Monthly Archives: June 2011

Howard Stringer this week apologised at Sony’s annual general meeting in Tokyo for the hacking attacks that contributed to a 24 per cent fall in its shares in the past three months and a 16 per cent cut in his pay as chief executive. Meanwhile, the culprits have sailed gleefully away.

Andrew Hill

Three things irritate me about Biz Stone’s announcement that he will step back from running Twitter.

1) He doesn’t know the difference between “its” and “it’s”. (Too much time reading his followers’ tweets, I suspect).

2) He talks about his stint at Twitter in grandiose terms that imply he has been there a lifetime, describing how his work there has “spanned more than half a decade”.

3) His Twitter project isn’t complete yet. Read more

John Gapper

Richard Lambert’s piece on Vallares and the reputation arbitrage that the £1.3bn investment vehicle is pulling off by listing on the FTSE 100 is well worth reading. It raises serious questions about how London financiers are exploiting index funds.

As Sir Richard, a former editor of the FT, points out, Tony Hayward and Nat Rothschild are pulling a neat trick by promising investors they can release the “trapped value” of commodity groups in far-flung countries with murky corporate governance:

You unlock this value by putting a respectable board of directors on top of the notepaper, by appointing managers with a strong following in financial markets, by pledging to follow all relevant corporate governance codes and by listing the shares on the London Stock Exchange, preferably on a scale that gets them into the FTSE 100 index. Suddenly investors who might previously have run a mile are queuing up to buy.

 Read more

Surveys say business leaders are overwhelmed, workers are stressed out and unfulfilled, and managers are struggling to manage. My straw poll reveals why: they are frantically filling in questionnaires and participating in online surveys.

Andrew Hill

Old companies may die, but old stock market indices ought to live for ever. Certainly, the longevity of the FT30 index, first published in 1935, suggests they can go on and on, even if their relevance ebbs and flows.

In fact, there could be no better moment to revive interest in the original benchmark of British stocks. Read more

John Gapper

J.K. Rowling is not the average author, given that she has amassed a estimated fortune of £500m from the Harry Potter series and that she can more or less dictate her terms to Hollywood studios and others.

Nonetheless, her new e-book venture Pottermore is a fascinating insight into the shifting balance of power between book publishers, authors and e-book retailers and publishers, led by Amazon’s Kindle platform.

I wrote last July about the impact of the short-lived threat by Andrew Wylie to publish backlist titles from his authors in e-book format without giving the publishers with the physical book rights a share of revenues.

Since then, other agents have jumped on the bandwagon, including Ed Victor, the UK agent, who has established a publishing armRead more

Andrew Hill

Some have attributed Nick Clegg’s proposal to give every British voter a share in the UK’s state-owned banks (floated during a trade visit to Rio de Janeiro) to a combination of jet lag, domestic political calculation and Copacabana sunstroke. But the UK deputy prime minister’s suggestion has a long pedigree – longer than perhaps even he recognises. Read more

Andrew Hill

The demise of Norwegian electric car pioneer Think Global will drain some of the energy from advocates of electric vehicles.

They should recharge by shifting their view from blueprints of cars and studying instead more comprehensive plans that aim to combine vehicle, infrastructure and services. Read more

JPMorgan Chase this week became the second Wall Street bank after Goldman Sachs to face a large fine and a stiff warning over its sales of mortgage-backed bonds in the last days of the housing bubble in spring 2007. Others are to come, perhaps including Merrill Lynch, Deutsche Bank and Citigroup.

Andrew Hill

When a Rolls-Royce engine on a Qantas jet blew up last November, the engine-maker and the airline joined Toyota and BP in a list of companies fighting to repair damage to their global reputations.

But the Rolls-Qantas incident was of a different order and degree from the Toyota car recall and the BP Deepwater Horizon explosion. The settlement announced on Wednesday seems to reflect that. Read more

Some British banks don’t like the idea of having their retail operations “ringfenced” from riskier investment banking activities. Why would they? It sounds like another regulatory attempt to pen in capitalism’s animal spirits.

John Gapper

The impression I am left with from reading George Packer’s account in the New Yorker of the Raj Rajaratnam prosecution is of how the odds still favour the determined insider trader who takes precautions.

Packer recounts how the Rajaratnam case, which ended up as the biggest insider trading investigation ever known on Wall Street –  claiming scalps including Rajaratnam and Anil Kumar, a former McKinsey partner — gained momentum as a result of a single instant message conversation:

rajatgalleon: hey
rajatgalleon: u back
roomy81: i am here
roomy81: did not go any where
rajatgalleon: call me..just got back today
roomy81: please let me know on JNPR
roomy81: donot buy plcm till i het guidance
roomy81: want to make sure guidance OK

Not only was it very hard to mount a criminal case against Rajaratnam until that lead enabled prosecutors to tap his work and personal phones but it was incredibly labour-intensive for the lawyers and prosecutors. Read more

John Gapper

The official Chinese estimate that corrupt officials and executives of state-owned enterprises smuggled $124bn in bribes and ill-gotten gains out of the country over 15 years is a vivid confirmation of one of the country’s Achilles heels.

It follows the resignation of China’s railways minister in February after he was investigated for corruption. Liu Zhijun was in charge of the country’s vast and expensive (as well as lucrative for suppliers) high-speed rail network. Read more

Spider-Man at last opened on Tuesday night on Broadway, having already been playing to audiences for six months of “previews” that produced disastrously bad notices, injuries to five actors who fell off the set or crashed from the hanging wires, and the eventual firing of Julie Taymor, its original director.

Andrew Hill

“Ringfencing” is the word of the day – in the City of London at least. On Wednesday night, chancellor of the exchequer George Osborne will get his annual opportunity to excite, extol or excoriate the financial sector in his Mansion House speech. He’s expected to endorse proposals to “ringfence” banks’ deposit-taking and payment systems from their riskier investment banking arms. The aim is to keep customers’ savings safe in any future financial meltdown.

Like most plans for regulatory reform, this is easier said than done. Read more

Andrew Hill

My favourite bon mot from Richard Rumelt, the UCLA strategy expert whose interview fuelled my column this week, was his comment that in any boardroom discussion of strategic options, acquisitions should be “guilty until proven innocent”.

Prof Rumelt’s new book Good Strategy/Bad Strategy makes clear he is no fan of M&A. “The problem with engineering growth by acquisition,” he writes, “is that when you buy a company, especially a public company, you usually pay too much.” Read more

John Gapper

J.C. Penney, the department store chain, has pulled a fast one by nabbing Ron Johnson, head of Apple’s retail stores as its next chief executive.

The runaway success of Apple’s stores, despite early predictions that they would go the way of other capital-intensive efforts by product manufacturers to reach consumers, have prompted many imitations but none have worked as well. Read more

Few terms of corporate art are more abused than “strategy” and its cousins. Put “strategic” ahead of simple decisions (strategic acquisition, strategic initiative, strategic hiring) and the people carrying them out can feel more important, while those advising can charge a higher fee.

John Gapper

Further to my column on the bad smell emanating from Groupon’s S-1 filing for an initial public offering, more details are emerging of how Groupon has been buying growth and the past business ventures of Eric Lefkofsky, its chairman.

Fortune has an article on how Mr Lefkofsky and Brad Keywell, his business partner, have launched other businesses that have grown rapidly and then run into trouble – and have taken out money through share offerings.

Meanwhile, Sarah Lacy at TechCrunch reports on the turmoil in Groupon’s international businesses, especially in China. As Sucharita Mulpuru of Forrester Research points out, much of Groupon’s growth comes from international acquisitions.

One thing this reminds me of, however,  is the value of listings requirements and public market disclosure. In a world where late-stage technology investments are increasingly made through private markets such as SecondMarket and SharesPost, there is nothing like an IPO to bring awkward details into the open. Read more

Andrew Mason, the co-founder and chief executive of Groupon, is an amusing frontman. “Life is too short to be a boring company,” the 30-year-old declared in Groupon’s public filing for an initial public offering last week, and he lives up to that in his personal life, with pranks such as filming himself performing yoga in his underwear.