The Star Online: Business
The Star Online: Business |
- Amazon's tablet may be hottest holiday gadget
- Citigroup to pay $285 million to settle fraud case
- Underlying inflation pressures in US ease
| Amazon's tablet may be hottest holiday gadget Posted: 19 Oct 2011 05:52 PM PDT NEW YORK (Reuters) - The Kindle Fire tablet may be the hottest selling gadget this holiday, pressuring Amazon.com Inc's profit margins but giving the world's largest Internet retailer potentially millions of new high-spending customers. Since Amazon Chief Executive Jeff Bezos unveiled the tablet at a lower-than-expected price of $199 on September 28, some analysts have increased their sales estimates for the device. Amazon got 95,000 Fire pre-orders on its first day and has been averaging about 20,000 a day since then, email-monitoring firm eDataSource estimated. The device ships November 15. Technology blog AllThingsD reported on October 6 that Amazon is selling over 25,000 Fires a day, citing unidentified sources close to the company. "The rumored numbers out on the Web are far too low," said Mark Gerber, an analyst at Detwiler Fenton & Co. "Really strong pre-orders and the surprising $199 price means they will easily do five million units this quarter." Gerber previously expected Amazon to sell three to four million Fire tablets in the fourth quarter. Amazon declined to comment. But Gerber and other analysts will be watching closely for clues on tablet orders when the company reports results on October 25. The company is expected to make a third-quarter profit of 24 cents a share on revenue of $10.93 billion, according to Thomson Reuters I/B/E/S. A SECOND TABLET Peter Rojas, head of gdgt.com and co-founder of gadget websites Gizmodo and Engadget, expects the Kindle Fire to be the hottest holiday product this season, ahead of Roku Internet TV boxes and Canon's new PowerShot S100 camera. The Fire's $199 price means people who already own Apple Inc's more expensive iPad will buy the device as a second tablet for their family, Rojas said. "A lot of people started to have more than one computer in the home in recent years and cheaper netbooks fulfilled that need perfectly," Rojas told Reuters. "The Kindle Fire could meet the demand for a second tablet." Other buyers will be people who dislike Apple or passed on buying an iPad because it was too expensive, Rojas noted. "They have been waiting for that iPad alternative to emerge and it never did," Rojas said. "Amazon played it smart -- there's just enough dissatisfaction out there with iPad alternatives." NEW TABLET SEGMENT Apple's iPad created a new segment of the personal computer market and now Amazon has created a new segment of the tablet market, according to Dominic Field, a partner at The Boston Consulting Group and author of a recent report on the tablet market. "Our research suggests that $199 is the price point that mass market America was looking for in a tablet," Field said. "This is the point at which it moves from being a very successful phenomenon for early adopters to the mass consumer market." Ashok Kumar, an analyst at Rodman & Renshaw, recently raised his Fire sales estimate to five million units in the fourth quarter, from an earlier forecast of three million. There was initially a problem with the supply of displays for the device, but this has been fixed, Kumar said. "They are priming the supply chain for this to be a blockbuster product under a lot of people's Christmas trees this season," he added. Colin Sebastian, an analyst at RW Baird, has published a fourth-quarter sales estimate of three million Fire tablets, but he said five million units are possible if Amazon avoids production, shipping and other bottlenecks. MARGINS VS. PRIME Initially, Kindle Fire sales will dent Amazon's profitability, partly because the company is selling the device close to cost or even at a slight loss. Dan Geiman, an analyst at McAdams Wright Ragen, expects Amazon's operating profit margin to fall to 1.5 percent in the third quarter from 3.5 percent a year earlier. However, getting the tablet into as many hands as possible may drive higher sales and profit at Amazon in coming years, Geiman and others said. The Kindle Fire comes with one month of Amazon Prime for free and the device is expected to encourage more customers to sign up for the service. The Prime service costs $79 a year in the United States and includes free two-day shipping on eligible Amazon purchases. It also gives members free access to instant streaming of more than 12,000 movies and TV shows. Amazon has over 12 million Prime customers and they buy at least three times more products after they sign up for the service, according to estimates from ChannelAdvisor, a software provider that helps retailers sell online. UBS analysts Brian Pitz and Brian Fitzgerald estimate that Prime members increase purchases by five to eight times, a year or more after joining. ChannelAdvisor expects Amazon to sell more than five million Fire tablets in the fourth quarter and more than 20 million next year. The UBS analysts have more conservative sales estimates. But if half of Kindle Fire users sign up for Prime, Amazon could end 2012 with more than 20 million "heavy-spending" Prime subscribers, they said. Full content generated by Get Full RSS. |
| Citigroup to pay $285 million to settle fraud case Posted: 19 Oct 2011 05:51 PM PDT NEW YORK (Reuters) - Citigroup Inc will pay $285 million to settle charges that it defrauded investors who bought toxic housing-related debt that the bank bet would fail, the U.S. Securities and Exchange Commission said on Wednesday. The SEC said the bank's Citigroup Global Markets unit misled investors about a $1 billion collateralized debt obligation by failing to reveal it had "significant influence" over the selection of $500 million of underlying assets, and that it took a short position against those assets. It said one experienced CDO trader called the portfolio "possibly the best short EVER!" while an experienced collateral manager said "the portfolio is horrible." In a statement, Citigroup said the SEC did not charge the unit with any "intentional or reckless misconduct" and that the settlement "resolves all outstanding SEC inquiries into those activities." The settlement is the third by the SEC against a major bank it accused of marketing a CDO without disclosing it was betting against it or allowing others to do so. The SEC has also settled cases against Goldman Sachs and JPMorgan. The agency and criminal prosecutors are under pressure from lawmakers and the public to bring cases that hold Wall Street figures accountable for their role in the 2007-2009 financial crisis that triggered a deep recession. According to the SEC's case against Citigroup, the CDO, Class V Funding III, defaulted in November 2007, fewer than nine months after it closed, leaving investors with losses even as Citigroup made $160 million of fees and profits. On the other side of the deal was Ambac Credit Products, which agreed to sell insurance on the $500 million in assets Citigroup had selected. "The securities laws demand that investors receive more care and candor than Citigroup provided," SEC enforcement chief Robert Khuzami said in a statement. The sanctions will go to the investors who lost money on the deal, the SEC said. Citigroup settled with the SEC without admitting wrongdoing. The SEC also filed charges against Brian Stoker, who it said was the Citigroup employee primarily responsible for structuring the transaction. A lawyer for Stoker said there was "no basis" for the SEC's allegations against him. "He was not responsible for any alleged wrongdoing -- he did not control or trade the position, did not prepare the disclosures and did not select the assets," said Fraser Hunter, Jr., with Wilmer Hale. In marketing materials outlining the deal, the SEC said Citigroup represented that the collateral manager of the CDO, a unit at Credit Suisse Group AG, had independently selected the assets. In reality, it said, many had been selected by Citigroup, with the intention of taking the short position. The SEC settled separate charges against Credit Suisse's asset management unit as well as Samir Bhatt, the Credit Suisse portfolio manager mainly responsible for it. Credit Suisse will pay $2.5 million to settle, while Bhatt agreed to a six-month suspension from associating with an investment adviser, the SEC said. Neither admitted wrongdoing. A spokeswoman for Credit Suisse and a lawyer for Bhatt declined comment. The SEC has been conducting a broad probe into mortgage-bond deals, with several settlements this year. "This is not the last one," an SEC official said in an interview. "I think we are likely see a couple more." In June, JPMorgan Chase & Co agreed to a $153.6 million settlement over the Squared CDO 2007-1, while Goldman Sachs Group Inc in July 2010 accepted a $550 million accord over the Abacus 2007-AC1 CDO. As part of the settlement, Citigroup will give up the $160 million of alleged improper fees and profits plus $30 million of interest, and pay a $95 million fine. The settlement requires court approval. The case was assigned to U.S. District Judge Jed Rakoff in Manhattan, who chastised the SEC and ultimately rejected its proposed $33 million settlement in 2009 with Bank of America Corp over that bank's purchase of Merrill Lynch & Co. He later grudgingly approved a revised $150 million accord. Full content generated by Get Full RSS. |
| Underlying inflation pressures in US ease Posted: 19 Oct 2011 05:49 PM PDT WASHINGTON (Reuters) - U.S. consumer prices outside food and energy rose at their slowest pace in six months in September, a sign broad inflation pressures remained contained. The core Consumer Price Index edged up just 0.1 percent, a Labor Department report showed on Wednesday, as the cost of apparel and used vehicles fell, new car prices held steady and rental-related costs rose only modestly. While overall consumer prices rose a relatively steep 0.3 percent, taking the year-on-year rate to a three-year high of 3.9 percent, economists expect inflation to subside in the months ahead. "With households facing weak wage growth and tight budgets, it is difficult to see a sustained broad-based increase in prices." said Neil Dutta, an economist at Bank of America Merrill Lynch in New York. Dutta and other economists said the report bolstered the Federal Reserve's view that inflation pressures will moderate as temporary factors such as high gasoline prices and disruptions to motor vehicle production fade. Even though the core inflation has risen 2 percent over the past 12 months, economists said the Fed still has some wiggle room to ease monetary policy further if the recovery falters. The U.S. central bank is searching for more ways to boost growth and lower an unemployment rate that has stubbornly remained above 9 percent. It has already cut overnight lending rates to near zero and pumped $2.3 trillion into the economy. "The Fed is unlikely to publicly crow about this CPI print, as headline inflation is still frustratingly high, but the easing in core inflation does validate the inflation forecast underpinning their recent policy moves," said Michael Feroli, an economist at JPMorgan in New York. HOUSING STARTS JUMP Recent economic data have suggested the U.S. economy fared much better in the third quarter than it did in the first half of the year, lessening the pressure for more monetary stimulus. That positive tone on the economy was reinforced by a report from the Commerce Department on Wednesday that showed housing starts rose 15 percent to an annual rate of 658,000 units in September, well above economists' expectations for a 590,000-unit pace. But that jump reflected a big surge in groundbreaking for multifamily dwellings. Single-family home construction -- which accounts for a larger share of the market -- rose just 1.7 percent and permits for future building fell 5 percent, a sign the housing market remains far from recovery. Another report showed applications for U.S. home mortgages tumbled 14.9 percent last week as demand for both refinancing and purchases fizzled. For details, see Financial markets largely shrugged off the data. U.S. stocks were mostly higher in late morning, while prices for longer-dated Treasury debt were marginally lower. The dollar was down against a basket of currencies. CORE INFLATION MAY HAVE PEAKED Core consumer prices last month were restrained by new motor vehicle costs, which were unchanged for a third straight month. This likely reflects a normalization in supplies after the March earthquake in Japan disrupted production. A rolling three-month average suggests core inflation peaked earlier this year. Prices for used cars and trucks fell 0.6 percent in September after months of gains. Apparel prices dropped 1.1 percent, the largest decline since September 1998. "There is high slack in the economy and consumers are price sensitive," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester Pennsylvania. "Given that the unemployment rate is 9.1 percent and wages are barely keeping up with inflation, businesses will have to swallow some of those (increased production) costs." Shelter costs edged up 0.1 percent in September, the smallest rise since April, with owners' equivalent rent -- or OER -- rising 0.1 percent after a 0.2 percent in August. But economists expect OER to rise in coming month as rental vacancies fall. OER gauges what homeowners would pay to rent their property or what they would earn from renting it. While the Labor Department said a 2.9 percent increase in the price of gasoline pushed overall consumer prices last month, prices at the pump actually declined September and remain relatively steady. The rise reported in the inflation report probably has to do with the way the department adjusts the data try to smooth seasonal volatility, economists said. Full content generated by Get Full RSS. |
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