Market News: Sony, Goldman Sachs, UBS, Shell….

  • Sony forecasts net profit for FY 2012. Sony (SNE) has predicted it will swing to a net profit of ¥80B ($975M) in FY 2012 (.pdf) after three years of losses, although the company’s outlook is less than analyst forecasts of ¥105B. Even so, some think Sony could be too ambitious, with one economist saying that “there’s a lot of uncertainty and there is a risk they will come in below that expectation.” Sony is battling to recover from the damage caused by the March earthquake, while the hacking of its PlayStation Network and other Web sites will hit operating profit by ¥14B this year. Sony gave the forecast along with its results for FY 2011, which it flagged earlier this week. Net losses widened to ¥259.6B from ¥40.8B in 2010 as revenue slipped 0.5% to ¥7.18T.
  • More details emerge of massive Fed loans during crisis. Credit Suisse (CS), Goldman Sachs, (GS) and Royal Bank of Scotland (RBS) each borrowed at least $30B in 2008 from a Fed emergency lending scheme called single-tranche open-market operations (ST OMO). Under the program, details of which are just emerging, the Fed made 28-day loans to 20 banks from March through December, with rates in the latter months as low as 0.01%. While a former senior Atlanta Fed official called the loans a ‘pure subsidy,’ a spokesman for Bank of America (BAC) defended them for providing liquidity and stabilizing the financial system. The ST OMO was in addition to the massive loans the Fed made via its discount window.
  • Fitch, S&P less pessimistic on possible impact of Greek default. In contrast to Moody’s warnings about the effect of a Greek debt restructure on other European countries, Fitch and S&P seem less gloomy. Fitch said even a 50% haircut for bondholders would not deplete enough capital at German banks to cause a ratings change. “The worst consequence…for German and other European banks would be a sharp increase in general capital market and creditor risk aversion,” Fitch said. S&P said a Greek restructuring would not trigger a chain reaction resulting in the automatic downgrade of Ireland. And while the ECB has been firmly against Greece defaulting, the bank’s rules leave more scope for a restructuring than its rhetoric suggests.
  • Battered Libya sues for peace. Libyan Prime Minister Al-Baghdadi al-Mahmoudi has reportedly sent a letter to several foreign governments proposing an immediate ceasefire, unconditional talks with the opposition, amnesty for both sides in the conflict, and the drafting of a new constitution. Unusually, Mahmoudi’s letter doesn’t mention Muammar Gaddafi’s role in the country’s future. Separately, the anti-corruption group Global Witness says it has obtained a document (.pdf) that outlines the involvement of Western firms in the finances of Colonel Gaddafi’s regime. The largest Western holder of Libyan cash as of last June was HSBC (HBC) with nearly $300M, followed by Goldman Sachs (GS) with $43M. The Libyans also held nearly $1B in U.S. Treasurys and had invested $1B with Societe Generale.
  • UBS intends to separate key investment bank arm. UBS (UBS) is planning to separate its investment bank division, which accounted for 44% of its Q1 2011 revenues, into its own legal entity and incorporate it in London, New York or Singapore, sources said. The move is aimed at placating Swiss regulators who want to prevent another rescue of UBS such as the one in 2008, when its investment arm lost billions of dollars during the financial crisis. The authorities hope the changes would mean the parent company wouldn’t be liable for huge losses if the investment bank encountered problems, although it’s unclear whether this would be the case.
  • Ricoh to cut 10,000 jobs. Ricoh (RICOF.PK) plans to slash 10,000 jobs, or almost 10% of its workforce, over the next three years in a move aimed at enabling the Japanese copier and printer maker to reverse a slide in sales and compete with rivals such as Xerox (XRX) and Canon (CAJ). The company expects the restructuring, which also includes axing products and consolidating factories, to cost ¥60B ($733M) by the next fiscal year. However, the scheme is also intended to boost operating profit by ¥140B within three years from ¥60.2B in the last fiscal year. Ricoh’s program, along with restructuring at Panasonic and Olympus, could herald a wave of cost-cutting by underperforming Japanese companies, especially following the damage caused by the March earthquake.
  • Freescale raises $783M in disappointing IPO. The glow surrounding IPOs for Internet companies is not extending to everybody, with Freescale Semiconductor (FSL) raising a less-than-expected $783M at a market cap of $4.3B. The company sold 43.5M shares for $18 each, well below an initial range of $22-$24. A reason for the tepid offering is Freescale’s $7.5B debt, left over from when Blackstone (BX) and other P-E firms took the company private in 2006 for $17.6B. Freescale is due to debut today on the NYSE. Meanwhile, Delphi Automotive, GM’s (GM) former parts unit, has filed for an IPO of $100M, although it may eventually raise over $1B, a source said. Oil and natural gas company SandRidge Permian has registered to raise up to $720.9M.
  • Shell looks to muscle in on Arctic project. Shell (RDS.A) CEO Peter Voser has held talks with Russian energy czar Igor Sechin and Rosneft CEO Eduard Khudainatov about exploring the Arctic. The meeting comes just several days after an Arctic exploration and $16B share swap deal between Rosneft and BP (BP) collapsed due to the opposition of the latter’s partners in its TNK-BP Russian joint venture. While industry experts agree that BP has the best technology and experience in deepwater drilling in extreme conditions, such as in the Arctic, Rosneft has anyway opened discussions with other companies since the stalling of the BP deal. These include Chevron (CVX) and Exxon Mobil (XOM) as well as Shell.
  • Heinz reports record annual earnings. Heinz’s (HNZ) FY 2011 net income rose 14% to a record $990M as sales edged up 2% to $10.7B, also a best ever. The company has raised its long-term EPS outlook to a range of 7%-10% from 6%-9% and said it will increase its annualized dividend by $0.12 to $1.92 a share.
  • Foreclosure sales tick higher. Sales of homes in foreclosure rose to 28% of all home sales in Q1, nearly six-times as much as in a typical healthy housing market. “It’s an astronomically high number,” RealtyTrac’s Rick Sharga said, though it is down from a peak of 37.4% in 2009. The inventory of foreclosed homes will likely depress housing prices for several years, which may be a blessing in disguise if it accelerates the race to the bottom.
  • Maple goes hostile in TMX bid. The London Stock Exchange (LDNXF.PK) and TMX Group (TMXGF.PK), the operator of the Toronto Stock Exchange, face a battle to complete their $3B merger after a group of Canadian banks and insurance companies went hostile with their $3.7B counter-offer for TMX late yesterday. The move by the consortium, called Maple, came after TMX and the LSE earlier in the day said their shareholders would vote on the deal on June 30. Maple hopes to use patriotic sentiment to keep TMX in Canadian hands, while failure for the LSE could see it open to takeovers.

Source: Seeking Alpha