Archive | April 16, 2013

At Goldman, the Average Pay for Three Months Is $135,594

Despite an effort by Goldman Sachs to keep compensation costs low, its earning statement, which was released today, revealed that the company paid $4.34 billion to its employees in the first three months of 2013.  That equates to an average of $135,594 per person in a company with 32,000 employees.  It is also worth noting that the wages of lower-level employees like secretaries and other supporting staff members weigh down this number drastically.  Chief Executive Officer Lloyd Blankfein claims that it is hard to cut wages because top performers will move to private equity or “more nimble investment banks.”  To offset the high wages, Blankfein has decreased employment by 400 people between the first quarter of this year and the first quarter of last year.  The result has been a decrease of compensation costs by more than a third, as well as a 26% decrease in revenue.  Meanwhile, Blankfein received a stock bonus of $13.3 million.

After the trouble Goldman Sachs got into in the recent past, I would expect the company’s managerial staff and higher-level employees to see pay decreases.  However, the company has unfortunately laid off workers to make up for the still outrageously high wages of upper-level employees.

Written by: Constantine Kostikas

Source: Businessweek.com

Goldman Sachs To Operate In London

Goldman Sachs started its business in the United States, and has recently been granted permission to run a bank in the UK. The new Goldman Sachs branch will provide services in deposits, investment advisement and asset management. Goldman Sachs is now opening up to more possibilities in commercial banking as opposed to staying strictly with investment banking. Goldman Sachs is very satisfied with the approval of their branch in London and is looking forward to conducting business there.

Goldman Sachs already holds an extreme importance on the United States economy, and since the American economy is so vital to the global economy, many can say that Goldman Sachs already holds an important position on the global economy. The recent addition of the branch in London is expanding Goldman Sachs’ importance and impact on the global economy since it can now officially operate in another country. I now expect for Goldman Sachs to be expanding to even more countries internationally, and this would cause Goldman Sachs to hold an intrusive amount of power on the global economy.

Written by: Jessica Ho
Source: The Wall Street Journal

http://online.wsj.com/article/SB10001424127887324030704578426782126301400.html?KEYWORDS=Goldman+Sachs+Bank+Gets+UK+License

Coca-Cola Posts Lower Net, Unveils New U.S. Bottler Deal

Coca-Cola Co. is choosing to revert back to independent bottlers in less than three years after they made a billion of dollars deal on hands-on packaging their own drinks.  Their recent first-quarter earnings also show that they have reached a new fifteen-year high with their shares up 5% with a stock price of $42.09.  In 2010, both Coca-Cola and their rival PepsiCo Inc., acquired large portions of their bottling operations. For the future of the company, they plan on owning their own bottling system that occurs from coast to coast with a system that puts it into cans and bottles. The five bottling companies, Coca-Cola Bottling Co. Consolidated, United Inc., High Country, High Country and Corinth Coco-Cola Bottling Works Inc., and Swire Coca-Cola USA, would have contracts for ten years, then possible renewals. The company is doing well internationally as well as in the Americas because its overall first-quarter sales volume rose 4%, which is still surprising since there has been an offset of weakness in sodas due to still beverages.

I think that if Coca-Cola has seen positive numbers and an increase in their numbers after returning back to their independent bottlers, they should continue to follow through with this new deal. When a company is able to own and manage their own bottling system, it would be easier for them to keep track of the information of how much they are distributing, as well as using trucks, coolers, and other equipment to distribute the products elsewhere.

Written by: Samantha Chin

Source: The Wall Street Journal

http://online.wsj.com/article/SB10001424127887323346304578426353333540848.html?mod=WSJ_business_whatsNews

An Unbowed Goldman Reports Profit Growth, but Caution Remains

At the top of the investment banks stand Goldman Sachs and JPMorgan, with the former recently announcing earnings that beat expectations. The interpretation of the results, however, creates a larger picture of the bank that creates doubt and uncertainty.

The sources of revenue for Goldman Sachs were closely analyzed, and it is very important to investors given that the bank’s future is still highly unstable. A large portion of the revenue in the first-quarter was “from investments that tended to fluctuate in value,” meaning that the earnings may have been merely good timing. Another area is fixed income, which, unlike other banks, Goldman Sachs remained in, and the bank continues to pull substantial amounts of revenue from the area. Also, “the core business unit that has produced many of Goldman’s leaders and has helped define its culture — the powerful division that trades bonds, currencies and commodities — produced lower year-over-year results for the first three months of the year.” Investment banking, in contrast, was up 36 percent.

The shift in revenue sources for the banks is huge in determining how they will perform in the future, and it is not looking good for Goldman Sachs. They still draw a lot of revenue from areas that are facing increased regulations that are constantly changing, and the once powerful bond, currencies, and commodities is no longer a stable base for the bank. The biggest growth lies in investment banking, which can face a wide range of highs and lows, leaving little to be accurately depicted in terms of future revenue.

Source:

http://dealbook.nytimes.com/2013/04/16/goldman-sachss-first-quarter-profit-beats-estimates/?ref=business

SoftBank Can Win By Losing Sprint

It seems like whenever we talk about American phone companies, we seem to only talk about Verizon Wireless and AT&T. But Softbank, a Japanese company, has their eyes on Sprint. They are deciding on a $20 billion dollar deal to get the control of Sprint. The merger agreements mentions that if Sprint backs out of this deal that SoftBank would receive $600 million. Softbank is not Sprint’s suitor, Dish has also made an offer for $25.5 billion.

I did not think Sprint is a hot commodity for investors, AT&T and Verizon dominates the telecommunications. According to this article, that Softbank would not be a loser with losing this bid for Sprint. Only time would tell to see who would be the actual winner of this deal but as of now Sprint has a tough decision to make as it could change their whole company’s direction.

-Derby Ng

http://blogs.wsj.com/moneybeat/2013/04/16/softbank-can-win-by-losing-sprint/

 

AMR, US Airways Forecast Big Profits

The airline industry has fared poorly in recent years; a factor contributing to the mergers of several large companies including American Airlines and US Airways Group. AMR Corp., the parent company of American Airlines announced today that they expect the merger to earn a profit of $2.6 billion this year. Total revenue is forecasted to reach $40.91 billion and is expected to hit $47.83 billion in 2017. One of the biggest factors in long range planning and projections for the company’s performance is oil prices; which are highly volatile. Fuel prices will be the company’s biggest cost with estimations reaching 13.4 billion this year and 13.1 billion in 2017.

AMR went bankrupt in late November 2011 and agreed to merge with U.S. airways two months ago. Their merger made them the largest airline in the world although $1.2 billion will be spent in transition cost over the next 3 years.

Evan Chang

Source: The Wall Street Journal

http://online.wsj.com/article/SB10001424127887324030704578426840496206824.html?mod=WSJ_business_whatsNews

Markets Losing Their Luster

This week has been quite hectic; after falling 9 percent on Monday, the price of gold had reached its sharpest drop in 30 years, threatening the faith on investors. At the same time, the decline of gold led a broader sell off in commodities and stock markets, the S&P index dropped 2.3 percent, crude oil prices per barrel dropped to $90 and copper prices reached a 17 month low. In addition, disappointment over Chinese economic growth was based on the fact that it only expanded 7.7 percent compared to 7.9 percent from last year, indicating that China’s demand for industrial material would lessen. The U.S. stock market was also affected negatively by weak manufacturing and the explosions in Boston, but gold took the spotlight for this week.

After a decade long rally, gold is now going through a reversal. Ever since prices reached a high of $1,888 an ounce in August 2011, prices have been on a downward slope, and last Friday, it dropped another 4 percent, which officially put gold into a bear market, which is defined as a 20 percent drop from its recent high.

 

Written by Kevin Zhang

Source:

http://dealbook.nytimes.com/2013/04/15/golds-plunge-shakes-confidence-in-a-haven/

Penney Has Some Persuading to Do

J.C. Penney one of the biggest retailers is struggling to operate their business. The company’s decline in sales is making it hard for the company to cover cost and pay their suppliers. Suppliers who are skeptical of J.C. Penney’s ability to pay for the supplies want the supplies to be paid for quicker which can severely hurt the business operation. Having to pay off suppliers immediately would significantly reduce the amount of cash flow available to the company. Not having a strong cash flow is one of the biggest problems in a business and also the main reason why many companies have gone down. Circuit City is a prime example of a company that collapsed several years ago due to the stricter payment terms which led them into bankruptcy. To prevent this from happening, J.C. Penney has borrowed another $850 million from a credit line to increase their cash flow to around 1.85 billion.

Borrowing another $850 million from a credit line was a good approach for J.C. Penney to prevent the company from collapsing. With more cash available, suppliers will be less nervous about defaulting payments. The $850 could be used as emergency funds only if the company could turn around and make enough profits to cover their operating costs. J.C. Penney could also sell new shares of stock to raise more money but this method will lower their stock prices which might not be a good thing either.

Written by: Wilson Tang

Source:

http://dealbook.nytimes.com/2013/04/15/pre-emptive-moves-should-help-j-c-penney-shore-up-cash-position/

Ford Outsells Toyota in China as $4.9 Billion Bet Pays

Ford’s earlier decision to move into global markets has shown positive outcomes. The Ford Focus has helped Ford Motor Co. increase sales by 54%. The figure also exceeds that of Toyota Motor Corp., a long-term competitor. A reason for this is the political tension between China and Japan. Another reason for this progress is Ford’s decision to expand its operations to global markets such as China. CEO Alan Mulally suggests that their goal is to generate one-third of the company’s sales from Asia by 2020. He also plans to invest more money into developing new models. The profitability of this large market has also surpassed that of Europe.

Mulally’s decision to expand Ford Motor’s market into Asia has benefited the company in many aspects. The restructuring of the company’s operations has shown many positive results. Continuous innovation and expanding markets will provide Ford with an opportunity to gain more market share. They also keep competition within the market in check.

 

Written By: Melody Mark

Source:

Naughton, Keith. “Ford Outsells Toyota in China as $4.9 Billion Bet Pays.” Businessweek. Bloomberg L.P., 15 Apr. 2013. Web. 16 Apr. 2013.

AMC Shifts a Series to Saturdays, but Not to Kill It

As much as I enjoy my Saturday, your favorite show and channels do not. For the past decade, Saturday nights are where many shows go to die. Therefore many channels only move shows to Saturday if they see a large drop in ratings or a hopeless future. Since only “bad” shows are aired on Saturday, AMC believes there is an opportunity they can take advantage of. They believe there is a large target market of males that enjoy western shows. For this reason, which they have data behind, they have moved their established western series, “Hell on Wheels.”

In addition to Hell on Wheels, they have acquired another classic called “Rawhide” which features Clint Eastwood when he was younger. To go along with the western themed Saturdays, they will show classic movies and shows like “Hondo,” “High Plains,” and “The Rifleman.”

I think this move is smart because of the opportunity AMC sees. However I do not agree with the shows and genre they are using. Although it is to appeal to men ages 25-54, I feel like westerns are overplayed. Instead of a whole day marathon, maybe they should consider playing them on Saturday nights.

URL:http://www.nytimes.com/2013/04/15/business/media/amc-shifts-hell-on-wheels-to-saturdays-with-high-hopes.html?src=busln&_r=0

-Jonathan Chan