Archive for June 23rd, 2009

NEW YORK: A new Mafia video game has presented Twitter with an offer, but it’s one that Twitter thinks it can refuse.On Tuesday, a Twitter-based game called “140 Mafia” became the first to use “virtual currency” on the social networking site, providing a money-making platform that experts believe could fuel Twitter’s success. Designed by a company called Super Rewards, the virtual currency lets users pay for game-playing advantages. For instance, in the popular role-playing game “140 Mafia,” players will now be able to visit a character named the Godfather to buy virtual health, money and ammunition with their real credit cards or bank accounts. Although most virtual currency users pay 15 to 20 per transaction, some have paid thousands of dollars playing the original Facebook version, “Mob Wars,” which debuted in March 2008, and immensely popular “Mafia Wars” sequel.Super Rewards Chief Executive Jason Bailey said his company is currently on track to make close to 100 million in revenue this year through the games’ success on Facebook and MySpace, as well as iPhone applications. “This is a tremendous opportunity for Twitter, and they can make a ton of money” said Bailey.Apple (AAPL, Fortune 500) takes a cut of its app sales. Social networks like Facebook and NewsCorp’s (NWS, Fortune 500) MySpace use an advertising model to generate revenue — driving up site traffic as gamers use more and more virtual currency. Facebook began selling “Facebook credits” that game players can use for virtual currency, but many analysts say they came too late to the table to be successful. Bailey believes that Twitter, which is new to the virtual currency frontier, could lay down Apple-like ground rules for future games and make a killing off of it.But, he added that, “Twitter seems content to not make money. It’s all about eyeballs with them.” They’re getting those eyeballs. Twitter is by far the fastest-growing social networking Web site. The site attracted 18.2 million unique visits last month, up 1,448% from a year ago, according to the latest data from Nielsen. Average time spent on the site increased 175% during that same time period.0:00
/2:44Twitter finds its ‘moment’Excitement about Twitter has grown rapidly in the past few weeks, as the social network has gotten a lot of free press amid its role in broadcasting the post-election Iranian protests. Iran’s tight restrictions on outside news coverage of the protests have led the global media to turn to protesters’ 140-character “tweets” to find out what is happening on the ground. Next Google or Craigslist? Twitter continues to turn down opportunities to make money off of its popular Web site. It has no advertising. It allows third-party developers to use the social network’s platform to make games and applications, but it doesn’t charge those companies a fee. And it doesn’t seem interested in revenue sharing with virtual currency companies either.Many analysts believe that the company taking a Google-like path, generating millions of users as it figures out its business model. Google, which some believe is a prime candidate to buy Twitter, was popular for many years before it figured out the key to online advertising.”Twitter absolutely wants to have a long-term sustainable business once they find their business model,” said Ray Valdes, social network analyst at Gartner. Others wonder if Twitter is becoming the Craigslist of social networks. Craigslist is an online classified Web site that famously does not monetize its business.”I don’t know who puts hippies in charge of these companies,” said Bailey, who noted that he has begun making far more money with Twitter than Twitter itself.Twitter not budging. Twitter appears to be content where it is.Though the company declined to comment for this story, co-founder Biz Stone has previously said publicly that Twitter does not need to generate revenue for the time-being, since it has still yet to blow through the more than 50 billion it has raised from venture capitalists.”They are passing by the pennies on the path for the real dollars further down the road,” said Valdes. “As long as they provide opportunities for others to have an ongoing engagement with Twitter users, they can monetize later.”Valdes said Twitter is getting buyout offers from several companies for close to 1 billion. But he does not believe Twitter is interested in selling quite yet. Instead, Valdes said Twitter will likely take advantage of its unique position in the social networking world, as a kind of live-updating news service for millions of followers, as highlighted by the Iran protests.Experts are mixed on how the company’s business model will eventually pan out, but most say virtual currency and charging users to follow certain content could likely be a part of that.”Twitter is a new kind of broadcasting, with millions of people listening in real time on their cell phones and computers,” said Valdes. “There’s money to be made on all sides of Twitter interactions.”

Source:CNN

NEW YORK (Fortune) — In order to crack the smartphone market it covets — but has failed thus far to crack — the world’s largest computer chip maker Intel realized it needed a partner in the cell phone business. It ended up snagging the world’s largest handset maker, Nokia.The two companies Tuesday announced a long-term technology collaboration to develop a new class of “mobile computing devices” based on Intel’s microprocessor technology. The partnership comprises three key areas: developing mobile chipsets based on Intel’s x86 chip architecture; furthering the development of open source Linux software for smartphones and other mobile gadgets; and for Intel Corp. (INTC, Fortune 500), getting a license to put Nokia’s latest 3G modem in future products.Despite repeated questions from analysts and media, neither company would detail what those products might look like — a phone or a netbook-like computer — nor did the companies give a timeline on when the fruits of their new collaboration might appear in the marketplace. “This is about technology collaboration and a licensing agreement,” said Anand Chandrasekher, Intel senior vice president and general manager of its Ultra Mobility Group. “We are not commenting on specific products today, I’ll leave it at that. When we are ready to talk about products, we will.”The reality is that Intel today does not have a chipset ready that is suitable for a smartphone. Intel’s Atom line of chips power the vast majority of netbooks, those low-power, clutch-sized computers. The second generation of Atom, dubbed Moorestown, though even stingier on power consumption, is not for handsets either. Designs from a number of electronics manufacturers — the only one publicly announced is LG — will use Moorestown in devices that are bigger than an iPhone but smaller than a netbook — so-called Mobile Internet Devices or MIDs. Nokia (NOK) has tried to sell these recently and flopped. But will Nokia offer something MID-like powered by Intel’s Moorestown chipset soon? Given today’s announcement there is a very good chance.0:00
/2:44Twitter finds its ‘moment’It won’t be until around 2011 that the third-generation of Atom, dubbed Medfield, will be ready for the market. This system-on-a-chip is being developed to power smartphones. It’s destiny, as one engineer in Intel’s Austin lab crowed, is to kick the pants of the incumbent in the mobile chipset world ARM. So will we see Intel inside a Nokia smartphone? You bet, but it will be at least a two-year wait. While they are waiting for Medfield to be ready, it looks like Intel and Nokia will be pushing this “new class” of devices. And you have to figure they’ll be in the market sooner rather than later.That will have to suffice until the Intel/Nokia team can really start a push into smartphones. While it owns the market outside of North America, Nokia is desperate to have a real competitor for Apple’s iPhone and Research in Motion’s BlackBerry, as well as Google’s Android mobile operating system. Having Intel architecture inside, including access to all the applications developed since the beginning of the PC-era, not to mention the beginning of the Internet, could give them the edge they need.Intel badly wants a way into the mobile world. For all its prowess in personal computers, Intel is not a major player in cellphones, which is the main computing device for much of the world’s consumers. (Intel briefly produced a chip for cellphones, but decided instead to focus on broadband wireless technologies such as WiFi and WiMax.)Now, though, Intel has found in Nokia an important — and big — customer for its mobile technologies. If Intel is going to succeed in the mobile market, it needs design wins. While today’s collaboration announcement falls short of that, it’s heading in that direction. Ultimately what will decide the success of this partnership is the gadgets these two companies can cook up together, and if at the end of the day, consumers are willing to swap out their BlackBerry or their iPhone for a Nokia/Intel smartphone.

Source:CNN

NEW YORK: Despite Exxon Mobil Corp.’s well-publicized stance in support of fossil fuels, the oil giant said on Tuesday that it is sponsoring a program to bring a zero-emission electric vehicle to Baltimore. The car, called the Maya 300, is a partnership between the oil company and electric-vehicle maker Electrovaya. Exxon (XOM, Fortune 500) is providing parts for the Electrovaya’s lithium-ion battery.The Maya 300 is slated to be available for sale in 2011, but visitors to the Maryland Science Center can test-drive it for free beginning on Tuesday on a track inside the building. The test program ends August 1, when a car-sharing program will become available for a membership fee. Through the car-sharing program, drivers may rent the Maya 300 vehicles for 14.50 an hour, at a minimum of 2 hours.A standard rental program will also be available “in the coming months,” a press release said. Further details were unclear. The environmental conundrum. Exxon president and chief executive Rex Tillerson has been resistant to pegging his company’s future on alternative energy.In August 2008, Tillerson told ABC News, “I cannot say we’re going to opt for an alternative elsewhere at the expense of oil and natural gas, because oil and natural gas are going to take us to [the] future.”That same year, influential Exxon shareholders the Rockefeller family made an attempt to separate Tillerson’s CEO and chairman positions, saying they wanted Exxon to invest more in alternative energy. Later, four large British investors joined the family’s effort, which ultimately failed.Because of Tillerson’s stance, this foray into the electric vehicle market comes as a surprise to some even though Exxon has been researching alternative energy for years.”My initial reaction is that this is PR more than anything else,” said Paul Weiss, analyst at Argus Research Company.But Robert Kessler, an analyst at Simmons & Company International, disagreed that Exxon’s move was a public-relations grab.”I think there’s a genuine interest to increase energy efficiency,” Kessler said. “They’re interested in all options, especially any investment that generates an attractive return.”Exxon is “one of the slower-moving, more conservative” energy companies in terms of investing in renewable energy, and that approach has paid off thus far, Kessler said. “With the benefit of hindsight, we see that investing in [alternative energy] a year ago looks to have been early relative to the opportunities available today,” he said. Exxon’s caution has helped its bottom line, said Kessler.0:00
/1:39Making a battery to replace oilJust a timely investment? The move could also be part of a larger motive to invest in Electrovaya or other small alternative-energy firms, as Exxon enjoys strong balance sheets and a large amount of cash, Argus’ Weiss said.”Exxon is in a position to take on some risk,” Weiss said. “If a company they invest in does well, it would be a great move for them to have equity in it.”Electrovaya said the Maya 300 is zero-emission and low-speed, offered with the option of a standard battery pack that can drive for up to 60 miles on a single charge for about 25,000. Another version with the extended 120 mile-range battery will sell for about 35,000. Tuesday’s event will also feature the opening of an Exxon-sponsored energy efficiency exhibit at the Maryland Science Center. Exxon has invested more than 500,000 in the car-sharing program and exhibit.

Source:CNN

SAN FRANCISCO (Fortune) — Concepts like “smart grids” and “intelligent metering” are difficult for the non-expert brain to grasp. So instead, wrap your mind around a simpler set of facts. Utilities experience peak demand for example, on blistering hot days when air conditioners are pumping all out just 2% of the year.Yet to serve their customers on such days, the utilities will incur as much as 15% of their total costs for the year while using their oldest, dirtiest generating plants to satisfy the demand.In other words, it’s a dirty, costly affair to keep us comfortable for a relatively short period of time.Imagine, then, the benefits of an electric network – often called a grid because of the wired interconnections among power plants, homes and businesses – that “think” intelligently.Such a smart network would tell customers things like the cheapest time to wash the dishes or charge an electric car. It would represent huge savings, financially and environmentally.0:00
/2:06Save money with ‘green’ lightingIt’s the vision, anyway, behind a wave of companies funded by Silicon Valley venture capitalists. It’s also the strategy of energy and technology behemoths like General Electric (GE, Fortune 500) and IBM (IBM, Fortune 500), who see the same potential gold mine as tech-industry entrepreneurs. (Jeffrey M. O’Brien’s smart-grid feature on IBM offers a good primer on how the big boys are approaching the task.)In between the tiny startups and the giants aiming to exploit a niche are some early leaders in making dumb power grids smart. One is Silver Spring Networks, a Midwestern transplant in Silicon Valley funded by Foundation Capital (which got in early) and Kleiner Perkins, which invested more recently.Silver Spring named for a street in Milwaukee, where the company started in 2002 makes software and other technology that turns electric systems into the equivalent of an Internet network. By installing its cards into traditional utility metering technology, utilities have near-perfect information about their customers’ usage. Customers, in turn, get helpful data from their power provider about how to save money.”Billion of devices have been deployed that need to be managed on the network,” says Scott Lang, Silver Spring’s CEO. The company’s technology, he says, manages that process across the network in a secure manner the latter a nontrivial concern given that the equipment resides in or near the homes of millions of customers.A private company that doesn’t disclose financials, Sliver Spring clearly is preparing for an initial public offering. Lang says the company will be cash-flow positive this year on the strength of large-scale pilot projects it has put together with major utilities including PG&E (PCG, Fortune 500) and Florida Power & Light (FPL, Fortune 500).An IPO would be welcomed by investors; Silver Spring already has raised 175 million and employs more than 250 people. In fact, a Silver Spring IPO would be resonant of the dot-com era: a fledgling company pursuing a big idea with the tailwind favorable public opinion.As an added bonus, the company stands to benefit from the Obama Administration’s stimulus plan, which will apportion “smart grid” funds to utility customers. “Utilities are lining up to apply,” says Lang, who adds that state regulators around the country have been “invigorated” by the prospect of their utilities finding alterative sources of funding from Washington.Utilities that pollute less while lowering prices to their customers. There. That’s an easy concept to like.

Source:CNN

WASHINGTON: President Obama offered a passionate defense of the Federal Reserve on Tuesday, explaining his proposal to put the central bank in charge of monitoring broad risks facing the financial system.Obama, speaking at a midday press conference, defended the performance of Fed Chairman Ben Bernanke after the financial crisis. Bernanke has done a “fine job” and “performed well,” the president said. In addition, Obama answered criticism, some of it resonating from members of his own party in the Senate, that giving the Fed authority to monitor systemic risk would endow it with too much power.”If you look at what we’ve proposed, we are not so much expanding the Fed’s power as we are focusing what the Fed needs to do, to prevent the kinds of crises that are happening,” Obama said. Obama last week presented an 88-page list of proposals to revamp parts of the system that regulate financial firms and products. On Tuesday, Obama said that one of the reform proposals actually removes one Fed power: enforcing consumer protection. He wants to create a new agency to enforce consumer protection of financial products like mortgages and credit cards.However, under Obama’s plan, the Fed would be charged with making sure giant banks and insurance companies have enough capital to back up the big financial bets they’re making.Republicans and some key Democrats, such as Banking Committee Chairman Sen. Chris Dodd, D-Conn., are still perturbed that the Fed didn’t do enough to monitor risk among the banks it already had under its watch.0:00
/5:01The Fed’s heavier handObama on Tuesday acknowledged the criticism. He said even the Fed would be the “first to acknowledge in dealing with systemic risk and anticipating systemic risk, they didn’t do everything that needed to be done.”But Obama said he believed the Fed did better than most other regulators before the crisis started.”I would say that all financial regulators didn’t do everything that needed to be done to prevent the crisis that happened,” he said. “That’s why we put forward the boldest set of reforms in financial regulations in 75 years — because there were too many gaps.”But the president went further in explaining why he wants Bernanke to be the one in charge of systemic risk. He said he believes the Fed has “the most technical expertise and the best track record in terms of doing that.”

Source:CNN

NEW YORK: Should the Federal Reserve be more worried about the threat of inflation on the long-term horizon, or deflation in the short-term? It’s an important question to ask as the Fed’s policy-making committee prepares to release a statement about the economy on Wednesday.Those who fear inflation argue that the recent rise in oil prices, the dollar’s loss of value and the recent rise in yields on U.S. Treasurys are all signs that consumers could soon be grappling with higher prices for lots of goods and services. These economists say the seeds for inflation have been sown by the Fed’s extraordinary efforts to keep the economy afloat over the past year. Many believe the central bank needs to pull back quickly on the various programs it has created to pump cash into the economy, even if the U.S. economy is still struggling. If the Fed doesn’t act, it could risk even worse problems down the road — especially if long-term bond yields and the lending rates tied to them continue to rise. “There’s no doubt that what the Fed is doing today is inflationary,” said Brian Wesbury, chief economist at First Trust Portfolios. “The real sign of that is the increase of commodity prices since early this year.”But others argue the economy is still so weak that deflation, or a drop in prices, is the more serious threat. The Consumer Price Index, the government’s key inflation measure, posted its largest 12-month drop since 1950 in May.This year-over-year decline in prices, coupled with rising unemployment and low factory utilization, could be signs that prices are likely to keep falling. And while lower prices might sound like a positive to consumers with budgets stretched to the breaking point, economists are in general agreement that deflation is far more destructive to the economy than inflation.Businesses unable to make a profit in an environment of declining prices will likely cut production and lay off more workers. That could cause a deflationary spiral. The Great Depression and Japan’s so-called Lost Decade of economic stagnation are both well-documented examples of the damage that deflation can cause.”I think the predominant risk in the next 6 to 12 months is deflation,” said Mark Zandi, chief economist at Moody’s Economy.com. “There’s excess capacity everywhere. There’s vacant real estate across all property types. Unemployment continues to rise. I don’t see how businesses can raise prices in this environment.”0:00
/3:53Behind oil’s steady riseZandi said one reason people don’t need to fear inflation is because the Fed knows how to fight inflation — with higher interest rates and tighter money supply.”But if you get into a deflationary trap, it’s very difficult to get out of. Japan is a good case in point,” he said.Rich Yamarone, director of economic research at Argus Research, said he’s not concerned about such a trap. But he agreed with Zandi that people shouldn’t worry about the prospect of runaway inflation either since the Fed can easily put the brakes on the economy if it has to. “The next problem coming down the pipe will be inflation, not deflation. I just don’t think it’ll be happening any time soon,” Yamarone said. “And I suspect the guys who control the spigots are on top of this.” What will the Fed say?Investors looking for clues about how the Fed views the threat of inflation or deflation won’t have to wait much longer.When the Fed wraps up its two day policy meeting Wednesday, it is virtually certain that it will leave its key interest rate near zero. What will be watched more closely is whether its statement has language warning of greater risk from rising or falling prices in the future.In its last statement, the Fed said it “expects that inflation will remain subdued.” It also rang a deflationary warning bell, indicating that “inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.”But the so-called inflation hawks at the Fed have become more vocal since that April meeting about what they see as the growing threat of inflation.Philadelphia Fed President Charles Plosser argued in a speech last month that unless the Fed soon becomes aggressive in raising rates and disposing of assets it bought during the financial crisis, it could spark the kind of high inflation levels seen in the late 1970s.Wesbury agrees that the Fed has to be more vigilant about fighting inflation and added that the Fed may soon need to raise rates. He said low inflation today is only a result of oil prices falling from last year’s record highs. Core price readings, which strip out food and energy, have remained stubbornly high despite the weak economy.”In order to fight [inflation], you have to start tightening now,” said Wesbury. “By the end of this year it’ll be too late to stop the inflation that will be happening in 2011.”But Zandi believes Fed chairman Ben Bernanke and other central bank policymakers that he refers to as “deflation hawks” are still concerned enough about the risk of deflation that he does not think the Fed will rein in its stimulative programs anytime soon just because of long-term inflation fears. “If they do bow to that view, then I think the risk will rise that we’ll have outright deflation,” said Zandi.

CONROE, Texas (Reuters) — Peter Huntsman never would have agreed to sell the 4.5 billion chemical company founded by his father if he thought the banks funding the deal could wiggle out of their commitment, the executive told a Texas court Tuesday.”This is about certainty,” Huntsman, president and chief executive officer of Huntsman Corp., told a jury in state district court located in a town about 40 miles north of Houston. “We’re selling 40 years, two generations of life’s work.”Huntsman is suing Credit Suisse Group AG and Deutsche Bank AG for more than 4.6 billion in damages for their role in the failed 6.5 billion takeover of the company.The banks were lenders in a 2007 buyout led by private equity firm Apollo Management LP that fell apart after Apollo and the banks backed out of the deal, claiming it would create an insolvent company as the U.S. economy deteriorated.Under questioning from company lawyers, Peter Huntsman said the company agreed to a higher offer price from Apollo’s Hexion chemicals business even though the private equity firm had burned them in earlier negotiations.So any deal struck, Huntsman told the jury, hinged on the soundness of financing.And in the end, Huntsman believed it negotiated “a rock-solid, ironclad agreement,” the CEO told the court.On Monday in opening arguments, lawyers for Huntsman alleged the investment banks had no intention of honoring contracts to finance the takeover of Huntsman Corp. and had a side deal designed to protect themselves.And after the deal was signed, the banks scrambled to change the terms of their commitments in an effort to reduce exposure as the credit markets turned against them, Huntsman testified.”The commitment to fund this transaction was really being pushed over here to Apollo, which is not really even a bank,” the CEO told the jury.The buyout, struck in July 2007, was one of the last big deals signed in an era where credit was readily available to private equity firms.0:00
/4:22Bailout culture clashWhen the global credit crisis hit, Deutsche Bank (DB) and Credit Suisse (CS) were unable to syndicate the deal’s hefty debt load.Huntsman (HUN, Fortune 500) later sued to complete the sale to Apollo. Huntsman won that lawsuit and later agreed to settle with Apollo for 1 billion.The two banks were Huntsman’s primary lenders and were chosen to back the financing because the company did not trust Apollo to close the deal, Huntsman’s lawyers contended.”There’s no point in having a merger if you don’t have the funding to back that up,” Huntsman told the court.The trial is scheduled to last six weeks before Judge Fred Edwards.

Source:CNN

DEARBORN, Mich. (Reuters) — Ford Motor Co. will receive nearly 5.9 billion in U.S. government loans to spur development of more fuel-efficient vehicles, the Obama administration said Tuesday.Japan’s Nissan Motor Co. Ltd. will receive 1.6 billion, and start-up Tesla Motors Inc. will receive 465 million in advanced technology financing from the Energy Department program.”By supporting key technologies and sound business plans, we can jumpstart the production of fuel-efficient vehicles in America,” Energy Secretary Steven Chu said at Ford headquarters.”These investments will come back to our country many times over by creating new jobs, reducing our dependence on oil, and reducing our greenhouse gas emissions,” he said.The agency plans additional loans over the next several months to automakers and suppliers.Chu said the administration began talks with Chrysler Group LLC on possible energy technology loans immediately after the company stepped out of bankruptcy protection this month. It is also having “technical” discussions with General Motors Corp., which is currently reorganizing in bankruptcy proceedings.Both companies applied for financing last year but their financial distress disqualified them from consideration in the first round of financing. The 25 billion program is only open to viable companies.Chrysler is operating in an alliance with Italy’s Fiat.”There is money there – I wouldn’t say set aside – but we are trying to stretch these dollars as far as we can,” Chu told reporters.0:00
/1:39Making a battery to replace oilBoth Chrysler and GM rely on government bailout funds to operate. Ford, struggling like other companies with the industry’s sharp sales decline this year, is the only U.S. auto manufacturer that did not seek bailout assistance.Ford will receive loan funds through 2011 to retool factories in Michigan, Ohio, Illinois, Kentucky and Missouri in order to produce 13 models. Ford is focusing on electrification and improvements to conventional engines as well as converting two truck plants for car production.The loan is part of a 14 billion investment Ford plans in advanced technology vehicles over the next seven years, said Ford Chief Executive Alan Mulally.The No. 2 U.S. automaker hopes most of that financing will come from government loans.Nissan’s North American unit will receive the funds to retool its Smyrna, Tennessee, facility to build electric cars and an advanced battery manufacturing plant, Chu said.Tesla, based in San Carlos, California, will receive funds to build electric drive trains and electric vehicles.Ford (F, Fortune 500) shares were up 14 cents, or 2.6%, to 5.52 in early afternoon trading on the New York Stock Exchange.

Source:CNN

NEW YORK: What’s that sound? That rumbling from Wall Street? The broad market has cooled off this month. But some stocks are taking the June swoon in stride, thank you very much.It’s what basketball broadcaster Marv Albert would describe as the crowd taking up the chant of defense. Many utility stocks, due to their relatively steady business of collecting monthly payments and providing investors with fat dividends, are actually up this month. Boring slow-growth telecoms Verizon and Embarq are also up in June. So are stodgy consumer staples firms like J.M. Smucker, General Mills and Clorox. But where oh where are the health care stocks? They’re down along with such losers as banks and tech. The difference is that health care stocks are often viewed as good hiding places in a recession. After all, if you’re concerned about your job security, you might be willing to convince your kid that he doesn’t need a new pair of Nike LeBron VI “kicks” for 140. But if Junior comes down with the sniffles, are you not going to take him to the pediatrician?Yet, the S&P Healthcare Index is flat so far this month, while Big Pharma giant Merck (MRK, Fortune 500), insurer UnitedHealthcare (UNH, Fortune 500) and biotech firm Genzyme (GENZ) are all down nearly 10%Jack Ablin, chief investment strategist with Harris Private Bank in Chicago, summed up the problem in one word: politics.”The sector is like a yo-yo tethered to the conversations in Washington. There is cause for concern because of the potential for upheaval,” he said.President Obama is eager for health care reform. But there is little consensus on how to do it. Will there actually be a public health plan? Will drugmakers, which have already agreed to some price cuts for seniors in Medicare, be forced to go even further? With all those unanswered questions, Ablin said that health care stocks are trapped in a no-win situation. “Health care took a back seat during the rebound, but now it’s role as a typical defensive area in the market has been undermined as well,” Ablin said. “The perception is that it will no longer be business as usual so investors are worried about the impact of reform on profits.”Talkback: What do you think needs to be done to reform the nation’s healthcare industry? Leave your comments at the bottom of this story. Along those lines, Cowen & Co. pharmaceutical analyst Steve Scala did an analysis of how much of a profit hit the big drug companies could take as a result of their agreement to fund half of the cost of brand-name drugs for seniors falling into Medicare’s so-called “doughnut hole” of coverage.Scala wrote in a report Tuesday that filling this hole would be “costly but manageable.” He found that the companies that would likely suffer the largest drop in profits were Eli Lilly and AstraZeneca while Wyeth, GlaxoSmithKline and Pfizer would experience the smallest decline in earnings.0:00
/2:50The great health care debateTed Parrish, co-manager of the Henssler Equity fund, agreed that the possibility of a real change to the way big health care firms do business is more likely now than at any point in the past few decades. For that reason, he said his fund, which usually has had heavy exposure to the health care group, has been trimming its positions in pharmaceutical firms, HMOs and medical device makers. Simply put, even if you believe that the long-term demographic trend favors healthcare — i.e. Baby Boomers aging and needing more medical attention — treating illness may no longer be as profitable. “It’s clear that health care costs have to come under control. We’ve known for years something has to be done and this time it looks like reform is for real,” Parrish said. Still, this doesn’t mean that there are no opportunities in health care. For one, the changing landscape is likely to lead to more consolidation. There already have been two blockbuster mergers announced this year — Pfizer buying Wyeth and Merck’s acquisition of Schering-Plough. More recently, generic drugmakers and biotechs have become the focus of the M&A market, with generic leader Watson Pharmaceuticals (WPI) buying privately held Arrow Group for 1.75 billion and diversified healthcare giant Johnson & Johnson (JNJ, Fortune 500) scooping up cancer treatment specialist Cougar Biotechnology for 1 billion.Parrish said generics firms, which make cheaper versions of drugs that are no longer protected by patents, should continue to do well given the focus on reducing the cost of medication. His fund owns shares of Israeli-based Teva Pharmaceutical Industries (TEVA), the world’s largest generic drug firm. And shares of Teva, Watson and fellow generic maker Mylan (MYL, Fortune 500) are all up year-to-date. As for biotech, Parrish thinks more big firms like Johnson & Johnson, which his fund also owns, will seek to broaden their pipeline with biotech acquisitions. But instead of gambling on the biotech firms themselves, many of which are unproven and unprofitable, he’d rather own solid leaders like J&J that have a history of making smart deals.”It’s difficult to pull the trigger on biotechs because a lot of them are one-trick ponies,” Parrish said.Still, as long as investors remain in the dark about what exactly health care reform is going to look like, much of the sector will probably remain stuck in Wall Street’s sick ward — regardless of whether recovery or recession fears rule the daily headlines.Talkback:What do you think needs to be done to reform the nation’s healthcare industry?
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NEW YORK (Reuters) — Intel Corp., the world’s biggest chip maker, and cellphone market leader Nokia, said they would work together on a new class of mobile computing device.Under the agreement announced on Tuesday, Intel will buy intellectual property from Nokia related to high-speed wireless technology and the companies also said they plan to collaborate on open-source mobile Linux software projects.They did not give a specific timeline for the development of products but said they expect “many innovations to result from this collaboration over time.”The companies said they aimed to define “a new mobile platform beyond today’s smartphones, notebooks and netbooks” for hardware, software and mobile Internet services.Intel (INTC, Fortune 500) already sells chips for netbooks, a type of no-frills laptop computer, and Nokia (NOK) has said it would look into the possibly of expanding beyond phones to develop netbooks.

Source:CNN