The Star Online: Business
The Star Online: Business |
- Amazon profit forecast disappoints, stock slumps
- Brazil rejects Europe debt purchase plan
- IBM taps Rometty to succeed Palmisano as CEO
| Amazon profit forecast disappoints, stock slumps Posted: 25 Oct 2011 06:18 PM PDT Amazon.com Inc shocked investors with a far weaker-than-expected outlook for the crucial holiday season quarter as it spent heavily on its new Kindle Fire tablet computer. The stock tumbled 12 percent Tuesday in extended trading as the news raised concern that Amazon was losing some of the revenue momentum that had helped investors overlook its razor-thin profit margins. Amazon forecast fourth-quarter revenue of $16.34 billion to $18.65 billion, compared with analysts' average estimate of $18.15 billion as compiled by Thomson Reuters I/B/E/S. Amazon's forecast would mean 27 to 44 percent growth from a year earlier. In the third quarter, sales grew 44 percent, less than the 51 percent gain in the second quarter. The company also said it could report a $200 million operating loss to a $250 million operating profit in the holiday quarter as it spends on the Fire and other initiatives. That forecast, which includes $200 million for stock-based compensation and intangible assets, was "materially" below Wall Street expectations, according to UBS analysts Brian Pitz and Brian Fitzgerald. They were looking for $374 million in operating profit in the fourth quarter. "We're not seeing the investment pay off yet, but I think investors are impatient as to how long will it take before you will start to see this pay off," Evercore Partners analyst Ken Sena said. "When are we going to start to see some signs?" Amazon's fourth-quarter forecast implies a profit margin of "effectively zero," Youssef Squali, an analyst at Jefferies & Co, noted during a conference call with the company. KINDLE FIRE COST Amazon said on Tuesday its third-quarter net income was $63 million, or 14 cents a share, versus $231 million, or 51 cents a share, a year earlier. Revenue was $10.88 billion, up 44 percent from the third quarter of 2010, it added. Analysts had expected earnings per share of 24 cents on revenue of $10.95 billion, according to Thomson Reuters I/B/E/S. "Lower profit margins would be acceptable, but for the lower-than-expected revenue growth numbers," said Fred Moran, an analyst at The Benchmark Co. Moran had expected third-quarter revenue growth of as much as 50 percent. The company unveiled its new Kindle Fire tablet in late September and many analysts think it is being sold close to the cost of making it, or even at a loss. "The revenue is a little light, but margin is where the biggest variance is from Wall Street's expectations," said Scot Wingo, chief executive of ChannelAdvisor, a software company that helps merchants increase online sales. "This is largely due to Amazon's investment in the Kindle Fire." Amazon is also investing in video content and other publishing deals to support the device, while spending on datacenters for its cloud computing business and fulfillment for its online retail operations. Wall Street has accepted such spending because Amazon has proved in the past that it can generate higher growth from such investments. However, analysts have been on edge about Amazon's third-quarter results and fourth-quarter forecasts because of the recent increase in expenditures. SPENDING TO SUPPORT GROWTH Amazon Chief Financial Officer Tom Szkutak said on a conference call after the results that the company has had to add fulfillment capacity to handle the growth of its main online retail business. The company is planning to build 17 new fulfillment centers this year, two more than its previous plan, the CFO noted. Szkutak also said Amazon is increasing production of the Kindle Fire by "a few million units," citing strong demand. -Reuters Full content generated by Get Full RSS. |
| Brazil rejects Europe debt purchase plan Posted: 25 Oct 2011 06:17 PM PDT BRASILIA (Reuters): Brazil on Tuesday rejected the idea of buying European bonds to help ease the euro zone's debt crisis, casting doubt on a plan for major emerging market economies to offer fresh funds for the continent's rescue. European leaders had floated the idea that developing nations including Brazil and China could provide funding to buy Euro zone bonds, which would help lower yields and ease pressure on countries such as Spain and Italy. But Brazilian Finance Minister Guido Mantega echoed calls for Europe to solve its own burgeoning fiscal problems, saying Brazil had no intention of making such purchases. "I believe that European countries do not need funds from Brazil to buy bonds. Brazil is not considering it," Mantega told reporters in Brasilia. "They have to find solutions to the European problems within Europe." However, Mantega said Brazil would be willing to provide financial help via the International Monetary Fund. His statements came as European leaders head into a summit on Wednesday with no apparent compromise to reduce Greece's debt to private bondholders amid uncertainties about a planned bank recapitalization. Brazilian officials earlier this year floated a plan to buy European debt along with members of the BRICS group of nations, which includes Russia, China, India and South Africa, but backed away after tepid response from the group. Analysts said that move was unlikely to begin with, given that Brazil would not be able to put up enough money to have a serious effect on the crisis, and could be legally restricted from using reserves to buy debt that faces a high or moderate risk of default. IMF PROPOSAL Eurozone officials said on Tuesday the IMF is considering taking part in a special purpose investment vehicle (SPIV), which would issue debt and use the proceeds to buy bonds of distressed euro zone sovereigns on the secondary market or extend loans to at-risk governments. India and Russia are not interested in offering more funds to help Europe while there was not evidence China planned to chip in, a high ranking official from an emerging market country told Reuters. The official said major emerging powers believe Europe is not doing enough to find a solution to the crisis amid internal bickering. In September, Brazil proposed that BRICS countries offer new funds to the IMF to battle the European crisis. The IMF's leading share holders, which include the United States and some European countries, rejected that idea, which analysts say could potentially dilute their influence in the lender. The United States, Japan, Germany and China, have said that the fund's $380 billion worth of resources is enough. Some Brazilian officials see the crisis in Europe and slow growth in the United States as a chance to increase the South American country role in global affairs. Brazil's economy, by far the largest in Latin America, will keep growing in coming years despite the international turmoil, Mantega said. Brazil, a commodities giant, has lowered its benchmark interest rate in a bid to shield its economy from a deteriorating global economy and hiked import taxes to protect the local auto industry. Full content generated by Get Full RSS. |
| IBM taps Rometty to succeed Palmisano as CEO Posted: 25 Oct 2011 06:17 PM PDT IBM global sales chief Virginia Rometty will take over as CEO from Sam Palmisano in January, becoming one of the most powerful women in business and technology today. In taking the helm of the storied industry icon, she makes it the largest US corporation by value to be headed by a woman. IBM, which over the decades had a reputation of being a strait-laced, plodding, male-dominated business empire, will formally appoint the 54-year-old engineering and computer science graduate its first female CEO on January 1. The selection went down well with Silicon Valley and Wall Street, especially because the 60-year-old Palmisano -- who helped transform Big Blue from a computer hardware company into a global services and software behemoth -- is staying on as chairman. "Given Ginni's experience running the largest portion of the business by revenue, she was a logical choice," said Macquarie Securities analyst Brad Zelnick. Her ascension will set up a rivalry with Hewlett-Packard CEO Meg Whitman for the mantle of most powerful woman in technology, mirroring a long-running rivalry between the two companies. Rometty joins a relatively small circle of top female CEOs, including Whitman, Pepsico's Indra Nooyi, Xerox's Ursula Burns, Kraft Foods' Irene Rosenfeld and DuPont's Ellen Kullman. Rometty -- who most recently served as senior vice president of global sales -- made her mark with the smooth 2002 integration of PriceWaterhouseCooper's consulting arm, a landmark move that catapulted IBM into the upper echelons of the technology consulting business. Colleagues say that Rometty, often clad in elegant pastel-coloured suits, cut a striking figure in IBM's staid hallways and impressed co-workers with both her cool-headedness and enthusiasm. "She exudes energy," said Nelson Fraiman, professor at the Columbia University Graduate School of Business. Fraiman, who has known the computer science and electrical engineering graduate from Northwestern for about a decade, said she was a good strategist and an early advocate for IBM's expansion into business analytics, or tools and services that help companies quickly analyse trends. "She thinks in a very analytical way. That's part of her engineering training," he said. One former IBM executive said Rometty -- who sometimes carries a backpack rather than a briefcase -- worked long hours and demanded that her subordinates do the same. "People who work for her just don't sleep," said the source. "She has a style that is very different from anybody else's, but is all her own." THE TRANSFORMATION In nine years as IBM's leader, Palmisano exited low-margin businesses including PCs, printers and hard drives. He expanded the company's offerings in services, consulting and software. Since the former history major took the reins, Big Blue's stock has outperformed HP's and matched Oracle's, according to Thomson Reuters data. Wall Street appeared to approve of the choice of Rometty, and some analysts said that Palmisano had put in place a structure that would ease the way for anyone to follow in his footsteps. Sources told Reuters in 2010 that Rometty had rebuffed advances from arch-rival HP, which was then looking to replace the ousted Mark Hurd, to stay at the company where she was seen as a rising star. "She has done well at IBM. She has contributed to their expansion overseas -- emerging markets -- and has done a fantastic job in that space," said Morningstar analyst Sunit Gogia. "All the public knowledge about her performance is very encouraging." But "computing is an industry that is always evolving," Gogia said. "It's moving into an era of cloud computing. The company will have to reinvent itself for the future, stay with the times and maintain the revenue base when they do that." Shares in IBM slipped about a dollar from their $180.36 close following the announcement. -Reuters Full content generated by Get Full RSS. |
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