Archive for January, 2006

Dick Parsons faces toughest battle yet

January 31, 2006

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Dick Parsons, born in th economically disadvantaged Bedford-Stuyvesant section of Brooklyn in 1948 and raised in the rough and tumble Jamaica, Queens, has spent most of his profession life fighting – and usually winning – uphill battles.  Today he faces the biggest so far when Carl Icahn, the serial activist investor launches a campaign to remove Parsons from his job as chairman and chief executive of Time Warner.

Parsons took over in 2002 after Time Warner’s ill-fated $300 billion merger with AOL which turned out to be the worst in the history of misbegotten mega-mergers and the compny subsequently recorded the largest write down in the history of American business – an astonishing $90 billion.

Parsons continues to defend his conglomerate structure but plans to spin off 16% of Time Warner Cable when its acquisition of Adelphia is completed this year.  Icahn wants more radical change, including the spinning off of the entire cable business and the company to buy back $20 billion of shares.

The decisive shareholders will be in May and the going will be rough but Parsons is a big man in every respect and a tough fighter as his business track record shows. A lawyer, he cut his political teeth in Washington in the aftermath of Watergate and later joined a blue-chip law firm where he quickly established a reputation as a can-do problem solver with a soft touch.

He was called in to rescue the huge and deeply troubled Dime Savings Bank of New York by masterminding a complicated merger with Achor Savings Bank which created a $20 billion financial institution with impeccable credentials.

Parsons is an Africn American of prodigious accomplishment and massive physical presence – he’s broad-shouldered, deep-voiced 6 foot 4 – who nonetheless has been underestimated throughout his career.  Some people have blamed racism but it is also the result of his own effort.  In that way that some people work hard to smooth their rough edges, Parsons has endeavoured to shrink himself to better disam foes and rivals.

Unpretenious and low key, he will need ll of his business acumen and diplomcatic skills to ward off the Icahn attacb but observers say they wouldn’t bet again Parsons.

The Fed’s new man

January 29, 2006

 

Ben_Bernanke.jpgWhen the Chairman of the Federal Reserve speaks, the   world’s business leaders listen.  For the past 18 years they have hung on to every word of Alan Greenspan but this Tuesday the economic voice of America passes to a new man – the widely known and admired Ben S Bernanke, a 52 year old macroeconomist who joined the White House as chief economist last year.

Ben Bernanke is clever, very clever. An exceptional student throughout his life, he won the South Carolina state spelling bee when he was in the sixth grade and earned the highest score of any South Caroline student when applied to college. He received his degree in economic history (summa cum laude) in 1975 from Harvard University and received his doctorate in economics four years later from Massachusetts Institute of Technology and in more recent years was chairman of the Department of Economics at Princeton University.

According to John J. Xenakis, the journalist and analyst of world history, Bernanke is completely different from Greenspan. 

Sayd Xenakis: “Nowhere is the difference so apparent as when you contrast Bernanke’s ‘What me worry’ attitude toward economic bubbles with Greenspan’s genuine agony over the fact that his gut is tellinghim that we’re headed for a major financial crisis”

Lakshmi Mittal hits the headlines again

January 28, 2006

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 For someone who wants to remain intensively private, Lakshmi Mittal, Britain’s wealthiest man, seems to have the knack of exploding into the headlines at regular intervals.

The public first heard of Mr Mittal five years ago when he reportedly paid £70 million to Bernie Bernie Ecclestone, the Formula One supremo, for a house in Kensington Palace Gardens in London.

In 2002 he was involved in a “cash for favours” political row.  It emerged that shortly after he had made a £125,000 donation to the Labour Party, the Prime Minister wrote to his Romanian counterpart support a bid by Mr Mittal’d company for Sidex, Romania’s state steel firm.

Mr Blair insisted that he did not know that Mr Mittal was a Labour donor and that he had offered his support because the deal, which went thrugh for £300 million, represented British interests.

In 2004 the extravagant £30 million celebrations for the wedding of his daughter Vanisha at the Palace of Versailles propelled Mr Mittal back into the newspapers.

Yesterday he did it again with an audacious £12.7bn bid for rival steel firm Arcelor which has caused a political storm in French and Luxembourg political circles.Mittal Steel is already the world’s largest producer of steel giving Mr Mittal a near £15 billion fortune which is fair testament to the business acumen of a man, born 55 years ago in western Rajasthan a village without electricity.  When his family moved to Calcutta he studied accounting and business. At 21 he began working for his father Mohan, who ran a small, family owned steel mill.

Frustrated by Indian burearacy he left the country for Indonesia in 1976. Backed by his father, he founded a steel plant and the rest is history, as they say.

Mittal Steel is still very much a family business. Vanisha and her brother Aditya work in the company and Mr Mittal has said:  “It’s natural to have my family in the business.  I wanted to build something to last, to make something for the future”.      

   

   

New role for John Studzinski

January 27, 2006

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According to the grapevine, John Studzinski, (above) one of the City of London’s highest flyers, will be taking home £13.5m  in salary and bonuses about now and soon he will also be starting a new job.

John’s earned his bumper pay packet as co-head of investment banking at HSBC, which has dubbed itself “the world’s local bank”.  He is now reportedly to be reassigned as special adviser to chief executive Stephen Green who is to succeed Sir John Bond as chairman when he takes on the leadership of Vodaphone later this year.

HSBC started life as the Hong Kong & Shanghai Banking Corporation in 1865, but moved its headquarters to London when it bought Midland Bank in 1992. Its operations have since been unified under the HSBC brand comprising 9,500 offices in 80 countries.

Studzinski’s new role will be to help Green with the bank’s plans to expand in emerging markets, where it has so far failed to build a large investment.

At 50 and with more than 20 years in banking, Studzinksi is not the usual type of brash heavy hitting corporate banker.

He is urbane and affable, with a black book of contacts the envy of most of his rivals. He has  degrees in both sociology and biology and has given millions away to human rights causes, the homeless and the arts.   On Saturday nights he can often be seen serving up food to down and outs at a shelter he helped to set up near London’s Victoria Station.

His work for the homeless was honoured In 2000 when he received the Prince of Wales Ambassador’s Award and a year later he was made a Knight of the Order of St. Gregory by Pope John Paul II.

 

Sony’s Welsh “affable axe-wielder”

January 27, 2006

The fact that Sony, the world’s second largest consumer electronics and entertainment company, has today announced a 47% jump in third quarter profit and is predicting a full year profit from a loss is remarkable by any standards but even more so when you examine the CV of the man who has been responsible for it.He is Sir Howard Stringer, who was named chairman and chief executive of Sony last February, the first Westerner ever to lead a major Japanese company.

Born in Wales 64 years ago, he lived in a house with no electricity, then won a scholarship and later went to Oxford.  At 22 he went to America with $200 in his pocket to get a job and was drafted to fight for the United States in Vietnam.  Back in the US the work he found was at CBS News in the 1970’s producing documentaries. He ran the CBS Evening News but more defining was his promotion to president of CBS News. In 1987 he oversaw the first redundancies in the company’s history, he had to fire 200 colleagues and friends but his greatest coup was to persuade David Letterman to bring his Saturday Night Show to CBS.

After a distinguished career in journalism, he joined Sony in 1997 to sort out some problems at its Columbia Pictures unit and later was appointed president of Sony Corporation of America. His star rose as he moved up Sony’s management tree and last year he was appointed to the top job.

“I thought about taking this job for well over a week because I knew that the reason I got the offer was because the company was in financial difficulties. And so I knew that I would to use every personal skill I had to persuade and cajole and convince that for the greater good of the company, we might to have some tough things” he said later.

His new restructuring plan called for the elimination of 10,000 jobs and 11 of 65 factories, something Sony’s Japanese executives, so entrenched in the tradition of jobs-for-life, could never do. But he is doing it with good effect as the latest result show and at the same has unified the company’s massive workforce. One newspaper has dubbed him “the affable axe-wielder”.

Sony has never had a leader quite like Howard Stringer.
He doesn’t speak Japanese and just standing up make him stand out – he’s a foot taller than everyone. Based in New York, he spends two weeks in Japan, mostly getting out on the shop floor meeting the workers. His travel schedule is so awesome that he only sees his wife and two children who live in a country mansion in Oxfordshire a few days a month.

His mission to restore Sony to No 1 is just starting and he is mindful of the company’s great traditions. “I have to look after some of those traditions because why the successful in the first place. And I am not sure that leaping on board an American business model of ruthlessness and viciousness and counter-attacks all the time is a good thing necessarily for somebody else. And so, taking care of something else’s culture is part of the job and opportunity of this job. I have things to learn from the Japanese. And not just the other way around”

Sir Howard was knighted in 1999 for achievements that have left some mark on the 20th century or will leave a mark on the 21st.

It seems they have got it right!
 

 

Kirk Kerkorian…school drop-out billionaire

January 26, 2006

The fourth largest shareholder in General Motors, the world’s biggest car company, is an 88 year old son of Armenian immigrants and school drop out who once worked for 45 cents an hour installing wall furnaces.

His name?  Kerkor “Kirk” Kerkorian, the richest man in Los Angeles with a $10 billion fortune who
yesterday upped his stake in GM to 9.9% to pressurize the company to cut its $1 billion dividend and executive salaries.

How did he become so rich?  His first serious business venture was to launch a charter airline between LA and Las Vegas which he later sold.  With the money he speculated on land and today owns more than half the hotel rooms on The Strip. To his hotels he added the MGM/UA film studios.  His failed battle to take over Chrysler is legendary and now he is stalking GM.

What’s he like?  Divorced three times, he is LA’s most private resident. Rarely gives interviews, does not use credit cards, does not have an email account, does not board commercial flights, does not wear expensive clothes, does not shop in retail stores, does not make speeches and does not accept awards and does not allow anything to be named in his honour. He eats out 3 or 4 times a week and plays tennis every weekend.
 

 

BOC fighting for independence

January 25, 2006

Robert Margetts, chairman of BOC Group, the industrial gases group, sets out today to persuade investors that it is in the best interest of the industrial gases company to stay independent.

Yesterday he turned down a £7.6 billion offer from Germany’s Linde arguing that it failed to fully value BOC’s growth prospects.Arguing against the bid on the ground that it fails to fully value the growth prospects of the British company, Mr Margetts now has to convince investors that it is in the best interests of the company to remain independent.

Observers say Mr Margetts has a hard task ahead because a  tie-up between BOC and Linde has long been seen as the last big deal left in the highly consolidated industrial gases industry. The logic of combining Linde’s European business with BOC’s industry-leading position in Asia – and, particularly, China – is clear

Disney-Pixar $7.4bn deal confirmed

January 24, 2006

The purchase by Walt Disney of Pixar, the animation company (Big Business January 20) was confirmed tonight. The agreed price of the all-share deal,  $7.4bn (£4.1bn), is a little more than most investment analysts predicted.

Pixar’s chief executive Steve Jobs, will join Disney’s board of directors and now the two firms can continue their successful collaboration of recent years which looked on the rocks just a few months ago.
 

Vatican struggles to balance the books

January 24, 2006

The Vatican is struggling to balance its books against the background of increased running costs and currency fluctuation.

Higher investment income and the sale of property, mainly individual apartments, in buildings outside Rome helped to stem three years of deficit to produce a small surplus in 2004 on revenues, mainly donations and sales, of about $246.3 million,

The 2005 forecast is break-even because the extraordinary costs connected with the death and funeral of Pope John Paul II and the election of Pope Benedict XVI will be accounted for separately.

The Vatican accountants, looking for every revenue opportunity, are tightening the copyright rules for publishing the speeches and writings of Pope Benedict  and any other papal texts of the past 50 years.

A row has now broken out when it was revealed that a publishing house in Milan had to pay £10,000 (€14,550) to reprint 30 lines from the first speech by the Pope following his election in April, after the Vatican transferred copyright on papal texts to its own publishing house, Libreria Editrice Vaticana.

The Vatican has said that papal texts have always been subject to copyright but that the rules were often not observed. Transferring the copyright was to protect papal works and ensure that the rules would be applied more rigorously, a spokesman said.

The spokesman denied that the charges were excessive and said there was a sliding scale of 3 to 5 per cent in royalties on books which used extracts from the Pope’s teachings. But the newspaper La Stampa claims that the Milan publishing house which printed an excerpt from the Pope’s first speech had to agree to pay 15 per cent in royalties and £2,000 (2,900) in legal costs.
 

Deal makers delusion of success

January 24, 2006

Deal makers should not believe in their own PR. 

That’s the underlying message of a survey conducted by KPMG, the accountancy firm and confirms what I have been telling clients for years.The firm interviewed 101 big deal makers and found that nine out of ten judged the deals a success but only three out of ten actually created value for shareholders and 62% thought their deals had worked.

“The perception gap is wide” said John Kelly, head of integration advice at KPMG.
That could be the understatement of 2006.