'Industries' Archive
The Office of Thrift Supervision (OTS) announced on Wednesday that thrifts — consisting of some 830 savings and loan associations (S&Ls), savings banks, and cooperative banks — lost approximately $5.4 billion in the second quarter. It was one of the largest losses ever, second only to the $8.8 billion that thrifts lost in the fourth quarter of last year. The institutions lost a comparatively paltry $627 million in Q1.
On Tuesday, the FDIC released a report, entailing all banks and thrifts, revealing that Q2 deposits and earnings are down, and charged-off and noncurrent (more than 90 days past due) loans are at their highest levels in some 15 years. A total of 117 institutions are on its “Problem List.” The OTS said in its report that 17 of those are thrifts. (The main difference between thrifts and banks is that thrifts are mandated by law to have at least 65% of their loan portfolios invested in mortgages and consumer loans, making them more vulnerable to the vicissitudes of the housing and consumer markets.)
Of course, not all those banks and thrifts are ready to implode, and it’s still a far cry from the S&L crisis of the late eighties and early nineties, when more than 700 institutions failed. But last week, small Kansas-based Columbian Bank and Trust became the ninth bank this year to be closed by federal regulators. Of course, the most spectacular collapse so far in 2008 was that of one of the largest thrifts, IndyMac Bancorp, which was also one of the largest bank failures in US history.
Like the S&L Crisis, the current mess faced by thrifts has been fueled by risky real estate loans. In addition to the bottom-line losses they have endured, thrifts set aside $14 billion in the second quarter (more than 3.7% of average assets) to cover anticipated losses from bad mortgages and other loan-related investments.
Consolidation is a practical solution when the competitive squeeze gets put on an industry, and large pharmaceutical companies are predictably falling into the acquisitive suitor role in an effort to solve their woes, despite their quarry’s occasional reluctance to fall into line.
Prescription drugmaker King Pharmaceuticals has made public its $1.4 billion offer to purchase rival pain medication maker Alpharma. Though Alpharma has apparently rejected King’s proposal several times this summer, King is relentlessly bringing its offer into the limelight in an attempt to rally shareholder support for the deal.
Two other hostile takeover attempts have surfaced this summer — Roche’s bid for Genentech and BMS’ bid for ImClone. All three target companies — Alpharma, Genentech, and ImClone — have taken the role of the coy maiden, rejecting their suitors’ initial proposals but hinting that they may be available if the wooing is increased.
Despite Genentech’s initial rejection of Roche’s bid, the company is obviously looking for a higher offer and has outlined a new retention plan for its employees to ease tensions over the merger speculation. ImClone has stated that BMS’ offer is undervalued and is hemming over its pursual of other options. In the most recent case, Alpharma has stated that King’s offer is not in its best interest but that it would look at a higher proposal.
The synergies in this case are clear — King Pharmaceuticals and Alpharma have similar abuse-resistant pain medications up for FDA approval, as well as other compatible substances on the market and under development. King is likely hoping to head off future competition, in addition to solidifying its current operations, by buying Alpharma outright.
Alpharma has taken the tone of refusal over the deal, but with the Genentech and ImClone deals still up in the air, one has to wonder if Alpharma is also playing hard-to-get. In all three cases, there is a real possibility that the suitors could become more agressive in their takeover attempts, despite the receiving companies’ wishes. There is also the possibility that new acquisitive gents will step onto the scene.
When the mercury dips below 95 degrees here in Central Texas it can only mean one thing: The back-to-school shopping season is upon us. Actually, yesterday was the first day of school for my daughters, while parents in the Northeast and other parts of the country still have a week or so before the first bell rings in a new school year.
With an estimated $51 billion in back-to-school spending on the line, retailers are competing fiercely to capture as many of those dollars as possible. Given the hobbled state of the US economy, it comes as no surprise to learn that back-to-school (grades K-12) spending is expected to rise only modestly this year vs. last, while back-to-college spending will actually drop an estimated seven percent, from an average of $641.56 per student in 2007 to about $599 this year, according to the National Retail Federation’s 2008 Back to School Consumer Intentions and Actions Survey.
With the turmoil in the student loan industry and sky-high tuition bills it’s no wonder that parents of college bound students are spooked. But they’re not alone. Parents of younger kids are searching for bargains like never before to outfit their children for school. Indeed, about a fifth of thrifty parents nationwide report having set aside a portion of their tax rebate checks to cover back-to-school purchases, says the NRF.
One bright spot in the back-to-school outlook is electronics spending. While purchases of apparel, shoes, and school supplies are expected to rise only modestly this year over last, spending on computers and (gasp!) cell phones for kids are expected to enjoy double digit increases. That’s good news for chains like Best Buy, which was already outperforming its competitors and retailers in other categories prior to the back-to-school rush. (Wal-Mart is also aggressively courting the electronics shoppers with deals on lap tops, etc.)
Speaking of the back-to-school rush, while the NRF study reports that about 45% of parents will begin shopping at least three weeks before school starts, the majority of shoppers will opt for a more last-minute approach. My family could be found a mere 48 hours before school began combing the aisles of Target, OfficeMax, and The Gap frantically checking items off our school supply lists. Both by procrastinating and visiting discount and office supply chains we were fairly typical back-to-school shoppers: 73 percent of consumers will visit discount stores, such as Target and Wal-Mart, for back-to-school supplies while more than 40 percent will shop at office supply stores.
For those who’ve yet to begin their back-to-school shopping, you’ve got company. Nearly 4% of us begin shopping the week school starts, while about 2% wait until after the first bell has rung.
ER docs and vampires take note: Scientists have figured out how to turn embryonic stem cells into human blood.
In a study published in the (aptly named) journal Blood last week, researchers at a company called Advanced Cell Technology tell how exposing developing stem cells to a combination of proteins coaxed them into becoming red blood cells. The process is not ready for prime time: It’s way too expensive for mass production, for one thing, and it’s also not clear that the blood produced with the current process would be transfusable. But the breakthrough — which could potentially eliminate the prospect of blood shortages (not to mention the unpleasantness of donating blood) — nevertheless represents a significant technical success in the beleaguered field of US stem cell research.
US researchers have largely been denied federal funding for embryonic stem cell research since President Bush’s 2001 executive order limited funding to existing stem cell lines. And though state and private funding have taken up some of the slack by bankrolling laboratory and animal research in the field, very few are willing to take the next risky step of funding clinical research (that is, research in human subjects).
Nobody knows that trouble better than Advanced Cell Technology, which despite its recent success with the blood study and others in the area of age-related macular degeneration, is just about broke. Its first-quarter report for 2008 included a financial warning indicating it would require additional cash from somewhere to keep operating. Perhaps the company will find it, or at least be able to hold on until a new president lifts the ban that is impeding medical advancement in the field.
Wanna be one of the guys? Belly up to the bar? Patronize your local pub? Coors is courting the ladies. Yep, despite women’s sadly inadequate belching talents and less rabid devotion to football (American-style, or soccer, if you live on the other side of the Atlantic) as their gender counterparts, Coors, among others, is aiming at the ladies.
Coors is not the first brewer to hit upon this supposedly obvious idea to ramp up sales — after all, women are half the population. Interbrew (the Belgian brewery that merged with Brazil’s AmBev in 2004 to become InBev) tried a cherry-flavored concoction called Kreik. Launched in 2004, it was a disaster. Then there are all the craft brewers, whose seasonal beers are often made using the literal fruits of the harvest, who encourage the ladies to tip a few. UK-based Diageo is pushing its Guinness Red by advertising it as (listen up, women) tasting sweeter and smelling less strong than its traditional Guinness.
Trouble is, brewers never quite know how to market the stuff. Do they go with the line that women want to join men in their appreciation of the foam-laden amber liquid (but then, why make separate products?); or do they, as they are trying this time around, offer a “special brew just for you,” which runs the risk of making the companies look like they’re patronizing women? After all, today’s women are the daughters and granddaughters of Rosie, the Riveter, in the workforce in ever greater numbers; they make up more than half the enrollment in medical and law schools; they buy their own automobiles and houses; they even play professional football. Who says women need frilly (dare I say it?) paper-parasol-embellished beers?
Let us digress a moment to speak to women and beer. A few telling facts: 4,000 years ago, the master brewers in Mesopotamia were women. They had a beer goddess. In ancient Babylon, the brewers were designated as priestesses. Zip up a little closer in time to today and we see that until the end of the 1700s, nearly every cottage in the English countryside brewed its own beer. The brewers? The women of the cottages (thus, the term “ale wives”). Eventually, the best of these cottage/home brewery operations became “public houses” or pubs. When traveling through her realm, Queen Elizabeth I sent couriers ahead to taste the local ale. If it wasn’t up to Lizzie’s standards, a shipment of a more pleasing-to-the royal-pallet libation was sent out to her from London.
But let us step out of the Wayback Machine and return to 2008. Beer sales in the UK are sagging (they fell 4.5 % in the second quarter). In the US, they have increased some of late (up 1.9% in the first half as compared to the first half of last year). But 1.9% isn’t enough to make brewers dance atop their oasts.
Coors has just this year created an operation (code-named Eve) devoted exclusively to the development of beer brands and marketing techniques that appeal to women. Not quite ready with an actual product yet, Coors has begun encouraging pub owners to push its new-to-the-UK-market Blue Moon product “with touches like serving it with an orange slice to accentuate its fruity taste.” Some pubs are coating the orange slices with brown sugar. (It’s enough to rouse the envy of Martha Stewart, these chi-chi touches.)
Back in the good old USA, MillerCoors (a joint venture between UK-based SABMiller and Molson Coors), has come up with MGD 64, the lowest calorie beer ever made for the US market, at 64 calories per 12-ounce serving. (By comparison its standard Miller Genuine Draft has 143 calories per 12-ounce serving.) And we all know, don’t we ladies, that beer is more fattening. (Remember low-carb beer?)
To further its push to females, MGD 64 is being promoted in Seattle and Portland via a clothes-hanger campaign. Dry cleaners in those cities will distribute hangers with an attached message that touts the beer’s 64 calories as “a perfect fit” in order to “exclusively reach adult female consumers in the privacy of their homes.” Why Seattle and Portland women are the lucky recipients of these ad-festooned hangers is not clear. Suffice it to say, it (and the whole clothes-hanger idea) was some enthusiastic marketing decision.
If the coat hangers — I’m not even going near the Mommie Dearest associations — and Coors’ Eve unit (described as “designed to create a world where women love beer as much as they love shoes”) are examples of modern, enlightened, and revenue-enhancing thought, then the boys in the executive suites have no clue beer-wise, regarding a salable answer to Freud’s question, “What do women want?”
Freud, by the way, had no decent answers either.