News round up: Microsoft, Nokia, Bank of England, Spain, Mortgage lending, Standard Life.
Nokia Corporation's (NYSE:NOK) future as an independent company is hanging in the balance and Microsoft Corporation (NASDAQ:MSFT) could be forced to rescue the business if chief executive Stephen Elop cannot resuscitate the group's smartphone business by the end of the year, analysts have warned. The Finnish mobile phone manufacturer announced 10,000 job cuts on Thursday and issued its second profits warning in nine weeks.
Nokia's (NOK1V:FH) shares dropped 18%, falling below the €2 mark for the first time since 1996, as it acted to stem massive losses by cutting a fifth of its handset workforce. A total of 40,000 jobs have gone at the company and its Nokia Siemens Networks joint venture since Elop joined in September 2010. With Nokia still unable to dent Apple and Samsung's dominance in the smartphone market, Elop all but admitted the date of Nokia's recovery was impossible to forecast, saying in the second profits warning since April that the intention was to return to profit "as soon as possible".
"Stephen Elop is running out of time," said Francisco Jeronimo at telecoms research firm IDC. "If Nokia doesn't grow by the end of this year they will be in a very dangerous position. Many people are saying Microsoft will acquire Nokia." Analyst Janardan Menon at broker Liberum Capital says: "A Microsoft takeover is within the realms of possibility. Microsoft needs its Windows strategy on smartphones and tablets to work quite desperately, and desperate requirements could result in desperate moves," writes the Guardian.
Bank of England
George Osborne unveiled a £140bn emergency scheme to try to avoid a second credit crunch caused by the on-going chaos in the Eurozone. The Bank of England is to offer money to high-street banks to kick-start mortgage and small business lending to prevent loans being rationed for many families and entrepreneurs, the Chancellor announced.
It comes after sharp rises in the costs of mortgages and other loans in recent months as banks struggle to raise money in the midst of the single currency crisis. Sir Mervyn King, the Bank of England Governor, said that the “industrialised world have thrown everything bar the kitchen sink” at the global economic meltdown but that even “bolder action” was now required, The Telegraph reports.
Spain's borrowing costs have surged to record highs and are perilously close to the point of no return, threatening a full-blown sovereign crisis unless the European Central Bank comes to the rescue. "We're facing maximum tension. The situation is unsustainable over time," said the country's finance minister Luis de Guindos.
Yields on 10-year Spanish bonds yields punched to almost 7%, above levels that triggered ECB intervention to back-stop Spain last November. "The ECB needs to intervene very quickly or it is game over," said Nicholas Spiro from Spiro Asset Management. "There is a whiff of capitulation in the air," according to The Telegraph.
Mortgage lending fell off a cliff in April, after the end of the stamp duty concession for first-time buyers, new figures show. The Council of Mortgage Lenders (CML) said the number of loans to home buyers fell by 30% between March and April to 36,000. The biggest fall was among loans to first-time buyers, with lending at around half the levels of the previous month at just 12,600.
The stamp duty holiday for anyone buying their first home for between £125,000 and £250,000 was withdrawn on March 24, because the Chancellor had deemed it “ineffective”. The CML’s figures confirm that a last minute rush to beat the deadline, precipitated last month’s slump, The Times says.
Insurance giant Standard Life has bolstered its management structure in preparation for a major move into emerging markets in Asia. David Nish, the group’s chief executive, said the changes would allow the business to target “exceptional opportunities” in the region. The group will also combine its UK and European businesses which are both facing economic challenges and increased regulation. Nathan Parnaby, a long-term employee of Standard Life, will become chief executive of a new division, Standard Life Asia and Emerging Markets.
Parnaby was head of the firm’s European business in 2010 and was then handed additional responsibility for the Asian business. The reorganisation marks the beginnings of a shift in Standard Life’s business model as it targets the increasing levels of personal wealth in China and India – and as markets in UK and in particular, Europe, look set to lose traction under the European sovereign crisis and increasing regulation in the form of Solvency II, The Scotsman reports.
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