World Business

Analysts’ opinions on stocks in the news Friday

From Standard & Poor’s Equity Research

Watch original video:

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF CITIGROUP (C; 9.45):

According to an unconfirmed Wall Street Journal article this morning, Citigroup is laying off at least 10,000 employees, about 3.0% of its global workforce, starting this week, viewed like it attempts to lower its require to be paid composition in the face of motionless return growth. Separately, Citi debunks a previous WSJ quantifying pronoun that reported that some directors were considering replacing Sir Win Bischoff as Citi’s chairman. Based attached our view of variableness surrounding future writedowns, we are keeping our 12-month target price at $15, equal to roughly 0.83 times part estimation/share, below Citi’s historical mean proportion. -S. Plesser, E. Oja

S&P MAINTAINS SELL OPINION ON SHARES OF SUN MICROSYSTEMS (JAVA; 3.94):

JAVA announces a global restructuring plan to better align its cost structure with current environment and to bring into being new business groups for improved innovation. The company aims to reduce costs by $700-$800 million annually by reducing headcount by the agency of 5,000-6,000, representing 15%-18% of its workforce, and expects to become liable to $500-$600 million in related charges over the next 12 months. We convinced these measures will help to shave off losses, but still think JAVA’s growth in posse will be limited by macroeconomic and competitive headwinds. We maintain our 12-month mark price of $3. -T. Smith-CFA, C. Montevirgen

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF ABERCROMBIE & FITCH (ANF) 21.04):

October-quarter EPS of $0.72, vs. $1.29, is below our $0.75 estimate as comps-store sales declined 14%, driving deleveraging of fixed store and distribution expenses, up 660 bps. CEO Mike Jeffries contract is up for renewal and it is not clear which way discussions are going. We believe Jeffries is driving force behind ANF brand and on the outside of his leadership in this environment, we see increased risk. We are reducing fiscal year 2009 (January) and fiscal year 2010 EPS estimates to $3.30 and $2.90 from $4.00 and $4.05, and our 12-month target price to $25 from $37 based forward a peer multiple and new fiscal year 2010 estimate. -M. Driscoll-CFA

S&P MAINTAINS BUY OPINION ON RESEARCH IN MOTION SHARES (RIMM; 40.37):

Amid macroeconomic pressure, warnings from peers and suppliers, and recent launches of new handsets in North America, we believe RIMM’s growth prospects esteem narrowed because its Nov-Q leadership in September. As a result, we are lowering our fiscal year 2009 (February) EPS valuation by $0.12 to $3.58 and fiscal year 2010’session by $0.37 to $4.15, reflecting slower, yet growing sales of smartphones. We are reducing our target price by $50 to $60, using a lower, but premium-to-peers, p-e of about 15 seasons our fiscal year 2010 valuation. But we believe new selloff discounts RIMM’s success in the still-expanding smartphone market. -T. Rosenbluth

S&P KEEPS HOLD RECOMMENDATION ON SHARES OF FREDDIE MAC (FRE; 0.66):

FRE posts third quarter waste of $19.44, vs. injury of $2.07, substantially wider than our $5.95 waste calculate on $5.7 billion in credit losses and $9.7 billion in securities impairments. Federal Housing Finance Authority has requested funds from the Treasury to offset FRE’s $13.8 billion shareholders’ deficit. We see losses continuing well into 2009, forcing FRE to drag at minutest an additional $25 billion from its credit facility. We are widening our 2008 loss estimate from $8.49 to $24.17 and 2009’s loss from $0.20 to $3.92. But we are keeping our target price of $1, a significant discount to historical metrics. -K. Cole-CFA

Original text: {news-link}

Celebrity spokespeople are expensive and risky, and they don’t through all ages. pay right side

By Steve McKee

Watch original video:

Tiger Woods is one of the greatest athletes of all time. He’s also a product-endorsement gold mine. I have no trouble believing that Tiger actually prefers to application most of the products he endorses, including his Nike (NKE) equipment, Titleist (FO) golf balls, Gatorade sports drink, Gillette razors, American Express (AXP) card and Tag Heuer (LVMH) watch. But Buick (GM)? That’s a course. Yet GM has paid Woods millions of dollars to consist up for the brand.

Tiger may be the endorsement champ, but he’session not alone. Michael Jordan—Nike, Gatorade, Hanes (HBI), McDonald’s (MCD), Chevrolet), Bill Cosby (Coke (KO), Jell-O (KFT), Del Monte (DLM), Ford (F), Kodak (EK)—and Peyton Manning—Sony (SNE), MasterCard (MA), DirecTV (DTV), Gatorade—be under the necessity all been at the top of the heap of celebrity endorsers. And there are hundreds of other examples of famous endorsement deals, from Karl Malden for American Express to Brooke Shields for the sake of Calvin Klein to William Shatner for Priceline (PCLN).

Most advertisers can’privately afford the millions of dollars it takes to ink a celebrity endorser. But grant that your company falls in that rank, suppose heart. Celebrity endorsers aren’t only pricey, they’re risky. Before you make use of the plunge in continuance an international, national, or exactly local celebrity, ask yourself a few tough questions.

Are you being smart, or just lazy?

"Borrowed equity" is the term used to describe the value of a celebrity spokesperson. The premise is if Endorser A wears Product B and drinks Product C, maybe consumers will destitution to, likewise. But borrowed equity is appropriate that—borrowed. It may grate off on the brand endorsed, but in the long run it belongs to the distinction.

In some cases the match between person and production is strategic, such as Jordan’s natural tie to Nike or Cosby’s comical personality for a fun product like Jell-O. That’s too the enclose for Wilfred Brimley’s grandfatherly tone for healthy Quaker Oats (PEP) and Dennis Haysbert’s august frame and booming voice for the "Good Hands People" at Allstate (ALL).

Original text: {news-link}

The Principal Financial Group’s Renee Schaaf talks touching principally good practices for open enrollment

By Karen E. Klein

Watch original video:

Smaller businesses are significantly less convenient than larger ones to be at hand health insurance, surveys (BusinessWeek, 7/2/08) show, but there are diminutive firms that offer comprehensive benefits and do so with excellence.

Renee Schaaf, vice-president of retirement and investor services for The Principal Financial Group (PFG), spoke recently to Smart Answers columnist Karen E. Klein about a national contest her firm sponsors to identify feeble and midsize companies that excel in employee benefits. She discussed the best practices for open enrollment that the winners have in common. Edited excerpts of their conversation follow.

The "open enrollment" period for many insurance packages is coming up. What is open enrollment?

This is the time, it typically lasts between two weeks to two months, when employees are given the opportunity to make changes to their benefits program in health, living beings, and disability insurance. Usually the insurance companies need to have the decisions in hand by Jan. 1.

What’s the most important thing that unimportant employers can answer the purpose during this time period?

Educating employees is critical. And I’m not talking happy about the benefits details, except in general. What was noteworthy in the winners of our litigate is that these small companies were sharing financial advice through how their company was faring on a frequent basis—all through the year. That gives employees a much better feel for how much they can anticipate in terms of benefits and raises at the period of the year.

Of course, it’s also important to offer a comprehensive education program hind part before the benefits and the choices that employees have to make. Best practices include using every possible medium, from face-to-face meetings to group meetings, offering make an impress materials and Web materials. One commencing practice emerging is to bring in personal guidance for the sake of employees in planning their privacy. And include spouses in the meetings. So you need to have them at multiple times, including during lunch and after hours, thus the whole family can be involved in these decisions that aspire to them all.

So much of the language of insurance benefits is jargon-filled. Isn’t it tough to even conceive the choices, let alone end between them?

Yes! It’s very important to simplify the language and express jargon into plain English. What we found is that employees are embarrassed to say that they don’cheek by jowl get words be pleased with deductible or co-payment, because they think they ought to know which all these terms mean.

Employers furthermore need to use the like terminology for all communication, so what is online, on paper, and in the plan documents all say the same thing. Ideally, you require employees to subsist talented to understand their options at a glance by synthesizing the information down into digestible chunks. Providing worksheets or spreadsheets, where employees can plug in their own personal information and calculate their benefits, is furthermore good.

Most employees opt for freedom from disease benefits, but studies show that many one or the other don’confidentially understand the need to belong to the retirement savings account or they put on’t want to see any of their take-home pay diverted into a pension plan. How can employers help cure that short-sightedness?

More companies are considering automatically deferring funds into their employees’ departure plans by making those plans "opt-out." That means employees are plan participants supposing that not they take the advancement to say they slip on’confidentially want to participate. What we’re seeing with that is most employees stay in the device, so there’s some acceptance.

Another occurrence that helps employees get started with retirement accounts is to set up a company matching account. That provides a worthy incentive.

Many employees are so challenged just doing their jobs and raising their families that it’s hard to get them to charm their behoof selection seriously. How do you countenance them not to make superficial decisions?

Some employees pretend to that choosing the maximum retirement deferral is always the best choice, when actually they should be thinking about where their deferrals are going and granting that they need to rebalance their funds from year to year. Also, their current vitality situation may have changed and they maybe need to make adjustments because a new infant was born or a spouse has a new medical condition.

This is where those employee meetings are so important, because that’s where you be possible to help people be apprised the difference in balancing short-term and long-term needs. Our 10 winners also reported that serving good food is critical in acquisition employees to attend the meetings. And they sent text messages to remind them to guard.

What around structure meetings mandatory?

Yes, some of our winners set out to the point where it’session mandatory that employees meet with HR or a benefits counselor or specialist. They don’familiarily retirement that to chance. And more bring in salaried financial counselors who will meet through employees in spite of set at liberty—it’s a favor—and discuss their needs. That’s a very effective model for when employees take care that their group is making that kind of commitment to their well-being, that’s a effectual retention and recruiting tool.

Original text: {news-link}

Funds of funds were supposed to be the safe choice for wealthy investors and big institutions. But they were leveraged beyond the max

By David Henry and Matthew Goldstein

Watch original video:

John Hersey

Hedge funds, already suffering from an ill-fated tenderness affair with leverage, are verdict themselves haunted by some other riddle. It turns gone out many so-called funds of hedge funds, portfolios through stakes in multiple hedge funds, also depended on borrowed money. Now, with lenders retracting credit, fund-of-funds managers are being forced to dump assets, putting further pressure on the hedge funds and the markets generally. It’s “a vicious ring,” says Kate Hollis, director of fund research at Standard & Poor’s (MHP).

As the great edifice of leverage crumbles, funds of funds are faring worse than hedge funds. They’re off 18.7% this year, vs. 15.5% for individual hedge funds. Among the funds of funds hit hard: some run by Fix Asset Management, Ontario Partners, and HRJ Capital, co-founded by dint of. former football star Ronnie Lott. All declined to comment for this romance.

Funds of funds were supposed to be the safer choice for high-net-worth individuals and big institutions. By spreading their bets across dozens of investments, managers assured clients they didn’t possess to worry about a blowup in any single portfolio. It was the sort of flawed diversification argument used to justify many speculative investments during the resound, including those notorious collateralized debt obligations stuffed by subprime mortgage securities. The pitch fueled explosive growth: By the extremity of 2007, funds of funds accounted instead of 43%, or $747 billion, of the hedge fund industry, up from 19%, or $103 billion, in 2001, according to Hedge Fund Research.

Roughly half of that world employed purchase. Some funds of funds borrowed directly from banks to pervert with money $2 of assets for every $1 of investors’ coin. Brokers, meanwhile, encouraged affluent customers to finance their fund-of-funds purchases on reliance. Big banks sold “first in importance protection products,” derivatives that supposedly guaranteed clients wouldn’t lose a cent of their initial investment—and the banks in effect used leverage to create those insurance policies.

The funds of funds were layering purchase immediately after purchase. They owned hedge funds already loaded up with offence, roughly $6 on this account that each $1 of capital. When credit seized up, the process began to reverse. “Once things institute to delever, everything contracts,” says Andrea S. Kramer, a lawyer at McDermott Will & Emery who represents hedge funds.

To foster themselves, in the same state big global banks as France’s BNP Paribas, KBC Group of Belgium, and the Royal Bank of Canada are now charging higher fees on loans they extended to funds of funds, or pulling the loans entirely. The tight credit is compelling fund-of-funds managers to sell their holdings, that is driving individual funds to dump stocks, bonds, and commodities.

The situation shows none sign of stabilizing. Consider CMA Global Hedge PCC, a $360 million resources of funds. The portfolio, which over the years used financing from JPMorgan Chase (JPM), Société Gébornérale, and HSBC (HBC), is currently relying on credit from Citigroup (C) . Its holdings—47 hedge funds—are down 11%. Add in leverage, which amplifies losses, and CMA Global is not upon 25%.

Wary of Citi charging more for the fund’s lend, conductor Sabby Mionis is trying to sell hedge fund stakes to reduce debt. But a number of the funds have suspended redemptions, making it tough. Mionis is now working on a plan to return some money to investors: “For the foreseeable futurity, leveraged funds of funds are dead.”

Original text: {news-link}

They’re pursuing MBAs to change the world, but first they’re forcing business schools to make changes in order to hold them

By Geoff Gloeckler

Watch the Video…

Watch original video:

Editor’s Note: This is an extended lection of a story in the Nov. 24 issue of BusinessWeek.

Sara Hochman, 27, has always been self-seeking in environmental issues, so it wasn’t much of a surprise that her first job on the outside of association was as an environmental consultant. But after a few years steady the job, she grew frustrated working with clients who didn’t have a clue over sustainability and didn’confidentially care to learn. "They simply weren’t partial," she says. Part of the problem, Hochman concluded, was that she wasn’t able to make the business sheathe because of sustainability. "I needed to beef up my affair skills," she says. So she decided to attend business school, in the end choosing the University of Chicago. Since enrolling last fall, she has immersed herself in green business activities—including co-chairing the Energy Club and vexation a new elective on renewable energy that was added at the urging of Hochman and fellow students.

As a member of Generation Y, Hochman is part of a demographic tsunami that will early be remaking duty schools on a grand scale, and the changes she helped dart at Chicago represent the leading edge of that transfiguration. Since first appearing in the workforce in 2002, members of this so-called Millennial Generation accept been praised and derided in equal measure—for their tech knowhow and idealism, their unrealistic procedure expectations, and their doting "helicopter" parents, who hover from hand to hand their kids obsessively. Beginning for the reason that a distil last year, the flow of Millennials into B-schools will become a flood this year and next, as the largeness of Gen Y begins entering the prime B-school age group of 26 to 28. When that happens, B-school determination never be the same. Think parents footing the bill as antidote to tuition, personalized programs, and office hours held in the virtual world of Second Life.

At the best MBA programs in the nation—including those featured in BusinessWeek’s 11th biennial ranking of the Top 30 B-Schools—the changes have already begun, starting with No.1, Chicago’s Booth School of Business. There, Hochman found an abundance of features seemingly tailor-made for Millennials, including a leadership position at the B-school’s chapter of Net Impact, a nonprofit focused on using business to change the world. Stanford (No. 6) and Yale (No. 24) have introduced new, customizable curriculums that allow MBAs to design their course load based on individual career paths. Chicago recently announced a similar curriculum change. And many persons schools, including Cornell (No. 11) and Notre Dame (No. 20), bear added sustainability electives, case studies calm entire sustainability programs.

At Harvard Business School (No. 2), professors are experimenting with virtual worlds. The career services department at Northwestern University’s Kellogg School of Management (No. 3) is turning to technology to reach students faster. And at the Tuck School of Business at Dartmouth (No. 12), small class sizes give students a more personal experience. Cam Marston, an expert in multigenerational relations, says Millennials will be screening business schools since features like these that appeal to their lifestyles and values, and schools that fail to proportion will be left aft. Says Marston: "They are going to make the schools work a lot harder."

Who are the Millennials, exactly? Born between 1980 and 2000 and 78 million strong, they are a generational bands that’s bigger than the infant. boomers. Politically galvanized, they are in some ways steady more influential, helping propel Barack Obama to the Presidency steady Nov. 4. Generalizations about them should, like completely generalizations, be applied with caution. But they probably individual attention and are used to getting information how they want it, at what time they want it. They are strong-willed, violent, optimistic, and eager to work. And, like Chicago’s Hochman, they oversight deeply approximately the world and its problems. "There is likewise much potential for this generation," says Marci Armstrong, associate dean of graduate programs at Southern Methodist University’session Cox School of Business (No. 18). "They’re going to change the world."

Original text: {news-link}