Archive for April, 2009

BP Q1 profits fall 62 percent but beats forecasts (Reuters)

Monday, April 27th, 2009 | Finance News

LONDON (Reuters) –
Oil major BP Plc (BP.L) reported a 62 percent fall in first-quarter net profit on Tuesday due to a collapse in oil and gas prices, but heavy cost cutting helped it beat all analysts' forecasts.

Europe's second-largest oil company by market value said its replacement cost (RC) net profit fell to $2.39 billion from $6.59 billion last year.

BP said it was reacting to the weaker oil price environment by slashing costs. These fell by $1 billion in the first quarter compared to the same period last year.

"We need rapidly to bring our costs to a level that is compatible with a $50 world," Chief Executive Tony Hayward said in an email to staff seen by Reuters, referring to the current price of oil.

The Brent crude price averaged $44/bbl in the quarter compared to $97 per barrel (bbl) a year earlier and has since recovered to around $50/bbl.

Lower industry costs will enable BP to cut its capital expenditure budget to under $20 billion from the $20 billion to 22 billion BP said in February it expected to spend this year, a spokesman said.

The spokesman added that the company's lower capital expenditures were in small part due to delays in some projects.

BP's results were helped by a 2 percent rise in oil and gas production to 4.02 million barrels of oil equivalent per day (boepd), the first time the company topped the 4 million boepd level since the second quarter of 2006.

However, BP's debt levels rose as it borrowed to fund its generous dividend. Gearing rose to 23 percent compared with 19 percent last year.

BP needs oil prices of $60/bbl to generate enough cash to fund investment and pay its dividend, analysts said.

Excluding one-offs items, which amounted to a net charge of $194 million, the result was $2.58 billion, ahead of an average forecast of $2.28 billion from a Reuters poll of seven analysts.

(Editing by Karen Foster)

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IBM, Brocade boost ties as Cisco rivalry heats up (Reuters)

Monday, April 27th, 2009 | Finance News

NEW YORK (Reuters) –
Network equipment maker Brocade Communications Systems Inc (BRCD.O) is bolstering its partnership with IBM (IBM.N), in a sign it may be gaining market share from industry leader Cisco Systems Inc (CSCO.O).

International Business Machines Corp will rebrand ethernet switching and routing products made by Brocade as IBM products and sell them to mutual corporate customers, the companies said on Tuesday.

"I think what you're going to see is an expansion of revenue because of the sheer reach that IBM has and their ability to include it in their own branded products and solutions that they develop," said Brocade Chief Executive Michael Klayko. "This is some interesting upside opportunity

for us."

Brocade shares have risen around 27 percent since Reuters first reported the plan earlier this month, citing sources with knowledge of the matter.

The move to bolster this partnership comes amid increasing rivalry between IBM and Cisco, which recently announced that it will start selling computer servers. Cisco's move was widely seen as a direct challenge to IBM and Hewlett-Packard Co (HPQ.N), which help sell Cisco's routers and other network equipment through partnerships.

IBM already sells some Brocade equipment, such as storage-related devices, and accounts for at least 10 percent of Brocade's sales.

But the latest move expands on that relationship by including switches and routers made by Foundry Networks, which Brocade acquired late last year.

An IBM spokesman said the company's relationship with Cisco is unchanged and that it aims to provide a wider range of options for customers. But analysts said Brocade may be beginning to benefit from the increased rivalry between Cisco and IBM.

Yankee Group analyst Zeus Kerravala said the announcement showed Brocade's acquisition of Foundry was yielding the intended benefits.

"This is one of the most tangible proof points of the growth strategies for the data networking business that Brocade identified when it acquired Foundry Networks," he said.

In February, Brocade forecast 2010 revenue of $2.1 billion to $2.2 billion, but said a successful integration of Foundry could take it higher, to around $2.2 billion to $2.6 billion.

Brocade has been identified by analysts as a potential takeover target by IBM or other large technology companies. Klayko declined to comment on that possibility, but said he was satisfied with the current relationship with IBM.

"Essentially I've been married to them for over a dozen years, and we have a very, very good marriage," he said.

(Reporting by Ritsuko Ando; Editing by Richard Chang)

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Swine Flu Virus Infects World Stock Markets (Time.com)

Monday, April 27th, 2009 | Finance News

As authorities around the world rush to work out where swine flu will turn up next, the movement of markets Monday was far more predictable. With cases of the new H1N1 virus confirmed from Mexico to Spain - and tests on possible cases underway from New Zealand to Britain - investors battled their own nerves. Recovering slightly from earlier losses, Britain's FTSE 100 index of leading shares was down just under 1% in early afternoon trading. Indices in France and Germany, likewise up on their earlier lows Monday, were nonetheless subdued amid the global jitters triggered by the spread of the flu virus. Earlier, shares in Hong Kong closed down 2.74%.

For investors already wounded by the global economic crash, news of a potential pandemic came as a further blow. "As if we didn't have enough to contend with," strategists at the Royal Bank of Scotland wrote in a note to clients Monday, "it's just what we need now, a flu pandemic in the midst of the biggest financial crisis since the Great Depression." Amid the sell-off, travel industry stocks fell sharpest. Shares in Lufthansa, Europe's second-largest airline, tumbled by more than 12% before recovering slightly. Those of rival British Airways pulled back from similar lows, trading 8% down by mid-afternoon in London. Tour operators and hotel groups took similar hits. (See pictures of the swine flu outbreak in Mexico.)

From the volatility of global travel, investors sought the calm of safe havens. Both the dollar and the Japanese yen rose against major currencies. Defensive stocks, such as pharmaceuticals, registered healthy gains. Shares in Roche, the Swiss maker of Tamiflu, an antiviral drug effective against swine flu, had climbed almost 6% by Monday afternoon. Rival GlaxoSmithKline, which makes the influenza treatment Relenza, saw its shares rise even higher. (Read: "Swine Flu: 5 Things You Need to Know About the Outbreak.")

How long stocks hold those positions in the face of the threat from H1N1 remains to be seen. The fact that shares hit hard early had regained lost ground Monday suggests markets had earlier "responded in the time honored fashion," says Howard Wheeldon, senior strategist at BGC Partners in London, namely with "a degree of overreaction."

Given the lack of clarity over the threat posed by the virus, that's perhaps understandable. But gauging the impact of the outbreak - for markets and economies just as for health officials - takes time. Should the virus's potential for a pandemic be realized, though, its financial impact would be severe. As with the outbreak of severe acute respiratory syndrome (SARS), which devastated the Asian economy in 2003, economic consequences would be measured "not so much in the number of people that go down with it, or unfortunately are killed by it," says Justin Urquhart Stewart, investment director at Seven Investment Management in London, but by "the impact of the potential [population] that could be effected. Once it starts to gather momentum, it takes very little to start knocking serious percentage points off global trade and GDP." Right now, that's a momentum we could all do without.

See pictures of the swine flu outbreak in Mexico.

Read: "Swine Flu: 5 Things You Need to Know About the Outbreak.

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