martedì 30 ottobre 2012

The impact of Hurricane Sandy on the Economy

The devastation of Hurricane Sandy is likely to create big distortions — though not lasting effects — in a wide range of U.S. economic measures.
If past major storms and forecasts by economists are a guide, look for industrial production to have taken a dip in October as factories from the Carolinas to New England suspended activity and for housing starts to slow as builders postpone new construction. Retail sales may take a hit but are likely to benefit in November and December, when people buy the supplies they need to rebuild. There could be downward pressure on November employment should some of the employers affected (Atlantic City casinos, for example) be unable to get back to full speed quickly.
The Labor Department’s report on October jobs numbers scheduled for Friday, the last U.S. unemployment report before the election, should be unaffected by the storm because it is based on surveys taken earlier in the month.
Economic activity will slow some in the next couple of weeks because many businesses across the Northeast are shut down. Some will take days to reopen. During the next couple of quarters, there will be an almost perverse boost in overall economic activity, as efforts to clear damage and rebuild houses and businesses add to the gross domestic product.
So far, there are no reliable estimates of the financial damage wrought by the storm, butone pre-storm estimate of $88 billion would imply that rebuilding efforts would add about two-tenths of a percentage point to GDP growth. Although economists generally use GDP as a rough proxy for the overall change in human welfare, this is an area where it fails miserably.
The storm depleted some of the nation’s “capital stock” — houses, stores, and bridges and other infrastructure were destroyed. The country is, in effect, poorer by whatever amount the damage comes to. But the urgent need to rebuild will create jobs and spur economic activity, with the bill paid by insurers and governments.
When Hurricane Katrina struck New Orleans and the Gulf Coast in 2005, the devastation’s effect on national economic indicators was significant but short-lived. At the time, the U.S. economy was adding nearly 200,000 jobs a month, but that number fell to 66,000 in September 2005 and 80,000 in October 2005. The figure rebounded that November: 334,000 positions were added. (A look at state jobs numbers confirms that the yo-yo effect was driven by employment changes in Louisiana and other hurricane-affected gulf states).
But the economic repercussions from Katrina — in which nearly 2,000 people lost their lives and thousands were left homeless — were fairly unique to those circumstances and can’t easily be used as a precedent for measuring the impact of Sandy . The physical damage to New Orleans and other Gulf Coast areas forced thousands of residents to relocate. Katrina also disrupted oil drilling and refining at a key transport node, causing a spike in gasoline prices nationally.
As of Tuesday morning, no major damage had been reported at oil production or refining operations in the areas affected by Sandy. There were reports, however, that many refineries had suspended activity to gird for the storm, so gasoline prices on futures markets rose Monday by nearly 6 cents a gallon for November delivery.
“The supply of petroleum products is being disrupted,” Jason Schenker of Prestige Economics said in a report, “as Mid-Atlantic refiners are running reduced runs, and imports into New York Harbor and other areas are disrupted.”
But rising fuel costs should be short-lived, assuming that refineries can return to normal quickly, as people get back on the roads, airlines resume flights and factories start producing again. Indeed, Schenker argued that due to less demand, the storm would put slight downward pressure on crude oil prices.
One of the reasons it’s so hard right now to predict the economic impact of this major storm is that much of the devastation is without precedent. As of Tuesday morning, trying to determine when the New York subway, airports and tunnels into Manhattan might re-open was a guessing game at best. It’s too soon to know how the economy would react if transport to, from and within the nation’s largest metropolitan area — and its financial hub -- were disrupted for a prolonged period of time.
If there’s a silver lining to be found in past experiences, it’s that sometimes the need to rebuild — to replace older buildings and infrastructure — creates longer-term benefits for communities.
In a 2002 paper published in the journal Economic Inquiry, Mark Skidmore and Hideki Toya analyzed areas that were affected by natural disasters around the world. They found that such events can provide the impetus needed to invest in new and more productive capital.
Think of the intuition this way: Utilities may have resisted investing in underground power lines because of the expense. But after this hurricane, they may be more inclined to bury those lines, significantly reducing power outages during future storms.
That’s one of many economic ripples likely to emerge from the devastation, though it’s perhaps small solace to those who have lost their home to Sandy’s floods.

UBS to cut 10,000 jobs in fixed income retreat

Swiss bank UBS unveiled plans on Tuesday to fire 10,000 staff and wind down its fixed income business, returning to its private banking roots as it adapts to tough capital rules that make it harder to turn a profit from trading.
Zurich-based UBS will focus on wealth management and a smaller investment bank, ditching much of the trading business that ran up $50 billion in losses in the financial crisis and is embroiled in a global LIBOR rate-fixing investigation.
Some UBS staffers took to social media to air their frustration after dozens of traders were stopped from entering the bank's London offices on Tuesday.
Some staff turned up to work to find their employee cards no longer worked at the turnstile and were then escorted to human resources, according to various sources within the bank.
Once at human resources, they received their personal items in a bag with a letter saying they would have two weeks paid leave, after which they were to return to collect their redundancy package, the sources said.
Chafing at their treatment, several tweeters revived "U've Been Sacked," an invented acronym for UBS which circulated in 1998 after the bank fired hundreds of staff following the merger of the two big Swiss banks which formed today's UBS.
Chief Executive Sergio Ermotti, a former Merrill Lynch and UniCredit banker, is leading the three-year overhaul aimed at saving 3.4 billion Swiss francs ($3.6 billion), on top of cuts of 2 billion francs already announced last year.
Investment bank co-head Carsten Kengeter leaves Ermotti's top team to lead the winding down of fixed-income activities that are no longer profitable due to stricter capital rules on riskier business introduced after the financial crisis.
The remaining investment bank - handling equities, foreign exchange trading, corporate advice and precious metals trading - will be run by Andrea Orcel, a recent Ermotti hire from Bank of America who had co-run the unit with Kengeter.
"Change is necessary for the entire banking industry," Ermotti wrote in a memo to staff. "By acting now, we are getting ahead of our competitors and reshaping our business so that it can deliver sustainable results over the long term."
The measures translate to a 15-percent staff cut, taking UBS's overall staff to 54,000, from 63,745 now. It was already down from a 2007 peak of 83,500 as banks have shed tens of thousands of jobs globally since the financial crisis of 2008.
Of the new job cuts, 2,000 will be front-office investment banking staff, the revenue generators. Cuts among support staff will bring the layoffs to above 5,000 in the securities unit.
About 2,500 positions will go in Switzerland, slightly more than that in the United States, and the rest in Britain.
A smaller investment bank will leave UBS focused on its private bank, which looks after the affairs of the wealthy. With 1.6 trillion francs in assets, it is the second-largest operation of its kind in the world after Bank of America.
UBS shares, which soared 7.3 percent on Monday in anticipation of the announcement, were up another 5.4 percent at 13.83 francs by 1511 GMT in exceptionally heavy trading, their highest since July 2011. That compared with a 0.9 percent rise for the European banking sector index.
Investors in Switzerland, where anti-banker sentiment ran high after UBS took a government bailout in 2008 following more than $50 billion in mortgage losses, welcomed the overhaul.
"This restructuring should have happened after the rescue," retail investor Brigitta Moser-Harder, who has campaigned against hefty UBS bonuses, told Reuters. "The high cost of the investment bank has always been problematic."
Now, UBS is effectively admitting failure in its attempt to crack the fixed-income big league, launched a decade ago by former chairman Marcel Ospel. It will retreat to an advisory business rooted in the British merchant bank Warburg, which it bought in 1995.
The bank suffered a $2.3 billion hit last year blamed on London trader Kweku Adoboli. He is now on trial on charges of fraud and false accounting.
Germany's Deutsche Bank said on Tuesday it hopes to benefit from the UBS cuts as its investment bank delivered record third-quarter sales and trading revenue.
Credit Suisse said last week it was also cutting more costs to boost its profits and capital but did not announce the same kind of radical restructuring as UBS.
The bank aims to pay out more than 50 percent of profits to shareholders from 2015, after paying its first post-crisis dividend last year, a modest 0.10 francs a share. It has put away funds in the third quarter for an unspecified dividend this year, UBS financial chief Tom Naratil told journalists.
UBS swung to a third-quarter net loss of 2.172 billion francs, hit by restructuring charges and 863 million francs written off the value of its own debt. It said the costs related to the investment banking split would also lead to a fourth-quarter and full-year loss.
While the private bank also faces challenges from eroding Swiss banking secrecy, it secured 7.7 billion francs in net new money from clients in the third quarter. That represents the highest result in a third quarter - typically a slow one for the business due to summer holidays - in five years.
"UBS is returning to its boring roots as a discreet Swiss bank," said Mark Williams, author of a study of systemic risk in the latest financial crisis entitled "Uncontrolled Risk".
"UBS is setting an important new direction for the globe's largest banks - boring banking is good banking," said Williams, who teaches finance at Boston University School of Management.
UBS is aiming to reduce risk-weighted assets to below 200 billion francs by the end of 2017, from 301 billion currently. Of this, the investment bank will account for roughly 70 billion francs, less than half of what it accounts for today.

lunedì 29 ottobre 2012

Burger King Profit Falls 83%

The fast-food chain and home of the Whopper has been working to revive its menu and marketing strategy to expand beyond its core market of men in their early 20s. New restaurant designs and fresher food like salads, fruit smoothies and chicken snack wraps have also helped in that respect.
Burger King, which came back to the stock market in June, said sales at locations open at least a year rose 1.4% in the third quarter, helped out by its limited-time menu items, like the summer BBQ-themed and chicken ones, and by its progress in attracting a more diverse customer base.
The company acknowledged that, like the rest of the industry, it saw a deceleration from the second quarter, citing "more-challenging prior-year comparisons and the loss of some value-based traffic."
Burger King has said it plans to sell nearly all of its company-owned restaurants to franchisees by the end of this year as it looks to shift to a more "asset light" model. The franchise strategy helps insulate restaurant companies from the volatility of commodity costs and other burdens, providing a more steady income stream from royalty fees.
As the U.S. fast-food market becomes increasingly competitive, Burger King is looking to international markets for much of its growth. Nearly half of its locations are abroad currently, with all the segments reporting growth in sales at established locations except for the Asia-Pacific region.
Burger King profit fell to $6.6 million, or 2 cents a share, from $38.8 million, or 11 cents, a year earlier. Excluding business-combination expenses, realignment project costs and other items, adjusted per-share earnings rose to 17 cents from 16 cents.
Revenue dropped 26% to $451.1 million. "Organic" revenue, which strips out acquisitions, divestitures and the effects of foreign exchange, grew 0.2%, excluding the impact of re-franchising.
Systemwide same-store sales rose 1.4%.
Company restaurant profit margin fell to 11.6% from 12.4%.
Also Monday, the company initiated a quarterly cash dividend of four cents a share
Burger King returned to the public market in June after a $1.4 billion cash deal with U.K. investment vehicle Justice Holdings Ltd. The New York-based private-equity firm 3G Capital Management LLC—which initially paid $3.3 billion in 2010 to take Burger King private—remains Burger King's principal shareholder with a 71% stake.

Bracing for Storm, U.S. Stock Markets to Close

All United States stock and options markets will close on Monday as Hurricane Sandy approaches, as Wall Street braces for the storm to barrel through the heart of the country’s financial center.
The decision, made on Sunday night, leaves the American stock markets closed for weather conditions for the first time in nearly three decades. The New York Stock Exchange had previously planned on closing only its physical trading floor, while allowing for trading on its Arca electronic exchange. It has now decided to halt all trading.
The Nasdaq and BATS stock markets, which are built on electronic trading, also decided to close. The CME Group, which operates the Nymex commodities exchange, said it would halt trading on its physical commodities floor and on its electronic stock futures and options exchanges.
The Securities Industry and Financial Markets Association, or Sifma, said in an e-mailed statement that it was calling for bond trading, which is all done electronically, to close at noon Monday, though it left the final decision to member firms.
The N.Y.S.E. last closed trading for weather reasons in 1985, when Hurricane Gloria lashed the metropolitan area. The opening of trading has been delayed a number of times, including during a blizzard in January 1996. The exchange was closed for three days after the terrorist attacks on Sept. 11, 2001.
Since then, the business has largely moved onto electronic systems that are meant to work without the traditional army of floor specialists barking out orders. Exchanges had hoped that computerized platforms would allow the markets to open without endangering even a smaller number of staff members.
But after daylong discussions with city and state officials, brokerages, the Securities and Exchange Commission, the Federal Reserve Bank of New York and Sifma, the market operators decided to be even more cautious and halt trading for the day, according to a person briefed on the matter.
“We support the consensus of the markets and the regulatory community that the dangerous conditions developing as a result of Hurricane Sandy will make it extremely difficult to ensure the safety of our people and communities, and safety must be our first priority,” the N.Y.S.E. said in a statement on Sunday.
The decision came late: Nasdaq made its final determination around 10:30 Sunday night, according to a person briefed on the exchange’s decision.
Under the N.Y.S.E.’s contingency plan, traders would have routed their orders onto the company’s electronic exchange, while electronic options trading would operate normally. Volume was expected to be muted, and the decision over whether to open on Tuesday was to be determined later.
A spokesman for the N.Y.S.E., Robert J. Rendine, said the company’s data center in Mahwah, N.J., which handles all trade orders, is intended to withstand a storm of Hurricane Sandy’s strength. It also has generators and enough fuel to run for almost a week at current levels, with emergency plans in place to procure more fuel if needed, he added.
Since 2007, the N.Y.S.E. has offered a “hybrid” model that allows trades to be completed either by humans or by computers through the Arca system. That gave the exchange a contingency plan that was previously unavailable, said Duncan L. Niederauer, the chief executive of NYSE Euronext. The company has tested the backup plan regularly, most recently in March.
Many big banks are letting their employees work remotely, mindful of the suspensions of major transit systems and school closures.
Goldman Sachs and Citigroup said their major offices in Lower Manhattan — which house the firms’ enormous trading floors — would be closed to all but essential personnel. Some Goldman staff members will be asked to work from special centers in Greenwich, Conn., and Princeton, N.J., though the majority of employees at both firms will be allowed to work from home, according to internal memorandums.
“Citi has contingency plans in place including locations that can be utilized to ensure continuity of operations,” Shannon Bell, a spokeswoman for the firm, said in an e-mail statement. “Citi is committed to providing uninterrupted service to our clients during the storm and seeks to minimize any possible impact.”
JPMorgan Chase plans to close an office in Lower Manhattan that is in a potential flood zone, though its other offices will remain open and ready to run off backup generators if necessary.
Decisions on which Chase retail bank branches would be closed were still being decided on Sunday night, according to a person briefed on the matter. Chase also said it would waive overdraft and late fees for customers in seven states affected by the hurricane, including New York, New Jersey and Connecticut.
Ms. Bell of Citi said that the firm’s branches in affected areas would be closed.
Several of these firms plan to run some of their technology and trading operations through offices in Europe and Asia.

venerdì 26 ottobre 2012

COMMODITIES-Corn slips; Brent oil up on Hurricane Sandy threat

Most commodity markets posted
slight losses on Thursday, led by a 2 percent slide in corn on
weak U.S. export sales, though Brent crude oil prices bounced
Oil traders were eyeing a Hurricane Sandy as it raked Cub
following seven days of losses as gasoline prices surged. a with 150-mile winds. The powerful late-season storm is expected to makes its way north in the coming days toward the
theast, so it's very possible New Jersey and Pennsylvania r
Northeastern United States, potentially disrupting refinery operations. "Sandy looks to make a direct hit in the No refiners might engage in some defense and slow or shut some operations," said John Kilduff, partner at Again Capital LLC in New York.
. The Thomson Reuters-Jefferies CRB index, a
Brent crude oil prices rose 64 cents to $108.49 a barrel, while RBOB gasoline futures jumped more than 3 percent to $2.68 a gallo nbellwether for commodities, rose 0.02 percent, snapping a four-day losing streak on the back of the oil price bounce. Gold rose by 0.5 percent to $1,710.20 an ounce, a day after
decision to keep interest rates near-zero until mid-2015 to
falling to the lowest level since September. U.S. palladium futures were up 2 percent to $604.50 an ounce. WEAK ECONOMIC DATA WEIGHS The U.S. Federal Reserve's stimulate the economy did little to support copper in the face of a stronger U.S. dollar. Benchmark copper on the London Metal Exchange (LME) ended at $7,815 a tonne, down from $7,817 on Wednesday.
s for capital goods, excluding defense, were unchanged
U.S. business investment showed signs of stalling in September, an indication that worries over a possible sharp tightening in the federal budget are already weighing on the economy. New orde rlast month at $60.3 billion, the Commerce Department reported, disappointing analysts who had predicted a rise. A monthly manufacturing output report from the Federal Reserve Bank of Kansas City showed activity in the Midwestern
ts, who are now curtailing demand. The U.S. Departmen
United States slowed in October from the previous month. Corn was down 1.7 percent, wheat fell 1.4 percent and soybeans shed 0.4 percent on signs the historic highs of this summer during the Midwest drought have hit end-user prof it of Agriculture's (USDA) weekly export sales report showed lower-than-expected export sales. The USDA said net export sales of corn were at 142,400 tonnes, below estimates for 150,000 to 250,000. Export sales of U.S. wheat last week totaled nearly 572,000
% -12.9% Brent crude 108.49
tonnes, above estimates for 350,000 to 450,000. Prices at 5:20 p.m. EDT (2120 GMT) LAST/ NET PCT YTD CLOSE CHG CHG CHG US crude 86.05 0.32 0. 4 0.64 0.6% 1.0% Natural gas 3.434 -0.016 -0.5% 14.9% US gold 1713.00 11.40 0.7% 9.3% Gold 1710.54 8.61 0.5% 9.4% US Copper 355.05 -1.75 -0.5% 3.3%
872.75 -11.25 -1.3% 33.7% US Coffee
LME Copper 7815.00 -2.00 0.0% 2.8% Dollar 80.099 0.186 0.2% -0.1% US corn 742.00 -12.50 -1.7% 14.8% US soybeans 1564.00 -6.50 -0.4% 30.5% US wheat 161.00 1.20 0.8% -29.4% US Cocoa 2402.00 3.00 0.1% 13.9% US Sugar 19.53 -0.15 -0.8% -15.9% US silver 32.078 0.458 1.4% 14.9% US platinum 1569.60 6.90 0.4% 11.7%
US palladium 604.50 11.75 2.0% -7.9%


Asian shares, commodities slip, concern over earnings weighs

Asian shares and commodities slid on Friday while the yen steadied as investors shunned risk on concerns over corporate earnings, with the region's exporters struggling against shrinking global demand.
Oil retreated after rising on Thursday while London copper turned negative after earlier rising on short-covering, and gold, usually associated as a safe-haven, tracked a broad market decline led by a slump in Asian equities.
European shares were seen slipping as U.S. stock futures fell 0.8 percent to suggest a weak Wall Street open. Financial spreadbetters expect London's FTSE 100 .FTSE, Paris's CAC-40 .FCHI and Frankfurt's DAX.GDAXI to open down as much as 1.2 percent. .L .EU .N
The MSCI index of Asia-Pacific shares outside Japan .MIAPJ0000PUS tumbled 1.2 percent, and was set for a weekly drop of about 1.5 percent, which would be its largest weekly decline in two months.
China shares slumped 2 percent, underperforming Asian peers and dragging Hong Kong markets into the red after Chinese media reported domestic fund managers were not optimistic on the fourth quarter with funds reporting total losses of around 75 billion yuan ($12.02 billion) in the third quarter.
Hong Kong shares .HSI fell 1.2 percent and Shanghai shares .SSEC slumped 1.8 percent.
Samsung Electronics (005930.KS) reported record quarterly profits for a fourth straight quarter on Friday. And Bank of China Ltd (3988.HK) posted its biggest quarterly profit gain in a year the day before, but they failed to remove concerns about the outlook. Other top Chinese banks report later on Friday.
South Korean shares .KS11 slid 1.4 percent to their lowest since early September. Australian shares .AXJO fell 0.8 percent, losing 2.1 percent for the week in its biggest drop since May.
"Traders are starting to get desperate for a feel good economic indicator from somewhere," said Tim Waterer, senior trader at CMC Markets. "If one does not arrive soon the soft patch in markets witnessed this week could develop into a more pronounced downturn."
Some markets in the region were closed on Friday, including the Philippines and Singapore, to mark a religious holiday.
Markets' next key focus is the advanced reading of U.S. third-quarter gross domestic product due later on Friday, with the annualized rate of growth in the world's largest economy seen at 1.9 percent, up from 1.3 percent in April-June.
Profit for Samsung Electronics, the world's largest electronics company, will likely decline into next year as TV markets stagnate and growth in the high-end smartphone market eases from the recent breakneck speed.
"Though Samsung's sales, particularly of its smartphones, are impressive, what shareholders would like to see is margins that are closer to those of Apple," said Lee Yong-jik, a fund manager at Pine Bridge Investments, who owns shares of the company.
Apple Inc (AAPL.O), the most valuable public company in the United States, on Thursday posted quarterly earnings that fell short of expectations.
Bank of China posted solid results after cutting back on bad-loan provisions, prompting concerns that it may face a cash crunch if more borrowers default as the economy worsens.
The deterioration in the euro zone economy, hit hard by the region's prolonged debt crisis, and shrinking global demand has hit Asian exporters.
South Korea's economy grew by 0.2 percent in the July-September period from the previous three-month period, the slowest quarterly growth since the fourth quarter of 2009 in Asia's fourth-largest economy. The median forecast called for a 0.1 percent expansion.
Japan, Asia's other export-reliant powerhouse hit by weak global demand, approved a 422.6 billion yen ($5.3 billion) economic stimulus package of subsidies and tax grants on Friday.
Japan's Nikkei average .N225 fell 1 percent as Asian shares slipped. .T
"The market is confused about how to react to the earnings cuts and to what extent they're priced in," said Yuuki Sakurai, CEO of Fukoku Capital Management.
The dollar eased 0.3 percent against the yen to 80.07 after hitting a fresh four-month high of 80.38 yen early in Asia on Friday on expectations the Bank of Japan will take aggressive easing measures at its policy meeting on October 30.
The euro also fell 0.3 percent to 103.60 yen and the Australian dollar fell 0.7 percent to 82.63 yen.
Japan's core consumer prices fell for the fifth straight month in the year to September, keeping pressure on the BOJ to do more to achieve its inflation target.
The euro edged 0.1 percent higher to $1.2942, not far from a near two-week low around $1.2921 seen on Wednesday.
U.S. crude futures slid 1 percent to $85.17 a barrel and Brent dropped 0.9 percent to $107.46. <O/R>
Asian credit markets were subdued, keeping the spread on the iTraxx Asia ex-Japan investment-grade index little changed from Thursday.

Anglo American PLC CEO Cynthia Carroll to Step Down

Anglo American PLC on Friday said its Chief Executive, Cynthia Carroll, has decided to step down with the board of directors' agreement, but will remain in her post until a successor has been appointed.
Ms. Carroll, who is the only female CEO of a major global mining company, will leave after nearly seven years in the position, having faced recent criticism from shareholders and analysts over the company's underperformance compared with its peers. She has also suffered flak for the escalating costs of the Minas Rio iron ore project in Brazil.
However, Ms. Carroll also led the company to record profits in 2011 and oversaw three major projects that have enabled it to enter the current commodities-price downturn in a strong position. Safety at the company's platinum operations improved on her watch and she orchestrated Anglo American's acquisition of majority control of the world's largest rough diamond producer, De Beers, for $5.1 billion this year.
"It is a very difficult decision to leave, but next year I will be entering my seventh year as chief executive and I feel that the time will be right to hand over to a successor who can build further on the strong foundations we have created," Ms. Carroll said in a statement.
"I am extremely proud of everything we have achieved during my period as chief executive and I will always retain enormous admiration and affection for this great company and its outstanding people."
Anglo American's Chairman, Sir John Parker, said: "Cynthia's leadership has had a transformational impact on Anglo American. [She] created a strong and unified culture and a streamlined organization with a focus on operational performance."
Ms. Carroll is the latest female CEO to step down from a major European-listed company.

Amazon's results fail to meet expectations

Amazon's stock fell Thursday after the world's largest online retailer reported third-quarter results below Wall Street's expectations, including a large loss related to its stake in online deals service LivingSocial. (AMZN) posted a loss of $274 million, or 60 cents per share, in the July-September period. That's down from earnings of $63 million, or 14 cents per share, a year earlier.

The latest quarter's results include a loss of 37 cents per share related to Amazon's stake in LivingSocial. Without the charge, it still would have lost 23 cents per share, worse than analysts expected.

Revenue grew 27% to $13.81 billion, from $10.88 billion, also falling short of analysts' expectations.

Analysts surveyed by FactSet, on average, were expecting a loss of 7 cents a share on revenue of $13.91 billion.

Amazon said its $199 Kindle Fire HD tablet is its best-selling product worldwide, but as usual, it did not give sales figures.

"Our approach is to work hard to charge less. Sell devices near breakeven and you can pack a lot of sophisticated hardware into a very low price point," founder and CEO Jeff Bezos said.

Amazon has a larger version of the Kindle Fire HD out next month.

Amazon's results come two days after Apple introduced a smaller iPad, the Mini, for $329. In its press release announcing the results, Amazon included a list trumpeting its high-definition Kindle Fire as cheaper than the iPad Mini and with more features. However, Apple's iPad has a much wider selection of third-party apps.

At one point, Amazon's stock was off $6.42, or 2.9%, to $216.50 in after-hours trading before recovering some of that loss. The stock had closed down $5.57, or 2.4%, at $222.92 in the regular trading session.


mercoledì 10 ottobre 2012

Bain Capital Buys Apex Tool Group for $1.6 Billion

Bain Capital LLC agreed to buy Apex Tool Group LLC, the maker of Craftsman hand tools, fromDanaher Corp. (DHR) and Cooper Industries Plc for about $1.6 billion in its largest deal so far this year.
Danaher expects the sale to the Boston-based private-equity firm to generate after-tax net proceeds of about $650 million and be completed in the first half of 2013, the two companies said today in a statement. Danaher, based in Washington, and Houston-based Cooper each own 50 percent of Apex.
The acquisition of Apex is the largest this year for Bain, which has participated in announced deals worth $4.7 billion in 2012, according to data compiled by Bloomberg. Apex, based in Sparks, Maryland, describes itself as one of the world’s largest makers of hand and power tools. It has dozens of its own brands, including GearWrench ratchets, and makes some of the tools sold by Sears.
Danaher and Cooper (CBE) join United Technologies Corp. and DuPont Co. in selling major divisions to private-equity buyers this year. Danaher, which generated $16.1 billion in revenue last year, formed Apex with Cooper in 2010 by combining their tool businesses and naming Steve Breitzka, previously the head of the Danaher tool unit, chief executive officer.

Lead Bidder

Apex had net income of $134 million on sales of $1.46 billion last year, according to a Cooper regulatory filing. Apex employs 7,600 people, according to its website.
Bain emerged as the lead bidder for Apex and was considering a purchase of the unit for $1.5 billion to $1.8 billion, a person with knowledge of the matter said last month, asking not to be identified because the talks were private.
Bain’s second-biggest deal this year was the purchase of a 50 percent stake of Japan’s Jupiter Shop Channel Co., worth more than $1 billion, according to the data.
Bain, which was co-founded in 1984 by Republican presidential candidate Mitt Romney, is raising a $6 billion buyout fund. Bain Capital Fund XI, which follows the firm’s 2008 pool of about $10 billion, aims to gather initial commitments by February, according to an e-mail sent to prospective investors, a copy of which was obtained by Bloomberg News.
Goldman Sachs Group Inc. advised Apex on the sale, according to today’s statement.
Danaher’s products include dental and laboratory equipment, while Cooper makes electrical products and tools. Eaton Corp. (ETN) in May agreed to buy Cooper in an $11.8 billion transaction to expand its power-management business and tap more into a U.S. housing recovery. The deal is scheduled to close by the end of this year.

Wall Street edges down as Alcoa, Chevron weigh

U.S. stocks dipped on Wednesday asearnings season began with Alcoa forecasting slower demand for aluminum, while a profit warning from Chevron weighed on the energy sector.
But declines were muted as Yum Brands Inc (YUM.N), climbed 8 percent to $70.99 and was the best performer on the S&P 500. The parent company of KFC and other fast-food restaurants raised its full-year outlook after sales in China held up despite slowing Chinese growth.
The overall tone at the start of the earnings season was downbeat, however. The S&P 500 index was on pace for its fourth day of declines over concern the global economic slowdown was hurting profits and causing companies to lower their outlooks. The index was testing the technical support level of 1,440.
Stronger demand from airplane and automobile producers helped Alcoa (AA.N), the largest U.S. aluminum producer, to report third-quarter results that beat analysts' expectations. Still, Alcoa fell 3.1 percent to $8.85 as the biggest percentage decline on the Dow.
Chevron Corp (CVX.N) dipped 3 percent to $113.80 as the biggest drag on the S&P 500 after the second-largest U.S. oil company warned third-quarter profits would be "substantially lower" than in the previous quarter. Chevron said a hurricane and maintenance curbed its oil and gas output and a fire hit its refining operation.
Lackluster growth in China, the world's second-largest economy, is expected to rein in corporate earnings in the third quarter and dent profit forecasts as the Asian nation feels the pinch of the debt crisis in the euro zone, a key trading partner.
"You've seen very cautionary earnings results and even forward guidance. Alcoa has good earnings, but their forward guidance is lackluster. It points to a slow China and slow global growth," said Richard Weeks, managing director at HighTower Advisors in Vienna, Virginia.
The Dow Jones industrial average .DJI dropped 42.05 points, or 0.31 percent, to 13,431.48. The Standard & Poor's 500 Index .SPX shed 1.83 points, or 0.13 percent, to 1,439.65. The Nasdaq Composite Index .IXIC gained 1.18 points, or 0.04 percent, to 3,066.21.
The International Monetary Fund and the World Bank have recently cut world growth forecasts, citing concerns about China's slowdown.
Engine maker Cummins Inc (CMI.N) lowered its 2012 forecast for a second time this year, citing delays in customer spending due to a weakening global economy, and said it would cut up to 1500 jobs. Cummins shares dropped 2.6 percent to $88.45.
The cautious outlooks are the latest in a string of forecasts from large multinational companies, including FedEx Corp (FDX.N), Caterpillar Inc (CAT.N) and Hewlett-Packatrd Co (HPQ.N).
Analysts forecast third-quarter earnings of Wall Street's S&P 500 .SPX companies would fall 2.3 percent from the year-ago quarter, according to Thomson Reuters data, which would be the first drop in U.S. quarterly earnings in three years.
According to data through Tuesday, 94 companies in the benchmark S&P index have issued negative outlooks, compared with 23 positive pre-announcements, for a ratio of 4.1, the weakest showing since the third quarter of 2001.
FedEx (FDX.N) said it plans to slash costs at its underperforming express air freight and services divisions, with profit improvements of $1.7 billion planned at those operations over the next four years. Shares gained 5.5 percent to $90.30.
U.S. data showed wholesale inventories rose 0.5 percent, as expected, in August. Investors will also look to the Federal Reserve's Beige Book at 2 p.m for the U.S. central bank's assessment of the economy.
Earnings from warehouse chain Costco Wholesale Corp (COST.O) were a bright spot as the company reported a 27 percent jump in quarterly profit on higher sales and membership fees. Costco shares were up 4 percent to $103.60.
True Religion Apparel Inc (TRLG.O) surged 22.2 percent to $25.67 after the denim maker said it was evaluating strategic alternatives, which could include a possible sale of the company, after receiving indications of interest from third parties.


U.S. stocks were trading mixed Wednesday, as the Dow Jones Industrial Average fell 28 points to 13446, the Standard & Poor's 500-stock index rose 0.1 point to 1442, and the Nasdaq Composite added five points to 3070. Among the companies with shares actively trading are True Religion Apparel Inc. (TRLG), Yum Brands Inc. (YUM) and OCZ Technology Group Inc. (OCZ).
True Religion ($25.71, +$4.70, +22.37%) confirmed it is considering a possible sale after receiving interest from third parties. Late Tuesday, The Wall Street Journal reported that the fading maker of premium jeans was putting itself up for sale, as it looks for help to boost its growth. On Wednesday, the company said its board formed a special committee to explore and evaluate potential strategic alternatives available to the company, including a possible sale, though no decision has been made to engage in a transaction and the committee hasn't set a timetable to complete its review process.
Yum's ($70.78, +$5.08, +7.72%) third-quarter income jumped 23% as its Taco Bell, Pizza Hut and KFC chains continued to improve in the U.S., though Yum's growth in China was held back by the economy. The company beat Wall Street's estimates and raised its expectations for the year.
Data-storage provider OCZ Technology ($1.85, -$1.30, -41.27%) warned it expects sharply lower quarterly revenue and said it is reviewing its financial statements after the company discovered costly customer incentives. OCZ now expects its fiscal second-quarter revenue to come in "materially lower" than the $110 million to $120 million the company forecasted in early September, and said it expects to report a significant loss in the quarter with negative gross margins. The company also appointed Ralph Schmitt as its new president and chief executive, filling a post long held by company co-founder Ryan Petersen, who resigned last month.
FedEx Corp. (FDX, $90.32, +$4.74, +5.54%), backing its outlook for fiscal 2013, disclosed its much-anticipated cost-cutting plan after the bell Thursday, targeting $1.7 billion in "profitability improvement" over the next three years which the cargo-delivery company aims to secure primarily by cutting expenses at its U.S. express-air operation. Portions of the $1.7 billion will come out of FedEx's service division, as well as overall corporate overhead, but the U.S. express network is targeted for the bulk of it.
Other Stocks To Watch:
Aluminum maker Alcoa Inc. (AA, $8.83, -$0.31, -3.34%) swung to a third-quarter loss, reflecting in part the costs of settling a four-year legal battle over bribery allegations, but results were modestly better than Wall Street's forecasts. Still, Alcoa on Tuesday said it had reduced its forecast for global aluminum demand growth in 2012, citing a slowdown in China, the world's largest consumer of the lightweight metal.
After communications with the U.S. Food and Drug Administration Tuesday, Amarin Corp. (AMRN, $11.13, -$0.73, -6.16%) said it expects the agency to again delay a decision on exclusivity for the biopharmaceutical company's fish-oil drug Vascepa. In July, Vascepa was approved by the FDA for patients with very high triglycerides.
AuRico Gold Inc. (AUQ, $7.50, +$1.08, +16.82%) (AUQ.T) has agreed to sell its Ocampo mine in Mexico and other assets to Minera Frisco SAB de CV (MSNFY, $8.35, +$0.00, +0.00%) (MFRISCO.MX) for $750 million as it seeks to pay down debt and focus on its core operations.
Avnet Inc. (AVT, $26.92, -$1.65, -5.78%) lowered its fiscal first-quarter expectations mostly on lower-than-expected revenue at the distributor's technology-solutions business. Chief Executive Rick Hamada said it appears uncertain economic conditions continue to hurt demand in Avnet's key markets.
Chevron Corp. (CVX, $113.93, -$3.43, -2.93%) said Tuesday it expects its third-quarter profit to be substantially hit by Hurricane Isaac and an August fire at a California refinery.
Metal-components maker Cleantech Solutions International Inc. (CLNT, $3.60, +$ 1.06, +41.73%) said it has received purchase orders to deliver a total of 23 units of airflow dyeing machines and components for a total purchase price of CNY13.8 million ($2.2 million). The China-based company, which makes metal components and assemblies primarily for the wind power, solar and other clean- technology industries, said the orders it has received are both new and follow- on, and are from its new and existing domestic customers.
Costco Wholesale Corp.'s (COST, $103.89, +$4.25, +4.27%) fiscal fourth-quarter earnings rose 27% as higher membership fees helped the wholesale-club operator improve margins. The company's earnings and revenue beat analyst expectations.