Breakingviews

Tesco’s new chief should think the unthinkable

July 21, 2014

Hiring Unilever exec Dave Lewis to replace Phil Clarke as CEO shows necessary decisiveness. A profit alert highlights the urgency of the situation. The UK grocer needs radical reinvention. The structure could be simplified, and braver tactics in the UK price war may be required.

The perks and pitfalls of depending on Jack Ma

July 21, 2014

Alibaba’s founder, chairman and spiritual sultan will continue to exert near-total control of the Chinese e-commerce giant even after its massive IPO. For prospective shareholders, the question is whether Ma can be trusted to act in their interest. The answer is a qualified yes.

Malaysia Airlines plight points to riskier world

July 18, 2014

Fatal air passenger accidents almost never happen. Malaysia Airlines has been struck by tragedy twice in four months. The aviation industry has its own challenges. Yet even more robust businesses need to consider political risk carefully.

BofA stuck in a low-profitability trap

July 16, 2014

Several of the bank’s businesses put in a good showing for the second quarter. Trouble is, even after aggressive cost-cutting, BofA is floundering. Strip out legal costs, tax breaks and other noise, and the firm run by Brian Moynihan can only manage a 6.4 pct return on equity.

China’s “De-IOE” campaign takes a bite out of tech

July 16, 2014

Beijing has been nudging state enterprises to wean themselves off U.S. software and service firms, chiefly IBM, Oracle and EMC. The drive, which accelerated after Washington indicted Chinese army officials, has dimmed the brightest star in Big Tech’s otherwise dull constellation.

Market has message for tobacco M&A trustbusters

July 15, 2014

Reynolds and Lorillard have gained over $10 bln of market value since talk of their $55 bln merger surfaced. That can’t be justified by promised savings or the market rally. Anticipation of a surge in pricing power through the creation of a duopoly explains investor enthusiasm.

Has Yum outlived its usefulness to China?

July 15, 2014

The Kentucky Fried parent earned respect – and profits – less by currying favor with Beijing, more by doing good business. Innovations like a safe food-supply chain benefited the country. But having created the standard, Yum is now struggling to revitalize its recipe.

WH Group’s revived IPO shows one lesson learnt

July 14, 2014

The Chinese pork producer is planning a re-run of its failed IPO, having cut the size, valuation, and number of advisors. WH Group learned that being too greedy doesn’t pay. But without an exuberant price, it’s not clear why it is rushing back to market at all.

German soccer glory was predictable – with luck

July 13, 2014

Brazil’s World Cup was first-rate entertainment, thanks to many surprising results. In finance, as in sport, forecasting is a dangerous game. But it is where the greatest value lies. The key is to draw conclusions from pertinent facts. Luck helps, too.

Why investors were taken in by Gowex

July 11, 2014

The scandal-hit Spanish wifi provider raised many red flags. Why were they all ignored? Because more people benefit when companies flourish, and Spain needs success stories. Gotham City, Gowex’s nemesis, did everyone a service, but its work shouldn’t have been necessary.