The full Citigroup blast against Nasdaq’s handling of the Facebook IPO is well worth a read. (Big hat-tip to NYT Dealbook, click to enlarge)
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This is the third installment in FT Alphaville’s “Beyond Scarcity” series, a somewhat radical look at the impact of technological progress and efficiency on the volume of goods and services being produced by the system, asking whether “abundance” could now be a key determinant of deflationary forces in the western world.
On top of this, we have considered the role played by “artificial scarcity”, whether imposed wittingly or unwittingly by industry participants as a counterweight to such deflation, and to what degree such measures could now be running into scalability issues. In short, whether there is a limit to how much artificial scarcity private organisations can impose to counteract deflationary forces of abundance, without experiencing diminishing returns. Read more
Presenting an economic journey in felt, looking at whether the system’s ails have more to do with an abundance of goods than a shortage of credit because of the system’s technological advances and efficiencies. Move ahead to slide 20 for a snapshot of where we *think* we are today.
1) The water source. Read more
FT Alphaville spent a lot of last week hanging out at Lift12, a Geneva-based technology conference exploring the social implications of new technologies.
Research in Motion, the maker of BlackBerry smartphones, was battling to shore up its network on Wednesday as it emerged that an intermittent service outage preventing users accessing email had spread to 30m-40m people, half of all Blackberry subscribers worldwide, the FT reports. RIM confirmed the problems during a news conference and said its engineers were working night and day to resolve the issue. David Yach, RIM’s chief technology officer for software, said there was no evidence of hacking, adding that the problems were global because RIM had to restrict service everywhere due to a backlog of undelivered messages after a core network switch in a data centre in Slough outside London failed on Monday. Since then the three-day old technical problems have spread to users in the Americas, Europe, India, the Middle East and Africa – the biggest network failure to hit the Canadian company since it launched the BlackBerry service a decade ago.
Ericsson’s second-quarter profitability was hurt by contracts in Europe and India, losses at the Swedish telecoms equipment maker’s joint ventures, and higher-than-expected costs for a job reduction plan, the FT reports. Ericsson on Thursday reported revenue of SKr54.8bn ($8.54bn) for the three months to June 30, up 14 per cent compared with the same period last year. Net income rose 59 per cent to SKr3.2bn, fuelled by the sales growth. However, the closely watched gross profit margin was 37.8 per cent in the second quarter, down from 39 per cent one year ago. The deterioration was blamed on lower-margin mobile network contracts in India based on third generation wireless technology and infrastructure modernisation projects in Europe. More such European projects are expected in the second half of 2011, which could put further pressure on profitability.
Global technology stocks were rebooting the rally in riskier assets after Apple joined IBM in delivering better than expected results, the FT reports. The more ebullient mood was also founded on hopes that signs of progress in US negotiations on raising the government debt ceiling sharply reduces the chances of a technical default by Washington – an event whose fallout investors have had difficulty extrapolating. In addition, stronger than forecast US housing data on Tuesday provided a morsel for growth optimists to chew on, while an easing of eurozone stresses was also providing cud for the bulls. The FTSE All-World index was up 0.5 per cent, with the FTSE Eurofirst 300 up 0.6 per cent as traders price in the extra gains from Wall Street’s 1.6 per cent advance overnight. S&P 500 futures pointed to Wall Street putting on another 0.2 per cent at the opening bell.
Apple beat Wall Street expectations with third-quarter revenues up 82 per cent and profits up 125 per cent year-on-year fuelled by demand for its iPad, iPhone and Mac products, the FT reports. The company said its record sales had been led by the iPad 2 and growing demand for its products in newer markets, such as China. Apple shares rose more than 5 per cent to $397.20 in after-hours trading in New York, despite the company suggesting that its fourth-quarter outlook would be weaker than expected. “We … have a future product transition that we’re not going to talk about today and [this] will impact our September quarter,” said Peter Oppenheimer, chief financial officer. Apple did not announce in June its usual annual update to the iPhone, leading to speculation that an iPhone 5 would be introduced in its September quarter. For more analyst reaction see FT Alphaville.
IBM raised its earnings forecast for the year as it reported a 12 per cent surge in second-quarter revenues, surpassing Wall Street expectations, the FT reports. “In the second quarter, our long-term strategic investments in the company’s growth initiatives again helped drive strong revenue performance,” said Samuel Palmisano, IBM chief executive, on Monday. “Hardware, software and services revenue grew at double digits, and we achieved strong profit and free cash flow growth.” Net earnings rose 8 per cent to $3.7bn as the company reported $26.7bn in revenue, $1.35bn more than had been expected by analysts. IBM lifted its full-year earnings forecast to at least $13.25 a share, ahead of analysts’ average estimate of $13.21. The company’s shares rose 3 per cent in after-market trading to $178.30.
Cisco Systems is to cut its workforce by 9 per cent as it struggles to improve its performance and refocus on its core network equipment operations, the FT reports. The Silicon Valley company said 6,500 employees would leave the company as part of a $1bn annual operating expenses reduction announced in May. This includes about 2,100 staff opting for voluntary early retirement.The cuts were fewer than anticipated, with sources indicating last week that 8,000-10,000 jobs could be cut from a global workforce that totalled 73,400 at the end of April. Its headcount is set to be reduced by another 5,000, however, after the sale of a factory in Mexico to the Taiwanese contract manufacturer Foxconn, also announced on Monday.
The FT reports that sharp increases in share prices of young technology companies has led Oracle, Silicon Valley’s most acquisitive company, to turn its back temporarily on considering new deals, the company’s executives said on Thursday. “They are by and large not attractively priced right now and don’t make sense and we’re not doing them,” said Larry Ellison, chief executive, on a conference call to discuss the company’s latest earnings. “Anyone looks at the valuations today, and we don’t think they make any sense,” said Mr Ellison, who began a series of acquisitions nearly a decade ago that has left Oracle with a software business that tops IBM and is second only to Microsoft. Safra Catz, Oracle’s co-president and a former investment banker, added that prices of potential targets were “quite ridiculous”. The high price of acquisitions meant that Oracle had turned its sights inward for growth, for instance by boosting the number of sales people in its hardware division, said Mr Ellison.
Businesses are facing a dilemma over how to protect their trademarks after the body governing internet names voted on Monday to allow the creation of thousands of web suffixes to run alongside .com and .net, the FT reports. For a starting price of about $500,000, the Internet Corporation for Assigned Names and Numbers will allow companies and community groups to create customised domain names – such as .canon for the camera maker or .london for the English capital. So-called “generic” domains, putting common words after the “dot” in addresses, will extend the system further. The actual cost for popular domain names contested by several parties, however, is likely to multiply, with lawyers predicting that the new addresses will trigger big legal battles.
One of the most pervasive and costly types of virus is now affecting Mac computers, signalling the end of an age of innocence for Apple customers, who until now have been spared many common cybersecurity problems, the FT reports. Known as rogue antivirus or scareware, the scam programs warn PC and now Mac owners that they have been infected, then demand credit card payments to clean the machines. The operators of the programs are typically criminals who may resell the card details or try to install more malicious software.
Markets were enduring a classic “risk off” session as traders were rattled by evidence of slowing growth in China and the debilitating irritant that is the eurozone fiscal crisis, the FT’s global market overview reports. The FTSE All-World equity index was down 1.1 per cent and industrial commodities were sliding. US stock futures pointed to Wall Street opening lower by 1 per cent, starting a fourth consecutive week of declines, while the FTSE Eurofirst 300 was down 1.3 per cent as miners, financials and technology groups saw sellers. Investors were seeking the refuge of the dollar, Swiss franc, Treasuries and gold. A clue to the session’s risk aversion was being provided by the euro, which was down 0.9 per cent to $1.4008 and had hit a record low against the Swiss franc of SFr1.2352.
Amazon.com says it is selling more e-books for its Kindle electronic reading device than paperback and hardback print editions combined, helping its book business to see its strongest growth in more than a decade, the FT reports. The news that the online retailer has sold more than three times as many Kindle books so far this year as in the same period of 2010 came as the Association of American Publishers reported that US e-book revenues had grown 146 per cent in March over the same month a year earlier. Amazon only released unit sales data rather than comparable revenue figures, and Kindle editions typically sell for lower prices than print titles. However, the data suggest it may be extending its leading market share in e-books following the release five weeks ago of a cut-price Kindle at $114 for customers willing to accept sponsored screensavers and other advertising.
Intel has claimed the biggest breakthrough in microprocessor design in more than 50 years, raising the stakes significantly for rivals in the increasingly capital-intensive global chip industry, reports the FT. The world’s biggest chipmaker said on Wednesday that it would begin producing chips this year using a revolutionary 3D technology that has been nearly a decade in the making, and which it said would act as the foundation for generations of computing advances to come. Microchip transistors, the building blocks of electronics, have to date been produced in flat structures – akin to printing on a sheet of paper. Intel’s breakthrough involves producing more complex three dimensional transistors on chips.
Shares in Ericsson rose more than 8 per cent on Wednesday after the Swedish network equipment maker announced better than expected first-quarter results driven by surging use of mobile broadband services, the FT reports. Net profits more than tripled to SKr4.1bn ($674m) from SKr1.3bn in the same period last year, easily exceeding analysts’ consensus forecasts for about SKr3bn. Hans Vestberg, chief executive, attributed the strong results to rising demand for network infrastructure, such as radio base stations, as increased use of bandwidth-hungry smartphones and other mobile broadband devices prompts telecoms operators to increase capacity.
More than 70m users of Sony’s online gaming network have had their names, e-mail addresses and passwords stolen by a hacker in one of the largest privacy breaches to date, the FT reports. Sony announced on Tuesday that the information had been taken – six days after it closed the PlayStation Network – as it began e-mailing users of the free service with warnings to be on the lookout for scams. The Japanese electronics and entertainment powerhouse said it was possible that credit card information had been taken as well, recommending that customers who had supplied those numbers online should review their bills carefully. The breach is troubling because many Sony gamers are likely to have used the same passwords for e-mail and social networking accounts. The hacker could resell user name and password combinations to other criminals, who could take control of those accounts and mine them for bank account passwords or send bogus e-mails to friends’ addresses.
Research in Motion cautioned that its performance in the current quarter would be affected by costs associated with the launch of its PlayBook tablet device next month, disappointing investors who sold-down the stock in after-market trading, the FT reports. Shares in the Canadian company tumbled as much as 12 per cent in after-hours trading on Nasdaq before settling 10 per cent lower at $57.50. RIM also confirmed that its soon-to-be released PlayBook will be able to run software applications developed for other devices, including Android-based smartphones – a move that could enable it to compete more effectively with Apple’s iPad. Continued strong sales of its BlackBerry family of smartphones, particularly in markets outside North America, helped RIM report a 36 per cent increase in fiscal fourth-quarter revenues and a 32 per cent increase in net profits for the quarter ending February 28.
Oracle, the US software maker, claimed market share gains from rival SAP on Thursday as it reported quarterly earnings that showed a further rebound from the economic downturn, the FT reports. A better than expected 29 per cent rise in revenue from new software licences pushed the company’s earnings well above its own and Wall Street forecasts. Oracle issued a forecast for its current quarter ahead of most estimates and raised its dividend by 20 per cent. The company’s shares climbed 3 per cent in after-market trading, having already risen more than 2 per cent earlier in the day. Safra Catz, one of two Oracle presidents, would not attribute the group’s success to a broader recovery in IT spending, claiming it reflected the success of a wave of Oracle software products and the successful integration of Sun Microsystems, which it acquired early last year.
Hewlett-Packard added five new directors to its board, giving majority control of the world’s top-selling technology company to people who weren’t involved in the controversial August ousting of chief executive Mark Hurd, the FT reports. Four serving directors will stand down, while new chief executive Léo Apotheker and chairman Ray Lane, who both joined in late September, will be among the eight who remain, the company said on Thursday. The shake-up gives HP distance from the continuing fallout from the departure of Mr Hurd, a hard-driving executive whose resignation knocked $10bn off the company’s market value. “It’s very unusual” said Steve Mader, a director at recruiters Korn/Ferry International. “One of the obvious possibilities is that the decisions around Hurd and some of the subsequent actions were a schism or a factioning on the board”.
Skype plans to lift its headcount by nearly 50 per cent this year, reports the FT, as it looks to reinvigorate its lacklustre product development processes and capitalise on its viral consumer growth. The hiring spree marks an attempt by Tony Bates, Skype’s new chief executive, to inject urgency into a company synonymous with online voice and video calling. While its brand recognition and reach put it among the top handful of consumer internet companies, Skype has been slow to come up with a broad “premium tier” of services for which it can charge users – something Mr Bates aims to put right in a hurry.
Dell’s third-quarter profit more than doubled from a year ago on a 19 per cent increase in sales, easing concerns among technology investors about a slowdown in the sector, the FT reports. Shares in the second largest computer maker in the world by units shipped rose 5 per cent in after-hours trading on Thursday after the company said that all its divisions enjoyed revenue gains. In total, Dell said that net income reached $822m, or 42 cents a share, up from $337m and 17 cents, on revenue of $15.4bn. That encouraged investors alarmed by mixed results from Cisco Systems last week, although Dell cautioned that consumer demand remained “more muted” and it kept its full-year revenue guidance unchanged. Hewlett-Packard is set to report on Monday.
Fears that Google would allow its costs to spiral upwards as it prepared for a new wave of expansion proved unfounded in the company’s lastest quarter, as a jump in revenues and tighter controls led to earnings that comfortably beat analysts’ forecasts, the FT reports. The company’s shares jumped 8 per cent in after-market trading. The internet search company reported a 25 per cent jump in net revenues, to $5.48bn, as advertising continued to bounce back strongly from the downturn. Wall Street had been expecting a rise of only 20 per cent in net revenues, which are calculated after deducting the $1.81bn in traffic acquisition costs Google paid to other internet companies that generated some of its search traffic. Operating expenses, meanwhile, rose 34 per cent as the company continued to boost its spending on sales and marketing and on research and development. Headcount also continued to rise swiftly, rising by around 1,500, to 23,331, in the period.
Intel reassured markets at the start of the earnings season with third-quarter results ahead of its reduced expectations and a forecast of “healthy worldwide demand” for products for the rest of the year, reports the FT. Amid fears of a double-dip recession, the world’s biggest chipmaker had warned at the end of August of weaker demand than expected for computers in mature markets, reducing its sales forecast from about $11.6bn to $11bn. The “back-to-school” season was disappointing for PC makers in the US. Price-cutting is reported to have led to a recovery in September, meaning the “last four weeks of the quarter were better than we first thought”, according to Paul Otellini, chief executive. This had made Intel more optimistic about the fourth quarter. Intel shares closed at $19.77 in extended trading in New York.
Microsoft has sought to turn its back on more than decade of faltering performance in the mobile software business, betting heavily that it can use a new focus on design and marketing to recoup lost ground from Apple and Google, reports FT. The about-turn was on display on Monday as the software company took the wraps off a new family of smartphones based on its latest mobile software, called Windows Phone 7. A leader in the smartphone software world before the iPhone was launched three years ago, Microsoft has since seen its market share collapse to barely 5 per cent. Its sharp decline has led Microsoft executives to warn that its broader position in a new technology world, that depends on a range of personal devices that connect to services delivered over the internet, could be damaged unless it finds a way to fight back.
Cisco Systems, the top networking gear maker, has brought out its first homegrown product for consumers, a $599 gadget for videoconferencing from the living room, the FT reports. Cisco is aiming the premium device at US customers with high bandwidth, which analysts said would limit its potential for wide adoption, while the lofty purchase price and $25 monthly fee will discourage others. The New York Times Bits blog has a rundown of the new product.