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B&E This Fortnight
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B&E This Fortnight

Issue Date - 12/05/2011
Apple of the eye?

That Apple Inc. is the pick of the stocks for tech-investors, has become a cliché. Rightly so. And if innovation can be measured, earnings too can be. In this respect, the Apple engine is chugging on faster than imagined, delivering better-than-expected results, quarter after quarter. The giant again surpassed Wall Street forecasts by declaring profits of $5.99 billion for the quarter ended March 25, 2011 – up by 95% y-o-y. The results were announced on April 20, 2011. Revenues stood at $24.67 billion, recording a jump of 83% y-o-y. Apple sold 18.65 million iPhones and 3.76 million Macs during the three-month period. But Wall St. did find a reason to complain – the lower-than-expected sales of iPads. Apple sold 4.69 million units of the same during the aforementioned period, much below expectations of 6.3 million units. The problem arose because of issues on the supply side (not demand). Apple is also in the news for suing Samsung. Apple sued the Korean giant on grounds of violating patent rights by copying the aesthetics of its iPhone. Samsung responded by accusing Apple of infringing patents pertaining to cellphone transmission technologies. The dispute has strategic implications for Apple’s future earnings, as Samsung makes microchips for some of Apple’s products.

Google loses exec.
A CEO change at a Fortune 500 giant has often meant a radical change in ideologies. The experience is turning out to be strikingly similar at the $29.32 billion-a-year revenue-making giant Google. Ever since co-founder Larry Page took as CEO, the search giant is working hard to implement a long-term sustainable business strategy to excel in non-traditional areas like wind energy, robotics, et al. Lucky is Page, that he has brains at his disposal that can make his efforts worth counting. And his competitors know that. Not surprising then, that the latest crisis to hit Google is brain-drainage – that of its key employees jumping ship. The latest casualty is Margo Georgiadis, who was Google’s VP of Global Sales Operations, and one key member of the Google growth story so far. He has been hired by Andrew Mason-led Groupon, as its COO. Many speculate that Groupon is quite aware of the threat from the yet-to-be launched Google Offers. Also, the company is planning an IPO sometime this year (which will value it at $25 billion). Given Google’s tech-rich human resource, poaching of key personnel makes quite some sense for Groupon. Who’s next?

Fiat’s stake buy
As per recent developments, Sergio Marchionne-led Fiat has decided to exercise its option of increasing its stake in Chrysler, by investing $1.27 billion in an all-cash deal. This will raise its holding in Chrysler to 46%, from the current 30%. Apart from control, the acquisition will give Fiat economies of scale in Chrysler’s operations, thus helping bring down the automaker’s costs. The deal was cheered by investors but Fiat’s trade union was not happy. Fiat plans to hold a 51% stake in Chrysler by mid-2012.

Toyota (re)calling?
Despite taking vehicle-recall hits on its bottomlines in the past, Toyota seems adamant on not changing. For the past three years, the company had been aware of faulty air bags (that could deploy inadvertently due to a problem with the side curtain airbag sensor) in 307,848 RAV4 & Highlanders (213,825 RAV4s and 94,023 Highlanders). But, it was only on April 21, 2011, that Toyota announced the recall. Despite reports of random deployment, the company did announce a recall because it claims that the problem was not worth the investment. Shocking!


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