Business this week
Oct 29th 2011 | from the print edition
Deutsche Bank reported net income of €777m ($1.1 billion) for the third quarter. Although this was better than expected, the German bank recorded a sharp fall in revenue from investment banking, trading and securities. Josef Ackermann, Deutsche Bank’s chief executive, said business conditions were worse than at any time since the collapse of Lehman Brothers.
UBS made a quarterly net profit of SFr1 billion ($1.1 billion), as earnings at its wealth-management business and an accounting gimmick offset a trading loss from an alleged rogue-trading episode that rocked the Swiss bank in September. UBS raised eyebrows, however, by allocating 89% of the income from its investment-banking division during the quarter to pay salaries and bonuses, even though the division made a loss.
Will Rajat join Raj?
Prosecutors in New York brought criminal charges related to insider trading against Rajat Gupta, a former head of McKinsey and ex-director of Goldman Sachs. Mr Gupta, who denies any wrongdoing, is the most prominent person yet to be charged in a crackdown on insider trading. The case alleges, among other things, that he passed sensitive information on investments to Raj Rajaratnam, a former hedge-fund chief who was sentenced this month to 11 years in jail for securities fraud. See article
It was an expensive week for pharmaceutical giants. Amgen put aside $780m to settle allegations that it boosted sales of Aranesp, a drug to treat anaemia, and other medicines through improper sales techniques. Abbott Laboratories tentatively agreed to pay $1.3 billion to settle claims regarding its marketing practices for its treatment for epilepsy.
ArcelorMittal, the world’s biggest steelmaker, pulled out of a joint acquisition of Australia’s Macarthur Coal. Only a few days earlier it and its partner in the venture had urged shareholders who were holding out to accept the deal.
A long-haul plight
Boeing said it would spread the development cost of its new 787 Dreamliner over the first 1,100 planes, a much higher number than for its previous jets and an indication that the project may not be profitable for some time. Boeing made the announcement on the day that the Dreamliner made its maiden commercial flight, from Tokyo to Hong Kong.See article
Research from the non-partisan Congressional Budget Office showed that between 1979 and 2007after-tax income grew by 62% for all households in the United States, but by 275% for the top 1% of earners. The top 1% accrued more than 20% of total national income in 2007, double their share in 1979. The study comes amid a debate raging in Congress about taxation and the deficit. See article
News Corporation released a tally of shareholders’ support for directors at its annual meeting, which showed most independent investors voting against keeping Rupert Murdoch’s two sons on the board. James Murdoch has come under particular criticism for his handling of the phone-hacking scandal at News Corp’s British newspapers. Although the scale of the dissent was remarkable it had little impact on the Murdochs’ control of the company.
IBM confirmed that Virginia Rometty would become its new chief executive at the start of next year, making her one of around a dozen women to head a Fortune 500 company.See article
The chairman of Olympus resigned, thanks to a rumbling controversy surrounding unusual payments tied to the Japanese company’s past acquisitions. See article
India’s central bank raised its benchmark interest rate again, to 8.5%. The Reserve Bank of India also decided to allow banks to set their own interest rates on savings accounts, ending decades of controls.
Nokia unveiled the first smartphones to be born out of its partnership with Microsoft. The Finnish company is hoping its new range of Windows-operated devices can compete better with Apple, HTC and others in the rapidly expanding smartphone market, in which it has been flagging. See article
Sony bought out Ericsson’s 50% stake in their Sony Ericsson mobile-phone joint venture, giving Sony full control of the business and allowing it to integrate smartphones with its network-connected consumer devices.
The hangover, part two
Netflix saw its share price plunge by 35%, after it revealed that it had lost many more subscribers than it had feared because of a hefty price increase to its DVD-rental service and its clumsy attempt to separate rentals from online streaming (which was reversed after a customer revolt). Netflix registered 810,000 fewer subscribers in the third quarter, its first ever drop.
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