Thursday, April 22, 2010

Yahoo boosts profit on advertising rebound, Microsoft search-pact revenue

YAHOO'S first-quarter net income more than doubled as the internet heavyweight began to reap rewards from an improving online-advertising market, as well as its recent search pact with Microsoft.

A sharp rebound in display advertising enabled California-based Yahoo to report its first revenue growth since the third quarter of 2008, although a 14 per cent drop in search-advertising revenues tamped down overall revenue growth.

Chief executive Carol Bartz said in a conference call with analysts: “The economy continues to improve” and advertisers’ “purse-strings are starting to loosen up”.

The internet giant also began to show benefits from its search agreement with Microsoft, which paid an unexpected one-time “net transition cost reimbursement” of $US43 million ($46m) to cover costs that Yahoo incurred in 2009 as well as in the first quarter of 2010.

“It's unexpected and probably the biggest driver of the bottom-line upside surprise,” said Benchmark Capital analyst Clayton Moran.

Yahoo also received $US35 million from Microsoft for search operating costs, an ongoing reimbursement provided for in the two companies' recently implemented search pact. The company said it expects to receive between $US75m and $US85m in ongoing quarterly reimbursements under terms of the deal.

Chief financial officer Tim Morse told a conference call: “The $US35 million for search operating expenses represent the initial step on the path to the long-term cost savings we anticipate as a result of the alliance.”

Since taking the helm of Yahoo early last year, CEO Bartz has pushed to turn around the company by focusing on core web properties and its display advertising business.

Yahoo said revenue from its display advertising business climbed 20 per cent from the same period last year, reflecting a rebound in the online advertising market.

During the quarter, Yahoo launched its 10-year revenue-sharing partnership with Microsoft, aimed at challenging Google’s dominance of the online-search market.

Under the pact, Microsoft's Bing will power searches on Yahoo’s web properties. Data from web research firms indicate Yahoo has stabilised its declines in market share and may be expanding it.

Ms Bartz said she expected Yahoo’s search share to “trend up” during the second quarter, which would reverse several quarters of losses in market share.

Yahoo’s search share rose to 16.9 per cent in March from 16.8 per cent in the prior month, according to comScore. It was the first increase since Microsoft launched its revamped Bing search engine last year. The two companies' combined share in the search market has remained relatively stable since, while Google's share has also held firm around 65 per cent.

In the most recent period, Yahoo reported that operating search advertising revenue dropped 14 per cent, after posting its first sequential quarter of growth in a year in the fourth quarter.

Yahoo posted a profit of $US310.2m, up from $US117.6m, a year earlier.

Total revenue increased 1.1 per cent to $US1.6 billion, in line with the company's January forecast of $US1.58bn to $US1.68bn. But net revenue, after traffic acquisition costs, was at $US1.13bn, slightly below Wall Street expectations of $US1.17bn.

Gross margin crept higher to 55.8 per cent from 55.7 per cent.

TelstraClear looks to cut 120 jobs

Australian owned telecommunications company TelstraClear is looking to cut 120 call centre jobs in New Zealand, moving the service to Manila in the Philippines.

The Engineering, Printing and Manufacturing Union (EPMU) condemned the proposal and said it believed 170 jobs would be affected.

TelstraClear told Fairfax's BusinessDay 120 jobs were under consideration, including 75 in Christchurch, but it was only a proposal at this stage.

TelstraClear spokesman Chris Mirams said the proposal was about better customer service but admitted it would also save the company millions of dollars.

"We've been making the case to keep these jobs in New Zealand since last November when TelstraClear said they were conducting a feasibility study into shifting their call centres offshore.

Today they told us they thought the case for going offshore stacked up," EPMU organiser John Kerr said.

"This is all about accessing so-called cheap labour overseas but comes at an enormous price for our members, many of whom are just starting out and have young families to support."

Kerr said the proposal did not even make good business sense as potential damage to TelstraClear's brand was enormous.

Wednesday, April 21, 2010

Yahoo profit nearly trebles

SUNNYVALE, California - Yahoo's first-quarter earnings nearly tripled as the internet company's revenue edged up for the first time in more than a year.

The results released on Tuesday, local time, represented Yahoo's best quarterly performance since it hired CEO Carol Bartz to engineer a turnaround 15 months ago.

The performance reflected an upturn in online advertising, the main source of Yahoo's income. Advertisers have been spending more freely in recent months amid signs that the US economy has emerged from its worst recession in more than 70 years.

Display advertising, a category that includes online billboards and other visual marketing campaigns, surged 20 per cent from last year, Yahoo said.

The company earned $310.2 million, or 22 cents per share, in the January-March period. That compared with income of $117.6 million, or 8 cents per share, a year ago.

The results were boosted by the recent sale of an email service and the initial payments from Microsoft to cover some of the costs of a search advertising partnership between the two companies.

Excluding those one-time gains, Yahoo said it would have earned 15 cents per share. That figure easily topped the average estimate of 9 cents per share among analysts polled by Thomson Reuters.

"We had a good quarter, delivering income from operations higher than our outlook," Bartz said in a statement.

Revenue was up 1 per cent to $1.6 billion. Although modest, the gain represented the first time Yahoo's quarterly revenue has increased since the third quarter of 2008.

After subtracting commissions paid to its advertising partners, Yahoo's revenue totaled $1.13 billion - about $40 million below analyst estimates.

Yahoo shares climbed 13 cents in Tuesday's extended trading after finishing the regular session at $18.38, down a penny.

- AP

Monday, April 19, 2010

Food, petrol price hike tipped to push inflation up

Inflation data is tipped to reveal an overall rise in prices in the March quarter, but economists are at odds over the fate of interest rates.

Statistics New Zealand will release the Consumer Price Index (CPI) for the three months ending March tomorrow.

Lifts in food and petrol prices are picked to help push the rate of inflation above the Reserve Bank's forecast of 0.3 per cent.

Westpac economists predict a much stronger 0.7 per cent rise in inflation and have backed market expectations that the central bank will raise the Official Cash Rate (OCR) in June.

But ANZ economists expect the Reserve Bank will sit on interest rates until the second half of the year. First-quarter inflation was likely to be 0.5 per cent and take annual inflation to 2.2 per cent, they said, with lifts in education fees and rents contributing to inflationary pressure.

But the CPI result on its own may not be enough to force a June jump in the OCR, they said.

Weak retail trade statistics for February – core retailing dropped 0.9 per cent or $35m – indicated retailers may have cut prices by more than expected. Activity in the residential construction sector had been weak, while an anaemic labour market was keeping labour cost pressure contained.

"Our monthly inflation gauge rose strongly in January and February but dipped in March," ANZ said. "While we expect a climbing trajectory for inflation over 2010, the patchiness of the recovery is likely to contribute to a more patient policy response.

"More concrete signs of economic recovery becoming established are likely to be another prerequisite for the Reserve Bank moving, but we believe they will not be evident until the second half of 2010."

Westpac economists said their bullish forecast reflected "inconsequential quarterly volatility, rather than a generalised lift in inflation".

Food prices rose about 1 per cent in the quarter, and petrol prices 3.6 per cent – but neither increase was expected to be long-lasting or important.

Construction cost inflation jumped to 1 per cent after five subdued quarters, which was higher than Reserve Bank expectations and would be food for thought for the central bank, they said. Construction costs tended to be one quarter behind house prices – which rose rapidly last year, and anecdotal evidence pointed to rising costs.

"We are definitely plumping for a June hike, because it is highly likely that the Reserve Bank will receive an upside surprise on CPI." Inflation for the three months ending June was likely to be 0.3 per cent – balancing out the first-quarter result – with the effects of the strong kiwi dollar last year still evident and non-tradable inflation still low, they said.

But the impact of the emissions trading scheme and the signalled rise in GST later this year would probably push annual total inflation closer to 5 per cent for a year or so.

Big-scale rivals put heat on NZ farmers

New Zealand agriculture has as little as five years before large-scale intensive farming in South America, western China and central Asia erodes its cost advantage in producing bulk commodities, according to accountant KPMG.

The KPMG Agribusiness Agenda report observes that these regions have the benefit of lower-cost land and labour and less complex regulatory regimes.

"In addition, they are traditionally closer to key markets, enabling them to deliver food to the customer at a significantly lower cost than a competing new farmer or grower in New Zealand could achieve," KPMG agribusiness chairman Ross Buckley said.

"This gives New Zealand companies a short buffer, maybe as little as five years, before low-cost regions are producing bulk commodity products in significant volumes and undercutting New Zealand's pricing in our traditional commodity markets."

Because of this, it was now time to start revising industry structures, practices and products to give New Zealand produce better value well in advance of large-volume commodities from these new suppliers.

To be more efficient, New Zealand needed to invest heavily in science, technology and infrastructure, KPMG lead agribusiness partner Ian Proudfoot said.

The farming sector of the future should have the ability to deliver food solutions all year around through adoption of advanced global sourcing and logistics.

"Companies need to be constantly talking with customers to understand their future needs and requirements around product presentation, sustainability and traceability to deliver these in advance of competitors and lock in price premiums," Mr Proudfoot said.

Sustainability was a priority. "Failure to adapt to sustainable practices will in our view leave the industry facing a future competing in low price, commodity markets with producers from countries that have increasingly got a significant low cost advantage over our producers."

Government policy should also be focused on better investment, management and use of water resources, Mr Proudfoot said.

"Water is New Zealand's liquid gold. Development of a policy framework that provides certainty over the access, quality and cost of water to agribusiness is important if the industry is to have the confidence to make long-term investments in improving productivity and increasing its contribution to the New Zealand economy."

National co-ordination of a water management strategy was needed.

Investing in connected rural communities would also be essential.

Mr Proudfoot noted that only 1.6 per cent of the new money the Government proposed to invest in broadband and fibre networks was targeted at the 13.8 per cent of the population in rural communities, "and yet this group grows, processes and exports 66 per cent of New Zealand's merchandise exports".

Mr Buckley said: "Success in our new markets depends on how intimately our exporters are able to understand their new customers and that will only come from doing the hard work to build the personal relationships on the back of the Government's free trade agreements and negotiations.

"Volatility will continue to be a challenge and investment in new research and development via co-ordinated science strategies is vital."

Tuesday, April 13, 2010

Economic risks remain

New Zealand's economic outlook has improved this year, but a swifter recovery for other nations could put the country's growth at risk, credit agency Dun and Bradstreet said.

New Zealand's economy is still forecast to grow by 1.8 per cent this year, unchanged from D&B's previous economic and risk report in January, but the risk trend has been upgraded to improving from deteriorating.

The improvement in key markets, including Australia and China, has supported New Zealand exports, reducing the country's liquidity risk.

But unemployment has continued to rise despite three consecutive quarters of economic growth, undermining the country's recovery.

New Zealand is rated one of the top four safest countries in the region and among the top 20 in with world, D&B calculated.

"This is a significant achievement and it demonstrates the strength of New Zealand's economy at a time when the rate of recovery in many other developed nations remains sluggish," D&B New Zealand general manager John Scott said.

"New Zealand is classified a low risk environment for business investment, however, as the rest of the developed world recovers, global competition will intensify.

"Therefore, we need to ensure our focus on reform, strong economic management and sound risk practices continue," Mr Scott said.

Challenges facing New Zealand included a reduction in economic stimulus from the Government, and the likelihood of interest rate rises this year.

Global growth is tipped to reach 2.4 per cent this year, with China's economy forecast to grow 9.8 per cent, the United States 2.0 per cent and Europe 0.7 per cent.

New Zealand was ranked second in the Asia-Pacific region at DB2c, compared with Australia's DB1d rating.

Sixteen countries had had their country ratings downgraded since the start of the year, including Japan and the Netherlands, while South Korea was one of the five countries to have its rating upgraded by D&B.


Monday, April 12, 2010

Go Google it!

You know you have truly succeeded in any market when your brand name takes over as the most commonly used way to describe your market. People might talk about needing to ‘Hoover’ the house, requiring a ‘Panadol’ for a headache, finding the ‘Sellotape’ to tape something, and drinking a ‘Coke’.

And so it came to pass sometime during the early-mid 2000s, that people started talking about ‘needing to Google’ a word or topic online, as opposed to needing to use a ‘web search engine’.

So what exactly is it? A web search engine looks for user-entered information on the world wide web, and produces a list of results or ‘hits’. They operate using algorithms (a list of instructions which produce an automated task). The first ever search engine was called Archie in 1990 but was limited to listing files. It wasn’t until 1993 that a web robot was designed to roam the entire www and by the mid-1990s ,many names were vying for our attention like Lycos, Magellan, Excite and Alta Vista. Probably the biggest name heading into the end of the century was Netscape.

Yahoo and Microsoft were players into the 2000s, and Microsoft has since re-emerged in 2009 with Baidu and Bing, but it has ultimately been a dust-eating exercise. Google held well over 60% of the US search engine market as at last year (peaked at over 80%, globally in December 2008). As most people are aware, the company has since become a global juggernaut, successfully branching into other web-related areas such as Google Earth, and ‘cloud’ applications like Gmail.

The ‘need to Google something’ has no doubt induced countless wry grins for developers Larry Page and Sergey Brin. Staggeringly, they are both still several years short of turning 40, and are both worth about a cool USD $17.5 billion each. Google is not only the most widely used search engine in the world, it is the world’s biggest internet company. The genesis of Google occurred when the ‘Google Guys’ (by all accounts very very bright cookies) were doing a project while doing their PhDs at Stanford University.
They agreed they could design a better search engine than conventional ones, which only ranked results based on how many times the search term appeared on the page. The guys’ system was simply superior – ranking web pages based on the number and page rank of other web pages that linked to the page being searched. The premise for this was that the better the page – the more other good pages it would be attached to. They registered the domain name September 1997 and incorporated the company a year later from a friend’s garage.

Google crushed the search engine competition, and such has been its dominance subsequently, that most people are hard pressed to name any of its competitors prior to, or since the new millennium.

Google makes most of its income from advertising revenue through its AdWords programme. Today it runs over one million servers in global data centres. It processes more than 1 billion search requests and generates 20 petabytes (1000 terabytes = 1 petabyte) of data daily.

If you have any queries or issues with your business internet connectivity please contact us at Origin IT. And don’t forget to think about Google’s unofficial corporate slogan – ‘Don’t Be Evil’!

Taxation tips

Tax trap:

Landlords inexperienced in property investment and tax matters need to be careful when they decide to sell an investment property.

If the property has been held in an LAQC (Loss Acquiring Qualifying Company), in a partnership or in their personal name over a number of years and depreciation has been claimed, it is important to sell the building part of the property at around book value otherwise a tax liability will be incurred as a result of recovering depreciation on the sale, i.e. the selling price of the building is greater than the original cost price less depreciation claimed (the book value).

Remember, seek sound advice BEFORE selling the property.

Declare all income:

Clients seeking the services of accountants to prepare business accounts and returns for rental properties should also give their accountant details of all their other income. This includes interest from bank accounts and any other investments plus dividend statements for shares they have purchased. In New Zealand all income is taxable including world wide income.

The overseas income and any tax paid is converted to NZ dollars and entered in their NZ tax return. There is, therefore, no duplication of the tax already paid overseas.

Claiming deductions:

Many taxpayers don’t deduct all of the costs available to them – are you claiming for home office and entertainment and are you correctly deducting motor vehicle costs?

Many self employed people aren’t claiming any deductions. Are you a labour-only contractor not claiming business expenses?

Wednesday, April 7, 2010

Auckland house sales booming

House sales in Auckland climbed to their highest level in almost two years last month, signalling an improvement in buyer confidence.

Figures from Barfoot & Thompson show house sales in March edged ahead of those for the same time last year, with the average sale price in Auckland now $545,156.

This is up 4.6 per cent on the previous month, and is more than $53,000 higher than the same time last year.

Barfoot & Thompson managing director Peter Thompson cited an influx of people into Auckland, growing confidence in the economy and an Indian summer as reasons for a busy first quarter's trading.

The firm, which has about a 40 per cent share of the Auckland market, sold 927 properties during March, slightly ahead of March 2009.

Thompson said if monthly fluctuations were evened out, its sales data showed house prices across Auckland had risen an average 3.2 per cent, or $16,000 in the last year.

The number of new listings (1671 in March) while down on February's figure of 1714, was still good, with existing listings on par with the same time last year.

Thompson said the housing market was balanced and did not favour either buyers or sellers.

"Our experience is that the majority of sellers are putting realistic values on their properties, while buyers are not solely intent on bargain hunting."

"It's creating a market where a lot of properties are changing hands."

Based on normal seasonal patterns, prices would probably ease into Autumn, he said.

- NZ Herald staff

Friday, April 2, 2010

Another finance company collapses

Auckland finance company Vision Securities has gone into receivership, but Treasury says investors will get all of their money back.

Vision Securities is a specialist property financier for the retirement village sector and a provider of general development finance and has been trading for 9 years. It has 953 debenture holders with $28 million invested.

It becomes the third company that has gone into receivership that is covered by the Government's retail deposit guarantee scheme. The others were Strata Finance and Mascot Finance, which resulted in payouts worth $35 million.

48 finance companies with a total of $6 billion in investor funds have failed since May 2006.

Perpetual Trust Head of Corporate Trust Matthew Lancaster said the directors requested receivers to be appointed following the failure of a major loan that was to be settled last week.

"The directors are now concerned about the company's on-going liquidity and believe that in due course the company would be unable to meet its ongoing debenture obligations," he said.
The company's borrowers were finding it increasingly difficult to refinance or repay their maturing loans, the directors said.

Vision Securities Limited had decided receivership was the best option to protect all investors and to ensure investors were treated fairly.

Rod Pardington and David Levin of Deloitte have been appointment receivers of the company.

The receivers say they expect to release a report on their initial
findings "as soon as possible".

Treasury said depositors would be contacted within six weeks when they would be told how they could claim under the terms of the guarantee, he said.

Treasury Director of Financial Operations Brian McCulloch said he expected an orderly process of payment to be eligible to Vision Security depositors.

New deposits and the roll-over of existing deposits after the default of the company, were not covered by the scheme.

"In circumstances such as this, when the guarantee is triggered, it is important to remember that it is the eligible depositors that are guaranteed rather than the company," he said.

The Crown retail deposit guarantee scheme was introduced at the end of 2008 to give New Zealand depositors confidence that their money would be secure in the event of an approved financial institution failing.

"Over the life of the scheme, exits, mergers and wind-downs will occur. This is normal financial sector activity and is expected to continue even though the guarantee scheme is in place," McCulloch said.

In February, Vision was put into the high risk category by rating agency Standard & Poor's, which issued it a B credit rating with a negative outlook, amid the flurry of companies lining up to meet Reserve Bank regulations that require non-bank deposit takers to be rated.

Today's announcement prompted S&P to downgrade the company's rating to a D, with any further write-downs of the company's loan book likely to breach its trust deed.

Greece May Be Heading to ‘Square One’ as Bonds Fall

Europe’s week-old rescue plan for Greece has so far failed to do what its leaders predicted: reduce borrowing costs for the region’s most indebted country.

The yield on 10-year Greek government bonds has increased 25 basis points since EU leaders agreed to the aid blueprint on March 25, reaching a one-month high of 6.529 percent yesterday. The yield eased to 6.525 percent today, still more than double the rate on comparable German debt. Seven-year bonds sold by Greece on March 29 fell for a third day today.

“What they were hoping for was to set up some sort of arrangement that never has to be used,” said Phyllis Reed, head of bond research in London at Kleinwort Benson, which manages about $32 billion. “The markets have sniffed that out and it seems like we’re heading back to square one.”

As borrowing costs increase, the risk is that EU leaders will have to deploy a rescue mechanism that still needs to be fleshed out. That would push them to decide the role of the Washington-based International Monetary Fund in any rescue and force the head of Europe’s biggest economy, German Chancellor Angela Merkel, to counter public opinion by funding a bailout with taxpayers’ money.

So far, EU officials say they expect Greek yields to decline as the government in Athens carries out a plan to reduce its deficit to 8.7 percent of gross domestic product from 12.7 percent last year. European Central Bank President Jean-Claude Trichet said yesterday investors will “progressively recognize” the steps taken by Greece. EU spokesman Amadeu Altafaj said that Greece’s deficit-cutting plan is “on track.”

Last Resort

The aid facility, a combination of IMF and EU bilateral loans, will only be triggered if Greece runs out of fund-raising options. Greek Prime Minister George Papandreou, who has to raise as much as 11.6 billion euros by the end of May, welcomed the plan last week as “very satisfying.”

Since then, the extra yield investors demand to hold Greek 10-year bonds instead of German equivalent has risen to 342 basis points, compared with 305 points on March 26. The yield on Greek two-year bonds rose to 5.17 percent today from 5.119 yesterday.

“Markets don’t believe that Greece will be able to see things through,” said Razeen Sally, senior lecturer in international political economy at the London School of Economics, in a telephone interview.

IMF Role

The EU’s bailout plan was complicated by Merkel’s push for an IMF role in the run up to last week’s summit. She argued that German taxpayers shouldn’t fund Greek excess, a position backed by sixty-one percent of Germans, a Financial Times/Harris poll showed on March 22. The final EU agreement nevertheless failed to outline the terms on which the IMF would co-finance a rescue, a lack of clarity that could pave the way for a power struggle.

IMF Managing Director Dominique Strauss-Kahn said on March 30 the lender would set the terms of any loans to Greece just as it does with other countries. Trichet said before the summit that ceding control to the IMF would be “very, very bad.” He later changed his tone to say he was “pleased” with the outcome.

“It’s supposed to be a joint EU-IMF thing, but it sounds like the IMF have plans of their own,” said Reed. “There are still a lot of question marks.”

‘Belief Factor’

Some strategists say it’s too soon to say the EU plan has failed to steer Greek bonds lower as the most recent austerity plan, announced on March 3, still needs to be implemented.

“It’s taking time to get the belief factor working,” said Padhraic Garvey, head of investment-grade bonds at ING Groep NV in Amsterdam. “It took six to nine months before Ireland’s story become credible and the Greek story will take longer.”

The premium on bonds issued by Ireland, which is also cutting wages to reduce the region’s second-largest deficit, was 138 basis points today, compared with 247 points a year ago.

Trichet reiterated his view yesterday that Greece’s deficit-cutting plans, which aim to push the shortfall below the EU’s limit of 3 percent of GDP by 2012, are “convincing.” Papandreou called on his ministers on March 30 to intensify their work to meet the budget plan.

Greek officials may not have long to convince investors that the government deserves to pay lower interest rates.

“Over the course of the summer I think we’ll run into a more difficult atmosphere on the markets,” said Frank Schaeffler, a lawmaker from Merkel’s Free Democrat coalition partners, in a telephone interview. “Then we’ll find out whether Greece can pull it off or not, over the course of the summer.”

With investors keeping up the pressure, Greek opposition politicians are criticizing the EU plan. Coalition of the Left deputy Dimitris Papadimoulis yesterday mocked Finance Minister George Papaconstantinou for comparing aid to a “loaded gun” that would threaten markets.

“The gun,” he said, “has proved to be a water-pistol.”