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12
Aug
10

Recovery still distant as GM turns a corner

NEWS
Recovery still distant as GM turns a corner
General Motors profits move past $1 billion

Thursday, August 12, 2010

••• General Motors said on Thursday its profits hit $1.3 billion in the second quarter, as the car company prepared to break free of U.S. government ownership by relisting on the stock exchange.

‘I am pleased with our progress on achieving our business objectives,’ said chief financial officer Chris Liddell, announcing the second consecutive quarter of growth.

The company erased a loss of $13 billion in the same period last year, as sales and revenues increased.

The firm saw stronger sales in North America in the quarter, even as sales in Europe floundered and market share around the world sank.

GM captured 15.4 percent of the U.S. market for cars versus 17.5 percent in the second quarter of last year, but elsewhere faired poorly.

GM’s executives have said that a public offering will come soon, a process that will help the U.S. government unwind its majority stake in the firm.

The U.S. Treasury Department still owns 61 percent of GM, which received $50 billion of U.S. government financing for its bankruptcy restructuring that led to mass layoffs, plant closures and billions of dollars in debt wiped out.

GM’s drive for an IPO will be boosted by news that the firm’s revenues swelled to $33 billion in the second quarter, a third more than the same period last year.

GM as well as its U.S. competitors Ford and Chrysler were hard hit by the recession which struck the United States in December 2007, caused by a home mortgage meltdown.

Of the so-called Detroit Three car makers, Ford was the only one to avoid bankruptcy, managing to stay afloat thanks to massive loans it had obtained prior to the credit crunch and because it moved more quickly to revitalise its product portfolio.
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04
Aug
10

News Corp. Posts $875 Million Profit as Ad Sales Rise

NEWS
News Corp. Posts $875 Million Profit as Ad Sales Rise

Wednesday, August 04, 2010

••• Media and entertainment giant News Corp. reported, Wednesday, that it has swung to profit in the fiscal fourth quarter on the back of strong performance from its television networks division which posted impressive ad sales.

News Corp. said its net profit in June quarter was $875 million or $0.33 per share as against loss of $203 million or $0.08 per share in the year ago period.

The company said its revenue moved up 5.7 percent to $8.11 billion.

Analysts, on average, had expected News Corp. to report profit of $0.20 per share on revenue on $7.87 billion.

However, operating profit, or sales minus the cost of goods sold and administrative expenses, slipped 1.7 percent year-on-year in June quarter to $932 million from $948 million.

The media conglomerate said its earnings were driven by strong performance put up by its television networks division, which accounted for more than half of its operating income.

Profits at domestic channels surged by 30 percent while international channels improved 40 percent. Overall, operating profit at cable television networks division, which include channels such as Fox News Channel and FX, surged 31 percent to $563 million on the back of advertising revenue which jumped 11 percent. The division also saw double-digit growth in revenue from fees paid by cable, satellite and fiber video providers.

Operating profit at News Corp.’s broadcast television division also surged 13 percent to $113 million on improved ad sales offsetting higher programming expenses at the company’s national broadcast network – Fox Broadcasting.

The group’s filmed entertainment division also did well but could not beat third quarter performance. Operating income in June quarter dropped 32 percent year-on-year to $137 million. In March quarter, profit stood at $497 million. At the time of announcing third quarter earnings, News Corp. had warned that one should not expect stellar performance from this division in the fourth quarter, largely due to an expected year-over-year decline in the film business due to the timing of releases.

The newspapers and information services division, which include the Wall Street Journal, Barron’s, MarketWatch and Dow Jones, also reported 20 percent surge in profit to $115 million on higher ad revenue, though it was below Street estimates.

The company’s digital media division, which include social networking site MySpace, however, disappointed, reporting an operating loss of $174 million in the June quarter on lower search and advertising revenue. News Corp. said MySpace is set for a “major overhaul.”

News Corp.’s satellite TV division also disappointed, reporting a 37 percent slide in operating income to $97 million on the back of continued weakness at Sky Italia.

To reduce dependence on the economically sensitive advertisement-based revenue, News Corp. said it is beefing up its portfolio of subscription-based assets. In June, it said it has made a bid for the 61 percent stake of pay-TV operator British Sky Broadcasting Group Plc (BSkyB) it doesn’t already own.

“The opportunity for us to expand the scale of our franchises is significant, including through taking advantage of the continual technological advances that will broaden the reach of our core content and distribution businesses,” News Corp. CEO Rupert Murdoch said in a statement.

The company’s full-year results were more impressive.

News Corp. said its net profit in fiscal year 2010 was $2.5 billion, helped primarily by blockbuster movie “Avatar.” DVD sales of other films like “Ice Age: Dawn of the Dinosaurs,” “X-Men Origins: Wolverine” and “Night at the Museum: Battle of the Smithsonian” also bumped up its profits. In the prior year, News Corp. incurred a net loss of $3.4 billion, which included a one-time pre-tax impairment and other charges of $9.2 billion.

“These results underscore just how well positioned we are – fiscally, operationally and strategically – for further growth across all of our markets,” Murdoch said.

Shares of News Corp., which owns Dow Jones, Wall Street Journal, New York Post, MySpace and 20th Century Fox among other things, closed up 1.61 percent at $13.85. Following the financial results announcement, the company’s shares were up 3.25 percent in the after-market hours.
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04
Aug
10

MasterCard 2Q profit jumps 31 percent, tops view

NEWS
MasterCard 2Q profit jumps 31 percent, tops view

Wednesday, August 04, 2010

••• Anaemic consumer spending in the U.S. was offset by strong international growth to help boost MasterCard Inc’s second-quarter profit by 31 percent.

The gain topped Wall Street profit expectations, but fell short of the 38 percent leap in operating income posted by the company’s larger rival, Visa Inc., last week.

MasterCard shares slipped $1.76, to $200.70 in midday trading as the broader market sputtered.

MasterCard’s gains showed the Purchase, NY-based payment processor’s reliance on overseas use of its cards and networks. Worldwide purchasing volume rose eight per cent, while U.S. purchasing volume eked out a gain of less than 1 percent.

Worldwide, credit card use rose 10 percent, while debit card use leaped 29 percent.

Chief Financial Officer Martina Hund-Mejean said in an interview that card use was particularly strong in Latin America and Asia Pacific, which both saw double-digit growth rates.

‘Even in Europe,’ she said, alluding to the economic turmoil on the Continent in recent months. ‘We do not see any significant impact on our numbers in terms of the Europeans not spending.’

U.S. credit card use edged down 1.5 percent, continuing a two-year decline, but showing the smallest drop since the third quarter of 2008.

Debit card use edged up less than 1 percent. That reflects more frequent use of debit cards, but was held down by MasterCard’s loss of several debit card deals with banks, most notably the former Washington Mutual, which was bought by JPMorgan Chase in 2008. Hund-Mejean said US debit growth was closer to 20 percent if the banks winding down their MasterCard programs are stripped out.

U.S. spending, particularly with credit cards, picked up in April but was less robust later in the quarter, Hund-Mejean said. ‘People still feel a little careful and cautious, and I think that’s what we saw in May and June,’ she said.

Analysts noted the growth compared with a weak quarter last year. Thomas McCrohan from Janney Capital Marketssaid it is hard to read into the results to say whether they indicate any real improvement in the economy. But there was ‘nothing alarming’ in the results.

‘There’s nothing that would support a double dip’ of the recession, McCrohan said.

The number of transactions MasterCard handled was basically flat at 5.6 billion. Cross-border volume jumped 15.2 percent.

Net income rose to $458 million, or $3.49 per share, compared with $349 million, or $2.67 per share, a year ago.

Revenue rose 7 percent to $1.37 billion from $1.28 billion in the 2009 second quarter. MasterCard said the revenue increase reflected the higher cross-border volumes, higher gross dollar volume of the transactions it processed and the impact of price increases of 4 percent.

Wall Street expected earnings of $3.33 per share on revenue of $1.38 billion.

Total operating expences dropped 10 percent to $648 million. The decrease was led by a drop in severance and compensation costs as a result of layoffs in 2009.

President and CEO Ajay Banga said it is too early to tell what results MasterCard will feel from the limits on debit card fees included in the financial overhaul bill signed by President Barack Obama last month.

‘I know that everybody is eager to fully understand the impact on our business, but the truth is we just have to wait for the (Federal Reserve) to develop the regulations, and for our customers to react, before we will know the full implications both for the industry and for our company,’ he said during a conference call.

Banga noted there are a number of options for implementing the new rules, and quipped that MasterCard benefits in this case from having a smaller market share of U.S. debit than Visa.

Regardless of the new regulations, Banga said he doesn’t see the shift from cash and checks to electronic payments slowing down. He spoke enthusiastically about a number of pilot projects and overseas ventures MasterCard has to expand its network beyond card payments. Deals the company struck on mobile payments in Latin America, money transfer services in China and contactless payments in the U.S. position MasterCard for continued growth as the payments market evolves, he said.

David Parker, an analyst with Lazard Capital Markets, said it will be a few years before ‘electronic wallets’ are a reality, and there are some challenges in terms of customer and merchant adoption, but it is clear the market is moving in that direction.

MasterCard’s investments in this area could help it overcome its disadvantage in debit cards.

‘I think there is an opportunity there with mobile commerce,’ he said.
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