Apple App Not Apt

Nowadays, people take their cellphones everywhere, to the park, to the store, to the dinner table, to the bathroom. It has become such a huge part of our lives in the past few years, and justifiably so. It's a phone, camera, music player, calendar and computer in the palm of your hand. A more recent feature is GPS. If you're lost in NYC, you pull up the Maps app. If you're driving somewhere new, you pull up the Maps app. Most of you have heard how Apple dropped the ball with iOS 6 and the new Maps app. Some people are still stranded in that park... Fortunately, Google has just launched the much anticipated Google Maps app, previously a default app for all new iPhones before iOS 6, available for free in the App Store.

The consensus is it's in fact more user friendly, accurate, and reliable than Apple's own version, and it has always been so. So one might wonder, why would Apple get rid of the previous, well-functioning Google maps in place of their own? Although Tim Cook, Apple's CEO, says they simply had their own vision of what maps should be like and it could only be done by themselves, it can be deduced that they just did not want to be associated with their highly competitive rival, Google, maker of the increasingly popular android phones. Big mistake. 

Apple seems to have turned the other cheek by permitting Google to launch the new Google maps, but what it comes down to is iPhone sales, and with GPS being an integral part of daily life, it seems they understand that restricting iPhones to the Apple brand, despite how it benefits the competition, will only hurt them.

Jonathan Louie

The SEC vs. Netflix

Back in July, Reed Hastings, the CEO of Netflix, posted a message on Facebook, which caused the SEC to warn the company last week of a potential investigation into Netflix’s violation of the Regulation Fair Disclosure. The message itself was short, consisting of only 45 words, and a simple exclamation of his excitement to see that the company has hit the milestone of 1 billion hours viewed in June (see above image).

Netflix disclosed that it received a Wells Notice from the SEC last Thursday, meaning that the SEC staff will recommend the full commission to pursue either a cease-and-desist action and/or a civil injunction. The SEC believes that Hasting’s post has violated Reg FD, the brainchild of Arthur Levitt, former chairman of the commission. The regulation was put in place slightly over a decade ago, originally designed to prevent selective leaks from companies to certain analysts and to promote “full and fair disclosure”. In general, Reg FD states that “when a public company gives material nonpublic information to anyone, the company must also public disclose that information to all investors”.

The SEC claims that by posting the fact that Netflix enjoyed over a billion hours of viewing in a month, Hastings released material information to investors and he did so through an unknown and non-public venue to release important company news. However, Hastings argues that, first of all, the information was non-material, especially since interested parties, viewers of the site, and the general public had known previously that the company was close to this milestone. As to the second part of the SEC’s claim, questioning the public nature of Facebook seems almost comical, especially when Hastings has over 220,000 followers and this post probably reached a lot more people than an SEC filing. However, the SEC might have a point in saying that Netflix did not alert its investors that Facebook was an available channel for information.

Currently, the sentiment both on the Street and online is that the SEC is over-reacting and its silly fetish of trying to control companies and their disclosure methods needs to be adjusted and updated to fit the latest trend in the rise of social media. This case still has a long way to go, and it may lead to an evolution of the SEC into a more modern governing body.

- Jennifer Zhang

Big Data Big Money

                What the internet has done to social media will be talked about for the next hundred years, as it has changed the game for so many industries, especially advertising. Take Facebook for example. Everyone has one. Okay, not everyone, but about a sixth of the entire population (1 billion people) are active users, which one can leave up to the imagination the number of people who have simply used Facebook once in their life.

                Facebook users post all types of information on their profile, from photos, personal information, relationship statuses, school, and location, also known as Big Data. To any consumer targeted business such as retail or advertising, this information a goldmine, as they are only a couple clicks away from obtaining information from a billion people. From photos for example, you can see that Person A has recently posted pictures of his snowboarding trip in the Swiss Alps. If companies could obtain this information, stores such as Dick’s Sporting Goods could specifically display ads related to snowboard equipment or discounts, and even airlines can post cheap tickets to other popular snowboard sites.

                The popular TV show Mad Men depicts scotch drinking, heavy smoking advertising kings who utilized their creativity to come up with the best advertisements. 50 years later today, all advertising companies need is access to this data so that they no longer create blanket advertisements singling out a specific demographic, but create advertisements actually single out specific people. Moreover, the number of clicks on any ad can be specifically monitored to track its success in real-time.

                While all of this sounds like a hop, skip, and a jump towards profit, there are some issues that arise such as correctly sifting through data, and privacy. The former is the difficulty associated with knowing exactly what’s relevant to said company, and the latter is more of a moral issue, which is why I said “if companies could obtain this information.” I know I personally wouldn’t want firms snooping around my profile and looking at my pictures, regardless of how much I save on product X. 

Jonathan Louie

10 Year Treasuries Trade in Tightest Range Since July on Fed Speculation

      What seems to be somewhat of a surprise recently is the fact that US treasuries are trading at their tightest ranges since July, which most believe is due to Fed speculation.  10 year US treasuries have been trading within a quarter percent point, a record low, as potential forecasted job growth failed.  This is leading to speculation that the Federal Reserve will, as a part of QE3, announce another round of bond purchases and further increase their balance sheet. Yields on the 10-year treasury note benchmarks have risen from the least in more than 2 weeks after the United States Labor department showed figures that the US has added approximately 146,000 jobs in November, causing the unemployment rate to drop to 7.7 percent.  Federal Reserve officials have expressed that they will continue to buy bonds until the job market improves greatly.  Industry leaders expect easing to continue, guaranteeing that we will “see more balance sheet operations,” expecting the Fed to continue to be “hyper active.”

      Hedge fund managers and other speculators have increased their long positions in 10-year treasury notes according to the US Commodity Futures Trading Commission according to recent data.  As expected, volatility in these treasuries dropped further this week to the smallest value in over 5 years.  Bank of America’s volatility index, the MOVE, touched just 51 basis points on Dec 3, the lowest it’s been since April 1988.  Looking at all these numbers, the obvious question that follows, especially to us students is – who cares? In all actuality, this is a great sign for the Untied States economy.  What these numbers demonstrate, and what can be seen in the market, is a sense of stability.  The volatility that has been plaguing out economy over the last year and a half is finally leveling off. Confidence in the markets, it seems, has finally been restored.

- Vivek Shah

Foreign Retailers Poised to Enter Indian Market

                 The lower house of India’s parliament, the Lok Sabha, today voted to allow foreign supermarkets to conduct business in India. The Congress Party backed government managed to push the measure through, after to minority parties abstained from voting. India badly needs Foreign Direct Investment (FDI) as its once booming economy has slowed to around 5.5% percent growth in GDP and is suffering from high inflation.

            The move to open the retail sector to foreign investors was first approved in September, and did not need parliamentary approval. However in the face of opposition protests, Indian Prime Minister Manmohan Singh decided to put the measure to vote in both houses of parliament. The vote passed with 253 members for and 218 against while 74 abstained. The measure has been largely contended because many believe that it will put many small stores out of business. However, the passage of the measure in the lower house raises hopes that it can also be passed in the upper house, where it faces a tougher challenge.

            Allowing foreign retailers would enable the likes of Wal-Mart, Tesco, and Carrefour to enter the market. India’s retail sector is expected to grow to $725 billion by 2017. The entry of supermarkets would greatly change India’s retail sector, which has traditionally been dominated by small owner manned shops.

            The government and many economists applauded the vote, believing that investments made by foreign retailers would bring much needed capital into the economy. Under heavy pressure due to high inflation, the rupee has fallen 18% against the dollar. Foreign retailers could also help improve India’s supply chain, where many agricultural products spoil before they can reach the market. India’s SENSEX stock index increased by 0.2% to 19391.86, a 19-month high, riding investor confidence that the measure will pass through the upper house of parliament as well. 

-Ashish Sathe

Cash-Trapped Companies

Recently, we’ve heard a lot about companies holding excess cash on their balance sheets. Many claim that if these companies invested some of the cash they’re been hoarding, the US economy would get the boost it needs. Ironically, even though American companies currently hold near record amounts of cash, many of them are “cash poor” in the US. This is because a majority of their cash is trapped in foreign countries, mainly in Europe and Asia. The list of companies with cash aboard is extensive and includes some major US companies such as Johnson & Johnson, GE, Whirlpool and Microsoft.

So why can’t they just bring the cash back to the US? This mainly has to do with the fact that these companies would incur a 35 percent tax rate on corporate profits from the cash they bring back. A recent WSJ article mentioned the company Emerson Electric, which holds almost $2 billion in cash abroad, has only been able to bring back $500 million to the US. This meant that the company had to resort to borrowing money in the US for share buybacks, to pay out dividends and even to pay its taxes. This impact is being seen on many American companies that claim they would gladly bring more cash holdings back to the US if the effect of taxes were minimized. They state that being able to move their funds back will definitely boost capital spending in the US and help improve the job market. The Obama administration is proposing a lower tax rate, but a solid plan has yet to be developed. 

-Ritika Gawande 

Photo Credit: http://tedfreeway.com/2010/10/26/trapped-overseas-billions-could-be-stranded-waiting-to-return/

Losses to Autonomy and the Unending Nightmare for H-P

            While the news broke surrounding Hewlett Packard’s sudden write-down of its November 2011 acquisition of Autonomy nearly two weeks ago, developments continue to plague H-P as it settles this mammoth blunder. 

            On November 20^th, H-P’s stock went tumbling 12% as the company announced a massive $8.8B write-down, primarily tied to its acquisition of Autonomy.  H-P directly accused Autonomy of "serious accounting improprieties, disclosure failures and outright misrepresentations".  The Founder of Autonomy, Michael Lynch, has openly rejected these accusations, and has gone as far as sending an open letter to H-P’s board asking for an explanation of what these supposed “accounting improprieties” are.     

            Unfortunately, the write-down of Autonomy is only the most recent in a slieu of problems that have been plaguing H-P as the stock has fallen over 50% this year, amid management turnover, decreased product demand, and growing debt. 

            While it might seem permissible for a company to have large write-downs in the case of accounting misrepresentations, too many flags have been thrown to look at this as a one-sided mistake.  The market was openly pessimistic about H-P’s acquisition from the beginning.  From the time H-P announced the Autonomy acquisition to the time the deal was completed, H-P’s market capitalization dropped $15B from $58.5B to $43.5B.  Additionally, H-P’s share price drop of 12% on the $8.8B write-down announcement represented a $3B drop in the company’s market capitalization, implying that the market had already priced in a $5.5B loss. 

            One of the most appalling details about the Autonomy write-down is the uncanny resemblance of the acquisition write-down to the original acquisition premium.  H-P originally paid a $5.2B acquisition premium on Autonomy back in 2011.  Now it has made a $5B write-down on that original acquisition ($3.8B of the original $8.8B write-down was not due to Autonomy).

            A year after H-P’s acquisition, the company has written down nearly the entirety of its original acquisition premium.  Even if Autonomy is guilty of the accounting misrepresentation it is accused of, can anyone really find H-P free of blame?             

-Kyle Cameron

Boeing Renews Labor Talks

Boeing Co and the union that represents its 23,000 engineers and technicians agreed to resume labor talks earlier this week. Both sides have now been sparring over mediation of the talks as well as dates and times to meet. Boeing stated late Friday that the union declined its offer to attend meetings with the Federal Mediation and Conciliation Service on Monday. The Society of Professional Engineering Employees in Aerospace, or SPEEA, said that it contacted the mediator before Boeing, and have been accommodating in the places to meet. It has taken a bigger initiative in setting up dates, and has been the one waiting for Boeing to confirm these meetings. 

"I've responded that we have a mediator assigned to us ... but if Boeing is dissatisfied with that mediator, they need to take that up with FMCS not us," Ray Goforth, SPEEA executive director, said.

"We also don't see the need to meet in a hotel. I offered to meet on Boeing property if that would make them comfortable."

Both sides have been seeking to negotiate since April for a labor contract that ended November 25th. An analyst at Sterne, Agee & Leach that has followed Boeing stated that he has hope that the dispute will be resolved with mediation. He notes that there has not been a strike by the SPEEA since 2000 and are rare.

Boeing states that it has offered a fair proposal in a tough economic environment. The new proposal would still cut back the growth rate of compensation of for both engineering and technical employees significantly. These disputes come at a time when Boeing has enjoyed record production rates and orders, and is looking to increase jet production from 52 to 60 per month.

Boeing's stock price only dropped 3 cents to $74.09 reflecting the opinion that this conflict will be resolved in the near future and will not cause any serious damage to Boeing's production.

-Rishi Chheda

New Hope for a Fiscal Cliff Solution

          

            President Barack Obama met with a group of CEOs from some of America’s largest companies yesterday regarding the upcoming fiscal cliff. Approximately 14 CEOs participated in the meeting, including Llyod Blankfein of Goldman Sachs, Joe Echevarria of Deloitte, and Marissa Mayer of Yahoo.

            The CEOs want the government to act fast before a combination of over $500 billion of spending cuts and tax hikes takes effect in 2013. Economists predict that the policies could cut GDP growth by up to four percent and raise unemployment by one percent, sending the US back into a recession. Losses from the economy are estimated at $280 billion from ending the Bush era tax cuts, $125 million from the expiration of the payroll-tax holiday, $40 million from expiring emergency unemployment benefits, and $98 billion from spending cuts under the Budget Control Act, as estimated by J.P. Morgan analysts.

            Republican and Democratic party leaders in Congress are currently at a gridlock over the relative levels of spending cuts and tax hikes. Obama along with the Democrats in the Senate are calling for around $80 billion in spending increases, while Republicans are resisting letting tax rates raise for Americans earning over $250,000.

            The general consensus among the CEOs was to allow tax rate increases for the richest Americans. Echevarria said that most CEO’s agreed that there needs to be a revenue increase. Business leaders agreeing to the tax increases could possibly cause Republicans to end their long standing opposition to tax increases, without fear of angering wealthy individuals. This new development increases the chances that a deal will be reached before the deadline, averting a financial disaster. Investor optimism for a deal caused the S&P 500 to increase 0.8% on Wednesday.

Ashish Sathe