Business this week: 27th January – 2nd February 2007

Business this week

Feb 1st 2007
From The Economist print edition

The New York Stock Exchange and the Tokyo Stock Exchange announced an alliance. The partnership covers trading-systems technology, investor services and regulation and is the latest expansive move into foreign markets by the NYSE, which is acquiring Euronext and recently took a stake in India’s National Stock Exchange. For Japan’s biggest stockmarket, the pact should help boost market confidence, which has been dented by a series of technical mishaps in its trading operations. See article

Citigroup agreed to buy Egg, an online bank, from Prudential, a British insurer, for £575m ($1.1 billion). Egg’s sale price is much less than the £950m Prudential had said it was worth a year ago when Egg’s minority shareholders were bought out. The bank made a loss of £145m last year, but Citigroup hopes that combining it with its own British consumer operations will prove a boon. See article

Deutsche Bank had a record year; its annual net profit rose by 70% to euro6 billion ($7.8 billion) in 2006, partly on the back of a resurgence in its investment banking business.

Climb every mountain

With $6 billion in development costs and a delay of some two years behind it, Windows Vista finally went on sale to consumers. Microsoft’s latest operating system, its first since XP in 2001, has better security and new navigational designs. Bill Gates, the company’s chairman, promised PC users that “the wow starts now”; analysts said they would sooner wait for Vista’s sales figures.

Dell’s chairman, Michael Dell, returned to his old job of chief executive after Kevin Rollins was dismissed. The computer-maker is trying to reboot its business in response to sliding market share and slowing growth. Investors were heartened by the news. See article

Google’s fourth-quarter net income nearly tripled compared with a year earlier, to $1 billion (its annual profit for 2006 doubled to $3.1 billion). The company is prospering from website advertising revenue; the number of paid clicks rose by 61% in the quarter. However, Google’s share price came under pressure after analysts cautioned its future profits might be hurt if it over-extended its new business.

US Airways withdrew its hostile $9.8 billion offer for Delta Air Lines after Delta’s creditors threw their support behind the bankrupt carrier’s reorganisation plan. Delta and its pilots’ union insist the company has a future as an independent airline, but the bid has raised speculation about more attempts at consolidation in the industry.

The empire strikes back

India’s Tata Steel beat Brazil’s CSN in the bidding for Corus, an Anglo-Dutch steelmaker, so creating the world’s fifth-largest steel company. Formed in 1999 from the remnants of British Steel, Corus is India’s biggest foreign takeover. But Tata’s share price fell sharply amid concern that the price it is paying, £6.2 billion ($12.2 billion), is too high.

US Steel said its annual net profit last year rose by more than 50%, to $1.4 billion. The company’s European operations helped compensate for a rise in cheaper steel imports and falling demand from carmakers in America.

Altria made a long-awaited decision to spin off Kraft Foods. The idea was first mooted more than two years ago, but was delayed while Altria fought litigation about its Philip Morris tobacco business. Kraft’s sales have been languishing of late, partly because of the trend towards healthier foods; the decision to divest the company will put an additional 1.5 billion of its shares in the market.

Ford reported an annual loss of $12.7 billion, its biggest ever, on January 25th. The carmaker is suffering from a persistent decline in sales and is busily restructuring itself. Meanwhile, General Motors said it would delay announcing its results because of accounting errors.

Manchester won the competition to host Britain’s first Las Vegas-style “super-casino”. The city was chosen by the independent Casino Advisory Panel over more high-profile bids, including one led by Philip Anschutz, an investor, for a casino at London’s Millennium Dome.

Hank Paulson, America’s treasury secretary, told the Senate Banking Committee that he would like eventually to see a “fully market-determined, floating Chinese currency”. The new Congress has made no secret of its irritation at China’s stance on trade and exchange rates.

Shopaholics

America’s GDP grew at an annualised rate of 3.5% in the fourth quarter, which was stronger than expected (the economy grew by 3.4% for the whole of 2006). A surge in consumer spending, helped by falling energy prices, boosted the figure. See article