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A round up of some of the week’s most significant corporate events and news stories.
Europe puts Google privacy policies under fresh scrutiny
Google faced fresh scrutiny of its privacy policies, business practices and tax arrangements in Europe this week, as the internet company continued to come under pressure from the continent’s regulators, writes Murad Ahmed.
On Tuesday, it emerged that the European Commission was considering reopening its draft antitrust settlement with Google. The pact had appeared to end a four-year investigation in Europe over allegations that Google had rigged search results for the benefit of its own in-house services. People familiar with the process told the Financial Times that Google’s rivals have made arguments to Brussels that may convince it to revisit the provisional pact, which could leave the deal in danger of collapse.
On Thursday, Google, Microsoft and Yahoo met European data protection watchdogs about the implementation of the ruling in May by the European Court of Justice granting people the “right to be forgotten” online. The court gave citizens the right to ask internet search engines to remove embarrassing or sensitive results for queries.
At the meeting, Google was asked about its refusal to remove links from all versions of the search engine. The watchdogs want links expunged from Google’s French, German or British sites to be also stripped from Google.com, its American search engine and all global versions.
The regulators will investigate its implementation over the coming weeks and could take legal action.
China demand helps Apple exceed earnings predictions
Chinese demand for the iPhone and iPad underpinned strong earnings for Apple this week, even though some customers in the US and other developed markets were less eager, opting to wait for future product launches before replacing their devices, writes Murad Ahmed.
The company recorded a 6 per cent growth in revenues worldwide, but a larger increase of 28 per cent in greater China. This along with lower component costs enabled Apple to beat earnings forecasts, with $1.28 per share. Net income rose 11.6 per cent to $7.7bn.
Ricardo Salgado, executive chairman of Portugal’s Banco Espirito Santo, faces an uncertain future
But group sales for the three months to June were slightly weaker than expected at $37.4bn. Wall Street had forecast iPhone sales of about 37m in the quarter. Apple reported 35.2m, though this was up 13 per cent over the same period a year ago; iPad sales were also below expectations at 13.3m, down from 14.6m last year.
Luca Maestri, Apple’s chief finance officer, said that iPhone sales were “even more impressive because we have started to see some purchase delays, particularly in English-speaking companies, where you read a lot of rumours in the media . . . It’s typical of this time of the year.”
There remain hints that the US technology group could soon unleash more products, and the results revealed a 36 per cent jump in research and development spending year on year.
People familiar with the situation have indicated that this year’s new product will be a wearable device that tracks fitness.
Credit Suisse to jettison commodities trading unit
Credit Suisse joined the exodus of banks from commodities trading this week as it revealed another round of cuts at its investment banking arm, writes James Shotter.
The Swiss lender has been under pressure from analysts and investors to overhaul its fixed income, currencies and commodities operations, which were once a big source of profits but have been hit by subdued markets and tougher regulations.
Credit Suisse has cut back the riskiness of its investment bank since the financial crisis, and last autumn said that it would reduce its interest rate trading business by 40 per cent. But it has resisted suggestions it should shrink its investment bank more radically, as rivals UBS and Barclays are doing.
Besides jettisoning its commodities unit, which was lossmaking and considered sub-scale by analysts, Credit Suisse said that would also “refocus” its foreign exchange operations to concentrate on “a combination of electronic trading and voice offering for larger and more complex trades”, and make further cuts to its rates business.
The bank said it would yield $200m a year in savings, as well as reducing the amount of capital tied up in its so-called “macro” business – its rates, foreign exchange and commodities units – by 35 per cent.
The bank revealed a SFr700m net loss for the second quarter, mainly because of a SFr1.6bn charge it took to fund its $2.8bn settlement with the US, after admitting it had helped clients evade taxes.
Related Commodities Note: Credit Suisse heads for exit on commodities trading
● Related Lex note: Credit Suisse: cutting edges
Clarke ousted from Tesco amid fresh profit warning
Mr Lewis became Tesco’s first outside chief executive in its almost 100 year history. The abrupt exit of Mr Clarke came just one day before he was due to celebrate his 40 years with the retailer at a swanky party hosted by chairman Sir Richard Broadbent at the Victoria and Albert Museum.
Mr Clarke had presided over months of poor performance and his ousting was accompanied by a profit warning.
The situation deteriorated since April, when finance director Laurie McIlwee quit and Tesco announced its second consecutive fall in annual profits.
As chief executive of Tesco, Mr Lewis, who is described as an experienced operator prepared to take radical action by people who know him, faces the task of reinvigorating Tesco. The supermarket chain is under pressure from the German discounters, Aldi and Lidl; the rise of online grocery retailing; and shoppers turning away from big stores. He must also reinvigorate the Tesco brand, which has fallen out of favour with shoppers, restore morale within the company, and strengthen the senior team after a series of departures.
Tesco may also face questions from investors over the size of Mr Clarke’s pay-off of just under £4m, given the recent performance.
● Related Lombard: Tesco’s shareholders must wait to feel the love
● Related Video: Tesco looks for fresh perspective
● Related Comment: A stepping stone links Tesco’s Philip Clarke and Man Utd’s Moyes
● Related Lex: Tesco: Clarke, not Superman
Unilever sales fall foul of emerging market slowdown
Unilever is a consumer industry bellwether. So when the maker of Lipton tea, Dove soap and Domestos bleach reported a bigger than expected drop in first-half sales this week, it underscored an enduring problem for food manufacturers, writes Scheherazade Daneshkhu.
Many consumer goods companies, including Unilever, have poured money into emerging markets in a bet that growth there would offset the economic downturn in the US and Europe.
The hope was that developed markets would then recover and reduce the dependence on emerging markets for growth. That did not happen.
Analysts had expected sales growth of 4.3 per cent in the second quarter, up from 3.6 per cent in the first three months of the year, but the pick-up was more modest at just 3.8 per cent.
Unilever’s pre-tax profits were up 15 per cent at current exchange rates to €4.2bn in the six months to the end of June, boosted by disposals, while sales fell 5.5 per cent to €24.1bn.
And finally ... the lighter side of the news
● Beat them at their own game? No, join them, especially if they are Scandinavians. Executives of Denmark’s Lego may wish Minecraft, developed by Sweden’s Mojang, had been their idea, but the two have formed a partnership to release several plastic building sets based on the video game’s virtual world.
● If George Harrison were alive, they might have found a home on his Friar Park lawn, as pictured on the album, All Things Must Pass. But retailer Kingfisher’s England-themed garden gnomes weren’t a hit with everyone else. A second-quarter sales drop was partly driven by poor sales of World Cup novelties, including gnomes.
● Unlike the boxing ring, the London Metal Exchange is one place you don’t want to be caught standing. This week nine copper traders were fined for “standing in the ring” at Europe’s last open-outcry trading floor. They broke the rule that ensures metal traders’ lines of sight are never obstructed during sessions.
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