What's Important in the Financial World (10/19/2012)

Douglas A. McIntyre

EU Bank Supervision Coming

The Europeans finally have agreed on something. There will be one bank supervisor for the region as early as next year. While the decision may be a step forward, it is not entirely clear what it means. Many sovereign nations are unlikely to abandon control over their own financial firms. That means the new agency may be emasculated before it comes into existence. Bloomberg reports:

The European Union will seek to agree on a framework that makes the European Central Bank the main supervisor by Jan. 1, according to conclusions released early today after leaders met at a summit in Brussels. The new system, intended to break the link between banks and governments at the root of the region’s financial crisis, will phase in over the next year and could cover all 6,000 euro-area banks by Jan. 1, 2014.
The supervisor can “probably be effectively operational,” allowing the euro bailout fund to lend directly to banks as soon as 2013, EU President Herman Van Rompuy told reporters. He said finance ministers will design rules for such bank rescues.

However, those finance ministers may be unable to come to a conclusion at all, as has happened with so many other plans to save Europe.

What to Make of Windows 8?

The number of reviews of Microsoft Corp.’s (NASDAQ: MSFT) Windows 8 OS has increased rapidly, with its release only days away. The earnings of the world’s largest software company, hurt by low sales of Windows 7 while people wait for the new version, obviously rides on the success of the latest version. The barrier to its success may be more the “death of the PC” than a few reviews about it features. People and companies who need Windows, which is almost everyone with a PC, will get it whatever experts say. According to ZDNet:

The PC industry just isn’t sure what to make of Windows 8. Intel CEO Paul Otellini noted there are many form factors and it’s unclear which one will win. Otellini said what hardware ultimately wins with Windows 8 may not be known for a year.

Couple Windows 8 — an OS that will have a new interface and learning curve — with slowing PC sales and Microsoft’s big launch has a series of unknowns. Those uncertainties will be reflected in Microsoft’s quarter as well as the commentary that follows the results.

Sony’s Many Headwinds

Sony Corp. (NYSE: SNE) continues it retreat as most of its business divisions continue to sputter in the face of competition. The company closed a camera and mobile phone factory. It also will “downsize” its headquarters staff. Some 2,000 people will be affected. A layoff that small will not bring Sony back to health or profitability. Its buyout of the half of the Sony-Ericsson smartphone business it did not own was a mistake. The unit’s products run well behind those from Apple Inc. (NASDAQ: AAPL) and Samsung and they struggle in a pack that includes LG, Motorola, HTC and Google Inc. (NASDAQ: GOOG). Sony’s camera and television operations cannot recover. Camera sales have been hurt by smartphones that have cameras of their own — good ones. TVs and screens have become a commodity, and the low-margin manufacturers are in China and Korea, not in Japan where labor costs are fairly high. Finally, Sony’s game operation faces greater and greater competition from rivals Microsoft  and Nintendo. This is another market in which smartphone products have started to supplant those that run on consoles and handheld gaming devices.

Douglas A. McIntyre