Author: Charlotte Gill

Canon enters surveillance market with Axis acquisition

Posted on by Charlotte Gill

The world’s largest camera-maker is planning to expand into the surveillance products market and announced it was launching a tender offer to buy all of Sweden’s Axis shares for 340 kronor in cash. According to a statement issued by Axis, this price was almost 50 percent more than the stock’s closing price on Monday, the last trading day prior to the offer announcement. The Swedish company said its board of directors unanimously supported the offer and the offer price is conditional to a dividend that Axis plans to pay its shareholders.

Canon has been struggling with falling demand for digital cameras after reporting a slight increase in its fourth quarter profit. This weakness was potentially offset by a weaker yen and increasing sales of office equipment. A statement issued by Canon said the company plans to offer ‘innovative, sophisticated network video solutions’ by combining Canon’s ‘excellent optical and imaging technologies’ and Axis’s ‘outstanding network image processing technology.

The acquisition plan falls in line with Canon’s plans to become part of the rapid growth of the video surveillance system market. The company already sells surveillance cameras and, although it has not disclosed how much profit it earns from their products, sees it as a promising new business area. The purchase also offers an opportunity for Canon to diversify its overseas operations as around half of Axis sales come from the Americas, with 40 percent coming from Africa, Asia, the Middle East and Europe.

China fines Qualcomm $975m

Posted on by Charlotte Gill

Following a 14-month probe by Chinese authorities for anti-competition practices, Qualcomm has agreed to pay $975m in penalties. As part of the deal, the chip manufacturer must also reduce its royalty rates on patents, thereby increasing profitability for China’s growing smartphone market.

The chip manufacturer must also reduce its royalty rates on patents

The San Diego-based firm produces chips for smartphones, tablets, wireless modems; priding itself on being leaders in mobile technology innovations. In recent years, Qualcomm has been enhancing its efforts in the Chinese market, making investments into technological development, as well as start-up companies. Last July, the company announced its collaboration with Semiconductor Manufacturing International Corporation in order to manufacture Qualcomm’s mobile device processors in China.

Despite the impact of the Chinese investigation, Qualcomm reported an annual revenue growth of 6.6 percent in fiscal year 2014 as a result of record MSM chipset shipments that exceeded expectations.

When asked by Reuters about concerns that other countries will follow suit with anti-trust investigations, Qualcomm President, Derek Aberle, responded, “We fully respect their authority, but we don’t believe it’s likely that other agencies will necessarily meet similar conclusions.”

The news of lower royalty payments will be welcomed by Chinese smartphone manufacturers, such as Xiaomi and Meizu, both of which produce relatively cheap handsets and have razor thin profit margins. With Xiaomi becoming China’s top-selling smartphone brand in 2014 and the recent announcement of Alibaba’s $590m investment in Meizu, the market is set to continue its rapid expansion.

Japanese brands exit the global television market

Posted on by Charlotte Gill

Not long ago, Japanese brands such as Panasonic, Toshiba and Sony, dominated the global television market with shiny models that were the envy of many Western homes. In a rapid change to consumer demand, buyers around the world have turned their backs against Japanese-made sets in favour of cheaper, high-spec versions from South Korea and China.

As a result of mounting price pressure, in February, Panasonic announced that it would pull out of overseas markets. Panasonic’s lower-end product, Sanyo, which is sold in Walmart stores across the US, will be bought by Japanese counterpart, Funai Electric, in return for royalties. Toshiba will also stop making and selling televisions in North America from March for the same reason of being unable to compete with specifications and price. Conversely, Sony Corp is spinning off its television division into a separately operated subsidiary.

Chinese brands have won a greater market share due to a focus on low prices and slim
profit margins

“The reason the Japanese players are suffering is down to strategy. Japanese brands such as Sony and Panasonic have also emphasised quality, but given that they have little actual capability in making the LCD and LED panels, they are not able to bring anything differentiated to market. Add to this typically convoluted and costly business structures and it’s hard for the Japanese vendors to make significant returns”. Peter Richardson, Research Director at Counterpoint market research firm explains to The New Economy.

Panasonic and Toshiba will refocus their efforts on the domestic market, as the demand for their high-margin, large-screen models remains, albeit not as ferociously as it once was. Brand loyalty for Japanese televisions is strong and enables a 90 percent share of the domestic market; LG on the other hand has only a two percent share, while Chinese brands are virtually non-existent in Japan. Although Japanese brands are not contending with a price war as elsewhere, revenue has shrunk in the domestic market also, with unit sales dropping from 24.8m in 2010 to 5.6m last year.

Filling the recently engineered void of Japanese-made televisions are South Korean companies, such as Samsung and LG. For example, competitive prices and an aggressive marketing campaign by LG have caused worldwide sales to increase from 800m to 174bn won from last year. “The Korean brands, Samsung and LG prioritise quality and leading edge technology thanks to their in house development capability. This means they’re able to charge a premium and generate reasonable rates of return on investment,” says Richardson.

Chinese brands on the other hand, have won a greater market share due to a focus on low prices and slim profit margins. “There are a number of Chinese domestic brands launching affordable smart TV with high definition and quality, such as Xiaomi TV and Leshi TV. They are very competitive to the international rivals, especially these relatively expensive brands,” says Ivy Jiang, China-based Research Analyst for market research firm Mintel.

The evolvement of technology and home entertainment has also attributed to a change in the global market, with consumer demands adapting to the new systems on offer, yet for lower prices than ever before. “Mintel consumer data show that the Chinese TV ownership is rapidly moving from standard definition TV to HDTV and internet enabled TV, presenting 55 percent and 36 percent of surveyed consumers having HDTV and internet enabled TV compared to the 33 percent ownership of standard definition TV in 2014,” Jiang tells The New Economy.

The feat of surpassing global leaders in television sales is truly impressive given the pressure facing South Korean exports, which are currently competing with a strong won against a weak yen. As a surprising twist to the challenges facing the South Korean economy, one of the world’s most reliant on exports, in the battle for the global share of televisions, South Korea has won. Japanese counterparts are receding wholly to the domestic market; something no one could have predicted a decade ago when they dominated worldwide sales. With such a withdrawal, it is unlikely that Japanese televisions will ever make a comeback, leaving the market open for other manufacturers, such as Samsung and LG. The lesson learnt from this drastic transformation for any electronics company is that with a strategy based on cutting-edge technology, competitive prices and dynamic promotion – any market can be theirs for the taking.

Pfizer leaps into biotech with Hospira purchase

Posted on by Charlotte Gill

Pfizer has announced plans to purchase US-based Hospira for $15bn in order to bolster its standing in the growing market for biotech drugs, and specifically biosimilars.

Pfizer has lost approximately $26bn in global sales in a period of five years

Producing biotech medicine, which involves living cells, is a complex and expensive and process, thereby making mass production a pricey venture. In recent years, companies such as Hospira have begun creating replica drugs, known as biosimilars, in a bid to reduce the high costs of production.

Although various health organisations have shown trepidation about the use of biosimilars, which are similar, but not identical to proven treatments, an increasing number of health systems around the world are beginning to explore these products. According to a Thomson Reuters published report by Bioworld, total global sales for biosimilars is projected to reach $190bn by 2018.

By making this purchase, Pfizer gains access to Hospira’s European-sold biosimilar treatment for arthritis, a copy of the revolutionary drug Remicade made by Johnson & Johnson and Merck & Co. Hospira is also seeking FDA approval for this product; currently there are no biosimilars approved for use in the US.

“The Pfizer-Hospira combination is an excellent strategic fit. We hope it will fundamentally improve the growth trajectory of Pfizer’s Global Established Pharmaceutical business, vault it into a leadership position in the large and growing off-patent sterile injectables marketplace including enhanced manufacturing, and advance its goal to be among the world’s most preeminent biosimilars providers,” Pfizer told The New Economy today.

This acquisition comes at a crucial point for Pfizer as it contends with the loss of patent protection on various medicines. As a result, Pfizer has lost approximately $26bn in global sales in a period of five years, with a reported $3.5bn profit loss for the past year. The deal also comes as good news for Hospira, as Pfizer will assume their burdening debt of $17bn.

Sony’s Pascal steps down after email embarrassment

Posted on by Charlotte Gill

Amy Pascal, one of the most high profile and powerful executives in Hollywood, is soon to step down as co-chair of Sony Pictures Entertainment, following a hacking scandal that brought controversy to both her and the company’s doorstep. The California-based company announced that Pascal would be leaving in May this year to begin work on a production company of her own, which Sony Pictures will fund and retain the distribution rights for at least the next four years.

The cyber attack brought to light racially insensitive remarks she made about President Obama’s taste in films

Hackers launched a “vicious” attack on Sony Pictures towards the end of November and, in doing so, made public confidential company information, including private email correspondence, salaries and social security information. Crucially for Pascal, the cyber attack brought to light racially insensitive remarks she made about President Obama’s taste in films, leaked by Buzzfeed, for which the chairman later apologised and condemned as both “insensitive and inappropriate”. Other revelations included an email exchange between Pascal and Scott Rudin, in which the latter called actress Angelina Jolie a “minimally talented spoiled brat”.

Pascal’s own production company will focus on film, theatre and television, where her contacts and close to 20 years experience at Sony Pictures will prove invaluable in succeeding in this same industry once again. “I have spent almost my entire professional life at Sony Pictures and I am energized to be starting this new chapter based at the company I call home,” said Pascal in a statement.

Pascal leaves behind a legacy of bold choices at the company, best characterised by her support of The Interview, for which the cyber attack is suspected to be indebted to, Zero Dark Thirty and The Girl with the Dragon Tattoo, all films that were both controversial and highly profitable. “Amy’s creativity, drive, and bold choices helped define SPE as a studio where talented individuals could take chances and push boundaries in order to deliver outstanding entertainment,” said Michael Lynton, CEO of Sony Entertainment. “The studio’s legacy is due in large part to Amy’s passion for storytelling and love of this industry. I am delighted that Amy will be continuing her association with SPE through this new venture, which capitalizes on her extraordinary talents.”

Stryker’s high-tech camera revolutionises endoscopic surgery

Posted on by Charlotte Gill

With images being the main weapon used to tackle some of the most life-threatening diseases, a new piece of technology is proving to be a powerful tool in the arsenal of surgeons and doctors. The New Economy speaks to Erik Todd, Senior Director of Business Development and Strategy at Stryker Corporation, to find out more.

The New Economy: So let’s get right into it, what is this innovation all about?
Erik Todd: The 1488 High Definition Camera utilises CMOS technology as well as precision optics to provide a world-class surgical image. The camera itself is actually part of a platform including a digital capture device and a light source. Now this solution is designed to provide customers with the ability to see and do more across multiple specialities for endoscopic surgery.

The New Economy: So tell about some of the surgical specialities that really stand to gain from this technology?
Erik Todd: Well, virtually any speciality that’s done endoscopically or, what’s typically referred to as keyhole surgery -through a small incision- can benefit from the technology. Some procedures that are done in general surgery for instance are laparoscopic cholecystectomy, which is the removal of a gallbladder, or an arthroscopy the repair of an anterior cruciate ligament, typically from a sports injury.

The 1488 High Definition Camera utilises CMOS technology as well as precision optics to provide a world-class surgical image

The camera actually comes with nine preset surgical specialities, which maximises both the colour and the light to provide the best image for that specific procedure.

The New Economy: We know the medical marketplace is of course extremely competitive; how do you set your endoscopic camera apart from the rest?
Erik Todd: Besides providing a world-class surgical image, this camera actually was designed with patient safety in mind. The camera is so light sensitive that you can reduce the power settings of the light source, which reduces the risk of patient burns or a fire in the operating room, during, before or, after procedure.

The New Economy: So what can we expect from your company in the future?
Erik Todd: Stryker Corporation itself is dedicated to partnering with our customers, to make healthcare better. Last year alone we invested over 500 million back into R&D to improve the products that are used everyday for our customers. The 1488 represents the continuation of a 25-year legacy of surgical visualisation. Probably some specific examples of innovations that you will see around this camera will include, providing both the surgeon and their staff with more information around the procedure, as well as more clearly delineating anatomy in a specific procedure to improve patient outcomes.

The New Economy: Well exciting changes and improvements coming, Erik thank you so much for joining me today.
Erik Todd: Thank you for having me.

Google taxi service threatens Uber’s market hold

Posted on by Charlotte Gill

Hailing a taxi is about to get a lot easier with news that Uber, the popular taxi app, is developing its own driverless car services. At the same time, however, one of the company’s principal investors, Google, is said to be on the verge of launching its own competing taxi service that would operate alongside the driverless cars it’s been developing for a number of years now.

The implications of driverless cars could be huge as it could eventually eliminate ownership of cars

Uber announced this week that it would be helping to fund a research centre based around driverless car technology. A collaboration with the Carnegie Mellon University, the institute will also look at advancing mapping technology.

The increased competition between the two companies comes as the car industry undergoes a dramatic shakeup. While driverless cars have yet to come into commercial use, the advances in the technology have led to many to speculate that the next decade will see widespread adoption of self-driving smart cars.

Google is well placed to capture a considerable share of the taxi market; with its dominant Google Maps and integrated platform meaning it will easily be able to implement such a service. It’s thought that the tech giant is looking at a ride-sharing platform that would help reduce the number of cars on the road.

In the past, the two companies have collaborated closely over developing internet taxi services. As part of its investment in other firms, Google Ventures put $258m into Uber back in August 2013, while Uber purchased 2,500 driverless cars from Google a few months before. Google’s chief legal officer, David Drummond, has sat on Uber’s board for the last two years as a result of the investment.

Uber CEO Travis Kalanick has spoken enthusiastically about the potential for driverless cars and how it can help to bring down the cost of the service to users. Speaking at the Code Conference last year he said, “The reason Uber could be expensive is because you’re not just paying for the car — you’re paying for the other dude in the car. When there’s no other dude in the car, the cost of taking an Uber anywhere becomes cheaper than owning a vehicle.

The implications of driverless cars could be huge, added Kalanick, as it could eventually eliminate ownership of cars. “So the magic there is, you basically bring the cost below the cost of ownership for everybody and then car ownership goes away.”

Debt levels higher than ever, says McKinsey study

Posted on by Charlotte Gill

Global debt has grown

Although it was widely forecast that the world’s economies would deleverage after the financial crisis, the McKinsey study shows this has not been the case. Not a single major economy and only five developing countries have reduced their debt to GDP ratio in the real economy, and, since 2007, the burden has grown by $57tn, equivalent to 17 percentage points of GDP. The findings also show that household debt levels in northern Europe, Canada and Australia are higher even than they were in the UK and US at the peak of the crisis.

China’s debt is rising

The most telling statistic of all is that China’s debts since 2007 have quadrupled, up to $28.2tn from $7.4tn, as of last year’s second quarter. By most estimates, China’s debt ratio is manageable at 282 percent of GDP, up from 158 percent, though still larger than either the US or Germany’s current level. The concentration of debt in real estate, the growth of the shadow banking sector, and a tendency among local governments to borrow off the books could exasperate the country’s already delicate situation.

Shadow banking on the slide

Where once shadow banking posed a considerable threat to the global economy, the sector – at least from a global perspective – is on the slide. Regardless, non-bank credit remains an important growth engine as many in the banking sector struggle to come to terms with a more stringent regulatory landscape. The financial sector has raised capital and reduced leverage in advanced economies, and, in doing so, overturned a dangerous trend where the sector’s debt load grew from $20tn in 2000 to $37tn in 2007.

Household debt on the up

Although rising household debt levels were a large part of why the financial crisis struck in the first place, an unwillingness to deleverage unsustainable debts shows that, in many countries, the lesson has not be learned. Whereas households in the US, UK, Ireland, Spain and Portugal have taken steps to address the issue, household debt in the Netherlands, Norway and Denmark has tipped the 200 percent mark, greater even than at its peak in the US.

Government debt

Government debt has increased both in advanced and developing economies since 2007, by $19tn and $6tn respectively. Taking into account fiscal balances, inflation, interest rates and growth projections, the McKinsey report forecasts that the government-debt-to-GDP ratios will continue to rise for at least the next five years. The study also shows that in order for Spain, Finland, Japan, Portugal, France and Italy to reduce their debts, real GDP growth would need to be twice its current level, which seems all the more unlikely in a current climate of lacklustre growth and low inflation.

Micromax overtakes Samsung in Indian phone market

Posted on by Charlotte Gill

According to market research by Canalys, Micromax accounted for 22 percent of India’s smartphone shipments in the three months to December, 2014 – ahead of Samsung’s 20 percent.

India has experienced a very strong annual growth of 90 percent in the quarter

The company’s success is, in part, due to their ability to lure in mobile phone users wanting to upgrade to smartphones. They have also attracted different income groups by introducing flagship products, such as Canvas Nitro and Canvas Hue phones, that target the $150 to $200 segment of the market.

As the world’s third-largest smartphone market, India has experienced a very strong annual growth of 90 percent in the quarter, with nearly 22 million smartphones sold. Many users are upgrading for the first time from basic handsets and more than a quarter of all shipments were for smartphones that cost less than $100 while 41 percent were devices in the $100-$200 bracket.

Speaking in a statement, Rushabh Doshi, Canalys Analyst said: “Catering to local market preferences will become increasingly important. Micromax has been quicker than its competitors to improve the appeal of devices, for example, by including a wide variety of local languages on its Unite phones.

“Vital to success is selling these handsets at low price points to appeal to the bulging mid-level income market in India.”

Samsung is still a key player in the Indian smartphone market but is up against rising competition from local brands Karbonn and Lava. The latter has recently won popularity launching a new device that provides greater battery life.

Vietnam’s textile industry could be great – with a hand

Posted on by Charlotte Gill

Since the late 1990s, Vietnam’s textile and apparel sectors have shown impressive growth and export revenue. In less than two decades, the country has rapidly risen the ranks to become one of the world’s top ten textile exporters. As a result, the industry plays a significant role in the socioeconomic climate of Vietnam, accounting for approximately 2.3 million jobs, with 80 percent held by women. Government initiatives that encourage international investment have contributed to this recent success, with foreign-invested firms accounting for 60 percent of the industry’s export revenue.

Supporting Vietnamese fashion brands can also strengthen foreign demand

This exponential growth can be largely attributed to the nature of the business, as a small capital investment is required for a short-term profit. This is particularly encouraging for both domestic and international investors, as it presents the opportunity of a fast turnaround with a relatively low level of risk. The country’s bulging labour force also facilitates the growing sector, while lower wages give Vietnam an edge against China – the largest competitor in the global textile industry.

In order to maintain persisting expansion of the textile and clothing industry within Vietnam, several challenges must be confronted. The ‘CMT’ business model, in which Vietnamese factories are provided with the raw materials from foreign buyers, presents the disadvantage of restrictive profit margins for domestic firms. At the same time, productivity levels are relatively low – largely due to under-performing management and a lack of innovation in the sector. Although a workforce with a limited skill set is conducive for low wages, it impedes the possibility of continual growth. It is therefore vital for the government to invest in broadening the skill set of workers, which can also improve production and distribution.

According to a special report by the World Bank about the light manufacturing industry in Vietnam, the government must make a structural transformation in order to continue developing. Currently, apparel production is contracted by foreign companies that provide their own specifications, designs and even equipment. If the sector can mature into developing its own products and styles, a more sustainable long-term strategy can be achieved. This could also present the prospect of value-added products and new streams of foreign investment, as well as raising the viability of a fashion industry in Vietnam. Given a population of 90 million, the opportunities within the domestic market are rife.

Supporting Vietnamese fashion brands can also strengthen foreign demand, as well as encourage competition with other top garment producers in the world, such as Italy, France and Spain. In addition, scope exists for product specialisation, with Vietnamese manufacturers currently exploring the benefits of niche clothing and furnishings. As well as traditional markets, including the EU, US and Japan, the sector is beginning to discover new markets such as the Middle East and Russia. International buyers are always on the search for competitive prices, partnered with good quality and timely delivery. If the apparel and textile industry in Vietnam can uphold these principles, while implementing structural changes and product diversification, growth is set to continue at its current velocity.

Petrobras CEO steps down amid corruption claims

Posted on by Charlotte Gill

The corruption scandal that has hit Brazil’s state-owned oil giant Petrobras is set to claim its biggest casualty as news emerges that CEO Maria das Graças Foster is due to step down within a matter of weeks. Talk of a potential replacement sent the company’s shares surging by 15 percent, the largest one-day increase for 16 years.

The news comes after a number of years of allegations against senior Petrobras executives and politicians over apparent bribes and illegal payments. These scandals have been rumbling on for almost a decade, and Graças Foster was appointed in 2012 with the mandate to root out any wrongdoing.

Confidence in the company has sunk
among investors

However, it seems that the corruption may have carried on under her leadership. In December, 35 oil executives were charged over apparent corruption, many of whom worked at Petrobras, with a number more following at the start of this year. According to authorities, kickbacks on contracts worth as much as $4bn may have occurred between oil executives and politicians at the ruling Workers’ Party.

Graças Foster has close links with recently re-elected Brazilian President Dilma Rousseff, who was previously chairperson of the oil firm until becoming President. Earlier this week, Rousseff’s government announced it would be postponing sales of global bonds in light of the corruption scandal.

Last week, Petrobras published its third quarter financial results for 2014 – two months after originally scheduled – but failed to reveal quite how much the corruption scandal had hit the oil company. However, independent auditor PricewaterhouseCoopers hadn’t even had a chance to properly audited this report. As a result, confidence in the company has sunk among investors, while ratings agencies Fitch and Moody’s recently downgraded the firm.

The news of a collapsing global oil price couldn’t have come at a worse time for Petrobras, will reduced revenues compounding the scandal. It is currently unclear who will be tasked with facing these challenges when Graćas Foster does eventually step down.

Teixobactin offers hope in fight against antimicrobial resistance

Posted on by Charlotte Gill

“When I woke up just after dawn on September 28, 1928, I certainly didn’t plan to revolutionise all medicine by discovering the world’s first antibiotic, or bacteria killer,” said Alexander Fleming, “but I guess that was exactly what I did”.

The discovery of penicillin in 1928 revolutionised the 20th century but Fleming’s fortuitous discovery started the ongoing battle against superbugs; specialised bacteria that are resistant to the effects of antibiotics.

Teixobactin is the first new antibiotic to be discovered in 30 years as antibiotic development has progressively stagnated

Every year, these superbugs are responsible for 700,000 deaths globally. Damning projections in The Review on Antimicrobial Resistance, published in December 2014, estimated the prolonged virulence of drug resistant infections could see 300 million die prematurely over the next 35 years, from conditions that are currently treatable using antibiotics.

The world is in a race against evolution to halt the detrimental effects of resistance to antibiotics and offering a glimmer of hope into the future of healthcare is a new ‘super’ antibiotic, discovered using a revolutionary method.

Teixobactin was identified in soil and effectively eliminates bacteria without stimulating any detectable resistance in the treated bacteria.

Most antibiotics primarily target bacterial proteins to destroy the microbe; Teixobactin focuses its attack on the building blocks of the cell wall, effectively killing bacteria for MRSA and tuberculosis.

Kim Lewis, from Northeastern University, made the discovery in early 2015. Writing in his research paper to announce the findings, he said: “Teixobactin kills exceptionally well. It has the ability to rapidly clear infections.”

Alarmingly, Teixobactin is the first new antibiotic to be discovered in 30 years as antibiotic development has progressively stagnated. Pharmaceutical companies, faced with tough regulations and poor returns on investment, turn their trade to more profitable ventures meaning the emergence of drug resistant superbugs are gradually overtaking the number of drugs available to treat them.

This doomsday future would see normal treatments, such as caesarean sections, joint replacements, cancer drugs and organ transplants halted by the absence of antibiotics. These simple procedures contribute almost 4 percent of global GDP, signalling a loss of $120 billion over the next 35 years.

According to The Review on Antimicrobial Resistance, global GDP is predicted to be 2-3.5 percent lower in 2050 than it would otherwise be, leading to a loss of $60-$100trn.

The procedure used by Lewis and his team has received worldwide acclaim, with Professor Laura Piddock, Professor of Microbiology at the University of Birmingham, heralding the breakthrough as a ‘game-changer’.

Speaking to The New Economy, she said: “The approaches taken by Lewis and colleagues can be extrapolated and used by others; this work ‘opens the door’ on a new era of natural product antimicrobial discovery.”

The affinity to destroy pernicious diseases, otherwise impregnable to antibiotic attack, is essential for any super antibiotic and the growing success of Teixobactin ultimately puts the world in the best position it can be to tackle the next generation of bacteria. In 1928 Fleming’s answer lay in a laboratory dish, in 2015 our answer could lie in one of nature’s richest, and unlikeliest, sources of potential antibiotics; soil.