Posts in category Business


ApprovedBusinessBusiness and finance

Ameerpet, India’s unofficial IT training hub

Eat your heart out, Stanford

UNIVERSITY campuses can take a while to get going in the mornings, as students recover from extra-curricular antics. Contrast that with Ameerpet, a squeezed neighbourhood of Hyderabad that has become India’s unofficial cramming-college capital. By 7.30am the place is already buzzing as 500-odd training institutes cater to over 100,000 students looking to improve their IT skills. If there are ivory towers here, they are obscured by a forest of fluorescent billboards promising skills ranging from debugging Oracle servers to expertise in Java coding to handling Microsoft’s cloud.

Expertise in the IT industry erodes fast as software programs are upgraded or become obsolete. Indian outsourcing giants such as Infosys and Wipro spend heavily to keep employees’ skills up to date. But staff looking to change their career paths—to say nothing of those who didn’t crack the interview in the first place—need rapid systems upgrades of their own. Training courses authorised by software providers exist but cost up to 375,000 rupees ($5,765). Fees at Ameerpet’s informal institutes are typically below 25,000 rupees for classes…Continue reading

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ApprovedBusinessBusiness and finance

YouTube highlights problems with digital advertising

EVEN advertisers can be seduced by slick marketing. Google and Facebook have built huge businesses by promising that online ads are more effective and easily measured than traditional media, such as television, radio and print. This year the amount spent on internet advertising, globally and in America, is forecast to surpass television advertising for the first time (see chart). But a controversy at YouTube, an online-video site owned by Google, shows how digital advertising still has problems to sort out before it lives up to the dazzling sales pitch.

A slew of advertisers, including stalwarts such as Coca-Cola, Walmart and General Motors, have announced plans to suspend usage of, or move ad spending away from, YouTube because ads (in some cases their own) were appearing alongside offensive content, including videos by jihadist and neo-Nazi groups. Google’s own brand has suffered: the damage to the firm’s sales could be as much as $1bn in 2017, or around 1% of its gross advertising revenue. Shares of its parent company, Alphabet, have fallen by around 3% owing to the controversy.

It is not the first time that brands have fretted about where…Continue reading

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Luxury-goods companies in the digital era

IT TAKES at least a month to wash, comb, spin and otherwise prepare fine mohair to become cloth that is stitched into suits by Ermenegildo Zegna, a 107-year-old Italian brand. In Trivero, an Alpine village west of Milan, 150 artisans in an elegant factory work at carding, dying, weaving and warping. As looms rattle, bespectacled women stretch cloth over illuminated screens and check for imperfections. Others use a rack crammed with dried Spanish thistles to remove excess hair from fabric.

Zegna, run by its fourth generation of family owners, is distinctive in many ways. Big corporate successes are rare in Italy, which tends to nurture smaller firms. Sales from Zegna’s 500-odd shops worldwide, plus earnings from selling to other producers, amount to an annual €1.2bn ($1.3bn) or so. It controls its entire supply chain, which is unusual even in an industry that cherishes raw materials. Three years ago it bought a 6,300-acre farm with 10,000 sheep in Australia. A spokeswoman brags that vertical integration at Zegna runs “from sheep to shop”.

The company is also unusual because it has stayed independent of the few swaggering giants that bestride the luxury-goods…Continue reading

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ApprovedBusinessBusiness and finance

Swiss watchmakers try to keep pace

BASELWORLD, a giant watch fair that ended this week, usually runs like clockwork. Companies show off new products; buzz and higher sales follow. However, something seems to have jammed. Exports of Swiss watches sank by a tenth in 2016, the worst performance since the financial crisis. Swatch, the world’s biggest watch company, saw profits plunge by 47%. In February exports were 10% lower than they had been a year earlier.

Swiss watchmakers have been around for long enough not to panic: Blancpain, owned by Swatch, dates back to 1735; Vacheron Constantin, owned by Richemont, a Swiss luxury conglomerate and Swatch’s closest rival, was founded 20 years later. In La Chaux-de-Fonds, a watch-manufacturing hub, workers toil much as they always have, at chin-high desks, using slim instruments to assemble springs, wheels, jewels and other tiny parts. But swings in demand have of late been particularly extreme.

The period from around 2004 to 2012 saw high growth. Chinese shoppers accounted for about half of Swiss watch sales during that time, reckons Thomas Chauvet of Citi, a bank. Manufacturers introduced pricier products and raised the cost of existing ones. The financial…Continue reading

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ApprovedBusinessBusiness and finance

Masayoshi Son goes on a $100bn shopping spree

IF YOU want to find a spectacular vision of the future, Silicon Valley is not the only place to look. In Tokyo Masayoshi Son, the boss of SoftBank, a Japanese telecoms group, is starting an investment fund worth $100bn which, he hopes, will make him the Warren Buffett of technology. “Masa” is no stranger to risky bets: SoftBank was an early investor in Alibaba, a Chinese e-commerce company, and has sunk $22bn in Sprint, a struggling American telecoms firm. Now he has been seized by the kind of Utopian fever that would make the Sage of Omaha choke on his Cherry Coke.

Mr Son, who is 59, believes that the world will soon encounter what is known as the Singularity, the point at which artificial intelligence exceeds the human kind. The brains of people and machines will become enmeshed (see article). Every person will have over 1,000 devices linked by a seamless global network, with the data analysed by machines in the cloud. As well as smart glasses, people will wear smart shoes and every car and washing machine will…Continue reading

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ApprovedBusinessBusiness and finance

Westinghouse files for bankruptcy

Who will see it through?

THERE are few more storied innovators than Westinghouse. Founded in 1886, it is the company that brought electricity to the masses. When you plug in your toaster or flip your light switch, you have George Westinghouse’s alternating-current system to thank. In the 21st century the firm seemed poised to unleash a new revolution in nuclear energy. Its AP1000 pressurised water reactor was supposed to make nuclear plants simpler and cheaper to build, helping to jump-start projects in America and around the world.

But those nuclear ambitions have gone awry. On March 29th the firm filed for Chapter 11 bankruptcy in New York. Its troubles have been a running sore at Toshiba, its Japanese parent, a headache for its creditors, and the latest bad tidings for a nuclear industry beset with problems.

Toshiba was triumphant in 2006 when it paid $5.4bn for Westinghouse after a bidding war, beating out General Electric (founded by George Westinghouse’s archrival, Thomas Edison). Around the same time, Southern and SCANA, two big utilities based in Georgia and South Carolina, respectively, chose the AP1000 design for new nuclear…Continue reading

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The next head of America’s Food and Drug Administration

WHEN the names of potential candidates for the new head of America’s regulatory agency for drugs, the Food and Drug Administration (FDA), were first circulated, you could almost hear the sound of jaws hitting desks throughout the pharmaceuticals industry. One contender was Jim O’Neill, head of Mithril Capital Management, an investment firm, who is such a libertarian that he doesn’t think the FDA should insist that medicines have to work. Another was Balaji Srinivasan, an entrepreneur from Silicon Valley, who thought roughly the same.

Removing such a core regulation might seem appealing to business. In fact, the idea of not approving drugs for efficacy is as unwelcome to the industry as it is to doctors and patients. It spends billions of dollars every year on research to deliver better treatments; this would be impossible to justify if drugs had merely to be safe. Patients, meanwhile, would face the awful prospect of having to identify which life-saving medications worked.

So, when the name of the FDA nominee was announced in March, there was widespread relief. Scott Gottlieb (pictured) a resident fellow at the American Enterprise Institute, a conservative…Continue reading

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ApprovedBusinessBusiness and finance

Uber is facing the biggest crisis in its short history

AS A teenager, Travis Kalanick’s first job was to knock on strangers’ doors and sell them knives. Now he is trying to dodge the daggers aimed at him and at Uber, a ride-hailing firm that is the world’s most valuable startup. On March 19th Jeff Jones, the company’s president, stepped down after six months, declaring that “the beliefs and approach to leadership that have guided my career are inconsistent with what I saw and experienced at Uber.” At least six key executives and high-ranking employees have left in the past nine weeks. They include Uber’s head of mapping, a former head of self-driving car technology, and an artificial-intelligence (AI) expert who had been put in charge of the firm’s AI research lab only three months ago.

Aggressive and unrelentingly ambitious, Mr Kalanick built his eight-year-old company into America’s largest privately owned technology firm by treading on the toes of different groups, including traditional taxi drivers, other…Continue reading

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ApprovedBusinessBusiness and finance

The battle to build Donald Trump’s wall

FEW slogans were chanted with as much passion by Donald Trump’s supporters in the presidential campaign as “Build that wall!”. The construction industry is almost as enthusiastic. Last week America’s Customs and Border Protection agency (CBP) issued two invitations for companies to bid to build the wall on the border with Mexico, which is expected to cost anywhere between $12bn and $25bn. The deadline for designs falls on March 29th. One request is for a solid concrete border wall, and the other for a wall using “alternatives” to reinforced solid concrete, suggesting the government has yet to decide what the barrier should be made of.

More than 700 companies, from big general contractors to firms selling materials to niche providers of lighting and surveillance systems, have registered to try to become suppliers. To the surprise of some, about one in ten of the firms bidding are local ones with Hispanic owners, drawn by the scale of the earnings on offer. Cemex, a Mexican cement giant that has plants on both sides of the border, said it would not sell cement for the project, though it had earlier expressed interest in joining the bidding. Another, tiny, Mexican firm…Continue reading

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ApprovedBusinessBusiness and finance

Big tyremakers are regaining their grip

CARS can be objects of desire and the bonnet badge an indicator of wealth and status. Yet the four small patches of rubber that do the vital job of attaching them to the road stir little emotion. A third of drivers cannot name the make of tyre on their car. Nor do they know that the dominant global brands have been fighting a losing battle for 15 or so years against Chinese competitors and now have a chance of winning back ground.

The established tyremakers have advantages over the industry they serve. They have margins that outstrip even Germany’s luxury carmakers. Supplying manufacturers accounts for only a third of revenues of a typical tyre firm and even less of the profits. The rest comes from replacing tyres on vehicles on the road, which wear out every four years or so.

The expansion of the global vehicle fleet, forecast to grow by around 3.5% a year, helps gradually to reduce firms’ dependence on the cyclical market for new cars. Tyremakers also benefit by selling most of their wares to thousands of distributors. They are fragmented and weak compared with carmakers, and less inclined to drive hard bargains.

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ApprovedBusinessBusiness and finance

America and Britain prohibit large electronic devices in aircraft cabins on some routes

For whom the belt tolls

NEW intelligence appears to have prompted the decision of the authorities in both America and Britain to prevent the carrying of large electronic devices into the passenger cabins of aircraft flying from several Middle Eastern and North African countries. However, the announcements, which both came on March 21st, raise several unanswered questions. Passengers, and the affected airlines, may be concerned that there is an element of politics behind the new measure, coming as it does in the wake of Donald Trump’s second attempt to ram through a highly controversial executive order restricting travel to America from some Muslim countries.

Some speculate that the intelligence may have been gathered by a raid carried out by American special operations forces on al-Qaeda’s affiliate in Yemen, known as al-Qaeda in the Arabian Peninsula (AQAP). One such raid took place on January 29th and left a Navy SEAL and up to 30 civilians dead. Some reports suggested that the botched operation yielded no actionable intelligence. But administration officials maintained that material indicating future AQAP targets was seized.

AQAP has…Continue reading

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ApprovedBusinessBusiness and finance

Companies are racing to add value to water

PRESENTED in an unusually-shaped heavy glass bottle with outsized black lettering, it could be a fine vodka. On sale for £80 ($99) in Harrods, an upmarket department store in London, it has a price tag to match. In fact, it is a bottle of water. Harvested directly from Norwegian icebergs that are up to 4,000 years old, Svalbardi is one of hundreds of water brands that are sourced from exotic places and marketed as luxury products.

From the basic to the expensive, the market for bottled water is an attractive place to be. According to Zenith Global, a consulting firm, the global market has grown by 9% annually in recent years and is worth $147bn. The main reason is changing lifestyles. People are spending more time, and eating more of their meals, away from home. They are also switching from soft drinks and alcohol to healthier fare. Data from Beverage Marketing Corporation (BMC), another consultancy, show that consumption of bottled water overtook that of sugary soft drinks in America in 2016 (see chart).

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America’s shale firms don’t give a frack about financial returns

INSIDE the boardrooms and bars of Houston, the spiritual capital of America’s energy industry, the swagger is back. The oil price may only be at $48, or half the level it was three years ago. But shale fracking—the business of getting oil and gas out of rocks by blasting them with water and sand—is booming once again after the crash of 2014-16. Exploration and production (E&P) companies are about to go on an investment spree. Demand is soaring for the industry’s raw materials: sand, other people’s money, roughnecks and ice-cold beer.

Shale’s second coming is testament to Texan grit. But the industry’s never-say-die spirit may explain why it has done next to nothing about its dire finances. The business has burned up cash for 34 of the last 40 quarters, according to figures on the top 60 listed E&P firms collected by Bloomberg, a data provider. With the exception of airlines, Chinese state enterprises and Silicon Valley unicorns—private firms valued at more than $1bn—shale firms are on an unparalleled money-losing streak. About $11bn was torched in the latest quarter, as capital expenditures exceeded cashflows. The cash-burn rate may well rise again…Continue reading

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A meat scandal in Brazil damages two of its biggest firms

The steaks are high

EVEN amid Brazil’s pungent stew of recent big corporate scandals, the latest is particularly stomach-turning. On Friday March 17th, in time for a traditional weekend churrasco, or barbecue, the federal police accused some of the country’s biggest meat producers of bribing health inspectors to turn a blind eye to grubby practices. These include repackaging beef past its sell-by date, making turkey ham out of soyabeans rather than actual birds and overuse of potentially harmful additives. The police operation, dubbed Weak Flesh, could reduce Brazil’s meat exports, worth $13bn a year, and damage its two big global meat producers, JBS and BRF.  

Two days later the president, Michel Temer, treated 27 diplomats from the country’s main export markets to prime Brazilian cuts at a steakhouse (pictured) in the capital, Brasília. Nevertheless, straight after that China, the European Union (EU), Chile and South Korea, which together consume a third of Brazilian meat sold abroad, said they would ban some or all imports from Brazil until it can allay misgivings about its inspection regime. The…Continue reading

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Mobileye and Intel join forces

Data trafficking

CARMAKING in Israel has amounted to little more than some unstylish models put together in the latter half of the last century and a few rugged off-roaders still assembled for the country’s security forces. A reluctance to make them, however, has not stopped Israel from becoming a thriving centre for the high-tech kit with which cars now bristle, and also for mobility services such as ride-hailing.

The latest evidence of Israel’s pre-eminence in the field came on March 13th, when Intel, a giant American chipmaker, paid $15.3bn for Mobileye, a Jerusalem-based firm that is at the forefront of autonomous-car technology. With the acquisition, Intel joins the ranks of technology companies that are trying to outmanoeuvre carmakers and auto-parts suppliers to develop the brains of vehicles of the future.

Mobileye is an attractive target because of what it does now and what it will soon be capable of. Its EyeQ software is already used by most of the world’s carmakers to help their vehicles stay in their lanes and brake in emergencies, precisely what will also be required in autonomous vehicles. This…Continue reading

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ApprovedBusinessBusiness and finance

Citigroup’s decade of agony is almost over

IF YOU ask financial types in New York for their views on the world’s big banks, they usually come up with similar vignettes for each one. They agree that JPMorgan Chase is an unstoppable force under its boss, Jamie Dimon. Goldman Sachs is on a roll, with its shares up by 36% since the election (even if some worry that its Darwinian culture is going soft given all the regulation it faces). Across the pond Deutsche Bank is struggling to keep its head above water; its leader, John Cryan, embarked on a capital-raising and cost-cutting plan on March 5th. Yet one big bank elicits shrugs of bafflement: Citigroup. Its managers are anonymous and they get paid about a fifth less than their peers at other financial groups. No one is quite sure what Citi is up to or what it exists for. Once too big to fail, it is now too drab to mention.

That Citi has become the world’s half-forgotten bank is surprising. It was America’s biggest firm before the financial crisis, measured by size of assets; it is now the fourth-largest. After suffering huge losses on loans and subprime securities, in 2008-09 it received the biggest bail-out of any American bank. Citi can still…Continue reading

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