World Business

From deflation to geopolitics, here are the market factors that could make investors wealth in 2009—or keep them up at night

By David Bogoslaw

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With the U.S. government determined to drive by violence virtually everything in its toolbox at the recession in hopes of minimizing the economic pain, it may be all but impossible to individual out any one policy element that started the recovery rolling. Indeed, in that place are such many influencing parts not oblique a little while ago in the economy—however the public perception may be that Bernanke, Paulson & Co. are spinning their wheels in lieu of moving the wagon forward—that it’s tempting against investors to throw up their hands and find a nice quiet place to hole up until the recruiting comes.

But you might be missing more opportunities to protect your portfolio or make some money. And that requires keeping your ear to the ground-work. BusinessWeek asked economists and investment strategists to identify five trends that carry watching in 2009 and that could arrange clues in regard to how to position your investing. portfolio.

Deflation clearly has the upper hand into the bargain self-complacency beneficial to the foreseeable future, and the Federal Reserve’s decision on Dec. 16 to knock down the Fed funds rate to a record low of zero to 0.25% drives home that fighting deflation is now the central bank’s priority.

What few people mention, however, is the potential benefits of deflation being of the class who antidote to U.S. consumers, starting with the plunge in energy costs and a discernible easing in interest rates. That may hurt people who thrive on investing. income boundary it’sitting more likely to unravel relief for individuals who still have jobs and companies looking to borrow or who want to refinance existing mortgages or other debt, says Dan Peirce , portfolio manager in the global asset allocation group at State Street Global Advisors (STT) in Boston.

That suggests some of the battered sectors in the equities emporium of the like kind being of the class who retailers, restaurants, and apparel chains may be able to beat place of traffic expectations in 2009, he says. If that’s your belief, Peirce points toward sector-oriented exchange-traded funds or mutual funds that focus upon consumer staples or even consumer discretionary stocks. Peirce says investors should not be dissuaded through quite the front-page headlines about the auto manufacturers, which are part of consumer discretionary group but account for a much smaller portion of the sector than they once did. Even some of the more diversified media companies that focus on advertising and broadcast operations may exist good bets in light of the beating they have taken, he adds.

Some strategists will tell you that as long as the deflation risk outweighs the potential for serious inflation, the bond market offers more attractive returns than equities. The real (inflation-adjusted) yields on 10- and 20-year Treasury Inflation-Protected Securities, or TIPS, compared with the nominal yields of regular Treasury notes of comparable maturity suggest that increase pleasure exist extraordinarily low over the next 10 to 20 years, says Peirce. While the TIPS mart has already priced in expectations of hugely negative inflation over the next two years, Peirce says his group doubts it will be that trenchant.

Although inflation probably won’confidentially subsist a credible denunciation again to the time when at least 2010, it will become a concern much sooner in the next expansion than it had been in each of the last three expansions, Dan Laufenberg, chief economist at Ameriprise Financial (AMP) in Minneapolis, predicted in a report published Dec. 19.

If inflation returns sooner than expected, the place to exist is in equities with exposure to resurrection commodity or asset prices, including energy and steel producers, says Hank Herrmann, chief executive at Waddell & Reed (WDR). Reducing your portfolio’s allocation to fixed income would also be a good idea before this inflation would exert one’s self yields higher and bond prices lower, he says.

Original text: http://www.businessweek.com/investor/content/dec2008/pi20081222_775899.htm?campaign_id=rss_null

Opportunity abounds in a mart forsaken by investors. Here’sitting a peek at some encouraging bond plays–from junk to bank loans, high-quality corporates, munis, and emerging markets

By Lewis Braham

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In the nearest five years someone will make a fortune in the durance market. That’s because bonds of almost every streak are extraordinarily of small account, with yields in the hollow digits for in the same state corporate issuers during the time that DirecTV (DTV) and power producer Mirant Americas Generation. But fortunes could even-handed as easily be preoccupied into the bargain the next few years. Bonds are so cheap, after all, inasmuch as of fears the economic mess be disposed generate record downgrades and defaults that adieu investors nursing huge losses.

In the worst confide in exigency since the Great Depression, investors be under the necessity fled to the safety of U.S. Treasuries—although they hardly appear to be a bargain with yields on five-year notes hovering around 1.4% and Washington borrowing hundreds of billions more to shore up the economy. Where are the opportunities? Almost everywhere, if you know how to pursuit. Here is our look at the bonds that hold the principally promise.

Once upon a time, bonds issued by blue-chip corporations yielded roughly a modest unit percentage point more than Treasuries. But panic in the credit markets has created unusual bargains, with the yield publish between corporates and Treasuries topping five points. “I can put together a fixed-income portfolio that yields 8% or 9% without a great quantity in the manner of [credit] risk,” boasts Tad Rivelle, co-manager of the Metropolitan West Total Return Fund (MWTRX), which has beaten 88% of peer funds over the past decade. Right now, roughly three-quarters of Rivelle’s fund is invested in AAA-rated bonds issued by companies such as General Electric (GE) and in mortgage-backed bonds from powers that be agencies Fannie Mae (FNM) and Freddie Mac (FRE). The two agencies have long carried an implicit federal guarantee, yet they now yield in excess of 7%. Rivelle also has been dabbling in the “jumbo aboriginal” area—pools of large mortgages made to wealthy borrowers with the highest credit ratings. These currently yield as much as 15%.

If you neglect less mortgage-bond exposure, consider instead a low-cost, high-quality corporate bond play such as the Vanguard Intermediate-Term Investment Grade Fund, what one. currently yields 7.3%.

Prior to the credit emergency, Derek Young was leery of junk bonds—lower-grade incorporated instruments—because the yields weren’t enough to offset the greater exposure to harm. But now the co-manager of the Fidelity Strategic Income Fund (FSICX) is adding to his position. “High-yield bonds were yielding only two percentage points more than Treasury bonds in 2007,” he says. “Now they’re yielding 15 percentage points more. So we’ve been looking for opportunities to buy back into the sector.” Today 28% of the permanent fund is in high-yields, including mining company Freeport-McMoran Copper & Gold (FCX) and natural gas producer Chesapeake Energy (CHK).

Original text: http://www.businessweek.com/magazine/content/08_52/b4114048560059.htm?campaign_id=rss_null

Top money managers pick stocks that ascertain by enumeration an offer stronghold in a brutally turbulent market

By Christopher Palmeri

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Polly Becker

These are days that bestow investors heartburn: market indexes divide in moiety; years of stock gains erased in months. Everywhere investors are seeking something safe, something familiar, the financial equivalent of a grilled cheese sandwich and tomato soup. We call them ease stocks.

To find them, BusinessWeek asked a number of money managers who outperformed the market in the by year to praise a company by a clean balance sheet, an easy-to-understand business, nay hidden financial time bombs, and good growth prospects.

On a whiteboard in Arthur Barry’s office is a list of stocks with prices he supposition would make them attractive buys. The problem is, they’re all under his price floor. In the past the co-manager of the $335 million Loomis Sayles Value fund estimated the sort of a company’s profits might be, looked at the stock’sitting lowest multiple of earnings, and considered buying shares when they neared that level. But his approach has become in greater numbers complicated. “All historical context has been broken,” Barry says. “In theory, you should buy everything, because they’re all poor. But you can’t buy everything.”

Now Barry has to value public funds relative to their peers. He’s well apprised many big pharmaceutical companies face an “earnings precipice” in 2010, when some lucrative drugs will rollicking time off patent and have to compete with generics. Yet he has zeroed in on Schering-Plough (SGP). Barry figures the company will earn at in the smallest degree $1.80 per quota in 2010. At 15, it trades for less than eight times those future earnings, unbecoming the shares of such rivals as Wyeth (WYE) and Bristol-Myers Squibb (BMY). Barry likes Schering-Plough’s lineup of new drugs to shape side effects of anesthesia and to prevent noble extraction clotting. And he’s a fan of Chief Executive Fred Hassan, who had a history of successful dealmaking and cost-cutting at Pharmacia (what one. he eventually sold to Pfizer (PFE)).

J. Michael Martin, who manages $250 a thousand thousand at Financial Advantage, finds comfort in fat dividends. Martin believes the recession will last longer than many people think and principal gains leave be hard to come by. But he figures dividends will clinch up in the place of Dow Chemical (DOW), what one. boasts a strong balance sheet and has been slashing costs aggressively. At a recent price of 18, its dividend is 8.5%.

The market evening party has brought many bears loudly of hibernation. Michael J. Cuggino, who runs the $3.4 billion Permanent Portfolio fund, holds everything from gold bullion to Swiss bonds. Going into the market slip, he had 35% of the money in Treasuries. He now thinks U.S. stocks are a buy. Among his purchases: Hewlett-Packard (HPQ), that is still racking up strong profit growth. The hoard is down because of fears tech spending will be cut, but Cuggino points to HP’session good management, cost-cutting initiatives, and pricing power. And, he says, “it’s taking market share from Dell (DELL).”

Comfort stocks are not limited to America. Rupal Bhansali, manager of the $1.2 billion MainStay International Equity fund, sleeps easier at night because she avoids big gambles. One of her most prominent one holdings is Tesco, a British retail giant that’s expanding overseas. Bhansali is most impressed by Tesco’s 17% return onward capital, double what it costs the company to borrow.

Longtime utility investor Donald A. Yacktman, co-manager of the $345 million Yacktman Funds, has always taken a comfort stock come, holding just 30 or so big brand-name companies. He has purchased more of his No. 1 holding, Coca-Cola (KO). Although the stock has lagged the broader market in recent years, Coke has still increased its earnings and dividends unwaveringly. Yacktman is pleased that 80% of Coke’s profits come from outside the U.S., often from countries to which place soft-drink competition is much less barbarous. “If nothing changes and the price drops,” he says, “purchase more of it.”

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WASHINGTON —

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Sales of existing homes plunged far more than expected last month as buyers recoiled from October’s financial wreckage on Wall Street. The middle sales price fell by the largest amount on enter.

The National Association of Realtors said Tuesday existing home sales vandalic 8.6 percent to an lasting a year rate of 4.49 million in November, from a downwardly revised pace of 4.91 million in October.

Sales had been expected to fall to a pace of 4.9 million units. according to Thomson Reuters.

The median sales price plunged 13.2 percent in November to $181,300, from $208,000 a year ago. That was the lowest price since February 2004, the biggest year-over-year very little on records going back to 1968 and most convenient the biggest drop since the Great Depression.

Lawrence Yun, the normally upbeat chief economist of the Realtors collection, found few positive spots in the month’s dismal data. But he did note that after prior stock market crashes home sales usually rebounded within a not many months.

“We hope that, similarly, the current slowdown in dwelling sales activity is a short-term marvel,” Yun said, noting that canaille in the real effects industry are “crossing our fingers” that the market will recover. Sales fell encompassing the inhabitants, with the largest drop - of 12 percent - in the Northeast.

Nationally, the Realtors assign places to estimates that sales of distressed properties made up 45 percent of all wealth sales in November.

There were 4.2 million unsold homes on the emporium in last month. At the current sales pacing, it would take 11.2 months to sell all the properties, matching a record set extreme head.

The glut is being driven by a massive wave of mortgage foreclosures. And until the inventory of homes falls to more regular levels, analysts say, the housing slump is likely to persist.

Original text: http://seattletimes.nwsource.com/html/businesstechnology/2008552325_aphomesales.html?syndication=rss

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A honest box was all that remained in the Legos section of a West Seattle toy store Saturday as the snow piled up outside.

By nightfall, Curious Kidstuff proprietor Ann Walker, whose 11-year-old shop also appeared to be selling out of board games and puzzles, marveled at the sudden turnaround in employment. A scarcely any weeks earlier, she had worried around having too many toys to sell given the housekeeping recession.

Along with other small, locally owned shops, Curious Kidstuff is benefiting from the uncommonly wintry pass between the wind and as last-minute Christmas shoppers look for close-to-home alternatives to regional malls. Bars and restaurants in Seattle’s densely populated neighborhoods say business is booming since them, too, though peradventure at some cost to downtown eateries.

“Saturday might acquire been the best day we’ve ever had, and we’re still busy,” Walker said. “I think people are leery of going far from home.”

As snow fell Sunday, pedestrians braved the icy sidewalks on Capitol Hill to shop and stand shivering in line for coffee at Espresso Vivace’session sidewalk bar.

At the nearby CD and DVD store Grüv, comptroller Jason Grimes said local residents with “hut heat” have been stopping by. “Everybody’s kind of banding together, and you’ve always got the weather to prattle about,” he said.

Seattle-based Bartell Drugs, which has 56 stores in King, Pierce and Snohomish counties, says it’s selling more “stocking stuffers” and other Christmas items than usual.

“I think people are trying to stay grapple to home while they do their shopping,” said Rebecca Siegmund, an assistant vice president of marketing. “What we have in stores is selling really well.”

For businesses benefiting from the weather, it couldn’t come at a better time: By all accounts, this year’s holiday shopping season is likely to act of turning up more of the weakest sales results in decades as shoppers try to lessen back their expenditure amid rising joblessness, shrinking 401(k)s and declining home values.

But the weather doesn’familiarily seem to exist creating additional spending money, precisely redistributing it. Malls in downtown Seattle and Bellevue say they have not been as busy as expected for this time of year, and downtown restaurants express they’ve noticed fewer office workers coming in notwithstanding lunch and dinner because of the weather.

“There are so few tribe working, and our lunch business is dependent on the neighborhood professionals,” said Tim Baker, director of operations and marketing beneficial to the Wild Ginger restaurant in downtown Seattle, which nevertheless reports a steady matter in downtown shoppers and hotel visitors.

“We’ve had more cancellations of Christmas parties and more have rescheduled for after Christmas,” added Ed Grandpre, general manager of the Oceanaire Seafood Room near Pacific Place in downtown Seattle. “Along with everyone else, we’re slow, and the weather’session playing a self-sufficient part of it.”

Original text: http://seattletimes.nwsource.com/html/nationworld/2008550408_retail23.html?syndication=rss

A controversy tied to a heavy road project deals a blow to Prime Minister Berisha’session promise to rid Albania of endemic corruption

By Besar Likmeta

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The track linking Albania and Kosovo stretches 234 kilometers, a mountainous, pot-holed coil connecting two of Europe’s poorest countries.

The go driving normally takes about seven hours, by the speedometer rarely topping 40.

“During the winter the track is a tough cookie to crack,” says Gjergj Erebara, a Tirana-based conductor and political commentator. “Parts of it are often icy, which makes it pretty dangerous considering that you are taking curves 800 meters up in the mountains.”

That is all expected to changed by the end of 2009, at the time that a new four-lane highway from Durres upon the body the Adriatic slide down hill into Kosovo is slated for completion.

Albania’s largest public-works plot in decades, the new road is expected to strengthen before that time deep ties (more than 90 percent of Kosovo’s population of 2 million is of Albanian descent) and ease travel for the hundreds of thousands of Kosovars who put athwart the border on summer holidays.

Analysts have dubbed it the “patriotic highway” traceable to the widely perceived political motive for the project, pointing to the lack of a feasibility examine into whether it will return the money invested. It was expected to be the complete gem amidst electoral assets for Albanian Prime Minister Sali Berisha’s right-wing co-partnership heading into next year’s parliamentary balloting. Instead it has turned into the regulation’s biggest headache.

In late November, following a 17-month investigation, Prosecutor General Ina Rama indicted Foreign Minister Lulzim Basha on charges that he abused his office in connection with the tender with respect to the highway. Prosecutors say the deal with American-Turkish consortium Bechtel-Enka to build the most challenging portion of the passage, 61 kilometers from Rreshen to Kalimash, has cost the abiding habitation hundreds of millions of euros.

Albania’s Supreme Court accepted the case, rejecting arguments by Basha’sitting lawyers and the body of executive officers that the prosecution is unconstitutional.

Rama was voted in by the current parliamentary majority after her predecessor was fired as being a poor showing in provision towards organized crime, but her corruption probes into senior officials have put off many of her onetime backers, including Berisha. The government has lashed back with a campaign many of its critics, including more U.S. and European Union officials, call unconstitutional.

Albania’s Transparency International ranking as the most numerous corrupt state in the Balkans notwithstanding, the abiding habitation’s highest officials have up till now remained formally uninjured. Basha is the first sitting minister to be indicted since Albania emerged from communist persuade in 1991.

The charges stem from his tenure as transport minister from 2005 to 2007. Prosecutors vindicate that Basha and his then-chief legal aide, Andi Toma, illegally favored Bechtel-Enka. They allege the minister allowed construction to begin before there was a perfected blueprint for the work and, in breach of Albanian law and regulations for public tenders, accepted a much higher price by means of work one than was charged on this account that similar projects.

The price tag for the Bechtel-Enka be in action, which covers a little more than a third of the highway’s full length, has leaped from 416 million euros in the initial contract to more than 1 billion euros, according to prosecution filings. Prosecution experts and the pass supreme auditing office say the Transport Ministry’s actions require to be paid Albanian taxpayers 114 very great number euros—232 million euros if the costs are calculated in comparison with sections of the road being built by the agency of means of other companies.

In 2006 and 2007 Bechtel-Enka registered a profit of more than 44 percent on the project, netting 67 million euros on work orders of 151 very great number euros.

Basha and Toma have denied any wrongdoing. Basha contends the charges against him were fabricated by the agency of opposition Socialist leader Edi Rama (no story to the chief prosecutor) and opponents of the public road out to sabotage the project. In a recent press conference he accused repugnance members of working on Serbia’s behalf to bustle the road link with Kosovo.

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As the outlook for 2009 worsens, tens of thousands of jobs could subsist axed in the British public and personal sectors, a cabinet minister tells The Independent

By Nigel Morris, Ben Russell and Alistair Dawber

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Britain faces an unemployment “bloodbath” in the new year with many tens of thousands of jobs axed in the public and private sectors, according to a cabinet minister. Senior body politic figures are braced for a dramatic lengthening in dole queues in the first quarter of 2009, as employers delay announcing redundancies until after Christmas.

Thousands of civil servants and town hall workers will share the pain as commonwealth efficiency savings bite, during the time that struggling retailers and manufacturing assiduity are heading for heavy redundancies.

The ranks of the idle will be swollen by up to 27,000 stick from Woolworths, which closes its last stores on 5 January, and 1,400 employees of the furniture retailer MFI, which shut last week. The Cabinet expects job losses to speed in the harsh trading terms of 2009. One cabinet member told The Independent: “We know there will be a bloodbath of do job-work cuts in January and February. A lot of companies are holding back till for Christmas.”

Contradicting saloon-bar wisdom, which says public jobs are safe, the notorious sector will not have being immune from waves of redundancies, with unions omen of more than 5,000 planned job losses among town hall workers alone. They could be the tip of the iceberg as councils face tough financial settlements from central government.

Oldham ministry is axing 543 jobs while Denbighshire council wants to cut 450 posts. Northumberland County Council is preparing to give out 800 employees with 510 going at neighbouring Newcastle City Council. There will be 400 staff cut in Peterborough and Aberdeen, 300 from Wolverhampton Council with a further 150 nearest year, up to 190 posts lost in Coventry and 100 in North Somerset. Other councils planning redundancies comprise Worcester (84), Amber Valley (72), Swindon (up to 50) and Ealing (40).

Elsewhere in the public sector up to 2,000 mainly white-collar posts will go at Transport for London.

Seventy hospital staff in Whitehaven, Cumbria, have corrupt their jobs and the league Unison is warning that NHS staff could be under threat from long-term spending cuts. Widespread redundancies are expected in the Civil Service, in what place union leaders fright nearly 10,000 jobs will custom in courts and the prison and probation services because of cuts at the Ministry of Justice. An estimated 3,500 in greater numbers will be axed to meet efficiency savings at HM Revenue and Customs.

The digit of people out of work stood at 1.86 million continue month and may have already passed two million.

The Federation of Small Businesses forecasts that 30,000 small firms could fold in 2009, with the loss of 160,000 jobs. Its spokesman, Stephen Alambritis, said: “It will be a very, very difficult year — there’sitting a foreboding here and there February and March in particular.”

Although transport is considered a able sector in a recession, that has not stopped National Express announcing plans to hut 300 posts. EWS, the Doncaster-based rail freight company, is in conference with rail harmony TSSA about axing 530 jobs.

Insolvency experts believe another 10 to 15 well-known sell in small quantities chains could follow Woolworths into the history books as shoppers rein in expenditure.

Speculation is rife that the music retailer Zavvi, fashion group The Officers Club and the sportswear exit JJB are title with regard to a financial crunch.

The UK’s two pharmaceutical giants, GlaxoSmithKline (GSK) and AstraZeneca have flagged up big redundancies. AstraZeneca said last month that the first of 250 manufacturing jobs will be lost nearest year, while GSK has said it will close pair factories with in the same proportion that manifold as 620 redundancies in Dartford and 200 in Barnard Castle.

Brian Strutton, the national secretary of the GMB, reported that branches up and down the people were reporting councils planning to cut jobs in 2009: “Reasons given go from the tightening of government grants to the credit crunch, to the Icelandic banks effect.”

Mark Serwotka, general secretary of the PCS union, which represents civil servants, declared: “Budget cuts, planned when the economy was in better shape, will not only result in the Government adding to the growing disused, but furthermore mine service lying-in at a time of principally need.”

Already 63,000 jobs have gone in the City of London, with more redundancies coming in the financial sector.

Abbey, which is now owned by Spain’s Banco Santander, has said that it will cut 1,900 UK jobs next year with Credit Suisse and HSBC expected to lose 1,150 positions in the first quarter.

Stephen Overell, the mate director of the Work Foundation think-tank, said short-lived workers and new staff had so far borne the brunt of job cuts. But he warned: “It is going to get a great quantity worse before there is any chance of the desired end of recovery.”

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After the collapse this weekend of Belgium’s ruling coalition, King Albert II is faced by naming an entirely new transition government

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Former Prime Minister Yves Leterme has taken himself out of the running to lead any new coalition after the resignation of his complete sway. He faces questions over his cabinet’s attempt to sell chiefly of Fortis, Belgium’s largest bank, at fire-sale prices.

After a turbulent weekend which saw the collapse of Belgium’session ruling coalition over a banking shame, King Albert II was faced with naming a transition government on Monday. Yves Leterme, who resigned Friday as prime minister, said Sunday that he wanted not any part of any new rule.

Leterme offered the resignation of his entire government utter on Friday amid questions over a bailout and sale of Fortis bank’s Belgian operations to a French shallow, BNP Paribas.

Fortis is Belgium’s largest bank, and it was imperfectly nationalized last autumn because of the credit acme. Now Leterme’s ministers are accused of trying to ease a cheap sale of Fortis to BNP Paribas at the expense of many jobs and the stakes of Belgian shareholders.

In particular, after a legal ruling ordered a postponement to the sale last week, Leterme’s right succor was accused of trying to block the decision. Belgian Justice Minister Jo Vandeurzen, announced he would rank down last Friday even before Leterme.

Bart Somers, chairman of the ruling Liberal party, before-mentioned the scandal was, “Shocking. This does not belong in the rule of law. A cornerstone of democracy has been put in risk.”

Leterme, from the Christian Democratic and Flemish party (CDV), denies any wrongdoing and says he will not seek to keep in pay his seat because he wants to concentrate on clearing his name. Two men in straight direction for his job have held it before. Jean Luc Dehaene, also from CDV, led Belgium for most of the 1990s, and Guy Verhofstadt, from the Flemish Liberals and Democrats (VLD), was Leterme’sitting predecessor considered in the state of prime minister.

After the recent credit crisis studiously sought Fortis to solicit a government bailout, France’s BNP Paribas said it was prepared to buy 75 percent of the bank’s Belgian operations. But stakeholders with near-worthless shares last week won a postponement in an appeals court, that said they should have been consulted prior to the deal.

Vandeurzen, the justice minister, complying after a report by the Supreme Court said the government had improperly tried to lift the appeals court’s decision.

Leterme has tendered his resignation to King Albert more than once in his brief and stormy time as prime minister. After coalition talks threatened to split Belgium in couple following its continue election in June 2007, Leterme forged a brittle, five-party coalition in March 2008. Belgium is culturally divided between its Flemish-speaking northern and French-speaking south.

The objection according to the sovereign, more observers say, will be to credit repaired ministers but keep the compact agreement intact. “It would be enough simply to change the prime minister and the minister of impartiality,” political analyst Herve de Ghellinck told European public broadcaster euronews. “If you take in other (parties), you’d be in possession of to re-negotiate the governmental affirmation, and that could be lengthy. But things should pick up pace with Leterme’s exit advertisement.”

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A bailout gives Infineon’s Qimonda one live room. But the once-thriving small piece industry in East Germany faces an uncertain future

By Jack Ewing

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Dresden is one of the great success stories of German reunification. After the fall of the Berlin Wall in 1989, the capital of the East German state of Saxony remade itself as the center of European semiconductor produce, becoming home to major facilities operated by U.S. chipmaker Advanced Micro Devices (AMD) as well as Munich-based Infineon Technologies (IFX). When a 1998 Time magazine quantifying adjective dubbed the portion "Silicon Saxony," locals embraced the label and even founded an organization by that part to promote industry interests.

But the mood in Silicon Saxony these days is anything but exuberant. On Dec. 21, Infineon’s separately listed Qimonda (QI) unit, the tract’sitting largest private employer, narrowly escaped bankruptcy when it received a rescue bale that could total more than $800 the masses. "We have achieved a breakthrough," Saxony’s Economic Affairs & Labor Minister Thomas Jurk related in announcing the deal.

The bailout includes a $208 million loan from the Saxony state government as well as $104 the great body of the people from Infineon, which holds 77% of Qimonda’s shares. A to a greater distance $140 million comes from each unidentified the usurer’s in Portugal, where Qimonda is expected to develop a research and development center. In addition, Germany’s founded on government and the Saxony state conduct are offering $390 million in loan guarantees.

It’s a greater reprieve for Qimonda’s 3,200 employees in the region and for thousands of other workers at nearby suppliers and research operations. Yet the long-term outlook for Dresden’session high-tech industry remains cloudy. "This may give a chance for Qimonda to sail through the tumultuous force but not guarantee the outcome," Nicolas Gaudois, UBS’s (UBS) London-based semiconductor algebraist, wrote in a research note on Dec. 22.

Qimonda’s New York-listed shares bounced more than 60% on the tidings, to about 49¢ apiece. But the dullard is far below its price of besides than $8 a year ago. Investors have good reasons to be spooked. In its most recent quarterly results, released without interruption July 24, Qimonda posted a $558 million net loss on only $534 million in sales. It’s burning through coin at a rate of as much as $420 the great body of the people for quarter.

At least Qimonda has company. It’sitting being buffeted by a global downturn in the semiconductor industry that has left almost all the players strapped.

Dresden’s status as a chipmaking excellent does not depend on Qimonda alone. AMD, based in Sunnyvale, Calif., is putting its manufacturing operations into a joint venture through Advanced Technology Investment, a vehicle owned by the emirate of Abu Dhabi. The venture, provisionally known viewed like the Foundry Co., will have its manufacturing heart in Dresden, and is investing $2.9 billion to upgrade one of its couple factories there. The company expects its 2,800-strong Dresden workforce to remain stable. Infineon employs about 2,000 people in Dresden, not counting Qimonda.

But if Qimonda doesn’confidentially survive, it would be a blow to Dresden’s image as a high-tech center. And it would lower the infrastructure that has grown up to serve the local semiconductor industry, including dozens of suppliers and research institutes as well at the same time that university programs to supply a qualified workforce. At the Technical University of Dresden alone, more than 5,000 students major in fields of the same nature to semiconductors or notice technology. Without Qimonda, which also conducts R&D in Dresden, the area would have not so much legitimacy like a so-called cluster of semiconductor expertise.

All of the world’s semiconductor makers are struggling amid a inhuman downturn. Industry sales will plunge 16.3%, to $219.2 billion, in 2009 after a 4.4% decline in 2008, consultancy Gartner (IT) estimates. Never before have chip sales fallen instead of two consecutive years.

But Qimonda is among the hardest hit because it makes so-called DRAM memory chips, which have be proper for so standardized that it is difficult for manufacturers to find a competitive superior situation other than price. "The DRAM market is a straight commodity. It’s all about acquirement your cost constitution equitable," says Malcolm Penn, CEO of British semiconductor consultancy Future Horizons.

Parent company Infineon, meanwhile, has been clobbered by means of dint of. the agency of the downturn in the auto industry, unit of its main customer groups. Slower shooting in the mobile-phone industry is also hurting Infineon, which supplies chips on this account that Apple’s (AAPL) iPhone, among other handsets. Those factors and the negative effects of Qimonda bumped Infineon to sixth from fifth place in the midst of global chipmakers, according to Gartner’s latest rankings.

Increasingly, Penn and other analysts say, a company’session ability to be rivals on price hangs on the willingness of local governments to offer support. Virtually all chip factories are subsidized in one tendency of action or another. In Korea, a consortium of state-owned and private banks are expected to arrange Hynix Semiconductor (HY9HQ) with about $600 million in new loans.

Now Qimonda is getting government heal, overmuch. But some local politicians worry that the bailout could set off a chain reaction of alms-seeking by local semiconductor suppliers and other industries. Neither government nor industry wants the region to become known as Subsidized Saxony.

Original text: http://rss.businessweek.com/~r/bw_rss/europeindex/~3/492500938/gb20081222_939565.htm

NEW YORK —

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Drugstore operator Walgreen Co. said Monday its profit fell 10 percent in its fiscal first quarter, short of Wall Street expectations, because of costs opening more than 200 unused stores.

The company said it plans to slow the rift of new supplies to save $500 million in response to the recession.

The Deerfield, Ill., gang uttered earned $408 million, or 41 cents per certain quantity, in the three months ended Nov. 30. That total fell short of analyst expectations, and compares with $456 million, or 46 cents per share, a year ago. Revenue grew 7 percent to $14.95 billion.

Analysts expected 46 cents per share and $15.08 billion in revenue, according to Thomson Reuters.

Walgreen said its selling and captain-general expenses grew 9 percent in the quarter as it opened 212 new stores, and profit margins dipped due to greater expense provisions.

Sales at its older supplies grew 1.7 percent, with prescription revenue in older stores growing 2.6 percent. Front-end revenue, or sales of nonprescription products, was below true pitch compared through last year, showing some resilience in a down economy.

The company said prescriptions filled grew 3.7 percent for the period of the quarter, while industry premises has showed falling prescriptions for its rivals. In total, 66 percent of Walgreen’session revenue came from direction sales.

At stores plain at least one year, prescriptions filled were roughly flat with ultimate year. However, besides customers filled 90-day prescriptions instead of 30-day orders, leading to adjusted growth of 1.5 percent.

Walgreen said community in its Prescription Savings Club grew more than 40 percent from the fourth quarter, and more than 30 percent of club members are just discovered customers. The savings club allows members to corrupt a 90-day supply of many general generic drugs for $12.

The program was created in late 2007 but was relaunched over the summer, and Walgreen aforesaid it has been much more aggressive in running promotions and advertising since that time.

The company also says flu shot demand is up “dramatically” this year, by more than 1.1 million vaccinations dispensed in the generally received flu season, compared with 440,000 in all of 2007.

In fiscal 2010, Walgreen said it inclination slow its fundamental store openings to a rate of 4.5 to 5 percent, with growth of 2.5 percent to 3 percent in fiscal 2011. In July the company said it would slow the pace of store openings down to 5 percent in 2011, from 8 percent. The reductions are expected to save the house a entire of $1 billion in annual spending.

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