Due to a technical problem on Wednesday Jan
16, we are upgrading the news management system by a Canadian
software company, which will be
completed in coming days.
It has taken longer than
anticipated. That is one of the drawbacks of outsourcing. C'est
la vie - even Google News updating falls behind at times!
News Headlines to Jan 16 2008
Today's News Links
Click for Monday's stories and links from Jan 17 2008
Newspaper Review - Irish Business News and International Stories
Principal news stories from the Irish Times,
Irish Examiner, Financial Times and New York Times.
The Irish Independent reports that Richard Branson's Virgin Group is reportedly planning a
sweetened bid for Northern Rock as the British government is
poised to outline financial support for a private sale.
The Virgin-led consortium is understood to be working on
an improved offer to gain the support of shareholders.
It comes ahead of today's Commons statement from
Chancellor Alistair Darling, which will set out plans to
convert Northern Rock's £24bn of Bank of England emergency
loans into bonds and sell them to international investors.
Mr Darling is also expected to give Northern Rock's
suitors, Virgin and Olivant, two weeks to table plans for
financing and management.
Northern Rock's shareholder base still presents a
significant hurdle to any private sector sale, with the
approval of the bank's investors needed to secure a
Robin Ashby, head of the Northern Rock Small Shareholders
Group, warned that it was unlikely Virgin's current offer
would be accepted.
Olivant's plans are widely seen as the shareholders'
favourite, as it would not involve a takeover or break up of
The Irish Independent also reports that short-term lending markets have shaken off much of the
paralysis of last autumn's credit crunch, thanks in part to
extraordinary efforts by central banks to restore order
within the guts of the global financial network.
it may be too soon to declare victory beyond the staid
environs of money markets. Analysts agree the pain of bad
mortgage investments that started it all will burden banks
and the broader economy for years to come.
In Ireland the impact has been manifest in the dire
performance of the Irish banks, with the share price of both
AIB and Bank of Ireland falling to levels not seen since the
outbreak of the first Gulf War.
Real or imagined, investors fear that the performance of
the Irish banks and other major companies on the Dublin
Stock Market, are inextricably linked to the fate of the US
economy rather than to anything which happen on this side of
Plunging interbank lending rates in the first weeks of
2008 stand as evidence that hefty cash injections by central
banks have helped money markets to resume functioning at
Just a month ago these rates had been the most elevated
than they had been since the stock market crash of 1987.
Banks were hoarding funds to shore up capital levels
depleted by soured mortgage investments, and those willing
to lend charged a premium.
The US Federal Reserve, through its massive provision of
liquidity has restored confidence in money market lending,
said William Sullivan, chief economist at JVB Financial
Group in Boca Raton, Florida.
Yet the ongoing onslaught of news about bank losses
indicates stress in the financial system is far from over.
In August, the Fed injected more temporary funds into the
banking system via daily money market operations than at any
time since shortly after the September 2001 attacks, but
what relief that brought was short-lived. More recently,
through the so-called term auction facility, or TAF, set up
with other central banks in December, the US Federal Reserve
has injected $70bn so far, with another $30bn to follow on
Analysts reckon the recent drop in dollar-denominated
Libor below the fed funds target rate -- the US benchmark --
signals that the first chapter of credit market troubles is
Libor, the London Interbank Offered Rate, is a global
benchmark for lending rates among banks. Yet because a root
cause of banks woes is the ailing US housing market, this
could be merely the first round in a long bout where a deep
economic downturn deals more blows to banks.
"You have here a recognition they (the Fed) have
shoved so much money into the system that you are shoving
Libor lower and next will drive the fed funds rate lower,
but that will not solve the problem," said Howard
Simons, a strategist with Bianco Research in Chicago.
Although most major US banks already have disclosed hefty
writedowns from the mortgage mess, more waves may put the
banking system under renewed stress, analysts warn. The
subprime loss tally so far is already in excess of $100bn,
and Federal Reserve chairman Ben Bernanke last week said the
ultimate total could be several multiples of that.
Whether there are more credit losses to banks from
subprime is obviously still an open question, and if there's
a nasty recession around the corner, there will be another
shoe to drop in terms of subprime and (mortgage)
delinquencies could go up.
Those worries notwithstanding, money markets are clearly
normalising, averting the most immediate threat of systemic
On Friday, one-month dollar-denominated Libor traded at
3.934pc well below the 4.25pc fed funds target rate, the key
overnight rate for US banks to lend to each other. The
target rate is set by the Fed.
"I would say money markets are pretty much back to
normal, with one-month Libor more than 25 basis points
through fed funds," said Bryson.
The Irish Times reports that UK-based Serica Energy is
hoping to begin a $30 million exploration drilling programme at its gas
prospects in the Slyne Basin off the west coast of Ireland.
"We hope to drill it this year," Serica's chief executive Paul Ellis
told The Irish Times. "It's a question of getting rigs and sorting out a few
other technical issues. [Because of the difficult Atlantic weather] we can only
drill there in the summer."
Serica secured rights to the Slyne blocks in the last licensing round in
2006. It is situated about 50km from the Corrib field, which has been the
subject of much controversy between Shell and locals in Co Mayo.
Serica is considering drilling two wells over a 60-day period during the
Mr Ellis said the company would probably bring in rigs from the North Sea.
With oil hovering around the $100 a barrel mark, rigs are in high demand among
exploration companies, pushing up their cost.
As a result, Mr Ellis said the company would probably incur costs of about
$500,000 a day for its Irish drilling programme.
"We are taking a risk, which is what you do as exploration companies,"
he said. "These are wildcat exploration wells but they are potentially large,
which is why we like them."
Mr Ellis said 3D seismic data suggests that its gas prospect could be as
large as the Corrib field, which has reserves of about a trillion cubic feet of
Serica has indicated that it could seek a "farm-in" partner for the
Serica was formed in 2000. It listed in Canada four years later and on the
Alternative Investment Market in London in 2005.
It recently raised $52 million to fund exploration activities and secured a
$100 million debt facility from JP Morgan and Bank of Scotland. It is also
considering drilling in Vietnam.
Serica is due to begin production at its Kambuna gas field in offshore
Indonesia in late 2008. This would be its first production of oil or gas. It has
a 65 per cent interest in the Kambuna field and has signed a deal to sell the
majority of gas there to the Indonesian state electricity company.
The Irish Times also reports that Payzone's board of
directors will meet at the company's head office in Sandyford, Dublin, tomorrow
but will not discuss the legal proceedings under way between the company and its
chief executive John Nagle and chief financial officer John Williamson.
It is understood Mr Nagle will present the board with an update of Payzone's
operational performance since the merger of Irish electronic payments group
Alphyra and UK ATM operator Cardpoint six weeks ago.
The Irishman is expected to inform the board that Cardpoint failed to perform
to expectations between October and December - the first quarter of its
financial year. Cardpoint's earnings are believed to have been more than 20 per
cent behind expectations.
Alphyra, however, has performed in line with expectations. In addition, the
company secured a lucrative contract this month to handle payments for the
operation of barrier-free tolling on the M50 motorway in Dublin.
Mr Nagle is also expected to address the issue of a meeting with the
company's lenders, which include AIB, Rabobank and Abbey.
Payzone has debts of €300 million, and the banks collectively are believed to
be seeking a meeting with Mr Williamson for an update on recent events.
Mr Nagle is believed to have spent much of the weekend at Payzone's head
office in Dublin preparing for the board meeting.
This will be the first scheduled meeting of the company's board since it was
created on December 5th, and will bring together Mr Nagle and Payzone chairman
Bob Thian, who sought to take charge of "executive responsibilities" at
Payzone last week.
Payzone dismissed the two executives last Tuesday night. The pair secured a
High Court injunction against their dismissal the following day.
On Thursday trading in Payzone's shares was suspended on the Alternative
Investment Market (AIM) in London pending the outcome of the legal action.
Separately, Mr Nagle, who founded Alphyra and owns 10.5 per cent of Payzone,
is this week expected to canvass support for his position from the company's
Sixty per cent of shareholders are reported to support the decision to remove
Mr Nagle and Mr Williamson from their posts, including private equity group
Balderton Capital, which owns 40.5 per cent of the business.
Balderton had supported the management buyout of Alphyra in 2003 and has one
representative on the board, Mark Evans a former Goldman Sachs executive.
Relations between Balderton and Mr Nagle have been strained in recent times.
The High Court action between the two sides was adjourned on Friday evening
and is expected to resume this week.
Mr Nagle claims the chairman Mr Thian is pursuing "a personal agenda"
to deflect attention from the underperformance of Cardpoint and to "transfer
blame" to himself and Mr Williamson.
Payzone argued in court last week that the two executives no longer had the
confidence of other board members.
Mr Thian has said that morale at Cardpoint was low and that 25 per cent of
the company's ATMs were inoperable over Christmas.
The Irish Examiner reports that
les than 30 minutes of Irish was spoken in the
European Parliament in the first full year as an official language — working out
at a little less than €13,000 a minute.
Despite pressure to have Gaeilge recognised as an
official language, records show six of our 13 MEPs have never used Irish in
parliamentary debates since January 1, 2007.
The Government has been warned that use of the language is being undermined and
EU officials will carry out a review in four years’ time to see if its official
status should continue.
The cost of implementing the language across all EU
institutions is estimated to be in the region of €3.5 million.
The cost of interpretation in the parliament alone was €360,000 last year,
meaning each minute of debate translated at a cost of almost €13,000.
There are four interpreters working in the parliament. Two man a booth at a
time, and there are two shifts a day for the 10 days the parliament sits each
month. These interpreters cost €30,000 a month, which is paid by the EU with
contributions from individual member states.
A parliament spokesperson said two interpreters are needed at a time in case
there is an “overflow”, or two MEPs speaking Irish in succession.
Records show that an overflow is unlikely, with an average of 30 seconds of
Irish spoken for each day the parliament sits.
Six MEPs have never used Irish, including Mary Lou McDonald (Sinn Féin), Gay
Mitchell, Mairéad McGuinness, Avril Doyle (all Fine Gael), Eoin Ryan (Fianna
Fáil) and Independent Kathy Sinnott.
Colm Burke (FG) spoke one Irish sentence at the start of one of his speeches.
This means none of the current Fine Gael MEPs, with the exception of Jim
Higgins, have spoken more than one sentence of Irish in the parliament. This is
despite Enda Kenny jointly tabled the Dáil motion to request that Irish would be
made an official language.
Fianna Fáil MEPs are the most frequent users of Irish.
Seán Ó Neachtain accounts for more than a third of Irish spoken in the European
Parliament, while Brian Crowley was the second highest user of the language
among Irish MEPs.
Sinn Féin’s Bairbre de Brún was also a regular user of the language in
As well as the interpreting service, there are three full- time translators for
the parliament, at €243,000 per year to translate texts.
In December, Foreign Affairs Minister Dermot Ahern, urged his colleagues to make
use of the interpreting service in meetings.
The Financial Times reports that Gordon Brown, the UK prime minister, is to
deflect criticism that his government is
subsidising a knock-down sale of
Northern Rock by proposing that the
taxpayer gets a slice of any windfall
profits made by a private buyer.
Mr Brown has been criticised for offering
a sweetener – in the form of a government
bond issue – to help Sir Richard Branson’s
Virgin Group or another bidder buy the
Vincent Cable, the Liberal Democrat
treasury spokesman, said Mr Brown suffered
from a “pathological inability to admit
failure” and risked wasting billions of
pounds to avoid the embarrassment of
nationalising the bank.
To minimise the political risk of
allowing a private buyer to make huge
profits on the back of government support,
Mr Brown will insist the UK taxpayer gets
some of the spoils from a recovery in
Northern Rock’s fortunes.
One official close to the negotiations
told the Financial Times: “The government is
assuming some of the risk so it would not be
unreasonable for it to get some of the
It is unclear what that upside would be
and it will be up to the bidders to
structure it in their proposals. Options
being examined include the government
receiving warrants or an equity stake of
5-10 per cent.
Mr Brown is travelling with Sir Richard
and other British businessmen in China and
India, prompting accusations he has set up a
sweetheart deal to help the Virgin boss buy
Northern Rock. One headline described the
deal as a “Chinese takeaway”.
Alistair Darling, the UK chancellor of
the exchequer, will on Monday give details
of the financial package being proposed by
the government to allow a sale, probably to
one of the three current bidders: Virgin,
Olivant, the private equity group, and
Northern Rock itself.
Mr Darling will make it clear that the
government – with £25bn in loans to Northern
Rock and up to £30bn in guarantees – would
decide who buys the bank, not its board or
shareholders. Although he will stress that
“all options” including temporary
nationalisation are possible outcomes, the
bond issue raises the likelihood of a sale
because it removes the need for bidders to
raise billions of pounds in capital upfront
to repay a large chunk of the government
Under the scheme, drawn up by Goldman
Sachs, the loans will be turned into gilts –
probably five-year bonds – guaranteed by the
They would be released into the market in
tranches over a period of months.
Northern Rock’s new owners would pay the
annual coupon on the bonds and pay the
Treasury for guaranteeing them, to satisfy
state aid regulators in Brussels. Government
officials say the bond vehicle would be
backed by enough of Northern Rock’s assets –
both in terms of quality and quantity – to
provide a “buffer zone” in case a property
crash meant the government guarantee was
called into practice.
The bond issue would leave Northern Rock
on the government’s books for years to come
and needs European Commission clearance.
The government expects bidders to present
business plans by February 4.
The FT also reports that
Europe’s plans to cut greenhouse gas
emissions, due to be unveiled as part of a
radical green agenda this week, risk working
against the environment and could destroy
the competitive position of European
industry, according to the region’s leading
The warning comes in a
letter to Gunter Verheugen, European
Union commissioner for enterprise and
industry, from Jeroen van der Veer, chief
executive of Royal Dutch Shell and chairman
of the energy and climate change working
group of the European Roundtable of
Industrialists. ERT is a group of about 50
of Europe’s biggest industrial companies
representing sales of about €1,600bn
The letter warns against the EU’s plans
to introduce an auction system for carbon
certificates to replace the current free
allocation of permits on a
The ERT says the plan could both
encourage undesirable protectionist
measures, such as import taxes on goods from
countries without similar schemes, and
severely damage the competitiveness of
European industry by imposing costs that
cannot be passed on to consumers. This, in
turn, could threaten investment in carbon
capture and other environmental initiatives.
Mr Van der Veer said that while the ERT
supported a carbon trading scheme,
industrialists believed Brussels was moving
too quickly. Draft versions of the proposed
scheme also revealed a fundamental flaw.
“We are concerned that we might have a
system that if you look at Europe in
isolation could work, but the reality is
that Europe is not isolated. We may destroy
capacity here and import those goods from
somewhere else and those imports might be
even worse [in terms of carbon emissions].”
The ERT was in favour of a more gradual
shift to an auction system, he said.
The ERT’s concerns are shared by
politicians and the wider business community
as Brussels prepares to unveil on Tuesday
the most extensive overhaul yet of the EU’s
green agenda. Member states will on
Wednesday receive binding targets on
renewable energy usage, along with details
on cutting greenhouse gas emissions and
Independent studies have shown that
European industry could be severely
penalised by the proposal to auction the
majority of carbon certificates.
The Breugel Institute, a Brussels-based
think-tank, warned in a report last year of
a “real risk that business will resort to
regulatory arbitrage, which will entail a
shift in where emissions take place but no
reduction in global emissions”.
Europe’s relatively high exposure to
carbon-intensive industries would put its
goods at a disadvantage to those produced in
the US and China, which do not price carbon,
the institute said.
Brussels has said that it will review the
trading system in 2011, but many fear this
pledge only creates uncertainty.
Mr Van der Veer warned that companies
would be reluctant to invest in
environmental initiatives, such as carbon
capture, as a result. The likelihood of
highly volatile carbon permit prices would
further deter such investment, he said.
“It is very difficult for a company to
invest in energy conservation if the prices
go up and down like a yo-yo. We need to
invent a system with a certain amount of
predictability on CO2
prices. That will be a bigger incentive to
invest in energy conservation.”
The New York Times reports that ever since John Riccitiello took over last year as chief executive of
Electronic Arts, the video game industry bellwether, he has promised to
revitalize the company with new games and new ways of reaching consumers.
Now, that may be happening.
In a major departure from its traditional business model, E.A. plans to
announce Monday that it is developing a new installment in its hit
Battlefield series that will be distributed on the Internet as a free
download. Rather than being sold at retail, the game is meant to generate
revenue through advertising and small in-game transactions that allow
players to spend a few dollars on new outfits, weapons and other virtual
At a conference in Munich, the company intends to announce that the new
game, Battlefield Heroes, will be released for PC this summer. More broadly,
E.A. hopes the game can help point the way for Western game publishers
looking to diversify beyond appealing to hard-core players with games that
can cost $60 or more.
E.A.’s most recent experiment with free online games began two years ago
in South Korea, the world’s most fervent gaming culture. In 2006, the
company introduced a free version of its FIFA soccer game there, and Gerhard
Florin, E.A.’s executive vice president for publishing in the Americas and
Europe, said it has signed up more than five million Korean users and
generates more than $1 million in monthly in-game sales.
Players can pay not only for decorative items like shoes and jerseys but
also for boosts in their players’ speed, agility and accuracy. Mr. Florin
said that while most users do not buy anything, a sizable minority ends up
spending $15 to $20 a month.
With Battlefield Heroes, E.A. hopes to bring that basic system of
“microtransactions” to Western players, along with increased
advertising. Mr. Florin said the licensing agreements around the soccer game
prevent E.A. from inserting in-game advertisements from companies that are
not already sponsors of FIFA, the international soccer federation. By
contrast, E.A. already owns the Battlefield franchise and will be free to
insert whatever advertising it wants.
The game industry is booming worldwide, largely on the strength of two
trends: a demographic expansion of the gaming population beyond the
traditional young male audience and the rising popularity of online play.
Electronic Arts, once the industry leviathan, has not taken full
advantage of those shifts. Meanwhile, one of E.A.’s main competitors,
Activision, is riding high on the strength of the mass-market Guitar
Hero series and has agreed to merge with
Vivendi’s games division, which makes the
world’s most popular online game, World of Warcraft.
With Battlefield Heroes, E.A. is trying to capitalize on both trends at
once. Not only will Heroes be distributed online, but also it is meant to
provide a simpler, more accessible entertainment experience than the
relatively complex earlier Battlefield games. The combat-oriented series has
sold about 10 million copies since the 2002 debut of the franchise’s first
game, Battlefield 1942.
“The existing Battlefield games are fairly deep; you have to be pretty
good or you’ll die pretty quick,” Mr. Florin said Friday in a telephone
interview from Geneva. “Now we’ve toned down the difficulty, shortened each
game session to 10 or 15 minutes and made the visual style more cartoony.”
Strategically, Mr. Florin said the game was a step toward figuring out
how to generate multiple revenue streams from a single intellectual
property, a maneuver Hollywood has mastered.
“I’ve always envied the movie industry when they put a film out in the
cinema, then they go to retail with a different business model and then to
pay television and then free TV,” he said. “They have the same
content reaching different audiences with different models, and we could
never figure out a way to do that. Now with higher broadband penetration, we
can use the technology to reach a broader audience.”
Not to mention the fact that popular games distributed online can be more
profitable than games sold at retail, a prime driver of the
Activision-Vivendi deal. Across China and South Korea, where online games
dominate the market, game companies are generating profits far beyond their
Western counterparts’ returns.
“The Activision-Vivendi deal changes the landscape for how investors will
look at game companies, and that puts pressure on everyone else,” Ben Schachter, an Internet and game company analyst at UBS Securities, said
“Before it was a battle for a few operating margin points here and
there,” Mr. Schachter said, “but when you look at the Asian companies
like Shanda or something like World of Warcraft, you talking about a 40
percent operating margin business, which is just in a different league from
the U.S. companies. So the U.S. publishers like E.A. have to be looking at
those models with envious eyes, and those companies will have to
Mr. Florin declined to name names but did say that if Battlefield Heroes
is a success, E.A. would soon look to create free downloadable versions of
some its other marquee games as well.
Perhaps the prime candidate would be the company’s flagship Madden
series, for which sales have slowed. Traditional versions of Madden are
extremely complicated, but a simplified downloadable version would be
expected to appeal to millions of more casual players.
The NYT also reports that the top editor of The Los Angeles Times has been forced out for resisting
newsroom budget cuts, executives at the paper said Sunday, marking the
fourth time in less than three years that the highest-ranking editor or the
publisher has left for that reason.
The removal of the editor, James E.
O’Shea, by the publisher, David D. Hiller, mirrors the odd spectacle of a
little more than a year ago, when the previous publisher, Jeffrey M.
Johnson, was fired for refusing to eliminate newsroom jobs as directed by
the paper’s owner, the
Tribune Company. In each case, a longtime Tribune executive was expected
to rein in costs at the paper, but instead sided with the newsroom and lost
his job for it.
The departure of Mr. O’Shea appears to contradict statements by
Samuel Zell, the Chicago real estate magnate who took over the company
last month and is now its chairman and chief executive. Mr. Zell has
criticized the previous regime of the financially troubled company for
trying to improve the bottom line by cutting costs, and he has said that the
path to profit lies in finding new revenue, not paring costs.
Calls to Mr. O’Shea, Mr. Hiller and a spokeswoman for Mr. Zell were not
returned. A Tribune spokesman referred inquiries to Nancy Sullivan, a
spokeswoman for The Times, who said, “I don’t have any comment for you.”
Officials at The Times said Mr. Hiller had ordered a $4 million cut in
the newsroom budget. Some said he specifically sought to cut expenses
related to covering the presidential campaign, a time when such expenses
usually spike. Some editors and reporters said that Mr. Hiller told them in
a meeting in November that he wanted to reduce staff somewhat by the end of
The shake-up came as a surprise to newsroom employees at The Times,
several of whom said late last week that they had not heard about a clash
between the editor and the publisher and did not have any indication that
Mr. O’Shea’s job was threatened.
People at The Times said they did not know whether Mr. Hiller was acting
on orders from company headquarters or on his own initiative; Mr. Zell has
said he would allow each of the Tribune properties greater autonomy.
The Times had a newsroom staff of more than 1,100 people at the start of
this decade, but the number has declined to below 900, officials say. Its
weekday circulation has dropped to about 800,000, from 1.1 million.
Tribune, whose flagship is The Chicago Tribune, bought the
Times Mirror Company in 2000, acquiring its crown jewel, The Los Angeles
Times, one of the nation’s largest newspapers and long regarded as one of
the best. The $8 billion price was widely seen as inflated, particularly
after recession struck the following year and newspaper ad revenues began a
The relationship between the Los Angeles and Chicago offices has been
troubled for much of the time since then. Chicago has demanded cost savings
and higher profit — officials at The Times say the paper still makes a
healthy profit, despite its troubles — and the view in Los Angeles has been
that the new owners are slowly killing an asset they neither value nor
Tribune first brought in two well-regarded editors from outside, John S.
Carroll and Dean P. Baquet, to run The Times. But after rounds of job cuts
and demands for more, Mr. Carroll quit in 2005, and Mr. Baquet rose to the
In late 2006, Mr. Johnson, the publisher, was fired along with Mr. Baquet
for refusing to carry out more cuts. Mr. Baquet then rejoined The New York
Times, which he had left in 2000 for the Los Angeles paper, as the
Washington bureau chief and an assistant managing editor.
With Mr. Baquet gone, Mr. O’Shea, the managing editor of The Chicago
Tribune, went to Los Angeles to run the newsroom.
Adding to the turmoil of the last few years has been the departure of two
editors of The Times’ editorial page,
Michael Kinsley and Andres Martinez, after short tenures.
It was not clear Sunday whether Mr. O’Shea’s successor would come from
within The Times, or when his departure took place.
Tribune, one of the nation’s largest media companies, also owns Newsday,
The Baltimore Sun and other newspapers, as well as two dozen television
stations, the Chicago Cubs baseball team and other properties.
But as newspapers endure tough times, Tribune’s papers have suffered even
more than the industry as a whole. Through the first three quarters of last
year, its profit was 53 percent below the same period a year earlier.
Newspapers generally have been cutting staff in recent years, especially
those in California, which have been hit hard by the downturn in real estate
and, in turn, real estate advertising.