Weekly Digest
Weekly Digest Issue No. 439
30-10-2008
by Deirdre McArdle
Eircom to change hands again? | Gaming firm creates 400 jobs in Dublin | Japanese giants feel the pinch | SAP throws in the towel on full-year estimates | Microsoft aims for the clouds | Slowing consumer demand stunts mobile market | Lottery scams: if you're not in, you can't win
Eircom to change hands again?
Eircom has announced it has appointed Ned Sullivan as non-executive chairman, replacing Pierre Danon, who left the company in June. Sullivan is currently chairman of Greencore Group and McInerney Holdings. The appointment was announced as news of a preliminary approach to buy out Eircom's parent company Babcock & Brown Capital (BCM) emerged. LIT, an Isle of Man based investment firm, told the Alternative Investment Market (AIM) that it had made a "non-binding indicative proposal" to buy out BCM, which owns 57.1 percent of Eircom. According to a statement from BCM, the proposal by LIT was in the form of shares in LIT, an AIM-listed entity with a market capitalisation of STG99 million. LIT also proposed that BCM make a cash dividend payment from BCM's existing cash (the payment amount was not specified). LIT has yet to put a value on its overall proposal, saying it would only be able do so after a due diligence review. The firm, in which investment company Laxey Partners has a controlling interest, currently holds a 6.7 percent stake in BCM. LIT has said it is considering calling an extraordinary general meeting of BCM shareholders because of what it calls a "lack responsiveness" to its approach from BCM's directors. The purpose of the EGM would be to approve the appointment of three independent shareholder representatives to BCM's board, according to LIT. For its part, BCM has said that until LIT clarifies its intentions, the directors "do not consider it necessary or possible to assess the proposal or make any recommendations to shareholders". LIT has said it will make a further announcement soon. LIT's main business is to invest in other companies. When it listed on the AIM at the beginning of October it said the recent weakness in global stock markets meant there were opportunities to invest in firms at "substantially less than the intrinsic value of the business". BCM's shares have lost over 67 percent of their value over the past year. If BCM was bought out this would be the fifth time Eircom has changed hands since it was privatised by the Government in 1999.
Gaming firm creates 400 jobs in Dublin
The gaming sector in Ireland got a boost this week when GOA, mobile operator Orange's online games unit, announced it was to set up a customer and operations support centre in Dublin's Digital Hub, and create 400 jobs. GOA specialises in so-called massively multiplayer online role playing games (MMORPG). These are online computer role-playing games (RPG) in which a large number of players interact in a virtual world. Perhaps the most well-known MMORPG is World of Warcraft, which has over 11 million monthly subscribers. GOA has a contract with online games developer Mythic Entertainment to support the upcoming game Warhammer Online: Age of Reckoning (WAR). GOA's office in Dublin will primarily support Warhammer Online. Separately, Dublin-based PopCap Games, a developer and publisher of casual games, has launched a new installment of its flagship franchise, Bejeweled. Called Bejeweled Twist, the new game will initially be available via web download from www.popcap.com and PopCap has confirmed that local language versions of the game will also follow. Bejeweled has proven to be widely successful for PopCap Games: over 25 million copies have been sold across all platforms.
Japanese giants feel the pinch
Sagging consumer spending had a profound effect on two Japanese consumer electronics giants this week, with both Canon and Sony recording plummeting profits. Canon posted a 26 percent drop in third-quarter operating profit from JPY174 billion in Q3 2007 to JPY129 billion (USD1.4 billion) in Q3 2008. Sales too were down, dipping 6 percent on the year-ago quarter. The Japanese firm also cut its full-year forecast by 23 percent, citing "increased concern over the impact to the real economy" from financial turbulence and "drastic fluctuations in currency exchange rates". Meanwhile, its compatriot Sony fared much worse; the firm's second-quarter net profit plunged a whopping 72 percent to JPY20.8 billion (USD214.1 million) from JPY73.7 billion in the year-ago quarter. Analysts had expected, on average, earnings of JPY25.1 billion. Revenue dropped marginally by 0.5 percent to JPY2.07 trillion, while operating profit nosedived over 90 percent to JPY11 billion. Meanwhile, two other Japanese giants, Fujitsu and Toshiba, both provided evidence that the semiconductor market is feeling the strain. Although Toshiba announced second-quarter operating profit of JPY700 million (USD7.2 million), its first-half loss of JPY60 billion in its semiconductor division highlighted the challenging market conditions for chip makers. Meanwhile, Fujitsu posted first-half operating profit of JYP38.5 billion, down 12 percent year-on-year. The firm also warned that its full-year operating profits would be JPY150 billion, 32 percent below its previous forecast, as sales of microchips, hard disk drives and mobile phones continue to decline.
SAP throws in the towel on full-year estimates
While some tech firms announced cautious forecasts in light of the ongoing financial downturn, German software giant SAP has abandoned its forecast entirely. SAP had previously forecast full-year sales growth of between 24 and 27 percent; however, the firm has now said the state of the global economy make the prospects for selling software so uncertain that it can no longer make a full-year prediction. The news doesn't come completely out of the blue: at the beginning of October SAP had warned of lower revenue expectations for its third quarter. Software revenue for the quarter rose 7 percent to EUR763 million. Though this figure is healthier than the firm's prediction of 4 to 5 percent growth, it's a far cry from analysts' expectations of 20 percent growth. Speaking at the firm's third quarter announcement, Henning Kagermann, SAP's co-chief executive, said he had "never witnessed such a sharp decline in customer spending in such a short time" as in September. So where does SAP go from here? Kagermann has said he aims to cut costs by 10 percent, but despite initiating a hiring freeze at the start of October, has said that the firm is not cutting jobs, yet. But the ongoing credit crunch, and the worry that large corporates are going to cut down on their software spending, could cause the software firm to consider more drastic measures soon.
Microsoft aims for the clouds
Perhaps recognising that the days of raking in the profits from software could be over, Microsoft this week announced the launch of Windows Azure, a hosted services offering. Azure represents Microsoft's efforts to muscle its way into the major shift in computing in which more companies are renting space on computers or subscribing to software operated online, or "in the cloud", by technology providers. Azure will run inside a network of Microsoft-owned data centres; over the past year, Microsoft has opened major data centres in the US and a 51,000 square foot centre in Dublin. Over the past few years the number of companies offering free alternatives to the likes of Microsoft Office has grown. From Google to IBM, free, online software and applications have become better and better, and made it more difficult for behemoths like Microsoft and indeed SAP to maintain the software profit levels they've been used to. In announcing Azure at Microsoft's Professional Developers Conference on Monday, Ray Ozzie, chief software architect with Microsoft, called the launch a "turning point for Microsoft". Indeed it is, but just how easy will it be to turn such a large ship as Microsoft?
Slowing consumer demand stunts mobile market
Following a sustained period of growth, driven most recently by emerging markets, mobile phone shipments slowed in the third quarter, growing just 5 percent year-on-year. Some 303 million units were shipped globally over the three months to 30 September, according to Strategy Analytics' latest report, which revealed that weakening demand in emerging markets such as India, China and Russia dragged the overall market to its lowest growth rate since the fourth quarter in 2002. Of the top six vendors, just three saw their markets grow during the quarter: Nokia, Samsung and Apple. Nokia posted a 5 percent increase in shipments, while Samsung recorded a healthy 22 percent jump. Meanwhile, Apple flung the gauntlet down with a whopping 516 percent growth; granted it started from a much lower level than the other established players, but you can't argue with that shipment growth. The iPhone maker now holds a respectable 2.3 percent of the market. Sony Ericsson saw shipments drop by 1 percent year-on-year, while LG saw a 17 percent decline. Motorola, which announced its third quarter results on Thursday, posted a 32 percent drop in shipments for the quarter, and has been replaced in third position on the vendor table by Sony Ericsson. Motorola posted a USD397 million loss for the quarter, compared to a USD60 million profit in the year-ago quarter. The US firm had originally scheduled the third quarter of 2009 as a deadline to spin off its troubled mobile division; however, it said the separation is now 'targeted beyond 2009'. Looking ahead to the fourth quarter, Strategy Analytics estimates 345 million units will be shipped globally, up just 5 percent on 2007's figures. Weaker consumer spending in developed markets during the Christmas season, and a slowing off of demand in emerging markets, will continue to have a negative impact on the market.
Lottery scams: if you're not in, you can't win
Though to the discerning eye, e-mail lottery scams appear to be just that -- scams -- a large proportion of internet users are regularly sucked in by the promise of easy money. In fact, a recent survey commissioned by Microsoft shows that 44 percent of internet users have fallen victim to an internet scam over the past year. These individual losses ranged from EUR100 to EUR7,000. Interestingly, 27 percent of respondents said they thought it likely they would become a victim of an internet lottery scam in the future. Lottery scams often arrive into Inboxes in the form of spam. The user is told they have won a special internet lottery, and are then told that to claim the prize and securely conduct the transaction, they must provide their bank details. This account information is then harvested by the attacker and sold or used for fraudulent transactions. In order to crack down on these internet scams Microsoft and Yahoo have joined forces with Western Union and the African Development Bank (a large portion of these scams emanate from Nigeria). The joint initiative will establish a service that allows scam victims to share police reports. The companies have set up e-mail addresses through which users can contribute their reports to a database. The National Consumer Agency has said more and more Irish people are being affected by lottery scams. "We have seen a huge rise in these kinds of scams in Ireland and they are increasingly sophisticated, so consumers should realise that anyone can be a target," said Ann Fitzgerald, CEO of the National Consumer Agency, in a statement. "Consumers should remember that you can never win a competition you did not enter. If you are not in you can't win and if you are contacted about winning a lottery when you didn't buy a ticket, you should ignore it." Sound advice indeed.
Caped Koala Studios has built a virtual world for kids, combining education and social networking 