Dell profits up but under target

Computer firm Dell has seen quarterly profits rise, helped by stronger laptop sales and lower costs for components.

Profits rose 27% to $766m (£371m) or 34 cents a share in the three months to 2 November, up from $601m (27 cents) a share in the same period in 2006.

Analysts said the numbers showed Dell was recovering but that it missed the average 35 cent a share forecast.

Faced with tough rivalry from Hewlett Packard, Dell has been trying to boost sales by selling at retail outlets.

Hewlett-Packard overtook Dell as the number one PC maker during 2006.

"We embarked this year on a long-term strategy to re-ignite growth," said Michael Dell, the firm's founder and chief executive.

He said the results showed "solid progress through investments in five key business priorities - consumer, emerging countries, notebooks, enterprise and small-medium business."

Brent Bracelin, an analyst with Pacific Crest Securities, said the earnings were roughly as expected after allowing for one-off expenses.

But he added: "The disappointment here is that you didn't see a follow-through of revenue upside to earnings upside....but the company is coming out of a two-year slump here and is still in turnaround mode."

Shares in the firm fell 7% in after hours trading. In May Dell outlined plans to sell personal computers through low-cost retailer Wal-Mart, marking a significant change for Dell, which had previously relied only on telephone, mail and internet sales.

Dell said US consumer business sales fell 6% however China, Brazil, Russia and India all saw strong growth.

According to Gartner, Dell shipped about 9.9 million computers worldwide during the quarter, while HP shipped 12.8 million.

The research firm puts Dell's share of the personal computer market at 14.4%, from 15.9% in the same quarter last year and less than HP's 18.6% stake.
(Source news.bbc.co.uk)

The owner of Currys and PC World saw half-year profits fall 26% after poor performance at its PC World and its Italian business, UniEuro.

Electrical retailer DSG International saw underlying pre-tax profits hit £52.4m down from £70.3m in the first six months to 13 October 2007.

Overstocking of laptops and hardware at PC World contributed to "disappointing" results, it said.

The firm also highlighted the uncertain outlook in many of its markets.

"The economic fundamentals make it difficult to extrapolate trends into the rest of the financial year," said the firm, adding that it was "appropriate to be cautious about the consumer environment".

Sales of flat screen televisions helped its like-for-like electrical sales rise 6% in the UK and Ireland, and grow 4% in Scandinavia but continuing problems in Italy saw them slip by 3% in southern Europe.

Overall like-for-like sales increased 5% over six months.

(Source news.bbc.co.uk)

Citigroup-Abu Dhabi deal: A sign of the times

Sovereign wealth funds are looking to park more of their $2 trillion with U.S. companies.

Citigroup's newfound $7.5 billion cash infusion from Abu Dhabi's state investment fund may not cure all that ails the embattled bank, but it heralds the growing influence of sovereign wealth funds.

With similar government-owned funds swimming in cash, more iconic U.S. firms like Citigroup may find themselves owned, at least in part, by foreign governments.

Sovereign wealth funds, which act as a country's investment arm, have long been investing money gained through exports or from the sale of commodities such as oil.

But because of their rapidly expanding size, these funds have become harder to ignore.

Located both in the oil-rich Middle East, as well as other nations such as Russia and Singapore, the funds' combined assets under management are expected in the next three years to quadruple in size to $7.9 trillion from $1.9 trillion, according to Merrill Lynch.

While government debt like U.S. Treasuries have long been their investment vehicle of choice, the funds' appetites have grown more complex as they have searched for greater returns, said Jay Bryson, global economist at Wachovia Corp.
Abu Dhabi buys Citi stake

"There are only so many Treasury securities or government bonds out there they can buy, so they are looking to diversify," said Bryson.

This year alone, sovereign wealth funds have gobbled up pieces of a number of U.S. firms. In May, China Investment Corp. purchased a nearly 10 percent stake of the private equity firm Blackstone Group (Charts).

In August, Istithmar, a financing arm of the United Arab Emirates, agreed to buy the department store operator Barneys for $942 million. And earlier this month, Mubadala Development Co., a separate investment arm of the government of Abu Dhabi, acquired a $622 million stake in the chipmaker AMD (Charts, Fortune 500).

Economists argue that investments by sovereign funds are important to the U.S. economy, providing capital to firms such as Citigroup (Charts, Fortune 500) and supporting the dollar. At the same time, the funds have have faced plenty of criticism.

World leaders at the October G7 meeting, worried that the funds may try to wield their investments as a diplomatic tool, called for greater transparency about investments.

Lawmakers in Washington have been equally cautious, despite a recent push by both the White House and some members of Congress to court foreign investors after last year's widely-publicized failure of Dubai Ports World to manage six U.S. ports.

The Citigroup-Abu Dhabi deal got a different reception on Tuesday. In a televised interview, Sen. Charles Schumer (D-N.Y.) said the investment would make the Wall Street firm "stronger."

"We just want to make sure other countries are as open to us investment as we are to them," Schumer said.

Going forward, sovereign wealth funds will most likely try to avoid scrutiny altogether by acquiring small stakes and forgoing management control, similar to the Citigroup-Abu Dhabi deal, said Edwin Truman, senior fellow at the Peterson Institute for International Economics.

"Sovereign wealth funds have learned from their experiences," said Truman.
(Source money.cnn.com)

Kodak Holders Focus on $40 Target With Digital Sales

Julie Won, who helps manage $200 million at Hanson Investment Management, has endured ``snickers and giggles'' as a shareholder in Eastman Kodak Co., the camera and film maker struggling to remake itself into a digital- imaging company.

``It was a pretty dire story; we had some difficulty explaining our position to clients,'' said Burlington, Vermont- based Won. Her firm owns 66,197 Kodak shares. ``It's a painful turnaround, but they seem to be doing a good job with it.''

Kodak has climbed as much as 10 percent since Won started buying it in the third quarter of 2005, when the stock was trading as low as $20.95. She counts herself among investors who are banking on the stock to top $40 a share. Chief Executive Officer Antonio Perez's ``new Kodak'' posted back-to-back profits for the first time since 2004 as digital revenue more than doubled last quarter and the company amassed $1.85 billion in cash.

``They've been able to get out of the traditional business without too many terrible side effects,'' said Dublin-based Rory Flynn of AGF Management Ltd., who helps manage 3.67 million Kodak shares as part of its $55.1 billion under advisement. AGF had owned less than 500,000 shares up until the beginning of this year, according to Bloomberg data.

AGF is among eight of the top 20 investors that have added to their stake in the past two quarters as Rochester, New York- based Kodak hit a 52-week high of $30.20 in June. The shares dropped more than 10 percent in the two days after Perez announced third-quarter results as some investors sold on the good news and others focused on cash flow as a sign that the pain isn't over. Cash from operations fell to $1 million in the most recent quarter from $237 million a year earlier.

Digital Space

Kodak must still overcome concerns that the four-year restructuring plan is being hobbled by wider-than-expected losses on its new inkjet printers, a 2 percent operating margin last year that was one-ninth the average in the Standard & Poor's 500 Stock Index, and declining market share for its digital cameras.

The company's next step ``is to scale those businesses,'' Perez said on a Nov. 1 conference call. ``We have phenomenal properties in the digital space that have enormous possibilities for expansion.''

Perez, 62, plans to end the restructuring program by the end of next month. Kodak is counting on cameras that cost less than $200 and a new line of inkjet printers to drive digital- sales gains.

Kodak fell 8 cents to $23.07 at 4 p.m. in New York Stock Exchange composite trading and is down 11 percent this year.

Printer Sales

To further temper its declining film business, whose sales dropped 16 percent last quarter, Kodak is developing technology to enhance the quality of photos taken in low light and working with Motorola Inc. to improve cameras on mobile phones.

While Kodak's printers cost about $50 more than similar models from Hewlett-Packard Co. and Seiko Epson Corp., refill ink packages, including photo-quality paper, cost about 9 cents less per page, said Ron Glaz, program director with Framingham, Massachusetts-based research firm IDC.

Kodak projects sales of 500,000 inkjet printers this year and may introduce new models for 2008. That accounts for about 0.5 percent of the global photo printing market of 78.6 million units last year, Glaz said. Perez wants to have 10 percent of that pie by the end of the decade.

``I think they'll make the half-million,'' Glaz said. ``They're trying to shift consumer behavior and it takes a while for that behavior to change.''

Inkjet Costs

Costs tied to the introduction of Kodak's entry into the $55 billion inkjet printing market have been higher than the company expected. The losses may top $200 million this year and could widen next year, said Christopher Whitmore, an analyst with Deutsche Bank in San Francisco.

``The losses in inkjet could get bigger before they get smaller,'' he said in an interview. ``It's still very early but the initial costs appear to be pressuring cash flow.''

Concern that competition in the electronic-imaging market is too cutthroat has led some investors like Colin Symons of Pittsburgh-based Symons Capital Management to dump the stock. Digital margins, narrower than those in film to begin with, have faced pressure as Kodak struggles to control costs.

Perez plans to re-enter the market for cameras costing less than $200 to regain its No. 1 spot in U.S. digital sales. Kodak has 15 percent of the U.S. market and ranked third behind Canon Inc. and Sony Corp. in the past two quarters, according to IDC.

Promising Projects

``We're not confident that they're going to be able to command good margins because there's so many competitors,'' said Symons, who sold his 169,723 shares in July. ``They just became too risky.''

The company missed its initial restructuring target of boosting sales to $16 billion by 2006. Kodak posted $13.3 billion in sales last year.

Some shareholders say Perez has handled the turnaround well. Under the five-year tenure of predecessor Daniel Carp, the stock plunged 60 percent, compared with a 13 percent slip since Perez took over in June 2005.

``He's kept them from making a bunch of mistakes,'' said Christopher Zook, chairman and chief investment officer at CAZ Investment. The Houston firm owns 226,828 Kodak shares and has held the stock since at least 2005. ``He hasn't chased projects that are speculative. He's gone after more economically viable and high visibility projects that have a higher probability of succeeding.''

Perez may be looking to reward shareholder patience with its first buyback since March 2001. On the company's third- quarter conference call, he said Kodak would decide how to use the $1.85 billion in cash on the balance sheet by February's investor conference. Zook and other investors would rather that money be used to ensure a lasting turnaround.

Once Perez can accomplish that, Zook said the stock will ``move from the 20s to the 40s so fast your head will spin.''
(Source bloomberg.com)

Sony sells 'substantial' stake to Dubai investors

Shares of Japan's electronics company jumps after Dubai International Capital purchases a stake of undisclosed size.

Dubai International Capital, an investment company owned by the ruler of this booming Persian Gulf city-state, has acquired a stake of undisclosed size in the Japanese electronics and media company Sony Corp.
Sony's (Charts) U.S. shares rose 4.2 percent in trading Monday morning following the announcement.
The purchase is the latest by Middle East investors who have become more aggressive in looking for investment opportunities overseas.
United Arab Emirates-based DIC described its investment in Sony as "substantial" in a statement posted on the company's Web site, but did not provide a specific ownership percentage.
Sony spokesman Daichi Yamafuji confirmed Dubai International Capital's purchase but refused to provide any other details.
"It's the other party that acquired the stake and we decline to discuss any other details such as the number of shares involved," he said.Dubai Ports redux over China deal
The chief executive of Dubai International Capital, Sameer Al Ansari, said the investment in Sony, which owns consumer electronics, video game and movie businesses, was "consistent with our mandate of supporting premier global companies."
"The combination of Sony's truly global brand, its leadership in product design and its global footprint will spur the business' medium term growth as it capitalizes on positive underlying trends and emerging technologies," said Al Ansari in the company's statement.
Dubai International Capital was established in 2004 and is owned by Dubai-ruler Sheikh Mohammed bin Rashid Al Maktoum. It has made several other prominent investments this year, acquiring 9.9 percent of Och-Ziff Capital Management Group (Charts), a U.S.-based alternative asset manager, and 3.12 percent of European Aeronautic Defense & Space Co., which builds Airbus commercial planes and military aircraft. The firm also holds stakes in Daimler AG (Charts) and British bank HSBC Holdings PLC (Charts).
Sovereign funds in the Middle East, like Dubai International Capital, have been building up their investments overseas recently, many of them on the back of rising oil prices that have brought the region record cash flows.
Many companies have welcomed such investments because the funds tend to be stable investors, but some countries like the U.S. have expressed concern that their acquisitions could target sensitive industries with links to national security.
(source money.cnn.com)

Yen Gains Versus 16 Major Currencies as Investors Reduce Risks

The yen rose against all 16 most- actively traded currencies this week as spreading losses in U.S. financial companies and real estate prompted investors to retreat from higher-yielding assets funded by loans in Japan.

The yen increased to the highest level since June 2005 against the dollar yesterday. The U.S. dollar fell to all-time lows against the euro and Swiss franc on expectations the Federal Reserve may cut borrowing costs next month. A report may show next week that sales of previously owned homes in the U.S. dropped in October to the fewest since at least 1999, according to a Bloomberg News survey.

``The real game in town is the yen,'' said David Woo, global head of foreign-exchange strategy at Barclays Capital in London. ``The yen is really flying. The U.S. economy is facing a lot of uncertainties.''

The yen rose 2.5 percent against the dollar this week, after touching a two-year high of 107.55 yen. The yen also gained 1.4 percent against the euro to 160.55 per euro. Japan's currency strengthened to 221.31 yen per pound yesterday, the most since Aug. 17.

The Organization for Economic Cooperation and Development said Nov. 22 that the estimated losses from U.S. subprime foreclosures may reach as much as $300 billion, on top of the more than $60 billion the world's biggest banks, brokers and insurers have announced they will write down. Freddie Mac, the second-largest U.S. mortgage-finance company, may report wider losses than it forecast as the slump in credit markets worsens, Moody's Investors Service said.

Swiss Franc

The Swiss franc, also used as a funding currency for so- called carry trades, gained against 14 of the 16 major currencies. It rose to a record 1.0890 versus the dollar yesterday, and strengthened to a three-month high of 1.63 against the euro. In carry trades, investors sell currencies in countries with low borrowing costs and buy higher-yielding assets elsewhere, profiting from the difference.

``The main trend is for the yen to appreciate further because of risk aversion,'' said Hidetoshi Yanagihara, senior currency trader at Mizuho Corporate Bank in New York. ``The market is thinking the turmoil in the financial sector will continue.''

The U.S. currency yesterday touched $1.4967 per euro, the weakest since the European currency started trading in January 1999. The dollar also dropped below 7.4 against China's yuan for the first time since a fixed exchange rate was scrapped in 2005.

Dollar Index

The U.S. Dollar Index traded on the ICE Futures in New York touched 74.484 yesterday, the lowest since the gauge started trading in 1973. The index tracks the value of the dollar against six major currencies, including euro, yen, pound, Canadian dollar, Swedish krona and Swiss franc.

Futures contracts traded on the Chicago Board of Trade showed a 94 percent chance of the Fed cutting its benchmark interest rate a quarter percentage point to 4.25 percent at the Dec. 11 policy meeting. The European Central Bank's benchmark borrowing costs are at 4 percent.

The U.S. currency has lost 12 percent against the euro this year as the housing recession and lower interest rates dimmed the allure of dollar-denominated assets. The Fed has cut the key rate 0.75 percentage point to 4.5 percent since Sept. 18.

``There's speculation in the market as to whether the dollar is in terminal decline,'' said Michael Klawitter, a currency analyst at Dresdner Kleinwort in Frankfurt. ``It's looking increasingly possible that the dollar will lose its status as the major transaction and reserve currency.''

Home Sales

Existing home sales probably declined to an annual rate of 5 million in October, from 5.04 million in the previous month, according to the median forecast of 56 economists surveyed by Bloomberg News. That would be the lowest since the National Association of Realtors compiled the data in 1999. The report is scheduled for release on Nov. 28.

``If the housing data turns out to be horrible again, the market will feel assured the Fed must cut rates in December,'' said Boris Schlossberg, senior currency strategist at DailyFX.com in New York. ``They will push it through $1.5 against the euro.''

China's yuan strengthened 0.25 percent this week against the dollar. The currency's appreciation ``should accelerate,'' ECB President Jean-Claude Trichet said on Nov. 22. Trichet will lead a delegation to Beijing next week for two days of talks with Chinese authorities on trade and allowing faster appreciation of the yuan.

While the yuan has risen about 5 percent against the dollar this year, it weakened by almost 7 percent versus the euro, raising the cost of European goods for Chinese consumers.
(Source bloomberg.com)

Glaxo shares gain on rotavirus trial data

GlaxoSmithKline's rotavirus drug candidate Rotarix protected infants through two consecutive rotavirus seasons, study finds.

Shares of GlaxoSmithKline PLC rose Friday after a medical journal published data showing its rotavirus drug candidate Rotarix provides protection against the five most commonly circulating forms of the virus.

Rotavirus causes diarrhea in infants. The drug candidate is already under review by the Food and Drug Administration. The new data, from a late-stage study involving almost 4,000 European infants, was published in The Lancet.

Rotarix was created by Avant Immunotherapeutics Inc. and licensed to GlaxoSmithKline. The drug is already available in more than 90 countries.

The late-stage study data show that two doses of Rotarix provided protection through two consecutive rotavirus seasons, or until subjects were about 2-years-old.

Shares of GlaxoSmithKline increased 6 percent in morning trading on the New York Stock Exchange Friday. The stock has traded between $47.49 and $59.98 during the last 52 weeks.
(Source money.cnn.com)

Shell veteran Greer takes over at Regal after Ukraine deal

Regal Petroleum has named David Greer, a veteran oil man from Shell, as chairman and chief executive as part of a sudden shake-up in the top management at the London-based energy company.

The surprise announcement comes a day after Regalentered into exclusive negotiations to transfer a majority stake in its Ukrainian operations to Shell.

Neil Ritson, who announced the agreement with Shell two days ago, is understood to have resigned as chief executive yesterday because he was opposed to an initial plan for Mr Greer to join the company as executive chairman.

Francesco Scolaro, who is stepping down as non-executive chairman, will continue on the board. Another Shell veteran, Antonio Mozetic, has been appointed as a non-executive, while Harry Verkuil, a former Shell exploration and production manager, is joining as an executive director in January.

Under a memorandum of understanding signed between Regal and Shell on Wednesday, the oil major would pay $410m (£195m) for a 51 per cent stake in a Regal subsidiary which holds the licences for two gas and condensate fields in central-eastern Ukraine.

Regal's founder, Frank Timis, still owns a 19.95 per cent stake in the company.

Mr Greer, who has worked for Shell International exploration and production for 28 years, was most recently the deputy chief executive and project director of the Sakhalin-2 project, the major liquefied natural gas development off the east coast of Russia. He said that he was looking forward to developing the company's Ukrainian assets.

"I am very pleased and honoured to be offered this position and to be given the opportunity to participate in the further development of the company's exciting portfolio of assets, particularly in the Ukraine," he said.

"The past board members have done a tremendous job getting our licences ratified by the courts over there ... With my background in the development arena, I would want to make the most of it ... It's a challenge but I'm looking forward to it."

Mr Greer declined to comment on Regal's recent agreementwith Shell.

Shares in Regal slipped 1p to end at 163p.
(Source news.independent.co.uk)

Red flags and roadblocks for Apple investors

The participants on AFB tend to be bullish on Apple and long the stock, but they’re smart investors and have good antennae for anything that could affect their holdings — up or down. So I was interested to see how they would respond when a member who calls himself (or herself) “lumi” opened a new thread early this morning with these questions:

What are the chief potential stumbling blocks, things that *could* either delay or derail AAPL’s projected growth trajectory? What events would be red flags or precursors to correction or erosion?

The early responders have taken the challenge seriously, as they usually do on AFB, and offered answers that are quite insightful. The most interesting so far was posted by Alexis W. Cabot, an investor based in Rome. With his permission, I quote it in full:

Steve Jobs continued leadership of the company is still essential. We all know how his idea of what works and what doesn’t permeates the decision thinking process at Apple, but Apple must learn to do without him, otherwise it will not be a great company. General Electric has done a great job at creating internal leaders that are excellent managers and have kept the company at the top of corporate America for a century. Apple must have it’s own management creation process in place.

Corporate hubris. Signs that the company starts believing it can do no wrong and that customers will buy anything they produce will be when the company has peaked. Apple went through this phase in the late 1980’s and we all know how that ended. Apple’s insistence on revenue sharing with the networks just to sell a Jesus Phone would be nice for us shareholders, but there is a wider world out there that has laws against such restrictions on trade. I hope that Apple/SJ doesn’t shoot itself in the foot if it insists too much on these revenue sharing deals.

Inability to build lasting partnerships. As SJ himself said at All Things Digital that Apple has to learn how to make better partnerships. Never has Apple needed more content and networking partners than before. It needs to work with music and movie companies, with it’s own set of histrionics, and then with the highly regulated and staid cell-phone networks.

Souring US relations with China and the rest of the world. A trade war between the incumbent superpower and the aspiring one are likely to derail Apple’s (and most of corporate America) growth. It will be more expensive to outsource and then sell to China, which has one of the most rapidly growing and homogeneous middle classes of the world. Given the poor job the US has done in managing its international relations, this is a growing possibility.
(Source money.cnn.com)

Market falls on credit, economic concerns

U.S. stocks fell on Wednesday, with the benchmark S&P 500 index briefly dipping into negative territory for the year, on persistent fears that fallout from the credit crisis and the housing slump will hurt economic growth.

Financial services companies, including Goldman Sachs Group Inc. (GS.N), led the sell-off, while bellwether General Electric (GE.N) dropped on concerns about the economy.

U.S. Treasury Secretary Henry Paulson said the number of potential U.S. home-loan defaults will be significantly bigger in 2008 than in 2007. His comments in an interview with The Wall Street Journal helped set the market's negative tone.

Shares of mortgage lenders, including Countrywide Financial Corp (CFC.N), also tumbled. American International Group Inc (AIG.N), the world's biggest insurer by market value, was the top drag on both the Dow and the S&P 500, dropping as much as 6 percent.

"We just can't seem to break free of the financial concerns that are out there. The unwinding of the real estate and the mortgage market continues to weigh on investor concerns," said Bucky Hellwig, senior vice president at Morgan Asset Management, in Birmingham, Alabama. "There is also more of a focus now on balance sheets of financials rather than their earnings -and that's never a good sign."

The Dow Jones industrial average (.DJI) was down 66.08 points, or 0.51 percent, at 12,944.06. The Standard & Poor's 500 Index (.SPX) was down 6.58 points, or 0.46 percent, at 1,433.04. The Nasdaq Composite Index (.IXIC) was down 5.24 points, or 0.20 percent, at 2,591.57.

For the year the S&P 500 was up 1 percent, after earlier dipping into the red.

The prospect of $100 oil hurt the shares of big manufacturers and retailers on concern about the impact of higher fuel costs on businesses and consumers. Earlier, a survey showed U.S. consumer sentiment fell in November to its lowest in two years.

U.S. crude for January delivery hit a record $99.29 earlier on Wednesday before retreating on the New York Mercantile Exchange. NYMEX January crude fell 73 cents, or 0.7 percent, to $97.30 a barrel.

Risk aversion drove investors to seek a safe haven in U.S. government bonds. By 2 p.m. (1900 GMT) when the market closed early ahead of the Thanksgiving holiday, the yield of the benchmark 10-year Treasury note was 4.01 percent. Earlier it had dipped below 4 percent for the first time since September 2005.

Shares of Goldman Sachs dropped 2.1 percent to $212.99 on the New York Stock Exchange, while AIG fell 4.5 percent to $52.00. On Tuesday, an AIG shareholder sued several of the company's officials over the insurer's exposure to the subprime mortgage crisis.

Shares of Countrywide, the biggest U.S. mortgage lender, declined 8.3 percent to $9.43 on the New York Stock Exchange.

Among big manufacturers, General Electric (GE.N) fell 2.6 percent to $37.06, while among retailers, home improvement chain Home Depot Inc (HD.N) declined 1.1 percent to $28.18.

But stocks were off the day's worst levels, due in part to a turnaround in the shares of General Motors. GM shares reversed course after finance company GMAC said it was exploring the sale of parts of its troubled mortgage-lending arm, Residential Capital LLC (ResCap). GM owns 49 percent of GMAC.

GM slid nearly 7 percent in early morning trading, before rebounding in late afternoon trading, when it was up 3.3 percent at $27.16.
(Source REUTERS)

Smart’s Fortwo aiming for big U.S. sales

Tiny car, three feet shorter than Mini, makes debut in January

The 8-foot, 8-inch Smart Fortwo micro car comes to U.S. shores in January, and even with gasoline prices well above the $3-a-gallon mark it remains to be seen whether Americans will flock to buy the tiny, two-seater car.

Ranging in price from $11,590 for the base version to $16,590 for a fully loaded Fortwo Passion convertible, the 1,800-pound car boasts 40 miles per gallon — a big draw for drivers worried about high gas prices.

Smart has already sold more than 770,000 Fortwos in 36 countries, and Smart USA is banking on robust sales in the United States. The Smarts on sale here will be made in France and sold through 73 U.S. dealers, including Mercedes dealers and dealerships that are part of the Penske Automotive Group owned by racing icon Roger Penske. Penske is chairman of Smart USA, a division of Daimler AG’s Mercedes-Benz brand.
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Smart says more than 30,000 consumers have put down a refundable $99 deposit to reserve a Smart car. Those deposits do not guarantee sales, but the company is hoping to move at least 30,000 units in the first year, said spokeswoman Jessica Gemmara.

“There will obviously be some fallout from the reservation program because of life changes, or because people move — things like that, but our goal is to fulfill all those orders,” she said at the Los Angeles auto show, where Smart has a large exhibit aimed at drumming up more business.

While small cars represent a tiny portion of the U.S. market, sales are growing, according to the Power Information Network, a division of market research firm J.D. Power and Associates.

Subcompact cars — defined as those cars smaller than compact cars, such as the Ford Focus and Honda Civic — made up 2.4 percent of the U.S. market in the first 10 months of this year, compared with 1.7 percent a year ago, according to J.D. Power data.

Other cars in the subcompact segment include the Chevrolet Aveo, Honda’s Fit and Toyota’s Yaris, the most popular subcompact on the market, which has managed sales of 73,874 units so far this year in hatchback and liftback versions.

Such strong sales are unlikely for the Fortwo, some analysts say. Even in Europe Smart has never been profitable. Daimler announced a restructuring of the division last year, when sales fell to 102,700 vehicles worldwide from 124,300 in 2005.

Not many U.S. subcompact cars sell in the 30,000-unit range. Close competitors like the Kia Rio and Scion xA sold 28,388 units and 32,603 units in 2006, respectively, while the significantly larger Scion xB sold 61,306 units and the popular Mini Cooper sold 39,171 units.

Another key issue is safety, particularly given the Smart Fortwo’s diminutive size. It is significantly smaller even than other subcompacts, so concerns about a collision with a large SUV or truck are likely to keep buyers away, analysts say. At 105.6 inches the Smart Fortwo is 45 inches shorter than a Yaris and 40 inches shorter than a Mini Cooper.

And at just 1,800 pounds, the Fortwo is 500 pounds lighter than any other subcompact, putting its occupants at a potentially significant disadvantage in a collision.

The Fortwo has a steel safety cage and four air bags, including two in front and two on the sides to protect the head and abdomen. It also has standard electronic stability control, which is designed to stop vehicles from swerving off the road, and Smart USA President Dave Schembri says the Fortwo is designed to get four out of five stars on U.S. crash tests and recently got four stars on an equivalent European test. The U.S. government will test the Smart car after it arrives on the market.

Another possible indicator of low demand for the Fortwo is that many city dwellers, considered to be a prime target market for the Smart cars, use car sharing services like Zipcar or rent cars for shopping trips or weekends away. A Fortwo might be too small for such needs with only 8 cubic feet of storage room, compared with nearly 26 in the rival Yaris liftback (with rear seats folded forward).

But demand for the Fortwo could come from unlikely sources, according to Smart’s Jessica Gemmara.

“We’ve seen strong interest in places that surprised us, like Birmingham, Ala., or Tulsa, Okla.,” she said. “These are places in the heartland of America where people tend to own a truck and don’t want to drive a rinky-dink car, but we’ve seen some of the biggest turnouts in these places, and once these people get to touch and experience the car they’re just as interested as (big) city dwellers.”
(Source msnbc.msn.com)

Global Stocks, U.S. Futures Drop;

Volkswagen, Wal-Mart Fall Stocks declined in Europe and Asia, led by exporters and banks, after crude oil approached $100 a barrel and the U.S. Federal Reserve lowered its growth outlook for the world's biggest economy. U.S. index futures retreated.

Volkswagen AG and Royal Philips Electronics NV led a slump by European companies most dependent on U.S. sales. Honda Motor Co. and Toyota Motor Corp. dropped as the yen strengthened to a two-year high against the dollar. Credit Suisse Group and Societe Generale SA fell after Goldman, Sachs & Co. added the stocks to its ``conviction sell'' list. Wal-Mart Stores Inc., the world's largest retailer, retreated in Germany as oil surged to a record.
The MSCI World Index lost 0.7 percent to 1,560.51 as of 9:20 a.m. in London. Futures on the Standard & Poor's 500 Index slipped 0.9 percent to 1,432.8. Bonds rallied as investors sought the relative safety of government debt.
``The whole market is going to take a hit for fear the U.S. slowdown may spill over,'' said Luca Martina, who helps manage the equivalent of about $4.45 billion for private clients at Credit Suisse Private Banking in Turin, Italy. ``High oil prices certainly don't help.''
The slump in stocks and the Fed's lowered growth forecast for 2008 sparked demand for U.S. and European government bonds. Yields on 10-year U.S. Treasuries dropped below 4 percent for the first time since 2005, while two-year yields on European bonds slipped to their lowest in 11 months.
Concern that widening credit-market losses and record fuel costs will crimp economic growth in the U.S. pushed the yen beyond 109 to the dollar for the first time in more than two years. The U.S. currency also slid to the weakest against the euro since the single European currency's debut in 1999.
Oil rose above $99 a barrel for the first time as the slumping dollar increased demand for commodities.
European Investors
The MSCI World has retreated 4.5 percent this quarter in dollar terms, lashed by writedowns at the world's largest financial firms tied to the U.S. subprime mortgage slump. European-based investors have fared worse, with the index tumbling 8.1 percent when measured in euros.
For European investors, the S&P 500 is down 9.4 percent so far this year, while Japan's Nikkei 225 Stock Average has slid 15 percent. In local currency terms, the S&P 500 has gained 1.5 percent, and the Nikkei has lost 12 percent.
Europe's Dow Jones Stoxx 600 Index lost 1.4 percent to 353.49 today. Germany's DAX fell 1.2 percent, as did the U.K.'s FTSE 100. France's CAC 40 declined 1.4 percent.
The MSCI Asia Pacific Index dropped 2.2 percent to 154.57. Japan's Nikkei slid 2.5 percent, and South Korea's Kospi index lost 3.5 percent.
`Worse Day by Day'
``The picture is getting worse day by day,'' said Alberto Magnani, who manages the equivalent of about $300 million at Abbacus Sim SpA in Genoa, Italy. Losses related to the credit market turmoil are ``spreading to the overall economy.''
Volkswagen, Europe's largest automaker, dropped 1.7 percent to 161.88 euros. Consumer electronics producer Philips lost 3.3 percent to 26.52 euros. North America accounted for 14 percent of the carmaker's sales last year, while Philips got 28 percent of its revenue from the U.S.
Honda, Japan's second-largest carmaker, dropped 5.7 percent to 3,620 yen. Toyota Motor, the world's most-valuable carmaker, fell 2.8 percent to 5,940 yen.
Wal-Mart lost 39 cents to $45.11 in Germany. Crude oil for January delivery climbed as much as $1.26, or 1.3 percent, to a record $99.29 a barrel in after-hours electronic trading on the New York Mercantile Exchange.
Credit Suisse, SocGen
Credit Suisse slid 3.4 percent to 62.2 Swiss francs. Goldman Sachs added the bank to its ``conviction sell'' list because of the company's reliance on trading and capital markets to generate earnings.
``We continue to prefer banks with exposure to structural growth in emerging markets over banks with exposure to a potential cyclical recovery,'' London-based Goldman analysts wrote in a note to clients.
Societe Generale slid 3.8 percent to 96.74 euros. Goldman also cut Societe Generale to ``sell'' from ``neutral,'' and added the stock to its ``conviction sell'' list.
Paris-based Societe Generale may need to write down holdings of collateralized debt obligations as losses from the U.S. subprime mortgage market get worse, analysts wrote. The bank's shares are expensive compared with those of French peers, they added. ADRs of Societe Generale sank 3 percent from the stock's Paris close.
Lloyds TSB Group Plc, the U.K.'s No. 1 provider of personal loans, declined 2.8 percent to 458.75 pence. Goldman also added the shares to its ``conviction sell'' list.
LSE, Ericsson
London Stock Exchange Group Plc, Europe's largest stock market by the value of companies listed, dropped 7.3 percent to 1,749 pence after Banca Monte dei Paschi di Siena SpA, Italy's third-largest bank, sold its 2.9 percent stake in the exchange.
Ericsson AB, the world's largest maker of wireless phone networks, retreated 4.8 percent to 15.24 kronor. Goldman Sachs downgraded the shares to ``neutral,'' removing them from its ``conviction buy'' list.
Analysts including Tim Boddy in London cited a ``deteriorating fourth-quarter revenue outlook and the growing probability that the wireless infrastructure market will decline again in 2008,'' according to a note sent to clients today.
(Source bloomberg.com)

Oil makes fresh run at $100

Crude sets new closing high, rising over $3 a barrel, on refinery outages, falling dollar and Fed hints at further rate cuts.

NEW YORK (AP) -- Oil prices rose sharply Tuesday, closing at a new record high and once again approaching $100 a barrel, as futures drew strength from a declining dollar, news of refinery problems and speculation that the Federal Reserve will again cut interest rates next month.

Light, sweet crude for January delivery surged $3.21 to settle at $98.03 a barrel on the New York Mercantile Exchange, surpassing the previous closing record of $96.70 set Nov. 6. Crude rose as high as $98.30 earlier, just 32 cents shy of oil's all time trading high of $98.62, set Nov. 7.

Gasoline prices, meanwhile, extended their decline at the pump.

Oil futures, which offer a hedge against a weak dollar, picked up momentum as the dollar fell to a new low against the euro, and added to their gains after the Fed forecast slowing growth and tame inflation next year.

Gas fell 0.5 cent overnight, retreating further from its most recent spike above $3. At a national average of $3.09 a gallon, according to AAA and the Oil Price Information Service, gas prices have fallen 2.2 cents in a little less than a week. Last week, many analysts predicted prices would instead rise another 10 to 15 cents a gallon to catch up with surging oil prices.

"More than likely, [prices will] probably hold steady through the end of the year," said Fred Rozell, retail pricing director at the Oil Price Information Service. "But that doesn't mean you're going to see relief in terms of lower prices."

Because gas prices are closely tied to the price of crude, pump prices could start rising again if crude does reach $100 a barrel, or higher. Oil peaked two weeks ago at $98.62 a barrel before pulling back to the low- to mid-$90s.
Gas prices hit working class

Many analysts cite speculative investing fueled by the weak dollar as a key reason for oil's fall rally.

"Expectations of interest rate cuts by the Federal Reserve are sending the dollar lower and this is once again drawing buyers ... into the crude oil market," said Addison Armstrong, an analyst at TFS Energy Futures LLC in Stamford, Conn., in a research note.

The Fed said it thinks business growth will slow next year, with gross domestic product growing between 1.8 percent and 2.5 percent. That's less than the Fed's previous projections. Meanwhile, overall inflation should fall next year to between a 1.8 percent and 2.1 percent increase, the Fed said.

"They just opened the door for the possibility of more rate cuts," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.

However, the rising cost of energy could also persuade the Fed to either leave rates stable or raise them - the latter would likely lend support for the dollar and could pull oil prices back down.

Energy futures received an additional lift from word of problems at two oil facilities Tuesday. A Valero Energy Corp. (Charts, Fortune 500) refinery in Memphis, Tenn., that processes 180,000 barrels of crude a day has shut down for 10 days of unplanned maintenance and a Royal Dutch Shell (Charts) plant that converts bitumen from Alberta's oil sands region into 155,000 barrels a day of synthetic crude oil was temporarily shut down due to fire.

Oil product futures surged on the news. Gasoline futures for December delivery rose 7.12 cents to $2.4528 a gallon, while December heating oil futures climbed 8.53 cents to $2.6895 a gallon.

"When you get this kind of problem in this kind of environment, prices will rise," Flynn said.

Economic reports gave investors more reasons to buy, analysts said. China's economy will likely grow at a rate of 11.5 percent in 2007, state media quoted Chinese Premier Wen Jiabao as saying on Tuesday. And in the U.S., the Commerce Department said housing construction rose by 3 percent in October, the first increase after three months of declines and the biggest since last February.
Ditching the dollar

Growing demand from China is another reason oil prices have risen in recent years. And signs of significant economic growth in the U.S. support prices because energy investors believe a strong economy will demand more oil and gasoline.

Natural gas futures fell 31.6 cents to $7.471 per 1,000 cubic feet on the Nymex. Natural gas inventories are at record levels, and several recent forecasts have predicted a warmer than normal winter.

In London, January Brent crude futures rose $3.31 to $95.59 a barrel on the ICE Futures exchange.

Traders were also anticipating Wednesday's petroleum inventory report from the Energy Department's Energy Information Administration. Analysts surveyed by Dow Jones Newswires, on average, predict that crude oil inventories rose by 800,000 barrels last week, while refinery use grew by 0.4 percentage point to 88.1 percent of capacity.

Gasoline inventories likely grew by 700,000 barrels, the analysts predicted, while inventories of distillates, which include heating oil and diesel fuel, fell by 400,000 barrels.

While oil supplies likely rose last week, prices were being supported Tuesday by concerns there would be a bullish surprise in the EIA report, such as an unexpected decline in inventories.
(Source money.cnn.com)

A Buffett investment that wasn't

Stories about the Berkshire billionaire buying into CarMax were not quite what they seemed, reports Fortune's Alex Taylor III.

(Fortune) -- With auto stocks beaten down, prominent investors looking for bargains have been on the prowl. Kirk Kerkorian bought nearly 10% of General Motors's shares last year, which he subsequently sold, and Cerberus Capital Management, the private equity group, took majority control of Chrysler earlier this year.

Last week, it began to look as if CarMax, one of the pioneers of the used-car superstore, had become the next target. Legndary investor Warren Buffett was said to be buying in. Headlines like "Buffett buys major stake in CarMax" and "Buffett Buy Sends CarMax shares soaring" appeared. Copycat investors sent CarMax's stock price shooting up when the news broke on November 15.

CarMax's (Charts, Fortune 500) stock jumped $1.62, up 7.5%. But the story as reported by many news outlets isn't accurate, because Buffett wasn't directly involved in the purchase. The stock was bought by GEICO, the auto insurer and a subsidiary of Buffett's company, Berkshire Hathway. There's a big difference, as I'll explain.

On its face, the notion of Buffett's involvement was logical. CarMax had been struggling, with its stock having hit a low for the year of $18.88 a week earlier. But analysts like its business model: Clean-scrubbed salespeople, working on a fixed commission, selling high-quality used cars at a fixed price with no haggling. "We most likely concur with Warren Buffet's [sic] long-term view of CarMax's prospects," wrote Goldman Sachs' Matthew J. Fassier.

Though CarMax was facing headwinds from the expected slowdown in consumer spending, its sales were still moving up and several analysts had recommended the stock. So CarMax looked like a typical Buffett deal. The renowned value investor likes to make big, long-term bets on companies with strong brand names with straight-forward business models. What could be more straight-forward than the used car business?

But a close reading of the 13-F SEC filing by Buffett's company, Berkshire Hathaway (Charts, Fortune 500), suggests that Buffett wasn't directly involved. First of all, the size of the investment - less than 14 million shares worth $258 million - wouldn't be big enough to interest Buffett. That's pocket change for him. Berkshire recently had investments worth $108 billion so Buffett has to take big stakes in order to make a significant impact on his portfolio.

Another clue in the filing is that three of the holders of the CarMax shares are associated with GEICO. GEICO has its own portfolio of stocks, as well as its own legendary stockpicker, Lou Simpson, president and CEO of capital operations. But Simpson takes smaller positions than Buffett because he has less capital to invest. And, as people familiar with the operations of Berkshire Hathaway know, Simpson makes his own investment decisions.

Urban legend though it may be, the news of Buffett's alleged investment may be difficult to stamp out. CarMax certainly isn't trying very hard. When it heard about the Berkshire investment, it started celebrating about the fortuitous timing - the company is planning to open a new outlet in Omaha next month and had invited Buffett to the opening. "Now I'm thinking he might actually do it," Katherine Kenny, the assistant vice president of investor relations, was quoted as saying.

When informed by Fortune a few days later that Buffett himself was likely not the actual buyer of the shares, she replied: "We don't really care. We're just happy that Berkshire is interested in and confident in our business plan." Some investors seem to have gotten the message, though. The stock price has since settled back down to $21.74 - basically where it was before the Buffett reports.
(Source money.cnn.com)

Office Depot's profit dips

Office-supply store chain says its third-quarter results fell 9% due to lower consumer spending, U.K. slowdown, higher costs in North America.

Office Depot's third-quarter profit sinks on weakness in North America, which was hurt mostly by the slumping housing market.

DELRAY BEACH, Fla. (AP) -- Office Depot Inc., the nation's second biggest office-supply store chain, said Tuesday its third-quarter profit fell 9 percent, hurt by lower consumer spending, an economic slowdown in the U.K. and higher costs in North America.

The company had delayed its quarterly results in order to revise some past financial statements. An independent review of vendor-program accounting found weakness in its internal controls and led to the firing of four merchandising employees.

Office Depot (Charts, Fortune 500) has retained Peter J. Solomon Co. to review its capital structure options and independently advise the company on the proper course of action.

Net income fell to $117.5 million, or 43 cents per share, in the three months ended Sept. 29 from $129.1 million, or 45 cents, in the year-ago quarter. The latest period includes a $33 million tax benefit.

Sales climbed 2 percent to $3.94 billion from $3.86 billion in the prior-year period.

Analysts surveyed by Thomson Financial predicted profit of 40 cents on slightly higher revenue of $3.95 billion.

The company said North American retail same-store sales fell 5 percent for the quarter, hurt mostly by the slumping housing market. Same-store sales, or sales at stores open at least a year, is a key indicator of retailer performance since it measures growth at existing stores rather than newly opened ones.

North American business services segment sales fell 3 percent. While international sales grew 13 percent from the year-ago quarter, the company said the international division still hasn't met expectations.

"There are signs of an economic slowdown in the U.K. which, if it persists, could provide continued challenges to the division's operations in the future," Office Depot said in a statement.

It is second in the office-supply business behind Staples Inc (Charts, Fortune 500).

Software division leads HP recovery

SAN FRANCISCO — Hewlett-Packard (HPQ) reported higher-than-expected quarterly earnings Monday, as the computer maker continued to reinvent and diversify itself.

HP reported revenue of $28.3 billion in its fourth fiscal quarter, ended Oct. 31. That's an increase of 15% from $24.6 billion a year ago. Every major division reported revenue gains.

But HP's fledgling software division was the star. Aided by the $4.5 billion purchase of Mercury Interactive in 2006, software revenue doubled to $698 million.

That's important, as HP is trying to move away from its dependence on traditional business such as PCs and printers, says software analyst Stuart Williams at Technology Business Research.

CEO Mark Hurd has been restructuring the company since he was hired in 2005, when HP was struggling with performance and management problems.

That job is not yet done, Hurd says. But the low-key Hurd acknowledged how far HP has come. "We like how we are positioned," he said in a conference call Monday.

HP said net income of $2.2 billion, or 81 cents a share, rose from $1.7 billion, or 60 cents a share, a year ago.

The company's PC division reported a 30% increase in revenue. Sales of back-office computer servers and storage systems jumped 4%. Low component prices helped.

The printer division — an industry juggernaut — wasn't as impressive. Revenue grew 4%; net income was flat. "We had expected a bit more pickup" in lucrative printer ink sales, says Josh Farina, hardware analyst at Technology Business Research.

HP could face bigger challenges going forward. The company's turnaround has been so impressive that "it will be difficult to keep their core business growing at this clip," says tech analyst Crawford Del Prete at researcher IDC.

HP has also benefited from market conditions that play to its strengths. HP's presence in retail stores has been a boon as consumer laptop sales took off, for example. But the market could shift at any time, Del Prete says.

Another threat: rival Dell, which has struggled with an accounting probe and other problems in recent months. Dell has launched its own recovery plan, which could make it a more formidable competitor.

HP expects revenue of $27.4 billion to $27.5 billion in the current quarter, with earnings per share of 75 cents. The company also authorized $8 billion for share buybacks. The news, released after markets closed, sent HP shares up nearly 1%, to $50.25 in after-hours trading.

Why is broadband switching so hard?

Download a song, email a friend, send a video to granny - it should all be so simple in our brave new technological world with broadband internet.

More than half the households in Britain have taken the plunge already, with BT alone grabbing four million subscribers in a market worth upwards of £1bn a year.

But try to take advantage of the temptingly low prices for high-speed services by switching from one provider to another, and all of a sudden things are not so easy.

The situation has become so bad that watchdog Ofcom is about to produce a report that will be fiercely critical of the companies' tactics to stall defections.

Karen Darby, founder of simplySwitch. com, which advises consumers on switching utilities and broadband services, says one of the companies' tactics is for call centre workers to be given bonuses to put off customers who want to switch.

Ofcom claims to be doing its best but admits problems remain.

One huge difficulty has been providers refusing to hand over the special Migration Authorisation Code (Mac) needed by customers who want to change.

Brian Holm, 70, and his wife, Elizabeth, 69, of Workington, Cumbria, said they experienced this frustration when they tried to switch their broadband supplier from AOL to Tiscali.

'We needed the Mac, but what a kerfuffle,' said Elizabeth. 'Brian could not get off the phone it just went on so long. The man told us we didn't need the code.'

The Holms now have to wait four weeks for the service to be switched. By contrast, changing their electricity and gas supplier took five minutes with an nPower representative in a local supermarket. Ofcom says it is looking closely at the problems. Last week, it fined service provider Prodigy £30,000 for failing to provide information about how it was complying with the Mac rules.

'We acted in February to make service providers hand over Macs to consumers who wanted to switch,' an Ofcom spokesman said. But Darby and other experts say that new barriers have simply been thrown up.

'I am a victim of this,' said Darby, whose company is owned by The Mail on Sunday's parent company,. 'Dropping my Tiscali service involved being passed around a dozen phone operators before ending up where I started.'

Virgin Media, which has come in for much criticism for its customer service, has a single number for customers to dial. But once they have rung the 0845 line, the problems start, with difficult menus and long queues.

McDonald's Eyes Ballooning Coffee Market

Clash of the Titans? McDonald's Eyes Ballooning Coffee Market, but Franchisees Not Happy

NEW YORK (Associated Press) - McDonald's Corp. executives came out swinging when they announced their assault on the comfy world of coffee shops.
After the success of its upgraded drip coffee _ which even managed to snag a thumbs-up from testers at Consumer Reports earlier this year _ the fast food chain known for super-size meals is gearing up for a massive expansion into the world of lattes.
"We want to move from beverages as an accompaniment to being a beverage destination," Don Thompson, president of McDonald's USA, said in a meeting with analysts Tuesday. "Our speed, our convenience, the value that we can afford to customers without quality comprise will make us a formidable player."
Restaurants will offer lattes, mochas, cappuccinos and espressos with a choice of different flavorings and milk. Industry watchers say the drinks cost about 50 cents less than at Starbucks.
But as it tries to cash in on the fast-growing specialty coffee market, the world's largest restaurant chain is already finding itself at odds with the unlikeliest of groups: Its own franchise owners.
"There's a real groundswell of resistance among the franchisees about this," said Richard Adams, a consultant for McDonald's franchise owners. He estimated the effort has a 50-50 chance of getting off the ground because of franchise opposition.
Store owners are balking at the plan's estimated $100,000 price tag to cover renovations and initial new equipment.
And many are concerned that little customer interest in McMochas means it will could take years to recoup their investment, even on the famously high-margin coffee drinks.
"They're going to have whipped cream on their face," Adams said.
McDonald's said it's confident the new coffee will win over new customers and help individual stores boost annual revenue by about $125,000 once the coffee products, along with new bottled drinks, smoothies and other beverages are added to stores.
Zachary Aisley, a 27-year-old from Woodland Hills, Calif., has been impressed with the value and taste of McDonald's attempts at premium drip coffees and iced coffees. Now he's looking forward to sampling the company's lattes and mochas to see if they merit more frequent visits.
"I think their addition could bring me into the store," he said. "And I would definitely be likely to go in and try it."
If McDonald's can persuade its franchisees to sign on, analysts say it can likely thrive in the growing $12 billion specialty coffee market, which includes both brewed coffee and beans.
About one in five Americans drinks some kind of espresso-based coffee each day, and the market is supposed to grow by at least 4 percent each year until 2011.
"With coffee gaining so much ground, McDonald's almost has to go there," said Sharon Zackfia, a restaurant and retail analyst with William Blair & Co. "The feeling that the coffee business is a single pie and everyone is fighting for different slices doesn't seem to acknowledge that the pie is growing."
In response, companies are scrambling to offer more steamy drinks and snacks.
Dunkin' Brands Inc. added espresso beverages to Dunkin' Donuts shops in 2003 and credits the full-line of coffee drinks with helping its aggressive growth plans.
And Canadian coffee chain Tim Hortons, which is expanding its own U.S. presence, said customer demand for one-stop food and coffee shopping is growing.
"I think we're all now competing in the same space," said spokeswoman Rachel Douglas. "I think the lines are blurring, and I think consumers are demanding that."
A full-court press by McDonald's couldn't come at a worse time for Starbucks Corp., the world's largest chain of coffee houses, which is struggling with rising dairy prices, growing competition and flattening store traffic in the U.S.
In a conference call with analysts last week, executives with Seattle-based Starbucks said they welcomed the competition. Then they threw in a subtle jab.
"We understand all too well that we have built a very attractive business for others to look at and try and take away, whether it's 1 percent on the margin or big companies that are trying to take more," Starbucks Chairman Howard Schultz said. "We are up for the defense and we are going to get on the offense."
McDonald's first launched its so-called premium coffee about 18 months ago, followed by limited tests of sweet tea and iced coffee. Since then, it has added the specialty coffee drinks at about 800 U.S. stores, and it announced Tuesday that it intends to add the beverages to locations nationwide by early 2009.
A Starbucks spokesman declined to comment on the news, offering a company statement that it remains "focused on exceeding ... customers' expectations."
In a seemingly coffee-saturated society, there's little chance of a full-fledged coffee war between McDonald's, Starbucks and the myriad of other coffee purveyors like Dunkin' Donuts and Caribou Coffee Co.
"I think that they appeal to two different types of customers," said Morningstar analyst John Owens. "I think there's room for both McDonald's and Starbucks to be successful in selling coffee. This isn't something where one is going to be completely victorious over the other."

Sony PlayStation 3 Sales Rising After Price Cut, New Model

LOS ANGELES (AP)--Sony Corp. (SNE) said sales of its PlayStation 3 gaming consoles have risen fast in the United States since it cut the price of its 80 gigabyte model by $100 and launched a 40 gigabyte model.

In the two weeks ending Nov. 11, Sony said it sold more than 100,000 consoles of all types.

The price cuts makes the PS3 more competitive against Nintendo Co.'s (NTDOY) Wii and Microsoft Corp.'s (MSFT) Xbox 360 as the holiday season opens, Sony Chairman and Chief Executive Howard Stringer said.

"It's the breakthrough we've been anticipating," Stringer told the Associated Press Wednesday. "We've been holding our breath."

Sony said it had been selling between 30,000 and 40,000 consoles per week before the Oct. 29 price cut.

In the first week after the price drop, sales rose to 75,000. Sales rose again to more than 100,000 per week after the introduction of the 40 gigabyte model on Nov. 2, Sony said.

Lagging sales of the PlayStation 3, compared to sales of the Wii and XBox 360, prompted Sony to cut the price in the U.S. as it had in Japan and Europe.

"Obviously, we've taken so much heat over the year on PS3," Stringer said from his office in Tokyo. "Finally, the turning point has been passed."

Stringer said Sony is poised to benefit from the difficulty Nintendo has had producing Wii consoles fast enough to keep up with demand.

"It's a little fortuitous that the Wii is running out of hardware," Stringer said.

Executives said the rising sales also boost the Blu-ray high-definition DVD format. A Blu-ray drive comes with the PS3.

"It puts us vastly ahead of where the other format is going to be in terms of an installed base in people's homes by the end of this holiday season," Andrew House, Sony's chief marketing officer, said.

Toshiba Corp. has been selling players for its rival DVD format for high- definition as low as $200 and prices are expected to drop further.

Disney to launch cell phone carrier services in Japan - report

TOKYO, Nov. 11, 2007 (Thomson Financial delivered by Newstex) -- US media and entertainment giant Disney will launch cell phone carrier services in Japan early next year by leasing local telecommunications networks, a press report said Sunday.

The Japanese unit of Walt Disney Co (NYSE:DCQ) (NYSE:DIS) has reached a basic agreement with Japanese Internet and telecom conglomerate Softbank Corp to tie up in cell phone operations, the business daily Nikkei reported.

Under the deal, the US firm will lease telecom networks from a Softbank unit, Softbank Mobile Corp., and start providing nationwide service, the report said.

No officials were immediately available at the two firms to comment on the report.

Disney will also join forces with Softbank to develop handsets and consign their output to other companies, the report said.

It added that the new phones would be sold at Softbank Mobile's 2,400 sales outlets across Japan and Disney will aim to sign up more than one million subscribers.

Disney will use its famous characters in designing its handsets and offering its animated films for downloads exclusively to subscribers, the daily said.

Launching cell phone services in Japan requires a huge initial investment because it costs about one trillion yen (8.7 billion US dollars) to build a network of base stations, the daily said.

As a result, Japan's cell phone service market is almost completely monopolised by NTT DoCoMo (NYSE:DCM) , KDDI Corp and Softbank Mobile.
(Source money.cnn.com)