Winter Knowledge

RIM stakes its future on BlackBerry 10

Research in Motion has staked its future on the new line of BlackBerry 10 (BB10) phones, which it is due to announce at the end of January and release shortly afterwards. The Canadian company has been struggling lately as its market share in the mobile phone market has continually diminished against its rivals.

The BB10 is already running two years behind schedule, causing RIM to lose sales to newer and faster mobile phones  already available to consumers: including Apple’s iPhones. RIM claims that its new phones will be faster and smoother, and come full of applications. Others have suggested better security than its market rivals may help RIM win back favour with its cornerstone corporate market.

The company received applause from Jefferies & Co analyst Peter Misek, long seen as a tough critic of RIM. In a note to clients, he said: “Preliminary results from our quarterly handset survey indicate developed market carriers have a much more positive view of BB10 than we expected.” In his view, the BB10 now has between a 20 and 30 percent chance of success and if the company’s gamble does pay off, the share price could reach as high as $43 in the next 12 months.

Nintendo levels up the competition

Nintendo has come first out of the gate in the eighth generation of video game consoles. Its new Wii U gaming system features a unique touchscreen controller intended to entice gamers with ‘asymmetrical gameplay’, where the player’s experience changes depending on whether they are using the new controller or the old Wii remote. The touchscreen controller also allows the game to be played without a TV set.

With its new system, the Japanese company hopes it can rise to the challenge brought about by the recent surge in popularity for touchscreen gaming on tablets and mobile phones, while also outdoing the competition. Nintendo chief executive Satoru Iwata said:  “The chances of consumers buying our software would be less and less if what we make isn’t so much different. We have to make games that smartphones or tablets can’t do.”

Nintendo’s traditional competitors Sony and Microsoft will be watching the performance of the Wii U eagerly as they are due to announce their own eighth-generation consoles.

With the video game industry changing, Nintendo’s success or failure in attempting to compete with tablet and mobile phone games should provide them with a valuable insight.

The response of the traditional players in this changing market will have a significant impact on their fortunes and further reveal the direction the industry is set to take.

Nintendo’s strategy to sell its console at a slight loss with the intention of recovering profits from game sales will also be of interest to the competition. This has traditionally been common practice in an industry where hardware is expensive to produce, so it is important to see if the strategy continues to work this generation. At the current price, however, most consumers only need to purchase one additional game for Nintendo to reap a profit.

Green money up for grabs

Voters in California have voted to direct some $2.5bn to energy conservation programmes over five years. Proposition 39 passed with 60 percent of the vote, closing a corporate tax loophole and directing much of the resulting revenue towards environmental goals.

Anne Smart, Director of Energy for the Silicon Valley Leadership Group, which worked to pass the initiative, said that the money is now “up for grabs”. With specific provisions in the law for the creation of “new private sector jobs improving the energy efficiency of commercial and residential buildings” and job training “on energy efficiency and clean energy projects,” a wide range of small and large enterprises could stand to benefit.

Nanoparticle breakthrough could fight disease

New research concerning nanoparticles published in the Biotechnology Journal is being called a breakthrough in the fight against multiple sclerosis and other autoimmune diseases. For patients with multiple sclerosis, white blood cells called T cells mistake the body’s own tissues for foreign bodies. The immune system proceeds to attack the myelin sheath insulating nerve cells.

Current treatments involving immunosuppressant medications leave patients susceptible to infections and even cancer. In a study done on mice affected by multiple sclerosis, scientists injected nanoparticles attached with myelin antigens. The nanoparticles managed to fool the body’s defences into thinking they were dying blood cells, which inhibited the autoimmune reaction and prevented the mice from having relapses for up to 100 days: the equivalent would be years for a human being.

Scientists hope the findings may one day treat a variety of autoimmune diseases, such as type 1 diabetes. Dr Stephen Miller, one of the study’s co-authors and professor of microbiology-immunology at the Feinberg School of Medicine, said: “The beauty of this new technology is it can be used in many immune-related diseases.”

US to be largest oil producer

New forecasts by the International Energy Agency (IEA) indicate that the US is due to become the world’s largest oil producer by 2017, surpassing both Saudi Arabia and Russia. This includes the production of liquid hydrocarbons and biofuels as well as crude oil. The forecast is based on an increase in American production of tight oil, such as shale oil, due to a combination of hydraulic fracturing and horizontal drilling unlocking previously inaccessible reserves.

However, America’s oil production crown may end up being short-lived, as current tight oil reserves are poorly known and much will depend on the discovery of new resources. The IEA also predicts that the US will become energy independent by 2035 as the country’s energy needs will shift from oil towards natural gas.

Xstrata and Glencore to form commodities titan

Mining company Xstrata is to become a part of commodities giant Glencore after shareholders voted to approve a merger between the two. The resulting company will have a market capitalisation of about $70bn and become the world’s largest zinc miner, ferrochrome producer and thermal-coal exporter. The deal was approved by 80 percent of Xstrata and 99.42 percent of Glencore shareholders.

Conditional approval has been granted by the European Union’s competition authority as long as the newly formed company cancelled a deal to sell zinc made by Belgian’s Nyrstar NV and sold off its stake in the firm. Analysts also expect China’s antitrust regulators to approve the deal by the end of 2012 as the company hopes to expand its market share in the country.

However, Xstrata shareholders rejected a £140m ‘golden handcuffs’ deal that would have seen 72 members of the company’s senior management retained following the merger. The rejection is widely seen as a coup against Xstrata chairman Sir John Bond. Shareholders accused Bond of first attempting to force them to accept a much lower offer from Glencore and later promoting enhanced terms for Xstrata’s top managers. Bond is set to step down once a successor at the combined company has been found.

Performance anxiety solved

Vancouver-based Lululemon Athletica has settled a lawsuit with Calvin Klein over claims of copyright infringement on its Astro line of pants. Lululemon’s patent on its Astro line concerns a series of angular pieces of fabric forming a V-shaped waistline that can be rolled down to sit lower on the waist. The company asserted that Calvin Klein’s ‘Performance’ brand of yoga pants use the same waistband design elements and overall style.

The allegations have not been proven but the two companies reached a settlement out of court for which they declined to disclose the details. Pursuant to the settlement, the pending litigation should now be dismissed by a judge. Lululemon had originally been seeking an injunction to prevent Calvin Klein selling its pants as well as damages for the alleged copyright infringement.

Greenhouse emissions continue to increase

Greenhouse gases hit a record high in 2011, according to the World Meteorological Organisation’s Greenhouse Gas Bulletin. The report warned that if current trends continue, global temperatures could rise 4°C by 2060, causing sea levels to rise, heatwaves and extreme weather events.

The predicted rises could have many effects on global businesses.  Insurers may face increased liabilities from unpredictable weather patterns, while other industries could see increased emissions taxes or new regulations as governments try to meet emissions targets. Green energy and smart energy systems are likely to become increasingly prominent as the world struggles with rising CO2 levels.

HP hit by autonomy fiasco

HP has taken an $8.8bn write-down on Autonomy, having acquired it in 2011 for $11.1bn. The write-down stems from “serious accounting improprieties” at the software company before the acquisition. HP argues that Autonomy sometimes sold hardware that it had booked as software to inflate margins. It also alleges that Autonomy reported licensing deals with retailers rather than with end-customers to “inappropriately accelerate revenue recognition, or worse create revenues where no end-user customer existed at the time of sale”.

HP chief executive Meg Whitman said: “It was a wilful effort by some company executives to mislead investors and potential buyers.” Mike Lynch, former chief executive at Autonomy disagrees, claiming that the company was “booking perfectly accurate operating margins”. Lynch had been ousted from Autonomy in May after a poor revenues performance.

The story is made more interesting by the fact that the alleged improprieties evaded 15 different financial, legal and accounting firms involved in HP’s acquisition of the firm. Deloitte, which had been reviewing Autonomy’s financial information for years before the deal, was specifically cited by Whitman, who said: “The board relied on audited financials – audited by Deloitte – not Brand X accounting firm but Deloitte.”

In a statement, Deloitte acknowledged the allegations made by HP but denied any wrongdoing. The firm said that it had no knowledge of any accounting improprieties or misrepresentations in Autonomy’s financial statements.

SAS cuts back in survival bid

Airline SAS has signed collective bargaining agreements with all eight of its unions in a bid to stave off bankruptcy. The Scandinavian flagship carrier has been under pressure from the global economic slowdown and competition from low-cost regional carriers.

The deals are part of a new restructuring plan and the company hopes that they will help it restore competitiveness. Costs are to be cut by 3bn Swedish kronor ($400m) per year by trimming salaries by up to 17 percent, slashing 800 administrative jobs and eventually reducing overall staff from 15,000 to 9,000 through outsourcing. Asset sales are also expected to strengthen the balance sheet by 3bn Swedish kronor.

Firefox gets the message

Mozilla has released its latest Firefox 17 web browser, complete with Facebook Messenger Integration. The service is the first to come out of Mozilla’s new Social API project, designed to make it easier for web developers to integrate with social media services.

While browser app tabs have already been utilised with email, document editors and newsfeeds, the integration with social media websites is due to provide new opportunities for developers. Mozilla has pledged that its integration with the Facebook Messenger is just the beginning and the company hopes to add support for more features and providers based on feedback from early users.

Firefox 17 marks Mozilla’s second ‘Extended Support Release’, a version of the browser supported longer than usual to allow time for the mass deployment of the software.

Apple-HTC agreement sparks another dispute

Apple has signed a 10 year licensing agreement with HTC to settle claims of patent infringement relating to its smartphones. The two companies had been suing each other in European and US courts for the last 32 months prior to the agreement.

Details were not disclosed but it’s believed that HTC is to pay Apple between $6 and $8 for every handset it produces using Android, Google’s mobile operating system. However, HTC chairman Peter Chou called the oft-cited media estimates “outrageous”, despite refusing to reveal the actual numbers.

The agreement is likely to affect other disputes Apple is involved in. A US judge has also ordered Apple to disclose details of the deal to rival Samsung. The rival company claims it was “almost certain” the deal covered some of the patents it is disputing with Apple.

Reckitt Benckiser to acquire Schiff Nutrition

British consumer products group Reckitt Benckiser has beaten out Germany’s Bayer in signing a deal to acquire Schiff Nutrition. The deal for the firm, worth $1.4bn, is to provide the company with entry into the $30bn vitamins and nutritional supplements market. As Schiff had earlier accepted a deal from Bayer, it will have to pay them $22m to terminate their previous arrangement.

The move comes as drug companies have increasingly set their eyes on additional sources of revenue due to competition from generic producers in the prescription market. Despite paying 16.5 times Schiff’s EBITDA earnings, Reckitt has a strong history of profitable takeovers, having previously acquired cough medicine producer Adams, condom maker Durex and Boot’s over-the-counter drugs business. The company expects the deal to immediately boost earnings on an adjusted basis.

Cemex unstuck by US housing market

After being hit by a fall in demand caused by the slowdown in the US housing market, Mexican cement producer Cemex is expected to soon return to profitability. Four out of six analysts contacted by Reuters believe the company will return to profitability in 2013, with the other two claiming 2014. Fernando Bolanos is an analyst at Monex brokerage in Mexico City. He said: “Cemex has taken the right steps to cut losses and we expect to see it generating positive flows in two to three quarters.”

Cemex has recently refinanced $6.7bn in debt, allowing it to push back looming payments by up to four years. The company has also issued $1.5bn in 10-year bonds and raised $1.1bn by floating its Cemex Latam Holdings unit on the Colombian stock exchange.

Analysts believe that additional asset sales or debt refinancing to further lower costs have not been ruled out. They also hope that management will focus on improving operations and capitalising on the recent growth in demand for cement in the US housing market.

Tata Steel hit by drop in demand

The slowdown in the European economy has hit Indian steel producer Tata Steel as the company posted an after tax loss of $69m in the second quarter ending September 30.

Steel deliveries suffered a 0.8 percentage point decrease to 6.07m metric tonnes, although output in India increased by 9.3 percentage points to 1.87m tonnes.

The company entered the European market in 2007 when Tata group acquired Europe’s largest steel producer, Corus. European operations currently make up nearly two-thirds of Tata’s 28 million tonne capacity.

Managing Director and Chief Executive of Tata Steel in Europe, Dr Karl-Ulrich Köhler said: “European steel demand and prices have weakened since the spring and this took its toll on our financial performance. We are certainly not seeing major improvement in steel consumption this year in Europe. Our response has been to accelerate our efforts to reduce those costs that we can influence.”

Tata intends to improve its bottom line in the coming quarters by shifting production to more complicated, higher value steel products, reducing various costs and delaying investments. Any recovery will be complicated, however, as European steel demand has fallen by 25 percentage points since 2007. Weaker Chinese and Indian growth is also expected to contribute to a decline in steel markets.