EMI, second act ...

On the 14th of March 2010 I had posted an article concerning the financial problems faced by EMI, the most well-known music company in the UK. The firm signed artists like The Beatles, Joe Cocker, Paul MsCartney, Queen, George Michael and other very famous singers...

It was important to me to speak about that subject, loving the music, playing and teaching the piano. Indeed to me there is a huge problem which hits the music sector nowadays because of the free downloading on the web. Without these music companies the artists, to my opinion, will not be able to live from their music any more. Companies like EMI help the artists to record their album, to do the promotion of the artists, its new album, to organize concerts and the most important: to pay the salary, which is not a small thing..

In March EMI was close to bankrupcy: £1.75bn pre-tax loss and £200m pension deficit. Terra Firma, EMI's private equity owner, had to find investors to save the company. at that time it seemed to be a very difficult task for Mr. Allen (the new CE after the departure of Leoni-Sceti in March 2010) to save the music... With £3.2bn debts to Citigroup, the bank wanted to take EMI over and to cut costs as soon as possible.

The Financial Times was very pessimistic about EMI's future, saying that the investors would not agree to re-inject the amount needed by the firm, EMI being in a very bad financial position. The Times focused on the famous artists who wanted to leave the company after such bad resulsts and after the departure of Leoni-Sceti (such as MsCartney and Queen).

I wanted for this last article to come back to this story which is important to me; to see what have changed, if there has been a progression, if Terra Firma's investors are still supporting EMI or not, and if the artists who wanted to quit are always par tof EMI or not any more.

Newspaper analysis:

Le Monde is the first newspaper to re-publish an article on this subject, on the 29th of April. A really short, but an important one for the company! Indeed the article "After 40 years of collaboration, Paul McCartney leaves the major EMI" announces the very bad news. One of the most important artists of the company finally decided to quit. The article explains that the famous singer left EMI to become a Concord Music Group's artist, one of the most important independant music companies in the USA. But the newspaper does not give any news concerning the financial progression.

The second newspaper to announce another bad news is Metro (France) with its article entitled "Exodus at EMI, Queen's turn". A second artist has left the orchestra. The author explains that Queen signed with the main competitorn Universal, because EMI could not compete with its contestant, the price asked being to big for EMI which prefers to focus on new artists rather than putting to big amount on the well-know ones, who became to expensive for it. In this article too there is not many financial information.

The Financial Times on the 11th of May publishes "Terra Firma to inject more cash into EMI". Is it the first good news? The article explains that Guy Hands (Terra Firma's chairman) plans to tell Citigroup that he received enough "verbal assurances" to put another £105m into EMI. The author then contrasts the news, stating a source (unknown..) who assures that some investors still need approval from their invesment committees before agreeing formally.

But even if this news seems to be good for ZMI's future, Chris Briggs, the A&R who worked at EMI for years (with Robbie Williams for example) is leaving for SOny Music (another competitor) because of the new policy since the departure of Leoni-Sceti: "Some of the uncertainties have made it harder to sign new artists because of the amount of publicity Guy (Hands) and Terra Firma get with regards to the debt and trying to raise this money".

Terra Firma investors interviewed by the TF explain that if the reinjection is successful, it would force Citigroup to restrucuture its £3.2bn debts. Furthermore if it is not enough, Terra Firma could ask co-investors such as Canada Pension Plan, which have not been taken into account from now on.

The author finishes its article explaining that Terra Firma plans to ask a further £225m before the end of the year to cover demands in its loans until they mature in 2014.

It seems that EMI is recovering!!!

Bloomberg Business Week is got the last news today (the 14th of May). In "EMI says Guy Hands wins investors backing for EMI cash", the author starts quoting the EMI' CE (Mr. Allen): "We are pleased to have received this confirmation of an additional investment, which is a vote on confidence is EMI from Terra Firma and its investors, following the significant improvement in the company's operationg performance". The article is really positive, explaining that this amount will help EMI for its conenants until March 2015.

My Opinion:

The news this week concerning the positive vote of Terra Firme's investors is good news for EMI!!! Even if very well-known artists left the company, it shows the confidence investors have in this company, and that the company will maybe survive... I am really pleased to hear such news, but for how long would it be possible? It the CDs are not bought, I do not know how the company will survive, and investors will not be able to finance EMI during many years...

Furthermore the news came yesterday and the reaction of EMI'CE only came today. The reaction from the bank Citigroup is missing for the moment.

The music of the week:

The Fantastic symphony, Berlioz, 2nd mvt (with Leonard Bernstein as Director of the orchestra).

Lots of notes and the hapiness of the company with the funds coming from Terra Firma ..!

http://youtbe.com/watch?v=npg11G8ZkAY&feature=PlayList&p=E930D65C37E22DF1&playnext_from=PL&index=0&playnext=1

Sources:

"Terra Firma to inject more cash into EMI", the Financial Times, 11th of May 2010

"After 40 years of collaboration, Paul McCartney leaves the major EMI", Le Monde, 29th of Aprim 2010

" Exodus at EMI, Queen's turn", Metro, 10th of May 2010

"EMI says Guy Hands wins investors backing for EMI cash", Bloomberg Business Week, 14th of May 2010

Is Iran going to play a solo?

Would new market legislation really help so stop the evasion of the foreign companies from Iran?

I have decided this week to focus on the foreign companies which have implementations in Iran. Indeed two weeks ago there was a discussion berween the United States and the other permanent members of the UN Security Council on possible new sanctions agains the country because on the Tehran's nuclear program. The country decided to sweeten the legislation concerning the foreign investments on its financial market. The problem nowadays is that some big foreign companies have announced their aim to stop their activities in the country in support to the US's policy. How have been perceived this news by the newspapers? Indeed this problem cannot only be seen with just a financial view, because even if it is the foreign investments on the Iran's financial market which are concerned, it cannot be separated from the political view. There are many issues in this subject, and so lots of points of view coming from the newspapers.

Newspapers Articles:

The news concerning the new legislation on the Iran's financial market has been displaid by Les Echos. The French newspaper explains in its article entitled "Iran wants to seduce investors", that the restriction concerning the funds transfers out of Iran have been raised and that the limit of hte foreign participations in the capital of the national companies has been carried from 10 to 20%.

The author states Ali Saleh Abadi, the director of the Audit Board of the stock market transactions: "The government puts forward from now on more incentive measures and less condition with the foreign investors. The investors will be exempted from taxes and will not be subjected any more with excessive payments". This new legislation seems to be good news for Les Echos. Abadi is quoted in a positive aspect even if the author specifies at the end of its article that companies are more reluctant because of the Uranium's program.

In this article only the conditions of the new legislation are developed, with an only small flat given at the end and explaining the companies' reluctance. The discussion concerning the sanction is not mentioned at all.

But this is the case in the Financial Times on its article entitled "Iran central bank in sanction spotlight". The author introduces its article, explaining that the USA tries to convince Russia and China to include Iran's central bank in a United nation sanctions resolution against Tehran's nuclear program. Indeed the article focuses on the Bank Markazi (Iran(s Central Bank), which is reproached by the USA to have had illicit activities. The author quotes Matthew Levitt, a former US Treasury Official who is now at the Washington Institute for Near East Policy: "The central bank (Bank Markazi) remains the one major financial institution which officials have been involved in Iran's illicit activity but has not yet been targeted. Closing that loophole would have a major impact on Iran's ability to finance its proliferation and other illicit activities".

Bank Markazi is also quoted, saying that it has always adhered to the best international practices and has respected international laws, and then the government, which insists saying that its nuclear program is purely peaceful. But the author goes on, specifying that Washington is seeking measures on finance, energy, inspection of cargoes coming from Iran, and wants to push an agreement on a complete embargo on arms sales to Iran.

This article doesn't take into account the news concerning the new legislation for foreign companies, but focuses on the politial issues.

The Herald Tribune in "Companies feeling more pressure to cut Iran ties", focuses on the big firms which have announced the end of theit artivities in the country. The article first list Ernst & Young and Pricewaterhousecoopers, which have both publicly "shun" the Islamic Republic. Then it is the turn to General Electric, Huntsman, Siemens, Caterpillar, Ingersoll Rand, Daimler, but also the Royal Dutch Shell and the Malaysian state oil company which decided to leave after its current contracts ended.

The author explains that with the sanctions since the last three decades, American companies do not have big businesses in Iran, but that the federal government had awarded more than $107bn in contracts payments, grants and other benefits over the past decade to foreign American companies which were in Iran. This companies' evasion could have huge impacts for Iran. Mark D. Wallace, a fromer ambassador under Mr. Bush presidency explains: "You're seeing the regime standing at the precipice and if a few more companies pull out they don't have the ability to access international services, goods and capital, they're in real trouble".

The article specifies that foreing businesses have been an important course of support of Iran in the recent years. Some figures are given to reinforce the author's point of view. Indeed, inthe last five years, 41 foreign companies have helped Iran to develop its oil and gas sector, which is not a small participation, considering that the sector represents more than half of Tehran government's income.

I also tried to find some articles extracted from Iranian newspapers in order to cover the largest points of view's panel, and to see have is seen the issues from the opposite side.

The article entitled "Ahmadinejad says he and Obama should not act hastily" comes from the Tehran Times. This article only focuses on quotations of the Iran's President against the US Government. The author quotes Ahmadinejad in different interviews about the US sanctions: "The resolution (presented to the International Atomic Energy Agency) was not based on any legal or lawful framework but surely a political, politicized act. It reduced public confidence in the negociation process in Iran" (Al Jazeera's interview). "The iranian nation is able to withstand the pressure of the United States and its allies". These quotations which constitute the article have really strong positions and display threats towards the USA: "Any connections and contracts with Iran, the pathway to Iran, will be shut permanently".

The author sides with the Iran's President. according to Ahmadinejad, these sanctions are not coming from any legal problem, but are only coming from political issues from the USA towards Iran.

On the contrary the Iran Times prefers to choose a positive tone in "US Firms fault sanctions on Iran". The author quotes Jim Fine, a legislative secretary for foreign policy:" I have seen very little evidence that the USA is still working on the engagement track". Then it is mentioned that that these measures would penalize foreign companies that export gasoline to Iran rather than Iran. This article trics to give back confidence to the Iranians readers, explaining that such measures would have more negative impact for foreign companies than the country.

My point of view:

I think that discussions between the USA and Iran will become really tense, and I do not know how this will end.. maybe a third war..?? Should the companies flee Iran and side with the US policy, even if they have implementations which are beneficial for their activities? I think the business will be harder and harder in the future in this country which semms to turn back tje clock since the election of ahmadinejad. TO my point of view the new legislation to attract foreign investors is the last desperate try before cutting the international relations. The companies which are stopping their activities will find other markets, but I do not think that Iran will find new foreign investors...

The music of the week:

The nocturne in C minor, Chopin. We can firsst hear the sadness of Iran, isolated country, and then the anger of Ahmadinejad...

http://www.youtube.com/watch?v=-MzrAGZHDvo

Sources:

"Iran central bank in sanctions spotlight", Financial Times, 25th of April 2010

"Iran wants to seduce foreign investors", Les Echos, 26th of April 2010

"Companies feeling more pressure to cut Iran ties", the Herald Tribune, 23rd of April 2010

"Ahmadinejad says he and Obama should not act hastily", Tehran Times, 6th of May 2010

"US firms fault sanctions on Iran" Iran Daily, 10th of May 2010

Argentina wants to come back into the orchestra

On Thursday (15th of April), the news concerning a possible restructuration of a €20 billion debt seemed to be a great march for the country and for the holders of bonds still unpaid since 2001.

Argentina reimbursed on the 5th of April 2010 $203.6 million with the reserves of the Central Bank. It was the first time that the justice authorizes the country to take money from these funds in order to pay back debts to private creditors since 2001. Indeed, at the beginning of the 90s the country wanted to attract foreign investors, the "Hoodouts" and reduce inflation. It had been set up with the "currency Board" system with the creation of the local currency with foreign currency coming from the investors.

This system worked during years; companies like Ford or Carrefour invested a lot, for example. But it started to crack in 1998 when the dollar started to raise, dragging the Peso with it. Argentina had been excluded from international markets after the defection of the IMF in 2001, when the government decided to interrupt the repayment of its external debt which had reached $90 billion. After this defection the government had closed all the banks in order to avoid liquid assets crisis.

The restructuration would consist in exchanging old unpaid bonds with new ones which would represent more than the half of their value. The country needs the approval of Europe and Japan, before launching his takeover bid. A restructuration had already been rejected in 2005, but the three-thirds of creditors had approved of it. How has been perceived the news? Is it more optimistic than the first time?

Newspapers analysis:

The Financial Times seems wanting to reassure the investors. Indeed in its article entitled "Argentina plans sweetener in bonds offer" the author quotes Amado Boudou, the economy minister saying that "It would be more advantageous than the last one, which was very good', the 'last one' being the first bid in 2005. Although the newspaper reminds that Argentina in prevented by law from offering improved terms this time, it explains that better market conditions have raised expectations that the new deal could be worth 55 cents or more if acumulated interest is paid and if the country also includes a payment related to a coupon related to GDP growth issued in the 2005 to sweeten that offer. The author finishes its article with another quotation coming from the former economy minister who mastermind the 2005 bid: "I still think it's worth it for the creditors, around 40-45 cents would be a level that would still leave them with a profit".

Reuters on the 15th focuses on the fact that Argentina needs approval from Europe and Japan, but it is quite neutral, explaining the fact. Indeed according to the author the bid is being examined by the creditors who had rejected the previous offer, precising that this rejection had concerned more than $100 billion. he also explains that the country first wants to stop judicial proceedings coming from investors who want their money back. According to Reuters this offer should be accepted, which could have the effect of turning down the loan cost of the country.

The Economist is quite severe towards Argentina. The author starts its article explaining to the readers that the restructuration of $80 billion defaulted in 2005, adding that recession pushed the public finances into red and that the country is now feeling the price it had paid for excluding itself from the world financial system. Then it goes on, explaining that investors were panicking, and that the government has tried to find "unorthodox sources of revenue", with the nationalization of private pension funds. The author then explains that if the government wants to succeed it has to change its policy, which would mean to clean up the government's dodgy economic statistics and stop harassing private business. He finishes saying that there is no sign of it, and that "Argentina's debt is likely to continue to be bracketed with that of Ecuador and Venezuela as the riskiest in Latin America until the president term ends in 2011".

My opinion:

I think that it is too soon today to really see the reaction of the different newpapers concerning this news. Indeed the official plan should only be revealed at the beginning of the week, of the other countries in Europe and Japan agree. maybe the "suite" of this story in another article? To my mind it would be a good thing for Argentina to succeed in this operation. Its exclusion by the IMF did not help the country, and it has prevent Argentina from developing its international economy, and its relation with the other countries and foreign companies. Some companies still does not want to invest in Argentina anymore, and the trust is still not back. That is why the bid has to be accepted by Europe and Japan, in order to help the country to forge ahead, make the trust back and develop its international economy again.

Music of the week: a Menuet, the dance in order to seduce the countries and investors, form Bach for example...

Sources:

"Argentina plans sweetener in bonds offer", the Financial Times, 13th of April 2010

"The government tries to make peace with international capital markets", The Economist, 31st of March 2010

"Argentina could announce the details of an exchange", Reuters, 15th of April

"Argentina waiting for approval for his debt's exchange", Les Echos, 14th of April 2010

The nuptial march for Iberia and British Airways

A new couple in the aircraft industry has been announced on the 8th of April 2010, which could become the third-largest airline group.

After the mergers of Lufthansa with Swiss, and Air France with KLM, this is now the turn of British AIrways and Iberia. This merger would create a company with more than €14 billion revenues, 408 aircraft and 58 million passengers per year.

The drums join the orchestra for this news!!

What are the reasons which have pushed the two companies to "tune" not their violin but their planes in order to play their music together, forming the new duo in the sky?

British airways recorded revenues of £8.992 million during the financial year ended March 2009, an increase of 2.7% over 2008, and has more than 40,000 employees. Iberia recorded revenues of €5,223 million during the same financial year, and has around 22,500 employees.

The two companies gathered a total amount of €750 million last year for net profits, but the aircraft market is sensitive to the competition of low-cost companies such as easyJet, or the oil prices and the economic slow-down. This merger will let them be more important in the negociation of the oil prices and the planes for example. The two companies also have different strenghts, such as the North America for BA and the South America for Iberia; and will weiht around €6 billion on the stock exchange.


Newpapers analysis:

The Telegraph only gives key facts (coming from Reuters) of the merger in its first article "BA and Iberia complete merger:key facts". Indeed the new CEO will be the BA one, Willie Walsh, the chairman the former Iberia's CEO Antonio Vazquez, and the headquarter will be situated in London, even though the operations will be in Euro.

In the second article entitled "Ba and Iberia sign €5.8bn merger deal", Alistair Osborne starts saying that is was the most important news of the day, because this merger would create a company with more than €14 billion revenues, and a market vaue of €5.8bn. He then explains that the two subsidiaries will retain their own brands in order to preserve existing traffic rights, even if it will be listed as International Airlines Group. The name has been chosen for the company to become the "top company" and the author explains that the regulations will allow future mergers, their first target being American Airlines. According to the Telegraph, this new company has everything to become a leader of the aircraft market in the future.

Les Echos, a French newspapers, in its article entitled "British airways and Iberia will birth to the European number three in the air transport", seems to be optimistic by the news at the beginning of the article. indeed it gives positive figures such as 408 planes, more than 60 million passengers per year, trhough 200 destinations. But then is specifies that the report still has to be approved by the shareholders of the two groups, and more important by the competition authorities in Brussels. Then the authof states that Iberia can still cancel this merger if BA cannot reduce its deficit of £3.7bn. He finishes in insisting on the fact that BA is always in conflict with its staff through the trade union Unite, and that the strike in March had cost £45 million.
It seems that the companies still have to tune their instruments for good music, or maybe should BA practice more its financial scales...

Jane Wardell, an Ap Business Writer, explains in her article "BA and Iberia sign merger deal" that the industry is broken by the global financial crisis and "wracked" by the industrial unrest. She quotes an analyst at Davy Stockbrockers in Dublin: "The Problem is that there are too many airlines. To be a major player in global aviation going forward, you are going to have size and scope and a network". But Jane Wardell explains that the companies have structured their deal, and that their rivals have worries because the new company hopes to extend this alliance with American Airlines. But she then quotes Bob Atkinson, the director of the web site Travelsupermarket.com in order to show that consumers groups have been skeptical in some points: "Any cost savings will only be felt by passengers if the business integrates quickly". It shows that some points in the merger are not clear, and form like a cluster.

My opinion:

I think that this new has been well perceived by the different newspapers, even if there are always the questions of the BA's staff recently on strike and the problem of its debt, as well as the result concerning the consumers cost savings which seems not to have been specified yet. To my opinion I think this merger is a good thing with the current crises, and I wonder with the issues the aviation has presently, how companies like BA or Iberia do not go bankrupt. But I do not think tjat prices will go down. it did go down for the other merger of Air France of Lufthansa. I onder if it would make a bigger difference on prices if there was a merger between a low-cost and a non-low-cost?

the music for this week is of course the Nuptial March of Mendelssohn:

http://www.youtube.com/watch?v=4tDYMayp6Dk

Sources:

"British Airways and Iberia will give birth to the European number third of the air transport", Les Echos, 9th of April 2010

"BA and Iberia sign €5.8bn merger deal", Telegraph, 9th of April 2010

"BA and Iberia complete merger: key facts", Telegraph, 8th of April

"Ba and Iberia sign merger deal", AP, 8th of April 2010

Is it the end of a sportive rhythm for Porsche ?

After a merger process with Volkswagen which should be done in 2011, Porsche has just announced its results...

Porsche Automobile Holding SE announced on the 17th of March 2010 a turnover of 3.16 billion Euros under the first half of the year 2009/2010, which will finish at the end of July, but also confirmed his forecast given last November according to which it would record a loss.

This loss could go up to 5 billion Euros for 2009/2010 because of countable adjustments, like the deconsolidation of Volkswagen AG on the 3rd of December 2009.

The speed seems to slow down for the sports cars...


Why such a current situation?

The company recorded revenues during the financial year ended July 2008 was 7,466.4 million Euros, an increase of 1.3% over 2007, But Porsche had to completely consolidate Volkswagen in his assessment after having carried his share of the rights to vote beyond 50% at the beginning of 2009. In December 2009, Volkswagen repurchased 49.9% of the artivities of Porsche for 3.9 billion Euros, within the framework of a process of fusion which must finish in 2011.

The German luxury manufacturer, which has been founded in 1900 by Ferdinand Porsche, is specialized in sports cars and all-terrain vehicles, but provides also services consisting of financing and leasing business for customers and dealerships. The Porsche Group consists of 23 German and 62 international subsidiaries and operates through 670 dealerships and 107 countries, with 12,200 workers.

What is the possible future for Porsche? how was perceived the forecast in the newspapers? The company had a strong and brilliant image for cars lovers... how would it end?

Is Porsche going to managed it with Volkswagen, or is it the end of the purrings of the luxury engines?

Newspapers analysis:

The Financial Times is optimistic about Porsche future. Indeed with the headline "Porsche shrinks ahead VW takeover" of the first of the two articles published on the 17th of March, day of the announcement, the tone is positive. The FT gives as usual lots of figures for its readers. Quoting that "it [Porsche] achieved a double-digital operating margin [...] having reduced its heavy debt loan", the FT explains that the company made an operating profit of 329 million Euros in its sports cas business in the first half of the year. Remembering the readers that Porsche sold half its business to VW to prevent itselm from being crushed, the newspapers quoters the manager: "We used most of the proceeds from the €3.9 billion sale to pay back debt, reducing the debt from about €10 billion a year earlier to €6.1 billion at the end of January". This quotation shows the tone and according to the author, Daniel Scheafer, "the company thanks to a positive accounting effect".

The second article explains that investors are getting a better view of the potential value, and focuses on the fact that toyota's recalls (explained in my first article) have helped VW to overtake Toyota as the world's largest carmaker. The good health of VW would help Porsche, according to the FT.

Le Figaro, a French newspaper, is using lots of figures, like the FT, in its article "Porsche remains profitable, reduced debt", and is also positive, quoting a Merck Finck's analyst: "The turnover is slightly higher than our estimation". Explaining that the sales had a light decrease of 1.7% compared to the first half of the year of 2008/2009, Le Figaro focuses on the fact that eventhough the sales have dropped on the North-American and European markts, it has risen in the rest of the world.

The headline "VW, Porsche merger faces risk,, delay-analysts" of the article from Reuters published on the 8th of April, goes to a completely different way than the FT or Le Figaro. According to the author, the risks from potential liabilities and hedge fund lawsuits could force the companies (Porsche and Volkswagen) to delay or abandon the planned merger next year. The author quotes a banker saying the "the level of risk factors was unusual".

Les Echos, a French newspaper, sides with Reuters, focusing on the loss forecasted, even in the headline "Porsche confirms to forecast a loss in 2009/2010", and remembers that cars manufacturer recorded a loss before tax of €4.4 billion in 2008/2009 because of the depreciation of the value of its options on the Volkswagen titles.

My Opinion:

To my point of view it is too soon to know what will happen to Porsche in the future. I will try to follow this news in the next few weeks. The company has still some debts, but has reduced them in a short term. The merger with Volkswagen, which is in a good health, is good news, but I hope that the issues which are still remaining for Porsche will not prevent Volkswagen from saving the luxury cars.

Porsche should accelerate the rhythm for the debt pay-off. The noise of cars is not very good for music to me, but Porsche cars' noise is better than others, and would be sad if this company would go bankrupt.

The relationship between a Porsche and its driver is often a "love story", that is why for the music of the week there is the Porsche's song.!!


http://www.youtube.com/watch?v=FhzyDfDetIg&feature=related

Sources:

"Porsche shrinks debt ahead of VW takeover", the Financial Times, 17th of March 2010
"Volkswagen/Porsche", the Financial Times, 17th of March 2010
"Porsche reste rentable, dette réduite", Le Figaro, 17th of March 2010
"Volkswagen: Porsche confirme prévoir une baisse en 2009/2010", Les Echos, 17h of March 2010,
"VW, Porsche merger faces risks, delay-analysts", Reuters, 8th of April 2010

Give me my music back !!!

It could the end of the music for EMI, the famous music company...

£1.75bn pre-tax loss, £200m pension deficit, £1.04bn write-down in value of the business and £223m interest paid to Citigroup. There is not rythm in the company any more, important artists, who has been with EMI for more than 40 years for some of them, want to quit... The record label is in a very difficult track and Elio Leoni-Sceti just left the orchestra after only 18 months at the chief executive's throne, after the label reported a £1.5bn loss for the 2009 financial year. It does not really sound good music for EMI...

What is happening to the famous record label, which saw the biggest stars in his studios? Is the new director, Charles Allen (former ITV boss), going to save the company from bankruptcy?
What do the newspapers say about EMI? Is there any solutions or is the clarion playing the last motion of the piece for the company?


Presentation of Electric Musical Industries (EMI) and its false notes:


EMI Group is a privately-held music company in the UK. It records and publishes music labels such as Blue Note, Virgin and Capitol Records. The groupe conducts business in about 50 countries, with licensees and distribution agreements in a further 20 countries. Electric and Musical Industries (EMI) was formed in 1931 by the merger of the Gramophone company and the Columbia Gramophone company. The EMI's products and services include artist development, audio and music video distribution, compact discsc, vinyl, cassettes and digital video discs manufacturing, music licensing, publishing and musical copyrights, but also motion picture and theatrical compositions. The famous artists who signed with EMI are: The Beatles, Joe Cocker, Paul McCartney, Pink Floyd, REM, Daft Punk, Placebo, The Rolling Stones, David Bowie, George Michael, and recently Coldplay, depeche Mode, Gorillaz, David Guetta, Robbie Williams and Kylie Minogue...
But EMI suffers from a drop of its market shares and of its competitors on the web's downloads. In August 2007, the company was acquired by Terra Firma Capital Partners (a private equity funds) for £3.2bn after a dramatic decline in sales and the announcement of a £260m loss in 2006/2007. At the same time the market share dropped from 16 per cent to 9 per cent.
Elio Leoni-Sceti, the CE who just left this week, had been called for his help in 2007 in order to turn the record label around and to put it in the good way. Indeed the company just fell into the hands of the bank Citigroup because of debts. Terra Firma (EMI's private equity owner) tried to help the company in injecting money since 2007: £16m in September 2008 and another £13m in December, £39m in March 2009 and £37m in June 2009. But the company still cannot pay off debts, even though its earnings in 2009 were bettre than the year before. Is the company still playing any music...?


Newspapers analysis:

The Financial Times was the first on the announcement of a loss at the begining of 2010. On the 25th of February, focuses on precise figures showing the really bad situation of the company, the newspapers explains that Elio Leoni-Sceti is working on a plan for Mr Hands, Terra Firma's CE, in order to present it to investors in the hope that they will see strong enough prospects to justify further investment. But the newspapers does not seem to see any future for EMI. It quotes Jonathan Shalit, a London-based manager: "EMI has a fantastic group of people, but the question is now are the financial shackles around EMI so severe that even the best people can't save the business". For the FT EMI has already a feet in the grave...

Then the rythm goes "crescendo" for EMI...

On the 11th of March, the Times' title is quite explicite:"EMI chief walks away and bands may be on the run". The Times also gives figures showing the situation (£1.75bn pre-tax loss, £200m pension decifit, £1.04bn write-down in value of the business, £223m interest paid to Citigroup), but it then focuses on the artists who want to quit. With the sales estimation it tries to explain how it could be difficult if these artists would quit the boat: 200m global album sales for Pink Floyd, 300m for Queen and 53m for Sir Paul McCartney, who are the three most important artists who could leave if the financial situation do not improve. the end of the article is quite optimistic, quoting Mr Allen, the new chief executive: "EMI is a fantastic company. We just have a very challenged capital structure. We're signing new acts and breaking hits. Have we got more to do? Yes." the the Times gives a small biography of Allen. EMI is not dead for the Times!

The Daily Mail is still shocked by Leoni-Sceti's behaviour. It quotes him: "My job here is now done and it's time to move on.", but reminds that the CE leaves at the worst time in EMI's history, when the company just has to convince investors to reinject an important amount of money in order to save the company before it falls in Citigroup's hands. Then the Daily Mail just wonders if the choice for the new CE, Mr Allen is the good one, explaining that Allen was not at his best when he left ITV: "When Allen left ITV in 2007, his reputation was not exactly unblemished, [...] The broadcaster is also set to lose around £150m on its takeover to Friends Reunited, which was the central plank in Allen's online strategy." The future is uncertain for the Daily Mail, but not as bad as it is explained in the Financial Times of the 25th February.

The Financial Times this week is always very pessimistic concerning EMI's future. To EMI's point of view the situation is worst than a month ago, the CE has quit the boat, artists are signed to Warner Music (the EMI's rival). It gives the situation with always lots of figures, and shows that Terra Firma did not help EMI at all since 2007, and then focuses on the debts to Mr Hands ( Citigroup' CE), who wants to cut costs. The FT finishes its article with a quotation of an analyst which does not give a chance to the company: "EMI doesn't have 20 years. It might not have 20 months."

The Daily Telegraph to his part focuses on the investors who already helped EMI since 2007, and the newspaper has the opinion that they would not help the company anymore. its headline is very explicite :" Terra Firma investors would rather not fell the pain of acquiring EMI". To the author's point of view is that the only way to help EMI is debts to be written off by Citigroup, because the investors would not inject the amount needed by the company. But it seems to be difficult with the will of the Citigroup's CE, Mr Hands, to cut costs as soon as possible...

My opinion:

It seems that the last note has just sound for the poor company... But I do not really understood in the articles what was the precise issue that has dragged EMI with it in such debts. The articles does not explain the real problems. In fact EMI has famous singers, and should not have such a bad situation and such debts. I founded that the issue are the competitors on the web download, but it is not explicitly explained in the articles that I have read. These music downloads on the web are a major issue for the music industry. Indeed the CDs are not bought anymore, but just downloaded on the web for free. The artists' concert just watched on the web too, and the artists would not survive in this situation for a long time ...

But what is EMI more affected by these downloads that its competitors? It is not explained... Is the EMI's problem just a bad positionning on the web for the downloads? It is a question to ask!!

I am sad when I read all these articles which do not really give hopes to the company. EMI has been the leader on the market for a long time, but its future seems really dark. I actually do not see how could EMI live anymore, too lots of money has been injected, lots of people tried to help, without any success. I only see one song for EMI this week, and it is not an happy one:

The funeral march of Chopin:

http://www.youtube.com/watch?v=3Z29STINh1w

sources:

"will ex-ITV boss hit right note at EMI?", Daily Mail, March 11, 2010,
"EMI chief walks away and bands may be on the run", the Times, March 11, 2010,
"Tera irma investores would rather not feel the pain of acquiring EMI3, the Daily Telegraph, March 11, 2010,
"Allen takes hot seat as EMI plays musical chairs", the Guardian, March 11, 2010,
"Artists aim to call tune on EMI's future, Financial Times, February 25, 2010,
"Allen task is to ensure EMI's record is a long-player", "Music fading as EMI tries to stem the decline", Financial Times, March 11, 2010

BP: which season for the sunflower?

Is it rather the winter or the summer of the four seasons of Vivaldi? Here different writers' sounds...

The 2010 strategy has been announced this Tuesday, the 2nd of March, and the sound is quite good for BP, which forecasts to boost its annual profits by £2bn over the next two or three years.

British Petroleum, founded in 1901 by William Know, is the world's largest private sector oil company by production volume. it is now present in more than 100 countries and employs more than 92,000 persons. The company operates through two main business segments; the first one is the upstream activities, which involve oil and natural gas exploration and fiels development and production. The second one is the midstream operations which involve the ownership and management of crude oil and natural gas pipelines, processing and export terminals. these two segments let BP being considered as one of the "most important instrument in the oil orchestra".


But this announcement has been received with some really different points of view. Indeed some are very preased to hear such "good notes from this Tenor". But for others this is perceived as overconfidence...


What are the BP's history and its situation at the end of 2009 which let the chief executive forecasting such news? Why are analysts so divided? With the actual economic crisi which affects the oil companies, and the uncertain future concerning the oil reserves, how can the CE be so sure about the long forecasts he just announced this week?


This is these uncertain future oil reserves and the long forecasts which motivated me to talk about this subject. In fact oil reserves are a really important issue for our future, and I do nor understand how oil companies can still hope to have a good future... Here is a new song for my blog...





BP's history in the recent past, the current situation and the CE's forecasts:


The company has been through difficult issues before 2007 when Mr. Browne was the CE. indeed the explosion of a refinery in Texas which killed 15 workers and some major oil spill in ALaska had damaged BP's wealth. In 2007 a new director has been put on the throne in order to "tune music with a good tonality". Tony Hayward re-managed the company with a recovery program in cutting 7,500 jobs and investing $2.4bn of management-instigated costs.

The new director has practiced its instrument with dexterity and is now a "maestro". The recovery program is nearly closed today. The operational availibility which had slumped because of the Texas' accident and other hurricanes at its US refineries has been restored, and the financial and operational performances have recovered relative to its peers. The Spleen is now behind the company.

Even though pre-tax profits fell by a half on the lower price and BP is only 55 per cent of the size of ExxonMobil (one of its competitors) by market capitalization, Tony Hayward just presented really good forecasts. He first wants to cut costs in boosting profitability by £2bn. He also plans to start 42 new projects (there were only 5 in 2009) and to focus on low carbon businesses. Finally he has the hope in raising the production by an average of 1-2 per cent a year between 2008 and 2015.

The tonality sounds good for the company, but how this news has been perceived through the newspapers?



Newspapers analysis:


The Daily Mail's article is the most positive of the fourth I will talk about. It announces the different measures in a really happy tone. The quotation of the CE chosen to support the author's point of view is quite clear: "The challenge and opportunity for us is that while our portfolio ranks among the best in the industry, our financial performances has yet fully reflect this". The article clearly sides with the CE's positive mind. For the Daily Mail, the Summer is here for BP:

http://www.youtube.com/watch?v=3dct8n7y2Y4&feature=related



The Daily Telegraph's article is quite close from the Daily Mail. It has the same tone in the measures' explanation and the same quotation of Tony Hayward. But it more focuses on the shareholders worries about the economic ciability of BP. It also explains the worries of analysts who are afraid that Shell has a stronger pipeline of projects. This article has a more ecological view with the problems of carbon dioxide emissions caused by the oil sands, but this stance on the matter can be explained by the author's specialization; indeed, Rowena Mason has an energy blog on the Telegraph's website. For the Daily Telegraph, it is rather the autumn, when the nature is dying slowly...:

http://www.youtube.com/watch?v=OgJYc9WE7xY



The article written by Ed Crooks in the Financial Times is the most neutral. The author first explains the measures taken by Tony Hayward in a "single-string tone". To Crooks' point of view the issues have been settled, the performance are at their best. Even if the company sold 10 refineries in the past years and is now selling marketing assets such as petrol stations in several African countries, he also explains that there are opportunities to raise profitability by bringing the US refineries up to the standard, of the bests, which are all in Europe.



This topic is also present in the Lex Column in the Financial Times. In this article Tony Hayward is quite adulated: "Hayward of BP has handled that role [alias CE]with distinction". Then BP is compared to his rival Shell which has invested in projects too, in order to give its superior production growth from 2011, and which has also cut costs which sounds liks good music today. The writer then analyses figures of the both companies, in order to show that they are both similar. For the Financial Times it is the beginning of the spring, with still some clouds in the sky, but with a good weather forecast:

http://www.youtube.com/watch?v=CSx6HrWV2XM&feature=PlayList&p=9A5469EC605BA2F0&index=14



The most negative article comes from The Guardian. In fact Tim Webb starts its articles sayig that BP "still has a long to go to improve its performance and cut costs". The quotation of Tony Hayward which he chose to illustrate his mind is quite strong: "Our financil performance still has some catching up to do. There is still a lot to be done". It is the opposite of the Daily Mail's tone. Then it is about the profit "of just $2.20 on each barrel, almost half last year's level and less than a quarter of the margins enjoyed in 2007é. It shows a really bad aspect of BP, and he finishes with the death blow: that come refineries could be closed. It is definitively the winter for the Guardian!:

http://www.youtube.com/watch?v=w8dq9NodWDY&feature=related





My opinion:


After the different positions, which is the real season for BP?

For my part I think that the Guardian is right in expressing some reservations. Indeed thet BP's finance is not as strong as it should be, when the CE forecasts such figures. I think that BP has always a long way to do and that some uncertainties should be taken into account...

But to an other side I really think that shareholders should not worry about the research in alternatives products such as the oil sands in Canada, because oil companies should invest in research before the end of the oil wells. Furthermore BP could be with this new product the future number 1 in new energy products thanks to this oil sand.

In addition it should be taken as good news given the current crisis and its context. Every news is good to keep!

For my answer on the first question, I would be on the summer's side for this song, I need some hope in the future energies!


The musical piece for the week, as you should have understood, is the "four seasons" of Vivaldi. There are the different points of views, optimistic or pessimistic, the uncertainty of the weather, here bound with the uncertainty of the energetic reserves...




sources:

"BP in drive to lift profits by $3bn by 2013", Daily Mail, 3rd of March 2010,

"BP targets $3bn more profit amid oil sands dissent", The Daily Telegraph, 3rd of March 2010,

"BP to cut costs and raise production", Financial Times, 3rd of March 2010,

"BP", Lex Column, Financial Times, 3rd of March 2010,

"BP will boost production, says Hayward", The Guardian, 3rd of March 2010,

BP, Datamonitor

http://www.bp.com/



2010 Strategy Presentation: Video:

http://www.gginternet1.co.uk/bp/ir/strategy2010/ggwebcast.asp?format=fl&bandwidth=hb