Last year, was the year of the write down at Hewlett-Packard (HPQ). New CEO Meg Whitman finally began cleaning up the messes of her predecessors and took an $8.8 billion write down on Autonomy and another $10.8 billion related to the 2008 acquisition of EDS and the stock retreated back to 2002 levels, the year when HP acquired Compaq for $25 billion ushering in the days of cheap laptops and board room squabbles. But to start 2013 HP finally delivered news that wasn’t outright awful and for that the market responded with a massive short-covering rally.
Its latest quarterly results beat analysts’ estimates and it raised its FY-2013 outlook somewhat. After destroying more than $30 billion in ill-advised M&A deals over the past decade, HP finally showed up for work. I hate to be mean about this but, frankly, the situation is embarrassing for one of the truly innovative companies of all time.
The technology equipment manufacturing behemoth, the maker of Apple’s ($AAPL) iPhones, and one of the most controversial firms in this sector, Hon Hai Precision ($HNHAF), otherwise known as Foxconn Technology, is currently investigating claims that some of its employees have accepted bribes from its “supply chain partners.” The company is based in Taiwan but does almost all of its manufacturing in China. The firm is known for its high quality of products but its reputation has been hit by the poor working conditions at its facilities that have created labor unrest, including more than a dozen suicides. In spite of these difficulties Foxconn is looking to expand its production base into a new market, itself struggling with labor difficulties, Indonesia.
Following in the footsteps of Royal Dutch Shell (NYSE:$RDS.A), Chevron (NYSE:$CVX) has now started hunting for shale gas in South Africa. According to the U.S Energy Information Administration, the country has 485 trillion cubic feet of recoverable shale gas resources, roughly half the size of U.S’s reserves of 862 trillion cubic feet.South Africa is looking to create thousands of more jobs from foreign investment in its energy sector while it needs cheap natural gas to fuel its massive mining operations. Chevron will be partnering with the Canada based Falcon oil and gas to hunt for the unconventional fuel in South Africa.
London-based Rio Tinto (NYSE:$RIO) is aiming to cut up to $7 billion by 2014 meanwhile it will increase its production of copper, iron ore and aluminum. The world’s second largest iron ore producer wants to increase output to 290 million tons/year, from 283 million tons announced earlier, which will further increase to 360 million tons/year by 2015. The company’s executives believe that aluminum and Australian coal will pose a significant challenge and most of the cost cutting will happen in these two areas of their operations – Coal and Aluminum.
The Netherlands-based LED lights and electronic equipment manufacturer Philips (NYSE:$PHG) reported strong results for its third quarter after it rid itself of its struggling television manufacturing unit that incurred losses of $70 in Q3 2011. The company’s income for the third quarter rose by 129.2% $220 million while revenues rose by 13.6% year-on-year to $7.9 billion beating analysts’ estimates for the third consecutive quarter. Through an effective cost reduction strategy, Philips was able to save $397 million in the third quarter. Philips will continue on this path and expects to incur another $389 million in restructuring and acquisition costs for the fourth quarter.
Peter Pham is an author, international fund manager, and a registered financial director by the Cayman Monetary Authority (CIMA). In 2013 he published his first book entitled, The Big Trade: Simple Strategies for Maximum Market Returns. He currently manages the portfolio of a global hedge fund and runs an asset management company, Phoenix Capital. (read more)
The Big Trade: Simple Strategies for Maximum Market Returns
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