News in Review

Introducing Microhoo?

Microsoft’s Corp.’s assault on search engine leader Google Inc. took a major step forward when U.S. and European regulators gave the software company’s partnership with Yahoo! a green light. This will mean Bing powers the natural search results for Yahoo!, in turn handling advertising for Bing.
An independent marketing agency revealed in its top 10 predictions that the search landscape that would be a two-horse race by the end of the year, drawing attention to “Microhoo.”

Microsoft and Yahoo! finalized their tie-up in early December, shortly after the competition regulators in Canada and Australia approved the deal.  The UK-based independent marketing agency, Greenlight said in a statement it expected other countries to follow suit, paving the way to integration before the year is out.  

“Having pledged 5 to 10 percent of their operating profits ($22.5 billion in 2008) to promoting Bing over the next 5 years, Microsoft has a good chance of increasing Bing’s market share over the next year (much as they have in the U.S.),” says Adam Bunn, head of SEO at Greenlight.  “That could make ‘Microhoo’ worth paying much more attention to from an SEO perspective,” says Bunn.

Mixed signs for an economic recovery

White House economic adviser Christina Romer said on Wednesday that the U.S. employment landscape looks stable, with job growth expected by spring.
Speaking on ABC’s Good Morning America program, Romer also said she believes there is bipartisan support in Congress to preserve jobs by providing new assistance to state governments struggling with yawning budget deficits.

President Barack Obama has made job creation his top priority in 2010 in a bid to address public anxiety about high unemployment and prospects for a slow economic recovery. “Right now the employment numbers look basically stable,” Romer said, days after the U.S. jobless rate for January fell to a five-month low of 9.7 percent, just below significant 10 percent point.
 
“We think we’re going to see positive job growth by spring,” she told ABC.

More recently, however, Democrats in Congress, led by Senate Majority Leader Harry Reid, have unveiled a jobs bill that relies on tax cuts to drive employment growth. The approach has been criticized in some quarters as being too small to aid job growth and lacking in assistance for state governments that are trimming payrolls to cope with fiscal problems.

Despite signals of a recovering job market, the number of U.S. workers filing new applications for unemployment insurance unexpectedly surged at the end of the last month. Meanwhile, producer prices increased sharply in January, raising potential hurdles for the economic recovery.
Initial claims for state unemployment benefits increased from a starling 31,000 to 473,000, the Labor Department said earlier this month. That compared to market expectations for 430,000.

Another report from the department showed prices paid at the farm and factory gate rose a faster than expected 1.4 percent from December after a 0.4 percent gain in December as higher gasoline prices and unusually cold temperatures helped boost energy costs.

“When you have PPI moving up and still no progress in the jobs situation, that doesn’t bode well for continued improvement in equity prices,” said Alan Lancz, president at Alan B. Lancz & Associates Inc. in Toledo, Ohio.

U.S. stock index futures added to losses after jobless claims and producer price data, while government debt prices rose. The employment data is expected to be released the first week of March.

Kraft revenue falls short but sees Cadbury boost

Kraft Foods Inc.’s quarterly earnings fell short of Wall Street expectations, but promises long-term growth with its recent acquisition of British chocolatier Cadbury Plc. Last month, Kraft reached a deal to buy Cadbury and create the world’s largest confectioner.

Investors are still waiting to see how the deal boosts Kraft’s growth, especially since top Kraft investor Warren Buffett had opposed the transaction. At the fore of Kraft’s earnings report was its recent acquisition of British candy maker, Cadbury.

In one sign of the added cost of the deal, the largest North American food maker said the related sale of its frozen pizza business to Nestle would cut 5 cents a share from earnings annually. The maker of Oreo cookies and Velveeta cheese said fourth-quarter earnings rose to $710 million, or 48 cents a share, compared with $178 million, or 12 cents a share, a year earlier, which included costs tied to Kraft’s restructuring program. Kraft maintains an optimistic outlook, however.

“As a combined entity, we are well positioned to deliver top-tier performance and accelerate our long-term growth,” said Kraft CEO Irene Rosenfeld in an interview with Forbes.

EU suggests extra Greek deficit cuts will be needed

European ministers told the debt-laden Greece that it will need to halt its legacy of free-spending and reinforce big cuts to calm “irrational” financial markets.

At a European Union meeting earlier last month, finance ministers from Germany, Austria and Sweden led the charge, with Germany’s deputy finance minister saying Greece should mimic Ireland and Latvia, both of which are slashing spending and wages savagely. Recent slashes to wages, however, caused a strike with the people in Greece. Although the Greek Prime Minister was publicly applauded when he openly admitted the extent of corruption, nepotism, tax evasion and inefficiency, many question his ability to lead and reinforce such significant change to the regime.

Greece is the first country in 11 years of the European monetary union to require a political pledge of support, as fears over its debt sparked a market attack that has dented the euro and lifted bond yields, making debt servicing even more challenging.

Massive global car recall

Honda Motor Co. added another 437,000 vehicles to its 15-month global recall for faulty airbags in the latest quality problem to hit a Japanese automaker. According to recent reports, the company will replace the driver’s side air bag inflator on the cars because they can deploy with too much pressure, causing the inflator to rupture and harm or kill the driver.

Japan’s No. 2 automaker originally announced the recall to the U.S. National Highway Traffic safety Administration in November 2008 and the total number of vehicles recalled since then is approaching 1 million. Approximately 378,000 cars in the U.S., some 41,000 cars in Canada and 17,000 cars in Japan, Australia and other parts of Asia have been recalled. The North American recall was announced Tuesday, followed by last month’s recall in Asia.

Honda’s announcement comes at a time of increased attention on automotive recalls, particularly the latest string of problems with Toyota Motor Corp.  Last month, Toyota said it would recall more than 440,000 of its flagship 2010 Prius and other hybrids due to a sticky petal issue.

Sports could be battleground for Comcast/NBC deal

It’s official. The Congressional Research Service has given the green light for the Comcast/NBC deal. Sports programming, a must-have for U.S. cable operators, could end up being the center of a battle between Comcast, NBC Universal and the companies, now that regulators have announced the joint venture is a go.

However, smaller cable companies fear that the top U.S. cable operator will jack up the fees for its sports channels, said Matthew Polka, president of the American Cable Association. In particular, Polka wants his members to be charged the same carriage fees for Comcast-owned channels as Comcast does.

With sports programming among the most expensive to produce, largely because of payments to the leagues, Polka worried aloud that costs could go up if professional and college sports sought to play Comcast’s Versus off against ESPN in negotiations.

“I can tell you that the leagues are going to charge even more,” he said.

Comcast, which declined to comment, owns the sports channel Versus and the Golf Channel.

Both broadcasters argued, however, the deal would benefit the end consumer.

China not giving into U.S. currency pressure

President Barack Obama has vowed to address the currency rates with economic partners, such as China, in effort to get tougher on trade.
A senior Chinese official said, however, that China would not bow to pressure from the United States to revalue its currency, which many observers believe is kept at an artificially low level to give China an unfair advantage in trades, according to a report in the New York Times.

The official, Ma Zhaoxu, a Foreign Ministry spokesman, said at a regular news conference here that “wrongful accusations and pressure will not help solve this issue.” Mr. Ma was reacting to remarks on trade that Mr. Obama made when he met with Democratic senators in Washington.

Mr. Obama stopped short of saying China manipulates its currency, but his words on China’s economic policies were harsh—the United States, he said, has “to make sure our goods are not artificially inflated in price and their goods are not artificially deflated in price; that puts us at a huge competitive disadvantage.”

The sharp exchange over China’s currency is only the latest symptom of rising tensions between Sino-American relations. Internet censorship, cyber attacks directed at American companies, arms sales to Taiwan and the possible White House visit with the Dalai Lama to Washington have been targeted as points of conflict.

Meanwhile, China has surpassed the United States, becoming now the world’s top exporter.

Obama to freeze domestic spending

Under pressure from deficit hawks, President Barack Obama will put a three-year freeze on domestic spending in his 2011 budget that would save $250 billion by 2020, according to officials.

Details were fleshed out in Obama’s State of the Union address on February 1, when he unveiled his second budget. Obama is under fire for a record deficit and has called for bipartisan congressional committee to consider spending cuts and tax increases to improve the country’s fiscal outlook.

After the Massachusetts election of a Republican for Senate seat long held by the late Edward Kennedy, Democrats are worried it may be a sign for congressional elections in the fall.
 
U.S. firm buys former Canadian printing powerhouse

World Color Press Inc., the Montreal-based printing giant formerly known as Quebecor World, has reached a deal with Quad/Graphics Inc., to merge the two companies with over 30,000 employees.

Quad/Graphics Inc., is currently the largest privately held printer in the United States but plans to go public in connection with the World Color takeover.
World Color Press is the publicly traded company formed after the restructuring of the former Quebecor printing business under court protection from its creditors.

As estimated value of the merger has not yet been released by either of the companies, however, each share of World Color will be converted into a number class A common shares of Quad/Graphics at a ratio that has yet to be determined.

Apple’s golden touch

The highly-anticipated introduction of a tablet computer has arrived.
 
Apple launched its newest product—a tablet—will do to magazines and newspapers what the iTouch did for music.

Nearly all media companies have run around the concept of integrating the print and video content on the Web and giving it away for free, meanwhile they watched as customers drift away as a result.

Observers of the tablet say it will provide a new way for companies charge for all that content. By marrying its famously slick software and sexy designs with the iTunes payment system, Apple could create a way for media companies to shift the business model—and consumer attitudes of the digital era.

Now, magazine publishers are already plotted schemes to use Apple’s iPad as a vehicle to deliver its digital product.

Google in middle of U.S.-China quarrel

China widened its attack against U.S. criticisms of Internet censorship, raising the stakes in a dispute that has put Google in the middle of a political battle.

China has defended its curbs on the Internet nearly two weeks after the world’s biggest search engine provider threatened to shut down its Google.cn site after a severe hacking attack from within China.

The dispute could narrow room for Beijing and Washington to back down quietly and focus on other disputes such as trade, currency and human rights.

Obama 2010 budget projects new deficit

President Barack Obama projected the U.S. budget deficit would soar to a new record in 2010, challenging his push for fiscal responsibility while driving to defeat double-digit unemployment.

Dubbed an old-style liberal tax-and-spender by his Republican opponents, Obama is under pressure to convince investors and big creditors like China that he has a credible plan to control the country’s deficit and debt over time.

While maintaining policies this year aimed at protecting a still-fragile economic recovery, in common with other major industrial nations, Obama will save money by curbing 120 federal projects, including a powerfully symbolic mission to return to the moon, but invest more in education and research.
Initial market reaction was muted and analysts were surveying the numbers with a healthy dose of skepticism.

The budget incorporates healthcare legislation before lawmakers. But an administration official told Reuters $646 billion in projected revenue from a controversial cap-and-trade climate change bill had been dropped from the budget, implying the White House is doubtful the measures will pass Congress.

Obama previewed some of these steps in his State of the Union address, including letting tax cuts lapse for affluent Americans, a fee on big banks to recoup losses on a taxpayer bailout during the 2008 financial crisis, and a three-year freeze on domestic spending outside national security.

Obama pitches economic plan

Shadowed by gloomy budget forecasts, President Barack Obama takes his economic message on the road today to seek American support as he takes aim on unemployment and high debt. According to a speech excerpt released by the White House, he has said: “I think we should make it easier for them to open their doors, expand their operations, and hire more workers.”

During the President’s visit to Nashua, New Hampshire, for an event that will feature a “town hall” question and answer session he will outline the plan in more detail.

The trip comes as Obama seeks to rebound from political setbacks and a drop in his popularity among middle-class voters anxious over the economy and wary of parts of his agenda, such as the push for a healthcare overhaul.

New Hampshire, a northeastern state known for fiscal conservatism, is next to Massachusetts, where a Republican handed Obama’s Democrats an embarrassing defeat last month in a pivotal Senate race.

Earlier this month, Obama sent Congress a $3.8 trillion budget for the 2011 fiscal year that begins on October 1. The document painted a bleak fiscal picture, prompting Republicans to accuse Obama of pursuing big-spending, fiscally reckless policies.

The White House counters that Obama inherited enormous deficits and a deep recession from the Bush administration and had to try to revive the economy with a large stimulus package when he took office over a year ago.

AOL reports profit but subscribers dwindling

AOL Inc. surprised Wall Street’s revenue expectations as it posted a quarterly profit even though the weak advertising market and the Internet company’s subscriber base has dwindled from a year ago.

AOL, which became an independent company once again in December after former parent Time Warner Inc. spun it off, reported a $1.4 million net income for the fourth quarter, or a penny a share. This compares with a loss of $1.9 billion, or $18.52 a share, a year ago when the company took a $2.2 billion charge.

The latest quarter’s earnings were hit by restructuring and other costs of around $110 million, or 70 cents per share. Revenue fell 17 percent to $809.7 million as it lost subscribers in its dial-up access business, and earned less revenue per search query in its online advertising business.

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