Americas

Hot speech tech firm’s story is too complicated

26 Oct 2011

Nuance Communications has built an $8 bln market cap by getting machines to understand talk. Its technology may even be behind speech recognition in the new iPhone. But its sky-high valuation multiple requires too much trust considering its complex finances and acquisitive ways.

Obama is handing too much gold to ivory towers

26 Oct 2011

The $1 trln U.S. student loan market fuels soaring tuition fees and leaves taxpayers on the hook for default. The president’s move to lighten the burden on graduates will only increase defaults. And taxpayers are already getting scant return for rising college subsidies.

Jon Corzine gets déjà vu moment at MF Global

26 Oct 2011

Dealing with rising costs, prop trading pain and capital concerns helped elevate Corzine to the top job at Goldman in 1994. Now he’s facing similar issues running MF Global. His experience should help, but the brokerage’s turnaround story is a tougher sell than Goldman’s was.

Gupta arrest puts Corporate America on notice

26 Oct 2011

Prosecutors have nailed dozens of insider traders, including Galleon founder Rajaratnam. Those now look to be mere prologue to the case against former McKinsey boss and Goldman director Gupta. The charges will be tough to prove, but a conviction would be the ultimate deterrent.

Neutral is best gear for U.S. automakers’ cash

26 Oct 2011

Ford’s ninth quarterly profit in a row has investors wondering about a dividend. GM’s cash pile has raised hopes it might buy back the U.S. Treasury’s holdings. But growth is sluggish and Europe’s still a profit hole. Keeping balance sheets strong is the better option for now.

Crop of shock CEO exits reinforces need to plan

25 Oct 2011

Judging by First Solar’s 25 pct stock price drop, you’d think it erred in ousting its chief. Or that Quest’s 11 pct jump meant it should’ve dumped its boss sooner. And no reaction must make IBM’s new CEO a snooze. The real lesson is that boards must carefully plan successions.

Amazon keeps digging costly moat around business

25 Oct 2011

The Internet retailer shocked Wall Street with low profitability due to heavy investment. This expenditure may eventually pay off - that’s why the stock trades at 100 times estimated earnings. But it’s a timely warning that even Amazon must keep girding the barriers to entry.

ArcelorMittal chickens out to hoard its cash

25 Oct 2011

The world’s largest steelmaker abruptly bailed on a joint takeover of Australia’s Macarthur Coal, selling out to partner Peabody, as investors tendered their shares with unexpected alacrity. It may be a sensible move, but it certainly makes the billionaire Mittals look a nervy bunch.

Sprint’s antitrust pitch hedges against DoJ miss

25 Oct 2011

The third-largest U.S. mobile operator says it just wants to help Justice kill AT&T’s takeover of T-Mobile USA. But its separate lawsuit suggests unease with Uncle Sam’s arguments. Such private cases rarely succeed. But this one looks like insurance against a government stumble.

Rick Perry’s simple tax plan spoiled by complexity

25 Oct 2011

The Republican presidential contender’s 20 pct flat tax is a sensible plan with some nice new features and structured to avoid being too regressive. But the capital gains exemption is a silly loophole and making it optional wrecks Uncle Sam’s yield. It’s a missed opportunity.

Rupert Murdoch’s sham governance on full display

25 Oct 2011

A majority of stockholders who don’t share the media mogul’s last name snubbed his sons, James and Lachlan, along with three other News Corp directors. The emphatic vote may be only symbolic. But even a board so entrenched as this one can’t ignore the angry mob.

Pfizer milk bid could fortify China’s M&A hopes

25 Oct 2011

Mengniu Dairy’s bid for the U.S. pharma giant’s $10 bln nutrition unit would make strategic sense. China can gain from deals pegged on rising consumer demand rather than cheap labour. Buying foreign brands may also help address food safety problems, if bidders tread carefully.

Netflix’s melting core spells value disaster

25 Oct 2011

Up till now, the company has been cagey about the respective profitability of the two units it was planning to separate. New figures show Netflix makes about 10 times more from a DVD customer than an online streaming subscriber. Trouble is, the wrong arm is shrinking - and fast.

Icahn’s American truck merger pitch has wheels

24 Oct 2011

The billionaire investor often has loopy ideas for M&A among his holdings (remember Lions Gate-MGM?) But a $5 bln-plus combination of Navistar and Oshkosh makes some strategic sense. The net present value of cost synergies could be worth more than their combined market cap.

Argentina’s lucky Fernandez may share Peron fate

24 Oct 2011

World War Two gave Argentina huge forex reserves and afforded Peron 10 years of glory. Easy money, globalization and a commodities bubble have done the same for newly victorious Fernandez. But Peron left Argentina divided and poor. Fernandez ought to be wary of a similar fate.

Apax misses with HIT disposal

24 Oct 2011

The private equity firm’s ownership of HIT Entertainment, the company behind kids’ character Bob the Builder, makes for sad reading. Mattel may enjoy the $680 million company more. But fixing Bob up with Barbie does not necessarily mean they’ll live happily ever after.

Hungry watchdog could curb websites’ data appetite

24 Oct 2011

Suits accuse Facebook and others of violating privacy with “cookies” tracking users online. But reluctant judges and dusty statutes mean the cases are toast. The better recipe is to require clearer consent before a poke into people’s lives. That’s a task for regulators to tackle.

Banks say sorry for crisis

24 Oct 2011

At least, they do in this imaginary letter to G20 leaders. They also promise no bonuses for top executives for two years or more. It’s part of an attempt to repair relations with an enraged public and prevent the anti-banker backlash from sweeping away what’s good in capitalism.

U.S. housing policy tilts further to richest 1 pct

21 Oct 2011

Legislators seem hell-bent on defending the millionaire property market. Raising the limit on government-backed loans and giving home-linked visas to rich foreigners won’t help the worst-hit low end. Tea Partiers and OWS protesters can find common cause in opposing these turkeys.

Celluloid hopes mean more to Tesla than earnings

21 Oct 2011

The $2.8 bln firm makes pure electric cars, but it’s valued as a hybrid. Sure, quarterly numbers hint at its ability to hit manufacturing targets. But Silicon Valley-style growth is central to the story. Tesla will be hoping a new documentary helps electric cars catch on.