Archive for July, 2008

British Airways says in merger talks with Iberia (Reuters)

Tuesday, July 29th, 2008 | Finance News

LONDON (Reuters) -
British Airways (BAY.L) said on Tuesday
it is in talks with Spanish carrier Iberia (IBLA.MC) about a
potential all-share merger, sending shares in the UK airline up
nearly 9 percent.

Britain's flagship carrier said in a statement the
discussions had the support of both companies, although it
expected it would take several months before terms could be

BA's shares were up 7.4 percent at 251.5 pence by 7:02 a.m.
EDT, valuing the company at 2.9 billion pounds ($5.76 billion).
Iberia, the smaller carrier worth about 1.5 billion euros
($2.36 billion), had its shares suspended until 7:30 a.m. EDT.

BA's chief executive, Willie Walsh, said the move made
sense in current market conditions.

"The aviation landscape is changing and airline
is long overdue," he said in a statement.

"The combined balance sheet, anticipated synergies and
network fit between the airlines make a merger an attractive
proposition, particularly in the current economic environment,"
he added.

"Over the medium term they should reap significant rewards
in terms of both synergies ... and also in terms of maximising
revenues," NCB analyst Neil Glynn said.

BA has been a shareholder of Iberia for nearly 10 years and
currently owns 13.15 percent of the Spanish carrier, while
Iberia has taken a 2.99 percent direct stake in BA, on top of
exposure to a further 6.99 percent through contracts for
differences linked to the BA share price.

BA said both parties were confident of securing regulatory
approval, adding that the European Union had already allowed
the duo to cooperate widely.

Iberia's 23 percent shareholder Caja Madrid declined to

(Reporting by John Bowker in London and Ben Harding, Sarah
in Madrid; Editing by Greg Mahlich)


Loss-making Alcatel-Lucent dumps CEO and chairman (Reuters)

Tuesday, July 29th, 2008 | Finance News

PARIS (Reuters) -
Telecoms gear maker Alcatel-Lucent
(ALUA.PA) on Tuesday ditched its chairman and chief executive
as it tries to galvanize a still-fragile merger following a
series of profit warnings and falling market share.

Chief Executive Pat Russo, long rumored to be on an ejector
seat at the world's largest provider of fixed-line telecoms
equipment, will leave before the end of the year while Serge
, the architect of the 2006 merger, will leave on
October 1.

The move comes weeks after shareholders heaped criticism on
top directors following a string of profit warnings and a
collapsing share price, and approved measures that would make
it easier to oust them. The firm also reported a deep second
quarter loss, stemming from the Lucent inheritance.

"This is a public admission, if ever one was still needed,
that the merger was a failure," said Sal. Oppenheim analyst
Niclas von Stackelberg.

The group was created when Paris-based Alcatel bought
Lucent of the United States. But it had trouble competing with
cheaper Asian rivals which learnt fast how to provide high
quality voice over internet and mobile communications.

Alcatel-Lucent shares rose as much as 6 percent, after a 23
percent decline this year and a 55 percent fall in 2007. By
4:46 a.m. EDT the stock was up 4.4 percent at 4 euros.

"These departures are not a total surprise," said Exane
analyst Alexander Peterc. "It is a good thing that the company
can now move forward and put behind it the differences between
the Lucent parts and Alcatel side," he added.

Henry Schacht, a former Lucent chief executive until Russo
took his job in 2002, will immediately resign from the board.

Alcatel-Lucent said both Tchuruk and Russo had decided
themselves to quit. It said the board would look for a new
non-executive Chairman and CEO immediately.

"The Board is also initiating a process to change the
composition of the Board to a smaller group that will include
new members," it added.

Russo stands to receive up to 6 million euros in
compensation while Tchuruk received 5.6 million when he gave up
the CEO role to Russo in 2006.

"I always thought they would both go, this way there is no
loser or winner," said the chief executive of another French
technology company who spoke on condition he was not be named.


Russo jetted into her job in Paris filled with American
corporate convictions that flew in the face of French culture.

She promised shareholders she would learn to speak French
but did not have time to master the language.

Tchuruk, born in November 1937, is a former arms engineer
born to Armenian parents in Marseilles who climbed the
corporate ladder to become head of oil group Total (TOTF.PA)
before joining Alcatel in 1996.

A tireless strategist, he engineered a restructuring of the
sprawling Alcatel empire into the core telecoms activities, a
defense branch that became part of Thales (TCFP.PA) and the
Alstom (ALSO.PA) industrial engineering group.

His departure is likely to reopen speculation over the
future of Alcatel's large stake in Thales, which Tchuruk had,
according to sources close to the matter, wanted to keep.
Thales shares dipped 2.1 percent.

The merger with Lucent was meant to crown his career as it
pulled the equipment firm back to the front line of global
competition with Nortel (NT.TO), Nokia Siemens Networks
(NSN.UL) and Ericsson (ERICb.ST).

"The merger phase is now behind us. I am proud that
Alcatel-Lucent has become a world leader in a technology which
is transforming our society," Tchuruk said in a statement.

"It is now time that the company acquires a personality of
its own, independent from its two predecessors," he added.

Alcatel-Lucent also reported underlying April-June sales
and profits which came in slightly ahead of expectations, but
reported a big net loss for the quarter due to writedowns.

Nokia Siemens, Ericsson and Alcatel-Lucent are the leading
players in the telecoms network market, but have been
increasingly challenged by Chinese vendors Huawei (HWT.UL) and

ZTE (0763.HK).

With aggressive pricing Huawei took the No. 4 spot in the
global telecom network gear market at start of the year,
bypassing Nortel Networks and Motorola (MOT.N).

(Additional reporting by Tarmo Virki in Helsinki, Jessica
Mead, Julien Toyer, Sudip Kar-Gupta; Editing by Louise Ireland)


In Japan, new signs of worsening economy (AP)

Tuesday, July 29th, 2008 | Finance News

TOKYO - Japan's economy showed more signs of deterioration as government data revealed Tuesday that the unemployment rate inched up and consumers tightened their purse strings amid rising food and oil prices.

Japan's jobless rate in June climbed to 4.1 percent from 4.0 percent in May, the highest level since last September, the Ministry of Internal Affairs and Communications said.

In another sign, the ministry said Japan's household spending in June dropped 1.8 percent from a year earlier, marking the fourth consecutive monthly decline.

Global rises in energy and food prices prompted consumers to be thrifty in those areas. Household spending on food dropped 3.6 percent, while outlays for clothing dropped 13.8 percent from a year earlier. Health and medical expenses also shrank 11.9 percent, according to the ministry report.

Household spending is closely monitored as a key indicator of personal spending, which accounts for more than half of Japan's gross domestic product.

The total number of jobless in June stood at 2.65 million, up by 240,000 from a year ago, marking the third consecutive year-on-year increase, the ministry said.

The jobless rate for men was at 4.2 percent, unchanged from the previous month, while the rate for women rose to 4.0 percent from 3.7 percent in May, it said.