The Morning Ledger: Jobs Report Could Offer Clues to Fed’s Plans

July 1, 2013 by  
Filed under Wind Energy Tips

[David Hall]

The Morning Ledger from CFO Journal cues up the most important news in corporate finance every weekday morning. Send us tips, suggestions and complaints: Get The Morning Ledger emailed to you each weekday morning by clicking here. Follow us on Twitter @CFOJournal.


The highlight of this holiday-shortened week is the June nonfarm payrolls report on Friday. As MoneyBeat’s Ben Fox Rubin notes, the report will be watched not just for what it says about the state of the economy but also for what it suggests about Fed policy decisions. Economists expect to see 155,000 jobs added in June—less than the 175,000 added in May—and the unemployment rate is forecast to fall to 7.5% from 7.6%. But if the data come in strong, the report could nudge the Fed closer to tapering its bond-buying program.

The ISM manufacturing index—out today—is expected to come in at 50. That would be higher than May’s 49 reading but it would also lie exactly on the boundary between expansion and contraction. Ahead of the Tape’s Spencer Jakab sees some cause for concern in the index’s recent trajectory and he warns that weakness in the latest reading could be a harbinger of recession and also equity bear markets.  On Tuesday, auto makers will report domestic auto sales for June, and economists are expecting another month of gains.

Markets flash: Asia ended mixed with dismal economic data from China weighing on some markets, while Japan got a lift from an upbeat manufacturing survey. European shares are lower and DJIA futures are up.


Investors look for dollar value of ‘do-good’ policies. As CFOs close their books for the second quarter, experts say companies should ensure they gather data that show the link between do-good policies on carbon emissions, human rights and the like, and the bottom line, writes Emily Chasan. An increasing number of companies are reporting their corporate responsibility activities. Coca-Cola highlights its percentage of recycled bottles and cans, while Clorox touts its staff diversity compared with the U.S. Census. “The challenge is to be able to quantify the monetary impact,” said Kristine Brands, assistant accounting professor at Regis University’s School of Management. Investors are increasingly focused on distinguishing whether environmental, social and governance data are a “public relations response” or an “embedded corporate social responsibility effort,” she said.

RIM earnings signal more pain from Venezuelan devaluation. Research in Motion posted a surprising first-quarter loss Friday and blamed Venezuela’s currency devaluation and controls for almost half of the decline in company’s service revenue, Vipal Monga reports. CFO Brian Bidulka said service revenues from Venezuelan carriers were off $72 million in the quarter. But the South American country’s foreign currency restrictions prevented RIM from being able to recognize that loss under U.S. accounting rules. In February, Venezuela boosted its official exchange rate to 6.3 bolivars to the dollar from 4.3, severely cutting the value of cash U.S. multinational companies held locally.


Dell faces dilemma with overseas cash. Advisers working on Dell‘s $24.4 billion buyout are trying to solve a problem: how to use the company’s foreign cash without paying a $2.6 billion U.S. tax bill, write the WSJ’s Kate Linebaugh and Sharon Terlep. That could be the cost levied to use the money held in foreign subsidiaries. With a July 18 shareholder vote looming, Dell’s cash balances are shrinking as the company’s core business falters. The computer maker’s cash holdings fell to $13.2 billion, down by $2.1 billion, in the three months to May 3. Accountants are working on a plan to use the company’s foreign earnings tax-free to fund their deal now, as well as help repay the substantial debt that is being taken on as part of the transaction. The efforts highlight a current bind of corporate America, Linebaugh and Terlep write: “While U.S. companies are holding more cash than ever, the tangle of U.S. tax policies and corporate cash-preservation strategies means much of it isn’t readily available for some of the most important corporate decisions, such as returning cash to shareholders or mergers and acquisitions.”

CEO pay keeps climbing. The NYT’s Gretchen Morgenson takes a deep dive into executive compensation practices and finds that among 200 top CEOs in 2012, the median compensation package jumped 16% from the previous year. Median cash compensation was $5.3 million last year, while stock and option grants came in at $9 million. “So much for the idea that shareholders were finally getting through to corporate boards on the topic of reining in pay,” Morgenson writes. Oracle CEO Larry Ellison is ranked No. 1 and had his two top lieutenants been included in the list, they, too, would have landed among the top five. Safra Catz, Oracle’s CFO and co-president and Mark Hurd, also a co-president, each received packages worth $52 million in 2012.

McKesson holders urge vote against chairman. CtW Investment Group is opposing the re-election of McKesson‘s chairman and two other directors, citing what the group said is excessive pay as well as the company’s failure to heed a shareholder advisory vote calling for splitting the chairman and CEO roles, the WSJ reports. In a letter to McKesson shareholders expected to be sent today, CtW urges a vote against the re-election of John H. Hammergren, who serves as McKesson’s chairman and CEO, and of directors Alton F. Irby III and Jane E. Shaw, who respectively head the board’s compensation and governance committees. CtW cited research from Equilar showing that Mr. Hammergren’s three-year “realizable pay” was four times the median among his peers, and mentioned the CEO’s “unmatched” $159 million pension benefit.

Onyx looks for other suitors after rejecting Amgen offer. Onyx Pharmaceuticals is looking for potential buyers after rejecting an unsolicited acquisition proposal from Amgen that valued the cancer-drug maker at around $8.7 billion, the WSJ reports. Onyx’s principal attraction is its blood-cancer treatment Kyprolis, a potential blockbuster therapy. Kyprolis could help Amgen offset expected declines for some of its core assets as they face patent expirations, but it also could make strategic sense for other large pharmaceutical and biotechnology companies looking to gain access to new cancer drugs.

Nokia buys Siemens stake in joint unit. Nokia agreed to buy Siemens’s stake in the companies’ telecom-equipment venture for €1.7 billion, putting an end to their six-year partnership, Bloomberg reports. For Nokia, which is fighting to make a comeback in the smartphone industry, the transaction gives it full control of a business whose earnings have been improving since returning to profit last year. Siemens has been seeking to exit the wireless-gear business for several years to focus on energy equipment, health care and rail.

How Honeywell trims waste. A Honeywell plant in Illinois has increased its efficiency while cutting its workforce in half—illustrating the shop-floor improvements that economists have dubbed a U.S. manufacturing renaissance, writes the WSJ’s Bob Tita. System Sensor, which was part of Honeywell’s 2000 acquisition of Pittway, came with a well-regarded product line, but high costs. “You couldn’t see the plant floor because there was so much inventory stacked up,” says Karl Odegaard, System Sensor’s director of manufacturing. As part of the revamp, more of the production systems were automated to detect worker errors and the company solicited ideas for improvement from employees. “We’re paying for people’s brains and their hands,” Mr. Odegaard says. “If I just wanted hands, I could find them cheaper elsewhere.”

U.S. tries to curb corporate espionage by Chinese companies. The U.S. could be signaling stepped-up prosecution of Chinese firms accused of stealing trade secrets, after filing charges against one of China’s largest wind-turbine manufacturers, the Journal’s Wayne Ma reports. U.S. prosecutors accused Sinovel Wind Group of stealing source code for software used to control wind turbines from American Superconductor, and then shipping four turbines equipped with the code to customers in the U.S. “This case is indicative that American companies and the U.S. government are fed up, and can and should pursue all available legal remedies, including criminal sanctions, to put an end to trade-secret theft,” said James Zimmerman, managing partner of law firm Sheppard Mullin Richter Hampton in Beijing. The issue has risen in prominence in recent months as companies reported that they had been hacked by groups that appeared to have connections with the Chinese government.


China manufacturing surveys highlight slowdown. Two gauges of China’s manufacturing fell in June, underscoring a sustained slowdown in the economy as policy makers try to rein in financial speculation and real-estate prices, Bloomberg reports. An official Purchasing Managers’ Index dropped to 50.1 in June—the lowest level in four months—from 50.8 the previous month. And a private PMI from HSBC and Markit Economics came in at 48.2, the weakest reading since September. Readings above 50 signal expansion.

Optimism returns to Japan’s manufacturers. The BOJ’s closely watched tankan survey showed that big Japanese manufacturers turned optimistic for the first time since September 2011, the WSJ reports. After six straight quarters of negative readings, the headline index measuring sentiment among large manufacturers came to plus 4 in the latest tankan, up from minus 8 in the March survey. The survey for the three months to June is the first since the central bank stepped up its easing measures in April, and the optimistic corporate outlook bodes well for Prime Minister Shinzo Abe ahead of an election for the upper house parliament later this month.

Euro-zone jobless rate rises to record high. The euro-zone jobless rate rose to a record in May, and will likely go even higher despite signs that the currency area’s long contraction may be coming to an end. The unemployment rate rose to 12.1% in May from 12.0% in April to reach its highest level since records began in 1995, the WSJ reports. As of May, 19.2 million people were without jobs in the euro zone, up 67,000 from April and 1.344 million from May 2012. The unemployment rate among people aged 24 or under was much higher, although it fell to 23.8% from 23.9% in April.


  • Mediabrix, an advertising and services-platform provider for social and mobile games based in New York, hired Glen Sussman as its chief financial officer. He was most recently a CFO consultant and board adviser to technology startups, according to a press release.
  • Directravel Holdings, a corporate travel management firm, hired John Coffman as its chief financial officer. He was most recently vice president of global mergers and acquisitions at Carlson Wagonlit Travel, according to a press release.
  • Neebo, a college store operator, said that Chief Financial Officer Alexi Wellman is no longer with the company. “It’s a personnel issue, so we can’t share any more details than have already been provided,” a Neebo spokeswoman told the Journal Star.

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