in such a way that stock investors can profit from the volatility that traditionally accompanies a major stock market plunge.
The difficulty with many tail risk protection strategies is they’re expensive and complex—assuming they work. No small matter: The iPath S&P 500 VIX Short Term Futures ETN (VXX) is a fear-gauge play on stock market volatility. It is down 81 percent from the same time a year ago. Barclays Bank (BCS) plans to dissolve later this month its iPath S&P VIX Mid-Term Futures ETN (VXZ). "Investment banks are offering ‘solutions’ (investment bank speak for high-fee products) to investors and fund management companies," writes a skeptical James Montier, a member of the asset allocation team at GMO, a long-term value money manager in Boston. "The very popularity of tail risk protection should spell caution to investors."
There are better alternatives for most individual investors. A relatively cheap, easily understood, and underappreciated hedge against catastrophe exists for most investors: cash. (The title of Montier’s June 2011 GMO report is A Value Investor’s Perspective on Tail Risk Protection: An Ode to the Joy of Cash.) With cash, the investor simply reduces the amount of money at risk to a financial cataclysm. On Wall Street, "cash" isn’t the money you put in your pocket or stuff under the mattress. It is T-bills and other high-quality, short-term, interest-paying investments. The price of safety from cutting your portfolio’s exposure to stocks and bonds and raising the amount invested in cash is a low return. That’s an acceptable price to pay considering the potentially frightening financial fallout if the European sovereign debt crisis spins out of control. Global money will flee for the safety of U.S. Treasuries.

FBI Probes Whether News Corp. Tried to Hack Terror Victim Phones

July 15 (Bloomberg) -- The FBI is probing whether employees of Rupert Murdoch’s News Corp. tried to hack into the phones of victims of the Sept. 11, 2001, terrorist attacks.

“We’re aware of certain allegations pertaining to a possible hacking by News Corp. personnel and we’re looking into those charges,” Jim Margolin, a spokesman for the Federal Bureau of Investigation’s New York office, said yesterday in a phone interview.

U.S. Representative Peter King, the Republican chairman of the House Committee on Homeland Security, asked FBI Director Robert Mueller in a July 13 letter to investigate whether employees of News Corp.’s News of the World tried to access voice mails belonging to victims of the 2001 terrorist attacks through bribery and illegal wiretapping.

King’s request to Mueller was one of several by elected officials and media watchdog groups to investigate News Corp. King, who represents part of New York’s Long Island, said in the letter that his district lost 150 people in the attacks.

At least six U.S. lawmakers yesterday asked government agencies, including the Justice Department and the Securities and Exchange Commission, to investigate possible violations of the law.

Reports that News of the World employees illegally gained access to the voice mail of murder and terrorism victims and paid police for stories have already resulted in several investigations into News Corp. The New York-based company closed the 168-year-old News of the World on July 10.

‘It’s Serious’

“I think it’s serious,” said white-collar criminal defense lawyer Ronald S. Safer, managing partner of Schiff Hardin LLP who previously worked for 10 years as a federal prosecutor in Chicago.

“I do not think that they will defer to U.K. authorities,” Safer said of the FBI probe. “If they find that there was hacking into those accounts that amounts to an unlawful intercept, then they will prosecute.”

Depending on how such a crime was carried out, it could be prosecuted as an illegal wiretap or as wire fraud, Safer said. Any defenses to those crimes would be technical in nature, amounting to challenging whether the alleged acts fit the legal definitions of the charged offense.

“The conduct itself would be indefensible,” he said. Hacking into the voice mail of a dead person wouldn’t lessen the offense, Safer said in a phone interview. “In federal law, you don’t need a complainant. The crime is against the United States and not an individual,” he said.

Not ‘a Lark’

Jeffrey H. Cramer, a former federal prosecutor in Chicago and a former state prosecutor in New York, said in a phone interview that the FBI isn’t “going off on a lark.”

“9/11 victims are held dear,” said Cramer, now managing partner of the Chicago office of international risk consultant and investigations firm Kroll Inc. “If there’s even some allegation that they’ve been victimized again, absolutely they’re going to look into it.”

Cramer said he would be “hard pressed” to think of a defense against such an allegation.

“If the investigation leads to anything,” he said, “the query would be, ‘Who did it and who authorized it? How high up on the corporate ladder?’”

The hacking scandal led News Corp. to drop its $12.6 billion bid for control of British Sky Broadcasting Plc.

Murdoch Testimony

Murdoch, News Corp.’s chairman and chief executive officer, and his son James Murdoch, the company’s deputy chief operating officer, agreed yesterday to testify about the phone-hacking scandal before the U.K. Parliament on July 19.

Rebekah Brooks, the CEO of News International, which publishes News Corp. newspapers in the U.K., is also scheduled to testify.

Rupert Murdoch, 80, said the company will set up an independent committee to look into allegations of wrongdoing by its employees, the Wall Street Journal reported. News Corp., which owns the Wall Street Journal, the New York Post, the Sun and the Times of London, said it will establish companywide rules for reporter behavior.

Julie Henderson, a News Corp. spokeswoman, didn’t return a voice-mail message seeking comment yesterday.

Bloomberg LP, the parent of Bloomberg News, competes with News Corp. units in providing financial news and information.

--With assistance from Patricia Hurtado in New York, Eric Engleman in Washington and Amy Thomson in London. Editors: Michael Hytha, Joe Schneider

Debt Deal Hampered by Republican Candidates, Democrat Activists

July 15 (Bloomberg) -- As President Barack Obama works for a bipartisan deal to raise the government’s debt ceiling, both the Republicans wanting to replace him and Democrats seeking the best way to re-elect him have emerged as obstacles.

Republican presidential candidates and Democratic activists alike are using the debate to sharpen their political messages and appeal to core supporters, complicating efforts to reach a compromise to avert a possible government default on Aug. 2.

“Both parties are set in concrete on what they believe their base has to have, and that makes it very difficult to find any middle ground,” said former Representative Charles Stenholm, a Texas Democrat who focused on reining in the federal budget as a lawmaker.

Even as House Speaker John Boehner, an Ohio Republican, negotiated privately last week with Obama on a potential $4 trillion, decade-long deficit-reduction compromise to pave the way for raising the $14.3 trillion debt limit, Representative Michele Bachmann of Minnesota was drawing attention to her Republican presidential candidacy by declaring she would oppose any deal.

“I will not vote to increase the debt ceiling,” she said in her first television advertisement in Iowa, site of the first contest in the nominating battle.

Representative Ron Paul of Texas, another Republican White House contender, also is stressing his opposition to any debt ceiling increase, in line with his decades-long effort to shrink government’s size.

‘Debt Ceiling Betrayal’

The website for Paul’s presidential campaign asks in large letters on its homepage: “Will Speaker Boehner Cave on the Debt Ceiling? Or will you help Ron Paul fight to prevent Debt Ceiling Betrayal?” A campaign ad that starts airing today in Iowa and New Hampshire spotlights the issue and touts Paul as the “one candidate” who “has always been true” to cutting government spending. It also says: “No deals.”

Virtually all their rivals in the Republican race have said they would balk at approving a debt-ceiling increase, unless certain debt-reduction mandates are met.

On the other side of the political spectrum, Democratic political groups have been firm in opposing any agreement that would cut entitlement programs such as Social Security and Medicare. A few hours after Obama held a nationally televised news conference at the White House on July 11 to try to resurrect a longer-range agreement combining some tax increases with trims to entitlement programs, his own party’s activists swung into action in opposition.

Petition Effort

“Obama went there,” was the subject line of a July 11 e- mail circulated by Adam Green of the Washington-based Progressive Change Campaign Committee, which raises money for Democrats. The message included a petition asking like-minded activists to warn Obama with their signatures that if he backed a deal that cut entitlement benefits, “don’t ask for a penny of my money or an hour of my time in 2012.”

Green has also said such an agreement would “put all Democrats facing re-election in 2012 at risk.”

The group said today it has reached its goal of 200,000 signatures and intends to deliver the petitions tomorrow to Obama’s campaign headquarters in Chicago.

Obama and congressional leaders are now discussing a smaller accord that would shave $2.4 trillion or less from the debt. At least some of Bachmann’s and Paul’s House colleagues, though, share their opposition to a debt-ceiling increase under any circumstances.

‘Major Influence’

Stenholm said, “The far right has a major influence on Republican primary politics, and we are seeing that play out in the debt-ceiling debate.”

Democrats are also reacting to the most vocal elements of their party, he said. “It’s just amazing how my party continues to politicize Social Security when everybody would tell you privately that we need to do something” to bolster its finances, said Stenholm, a board member for the Washington-based Committee for a Responsible Federal Budget.

Treasury Secretary Tim Geithner yesterday reiterated that the U.S. borrowing authority will run out on Aug. 2, saying there is “no way to give Congress more time” on lifting the debt ceiling. Obama in an interview with CBS News earlier this week cautioned that Social Security checks and veterans’ benefits could be delayed if Congress doesn’t act.

Bachmann Charge

Bachmann responded by accusing Obama of political blackmail on the issue. “President Obama is holding the full faith in credit of the United States hostage, so that he can continue his spending spree,” she said at a July 13 news conference in Washington.

Paul e-mailed his supporters blasting a last-ditch option proposed by Senate Republican leader Mitch McConnell of Kentucky that would essentially let Obama raise the debt ceiling unilaterally if no compromise is reached. Republican lawmakers could go on record against the move but couldn’t block it.

McConnell described his rationale in terms of 2012 politics, saying a default would be held against his party.

Paul said McConnell was “scheming to raise the debt ceiling with no real spending cuts.”

The day Obama hosted congressional leaders for a weekend session at the White House in search of a compromise, Republican presidential candidate and former Minnesota Governor Tim Pawlenty said there was no room for one that increased taxes.

‘Too Darn Much’

“The United States federal government is not under-taxed; it spends too darn much,” Pawlenty said on ABC’s “This Week,” on July 10.

Former Massachusetts Governor Mitt Romney, the Republican presidential frontrunner in fundraising and polls, has made limited public comment about the debt ceiling debate. At a town hall meeting yesterday in Derry, New Hampshire, he said, “For me to be willing to raise any debt ceiling would be dependent on cutting, capping and balancing the budget with a balanced budget amendment” to the Constitution.

He and seven of the party’s other presidential candidates have signed a pledge circulated by a coalition of fiscally conservative groups and Tea Party chapters known as “Cut, Cap and Balance,” in which they urge lawmakers to condition any increase in borrowing authority on those requirements.

One candidate who didn’t sign was former Utah Governor Jon Huntsman, who said politicians shouldn’t commit themselves to such pledges. His spokesman, Tim Miller, said Huntsman “believes we need real cuts that are equal or greater than any increase in the debt ceiling,” and “thinks any deal should include tangible steps toward” a balanced budget amendment.

Democratic Appeal

A fundraising pitch Democrats sent out yesterday seeks to use the impasse in the talks to the party’s advantage. Guy Cecil, executive director of the Democratic Senatorial Campaign Committee, asked in an e-mail for contributions to help Obama and Democrats “hold strong” against the Republican bargaining position.

“We’re protecting our ideology here,” Cecil wrote. “Democrats believe that a great nation protects those who can’t protect themselves. We believe in helping the elderly, the poor and the sick. Republicans will attack us for it and try to take it away.”

For all the political focus on the debate, investors haven’t shown many signs of reacting negatively. The yield on 10-year Treasuries was 2.97 percent as of 9:09 p.m. yesterday in New York, according to Bloomberg Bond Trader, after falling to a low this year of 2.81 percent on July 12. That compares with 3.04 percent a year ago yesterday.

Sun Art Delays Debut in Hong Kong on Error in Prospectus

July 15 (Bloomberg) -- Sun Art Retail Group Ltd., China’s largest hypermarket operator, delayed its trading debut in Hong Kong because of an error in its share-sale prospectus.

The retailer, which raised HK$8.2 billion ($1.1 billion) in an initial public offering this month, plans to list July 27 instead of today as scheduled, according to a statement to the city’s stock exchange today. Historical earnings-per-share figures in the prospectus failed to reflect a stock split that took place before the IPO, it said.

Sun Art, backed by France’s Groupe Auchan SA, dropped to HK$7.60 in over-the-counter gray market trading at 5:15 p.m. in Hong Kong yesterday, from as high as HK$8.28 earlier, according to the website of Phillip Securities Group. An “accident” caused trading to be suspended, according to a statement on the website. Sun Art sold shares at HK$7.20 apiece in the IPO, the top end of a range marketed to investors.

“The uncertainty is still around, so it makes sense that the gray market price dropped,” Nelson Yan, an investment manager at Mayfair Pacific Financial Group in Hong Kong, said yesterday.

Due Diligence

Ruentex Industries Ltd. and Ruentex Development Co., part owners of Sun Art, fell in Taipei trading. Ruentex Development dropped as much as 3.8 percent to NT$40.20 before trading at NT$41.2 as of 11:44 a.m. local time while Ruentex Industries Ltd. lost as much as 5.1 percent to NT$64.70 before trading at NT$66.1.

Hong Kong’s markets regulator plans to review how banks underwrite IPOs, after its former head, Martin Wheatley, said due diligence in offerings had at times been “inadequate.” The Securities and Futures Commission said June 8 that it may begin consultation on making sponsors legally liable for statements in their clients’ prospectuses in the third quarter.

Sun Art received orders for more than 40 times the stock available to retail investors, according to a statement from the company yesterday. Net proceeds from the share sale will be about HK$8 billion ($1 billion) the company said yesterday. About half of that will be used to open stores in China, where it has 196 hypermarkets using both the Auchan and RT-Mart brands.

Technical Errors

Citigroup Inc., HSBC Holdings Plc and UBS AG are managing the offering as global coordinators, and BNP Paribas SA, China International Capital Corp., Goldman Sachs Group Inc. and Morgan Stanley are joint bookrunners, according to the prospectus. KPMG was the auditor for the IPO.

Sun Art isn’t the first company this year to get tripped up by a technical error. Dragon Crown Co Holdings Ltd., which started trading on June 10, misprinted an earnings-per-share number in its IPO prospectus, according to a May 31 filing to the Hong Kong stock exchange.

Milan Station Holdings Ltd., which debuted on May 23, misstated a condition for measuring the company’s share capital in its IPO prospectus, a May 18 filing to the stock exchange showed. Goldman Sachs Group Inc. said in April it would buy back at a premium warrants that were suspended from trading in Hong Kong because of a misprinted settlement formula.

Sun Art last year had a 12 percent market share in China’s hypermarket industry, according to data from London-based researcher Euromonitor International. Wal-Mart Stores Inc. ranked second with 11.2 percent, China Resources Enterprises Co. had 9.8 percent and Carrefour SA 8.1 percent, according to Euromonitor.

--With assistance from Michelle Yun and Cathy Chan in Hong Kong and Zijing Wu in London. Editors: Philip Lagerkranser, Frank Longid

Kurzon Strauss Sued by Thomas Cooley Law School Over Data Query

July 15 (Bloomberg) -- Kurzon Strauss LLP was sued by the Thomas M. Cooley Law School over claims the New York law firm and two of its lawyers falsely claimed on websites that the school misrepresented graduate employment statistics.

Jesse Strauss, a Kurzon partner, along with attorney David Anziska, posted false statements on websites to “incite” the readers and to “troll” for plaintiffs for a purported class- action lawsuit against Cooley, according to the school’s complaint filed yesterday in state court in Lansing, Michigan.

“With ethics and professionalism at the core of our law school’s values, we cannot -- and will not -- sit back and let anyone circulate defamatory statements about Cooley or the choices our students and alumni made to seek their law degree here,” Brent Danielson, chairman of Cooley’s board of directors, said in a statement posted on the school’s website.

Anziska said yesterday in a phone interview that his firm was investigating numerous law schools for inflating the job placement rates of its graduates.

“This is one of the most ridiculous, absurd lawsuits filed in recent memory,” Anziska said. “We fully intend to countersue both Thomas Cooley and their lawyers for abusing the legal system.”

Anziska declined to comment further on the complaint filed by Cooley.

Cooley accused Anziska of posting statements on websites, including JD Underground and Craigslist, beginning in June to seek information from its graduates. The firm posted a retraction statement on JD Underground on June 15, according to the complaint.

‘Manipulating’ Data

Posts on Craigslist in New York and Detroit advertised a broad “wide-ranging” investigation of a number of law schools for “purportedly manipulating their post-graduate employment data,” lawyers for Cooley said in court papers.

In its statement yesterday, Cooley said its job placement rates are reported annually to the American Bar Association and the National Association for Law Placement nine months after graduations based on the results of surveys and are consistent with all 201 ABA accredited law schools.

Founded in 1972, Cooley is the largest law school in the nation, according to its Web site. The school has four campuses in Michigan.

The case is Thomas M. Cooley Law School v. Kurzon Strauss LLP, State of Michigan Circuit Court for the County of Ingham (Lansing).

Asian Commodity Stocks Drop as U.S. Concerns Drag Oil, Metals

July 15 (Bloomberg) -- Asian commodity stocks fell, with the regional index set for its first weekly decline in four, after Standard & Poor’s said it may cut the U.S.’s credit rating and the Federal Reserve ruled out immediate further bond purchases, driving down oil and metal prices yesterday.

BHP Billiton Ltd., the world’s largest mining company and Australia’s No. 1 oil producer, sank 1.7 percent. Woodside Petroleum Ltd., the nation’s second-biggest oil and gas producer, lost 1.6 percent in Sydney. Mitsubishi Corp., Japan’s largest commodities trader, dropped 0.5 percent in Tokyo. Asustek Computer Inc. jumped 5.9 percent in Taipei after Nomura Holdings Inc. named the company as one of its top picks among Asian technology stocks.

The MSCI Asia Pacific Index was little changed at 135.78 as of 12:34 p.m. in Tokyo. About five stocks rose for every four that fell.

“America still provides growth leadership and is the missing piece in the recovery story in many ways,” said James Holt, Sydney-based director of BlackRock Investment Management (Australia) Ltd., which oversees about $40 billion. “The default position is that a deal on the debt ceiling will be struck, but markets are getting jittery about the lack of progress. You either have a deal or you have a default, and one is hugely positive while the other is hugely negative.”

S&P said there was at least a 50 percent chance it will lower the U.S. AAA rating within 90 days, citing the risk of a stalemate enduring beyond any near-term agreement to raise the nation’s debt ceiling. Moody’s Investors Service put the U.S. credit rating on review July 13 for a downgrade. The U.S. has held the top rating since 1917.

Nikkei, Kospi

Japan’s Nikkei 225 Stock Average rose 0.2 percent. South Korea’s Kospi Index gained 0.4 percent. Australia’s S&P/ASX 200 Index fell 0.3 percent. Hong Kong’s Hang Seng Index dropped 0.3 percent, led by developers after China said it’s seeking to limit residential property prices in smaller cities.

Futures on the Standard & Poor’s 500 Index climbed 0.1 percent today. In New York, the index slipped 0.7 percent yesterday to the lowest level this month as a stalemate continued in Washington on negotiations over the U.S. debt ceiling.

Fed Chairman Ben S. Bernanke, testifying for a second day before the Senate Banking Committee, told lawmakers yesterday: “We’re not prepared at this point to take further action.” A day earlier, he had said he was prepared to provide more stimulus if needed.

Oil, Metals

BHP sank 1.7 percent to A$42.84 in Sydney. Woodside fell 1.6 percent to A$39.39. Jiangxi Copper Co., China’s biggest producer of the metal by market value, slid 1.1 percent to HK$27.20 in Hong Kong. Mitsubishi Corp. dropped 0.5 percent to 2,049 yen in Tokyo. Inpex Corp., Japan’s largest energy exploration company, lost 1.7 percent.

Crude oil for August delivery dropped 2.4 percent to settle at $95.69 a barrel in New York yesterday. The London Metal Exchange Index of prices for six industrial metals including copper and aluminum fell 1.8 percent.

Developers fell in Hong Kong after a summary of a State Council meeting chaired by Premier Wen Jiabao showed China will expand efforts to curb the growth in residential prices to smaller cities after limiting home purchases in Beijing and Shanghai.

China Overseas Land & Investment Ltd., controlled by the nation’s construction ministry, sank 4.1 percent to HK$16.20, while China Resources Land Ltd., another state-controlled developer, dropped 2.8 percent to HK$14.70.

Technology Stocks

The MSCI Asia Pacific Index lost 1.5 percent this year through yesterday, compared with a gain of 4.1 percent by the S&P 500 and a drop of 2.9 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 13.5 times estimated earnings on average, compared with 13.2 times for the S&P 500 and 10.7 times for the Stoxx 600.

Asustek climbed 5.8 percent to NT$282.50 in Taipei, leading technology stocks higher. Nomura said the company will likely be able to exceed its shipment target with a new tablet computer model, according to a report yesterday.

Other technology stocks rose after Google Inc., owner of the world’s largest Internet-search engine, reported sales and profit that topped analysts’ estimates.

Electronics Retailers

MediaTek Inc., Taiwan’s largest chip designer, climbed 3.7 percent to NT$267.50.

Japanese electronics retailers advanced on speculation the government will promote the use of “eco-point’ energy-efficient devices. The Nikkei newspaper reported that Japan may revive a program designed to promote sales of energy-efficient appliances to help cut power usage.

Yamada Denki Co. surged 3.4 percent to 6,950 yen. Kojima Co. climbed 2.7 percent to 578 yen.

Also in Tokyo, Hitachi Ltd., a maker of products from electronics to nuclear reactors, rose 2.1 percent to 485 yen. The company said it’s been named strategic investor for the Visaginas Nuclear Power Plant Project planned by Lithuania.

Tata Consultancy Says Uncertainty Spurs ‘Opportunities’

July 15 (Bloomberg) -- Tata Consultancy Services Ltd., India’s largest software exporter, said it continues to see strong demand for its computer services as the global economic uncertainty prompts customers to adapt and outsource more work.

“The macro uncertainty is real and it’s not going to go away in the near future,” Chief Executive Officer N. Chandrasekaran said yesterday. “Everybody is getting adjusted to the operating environment but staying pretty much focused on what they have to do. That is driving opportunities.”

Tata Consultancy, which yesterday reported a 28 percent jump in quarterly profit, joins larger rival Accenture Plc in signaling corporations are boosting spending on computer services and consulting. Chief Financial Officer S. Mahalingam has said the company expects to sustain 20 percent sales growth for the foreseeable future as outsourcing demand grows.

“Globally, information technology spending is expected to grow this year,” said Hitesh Shah, vice president of research at IDFC Securities Ltd. in Mumbai. “And as of now, that looks to be on track.”

Worldwide spending on information technology services is forecast to rise 6.6 percent to $846 billion this year, after growing 3.1 percent last year, Stamford, Connecticut-based researcher Gartner Inc. said in a report last month.

‘Pretty Strong’

Net income increased to 23.8 billion rupees ($535 million) in the three months ended June 30, from 18.6 billion rupees a year earlier, Mumbai-based Tata Consultancy said yesterday. The company stated earnings as per International Financial Reporting Standards, while profit was projected at 22.7 billion rupees under U.S. Generally Accepted Accounting Principles according to the median of 20 analyst estimates compiled by Bloomberg. Revenue climbed 31 percent to 108 billion rupees.

Demand remains strong across the company’s main markets in North America, the U.K. and Europe, which contributed 78 percent of revenue in the last quarter, Chandrasekaran said.

“We’re continuing to see business momentum,” he said. “The deal pipeline is pretty strong. If you look at the top 15 deals we’re chasing today, four of them are in U.S., four in the U.K., four in Europe, and one each in emerging markets areas.”

The software company added 24 clients last quarter, increasing the number of $50 million customers to 33 from 27, according to the statement.

Shares of Tata Consultancy climbed 3.5 percent to 1,162.90 rupees as of 9:24 a.m. in Mumbai trading, while India’s benchmark Sensitive Index rose 0.6 percent.

Volume Jump

Tata Consultancy, which provides computer services and back office support to clients including Citigroup Inc. and Singapore Airlines Ltd., had a 7.5 percent increase in volume last quarter from the preceding period. First-quarter volume at Infosys Ltd., India’s second-largest software exporter, grew 4 percent, Chief Financial Officer V. Balakrishnan said July 12.

Information technology services companies define volume as the number of man-months workers spend on projects for clients.

Infosys shares fell the most in almost three months in Mumbai on July 12, after the Bangalore-based company forecast sales that missed analysts’ estimates. The software-services provider projected revenue in the year to March to range from $7.1 billion to $7.3 billion. That lagged behind the $7.5 billion average of 56 analyst estimates compiled by Bloomberg.

Tata Consultancy said it added a net 3,576 employees during the quarter, for a total of 202,190. The company remains on course to hire 60,000 workers in the 12 months ending March 31, said Ajoyendra Mukherjee, vice president for human resources.

Wage Increases

Workers left Tata Consultancy at a rate of 14.8 percent in the three months ended June, according to the statement, up from 13.1 percent for the same period last year. Infosys reported employee attrition of 15.8 percent for the quarter.

Operating margin at Infosys may come under pressure during the year ending March because of higher salaries paid to attract and retain talent, CFO Balakrishnan said July 12.

Dollar Falls as S&P Says May Lower U.S. AAA Rating; Franc Gains

July 15 (Bloomberg) -- The dollar fell against most major currencies after Standard & Poor’s became the second ratings company this week to say it may cut the U.S.’s top credit grade.

The greenback headed for its biggest weekly drop versus the yen in three months after S&P said there’s at least a 50 percent chance it will cut the AAA rating within 90 days on risks a stalemate will endure beyond any near-term deal to raise the U.S. debt limit. The Swiss franc held five days of gains versus the dollar as concern the global recovery is slowing boosted demand for safer investments.

“Uncertainty about the credit rating and debt ceiling talk will continue weighing on the dollar,” said Toshiya Yamauchi, a senior currency analyst in Tokyo at Ueda Harlow Ltd., which provides foreign-exchange margin-trading services. “The market has a negative view for the dollar.”

The dollar fell to $1.4167 per euro as of 1:36 p.m. in Tokyo from $1.4143 yesterday in New York. The U.S. currency traded at 81.54 Swiss centimes from 81.60 yesterday, when it slid to a record 80.83. The greenback fetched 79.21 yen from 79.14 yen, headed for a 1.8 percent loss this week. The yen was at 112.20 per euro from 111.92.

S&P may lower the U.S.’s long-term rating by one or more notches into the AA category if it concludes Congress and President Barack Obama’s administration haven’t achieved a credible solution to the rising government debt burden and aren’t likely to achieve one in the near future, the company said in a statement dated yesterday.

‘No Way’

Moody’s Investors Service put the U.S. Aaa credit rating on review for a downgrade on July 13, citing concern officials won’t raise the nation’s $14.3 trillion debt limit in time to prevent a missed payment.

There’s “no way to give Congress more time” on lifting the debt limit, Treasury Secretary Timothy F. Geithner said after meeting with Democratic lawmakers on Capitol Hill in Washington. He has repeatedly said the U.S.’s borrowing authority will end on Aug. 2 without congressional action.

The dollar also weakened before a U.S. report that economists said will show the cost of living fell in June for the first time in a year, allowing the Federal Reserve to maintain record stimulus without worrying about inflation.

The consumer-price index decreased 0.1 percent, after a 0.2 percent gain in May, according to economists surveyed by Bloomberg News. The so-called core measure, which excludes more volatile food and energy costs, increased 0.2 percent, the survey showed.

Additional Action

The Fed is prepared to take additional action, including buying more government bonds, if the economy appears to be in danger of stalling, central bank Chairman Ben S. Bernanke said July 13. The Fed ended its $600 billion bond-buying program, also called quantitative easing, last month.

“I don’t think QE3 is off the table, and certainly if there is any opportunity for Bernanke to print money he would do it,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “If we see a softer CPI number over the next couple of months, that would be a catalyst” for dollar weakness.

Separate U.S. data today will show industrial production rose 0.3 percent in June after a 0.1 percent gain in May, according to another Bloomberg survey. A regional Fed report may show New York-area factories expanded in July after unexpectedly contracting the prior month.

Swiss Franc

The franc traded 0.5 percent from a record high against the euro as concern the European debt crisis is spreading boosted demand for safer assets.

Italian government bonds fell yesterday after borrowing costs climbed to a three-year high at a five-year note auction amid concern the nation will be drawn into the turmoil that’s forced Greece, Ireland and Portugal to seek bailouts.

Results of European bank stress tests to be released today may show that about 10 failed because they had less than the required 5 percent core tier 1 capital, the Financial Times reported, without saying where it got the information.

The euro traded at 1.15511 franc from 1.15429 yesterday, when it fell to a record low 1.14945.

Gains in the yen were tempered after Japan’s Finance Minister Yoshihiko Noda said he’s watching markets carefully because the currency’s moves have been “one-sided” in the last few days, fueling concern the authorities will intervene to support exporters.

Policy makers need to be mindful of the yen’s impact on the economy including corporate sentiment, Noda told reporters today in Tokyo.

“Every time there’s a bout of nervousness around sovereign debt issues, the yen and Swiss franc always strengthen,” said Khoon Goh, head of market economics and strategy at ANZ National Bank Ltd. in Wellington. “The perennial risk with the yen is that if it continues to head lower the market will be nervous of sending it lower still for fear of intervention.”

Freeway Shutdown Promises Sales for Gridlock-Survival Services

July 15 (Bloomberg) -- Closing the busiest stretch of freeway in Los Angeles this weekend may hurt businesses in the area, except for companies like Waze and JetBlue Airways Corp. that help travelers find a way around the mess.

The shutdown of part of Interstate 405 -- an event known as Carmageddon to local media -- may back up traffic by as much as 30 miles, according to Nancy Castles, a spokeswoman for Los Angeles International Airport. Residents have been warned to stay home or map out alternate routes during the closure of a 10-mile stretch that links L.A.’s Westside with the San Fernando Valley. Plans are for ramps to begin to be blocked at 7 p.m. tonight and for traffic to flow again by 6 a.m. Monday.

Waze, a mobile application that helps drivers navigate around traffic jams, has added more than 80,000 active users, an increase of about two-thirds in a market that is its biggest, said Di-Ann Eisnor, a vice president at the Palo Alto, California-based startup.

“When we heard about this, we thought we had to find a way to respond,” Eisnor said in an interview. “This really becomes an important showcase.”

Other companies see opportunities too. Briles Wing & Helicopter Inc. is offering to whisk passengers over the gridlock for $1,100 per person, and put a “countdown to the closure” clock on its website. JetBlue marketed $4 Carmageddon Fly-Over flights between Long Beach, south of the closure, and Burbank, in the valley. The four flights sold out.

Luring Customers

City officials are advising residents to stay out of their cars, as they did during the 1984 Olympics, when there were concerns that smog and traffic would interfere with the Games. Local bars and restaurants, worried the strategy will work again, started the website car-mageddon.com to lure customers with discounts and so-called CarmaCoupons.

The shutdown could blunt sales at Toyota of Santa Monica, said Billy Rinker, general sales manager at the dealership, which claims to be the top U.S. seller of Prius hybrids.

“July should be a good month because there’s five weekends this year,” Rinker said. “But on the Westside, Carpocalypse or Carmaggedon or whatever it’s called probably means we’ll lose that weekend.”

The freeway is closing to allow workers to demolish the 80- foot-high Mulholland Bridge that spans the 405. It’s part of a five-year, $1 billion project to add a carpool lane on the freeway between U.S. 101 in the San Fernando Valley and Interstate 10 on the Westside.

‘Massive Impact’

The stretch, which handles 500,000 vehicles on a typical weekend, is the third busiest in the U.S., according to Inrix Inc.’s Nation Traffic Report Card. The California Department of Transportation, which is overseeing the project, expects construction to be finished in 2013.

“In places like Los Angeles, where the transportation system is operating at or near capacity, even minor disruptions can have a massive impact,” said Brian Taylor, a transportation professor at the University of California, Los Angeles.

Motorists who typically drive the 405 will be directed 38 miles east through downtown Los Angeles. Sepulveda Boulevard, a main thoroughfare that parallels the closed section of freeway, will be marked for residents only, said Lt. Andy Neiman, a spokesman for the Los Angeles Police Department.

“If you’re not currently planning ahead to make alternate travel arrangements, your choices will limit you to staying home to avoid the congestion that is expected,” Neiman said.

Helicopters Booked

Police and fire units will be positioned in the area to ensure quick responses to emergencies. The Los Angeles Fire Department will add 15 fire engines and six ambulances, said Cecco Secci, the department’s public information officer.

Time Warner Cable Inc., the area’s largest cable TV television provider, will put repair crews up in Westside hotels so they can respond to calls, according to spokesman Jim Gordon. Airlines are advising employees and travelers to allow extra time to reach airports. Prime Time Shuttle, an airport transportation service, will have its entire fleet of 150 vans on the road to handle expected heavier-than-usual business at LAX as travelers avoid driving.

As for the $4 JetBlue flights -- $5 for extra legroom -- they’ll last 35 to 45 minutes, about what it would take to drive between Long Beach and Burbank under normal conditions, according to the Forest Hills, New York-based carrier.

Waze, which has backing from Blue Run Ventures, Magma Venture Partners, Vertex Venture Capital and Qualcomm Ventures, will provide real-time traffic data to local television station KABC-TV, and has put its links on the station’s website.

$4.05 Combo

The Arclight Cinemas 16-screen multiplex in Sherman Oaks, at the interchange of the 405 and 101 freeways, has recorded “brisk” sales of tickets for films showing over the weekend despite its location, said Gretchen McCourt, an executive vice president at Arclight and Pacific Theaters. Movie-goers will be able to see the closed freeway from the lobby windows, and buy a $4.05 food-and-drink combination in honor of the shutdown.

Citrix Makes a Run at the Cloud

Many telecommuters know Citrix Systems (CTXS) for its programs that let them access their office applications from home. That arcane bit of software represents steady, profitable sales that investors love; the company’s stock has risen nearly 70 percent in the past year. But the future of the tech business isn’t PCs, it’s cloud computing—running applications on distant servers rather than on the machine in front of you—a fast-growing business where Citrix has made little headway. Now it’s embarking on a new push in that market.
On July 12, Citrix paid what Chief Executive Officer Mark B. Templeton says was less than $200 million for Cloud.com, a startup that helps companies manage data traffic on their servers. Instead of assigning computing tasks to specific machines, Cloud.com’s software, CloudStack, can split the work among pools of computers, pulling them in when needed and freeing them up for other jobs when done. CloudStack also makes it easier for companies to quickly roll out new applications to users worldwide rather than forcing them to wait for a technician to do the work. The Cloud.com deal “is about technology, the team, and market momentum,” Templeton says. Citrix’s shares fell 3.6 percent following news of the acquisition, recovering some on July 13.
While three-year-old Cloud.com remains far behind rivals VMware (VMW), Microsoft (MSFT), and leader Amazon.com (AMZN), the purchase gives Citrix a toehold in an important new business. Citrix declined to discuss Cloud.com’s revenues. Researcher IDC expects the segment that Cloud.com competes in to jump to $11.5 billion by 2014, from $4.5 billion last year. “Like everyone else, they’re trying to pivot into the broader infrastructure business,” says VMware CEO Paul Maritz.
An earlier Citrix foray into a related market, virtualization software that lets companies run more programs on fewer servers, has been something of a disappointment, analysts say. In that business “VMware has a huge lead,” says Matthew Hedberg of RBC Capital Markets in Minneapolis. The day after VMware’s $957 million initial public offering in 2007, Citrix paid $500 million for XenSource, which made a rival program. Today, Citrix’s XenServer has less than 8 percent of the North American virtualization market, vs. 77 percent for VMware, according to Forrester Research (FORR). Citrix executives argue that the purchase brought in important technology that has been used in other products. “We’ve been thrilled with the XenSource acquisition, and it goes beyond the pure financials,” says Citrix Group Vice-President Sameer Dholakia.
Investors haven’t punished Citrix for its shortfall in virtualization, mostly because the company gets so much revenue from its older programs. “They have a lot of legacy businesses,” says Brian Marshall, an analyst with Gleacher & Co. in San Francisco. Analysts predict Citrix’s profit may climb 16 percent, to $2.41 a share, this year as sales rise 15 percent, to $2.16 billion, Bloomberg data show.
Founded in 1989 by a former IBM (IBM) engineer, the Florida company grew quickly with its signature software that lets PCs access programs located on distant servers. Then in 1997, Microsoft threatened to incorporate a similar program into Windows, which would have taken a huge bite out of Citrix’s business. After months of negotiations, Microsoft instead agreed to license Citrix technology.
Analysts are betting on two trends that may allow Citrix to continue to thrive. It has a lead over VMware in an application that lets companies store copies of Windows on servers and push them out to PCs, which saves money by letting users run newer versions of the operating system on older machines, according to brokerage Robert W. Baird. And Cloud.com’s CloudStack can cost companies half to one-tenth as much as comparable cloud products from VMware and Microsoft, says James Staten, an analyst at Forrester Research. “If you build your cloud on VMware or Microsoft,” he says, “you’re sharing your profits with them.”
The bottom line: With its purchase of Cloud.com, Citrix is hoping to capture a big chunk of a market that could reach $11.5 billion by 2014.

Ricadela is a reporter for Bloomberg News and Bloomberg Businessweek in San Francisco.

Preparing for the (Possible) China Crash

Moody’s Investors Service (MCO), the credit ratings agency, says China has underestimated by half a trillion dollars the exposure of state-owned banks’ loan portfolios to local governments. Despite five interest rate hikes since last October, inflation is now running at 6.4 percent, the fastest since 2008. Second-quarter gross domestic product grew at 9.5 percent, its slowest pace in almost two years.
No one is writing off China. An April Bloomberg survey of economists estimated the economy would grow more than 9 percent this year. The government is flush with cash and ready to prop up key banks and companies in case things get dicey. Yet bearish investors, such as James Chanos of Kynikos Associates, question whether China can beat inflation and stop over-investing in real estate projects and factories without triggering a hard landing. “A lot of people in the broader market are now asking these questions that they weren’t asking before,” says Patrick Chovanec, a business professor at Tsinghua University. “Before, the China story was so powerful that it overcame all doubt. Now there has been a big shift in sentiment.”
If a crash or slowdown occurs—which most analysts define as growth below 7 percent—it will be brought about either by inflation or a reversal in real estate. The Chinese Communist Party is loath to allow high inflation, says Chovanec. In the 1940s, hyperinflation turned ordinary Chinese into Communists. Inflation of around 20 percent was one reason protesters took to Tiananmen Square in 1989. Should inflation exceed 10 percent for long, “they pull a Volcker,” says Chovanec. Paul Volcker, the former U.S. Federal Reserve chairman, defeated high inflation in the U.S. with rates so steep they plunged the country into severe recession.
In real estate, the party has gone on too long. As Nicholas Lardy of the Peterson Institute for International Economics points out, inflation in China is outstripping the one-year savings deposit rate of 3.5 percent. That prompted many Chinese to pour parts of their savings into apartments. Already, 9 percent of economic output comes from residential housing investment. It was 3.4 percent in 2003. With the building boom well under way, supply is finally outstripping demand. The unsold inventory of apartments has gone from zero last summer to about three months’ worth now, according to Standard Chartered Bank.
If apartment prices fall steeply, ordinary Chinese could lose their savings, and local governments will be unable to pay off the loans they took out to invest in residential and commercial projects. Local governments also rely on land sales for over 60 percent of their revenues in some cases, says City University of Hong Kong political scientist Joseph Cheng. In a property bust, few will be buying land. A real estate reversal would drag down local makers of steel, cement, and household furnishings.
Victor Shih, a political scientist at Northwestern University who studies the local debt problem, says the banks are reacting to poor returns on their investments in everything from real estate to subway lines. “Banks’ focus now is to use existing credit to ensure loans don’t go into default,” says Shih. “That makes credit to new projects more difficult—one reason we are seeing a slowdown.”
Moody’s estimates that 8 percent to 12 percent of China’s total loan portfolio could be nonperforming: The official figure is 1.2 percent. Earlier this year, Fitch Ratings warned that nonperforming loans could reach as high as 30 percent. Especially vulnerable are small businesses. They account for 80 percent of employment, according to China’s Ministry of Industry and Information Technology, yet struggle to get credit. “They don’t have adequate liquidity at all,” says Dong Tao, Hong Kong-based chief regional economist at Credit Suisse (CS).

Chevron Looks to Its Home Court for a Comeback Win

For a decade, Chevron (CVX) has been embroiled in an epic legal battle in Ecuador over allegations that the country was used as a dumping ground for billions of gallons of toxic drilling waste. In February the plaintiffs, some 30,000 Amazon Indians and peasant farmers, won an $18.2 billion verdict in a provincial Ecuadorean court. Chevron called the case tainted by fraud and vowed to get the verdict nullified.
Six months later the company has made impressive progress toward doing just that. Lawyers for Chevron, the third-largest U.S. corporation in revenues behind Wal-Mart Stores (WMT) and ExxonMobil (XOM), have persuaded a federal judge in New York essentially to put the Ecuadorean court system on trial for corruption. The company is seeking a far-reaching order that would block the plaintiffs from collecting on their judgment in the U.S.—or anywhere else.
The prospect of establishing a U.S. precedent for extinguishing hostile foreign court verdicts has electrified corporate lawyers and their clients. A coterie of business groups in Washington has weighed in with friend-of-the-court briefs supporting Chevron. The U.S. Chamber of Commerce, the Business Roundtable, the National Association of Manufacturers, and the National Foreign Trade Council argue that the oil company was the victim of crooked proceedings in Ecuador. In their own joint brief, Dole Food (DOLE), Royal Dutch Shell (RDS/A) and Dow Chemical (DOW) say they, too, have been hit repeatedly by mass injury suits abroad.
A Chevron victory could become a powerful tool in fending off judgments in such cases. “Vigilance in ensuring that foreign judgments are rendered in systems that provide due process and impartial tribunals is a matter of growing importance in a world where international commerce will, with increasing frequency, be affected by foreign judgments,” the companies contend.
Environmentalists and the government of Ecuador are siding with the plaintiffs. They argue that Judge Lewis A. Kaplan, who was appointed to the bench by President Clinton in 1994, lacks the authority to issue a worldwide order blocking enforcement of the verdict. In court filings, Ecuador’s American law firm, Winston & Strawn, asserts that “Judge Kaplan’s gratuitous belittlement of the Republic [of Ecuador]’s judicial system is a wholesale condemnation of the judicial systems of the entire Latin American region.”
At the heart of Chevron’s legal predicament is a massive case of buyer’s remorse. The company fought for more than eight years to get the pollution suit moved to Ecuador, believing it would be more likely to prevail there than in the U.S. When it became clear that it would lose in Ecuador, Chevron came back to U.S. courts seeking to undermine the Ecuadorean proceedings. The oil and gas producer maintains that it cleaned up any pollution for which it was responsible and that it has been unfairly targeted.
The lawsuit began back in 1993 when attorneys representing the plaintiffs sued Texaco in federal court in New York, alleging the company had dumped billions of gallons of dangerous drilling fluids into rainforest streams and rivers while extracting oil from the Amazon from 1972 through 1990. Texaco denied wrongdoing and persuaded the New York court to dismiss the case, arguing that it would be more appropriate to try it in Ecuador. In 2001, Chevron acquired Texaco, and with it the pollution case. Two years later the plaintiffs refiled the suit in Ecuador, this time naming Chevron as the defendant, even though Chevron didn’t have operations in Ecuador—and still doesn’t.

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Interest rates: Savers' group calls for Bank rate rise

The value of UK savings has been eroded by £50bn in the past year because of inflation and low interest rates, a campaign group has said.

The Save Our Savers group wrote to each member of the Bank of England's rate-setting committee urging them to raise the Bank rate to help pensioners and encourage saving.
But the Monetary Policy Committee froze the rate at 0.5% later.
Mortgage borrowers have benefited from rates remaining at the record low.
'Permanent' impact
In a plea to all nine members of the MPC ahead of the decision, Save Our Savers said that "a country without savings is a country without a future".
It warned that those on fixed incomes, such as pensioners, were suffering terribly from the combination of extremely low interest rates and above target inflation.
"For many this is not a temporary setback. Its effect will permanently reduce the value of their future income," the letter said.
However, the MPC later announced that it was maintaining the Bank rate at 0.5%. It has now been at this record low for more than two years.
This has hit savers, but it has made home loans cheaper, ensuring some can meet their mortgage payments.
Financial information service Moneyfacts reported a week ago that interest rates on new mortgage deals had fallen to their lowest level, on average, in 23 years.
Halifax - a lender now part of Lloyds Banking Group - said typical mortgage payments for a new borrower had fallen from a peak of 48% of average disposable earnings in mid-2007 to 28% in the second quarter of 2011.
Source: BBC News

ECB raises eurozone interest rates to 1.5%

The European Central Bank (ECB) has raised interest rates to 1.5% from 1.25% in an attempt to cool inflation in the 17-nation eurozone.

ECB president Jean-Claude Trichet said that inflation, now 2.7%, was likely to remain "clearly" above the ECB's 2% target over the coming months.
He said inflation would be monitored "very closely", seen as a signal that rates are likely to rise further.
The latest increase was the second rate rise since April.
Earlier on Thursday, the Bank of England kept UK rates at a record low of 0.5%. Rates have been held at this level for more than two years.
The ECB's rise was widely expected after Mr Trichet indicated last month that such a move was likely.
He told a news conference after the rates announcement that recent economic data had showed a slowing in eurozone growth.

Analysis

Jonty Bloom Business correspondent, BBC News

---

If German workers start to think that they are entitled to some of the rewards for that performance and start demanding wage rises to make up for rising prices, inflation may well become established in the eurozone.
The ECB is acting now to try to stop that happening, regardless of the cost to Athens, Dublin and Lisbon.
For countries like the Irish Republic, Greece and Portugal; struggling under a mountain of debt, having to be bailed out and facing seemingly endless austerity measures; an increase in the cost of borrowing is about as welcome as an invitation to inspect the guillotine blade a bit more closely.
But the ECB has to look at the whole eurozone and make its decisions based on that. And it has decided that fighting inflation is a far, far better thing to do.

However, there were "upside risks" to inflation in the medium term because "the underlying pace of monetary expansion is continuing to gather pace," he said.

Higher prices
Mr Trichet said inflation would remain above target over the next few months largely because of higher energy and commodity prices.
The ECB's primary role is to keep inflation low by setting interest rates for the 17 countries that use the euro.
But there are concerns that rising rates will increase borrowing costs, adding to pressure on countries such as Greece and Portugal.
Asked if the rate rise would do more damage the eurozone's periphery economies, Mr Trichet said that "the entire continent would benefit from maintaining price stability and confidence".
He said that confidence was the "solid soil" on which the eurozone would build, despite some countries expanding at a faster pace than others.
The continuing strength of Germany's economy was underlined this week with figures showing that manufacturing orders rose 1.8% in June. Many analysts had forecast a fall.
Meanwhile, Mr Trichet joined in criticism of the credit ratings agencies which followed Moody's decision to downgrade Portugal's debt to "junk".
On Wednesday German Finance Minister Wolfgang Schaeuble said he believed limits should be put on the rating agencies' "oligopoly".
Mr Trichet added his weight, saying: "It is also clear that a small oligopolistic structure is not what is ... desirable at the level of global finance."
He said that despite Moody's downgrade the ECB would support Portugal by continuing to accept the country's debt as collateral in return for funding.
Default
"We have decided to suspend the application of the minimum credit rating threshold... This suspension will be maintained until further notice," he said.
The ECB has played a central role in the debt crisis by keeping banks afloat with emergency cash.
But he repeated firmly that the ECB would not accept a country's bonds as collateral if it had defaulted on its debts.
There has been speculation about whether Greece is close to defaulting, with ratings agencies speculating about the definition of a 'default'.
Mr Trichet said: "We say 'no' to selective default or credit event."

Source: BBC News

Santander to bring India call centres back to UK

Santander has said it is bringing all of its call centres back to the UK from India following complaints.

Chief executive Ana Botin told the BBC customers had said it was "the most important factor in terms of the satisfaction with the bank".
It is taking on 500 staff for new phone centres and has 25 million customers and 1,300 branches in the UK.
The bank acquired Abbey, Alliance & Leicester and parts of Bradford & Bingley in 2008.
Commenting on the call centre move, Ms Botin said: "This is what our customers have told us is the most important factor in terms of the satisfaction with the bank, and we have listened to them and decided to bring all of our retail call centres back from India."
BBC personal finance correspondent Simon Gompertz said Spanish bank Santander had one of the worst complaints records in the industry last year.
Our correspondent also said there was a trend for banks and other companies to bring call centres back to the UK, although many are now moving administration work to cheaper countries instead.
'Attrition'
On Tuesday, telecommunications company New Call Telecom announced that it was moving one of its call centres from India to Lancashire, in a move that is expected to bring 100 jobs to the area.
New Call Telecom transferred its business to Mumbai three years ago, but increased costs has prompted it to move to Burnley.
The company highlighted a growing trend in India for prices to increase in real estate, salaries and accommodation.
In September 2010, Santander said it was creating 400 call centre jobs in the UK following rapid growth in its business.
Liverpool got 200 of the call centre jobs, with 100 in both Leicester and Glasgow.
Source: BBC News

Japan's current account surplus falls sharply in May

Japan's current account surplus fell sharply in May, as the 11 March earthquake and tsunami continue to affect exports.

The surplus shrank 51.7% to 590.7bn yen ($7.27bn; £4.55bn) compared with a year earlier, said the Ministry of Finance.
However, that is less than most analysts had expected.
The data shows that while the economy continues to suffer from the disaster, it is recovering quicker than expected.
May's fall in the current account surplus marks the third straight monthly drop after the earthquake and tsunami wreaked havoc in the north east of Japan.
In April the surplus was down 69.5%.
Trade deficit
Even as the supply chain recovers and manufacturers come back online exports are still suffering.
The data showed that exports fell by 9.8% in May from a year earlier.
While imports rose 14.7%, mainly because of higher energy costs.
That translated to the second-biggest trade deficit on record, the ministry said.
The current account is the broadest measure of a country's trade with the rest of the world.
Source: BBC News

Malaysia picks industrialisation over natural treasures

The forest is dense, impenetrable beyond the cut trail, and the air is thick, hot and humid. What is most astounding is the noise of the insects and birds.

Whistles and clicks and hums, rattles and songs, rising and falling in intensity but always present.
The rainforest of Borneo is said to be the oldest on the planet, 70 million years older than the forest of the Amazon.
There are bright red centipedes and beautiful butterflies. There are crocodiles in the rivers, snakes in the dense bush, macaque monkeys and, at higher elevations, orang-utans.
In just the past few decades, hundreds of species of plants and animals have been discovered on Borneo.
The rainforest is one of the world's great, natural treasures.
Preservation v development
But it is also a national treasure and Malaysia, determined to develop its economy, has choices to make about how to ensure its natural resources pay.

“Start Quote

With the creation of this huge investment coming into this area, we expect a lot of job opportunities as well as business opportunities for the local, Malaysian people.”

End Quote Adie Abad Bintulu Development Authority

The government has reached a decision - industrialisation is the way forward.

In the state of Sarawak, they are clearing land and pouring concrete for a massive industrial park devoted to heavy industries.
On one site alone, they are looking for foreign investment in steel, aluminium, petrochemicals and glass production.
Further down the coast, there will be other sites for food processing, fish farming, palm-oil production, information technology and, of course, timber.
Greenpeace, the environment campaigners, are amongst those who have raised concerns about how "destructive logging" and other commercial activities in Sarawak are damaging.
Yet, countries from around the world are investing billions of dollars.
To power this industrial site, they have built one massive hydro-electric dam, flooding 700 sq km (270 sq miles) of land and cutting down 230 sq km (90 sq miles) of virgin rainforest.
Another dam is under construction and a third is planned.
"I have never experienced any hydro-power project without someone criticising it," says Sarawak Energy chief executive Torstein Dale Sjotveit.
"This is really valuable to flood it, if you look at the benefits that Sarawak gets from it."
Development benefits

The development of Sarawak is likely to provide a boost to the region's timber industry

That is the choice Malaysia has made. A standing forest does not earn much in the way of revenue.
A little eco-tourism, perhaps, or a few million dollars from the United Nations' scheme to prevent deforestation, cannot compete with the billions of dollars they have already received from foreign investors.
At a place called Samalaju, Adie Abad from the Bintulu Development Authority is escorting some Indian businessmen around the building site that will soon be an industrial park, trying to persuade them to invest, to build a steel works on the site.
Dodging bulldozers and trucks hauling gravel and steel, or diggers clearing the land, Mr Adie has high hopes for this place.
"With the creation of this huge investment coming into this area," he says, "we expect a lot of job opportunities as well as business opportunities for the local, Malaysian people."
"Maybe... in the next five years, you won't see those trees any more."
When asked whether Borneo prides itself on its trees, he says: "We will plant those trees later on - alongside the road, no problem. But we have to give way to the industry to come in."
Mr Adie's boss, the head of the development authority, Mohidin Haji Ishak, says: "Our priority is to have our people enjoy life.
"And, of course, we have a vision to become a developed nation by 2020.
"What we do here is as a result of the demand by the world, you know. We are reacting to the demand. I mean there is money to be made. Why not?"
Source: BBC News

Formula 1 technology aids everyday life

As the roar from Formula 1 racing cars shakes Silverstone, home of the British Grand Prix, silent concentration reigns at the futuristic-looking base of one of the leading teams, Vodafone McLaren Mercedes.

This weekend, everything at this unusual car plant in Woking, Surrey, is about winning the race this Sunday, so technicians will be hard at work as usual.
But for one division of the McLaren Group, victory on the racetrack is merely a means to an end.
Meet McLaren Applied Technologies - a department specially dedicated to expanding the home-grown Formula 1 know-how into the non-F1 world.
Sure, other F1 teams also make products that have nothing to do with Grand Prix racing - such as Red Bull's energy drink or Ferrari's roadcars.

McLaren's road car and Venge racing bike are probably the most well-known non-F1 products

But McLaren is focusing more on making money from the application of technologies developed for F1 cars to solve challenges off the racetrack.
McLaren's most famous product, besides its road cars, is probably the ultra-light carbon-fibre racing bike, Venge.
Developed in partnership with US cycling firm Specialized, it is said to be the fastest road-racing bicycle in the world.
"Their expertise in carbon technology and computing systems is exceptional," says Specialized research and development director Eric Edgecombe.
"After spending just a short amount of time together we realised that we shared some very core, deeply held beliefs about winning at the highest level."
The partnership has yielded results.
The first time the bike raced, it won the Milan-San Remo race - which at 298km is the longest professional one-day race.
Advanced telemetry
But there are lesser-known areas of application, too.
One cutting edge technology is McLaren's advanced telemetry system, which uses sensors to monitor data feeds and thus enable real-time strategy and decision making.

“Start Quote

It is a system to allow engineers to design a car - they build a car in the virtual world, then put the driver in the virtual model and validate”

End Quote Geoff McGrath McLaren Applied Technologies

"We've decided to take the aspect of remote condition monitoring of the car, and apply it to monitoring of people," explains Geoff McGrath, the head of the Applied Technologies department.

As he walks along a futuristic transparent walkway, suspended just under the ceiling, Mr McGrath says that the firm has already used this technology on patients undergoing a weight loss programme at a clinic in Norfolk.
The patients had medical sensors hooked up to them, transmitting data to the doctors.
"In the words of the people on the programme, they essentially had their GP with them, in their pocket," Mr McGrath explains.
"They could have continuous monitoring and also continuous interaction and feedback."
If patients are interested in an early warning, athletes might want to make vital improvements in performance.
The technology has already been used to train UK athletes in a number of Olympic disciplines - for instance, in canoeing.
"McLaren's miniature sensors go inside the paddle, so every time an athlete applies force on the water, the sensor measures it and transmits the data back to see how fast the boat is going," explains Scott Downer from UK Sport, a public body for directing the development of sport in the UK.

 

Mobile data experience must be consistent, says Acision

Each week we ask high-profile technology decision-makers three questions.

Marco Wanders has drawers of PDAs, but uses paper

This week it is Marco Wanders, executive vice-president of Acision's Mobile Data Control and Mobile Data Charging business units. Part of his role includes the duties of chief technology officer (CTO).
Acision is a mobile communications network infrastructure company. The global company's real-time mobile data solutions are aimed at helping their customers control, optimise and create revenue from data traffic.
This translates to services like mobile internet browsing, mobile broadband, streaming multimedia services and messaging.
Acision has 230 customers in 100 countries across six continents, including eight out of the top 10 global mobile operators.
They deliver more than one trillion SMS messages every year.

What's your biggest technology problem right now?

The biggest technology problem that we need to solve is ensuring we can help our customers - at this moment in time telecom operators, and the mobile telecom operators particularly - to deliver quality of experience to their end users.
Quality of experience is a broad term - what I mean is that you need to deliver content that is currently going over a network in the best possible way.
There are three certainties at this moment in time.
Firstly that the critical mass of smart devices is getting bigger - this could be a laptop, a PC, basically anything that has a screen. It could even be a television set that operates over a network and has a certain amount of intelligence, is connected and will run over a fixed or mobile network.
The second certainty is that what I call the 'real estate' will continue to get bigger - the real estate meaning especially the screen. If you look at smartphones today they already have resolutions and screen sizes that we didn't see even two years ago.
This means they need a huge amount of data to fill the screen.
The third certainty is that whatever becomes available - people will use it.
So you have an enormous amount of devices, larger screens and more people using them.
It's very simple to see that all networks will be getting a lot of pressure, especially mobile networks.
There is one huge limitation and that is the radio spectrum, the available capacity in a radio network is not endless. On the other hand you have consumers that expect that the content - which could be streaming radio, any type of video, whatever - be carried over the network and be delivered in a certain quality.
In a fixed network that is relatively easy to sustain - in a mobile network it's a lot harder.
I always take the example of video, everyone wants high definition. But if you view that on a mobile device no matter how good your picture looks, if the video stops playing at a certain moment in time it's worthless.
It's not only the quality of the picture it's the flow and continuity of the picture.

What's the next big tech thing in your industry?

This really leads on from the previous answer.
How can you monetise the technology mobile operators are using to deliver quality content?
Being able to deliver reliable, dependable content is of interest to both sides.
To the the end user who may be prepared to pay for that level of quality - but also as a content provider, there's value in knowing that the content you're producing is going to be delivered to the end user in a reliable and predictable way.