Wednesday, December 12, 2012

Atleast, we spared their pants!

Two biggest M&As. Who lost? The shareholders. Who won? Mmmm...

When it comes to research, experts from KPMG to Booz Allen have already testified that a blood-freezing 66.67% to 78% do not work to create value or are outright failures. When it comes to examples too, the same holds true; the only difference being that in this case, we even know who the victims are! Let’s begin with the biggest M&A trophy, ever – the much discussed hostile takeover of Germany’s Mannesman AG by UK’s Vodafone Plc in February 2000, for a mammoth $183 billion. A year after the deal, the cultural differences had made living hard for the two families, and Vodafone had put Mannesman’s art collection up for sale (true!). Numerically speaking, today, the value of the duo, which once stood at $365 billion (on day #1, post-merger), stands stripped down to a pathetic $64.46 billion (as of April 27, 2009) – a fall of 83%! So why did the soup go sour? First, the deal was at ‘a wrong price with a wrong rationale…’ Ignoring issues of culture, even their business models differed. Vodafone’s concentration of wireless telephony was in stark contrast to Mannesmann’s focus on fixed-line services. Moreover, the logic behind Sir Christopher Gent (the-then CEO of Vodafone) paying a 55% premium for one Mannesmann share remains a mystery...


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Monday, December 10, 2012

Earth Hour

Fighting doomsday prophecies with Earth Hour

This year the event took place on March 29, from 8.30 PM to 9.30 PM, and the participation increased from 35 countries in 2008 to about 85 countries and more than 2,400 cities this year.

“The event has helped create awareness, and as per the figures stated in some of the dailies, around 1000MW of energy has been saved. If that is true then it is indeed wondeful!” says Mahesh Chandra Mehta, an eminent environmentalist.

But not everyone is supportive of Earth Hour. Apparently, a group on Facebook is urging people to protest against this campaign as they believe that nothing would happen by turning the lights off for just one hour in an entire year. “I agree,” says Mr. Mehta “It should not be just a yearly thing but should be a regular feature. Probably, we could do it for 12 days a year and with this people will become more aware and educated.” We must remember basic things like turning the lights off when not required, turning the engine off at red lights, using a bucket instead of a shower while bathing and using public transport. But we need to do these continuously and not just continually. After all, it is completely up to us to decide the kind of world we will leave for our children.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Saturday, December 8, 2012

No ‘auto pilot’ can work here

Stability at the top management level is the need of the hour for Jet Airways in the financial slump

Turbulent weather, expert pilots needed, and only the best will do. Considering that the Indian aviation sector is going through one of its most critical and painful periods, the change of guard at the helm of Jet Airways is quite significant. A major domestic player of the Indian aviation sector, Jet Airways has recently witnessed a change of guards at the top of its management. And looking at the turbulence in the sector thanks to declining air traffic, mounting input cost et al leading to the bleeding bottom-lines and uninspirational top lines, it becomes all the more important to ensure that the baton is now given in safe hands.

Naresh Goyal’s private carrier Jet Airways’ group CEO Ravi Chaturvedi has put down his papers after serving the airline for only four months (Chaturvedi had joined Jet Airways in October last year after serving FMCG major Procter & Gamble). It cannot be more wrongly timed as the player, who was once the largest private carrier in the market (dethroned by Vijay Mallya’s Kingfisher Airlines), is reeling with the recent Rs.2.14 billion losses in the quarter ended December 2008. This forced the airline major to ask its senior officials to accept salary cuts. It was also forced to close down services to three of its major loss-making international routes (Amritsar-London-Amritsar, Bombay-Shanghai-San Francisco and Bangalore-Brussels) and has also unveiled plans to lease four wide-body Boeing 777 aircraft, coupled with phasing out of three Boeing 737 planes. Were these the actual reasons behind Chaturvedi stepping down from the helm? “The current financial standing of the company has got nothing to do with the resignation of Jet Airways group CEO Ravi Chaturvedi. He has resigned from the company, citing personal reasons. Chaturvedi and his family desire to return to the US,” clears a spoke-person of Jet Airways to B&E.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Friday, December 7, 2012

Why Buffett loves Harley’s b@#es!

The latest cash infusion has guaranteed Harley Davidson short term working capital; but it surely would need even more for a joyous ride!

Imagine Warren Buffett riding away on a Harley-Davidson bike... Imagine... Yes, curse our imaginations, for all we care, but actually, the likes of Warren Buffett are taking quite a liking to the mean machine, once associated only with flashy leather jackets and beautiful ‘agents’! And it’s not like Buffett is getting any younger or is delving deep into ‘how to win hearts through brawny stunts’ (he’s 78 years already for Chrissake, and has lost most strands decorating his temple); all that he cares about is... business!

Buffett’s infusion of $300 million in the ailing Harley-Davidson on February 3, 2009, has given a boost to the liquidity of the company. The consideration was in lieu of ‘senior unsecured notes’ to Berkshire Hathaway. Even Davis Selected Advisers (Harley-Davidson’s biggest shareholder) bought a similar-class asset for a consideration of $300 million. However, the question to be asked is: will this aggregate of $600 million raised, guarantee that the bleeding bike manufacturer gets back on its wheels?

Of late, Harley-Davidson has been losing tremendous value on the bourses (see chart).


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Thursday, December 6, 2012

PROFILE: CRAIG BARRETT

Barrett led Intel from the front, but little did we realise, he was the masthead for the entire industry...
He is also the brains behind Intel’s “copy exactly” process which Intel adopted full scale in 1996, and which was responsible for uniformity in facilities setup, increased economies of scale through viable output, more efficient logistics and improved yields. “Craig has had a very distinguished career at Intel.

Under his leadership, he turned Intel’s manufacturing operations in the best semiconductor manufacturer in the world,” explains Chuck Mulloy, an Intel Spokesperson. During his tenure as CEO, he oversaw a period of unprecedented growth, steered the company through two recessions, while ensuring that investments remain alive!

Ironically though, Barrett’s career closure may lack the shimmer as for the first time after 21 years of profitability, the company (and investors) are readying themselves for a loss in the last quarter of FY2008. [According to industry sources, a memo from CEO Paul Otellini to Intel employees supposedly noted that after 87 quarters of profit, 2009’s first quarter is “too close to call”.] Many regard Barrett as a statesman for the industry and as proof, he currently chairs the United Nations Global Alliance for Information and Communication Technologies and Development. 35 years is a real long time, and all at Intel acknowledge that he was the man who led Intel’s growth into the largest semiconductor chip making entity! We’re not sure whether his earning peanuts ($0!) in bonus during 2006 & 2007 makes his exit less glorious, but one thing’s for sure – every time a computer will be switched on, there will be a smile on his face; for this man stood for the industry as a whole, a revolutionary in his own right! Fare thee well! 

Read more....... 
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Tuesday, December 4, 2012

How is Mallya even sustaining the unbelievable losses quarter after quarter?

As if the problems with global fuel prices weren’t enough, Kingfisher has gone ahead and undertaken strategies that only seem a do ‘and’ die effort. How is Mallya even sustaining the unbelievable losses quarter after quarter? B&E’s Shashank Tripathi and Angshuman Paul meet Vijay Mallya and other top Kingfisher executives and investigate...

And one cannot forget that Mallya had spent a huge Rs.975 crore approximately of his invaluable cash to purchase 46% stake in Air Deccan in FY 07-08! All airlines in India, for that matter, are in losses and are bleeding bad. Where Jet has been facing a daily loss of almost over Rs.9 crore, Air India is expected to post well over Rs.4,000 crore losses in the current fiscal year as compared to net losses of Rs.2,144 crore in FY08.

All this has badly affected in-flight services and airlines are now even planning to charge for the water they serve on board. Would such process moves help Kingfisher? We found the question pretty hilarious. The per passenger loss for the combined entity of Kingfisher and Deccan is a confounding Rs.2,400! What help can charging for one bottle of water or even a meal help? So why can’t Kingfisher simply increase ticket prices? That’s the Devil and the Deep Sea conundrum. Competition ensures that the highly price sensitive consumer today has minimal loyalty to any airline [and is even ready to switch to the Indian Railways: read 4Ps B&M cover story, June 20-July 3, 2008, ‘Laloo has the last laugh’]. The initial 3Gs are no big help in increasing switching cost of the customer, neither are promo tactics like frequent flyer or advertising various quality awards.

The worst part is that the Kingfisher combine has seen passenger market share grow to close to 30%.That is simply fabulous! But if fabulous gets fabulous losses, then any self-respecting CEO should close down the business model. Air India has cancelled around 30 flights, Jet Airways 20 flights, SpiceJet over 17 while even Deccan has cancelled 50 flights due to mounting losses. To their credit, Kingfisher, which used to operate 218 flights on 38 destinations, pruned 10 percent of its flights and also sent 47 expatriate engineers back home to cut the operating cost.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Monday, December 3, 2012

“The future of the auto business is important to America...”

Fritz Henderson, COO & President (Global), General Motors Corp. writes in B&E on why GM still holds many promises, despite criticisms and obstacles galore!

Some auto industry observers ask whether Detroit’s auto makers can survive. In the case of General Motors, the answer is, emphatically, yes. And not only survive, but thrive.

There is no question the industry is facing significant pressures driven by a weak U.S. economy and rising fuel costs. At GM, we’re taking the difficult and necessary steps to reduce our cost structure to be more competitive in the global marketplace and build a stronger foundation for our future. Contrary to Mr. Ingrassia’s notion that U.S. auto makers did not anticipate the risk of rising fuel prices, GM has been preparing for the shift for several years toward more fuel-efficient models and developing diverse alternative fuel solutions that will redefine the industry. In fact, 11 of our last 13 US launches have been cars or crossovers, as will 18 of the next 19. We have 17 models that get 30 mpg or better, and offer six hybrid models. Most significant is our commitment to produce the Chevy Volt, a plug-in electric vehicle that will deliver 40 miles of gasoline-free driving and a total range of about 400 miles using a small gasoline engine to recharge its electric battery. This truly revolutionary vehicle will be on the market in 2010.

It’s also important to note that the auto industry has a significant impact on the U.S. economy – by directly employing a quarter of a million people and providing health care and pension benefits to millions. The auto industry has invested a quarter of a trillion dollars in the US over the last 20 years, spends $12 billion a year in R&D and is the largest purchaser of raw materials and computer chips in the US. The future of the auto business is important to America, and we are dedicated to seeing that GM continues to be a significant part of the American landscape for decades to come. Fritz Henderson GM President and COO (Global)

Fritz Henderson, in an exclusive interview with B&E on GM’s future strategies

B&E: Will GM continue to focus on several brands, or will the company adopt a central brand platform?
FH: We cannot pick up a new brand and put our engineers and technicians there while launching a specific product. As far as your question is concerned, we will launch an alternative fuel car like the Volt, under the Chevrolet brand. So I think the Chevrolet will remain our central brand for such endeavours.


Source : IIPM Editorial, 2012.An Initiative of IIPM, Malay Chaudhuri

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Saturday, December 1, 2012

CLINICAL TRAILS: PROSPECTS IN INDIA

That was just a joke... But drug testing is getting big in India; serious!!!

This is in sharp contrast to 28 days in Canada, Europe, UK and many other countries), inappropriate protection of clinical data, and lack of Good Clinical Practice (GCP) certified sites and investigators. Bio-analytical work is also another profitable technological process where Indian skill base is low. There is a need of bio-analytical scientists in order to fill this need.

Global drug companies are seeking a suitable destination within the country to conduct clinical research as India has the second largest pool of qualified doctors, next only to US. [Even in US, one out of every six doctors is an Indian.]Moreover, these companies want to exploit the cost advantage for all the margin expenses associated with clinical trials and patient monitoring such as CT scans, blood tests, X-rays and other similar basic medical tests which are cheaper in India as compared to US and Europe.


Source : IIPM Editorial, 2012.

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