My fascination with global positioning devices has not abated but it seems that not everyone shares my naive enthusiasm.

Devoted readers of this blog will recall my childlike sense of wonder at renting a car in Los Angeles last year and being guided around the city with a GPS device. Of course, GPS was already old hat then for many car drivers, but there we are.

My latest experiment has been to buy a small GPS Bluetooth fob for about $50 that links with my Blackberry and the Google Maps software that I have downloaded to it. As a result, I can now see where I am: a little blue dot on the map marks the spot.

(more…)

My column in the FT this week is about cross-border mergers and whether they are really more risky than other kinds. It starts like this:

Tuesday was not a propitious day to be announcing grand plans for a cross-border merger.

That morning, Alcatel-Lucent ejected Serge Tchuruk and Pat Russo, its chairman and chief executive, over its own unhappy merger. Meanwhile, Robert Dudley was trying to run TNK-BP, the disputed joint venture between BP and some Russian oil tycoons, from a safe haven.

Neither was an advertisement for the benefits of link-ups with foreign companies. The lesson appeared to be that chief executives of failed mergers at best lose their jobs and at worst have to flee the country.

Yet Willie Walsh of British Airways and Fernando Corte of Iberia chose this moment to say they wanted to join forces, following the example of Air France-KLM and Lufthansa, which acquired Swissair in 2005.

Were they mad?

You can read the rest here and leave comments below.

You only find out who is swimming naked when the tide goes out, as they say, and the Detroit auto makers are providing an example.

They are now halting cheap leases that have enabled Americans who could not afford to buy an expensive pick-up truck or Sports Utility Vehicle to lease one instead. Banks no longer want to underwrite that business.

The financial incentives are not entirely going, as the Wall Street Journal points out, since they now want customers to buy them instead. That needs some encouragement, in fact a lot of it given the high oil price.

But it does make me wonder about their business model yet again. The Detroit three always used to say that Americans wanted big vehicles and it was a good market business because margins were higher on trucks than on cars.

Now it turns out that a lot of those higher-margin sales were in effect being subsidised by the auto makers with cheap debt. Take away the debt and the natural level of demand is lower.

But if the auto makers had not relied on leases to boost sales of trucks, their product mix might not have been so skewed and they would not have been so badly caught by expensive fuel.

Cheap debt does feel good at the time but it has a lot of pernicious effects, and some that you only realise with hindsight.

So is 22 the number?

Merrill Lynch’s $6.7bn sale of a bunch of collateralised debt obligations for 22 cents on the dollar has been hailed as the long-awaited “capitulation trade” by various analysts.

In other words, this is being treated as the moment that a financial institution finally throws in the towel and agrees to shed assets at a price it knows is too low, because it cannot bear it anymore.

Wall Street certainly seems to regard it that way, having marked up Merrill’s shares since John Thain’s abrupt decision to sell.

On the other hand, 22 is still a number in the double figures so it does not count as one of the all-time bargains for distressed debt buyers such as Lone Star, the fund that did the deal.

I suppose you must discount even the 22 a bit since Merrill is providing debt financing to Lone Star to cover 75 per cent of the deal. In other words, it is being paid some cash and swapping one piece of debt for another.

Still, if one truly thinks that this is the worst financial crisis for at least 30 years, which seems fair, then surely the capitulation number should be lower?

Even an irrepressible optimist sometimes get repressed. I feel a bit sad at the departure of Vern Raburn as chief executive of Eclipse, the very light jet maker that has not yet fulfilled his hopes of transforming air travel.

Mr Raburn has paid the price for the fact that it has proved much harder than he promised to built a cheap, snap-together small jet that would be used for air taxi services and bought as an alternative to small turbo-prop aircraft.

Mr Raburn is a entertaining talker and he went out in style, noting that “debt-holders don’t have much of a sense of humour” about missing financial targets. “It cost more money and took more time than we had promised and there’s a price to be paid for that,” he told the Wall Street Journal.

Whatever his flaws, he brought Silicon Valley insouciance and self-confidence to a deeply traditional industry. There will presumably be a lot of people who are pleased that his showmanship did not quite work out, but I am not among them.

Here is a suggestion for a statement that Apple could issue on Monday to end the speculation about Steve Jobs’ health:

There has been some concern about Steve Jobs’ state of health. Mr Jobs has had intestinal side-effects from his surgery for pancreatic cancer in 2004. Earlier this year, he had minor surgery relating to this condition and subsequently lost some weight. He is free from cancer and his condition is not life-threatening.

It seems extremely likely, from the hints Apple has allowed to escape, and from Mr Jobs’ conversation with Joe Nocera of the New York Times, that this is the truth. A statement to this effect would reassure investors who have become increasingly worried that Apple’s silence indicates that Mr Jobs is more seriously ill.

Instead, he appears to be suffering some unpleasant but fairly common side effects from the intestinal surgery he underwent in 2004. The good news for Mr Jobs and Apple investors is that his health problems - if this is indeed the case - are chronic and manageable rather than anything worse.

Nocera’s column is highly readable not only because I think he neatly sums up why Apple’s secrecy is misplaced but because he forced Mr Jobs into telling him what was up, albeit off the record. I liked Mr Jobs’ opening gambit:

“This is Steve Jobs,” he began. “You think I’m an arrogant [expletive] who thinks he’s above the law, and I think you’re a slime bucket who gets most of his facts wrong.”

There is also a good summary of what appears to be affecting Mr Jobs’ health and weight here on the Fortune magazine website.

A minor excursion from Apple’s habit of compulsive secrecy would be helpful at this point and could put the matter to rest.

So what will higher commodity prices and discontent among McDonald’s franchisees do to the Dollar Menu?

The question arose yesterday after McDonald’s disclosed its second quarter results and said it was considering changes to the Dollar Menu, which offers US customers items such as a double cheeseburger or a McChicken Sandwich for a dollar.

That is pretty cheap and it is much more popular among customers than franchisees, which in effect have a price cap imposed upon them by McDonald’s. For other items they sell, they have more freedom to charge a premium.

The effect on franchisees’ profits since McDonald’s introduced the Dollar Menu in has been striking, according to a Stanford University study published last year. It found that McDonald’s had constrained franchisees’ ability to set higher prices than stores directly operated by McDonald’s.

The study found that the”franchisees’ premium” for a Big Mac Meal in 199 was 12.5 per cent but dropped to 3.5 per cent by 2006. In contrast, the premium for Chicken McNugget meals, which did not have a ready substitute on the Dollar Menu, had changed only slightly.

Meanwhile, McDonald’s has been spending the majority of its national advertising budget on marketing budget items such as the Dollar Menu. That has placed further strain on relations with franchisees.

Now, it seems as though something is going to have to give. So it is time to go out and buy that double cheeseburger for a dollar while stocks last.

I have reviewed a new book by Donald Keough, the former president of Coca-Cola, called The Ten Commandments of Business Failure in tomorrow’s FT.

Here are the first few paragraphs of the review:

The thing that bothers me about this book is the author’s grandfather’s toe. According to Donald Keough, the former president of Coca-Cola and life-long friend of Warren Buffett, his grandfather John was an Iowa homesteader who was cutting wood one day when “he swung the axe and cut off his toe. He simply shoved the toe back on, bound it up with burlap, and finished his work… the toe, the foot and my grandfather survived.”

I am sorry, but I do not believe that. You cannot amputate a toe, fasten it back on with a bit of cloth and re-attach it, bones, tendons, muscle and all. This is the kind of hearsay that goes down well in a bar, where standards of proof are low, but would not work in a court of law.

Grandpa Keough’s toe sticks out, so to speak, but the rest of Keough’s narrative also has a touch of Irish-American blarney. There is plenty of tough, no-nonsense advice dispensed here, much of it undeniably valid, but is it the whole truth and nothing but the truth?

The evidence suggests not. Keough has plenty of stories he could tell about Coca-Cola, where he served as president under chief executive Roberto Goizueta and then joined the board. From this vantage point, he not only oversaw what Coke’s chief executives did but also had a fearsome reputation for interfering.

You can read the rest here. Feel free to leave comments below.

My FT column this week is about Roche’s offer to buy the stake in Genentech it does not already own. I believe it is taking risks with its reputation and the value that it has gained from Genentec. It starts as follows:

One of the entertaining things about business is that executives must sometimes, in the interests of their shareholders, say one thing for years and then reverse themselves and declare the opposite.

This can involve double-crossing, or at least angering, those who believed the original story. So it goes.

It often happens when a big company takes over a small one. At first, the acquirer insists that its new subsidiary will be left alone and its managers will be free to carry on as before without interference from head office. Then, one day, the long leash becomes a short one.

The question is not whether this is bad behaviour – in fact, it is life – but whether it is wise. Will those who work at the subsidiary be so annoyed that they walk out, leaving little behind? Or will the U-turn work?

You can read the rest here and comment below.

Sadly, Apple is now stuck with a question that many people are asking, even if they feel awkward and guilty about doing so. Is Steve Jobs ill again?

The question has been around since Mr Jobs appeared at the iPhone 3G launch event in June looking very pale and gaunt, was put to Apple executives during Monday’s results conference call, and the reply did not help.

“Steve loves Apple, he serves as CEO at pleasure of Apple’s board and has no plans to leave. Steve’s health is a private matter,” said Peter Oppenheimer, Apple’s chief financial officer. That, combined with a downbeat earnings forecast, sent the company’s shares sharply lower.

Henry Blodget has retorted that Apple shareholders have a right to know whether Mr Jobs’ pancreatic cancer, for which he had surgery four years ago and seemed to have recovered, has recurred. Meanwhile, others retort that it is a private matter and we should not probe further.

With caveats, I think Mr Blodget is right. Mr Jobs’ health is clearly a material issue for Apple’s shareholders. Indeed, in many ways it is the most material issue of all. Apple’s fortunes have varied over the years according to whether Mr Jobs is in charge and he still embodies the brand.

(more…)