Citigroup Inc.'s Indian American chief executive Vikram Pandit and chairman Win Bischoff would forego bonuses for 2008, the ailing banking giant announced as it formalised its bailout agreement with the US government.
Bonuses for other top executives will be "reduced substantially," Pandit said in a memo to Citigroup employees Wednesday.
Citigroup has received $45 billion in federal capital infusions and a government-financed arrangement to insulate it from hundreds of billions of dollars in potential losses after the bank lost three-quarters of its market value.
"The harsh realities of 2008, primarily our earnings results, mean that our bonus pool is dramatically lower," Pandit said.
Citigroup, the biggest recipient of US bailout funds, completed an agreement for a $20 billion government investment, Pandit said in the memo. That was on top of an earlier $25 billion and a US guarantee on $306 billion in troubled assets.
Pandit is cutting 52,000 jobs worldwide after four straight quarters of losses tied to bad loans and failed investments with the last quarter alone accounting for a loss of 2.8 billion dollars.
Citigroup expects "major challenges" to continue into 2009, Pandit said, describing the proposed actions as part of a major overhaul of executive compensation to confront the problems for the company and banking sector.
The new plan may also include "clawbacks" to "recoup executive compensation that over time proves to be based on inaccurate financial or other information," according to the memo.
"The most senior leaders should be affected the most," Pandit said. "Win and I believe this is fair, in light of the challenges of the year and the need for compensation elsewhere in the organization."
The memo said bonuses for the "senior leadership committee "will be reduced substantially." Members of Citi's executive committee would see bonuses "cut even more" and in some cases given as deferred compensation.
Pandit said the principles to guide the company's executive pay would include "pay for performance" and "meritocracy," adding that "compensation will vary based on each person's performance - again, relative to the overall performance of the company."
Severance compensation will be subject to "significant new limitations" for executives and that the top five executives "no longer can receive severance," said Pandit, who became Citigroup CEO in December 2007.
Those affected executives are Pandit, Bischoff, Chief Financial Officer Gary Crittenden and Vice Chairmen Lewis Kaden and Stephen Volk.
Pandit noted that former treasury secretary Robert Rubin, an advisor to the company who has no direct management responsibilities, "has elected to take no bonus for the second consecutive year."
"The overall objective for all of us at Citi is to build shareholder value, serve our clients and customers superbly well and create growth opportunities for our employees," he said.
"Adherence to the principles of compensation outlined above is fundamental to achieving these goals."
Pandit, 51, received 1 million shares from Citigroup as part of a "sign-on" bonus in January, in addition to a $2.5 million "retention equity award," the company said in March. He was paid $250,000 in salary in 2007.
Pandit got $165 million from Citigroup in 2007 when he sold Old Lane Partners LP, the hedge fund he co-founded and ran. Citigroup closed New York-based Old Lane in June and took a $202 million writedown on its $800 million investment.
Source: Agencies
Thursday, January 1, 2009
IT sector likely to grow 31.4 percent in '09
The domestic IT- ITeS market is likely to grow 13.4% in 2009, the slowest since 2003, as per market research firm IDC India. The market which includes hardware, software and services, grew 17.3% in 2008 to generate revenue worth Rs 1,01,031 crore.
India is likely to witness a slower growth in the coming five years, IDC said. The domestic IT-ITeS market is expected to record an average growth rate of 16.4% in 2009-13, against 24.3% during 2003-08. The slower growth will see enhanced competition, leading to a change in strategy and continuous market re-alignment on the part of players, it said.
"The issues in the short run, more pronounced throughout 2009, will be productivity, cost savings and customer retention. This would eventually pave way for innovative services by leveraging the existing infrastructure and aligning it with emerging opportunities," IDC India country manager Kapil Dev Singh.
The research firm said global IT-ITeS market is expected to grow only 2.6% in 2009, against 5% in 2008 and much slower than 7% in 2007. Despite a lower growth rate, India will continue to be the fastest-growing IT market in Asia Pacific, followed by China, Vietnam, Thailand and Philippines.
In the domestic market, the product categories expected to grow faster than the average include collaborative applications, storage software, system and network management software. Within IT services, segments likely to outgrow the average include desktop management, information systems outsourcing, network management and application management. Solutions such as virtualisation, unified communications and business continuity services will also grow faster on account of enterprises' focus on cost savings.
Among emerging technologies, cloud computing services such as software as a service (SaaS) will be tested and adopted on a larger scale and will perform even better than in 2008. IDC said the economic slowdown will further increase and accelerate the adoption of outsourcing services by the Indian enterprises, while consumer spending on IT will moderate. There will also be increased consolidation among outsourcing vendors.
Source: Economic Times
India is likely to witness a slower growth in the coming five years, IDC said. The domestic IT-ITeS market is expected to record an average growth rate of 16.4% in 2009-13, against 24.3% during 2003-08. The slower growth will see enhanced competition, leading to a change in strategy and continuous market re-alignment on the part of players, it said.
"The issues in the short run, more pronounced throughout 2009, will be productivity, cost savings and customer retention. This would eventually pave way for innovative services by leveraging the existing infrastructure and aligning it with emerging opportunities," IDC India country manager Kapil Dev Singh.
The research firm said global IT-ITeS market is expected to grow only 2.6% in 2009, against 5% in 2008 and much slower than 7% in 2007. Despite a lower growth rate, India will continue to be the fastest-growing IT market in Asia Pacific, followed by China, Vietnam, Thailand and Philippines.
In the domestic market, the product categories expected to grow faster than the average include collaborative applications, storage software, system and network management software. Within IT services, segments likely to outgrow the average include desktop management, information systems outsourcing, network management and application management. Solutions such as virtualisation, unified communications and business continuity services will also grow faster on account of enterprises' focus on cost savings.
Among emerging technologies, cloud computing services such as software as a service (SaaS) will be tested and adopted on a larger scale and will perform even better than in 2008. IDC said the economic slowdown will further increase and accelerate the adoption of outsourcing services by the Indian enterprises, while consumer spending on IT will moderate. There will also be increased consolidation among outsourcing vendors.
Source: Economic Times
Will 2009 be worst year for US credit card companies?
US credit card companies have little to celebrate as many analysts brace for 2009 to be one of the worst years on record for consumer credit. Losses for the industry could top $70 billion, but it is hard to predict how bad the pain will be.
US consumers have never before been so deeply in debt. There was nearly $1 trillion of credit and charge card debt outstanding as of October, up more than 25 percent since 2003, according to the US Federal Reserve. That is in addition to $10.54 trillion in mortgage debt.
Unemployment, already at 15-year highs, is expected to rise to its highest levels since the early 1980s, when credit cards were not nearly as widespread. In short, there's more debt than ever and fewer people are able to pay it. "In many ways, we're in uncharted territory," said John Williams, an analyst at Macquarie Research.
Major credit losses are big trouble for Citigroup Inc, Bank of America, and other card issuers such as American Express Co and Discover Financial Services, which have seen their shares lose up to 80 percent of their value in 2008. The United States is not standing idly by.
Citigroup received $45 billion of taxpayers' money in October and November. Bank of America has received $25 billion. American Express, which became a bank holding company, got approval last week to receive $3.4 billion from the taxpayer-funded Troubled Asset Relief Program.
Lenders, seeing potential big losses, are trying to protect themselves by tightening credit availability, which leaves consumers with fewer options. This year's holiday shopping season was the worst since at least 1970, according to a report from the International Council of Shopping Centers. "It is hard to see the light at the end of the tunnel," Williams said.
Nowhere to hide
No credit card company is safe. According to Citigroup analysts, more than one-fourth of the credit card portfolios of Citibank, Bank of America Corp, Capital One Corp, and Discover are subprime, which could lead to further losses.
Meanwhile, American Express is heavily exposed to troubled markets with high default rates such as Florida and California, and JPMorgan Chase & Co has to digest the portfolio of failed savings and loans company Washington Mutual. Together, these six companies hold around 90 percent of the total US outstanding credit card debt.
Citigroup and American Express have said they are tightening lending to mitigate their losses. JP Morgan and Bank of America declined to comment, while Capital One did not return calls seeking comment. Credit card companies have reported increased losses.
Discover, the No 4 US credit card network, posted worse-than-expected results in its fourth fiscal quarter, the first sign of the harsh deterioration of the industry, when the economic downturn picked up steam in October and November. Discover almost doubled the money it set aside to cover credit losses. Analysts said its competitors would likely do the same in coming quarters, leading to lower earnings.
"Things have changed pretty rapidly in the last two months. I'm hopeful that we will see the worst in 2009, but I don't know yet," David Nelms, chief executive of Discover, told media in a recent interview.
Many analysts and credit card executives look at 2009 and remember the beginning of the mortgage crisis in early 2007, when lenders consistently underestimated what was coming up. Said Chris Brendler, analyst at Stifel Nicolaus, "The risk is that things get much worse than expected."
Source: Agencies
US consumers have never before been so deeply in debt. There was nearly $1 trillion of credit and charge card debt outstanding as of October, up more than 25 percent since 2003, according to the US Federal Reserve. That is in addition to $10.54 trillion in mortgage debt.
Unemployment, already at 15-year highs, is expected to rise to its highest levels since the early 1980s, when credit cards were not nearly as widespread. In short, there's more debt than ever and fewer people are able to pay it. "In many ways, we're in uncharted territory," said John Williams, an analyst at Macquarie Research.
Major credit losses are big trouble for Citigroup Inc, Bank of America, and other card issuers such as American Express Co and Discover Financial Services, which have seen their shares lose up to 80 percent of their value in 2008. The United States is not standing idly by.
Citigroup received $45 billion of taxpayers' money in October and November. Bank of America has received $25 billion. American Express, which became a bank holding company, got approval last week to receive $3.4 billion from the taxpayer-funded Troubled Asset Relief Program.
Lenders, seeing potential big losses, are trying to protect themselves by tightening credit availability, which leaves consumers with fewer options. This year's holiday shopping season was the worst since at least 1970, according to a report from the International Council of Shopping Centers. "It is hard to see the light at the end of the tunnel," Williams said.
Nowhere to hide
No credit card company is safe. According to Citigroup analysts, more than one-fourth of the credit card portfolios of Citibank, Bank of America Corp, Capital One Corp, and Discover are subprime, which could lead to further losses.
Meanwhile, American Express is heavily exposed to troubled markets with high default rates such as Florida and California, and JPMorgan Chase & Co has to digest the portfolio of failed savings and loans company Washington Mutual. Together, these six companies hold around 90 percent of the total US outstanding credit card debt.
Citigroup and American Express have said they are tightening lending to mitigate their losses. JP Morgan and Bank of America declined to comment, while Capital One did not return calls seeking comment. Credit card companies have reported increased losses.
Discover, the No 4 US credit card network, posted worse-than-expected results in its fourth fiscal quarter, the first sign of the harsh deterioration of the industry, when the economic downturn picked up steam in October and November. Discover almost doubled the money it set aside to cover credit losses. Analysts said its competitors would likely do the same in coming quarters, leading to lower earnings.
"Things have changed pretty rapidly in the last two months. I'm hopeful that we will see the worst in 2009, but I don't know yet," David Nelms, chief executive of Discover, told media in a recent interview.
Many analysts and credit card executives look at 2009 and remember the beginning of the mortgage crisis in early 2007, when lenders consistently underestimated what was coming up. Said Chris Brendler, analyst at Stifel Nicolaus, "The risk is that things get much worse than expected."
Source: Agencies
General Motors gets first tranche of US loan
General Motors Corp received its first multibillion dollar loan installment from the US Treasury Department Wednesday night, right in time to avert a financial disaster in which the struggling automaker may have been unable to sustain operations and pay suppliers.
``Treasury today finalized the loan transaction for GM and funded the first tranche of $4 billion,'' said Treasury spokeswoman Brookly McLaughlin in a written statement. The funds are the first portion of $9.4 billion in low-cost loans that GM is expected to receive from the government.
The Detroit automaker had been working feverishly with Treasury officials to close on the first loan installment. The money will be available for GM to use almost immediately. The cash-strapped Detroit company plans to use the money for continuing its operations.
GM is obligated to a make a large payment to a major supplier in early January, but has declined to offer details on the amount of money it owes or to which supplier.
``We appreciate the Administration extending a financial bridge to GM at this critical time for the US auto industry,'' said GM in a written statement shortly after the Treasury announcement. ``We are committed to successfully executing the viability plan we submitted on December 2 and remain confident in the future of General Motors.''
The loans come from the $700 billion bank rescue plan, approved by Congress in September. President George W Bush said earlier this month that the ailing automakers could tap part of those funds in the form of low-interest loans.
GM is burning through approximately $33 million a day, based on spending $1 billion per month during the third quarter. That daily amount is likely lower for the fourth quarter as GM has reduced spending on operations, sponsorships, utilities and even office supplies.
GM previously said it might not make it through the end of the year before running out of cash without government aid.
Auburn Hills, Michigan-based Chrysler LLC is expecting $4 billion in cash as well, but the Treasury has yet to announce the closing of the first round of loan money.
``We're working expeditiously with Chrysler to finalize that transaction and we remain committed to closing it on a timeline that will meet near term funding needs,'' McLaughlin said.
Chrysler is nearing the minimum level of cash, $2.5 billion, it needs to operate. Chrysler is already fending off angry parts suppliers and other vendors demanding cash payments on delivery. It generally pays suppliers $7 billion every 45 days.
Chrysler issued a statement Wednesday night, updating the status of its talks with the Treasury.
``We recognize the magnitude of the effort by the Treasury Department to complete these multiple financial arrangements quickly and sequentially,'' the company wrote in a press release. ``The discussions relating to Chrysler have been positive and productive, and we look forward to finalizing the details of our financial assistance in the immediate future.''
Dearborn, Michigan-based Ford Motor Co. said it does not intend to use government money to fund operations, as it is in a better financial position than its competitors. The Detroit automakers are trying to weather the biggest auto sales slump in more than 26 years.
Shares of GM fell 15.8 percent Wednesday, or 60 cents to $3.20, before the Treasury's announcement. Shares of Ford closed unchanged at $2.29.
Earlier this week, GM's financial arm, GMAC Financial Services, received $5 billion in aid from the Treasury Department. In addition, the Treasury said it would lend up to $1 billion to GM so that the automaker would be able to buy more equity from GMAC. Those purchases are expected to raise more capital for GMAC, and separate from the $4 billion received from the Treasury Wednesday.
Source: Agencies
``Treasury today finalized the loan transaction for GM and funded the first tranche of $4 billion,'' said Treasury spokeswoman Brookly McLaughlin in a written statement. The funds are the first portion of $9.4 billion in low-cost loans that GM is expected to receive from the government.
The Detroit automaker had been working feverishly with Treasury officials to close on the first loan installment. The money will be available for GM to use almost immediately. The cash-strapped Detroit company plans to use the money for continuing its operations.
GM is obligated to a make a large payment to a major supplier in early January, but has declined to offer details on the amount of money it owes or to which supplier.
``We appreciate the Administration extending a financial bridge to GM at this critical time for the US auto industry,'' said GM in a written statement shortly after the Treasury announcement. ``We are committed to successfully executing the viability plan we submitted on December 2 and remain confident in the future of General Motors.''
The loans come from the $700 billion bank rescue plan, approved by Congress in September. President George W Bush said earlier this month that the ailing automakers could tap part of those funds in the form of low-interest loans.
GM is burning through approximately $33 million a day, based on spending $1 billion per month during the third quarter. That daily amount is likely lower for the fourth quarter as GM has reduced spending on operations, sponsorships, utilities and even office supplies.
GM previously said it might not make it through the end of the year before running out of cash without government aid.
Auburn Hills, Michigan-based Chrysler LLC is expecting $4 billion in cash as well, but the Treasury has yet to announce the closing of the first round of loan money.
``We're working expeditiously with Chrysler to finalize that transaction and we remain committed to closing it on a timeline that will meet near term funding needs,'' McLaughlin said.
Chrysler is nearing the minimum level of cash, $2.5 billion, it needs to operate. Chrysler is already fending off angry parts suppliers and other vendors demanding cash payments on delivery. It generally pays suppliers $7 billion every 45 days.
Chrysler issued a statement Wednesday night, updating the status of its talks with the Treasury.
``We recognize the magnitude of the effort by the Treasury Department to complete these multiple financial arrangements quickly and sequentially,'' the company wrote in a press release. ``The discussions relating to Chrysler have been positive and productive, and we look forward to finalizing the details of our financial assistance in the immediate future.''
Dearborn, Michigan-based Ford Motor Co. said it does not intend to use government money to fund operations, as it is in a better financial position than its competitors. The Detroit automakers are trying to weather the biggest auto sales slump in more than 26 years.
Shares of GM fell 15.8 percent Wednesday, or 60 cents to $3.20, before the Treasury's announcement. Shares of Ford closed unchanged at $2.29.
Earlier this week, GM's financial arm, GMAC Financial Services, received $5 billion in aid from the Treasury Department. In addition, the Treasury said it would lend up to $1 billion to GM so that the automaker would be able to buy more equity from GMAC. Those purchases are expected to raise more capital for GMAC, and separate from the $4 billion received from the Treasury Wednesday.
Source: Agencies
Wednesday, December 31, 2008
Motorola to layoff another 400 employees
Mobile phone maker Motorola Inc said it will lay off 400 more employees in the fourth-quarter than it originally planned, resulting in additional charges.
In October, Motorola announced a cost-reduction plan that included cutting a total of 3,000 jobs, with 1,500 coming in the fourth quarter. The change means 1,900 will be in the fourth quarter although the overall total will not change.
The plan is intended to save the company $800 million in 2009. The fourth-quarter job cuts, primarily from the mobile devices segment, were expected to result in charges totaling $104 million.
In a filing with the US Securities and Exchange Commission, the company said it has since approved plans to cut another 400 jobs in the quarter. Motorola now expects $189 million in charges in the period related to its cost-cutting initiative.
In the filing, Motorola said "all of the company's business segments, as well as various corporate functions, are impacted by these plans."
Earlier this month, Motorola said it would suspend contributions to its 401(k) worker retirement plan, freeze its pension plan, stop some pay increases and cut the salaries of its two top executives.
Shares of Schaumburg, Illinois-based Motorola closed up 11 cents at $4.16.
Source: Agencies
In October, Motorola announced a cost-reduction plan that included cutting a total of 3,000 jobs, with 1,500 coming in the fourth quarter. The change means 1,900 will be in the fourth quarter although the overall total will not change.
The plan is intended to save the company $800 million in 2009. The fourth-quarter job cuts, primarily from the mobile devices segment, were expected to result in charges totaling $104 million.
In a filing with the US Securities and Exchange Commission, the company said it has since approved plans to cut another 400 jobs in the quarter. Motorola now expects $189 million in charges in the period related to its cost-cutting initiative.
In the filing, Motorola said "all of the company's business segments, as well as various corporate functions, are impacted by these plans."
Earlier this month, Motorola said it would suspend contributions to its 401(k) worker retirement plan, freeze its pension plan, stop some pay increases and cut the salaries of its two top executives.
Shares of Schaumburg, Illinois-based Motorola closed up 11 cents at $4.16.
Source: Agencies
Dell preparing for changes in senior management
Dell Inc's president of global operations, Michael Cannon, and chief marketing officer, Mark Jarvis will leave their roles in moves expected to be announced soon, the Wall Street Journal said, citing people briefed on the matter.
The people told the paper that they expect Jarvis to leave Dell, while Cannon will likely stay on in a different capacity.
Other changes are expected to focus on cutting costs and gaining tighter control over the company's global operations.
Two people with knowledge of the situation told the paper that Dell may also make cuts to its lower executive ranks.
The impending changes are intended to make managing Dell's world-wide business more efficient, people briefed on the matter said.
Operations now divided by geography will be consolidated into international business units, a shift Dell made earlier this year with its consumer division.
A Dell spokesman declined to comment to the paper on any changes, but said Dell has "been in a two-year process of positioning the company best for customers and long-term growth."
Dell could not be immediately reached for comment.
Source: Agencies
The people told the paper that they expect Jarvis to leave Dell, while Cannon will likely stay on in a different capacity.
Other changes are expected to focus on cutting costs and gaining tighter control over the company's global operations.
Two people with knowledge of the situation told the paper that Dell may also make cuts to its lower executive ranks.
The impending changes are intended to make managing Dell's world-wide business more efficient, people briefed on the matter said.
Operations now divided by geography will be consolidated into international business units, a shift Dell made earlier this year with its consumer division.
A Dell spokesman declined to comment to the paper on any changes, but said Dell has "been in a two-year process of positioning the company best for customers and long-term growth."
Dell could not be immediately reached for comment.
Source: Agencies
Air India announces fare cut up to 82pc
A day after Jet Airways reduced fares on domestic routes, state-owned operator Air India on Tuesday announced fare cut up to 82 percent in at least 20 sectors, mostly on metro routes, a senior airline official said.
"The new fare cut comes into effect today (Tuesday). We have cut fares on 20 sectors by up to 82 per cent. This will largely benefit passengers on metro routes," an airline spokesperson told reporters.
India's leading private air carrier Jet Airways Monday reduced fares on its domestic routes by up to 40 percent with immediate effect.
Another leading carrier, Kingfisher Airlines, Sunday announced fare cut from Jan 1. However, it has not announced the quantum of fare cut.
Low cost carriers are also expected to follow suit, said an industry official. The fare cuts comes in the wake of slackening demand in the post-peak season and continued decline in fuel prices.
Over the past four months, there has been a sharp decline in aviation fuel prices. While some air carriers earlier this month reduced the fuel surcharge on the ticket price by Rs 200 to Rs 400, they did not touch the base fare.
Oil companies have reduced aviation fuel prices seven times since September. The fuel is now sold at Rs 32,691.28 per kilolitre in Delhi after prices were slashed by Rs 4,208.37 in the first week of December.
Source: Airlines
"The new fare cut comes into effect today (Tuesday). We have cut fares on 20 sectors by up to 82 per cent. This will largely benefit passengers on metro routes," an airline spokesperson told reporters.
India's leading private air carrier Jet Airways Monday reduced fares on its domestic routes by up to 40 percent with immediate effect.
Another leading carrier, Kingfisher Airlines, Sunday announced fare cut from Jan 1. However, it has not announced the quantum of fare cut.
Low cost carriers are also expected to follow suit, said an industry official. The fare cuts comes in the wake of slackening demand in the post-peak season and continued decline in fuel prices.
Over the past four months, there has been a sharp decline in aviation fuel prices. While some air carriers earlier this month reduced the fuel surcharge on the ticket price by Rs 200 to Rs 400, they did not touch the base fare.
Oil companies have reduced aviation fuel prices seven times since September. The fuel is now sold at Rs 32,691.28 per kilolitre in Delhi after prices were slashed by Rs 4,208.37 in the first week of December.
Source: Airlines
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