The Star Online: Business
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- India, the taper and capital control
- Can Smartphone Visionary Engineer HTC's Second Coming?
- British bonuses little changed
| India, the taper and capital control Posted: NEW DELHI: India's imposition of capital controls shows how the prospect of a rollback of US monetary policy is already starting a global war for capital. India has rolled out a series of capital controls to help support the partially convertible rupee, which has been hammered 13% lower so far this year and stands at an all-time low against the dollar. Besides limits on the amounts Indian individuals and business can shift out of the country, India on Monday banned the duty-free import of flat-screen televisions by airline passengers, a move that has the feel of clutching at straws. Financial markets have been unimpressed by the moves, which started earlier this year, accelerating a shift in the wrong direction as investors weigh the possibility of further capital controls, perhaps even the capturing of foreign money. Indian shares fell 1.6% on Monday, the rupee hit a record low of 62.82 per dollar and 10-year government bond yields rose to 9.23%. To be sure, much of India's problems are of its own making. The country suffers from slow growth, by emerging market standards, high inflation and crucially, a high current account deficit. Add to that a sclerotic and uncertain legal and political system and development-slowing corruption, and it is easy to understand why India is among the hardest-hit in the emerging-markets selloff. Although India has large reserves of foreign currency – more than US$270bil – it also must sell or refinance bonds of about US$250 billion over the next year, leaving it highly vulnerable to strong outflows of capital. While India's problems may have been manufactured at home, the recognition of them was touched off by events abroad, namely the prospect of the Federal Reserve beginning to taper its purchases of bonds. As US economic data improves and the chances of a taper rise, the global repercussions have been strong. We've also seen benchmark US interest rates, which help to set the cost of capital globally, rise dramatically, with yields on the U.S. 10-year bond rise sharply since early May, to 2.9%. That rise makes it harder, and more expensive, for emerging markets in need of cash to finance themselves, and can tend to touch off the sort of vicious cycle – where doubt begets currency weakness, which begets equity falls - that we are seeing in India. BEEN THERE, DONE THAT We have been here before. The Latin American debt crisis of the 1980s and the Asian crisis in the late 1990s both happened in the wake of US credit-tightening cycles kicking off, and both ended badly. Indeed, India had its own crisis in 1991, when having expended its own foreign reserves, it was forced to seek a US$2.2bil loan from the International Monetary Fund, complete with a humiliating airlift of gold to Britain and Switzerland to serve as collateral. Lessons learned then, and during the Asian crisis later in the decade, are part of the reason the country built up its reserves of foreign currency. India is, of course, stronger, more globally integrated and more politically influential than it was in the 1990s, but other conditions have changed as well. Significantly, the IMF orthodoxy, which used to go for hell-for-leather austerity when faced with a country in need of cash, has become more pragmatic, perhaps because so many of its powerful member states have undergone their own ordeal by austerity. While the IMF opposed Malaysia's move to impose capital controls in 1998, it actually supported the tactic in Iceland during the last crisis. As India can see, both Iceland and Malaysia imposed capital controls, both thumbed their noses at global markets and both lived to tell the tale. India is not alone. Brazil, South Africa and Indonesia have also seen their currencies come under pressure. All this is happening when the taper is at best a rumour, though one whose existence is supported by hints from central bankers and some positive US economic data. India's problems, in a bizarre and short-term way, would be most easily solved by a bout of bad data out of the US, taking the taper off of the agenda. That is not something India can count on, and the fact that it realises this can be seen in the evident alarm with which it is reacting to events. Perhaps the worst of all worlds for India and other emerging markets would be any hint that the Fed will taper not because of a recovery but despite one not appearing. That would deal a blow to all markets, but an especially damaging one to emerging nations – Reuters |
| Can Smartphone Visionary Engineer HTC's Second Coming? Posted: SINGAPORE/TAIPEI: Now in his tenth year as CEO of HTC Corp, Peter Chou is lauded as the architect of the Taiwanese firm's award-winning smartphones. But as the company's fortunes have dived, some insiders say he's now an obstacle to any revival. Rocked by internal feuding and executive exits, and positioned at the high-end of a smartphone market that is close to saturation, HTC has seen its market share slump to below 5 percent from around a quarter five years ago; its stock price is at 8-year lows, and it has warned it could make a first operating loss this quarter. Reuters interviewed a dozen former and current HTC executives who said Chou's abrasive management style and weak strategic vision play their part in the company's decline, which has coincided with the success of Apple Inc's <AAPL.O> iPhone and Samsung Electronics' <005930.KS> Galaxy phones. Chou has said publicly he has no intention to stand down, and executives - none of whom wanted to be named because of the sensitive nature of the issue - said HTC has no clear internal successor. "Part of the weakness is there is no obvious successor, and that's not been good for morale," one said. Chou declined to be interviewed for this article, but in response to Reuters queries, the company said: "HTC's board and broad employee base remain committed to Peter Chou's leadership. The (flagship) HTC One product family - which has been met with accolades by media and consumers alike - was a result of Peter's vision and leadership, and speaks for itself." GRAPHIC: HTC by numbers http://r.reuters.com/jyf89t VIDEO: HTC's mid-market phobia http://r.reuters.com/dak99t OBSESSIVE EYE Born in Myanmar but educated as an electrical engineer in Taiwan, Chou joined HTC from Digital Equipment Corp (DEC) in 1997. Colleagues describe him as a perfectionist with an obsessive eye for materials and hardware design. Staff would deliver trays of prototype phones for him to inspect and pore over, spinning them to check for balance and running his fingers across the bevelled edges and joints. Phones would pile up on his desk, sometimes spilling onto the floor. That attention to detail and Chou's willingness to make decisions on the fly helped build a culture within HTC of moving quickly to address market demands. At an offsite meeting two years ago, for example, the HTC team realised it needed another device for its portfolio. Chou quickly drew some sketches on a whiteboard, recalled one of those present, and soon had the outlines of a device, its price point, and a launch date - just three months away. Most manufacturers would need up to 18 months for a similar project, yet the Sensation XL appeared on schedule, and to rave reviews. "Having the ability to just tear up a plan and say, OK, this is the new thing and we're going to get it done fast. That's Peter," said another former senior foreign executive. This shoot-from-the-hip approach served HTC well when the market was growing fast. Shortening the time to market meant HTC could alter plans at the last minute to take advantage of new or cheaper parts. But, as the market has matured, making it harder for handset makers to differentiate their products, the approach has left HTC vulnerable. Locking in the supply of more advanced components and materials to make products stand out requires more foresight and planning than HTC currently allows, former executives say. "The weak point is they don't really have a long term strategy," said one. "It used to be a strength, and now is becoming a weak point as they don't have a clear direction going forward." HTC's second-quarter net profit was well below forecasts even after resolving component shortages that hit its HTC One phone, [ID:nL3N0F91WF] and the company has said current quarter revenue could fall by as much as 30 percent from the previous quarter. [ID:nL4N0G01ZX] HTC shares trade at around a tenth of their 2011 peak. MANAGEMENT STYLE Just three years ago, HTC was shipping 25 million smartphones a year and Chou led a huge expansion, bringing in foreign executives from Sony Ericsson, Apple, Motorola and Microsoft <MSFT.O> as he sought to take on Apple by doubling HTC's shipments. HTC was named Device Manufacturer of the Year at the world Mobile Congress in February 2011 and its market value topped that of rivals Research In Motion, now BlackBerry Ltd <BB.TO>, and Nokia <NOK1V.HE>. Chou ordered champagne to celebrate. But as Apple and Samsung reigned supreme, HTC's annual shipments never reached that 50 million level, and by the end of last year HTC had dropped to 10th among global smartphone makers. The HTC One, and earlier so-called 'hero' handsets from HTC, have won wide praise. The problem has been selling them. Executives say HTC's failure to hit sales targets was at least partly down to Chou's management style. After hiring a slew of foreign executives, he fell short on promises to senior staff to foster a more open culture and cede sufficient authority. He openly berated managers and overrode their decisions, often with little discussion. Such an atmosphere, executives said, damaged morale and left managers uncertain of their roles. Chou kept his sales, product, marketing and design executives separate and, in some cases, created parallel teams doing the same thing. He didn't hold meetings of executives of the different departments to iron out problems even as HTC's performance wilted. "There's a culture in HTC not to discuss numbers at senior management meetings," said one former executive. "Those discussions tend to become hard or ugly, but if you don't solve it, it becomes bigger." OLD GUARD Chou's difficulty in developing a durable global brand of handsets and building an ecosystem of apps and services around it raise questions about how HTC can recover under his leadership at a time when high-end smartphone sales growth is slowing. "With intensifying competition from other top-tier players and the entrance of lower-tier players, we think a long-term margin downtrend is inevitable," SinoPac wrote in a recent note. Many of the foreign hires have now quit, and HTC's old guard has re-established charge, running nearly all operations except design from Taipei. That, say those both inside and outside the company, is a mixed blessing. While leadership tensions may have eased, some warn that concentrating global marketing in Taiwanwill create a one-size-fits-all, local approach that won't help HTC grow globally. "What works in Taiwan is different from other markets," said one of the former executives. Chief Marketing Officer Benjamin Hodefended the move, saying in a recent interview with Reuters that it made sense to centralise key functions, but that HTC was "not forgetting that we know we're an international brand." Even his fiercest critics agree Chou remains the heart of the company and say it's hard to imagine HTC coming up with great devices without him. As it seeks to turn around its fortunes, HTC has launched cheaper phones in China, and brought out a smaller, cheaper version of its flagship phone, the One Mini. [ID:nWNBB029OF] It is trying to revive its U.S. business by working more closely with operators and forming a new operations team. HTC has also signed up "Iron Man" star Robert Downey Jr, whose own turnaround story - from jail and drug rehabilitation over a decade ago - is an "inspiration", says Ho. As part of HTC's around $1 billion annual marketing spend, the first advertisements featuring Downey appeared last week.- Reuters |
| British bonuses little changed Posted: london: Bonuses for UK banking and insurance industry employees was little changed at £13.3bil (US$20.9bil) in the year through March, the Office for National Statistics (ONS) said. The average bonus in financial services declined £100 to £11,900 from a year earlier, the ONS said in a statement yesterday. It compared with an average £1,700 bonus paid to private-sector employees, it said. The payout to the finance and insurance sector is more than a third of discretionary £36.9bil payments made in Britain, the ONS said. – Bloomberg |
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