Friday, August 31, 2012

berkshire hathaway: q2 results

The ghosts from Buffett’s derivative investments have returned to haunt Berkshire Hathaway’s report card in the second quarter. It may well be time to give up the portfolio, says Deepak Ranjan Patra

However, what is even more threatening for the company is the amount of unrealised losses it has piled up in its balance sheet. The value of the company’s investments is directly linked to overall market position and the credit situation of company. So with the balance sheet showing unrealised losses of $4.1 billion at the end of June, 2010 as compared to $3.04 billion at the end of December 2009, the situation certainly calls for a reassessment of the company’s situation. Commenting on the financial outlook of the company and his ‘sell’ recommendation on Berkshire’s shares, Meyer Shields, Principal Analyst, Stifel Nicolaus & Company says, “The company’s stock price is not discounted for such a hesitant recovery that we are witnessing. Moreover, the prevailing weak micro-economic outlook means a poor second half for Berkshire’s operating companies.” And the holdings and derivatives products will continue to face depletion in value due to these weak economic conditions. But there are no signs of Buffett disposing off the culprit - the long-term derivatives (aggregate intrinsic value $6.4 billion as on June 30, 2010) business, until it matures.

Global management guru Al Ries once said, “What makes Warren Buffett so effective is the fact that he only participates in businesses he can understand.” Certainly, Buffett’s heavyweight track record is indubitable, but Berkshire’s own derivatives portfolio is the greatest vindication of his WMD hypothesis that can even blow in the face of the one launching them. The string of loss making quarters is self explanatory - $1.41 billion in Q2FY’10, $1.5 billion in Q1FY’09, $1.5 billion in Q3FY’08, $1.6 billion in FY’08 and $122 million in Q3FY’07.

Critics even argue that thanks to his rising predilection for the limelight, Buffett is now too distracted from the real focus that he once had and which made Berkshire what it is. Are we seeing a leader who is looking at derivatives as a personal challenge, rather than looking at them from the perspective of business logic? If that is so, his adventurism is proving too costly for Berkshire shareholders, and a reality check is imminent. And Berkshire’s investors would rather have it sooner rather than later.


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Thursday, August 30, 2012

INTERVIEW : RAJIV BHALLA, COUNTRY HEAD, SALES & MARKETING, NEC INDIA

Rajiv Bhalla, Country Head, Sales & Marketing, NEC India strives to be an active player in the UID project. He says that the project will completely change the way identity and authentication is viewed today. By Neha Saraiya

B&E: So, what should be a B2B company’s strategy to grow its partner network in the country to reach out to its customer base?
RB: For any B2B organization, direct marketing, relationship management and creation of a partner ecosystem that naturally complements the organization and in that process “value adds to its principal and the customer” is a key to success. Partner selection in a B2B setup is critical. Ideally partners need to have the domain and industry expertise, value sets, learning curve experience and the necessary “reach and depth” to complement and be a “mirror image” for the principal that it represents.

B&E: What is the core of your strategy to increase NEC’s market share in all the B2B categories?
RB: In APAC, we have attained a leadership position in the enterprise telephony space and are upbeat on replicating the same in the Indian market. NEC is well aware of the fact that India is a price sensitive and value conscious market. For this, NEC is working closely with its Japanese counterparts in developing products and solutions which meet the requirements of Indian customers and are also cost-effective.

B&E: Biometrics is another important field where you are working very closely especially with the advent of UID project in India?
RB: We have been very active in the biometric solutions space for the past 40 years globally. NEC is now looking at making a mark in India with its state-of-the-art biometric solutions. Our biometrics solutions are designed for both criminal and civil applications. Our market strategy in biometrics revolves around building partnerships. We hope to be an active player in the UID project. We believe that the project will completely change the way identity and authentication is viewed today. We have invested in the development of a Biometric Centre of Excellence in Bangalore. This is NEC’s first ever Centre of Excellence in India, established with an aim for development, deployment and support of identity solutions. We will continue to invest in developing cutting edge technology in this space and help improve security and preserve identity of people.

B&E: How does the company plan to provide its hi-tech solutions at reasonable costs?
RB: Like any other industry, opportunities and challenges are equally predominant. While hoteliers want to improve their guest experience, they are constantly striving to reduce the total cost of ownership. With the influx of technology and sophisticated solutions, conventional sources of earning revenue have dwindled. With the intention of increasing revenue the hotels are looking at offering a bouquet of value added services like movie on demand, music downloads, interactive games which will entice the guest and also add revenue. And we as ac company provide them an integrated technology solutions that enhance productivity, reduce overall operational costs and ensures customer satisfaction.


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Wednesday, August 29, 2012

Better with us than on the fence

India has to learn to exploit its relations with UK in a better way

Recently, on July 28, 2010, British PM David Cameron met Karnataka Governor HR Bhardwaj to sign an MoU, which will allow the British business process outsourcing (BPO) firm Xchanging Plc to set up a 2,000-seat processing centre at Shimoga SEZ. He also visited Infosys and HAL.

The Indian PM organised a joint conference with the British PM emphasising joint initiatives in some key areas including a promise of a joint CEO summit and a further boost in defence trade and foreign investment. But the manner in which David Cameron’s entire visit passed us by, it just seemed like a visit of another infamous head of an averagely influential nation. Congress Chairperson Sonia Gandhi’s cancellation of her meeting due to her mother’s health further dampened the visit’s prospects. It must be realised that Britain has much more promise than can be envisioned. UK is one of India’s largest trading partners with a bilateral trade worth £11.5 billion in 2009. India seeks to increase it to £24 billion in next five years. India’s exports to UK touched £6.8 bn in 2009 while imports were £4.7 bn, a clear surplus advantage. David Cameron is more promising and positive about India than Obama. Cameron’s approach towards Pakistan takes no prisoners and cuts no cake cherries. His statement on Pakistan, after the WikiLeaks incident (“We cannot tolerate in any sense the idea that this country [Pakistan] is allowed to look both ways and is able, in any way, to promote the export of terror, whether to India or to Afghanistan or anywhere else in the world”) is the best evidence that UK would stand as honest friends for much longer than the infidel master US.


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Friday, August 24, 2012

LEADERS: EXTRAVAGANCES

...and arm-twists BP with open threats – is this ethical, if not illegal?

Secondly, if 11 people died in the BP spill, the 440,000 who die every year in the US due to tobacco use and the $200 billion this industry costs US every year are bigger reasons why Obama and Emanuel should be threatening the powerful cigarette manufacturers to pay much more than the total of $206 billion they have to pay over 25 years under the Master Settlement Agreement they brilliantly signed with 46 US states in 1998, when the Democrats were in power.

Is Obama doing that? Not at all. While the BP CEO Tony Hayward was chastised openly by Rahm Emanuel for attending a yacht race and publicly humiliated by Obama (who said his meetings with affected parties have educated him on “whose ass to kick”; and that he would have kicked out Hayward), Obama himself was playing golf at Andrews Air Base. And Putin? He was watching with amusement the Moscow court proceedings against oil tycoon Mikhail Khodorkovsky.


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Thursday, August 23, 2012

THE NIYAMGIRI MINING PROJECT CONTINUES TO TAKE A TOLL ON TIME

SLATED TO BE A MAJOR GAME CHANGER, THE NIYAMGIRI MINING PROJECT CONTINUES TO TAKE A TOLL ON TIME, MONEY AND PATIENCE FOR VEDANTA. WHERE DID THEY GO WRONG?

Perhaps the best antidote to such a situation would have been to have sought clearance to the entire project in one go. That would have also helped Vedanta better gauge the quagmire it later got stuck into. Furthermore, Vedanta has been painstakingly working on communicating to the world that all talks of environmental and tribal devastation are a myth. They argue that the mining takes up only 4-5 sq km of the total 250 sq km and the mining goes up to only 30 metres, whereas the hills are 1050 to 1306 metres above sea level. The company also refutes charges of destroying cultivable area, depleting ground water and polluting the environment.

At the core are the communities that everybody is talking about and claiming to defend. As we had written about extensively in our exclusive on Vedanta’s mining project in an earlier issue of B&E, the company is doing a lot of work for the local communities there as per the SC mandate, which includes education initiatives for children, provision of nutritional food, hospitals and mobile health camps. More important are the livelihood initiatives being initiated for the local communities.

Significantly, there is a division within the tribals for and against the project; the ratio of which depends on whose statistics you choose to believe. While Vedanta is a welcome development for some, those who are not touched by the R&R and the community initiatives will obviously be easily swayed by the NGOs and political elements; and that has in fact happened. As many as 23 Dongria Kondh activists have submitted an appeal to the National Environment Appellate Authority and the hearing is ongoing. Continuous engagement is a must so that rigid mindsets can be bent.

But before that, Vedanta needs the mining operations to commence so that it would be able to source bauxite at competitive rates and have the kind of profits that will sustain its interest. Dr. Mukesh Kumar, COO, Vedanta Aluminium Ltd., Lanjigarh, believes that better communication is the key to results. Patient and persistent engagement is the need of the hour. As it is, they have come too far now to be able to move back.


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Wednesday, August 22, 2012

A world that still waits

More resources need to be diverted to reduce MMR in developing and underdeveloped countries, particularly from military spending

Every time a woman dies while giving birth to a child due to an inefficient and ill equipped medical facilities it is a crippling shame for humanity. Considering how such tragedies still happen in huge numbers, it’s evident that we aren’t really learning or repenting enough.

Recent data revealed by The Lancet, a UK-based medical journal, showed that for the first time in decades, the world has seen a significant decline in death due to pregnancy and childbirth to 342,900 in 2008 from 526,300 in 1980. But the death toll in developing and underdeveloped countries remains pretty startling. Around 85% of the world’s maternity-related deaths take place in Africa alone. Sierra Leone has the highest MMR, as 2,000 out of 1,00,000 population die every year. Over 36,000 women die every year in Nigeria.


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Tuesday, August 21, 2012

WORLD: TROOPS

Stronger nations station their forces to intimidate weaker ones

Even in their nascent democracy, the Iraqi government is forced to pay heed to the popular sentiment; forcing US to commit complete withdrawal by end of 2011. There was a massive rally in Tokyo on January 30 this year to protest against US military’s presence in Okinawa. In Germany as well, the government is echoing the popular sentiment against the presence of US troops.

This new version of imperialism is another way in which stronger countries try to retain positions of power and influence in weaker countries and arm-twist them as per their needs. Such tendencies have to be curbed; as they are self defeating. In the long term, this is a dangerous strategy and breeds hatred and extremism. It backfired for Russia in Afghanistan. It backfired for US in Vietnam. It backfired for India in Sri Lanka. It will backfire even today. The solution is evident – just move out and do something more... stay out!


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Monday, August 20, 2012

‘Smart’phones or just a ‘dumb’ call?

Michael Dell is betting big on smartphones to make up for the lack of any ‘killer app’. Is this a two-years-too-late strategy?

On a fine Tuesday afternoon in Tokyo, a year back, Michael Dell made public his intentions to enter the smartphones market. The world was taken aback. Not because this sounded like a far-fetched dream for Dell, who had been facing some tough quarters in the laptop market of late, but because this announcement came some good quarters too late, for speculations about Dell’s intentions to acquire Palm had been doing the rounds for quite some time then. Cut to the present, his wish to get into the smartphones arena has turned out to be real; getting hold of Palm didn’t. [Hewlett-Packard, the number one vendor in the PC market acquired Palm for $1.2 billion on April 28, 2010.]

Truth is that even 13-months after Dell first announced its entry into the mobile category (a period during which it has already launched a pair of smartphones – one with Google’s Linux-based Android OS – the Dell Mini 3i smartphone, which was launched in the Chinese market in November 2009 and another – the Dell Aero smartphone, which will soon hit US market through AT&T), many in the industry still doubt its future. The whisper in the woods at present however is that Dell is planning to launch five new smartphone models within the next 12 months, which include four Android OS-based and one Windows Phone 7 OS-based smartphones. Ron Garriques, President of Dell Global Consumer Group says, “Our entry into the smart phone category is a logical extension of Dell’s consumer product evolution over the past two years.”

To hit back hard at critics, Dell is also exploring strategic tie-ups to move into newer geographies, the latest being announced on April 14, 2010, with telecom provider Telefonica. The strategic implication of this deal is that, while it will improve Dell’s chances at newer hardware and services, on the other it will give Dell’s smartphones access to the Latin American and European markets. Dell is also looking at strengthening its presence across emerging Asian economies like China & India. So can smartphones do to this once-Lord-of-the-PC-Ring, what the iPhone did to Apple (the iPhone is the highest selling product under the Apple unbrella today, acccounting for 40.33% of its revenues in Q1, 2010)?

From a category perspective, Dell may just have taken the right gambit. As per the Q1, 2010 report by IDC, the global smartphone market grew by twice as much as the overall mobile phone market on a year-on-year basis (56.7% vis-a-vis 21.7%). Better still, as compared to the previous year, the quarter gone by saw smartphones account for 18.8% of all mobile phones shipped during the quarter, as compared to 14.4% a year back. Also, all the other players have contributed in a fairly equal proportion to this growth. While Apple grew by 131.6%, other players like Motorola, HTC, Nokia and RIM also maintained high double-digit improvements in volumes (growth figures of 91.7%, 73.3%, 56.9% and 45.2% respectively). The report also highlighted how a total of 54 million smartphones were shipped in the first quarter of this year – an increase of 56.7% from the same quarter a year ago. These are statistics enough to prove a heated-up table, enough to justify Dell’s timing to call it a bluff, with smartphones market on a higher growth trajectory as compared to even the overall mobile phone market.




 
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