A story was once told of a Jewish man who spotted a swampy area in a part of Lagos Nigeria.  He made a move for its purchase and the owners (Nigerians) laughed at him saying “can anything good come out of this”, that why would such a man indicate interest to purchase a swampy land.  After all said and done the land was sold at a give away price.  That same land was developed and today, it’s what is popularly referred to as Victoria Garden City.

          It is not just large companies that are finding opportunities in Africa, but also visionary entrepreneurs.  Success has been the testimony with the likes of Innscor, who leveraged on the poor socio-economic state of Zimbabwe and has successfully built conglomerates.  Bidco in Kenya has created an oil business with more than $160 million turnover, while building over 51 percent market share in Kenya, and the company exports oil, detergents and other products to more than a dozen African countries.  Bill Lynch, CEO of South Africa’s Imperial Holdings transport group, with annual turnover of $6.2billion, was born in rural Ireland.  Lynch was named Ernst and Young world Entrepreneur in 2006, He told the Financial Times in 2006, “if South Africa grows at the expected rate of 6percent, his business should grow at 15 – 20 percent over the next few years.

          As previously noted, Asian governments and companies have recognized the opportunities in Africa, as Chinese merchants and products are evident across Africa, from low-cost televisions, to generators, clothing, shoes and other appliances.  Jincheng motorcycles race across the roads and in Nigeria.  Indian and Pakistan traders sell leather, clothing etc in Johannesburg South Africa.  The same is being repeated in Algeria, Tunisia, Egypt, etc.

          “The growing African trade and investment by China and India, particularly in sub-Saharan countries, is one of the most significant features of recent developments in the global economy”.

Harry Broadman

World Bank Economist

          A sino-African Summit in 2006, brought representatives of virtually all African countries to Beijing, China, where she pledged $5 billion in loans and credits to Africa during the summit.  The same was duplicated in New Delhi, India, in an organized India – Africa summit in 2008, which brought about the set up of major companies like Tata, Mahindra, Kirloskar and Ranbaxyin Africa.

          We have been known to be a consumption economy, thereby managing depreciation, without a steady increase in production.  The real sector has been seen to be a major driver of growth, and whose opportunities can be leveraged upon for poverty reduction, unemployment reduction etc.  A few Nigerians are actively involved in productive activities while some lack the touch of excellence, others are not appreciated by the market.  Findings reveal that Nigerians prefer the purchase of foreign items compare to locally made goods. As we continue on this track, we would experience increased capital flights, where foreigners invade our markets, employ Nigerians to seat in offices and work under unhealthy weather conditions, make their money and repatriate these funds to their home country, at the expense of the growth of the Nigerian real sector, which is spurred by poor discretionary policy measures. Please ponder on these things, as we continue next week under the same discourse.  Have a great week ahead.

Obele Gospel Jesuite

CRO-Project Change Initiative

A 21^st Century Leadership, Organizational and Economic Development Strategist

For Comment, please visit Obele Jesuite on Facebook,

@ OBELEObele on twitter, Gospel_Obele@yahoo.com for emails,

or contact 08130070991.

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Columnist: Iyeomoan Emmanuel

In this maiden edition of the “POLITY POLICE”, let us together address some contemporary political issues that affect the economy and bring to light the forces of darkness militating against sustainable development in third world countries; Nigeria in particular. “For every aspiring-to-thrive nation, marriage between the economy and the polity must be blissful; a divorce of opinions between these two would mean a disintegration of growth-interests”. Any “aspiring to grow economy” can do so only in a system of administration and distribution having appropriate checks and balances.
The economic “big wigs” in this epoch of information; the US, Great Britain, France, Switzerland, and a few others, are at the fore-front due to the watchful eyes and critical minds of the populace. Thus, our contribution to political cum economic discourse determines the pace with which the economy grows. The growth of every modern economy like Singapore, Malaysia, Brazil, to mention but a few,  are evident from the contributions of individual Small and Medium Enterprises (SMEs); Corporate bodies (the private sector) and the government (in terms of creating the enabling environment). I observed that the contribution of the government is infinitesimal relative to the private sector. That notwithstanding, provision of basic amenities like electricity, water and housing by the government, are the motivators to economic vibrancy of the public sector; Nigeria should borrow a leaf from that. On that respect, “policing the polity is the surest-bet to securing economic harmony” in a country with divergent interest groups with diversified demands. Painstakingly, this article is tagged “irresponsive polity in a responsive economy”, as I bring to bare the nonchalant behaviour of actors in the polity that repel economic growth.
REDUNDANT HEALTH IN THE FACE OF ABUNDANT WEALTH
Third World countries will continue to grow retrogressively even in the face of “myriads of natural and human resources”, so long as there exist barricades to economic growth. I call problems- barricades, because I believe that they are propellants to growth. These “barricades to economic growth” are multifarious in nature and ubiquitous in our socio-political and economic terrain; vis-à-vis:
• Information secrecy: Many a public analysts will agree with me that the passage of the Freedom of Information (FOI) bill is a camouflage; and illusion from reality. How many political officials openly declare their financial worth, on assumption of office? Can an ordinary Nigerian walk into the Chief Statisticians office, or the Auditor-general’s, to gather information pertaining to the real state of the economy? All we see are media propaganda that gives a wrong impression on the health of the economy.
• Socio-political cum economic illiteracy: It is no news that Nigerians are becoming aware of happenings in the political sphere. Conversely, if you conduct a referendum, you’ll be shocked to know that majority of the youths (“would-be leaders” of tomorrow, which never comes) are ignorant of the devices of government mal-administrators and policy makers. During the “subsidy protest” in Lagos, I asked a handful of youths clustered around the Oshodi area of Lagos if they know the meaning of “subsidies or deregulation” and to my displeasure, I got a “no we don’t” answer for a reply. What a pity!
• Bureaucratic Insincerity: Due to the prevailing level of information secrecy, government officials pervert their political offices and get away with it; only those who refuse to play to the gallery of the “shadow godfathers” are probed and found wanting; James Ibori, the former Governor of Delta State is a case-study. For instance, we can remember the not too long cases of persons robbing the government and bailing themselves by settling an arm of the government; the judiciary to be precise. The bureaucratic nature of the civil service is another pain in the neck, as insincerity is brought to the fore on a daily basis. For example, a lump-sum meant to be distributed to some quarters, say, the local councils, pensioners and contractors, may loose the value of its zeros as it is transferred from one location to another. What can we say to all of these?
The Nigeria we are in today is just a mere delusion; a proper makeshift and a deviation from the master-plan of our founding fathers, who acted true federalism on the stage of economic abundance as we still have it today. Our resources are normally distributed, though there are some random disturbances to our growth model, which can be traced and treated with care.
Presently, the economy is caught in a web and the future looks bleak due to weak political and economic institutions and untreated issues of national concern; namely:
• Insecurity: Insecurity is a direct foe of investment and an indirect enemy of economic growth; it affects the GDP on a negative scale. The alarming state of insecurity in Nigeria is a topic on its own that this article is insufficient to expedite action on; that’s a topic for another day.
• Unstable supply of basic amenities:  The economy stagnates due to the insensitivity and insincerity of government to providing basic and essential amenities, which have a direct effect on economic growth. Thanks to the September 30 handover of ownership and distribution of electricity to the private sector; though, with unpaid remuneration of “to be laid-off staff” of the Power Holding Company of Nigeria (PHCN), which is an issue that may shake the foundations of the polity sooner than expected. Like every Oliver Twist and as the “oracle of the masses”, I say- ‘it is not enough to deregulate the power-sector without creating alternative jobs to laid-off workers”. Other sectors like the Petroleum sector still need then ever-ready helping hands of the private sector (deregulate at least, the downstream sub-sector of the petroleum industry). The reason why government would grin at deregulation of the petroleum sector boils down to greed. One the fastest means of lifting an economy from the dungeons of poverty is by government provision of essential amenities to the masses. The cost of doing business in Nigeria is fueling a generator, which is capital intensive. How can we grow in the face of these easy to be solved problems? Is the provision of basic amenities the citizens’ rights, or are they privileges enjoyed relative to their paid loyalty to the government of the day in terms of votes during elections? We all know the truth; let’s not shy away from it.
• Inconsistency of government policies: Since there is no friend in business and no permanent friend or enemy in Nigeria politics, policies are bound to change with each change in government. Uncompleted projects of previous governments will remain so with the inauguration of a new administration. We all know that the Yaradua’s 7-point agenda was replaced by the transformation agenda of the present administration. The next administration’s “agenda” is like a pregnant woman- we don’t know the name and form it will take; it may be a “national-restructuring agenda”. The government is dexterous when it comes to conning audibly-appealing acronyms and names for an agenda. How “sure” is “SURE-P” (Subsidy Reinvestment and Empowerment Programme? The shocking thing is that policies are changed, even when the same political party still controls power. What an ambiguity!
THE WAY FORWARD
Since the problem of the country is multi-faceted and thus, can’t be treated with a single blow, I make this clarion call to all Nigerians to stock themselves with information necessary to improving their lots in particular, and the nation én-large. The only way out of this cobweb-trap is personal capacity development. We can’t be waiting for an irresponsive government to put food on our tables. The Bible and Qu'ran posit that, “whatsoever your find your hands to do, do it with all thy might…” lets stop waiting for the government to tar the roads, build the bridges or give us pipe borne water, when we are uncultured. A defunct governor of Edo-state, Samuel Ogbemudia puts it this way; ‘if the government tar the roads and fail to tamed the persons that will ply the roads, the roads will be destroyed in a short-time, but if the government train the minds of the masses, they may end up building the roads themselves’. What a powerful quote! You all will agree with him.

Polity Police is your economic-watchdog of the polity and unravels the hidden secrets of government which are anti-growth. Remember, Nigeria was not built in a day and cannott be destroyed effortlessly. Together, we shall collectively build a virile economy, a steady polity and a better Nigeria anchored on sincerity of purpose and truth. In this regard, your comments and suggestions are anticipated and will be treated with umpteen confidentiality, if you so desire.
Thanks for your shared time.

© IYEOMOAN EMMANUEL EHIZOGIE
DEPARTMENT OF ECONOMICS AND STATISTICS,
UNIVERSITY OF BENIN, NIGERIA.

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Africa has more than 900 million consumers. Despite the challenges, every day they need to eat. They need clean water. They need shelter, Clothing and medicine. They want cell phones, bicycles, companies, automobiles and education for their children. Businesses are already seizing these opportunities to build markets across Africa.

New York Times, May 2006.

We are in a time and age where we are dealing with Nations that are major competitors for emerging economies that lack wisdom and many developing countries that have not articulated their own position of what they are seeking for. The resources of our Nation have been placed in our Nation, for the prosperity and upliftment of our people.

          Unfortunately, Africa though covering about 15% of the earth surface and two third of the world population with an estimate of 900million consumers, may be slipping into another brand of colonialism with its growing bilateral ties with china, dominating presence of European and American companies, increasing incursion of Indian firms and host of others. Trade between china and Africa is reputed to have increased more than six-fold during the past decade, rising to a record of $120bn in 2011.

The Chinese have not hidden their interest in Africa’s natural resources and seem to be putting their money where their mouth is by investing huge sums in Africa’s infrastructure. Roads and bridges are being built by Chinese firms at a good pace across the continent. From Liberia to Zimbabwe, Ethiopia to Sudan, Nigeria to Niger and Egypt. The Chinese have entered into business partnerships to increase their stand in Africa. Surprisingly, a substantial part of the manpower and material used for the project are imported from china. Beijing’s penchant for maintaining strict business relationships has endeared them to most Africa’s remaining dictators.

“It is clear to us that any global firm interested in growth must see Africa as an essential part of its portfolio”. 

E. Neville Isdell,

 Chairman and CEO , The Cola Cola Company USA.

Other companies are stepping up their presence in Africa. Unilever, facing increased competition and declining profits in the united states and Europe (where sales growth fell from 5 percent in 1998 to 0.7 percent in 2004), announced plans to step up its business in the developing world, including Africa, where it is already firmly established. Nestle caught between forecasts of growth of only 1.5 percent annually in developed market and its target of 5 percent to 6 percent organic growth, announced plans in 2006 to step up operations in west Africa and other developing markets to make up the difference

The Coca–Cola company which has been in Africa since 1928, has seen its business on the continent increase steadily over the past two decades, despite the ups and downs of individual countries. The company now sells 93 million servings of its beverages every day across Africa, generating about $4 - $5billion in system revenues for the company. As a sign of its development, in June 2007, Coca-Cola relocated its African headquarters from Windsor, United Kingdom to Johannesburg, South Africa.

“I believe that our business in Africa should be managed locally, by Coca-Cola associates who live and breathe the continent. Johannesburg is an ideal location for our new office since it has excellent business infrastructure network with the rest of the continent.”  

Muhtar kent

President and Chief Operating Officer, Coca-Cola Company

                                                                  

“On a per-unit basis, Africa is the third most profitable market in the world.

The African market is quite attractive for the company and for most multinationals if they look at it with the right lens. Most people only see the negatives of Africa. You have to get beyond the perception to see the opportunities. We estimate that 350 million to 500 million people would potentially be market for our products. That’s a lot of people. The returns in Africa are as good as, or better than, they are in a lot of BRIC countries (Brazil, Russia, India and China) in the medium and short term. And the African market is not as competitive as BRIC countries. We have a significant opportunity to shape beverages in Africa and see the results.”

Alex Cummings

 President, Africa Group of the Coca-Cola company.

I leave us this week with a question. Can only Africans save Africa? Cheers!

Obele Gospel Jesuite

CRO- Project Change Initiative 

          A 21^st century leadership, organizational and economic development strategist.

For comment, please visit Obele Jesuite on facebook, @OBELEObele, on twitter to Gospel _ obele@yahoo.com, or contact  08130070991. 

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Nigeria's Minister of Finance, Ngozi Okonjo-Iweala

If Nigeria and South Africa keep growing at their current paces, Nigeria could replace South Africa in the Group of 20 (G20) countries within nine years, according to Stanlib chief economist Kevin Lings. In a recent note he says: “It is entirely feasible that, by then, Nigeria’s economy will have overtaken South Africa’s, making it eligible for G20 membership, possibly at the expense of South Africa. “

The G20 is a group of 19 advanced and developing countries plus the EU, set up in 1999. South Africa is the only African country to be represented.

Lings points out that 20 years ago, the domestic economy was 7.5 times the size of the Nigerian economy, in dollar terms. But by the end of 2012 it was only 1.4 times the size of Nigeria’s.

“This narrowing of the gap is mainly because Nigeria’s economic growth rate has accelerated meaningfully in recent years, though off an extremely low base, while South Africa’s growth rate has moderated.”

According to Nigeria’s central bank, growth in gross domestic product (GDP) averaged 6.8 percent between 2005 and 2013. From 2005 until the global recession of 2008/09, South Africa’s growth rate averaged a little over 5 percent. Since then it has not topped 3.5 percent.

Nigeria’s central bank said the fastest growing segments were wholesale and retail trade, and telecommunications. Nigeria’s 170 million people make it the most populous country in Africa and the seventh-biggest in the world.

This creates a massive market, attracting investment from across its borders, including from South Africa, which is becoming increasingly aware of the opportunities in servicing this population.

In contrast, South Africa’s population is estimated at 51.1 million (5.7 percent of the population in sub-Saharan Africa), making it the fifth most populated country in Africa, Lings says.

Location, location, location

A study carried out by economists from Economic Information Services and led by Capetonian Barry Standish has “proved” that the property industry maxim “location, location, location” is spot on.

Standish’s team, commissioned by the V&A Waterfront to uncover its economic impact on the local environment, used the “Hedonic methodology”, which employs the comparative price per square metre to arrive at it findings that on average Cape Town’s waterfront increased neighbouring property values by R2.8 billion.

The study found that residential properties within a 1.5km radius of the waterfront were worth R123 056 more than similar properties elsewhere, and commercial properties were worth R1.14 million more.

Residential properties within the V&A Waterfront precinct were worth R3.6m more than similar properties elsewhere in Cape Town.

Standish reported: “There is anecdotal evidence to suggest the V&A Waterfront provided the catalyst for the significant upgrading of surrounding suburbs such as Green Point and De Waterkant.”

Reacting to these findings, V&A Waterfront chief executive David Green said: “Aside from the obvious benefit to property owners, the report also highlights the knock-on effect for the city of Cape Town in respect of property rates, which in turn has a benefit for residents and businesses in greater Cape Town. In addition to this ripple effect, the V&A Waterfront is the city’s largest ratepayer.’’

The total potential annual rates generated within a 1.5km radius of the waterfront has been estimated at just short of R250m in 2012. In more than 10 years, the waterfront had added nearly R200 billion to the GDP. It had created about 17 000 jobs directly and a further 16 000 indirectly.

Success also drives success. Recent residential sales for the new Silo residential development is 80 percent sold in little more than three months, which is about three times the pace at which developments are sold outside the waterfront.

It proves that the waterfront’s economic “ripple effect” works too.

Banking on reputation

Banks in South Africa have emerged from the global financial crisis with their reputations not only intact but generally enhanced.

It was not entirely of their own doing, of course, but they managed to avoid becoming embroiled in the sorry mess that was the subprime crisis. Thus there has been no discussion here of banks being too big to fail as there has been in Europe and the US.

However, when it comes to bank results’ season, it is impossible not to realise how big our banks are.

They are enormous and complex entities that have their fingers entwined in every aspect of the economy.

But, while it no doubt pleases the local regulators that they have big entities to oversee, the size of the four major banks makes it virtually impossible for journalists to do anything other than a superficial job in covering their results. Not so much a case of too big to fail as too big to cover.

The need to focus on the big picture means that lots of fascinating information tends to be overlooked.

Such as way back on page 90 of the FirstRand results released yesterday, you discover that “building and property development” has the highest rate of non-performing loans as a percentage of advances. It has 7.16 percent compared with mining, which has a rate of 0.54 percent.

Agriculture’s non-performing loan rate is down to 2.96 percent from 3.40 percent, which either means that the farmers are better off this year or that FirstRand has cut back its lending to them.

And then there’s the 2 500 innovations reported at FNB. This is an amazing “fact” and in line with what you’d expect from an innovation leader.

Of course, the big question for many FNB clients is whether or not its horrendous new website is included as one of the 2 500. page 19
- The Business Reporter

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The United States Trade and Development Agency (USTDA) has offered grant to Main One, to support a feasibility study on the extension of a fibre optic network from Lagos to Port Harcourt, Rivers State.
The grant will enable Main One to evaluate the technical and financial feasibility of extending 300 miles of undersea fibre optic cabling and supporting infrastructure between two of the country’s most important commercial centres.
Speaking at the signing ceremony of the initiative, USTDA Regional Director for sub-Saharan Africa, Paul Marin, said the project is important as it will help promote the drive for internet pentration in the country.
“This project is an important example of Main One’s commitment to bring high-speed broadband access to Africa. We are proud to be supporting Main One in their efforts to provide the infrastructure for broad-based economic growth in Nigeria,” he said. Marin was represented by the United States of America (USA) Consul General, Jeffrey Hawkins on the occasion.
Chief Executive Officer of Main One, Funke Opeke, said the grant will deepen the provision of broadband services in the Niger Delta region and boost the economy of the region. “We are appreciative to the USTDA for this important grant aimed at furthering the development of broadband services and economic development in the oil-producing Niger Delta region,” she said.
The grant was signed by Hawkins on behalf of USTDA and Opeke for Main One, at the residence of the Hawkins.
- The Nation

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President Goodluck Jonathan

President Goodluck Jonathan has reshuffled his cabinet, dropping nine ministers.
The ministers affected are Ruqayat Rufai (Education); Zainab Kunchi (Power, [state]); Buka Tijani (Agriculture [state]), Shamsudeen Usman (National Planning; Ita Okon (Science and Technology);  Olugbenga Ashiru (Foreign Affairs); Ama Pepple (Lands) and Hadiza Mailafia (Environment).

Nigerians had long expected President Jonathan to rejig his lackluster cabinet which has largely failed to deliver services to the Nigerian people.
But while the expectation mounted, Mr. Jonathan repeatedly  dispelled speculation that he had plans to fire non-performing ministers.
Last August, he unveiled a rating procedure known as Performance Contract Agreement for ministers but said he would not use the result of the assessment in considering who to fire.
Mr. Jonathan said the assessment would only appraise his administration’s performance and delivery of targets to Nigerians.
“I read all kinds of thing in the media, that the president wants to assess the ministers so that he would know who would go and who would stay. That is not the purpose of this.
“We would have done it probably in the first week when we came on board, but the key thing is that we have given ourselves points that we think we will get at, we believe that if we get at those points or even if we achieve 70 per cent of that, at least it will be better off for our own country,” the president said.
According to the president, the exercise was to ensure enhanced performance, transparency and accountability in governance, adding that it is not a witch-hunting exercise.
“I want to assure every one of you who has taken part in the exercise that this is not a witch-hunt targeted at anybody,” the president said in his remarks after the signing ceremony.
- Premiumtimes

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China's President, Xi Jinping

Kazakhstan and China will sign 22 agreements on Saturday worth a total of around $30 billion, including several deals in the key oil and gas sector, Kazakh President Nursultan Nazarbayev said.

“Among these (agreements) there are large-scale ones, including on cooperation in the oil and gas sector, which are essential for us,” Nazarbayev told a briefing after meeting with China’s President Xi Jinping.

“We have reached an agreement on building a new oil refinery (in Kazakhstan), which we need so much,” Nazarbayev said, without giving further detail.

Xi said the two sides had agreed on China’s shareholding in Kazakhstan’s giant Kashagan offshore oil project. Kazakh officials told Reuters earlier on Saturday that the package of agreements would include one on the purchase of an 8.33 percent stake in Kashagan by China’s state oil firm CNPC for around $5 billion.

One of the draft agreements, obtained by Reuters, would guarantee loans from The China Development Bank and The Export-Import Bank of China – worth respectively $3 billion and $5 billion – to Kazakhstan’s state holding Baiterek, which is charged with promoting innovation and industrial projects.
- Reuters

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Stephen Elop, CEO, Nokia Corporation 

Nokia was once the world’s dominant handset manufacture.
Two years after hitching its fate to Microsoft’s Windows Phone software, Nokia collapsed into the arms of the U.S. software giant, agreeing to sell its main handset business for 5.44 billion euros (N11.6 trillion).
Nokia, which will continue as a maker of networking equipment and holder of patents, was once the world’s dominant handset manufacturer but was long since overtaken by Apple and Samsung .
Nokia’s Canadian boss Stephen Elop who ran Microsoft’s business software division before jumping to Nokia in 2010, will now return to the U.S. firm as head of its mobile devices business.
He is being discussed as a possible replacement for Microsoft’s retiring CEO, Steve Ballmer, who is trying to remake the U.S. firm into a gadget and services company like Apple before he departs.
In three years under Mr. Elop, Nokia saw its market share collapse and its share price shrivel as investors bet heavily that his strategy would fail.
In 2011, after writing a memo that said Nokia was falling behind and lacked the in-house technology to catch up, Mr. Elop made the controversial decision to use his former firm Microsoft’s Windows Phone for smartphones, rather than Nokia’s own software or Google’s ubiquitous Android operating system.
Nokia, which had a 40 per cent share of the handset market in 2007, now has a mere 15 per cent market share, with an even smaller three per cent share in smartphones.
The sale of the handset business is not the first dramatic turn in the 148-year history of a company which has sold everything from television sets to rubber boots. But it was felt as a hard blow in its native Finland, even among hard-nosed investors who saw the sale as a final chance to salvage value.
“I have mixed feelings, because I’m a Finn. As a Finnish person, I cannot like this deal. It ends one chapter in this Nokia story,” said Juha Varis, Danske Capital’s senior portfolio manager whose fund owns Nokia shares.
“On the other hand, it was maybe the last opportunity to sell it.”
Mr. Varis was one of many investors critical of Mr. Elop’s decision to bet Nokia’s future in smartphones on Microsoft’s Windows phone software, which was praised by tech reviewers, but never caught on with consumers.
“So this is the outcome: the whole business for five billion euros. That’s peanuts compared to its history,” he said.
Finns lamented the decline of their former champion.
Finland’s minister for European Affairs and Foreign Trade, Alexander Stubb, said on his Twitter account, “For a lot of us Finns, including myself, Nokia phones are part of what we grew up with. Many first reactions to the deal will be emotional.”
It is also a pivotal moment for Microsoft, which still has huge revenues from its Windows computer operating system, Office suite of business software and the X-Box game console, but never managed to set up a profitable mobile device business.
Microsoft’s own mobile gadget, the Surface tablet, has sold tepidly since it was launched last year.
“It’s a bold step into the future — a win-win for employees, shareholders and consumers of both companies,”Mr. Ballmer said in a statement.
“Bringing these great teams together will accelerate Microsoft’s share and profits in phones and strengthen the overall opportunities for both Microsoft and our partners across our entire family of devices and services.”
The move leaves the Finnish company with Nokia Solutions and Networks, which competes with the likes of Ericsson and Huawei in telecoms equipment, as well as a navigation business and a broad portfolio of patents.
(Reuters/NAN)

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(Reuters) - The dollar fell against a basket of currencies on Friday, retreating from a three-week peak against the yen, as a steep drop in U.S. new home sales dented expectations that the Federal Reserve will reduce its asset-buying program next month.

The euro climbed above $1.34 after the data, edging back toward a six-month high set on Tuesday. Signs of an improving euro zone economy have buoyed the currency in recent weeks.

Sales of new U.S. homes slid 13.4 percent in July to their lowest in nine months, hurt by the rise in U.S. mortgage rates, suggesting an economy that may not be as robust as many people think.

"This report makes it look more likely that tapering will come later rather than sooner, perhaps under the leadership of a new Fed chair," said Douglas Borthwick, managing director of Chapdelaine Foreign Exchange in New York.

The dollar slipped 0.2 percent against a basket of six major currencies .DXY to 81.360.

Uncertainty about when the Fed will start reducing its $85-billion per month bond buying program has pressured the dollar in recent weeks. Minutes of the Fed's July meeting showed differences of opinion among members of the Federal Open Market Committee as to when the central bank should act.

Currency speculators pared their bets in favor of the U.S. dollar for a fifth consecutive week in the week ended August 20, data from the Commodity Futures Trading Commission showed on Friday.

The value of the dollar's net long position fell to $13.54 billion, the smallest in two months, from $17.62 billion the previous week. Speculators were bullish on the euro for a third straight week. <IMM/FX>

The euro rose 0.2 percent to $1.3383, helped by comments from European Central Bank policymaker Ewald Nowotny, who said he did not see much reason for the ECB to cut interest rates. He spoke after surveys showed euro zone economic activity quickening.

A second reading of German gross domestic product confirmed that Europe's biggest economy grew by 0.7 percent in the second quarter, helped by domestic demand, fueling optimism Europe's largest economy will outperform i 2013.

The recent pickup has pushed euro zone money market rates higher, and if sustained, is likely to challenge the effectiveness of the ECB's pledge to keep rates low until a full-fledged recovery is in place.

On the week, the euro was up 0.4 percent and 0.6 percent firmer so far in August.

The dollar slipped 0.1 percent to 98.68 yen after hitting a three-week high of 99.15 yen on the Reuters trading platform.

Despite the pullback, the dollar is still heavily favored by investors over the yen this year. The gap between two-year U.S. Treasury yields and their counterpart in Japanese government bonds moved to the widest since March 2012 and should encourage more investors in Japan to buy U.S. Treasuries, analysts said.

Sebastien Galy, currency strategist at Societe Generale in New York, said "there has been a tick-by-tick correlation between dollar/yen and U.S. bond yields, which has certainly supported that pair."

On the week, the dollar rose 1.1 percent against the yen. So far this year, the dollar has gained 13.7 percent against the yen.

The euro rose 0.1 percent to 131.97 yen, after touching a one-month high of 132.42.

The dollar also fell against other currencies, down 0.2 percent at 0.9211 Swiss franc. The Australian dollar gained 0.3 percent to #0.9033.

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Bill Maldonado, HSBC

The $1.5 trillion decline in equities in emerging markets has left South Korean and Chinese shares the most attractive for Bill Maldonado, who directs stock investments for HSBC Global Asset Management Ltd.

“It seems almost foolhardy in the face of the current volatility to be that positive but in reality, we are,” said Maldonado, Asia-Pacific chief investment officer for the unit of the London-based bank, which manages $413 billion. “The two big outliers today, which look both very cheap and very profitable, are China and Korea.”

While Korean profits are rising, slumping shares have made the benchmark Kospi index the cheapest in Asia, trading today at just 0.97 times the value of its constituents’ assets, Bloomberg reports. The ratio for China’s Shanghai Composite Index (SHCOMP) was 1.41 times, after falling in June to the lowest in 17 years.

Maldonado’s outlook for South Korea and China contrasts with growing doubts about India, where he’s weighing whether being bullish about investing in the nation was a mistake.

HSBC, Aberdeen Asset Management Ltd. and Baring Asset Management Ltd. say some developing-nation valuations are too compelling to ignore after the MSCI Emerging Markets Index slumped 13 percent this year through yesterday. That left it trading at 10.5 times estimated profit, compared with 15 for the Standard & Poor’s 500 Index.

While Asia’s role as the world’s growth engine is waning, economists surveyed by Bloomberg predict expansion of 6.3 percent across the region in 2013. That’s still more than triple the expected global rate.

Cheap Valuations Investors should also buy shares of banks, energy companies and other industries that benefit from a stronger economy, Maldonado said in an Aug. 21 interview in Hong
Kong. Energy stocks are the cheapest among the 10 industry groups in an MSCI gauge of equities in developed and emerging markets when prices are compared to forecast earnings.

Analysts expect companies in South Korea’s Kospi index to boost earnings per share by 58 percent in the next 12 months, according to data compiled by Bloomberg. The gauge climbed 1.1 percent today, while the Shanghai Composite Index declined 0.5 percent. The MSCI Asia Pacific Index advanced 1.1 percent as of 3:37 p.m. in Hong Kong.

China Mobile Ltd., the world’s largest phone company by users, in which HSBC Global Asset Management has invested, traded at 10.3 times estimated earnings yesterday compared with 13.6 times for AT&T Inc.

Growth Outlook The discrepancy in premiums between developed and emerging markets is due to investors preferring liquid large-cap stocks where they can get in and out easily, rather than a rebalancing of world growth or profitability, according to Maldonado.

Growth in emerging economies is still strong despite recent slowdowns, he said.

China, the world’s second-biggest economy, will increase output by 7.5 percent this year, from 7.8 percent in 2012, according to analyst estimates compiled by Bloomberg. India’s economy is expected to expand 5.4 percent in 2014, compared with 5.1 percent last year.

Emerging markets may outperform developed markets over five years, Aberdeen Asset’s chief investment officer, Anne Richards, said at a briefing in Sydney this week. The fund manager likes Indian stocks on their valuations and growth potential, Peter

Elston, Singapore-based head of Asia-Pacific strategy at Aberdeen Asset, told Bloomberg TV India on Aug. 16.

Chinese stocks are attractive as the risk of a sudden economic slump is receding and valuations trail other markets, Agnes Deng, head of Hong Kong and China equities at Baring Asset, said Aug. 12.
- BusinessDay

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Price movements at Tokyo Stock Exchange

(Reuters) - Emerging market currencies and shares fell on Thursday and the dollar rose as a spike in U.S. debt yields drove up borrowing costs globally, overwhelming the impact of buoyant economic reports from China and Europe.

However, with capital on the move back into developed markets, European shares and the euro bounced higher when the new business surveys confirmed expectations of strengthening recovery, lifting demand for banks and other financial stocks.

Driving the flight of funds were the minutes from the last U.S. Federal Reserve policy meeting, which left unchanged market expectations that the central bank would being to taper its asset-buying program as early as next month.

"It looks as if the minutes have done little to push back on market expectations for a Fed tapering," said Ian Stannard, head of European foreign exchange strategy at Morgan Stanley.

That sentiment sent the 10-year Treasury note yield to a two-year high of 2.905 percent on Thursday, and lifted the dollar against an index of the world's major currencies by 0.25 percent .DXY.

Emerging markets, which rely heavily on cheap dollars to fund large current account deficits, were hit hard by the rise in Treasury yields. The currencies of India and Turkey hit new record lows and their stock markets and bond prices also fell.

The currencies of Indonesia, Malaysia and Thailand all hit multi-year lows as well, while share markets across Asia outside Japan .MIAPJ0000PUS dropped 1.1 percent to a six-week low.

But as data from Germany showed Europe's largest economy expanding at its fastest pace since January, coming after a similar Chinese survey signaled expansion in world's No.2 economy, the euro rose and European shares gained.

The Markit preliminary composite Purchasing Managers' Index (PMI), which measures growth in both the manufacturing and services sector and covers more than two-thirds of the German economy, rose to 53.4 in August from 52.1 in July.

"It's an increasingly buoyant-looking picture, with manufacturing seeing its best performance for a couple of years, and alongside that there's an improving service sector, so exporters are doing well and the domestic economy is healing," said Chris Williamson, chief economist survey compiler Markit.

The euro hit $1.3360 after the PMI was released, while Europe's broad FTSE Eurofirst 300 index .FTEU3 jumped 0.7 percent, snapping three days of losses.

Germany's benchmark DAX .GDAXI index traded up 0.9 percent, while London's FTSE .FTSE was up nearly one percent.

The gains in Europe offset losses elsewhere to leave MSCI's world equity index .MIWD00000PUS, which tracks shares in 45 countries worldwide, virtually flat but near six-week lows.

The data, especially the upbeat Chinese numbers, helped industrial commodities to rally, with copper up 2.0 percent at $7,385 a tonne (1.1023 ton). Gold, bothered more by the risk of Fed tapering and rising bond yields, backtracked to be little changed at $1,370 an ounce.

HSBC said its preliminary purchasing managers' index for China rose to 50.1 in August, a five-month high and just above the 50 level that separates growth from contraction.

Brent crude held above $110 a barrel on hopes for better demand from the Chinese survey, though signs that OPEC producer Libya may resume exports dragged on price. U.S. crude oil futures were up 81 cents to $104.66 a barrel.

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(Reuters) - Hewlett-Packard Co shuffled its top ranks on Wednesday, reassigning a star executive to a new role identifying potential acquisitions, as the world's largest personal computer maker reported a larger-than-expected slide in revenue and forecast zero sales growth next year.

Its shares dropped 5 percent in after-hours trading.

The Silicon Valley stalwart, which has been undergoing a radical reshaping under Chief Executive Meg Whitman for the past two years, is looking for ways to escape the decline in PC sales as tablets and smartphones revolutionize computing.

Whitman, who said in May that fiscal 2014 revenue growth was still possible, told analysts on a Wednesday conference call that growth next year was now "unlikely" given the poor performance of the Enterprise Group and PC divisions.

"My read was that fiscal 2014 growth was a stretch goal rather than a baseline assumption," said Shebly Seyrafi, an analyst at FBN Securities. "That has become more challenging."

To meet that challenge, Whitman made a key personnel move on Wednesday, replacing Dave Donatelli with Bill Veghte at the helm of HP's second-largest business division, the Enterprise Group.

Donatelli, a rising star that Wall Street analysts once considered a candidate for a tech CEO position, relinquishes his post as chief of the unit, which sells server, storage and software services to large organizations. He will now focus on identifying early-stage technologies for investment, the company said.

The executive engineered some of the company's most significant acquisitions in past years, including of 3Com and 3PAR, which helped catapult HP deeper into the networking and storage markets, respectively.

Whitman told analysts on the conference call the computing giant was "back in the market" for strategic acquisitions, which she saw as essential to a continued transformation.

Veghte takes over immediately as head of the division, and will not be replaced as HP's chief operating officer. Veghte joined HP in 2010 after a 20-year career at Microsoft Corp, which culminated in his heading the business side of the Windows unit. He also worked on developing and marketing Microsoft's server software.

REVENUE SLIDES

CEO Whitman, who took the reins at HP in September 2011, is trying to revive the company after years of board turmoil and a backdrop of rapidly declining global PC sales, but has not yet halted revenue declines.

Donatelli is the latest executive with a strategic role to have been replaced. In June, HP moved PC division chief Todd Bradley into a new job aimed at improving its China business and distribution relationships around the world, a move many analysts deemed a demotion.

The Enterprise Group is HP's largest business unit after personal computers, and is a critical component of Whitman's efforts to boost margins and profitability, while trying to minimize revenue declines.

The division, which recorded a 9 percent decline in sales in the latest quarter, accounts for about a quarter of the company's overall sales.

In all, the company recorded revenue of $27.2 billion in the fiscal third quarter, down from $29.7 billion a year earlier, as PC sales continued to slide amid a shift toward mobile computing, and its enterprise business grappled with tepid worldwide information technology spending.

It missed the $27.3 billion in sales that Wall Street had expected, on average.

Overall net income in the quarter came to $1.39 billion or 71 cents a share, compared with an $8.9 billion loss a year earlier when the company swallowed a big writedown of the IT outsourcing business it inherited when it bought Electronic Data Systems for close to $14 billion in 2008.

Excluding one-time items, the company earned 86 cents a share, matching the 86 cents average forecast by analysts on Thomson Reuters I/B/E/S.

Shares in the company slid more than 5 percent to $24.07 in after hours trade, from a close of $25.38 on the New York Stock Exchange.

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Former Egyptian President, Hosni Mubarak

(Reuters) - Deposed Egyptian leader Hosni Mubarak could leave prison on Thursday after a court ruling that further divided a country in turmoil since the army toppled Islamist President Mohamed Mursi seven weeks ago.

Convening at the Cairo jail where Mubarak is held, the court ordered the release of the military man who ruled Egypt for 30 years with an iron fist until he was overthrown during the uprisings that swept the Arab world in early 2011.

The prime minister's office said he would then be placed under house arrest, which could be an attempt to placate the many who will object to the release of the man they held mass protests to eject in 2011.

Citing a security source, the state news agency said Mubarak was "likely" to be transported to one of the state's vital installations or one of two military hospitals where he will be guarded under heavy security.

Mubarak, 85, was sentenced to life in prison last year for failing to prevent the killing of demonstrators. But a court accepted his appeal earlier this year and ordered a retrial.

The ailing former air force pilot probably has no political future, but the court ruling made some Egyptians uncomfortable.

"His regime was foul. He damaged the country a lot. Unemployment high, no services, no health, no education. This is not a good day for the country," said Hassan Mohamed, 66, an engineer.

Refilling juice cartons in a convenience store, Amr Fathi also expressed disappointment. "I'm not happy, of course. He oppressed us a lot back in the day," he said.

Political upheaval triggered by Mursi's overthrow on July 3 has kept many Egyptians anxious. The military announced a road map designed to bring democracy back to Egypt but this has not created a sense of stability in the Arab world's biggest nation.

At least 900 people, including 100 soldiers and police, have been killed in a crackdown on Mursi supporters since last week, making it the country's bloodiest internal episode in decades.

The clampdown, which has included the arrests of top leaders of Mursi's Muslim Brotherhood, appears to have weakened the Arab world's oldest and arguably most influential Islamist group.

It has been struggling to get people onto the streets to protest what it calls a military coup since security crushed pro-Mursi protest camps in Cairo. Security forces arrested a Muslim Brotherhood spokesman, Ahmed Aref, early on Thursday, the state news agency reported.

Brotherhood supporters have called on Egyptians to hold "Friday of Martyrs" marches against the military takeover.

A grouping calling itself The National Coalition to Support Legitimacy, which has been demanding Mursi's reinstatement, said in a statement: "We will remain steadfast on the road to defeating the military coup."

Mubarak's release from jail would reinforce the Brotherhood's view that the armed forces, led by General Abdel Fattah al-Sisi, are trying to rehabilitate the old government.

"A GREAT MAN"

Mubarak is still being retried on charges of complicity in the killing of protesters during the revolt against him, but he has already served the maximum pretrial detention in that case.

The court ruling removed the last legal ground for his imprisonment in connection with a corruption case, following a similar decision in another corruption case on Monday. Mubarak will not be allowed to leave Egypt and his assets remain frozen.

Some Egyptians were happy to hear Mubarak could soon leave Cairo's Tora prison, where many of his enemies were jailed during his ruthless crackdowns on Islamists.

"He was a great man; he shouldn't be in prison. He is an old man," said Ibtisaam, 19. "Under Mubarak, we lived in safety. Now anyone can come up to us, thugs and all."

Egypt has suffered a deterioration in law and order since Mubarak was toppled. Political violence that erupted after Mursi's fall has also made Egyptians uneasy.

It is likely to drag on, with the authorities vowing to wipe out "terrorism", and the Muslim Brotherhood refusing to give up the fight to bring Mursi back to power.

The United States and the European Union are both reviewing aid to Cairo in light of the bloodshed, but Saudi Arabia, an enemy of the Brotherhood, has promised to make up any shortfall.

The European Union stopped short of agreeing immediate cuts in financial or military assistance to Cairo on Wednesday, as the bloc's foreign ministers held emergency talks to find ways to help bring an end to violence in Egypt.

The decision acknowledges Europe's limited economic muscle in forcing Egypt's army-backed rulers and the Muslim Brotherhood supporters of Morsi into a peaceful compromise.

It also reflects a concern that abruptly cutting aid could shut off dialogue with Cairo's military rulers and damage Europe's ability to mediate in any future negotiations to end the worst internal strife in Egypt's modern history.

Egypt has said repeatedly it does not want foreign powers to interfere in the standoff with the Brotherhood.

"Egypt can never accept an interference in its sovereignty or the independence of its decisions or an interference in its internal affairs," said Egyptian Foreign Minister Nabil Fahmy in a statement after the EU talks.

"The only standard that rules Egypt's decisions is the supreme interest of the country and its national security."

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Kaushik Basu

(Reuters) - India does not need to seek a line of credit from the International Monetary Fund (IMF) to help fix the economy, World Bank chief economist Kaushik Basu said in New Delhi on Monday, on the same day the rupee fell to another record low.

"I don't think that we are in a situation where there is any need for that," Basu told reporters after giving a lecture in the Indian capital, when asked whether India should ask the IMF for money. "India has enough foreign exchange reserves, so the question of having to turn to the IMF is not there."

The rupee fell despite a series of measures unveiled last week to try to stall its decline. The rupee has been the worst performer in Asia since late May, when the U.S. Federal Reserve first signaled that it may begin tapering its monetary stimulus this year, sparking an exodus of cheap money from emerging markets worldwide.

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Sierra Leonean President, Ernest Bai Koroma

Sierra Leone exported $102 million worth of diamonds in the first half of 2013, up from $71 million in the same period last year, largely due to higher output from the country’s main producer, the National Mineral Agency said on Friday.

 The government collected $5.1 million in taxes in line with the mining code’s 5 percent levy on exports, highlighting progress in channelling diamond revenues through the government. “At the end of the first half of 2013, exports exceeded those of 2012 by 42.95 percent, an improvement of $30.71 million,” Ibrahim Mohmed, who oversees the diamond sector at the NMA, told Reuters.

 ”The total diamonds exported amounted to 331,471 carats valued at $102,205,588,” he said. Sierra Leone exported 296,334 carats of diamonds in 2012. The NMA said that increased production from Koidu Holdings had been primarily responsible for the rise in output.

 Koidu is Sierra Leone’s only commercial pit mining operation. It is privately-owned by Israeli diamond trader Beny Steinmetz’s BSG Resources through its Octea diamond unit.

 Kimberlite, or industrial, production accounted for 62 percent of the diamond exports with a total of 205,834 carats over the six month period. Other artisanal production accounted for the rest, producing some 125,637 carats.

 The United Nations in 2003 lifted a worldwide ban on diamonds exported from Sierra Leone and the country is now a member of the Kimberley Process.

 The Kimberley Process certification scheme was established by the industry, producer countries and civil society groups in the wake of diamond-fueled wars in Angola, Sierra Leone and Liberia to ensure that revenues from diamonds sold on the world market were not financing violence.

- BusinessDay

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Facebook CEO, Mark Zuckerberg

Facebook, the world’s largest social networking company, is planning to test a new mobile payment feature.

It will use payment details added by users to their Facebook account to automatically fill in forms when they make purchases on mobile applications, the BBC reports.

Various companies have been looking to tap into mobile payments markets.

However, Facebook said the feature would not involve moving the payment processing away from an app’s current service provider.

“This product is simply to test how we can help our app partners provide a simpler commerce experience,” Facebook’s spokeswoman Tera Randall said in a statement.

She added that the firm has a “great relationship” with PayPal, one of the biggest processors of online payments.

Fantastic move

This feature will help them demonstrate to the advertisers the effectiveness of its platform in driving revenue.”

Facebook has more than a billion members and half log in daily. Its popularity has seen it attract advertisers keen to tap into the potential consumer pool.

According to its latest earnings report, it generated advertising revenue of $1.6bn (£1bn) in the April to June quarter this year.

Analysts said that if the site does eventually launch the payment feature it will help it track how many of its users actually purchased items from partner applications.

“Facebook does not want to remain just a platform for brand promotion and lead generation, but it wants to become the place where e-commerce deals actually happen,” Manoj Menon, Managing Director of consulting firm Frost & Sullivan told the BBC.

“This feature will help them demonstrate to the advertisers the effectiveness of its platform in driving revenue. It is a fantastic move by Facebook,” he added.

However, some analysts were sceptical if users would trust a social networking site with their financial information.

“Consumers want safe, seamless and convenient mobile payments and there are a growing number of competitors that consumers trust more, such as PayPal, Visa (V.me) and others,’ said Denee Carrington, an analyst with Forrester Research.

 - BusinessDay

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BlackBerry Ltd. (BB) Chief Executive Officer Thorsten Heins

BlackBerry Ltd. (BB) Chief Executive Officer Thorsten Heins stands to make $55.6 million if he sells the company and is ousted.  That’s the amount he’s entitled to receive if BlackBerry has a change of control and Heins is pushed out by the new owners, according to a May proxy filing, Bloomberg report.

  The figure, which includes salary, incentive payments and equity awards, is based on BlackBerry’s stock price at the end of the fiscal fourth quarter, Bloomberg reports. The plan was approved by shareholders at its annual meeting on July 9.

 Shares of BlackBerry have surged 19 percent in the past week on speculation that the struggling Canadian smartphone maker will be bought, broken up or taken private, bringing a windfall to investors.

 The Waterloo, Ontario-based company announced plans on Aug. 12 to form a board committee to consider a potential sale, as well as joint ventures and partnerships.  Prem Watsa, a Toronto businessman and BlackBerry’s largest shareholder, is stepping down from the board, fueling speculation that he may play a role in rescuing the company.

 Still, finding potential buyers may not be easy. BlackBerry bankers JPMorgan Chase & Co. (JPM) and RBC Capital Markets quietly contacted possible bidders for almost a year and found little interest in acquiring the company, said two people familiar with those discussions.

 Change of Control  If Heins is terminated without a change of control, he is entitled to $22 million in salary, incentive payments and equity awards, based on the March 28 share price. The payout would include his base salary of $3 million and about $72,000 in benefits and retirement savings. He also is eligible for an annual incentive payment of $2.8 million, which climbs to $4.5 million in a change-of-control scenario.

 The equity awards are valued at $16.1 million if he’s simply terminated and $48 million if it happens at the hands of new owners. The documents don’t specify what might occur in a more complex breakup situation.  Despite the stock’s recent surge, the shares remain 24 percent below the March 28 price on which the company’s payout scenario was calculated.

 Adjusting for the difference, Heins would be eligible for a payout of about $44 million, according to Bloomberg calculations. The shares have declined 7.7 percent since the start of the year.  Adam Emery, a spokesman for BlackBerry, declined to comment on the package.

 Heins was named CEO in January 2012, replacing co-founders and co-CEOs Mike Lazaridis and Jim Balsillie, who stepped down after shareholders demanded a management shakeup. At the time, Heins was the company’s chief operating officer, having joined BlackBerry in 2007 after more than two decades at Siemens AG. (SIE)

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Cisco Systems Inc. (CSCO), the biggest maker of networking equipment, said it’s cutting about 5 percent of its workforce after issuing a fiscal first-quarter sales forecast that missed most analysts’ estimates.

Cisco is eliminating 4,000 jobs as weaker sales in Japan, China and Europe weigh on revenue growth, Chief Executive Officer, John Chambers said on a conference call Thursday. Revenue for the current quarter through October will be $12.2 billion to $12.5 billion, the San Jose, California-based company said in a statement. Analysts on average were projecting sales of $12.5 billion for the current period, Bloomberg reports.

Chambers is grappling with concerns that Cisco’s growth rate may slow as companies and network operators postpone costly overhauls of their networks. The results suggest the CEO is struggling to deliver on his turnaround plan for the company, said Bill Kreher, an analyst at Edward Jones & Co. in St. Louis, Missouri.

“The guidance is below the long-term plan, which can be concerning,” said Kreher, who has a hold rating on Cisco shares. “Cisco has eliminated low-hanging fruit and has effectively managed their costs, but looking forward, the company must continually find ways to generate new sources of revenue.”

Cisco fell as much as 11 percent in extended trading. The shares advanced less than 1 percent to $26.38 the close in New York, leaving them up 34 percent this year.

Global Impact

While Cisco is benefiting from growing use of Web video and mobile devices that strain data networks and require the purchase of more routers, switches and servers, that hasn’t been enough to make up for weaker sales outside the U.S. Slower world economic growth impacts Cisco because the company gets 42 percent of its sales outside the U.S. and Canada, according to data compiled by Bloomberg.

“I’m real pleased with our momentum in the market — it’s just not growing as fast as we need,” Chambers said on the call.

Profit excluding some items was 52 cents a share in the fiscal fourth quarter, while revenue rose 6 percent to $12.4 billion. Analysts on average had projected profit of 51 cents and sales of $12.4 billion, according to data compiled by Bloomberg.

With the new cuts, Cisco will have eliminated 12,300 jobs over the past two years as it has exited consumer businesses while expanding on corporate software and technology services, including cuts of 500 jobs announced in March.

Net income rose 18 percent to $2.27 billion, or 42 cents a share, from $1.92 billion, or 36 cents, a year earlier.

Competitive Pressure

“If there’s something wrong somewhere in Cisco, given how well things have been going, investors would expect Cisco to make up the difference somewhere else,” said Jayson Noland, an analyst at Robert W. Baird & Co. in San Francisco who has an outperform rating on the stock, the equivalent of a buy.

Cisco is also facing increased competition from companies including Palo Alto Networks Inc. (PANW), Arista Networks Inc. and Huawei Technologies Co. in its core routing and switching markets, as well as security.

Margins are also narrowing. Gross profit margin in the just-ended fiscal year was 60.6 percent, down from 70.1 percent a decade ago.

Another reason for weaker profit growth and margins is Cisco’s entry into the computer-server business, where prices and margins are lower. It’s also expanding into markets such as computer security, where Cisco faces specialized competitors with advanced technologies. In July Cisco agreed to buy Sourcefire Inc., a maker of anti-hacking technology used by the U.S. government, for $2.7 billion.

Sourcefire competes with companies such as Palo Alto Networks and Fortinet Inc. (FTNT) Over the past three years, Cisco has spent $10.61 billion buying 59 companies, including $5 billion last year on NDS Group Ltd., whose technologies are used to deliver and secure pay-TV content, according to data compiled by Bloomberg.
- BusinessDay

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