Still No Greek Deal

The situation with Greece’s debt, which seemed better for a few hours as its leader met with European Union, European Central Bank and IMF officials in Brussels, is bad again. It appeared that those three groups would release the money Greece needs to cover its March obligations so as not to default. But that capital comes with strict restrictions, and the Greeks may be unable to accommodate them. Greece has to show its financiers that planned austerity programs are well underway and that all of the political powers in the country have endorsed them. That broad political endorsement is by no means assured as leaders jockey for the approval of sullen voters who believe austerity measures have gone too far.

Google Home Entertainment

Rumors have started to spread across the tech world that Google (NASDAQ: GOOG) will release a home entertainment system that can stream music throughout people’s homes. The press has speculated that the world’s largest search company believes it can follow Apple (NASDAQ: AAPL) into the hardware business. Apple is widely admired for its ability to marry devices with apps and entertainment. Google has started down the path of hardware integration with it purchase of handset firm Motorola (NYSE: MMI). Google may find the going rough, though. Most hardware companies have very modest margins, or make no money at all, as companies that make products to compete with the iPhone and iPad have already discovered.

Additional Job Cuts

PepsiCo (NYSE: PEP) and Alcatel-Lucent (NYSE: ALU) are the latest multinationals to “reorganize” their businesses for the future. At Alcatel this means a cut of 1,800 people. At Pepsi it means dropping 8,700 workers. These restructurings are presented to investors and the press as ways to drive efficiency and margins. A look below the surface at most companies that take this path reveals that sales have faltered and management needs a way to show investors that they can make even modest returns.

Douglas A. McIntyre

Greeks in Brussels

The Greeks have departed for Brussels, where they will plead with the European Union, International Monetary Fund and European Central Bank for the money needed to cover the nation’s financial needs next month. The parties have until February 15 to reach a settlement. The Greeks say they have given in to all austerity requests but have no deal to cut some government-controlled pensions. So, after all of the negotiations, that single issue may drive Greece into default.

Luxury Car Sales

At least some rich people around the world do not think their wealth will be entirely stripped away by taxes. Daimler said it had a 39% increase in fourth-quarter profits. It said the primary driver was an upswing in sales of high-end Mercedes, particularly the car company’s M-Class SUV. Daimler is not alone. BMW posted similarly impressive earnings, as did Volkwagen’s Audi division.

Yahoo! and Alibaba

Yahoo! (NASDAQ: YHOO) may finally get some tangible value from its 39% holding in large China e-commerce company Alibaba. Rumors suggest that Alibaba is close to securing bank loans of as much as $3 billion. Wall St. thinks the Alibaba stake is worth closer to $5 billion, so the firm may have to use some of its own money. Now, investors will have to wait to see what Yahoo! does with the cash. There is almost no optimism that Yahoo! has the management and prospects to use the billions to rebuild its troubled businesses. Yet, with a new CEO and newly constituted board, a turnaround is at least a long shot.

Douglas A. McIntyre

Yahoo! Shakeup

Four Yahoo! (NASDAQ: YHOO) directors will leave the battered internet portal company. Those departing include chairman Roy Bostock, who has been blamed for Yahoo!’s inability to get a good CEO and to set a strategy for the firm to recover from a weak internet advertising market. Yahoo! added two independent directors, Alfred Amoroso and Maynard Webb. Amoroso served as president and CEO of Rovi Corp. (NASDAQ: ROVI) until December 2011. Webb, the chairman of LiveOps, served as that company’s CEO until July 2011. Neither has particularly impressive credentials. But, even if either did, Yahoo! set no policy to solve its most immediate problems. It still has not disposed of its ownership positions in Yahoo! Japan or China e-commerce firm Alibaba. Neither stake does anything to help Yahoo!’s business operations. The disposal of the shares would add substantially to the firm’s balance sheet.

No Greek Fix

All of the participants in the resolution of the Greek sovereign debt crisis continue to refuse to act in a way that would bring the problem to a head. The European Central Bank apparently is willing to exchange some of its debt for new paper, the result of which would be to cut that southern European country’s debt load. Private investors have mostly agreed to terms to cut the value of their debts. Most Greek leaders have buckled to pressure to cut more government costs. Some of Greece’s unions continue to march in the streets to protest wage cuts. And, day after day, nothing is resolved.

Airbus and Boeing Woes

Two of the world’s newest commercial aircraft continue to have mechanical problems. The Sydney Morning Herald reported that a Qantas Airbus 380 super-jumbo has wing cracks. It is not the first of the planes to have the problem. Airbus has suggested an inspection of the model. In the meantime, some remain grounded. Some of Boeing’s (NYSE: BA) new Dreamliner 787 will not make it to airlines on schedule. Support structures in the aft fuselage of the plane have developed gaps. That could cause a series of inspections and a probable slowdown in factory production.

Douglas A. McIntyre

BP Fights On

The crisis at BP (NYSE: BP) due to the Deepwater Horizon disaster seems long gone. It is not. BP signaled an improvement of its financial health with a dividend increase. At almost the same time, the UK-based firm said it would “vigorously” contest suits against it because of the spill. That vigorous defense of actions will take years. The first major suits against it will be filed this month. Large liability cases brought by governments and private enterprises against major companies before indicate that the process of trial and settlement talks can drag on seemingly forever.

Toyota’s Recovery

Toyota (NYSE: TM) announced the start of an unexpectedly rapid comeback from recall problems and the shuttering of many of its plants due to the Japanese earthquake of last March and more recent interruptions of its supply lines due to floods in Thailand. Toyota made $1.1 billion in the quarter that ended in December. Toyota raised forecasts for net and operating profit. The company still has to regain market share in the U.S. and gain on Volkswagen and General Motors (NYSE: GM) in China, the world’s largest car market. Its market share in the U.S. reached almost 18% four years ago, and it briefly moved ahead of Ford (NYSE: F). Its portion of the market is down to about 12%, and its has competition from resurrected GM and Chrysler, as well has rapidly selling new cars and light trucks made by South Korean manufacturing behemoth Hyundai.

Lumia 900 Launch

Nokia’s (NYSE: NOK) Lumia 900, its new flagship product, is about to go on sale in the U.S. The launch carries with it the hopes of a comeback for the world’s largest handset maker and its software partner Microsoft (NASDAQ: MSFT). Microsoft has had terrible trouble as it struggled to sell its mobile OS against Apple’s (NASDAQ: AAPL), as well as smartphones that use the Google (NASDAQ: GOOG) Android platform. The recent history of smartphone launches shows that the fate of products usually is determined in the first few days they are available. Reports of strong sales bring new customers into stores. Reports of weak sales cause analysts and the press to label a new product DOA.

Douglas A. McIntyre

China’s GDP Growth

The IMF cut its forecast of China’s GDP growth this year. Given the uncertainties about the global financial markets and the GDPs of many nations, that move it not unusual. What is shocking is the size of the negative forecast — China’s GDP growth rate could drop 4% from the current estimate of 8.2%. And the 8.2% is a number reached by a downward revision by the IMF less than two months ago. It is hard to fathom that an economy that has grown at more than 10% a year for the past decade could face such a shock. It is the IMF’s acknowledgement that the entire world could teeter into recession, and that the problems in Europe could effect both China’s trade with that region, but also with the U.S. The latter will not avoid the slump either, the IMF must reason, despite recent, strongly positive signs.

Foreclosure Abuse Deal

State attorneys general and U.S. regulators are just a day from a settlement with Ally Financial, Bank of America (NYSE: BAC), Citigroup (NYSE: C), Wells Fargo (NYSE: WFC) and JPMorgan (NYSE: JPM) over mortgage foreclosure abuses. The settlement would help current homeowners. Some would be allowed to refinance current home loans. Others would get financial assistance. Even if the deal is closed, the implementation could take months. It will take at least that long to sift through which homeowners are worthy of aid, and then to process them to help those who deserve it. The entire face value of the settlement will be $25 billion.

GM Profit Forecast

General Motors (NYSE: GM) says it can make $10 billion a year for the next several years. That would mark a tremendous comeback from its 2009 Chapter 11 filing. It also would validate the decision of the U.S. government to bail out the car company. The challenge GM faces as it presses its goal is that the world’s largest car manufacturers, Volkswagen and Toyota (NYSE: TM), expect to do as well as GM. Toyota just raised its sales forecasts to levels that would take it to a record in units shipped next year, if it can reach the numbers. VW has attacked the U.S. market because it needs American sales to allow it to keep pace with its two major rivals. GM has momentum, but its profit forecasts are large enough to make an uphill battle.

Douglas A. McIntyre

A Loss for Panasonic

Panasonic (NYSE: PC) announced its expects a $10 billion loss for the year. That makes it one in a long line of Japanese companies that have either reported losses or revised their profits downward. Sony said yesterday that it would lose money again this year. Part of the problem is the value of the yen, but the trouble runs deeper than that. Another issue is the floods in Thailand, which have cut access to supply chains. That is not an adequate explanation on its own, either. To each of these has to be added that Japan has almost entirely lost its position as a low-cost provider of products ranging from cars to television screens. The shift of the manufacture of these products to South Korea is nearly complete. What was once the critical business advantage of the world’s third largest economy is nearly gone.

Fed Discord

The debate among Fed members about the future of the American economy, and how long rates should be kept low, has become ugly and public. Dallas Fed chief Richard Fisher said in a speech that “the economic forecasts and interest-rate projections of the FOMC are ultimately pure guesses.” Put another way, some of the greatest experts about the American economy have not a single clue about what the economy will be like in 2014. The Fed said it will keep rates near zero until then to protect the expansion. Fisher probably wonders what will happen if U.S. GDP begins to grow at 3% or 4% later this year or in 2013. He would argue that there is no way to put odds on that. And his vote against the validity of long-term forecasts has gained more support since the Fed issued its official numbers last week.

Oil Prices

Long-term oil prices are backing down, and WTI crude is around $96 a barrel. The fear of an interrupted supply because of an Iranian blockade of the Strait of Hormuz has been overshadowed by forecasts that the global economy has slowed and that Saudi Arabia is prepared to increase production. The drop, if it continues and is long term, will be critical to whatever recovery the economy in the U.S. and elsewhere can mount. It has been a long time since gasoline was below $3 a gallon. And, for consumers, the difference between that price and $4 could be the difference between a few hundred dollars of consumer spending a month and nearly no spending at all.

Douglas A. McIntyre

Sony Slashes Forecast

Sony’s (NYSE: SNE) new CEO-elect, Kazuo Hirai, will not get a honeymoon at all. The Japanese company said it expects an annual loss of $2.8 billion. Hirai said he will address Sony’s problems immediately, which he has to say. Any other reaction would be less than responsible, at least in the eyes of shareholders. Hirai sounds quite a bit like Howard Stringer, the lame duck CEO, did when he took the job. Sony, he said, has become too inward looking. Its engineering culture was isolated from the world of electronic product consumption. Stringer said he would tear the curtains away so that Sony employees could see the world of the consumers who bought its products and those of its competitor’s. The process did not work. Now Hirai can repeat it.

Deutsche Bank’s Q4 Loss

Deutsche Bank (NYSE: DB) is the largest bank in Europe, as well as one of the largest in the world. It is also the flagship financial firm of the strongest economy in Europe. Those things have not insulated it from the region’s deepening problems. Deutsche Bank announced that it lost $463 million in the final quarter of 2011. It blamed a collapse in investment banking brought on by the extreme caution of businesses in the region. These results are the swan song for Europe’s most powerful banker, Josef Ackermann. What it took him a decade to create could be gone in a short year. It may be he is lucky to be leaving when he is.

AstraZeneca Cuts 7,000

Drug maker AstraZeneca (NYSE: AZN) will lay off 7,000 people. At least the move is not part of the fallout from Europe’s problems. The reasons are more mundane. Like most major pharma firms, AstraZeneca’s major products are quickly losing their patent protection. The R&D arm of the company cannot replace them with new blockbuster treatments fast enough. Smaller and nimbler biotech firms have become the sector’s innovators. The size of these firms makes it possible for them to prosper on just one or two successes. That has prompted companies like AstraZeneca to buy these smaller companies. But the M&A process must be too slow to refill AstraZeneca’s pipeline, as the layoffs show.

Douglas A. McIntyre

Amazon Takes a Hit

The debate over whether Amazon.com (NASDAQ: AMZN) has made proper decisions about its future, decisions that have taken its margins down, will begin again in earnest now that it has issued its earnings for the past quarter and forecasts for this one. People who believe founder and CEO Jeff Bezos is a genius will support the argument that Amazon must spend all it reasonably can to expand its e-commerce and media businesses. That means high costs of marketing, shipping, and low margins on products, led by its Kindle and Kindle Fire. The market’s immediate reaction to earnings was to drive the stock down 10%. So the consensus reaction to Bezos’s plans is currently negative.

Chinese Manufacturing

China’s PMI for January was 50.5, which indicates modest expansion. This follows several months during which the direction of its manufacturing sector has been unclear. The trouble with the Chinese numbers is either that they are unreliable or China’s factory production has faltered — at least compared to the robust periods of three years ago. What may be more telling than the Chinese statistics is the demand for its exports in many of the troubled EU nations. No amount of stimulus that the People’s Republic can set, or level of demand from emerging markets and the U.S., can offset the EU problem.

Facebook to Raise $5B

IFR reports that the Facebook IPO documents will be released soon. The amount the social network firm plans to raise is $5 billion. Rumors have been that the figure would be closer to $10 billion. It is not clear what the lower amount means. Either Facebook does not need a great deal of capital for expansion, and current shareholders want to keep dilution low, or Facebook’s bankers do not think the market will support a valuation that might be as high as $100 billion — particularly if Facebook’s numbers and forecasts are below expectations.

Douglas A. McIntyre

Changes at RIM

The independent directors of Research In Motion (NASDAQ: RIMM) did what they should have long ago. They decided that the company ought to have one person as CEO and another as chairman. Co-chief executive officers Jim Balsillie and Mike Lazaridis also had control over the board as RIM ruined its own fortunes with a series of bad decisions about how it should evolve from a BlackBerry-driven company to one with a larger set of smartphones. In the meantime, the firm’s share price dropped by more than 80%. There has been little mention of the board’s important but cloaked role in the trouble.

EU Unemployment

The European Union’s statistics office Eurostat reported that unemployment in the 17-nation area reached 10.4% in December. That is an indication of the struggle the region faces as it tries to repair its finances and stay out of a regionwide recession. Some data show that Germany has dodged the fate of its neighbors, but that is the only bright light among the nations in the alliance. The unemployment number will raise the issue for the 1,000th time about whether austerity can ever be compatible with the actions needed to stimulate economies and employment.

Apple Retail Chief

John Browett of Dixons Retail will join Apple (NASDAQ: AAPL) as the head of its 361-store retail operations. Why Apple did not promote one of its own executives is a mystery. It hardly matters. Apple’s retail locations are constantly swamped with customers and, even as the company adds stores rapidly, that is not likely to change. Browett will get to ride the wave of that success without the slightest need to do anything but hang on.

Douglas A. McIntyre

At about 8:45 a.m. ET, Germany’s DAX is down -1.07% at 6,442.29 and France’s CAC 40 is down -1.30%, at 3,275.61. In London, the FTSE 100 is down -1.04%, at 5,673.78.

In Asia, the Hang Seng index closed down -1.66%, at 20,160.40 and the Nikkei index closed down -0.54%, at 8,793.05. The Shanghai exchange closed down -1.47%, at 2,285.04.

Dow futures are down -0.82%, at 12,510.00. The Nasdaq 100 is down -0.84%, at 2,435.50 and the S&P is down -0.94%, at 1,300.10.

In the currency markets, the US dollar is stronger against the British pound, the euro and the Japanese yen. The US dollar index is up 0.658% at 79.355.

In commodities, WTI and Brent crude are lower this morning, with WTI down -0.68% at $98.88/barrel and Brent is down -0.23% at $111.20/barrel. Gold is down -0.43% this morning, at $1,722.80/ounce.

Paul Ausick