My finance view

If AOL’s announcement on Thursday of another 2,500 job cuts is anything to go by, the painful layoffs that have ravaged the media industry over the past year are nowhere near over.

Even though U.S. media conglomerates have largely reported stronger-than-expected quarterly earnings and their CEOs are touting a long-awaited uptick in advertising spending, analysts and recruiters warn that more cost cuts lie ahead.

Much of the earnings upside came from lower costs instead of revenue growth, meaning future improvement could be more challenging as these companies face comparisons against year-ago periods when restructurings were already in place.

“I think many of these major companies have cut to the point that it is starting to affect their operations,” said Hal Vogel, head of trading and consulting firm Vogel Capital Management.

He did not believe there was an immediate need for a large round of cuts but said, “Out of the woods we are not.”

AOL on Thursday said it would cut one-third of its workforce to reduce annual costs by $300 million, as part of the Internet media company’s planned spin-off from Time Warner Inc in December.

The cuts come after an estimated 8,000 to 10,000 people have lost jobs at major media companies like General Electric Co’s NBC Universal, Viacom Inc, Walt Disney Co, Sony Corp and others since 2008.

“There’s no studio that hasn’t cut significantly. It’s understood that most of those jobs aren’t coming back,” said Standard and Poor’s analyst Tuna Amobi.

Some recruiters, job tracking experts and economists cite hiring upticks in certain areas like cable networks and the digital arms of studios check cash advance.

But even then, challenging consumer spending trends, declining DVD sales and unpredictable box office receipts will likely pressure media profits and payrolls in 2010 and beyond.

“I think you’re going to see a little bit of an upturn in hiring as advertising makes a bit of a rebound, but this is an industry in the midst of major change and many people are looking for a more steady line of work,” said Jack Kyser, an economist at the Los Angeles County Economic Development Corp.

CALIFORNIA UNEMPLOYMENT TO CLIMB

Film production and its attendant industries generate $38 billion for California’s economy and employ nearly 250,000 people. Analysts expect the state’s jobless rate to climb well into next year, even as broader U.S. unemployment is expected to ease from its peak of 10 percent in early 2010.

Job requirements for entertainment professionals are changing as well. New employees will need to not only demonstrate a knowledge of the media industry but also understand fast-changing technologies.

“The last several years have seen belt-tightening across the sector. Business models are still in flux,” said Chris Marangi, analyst with Gabelli & Co. “It’s a balancing act. I think it varies by segment and by company, but some areas in media will grow (by headcount) and some will slim down.” 

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Can you tell the difference between a plastic shoe and a luxury sports car?

Porsche, the famed German car company, is entangled in a legal spat with Crocs, the maker of rubber shoes. At issue: The shoe company’s use of the name Cayman for a line of footwear.

Porsche also has a product called the Cayman, and it claims that Crocs’ (CROX) use of the name infringes on Porsche’s trademark.

In Porsche’s case, the Cayman is a two-seat hard-top sports car with a starting price of about $51,000. Crocs’ Cayman is the familiar rubber clog with thick soles, holes covering its upper surfaces and a starting price of about $30 a pair.

The blog Footnoted.org spotlighted the quirky legal fight this week after finding it disclosed in the fine print of Crocs’ most recent quarterly report, which Crocs filed last week.

Crocs Europe, a division of the Niwot, Colo payday cash advance.-based shoe company, received a letter from Porsche on May 11 claiming that the Crocs’ use of the Cayman name violated Porsche’s trademark rights. Porsche demanded that Crocs immediately stop using the name, and also requested payment for the legal costs incurred in writing the cease-and-desist notice.

That was followed on July 30 by an injunction against Crocs Europe’s use of the Cayman name in Germany.

"The company intends to vigorously defend itself against these claims," Crocs said in its quarterly filing.

Neither Crocs nor Porsche was immediately available to respond to a request for comment on the legal spat. 

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China’s ties with Africa have been a magnet for critics worried about corruption and human rights on a continent struggling with both, but its investments are bringing more growth than risk for countries starved of trade.

Two-way trade flows have ballooned tenfold since 2000, to $107 billion last year, as China builds infrastructure, sells cheap goods and buys much-needed energy and mineral resources.

These deals have drawn criticism from activists and politicians, often Western, who say China is stripping Africa of raw materials while shoring up corrupt and oppressive regimes.

But African and Chinese businessmen and academics say Beijing is filling a yawning need for key infrastructure, and Chinese firms are also shaking up moribund markets where Western companies were doing little to develop local economies.

“We always talk about trade being more important than aid,” said Adrian Davis, the China head of Britain’s Department for International Development (DFID), which works with Beijing to support development in Africa.

“This is money going into Africa … We are investing in health and education, but Africa also needs physical infrastructure which we in the West haven’t been doing.”

China’s critics also say they are concerned about what it is funding, and how, as roads, stadia and government buildings built with Chinese cash spring up around the continent — some of them aid, some of them trade, but many something in between.

Beijing entwines business and assistance more closely than Western governments, using infrastructure to pay for resources and often disbursing donated funds through the Commerce Ministry quick payday loan.

This makes it hard to put a figure on handouts, and the only official number for Africa covers all spending from 1949 to 2006.

“We put everything into a very big basket called economic cooperation; investment, humanitarian assistance, contracts. So it is difficult to figure out what belongs purely to aid,” said He Wenping, an Africa expert at an official Beijing think-tank.

CUTTING OUT CASH

But Beijing is aware of the risk to its reputation and market access if projects are derailed by sleaze and its bankers have used their trade-aid model to curb dangers, experts say.

Bypassing host governments and paying Chinese firms directly to build a road or hospital, which is handed over when completed, cuts opportunities for the most predatory graft that often left other aid projects unfinished.

“The Chinese say: ‘We will take your gold and put in so many schools, we will take your copper and put in a railway line’,” said Kwaku Atuahene-Gima, a Ghanian citizen who is Professor at the China Europe International Business School.

“If that happens, that is a more effective way of developing the system than giving loans and aid money that go into the pockets of politicians and other people who squander it.” 

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The Wall Street Journal will close its Boston bureau to save money, and shift coverage of the mutual fund industry to its money and investing reporting team, the newspaper’s editor said on Thursday.

“The economic background is painfully obvious to us all,” Journal Managing Editor Robert Thomson told the paper’s employees in a memo. “That there has been truly great reporting… out of Boston over many, many years is not in doubt. But we remain in the midst of a profound downturn in advertising revenue and thus must think the unthinkable.”

News Corp, which owns the Journal, will keep sister news organizations Dow Jones Newswires and MarketWatch in Boston, the memo said. An investigative reporting operation for the Journal will remain too, Thomson said.

Nine bureau reporters at the Journal would have to apply for other jobs, the memo said.

A Journal spokesman declined to say how much money the closure will save.

There are no plans to close other U.S. or international bureaus, Thomson wrote. The Journal has 16 U.S. bureaus and 23 outside the United States.

Boston is a financial services hub, home to some of the world’s largest mutual fund firms, closely held Fidelity Investments and Sun Life Financial’s MFS Investment Management

The closing comes in the same month the Journal reported that it was one of the few U low fee payday advance.S. newspapers to report a circulation gain — of 0.6 percent — for the six-month period ending in September, compared with last year.

Additionally, the Journal said on Tuesday that it will stop selling its U.S. edition in London, and will offer a redesigned version of its European edition later this year.

Many U.S. newspapers are shedding jobs as advertising revenue falls and circulation declines as more people get their news online for free instead of paying for it in print.

The New York Times Co said earlier this month that it will cut 100 jobs through buyouts, and possibly layoffs, from its namesake newspaper’s editorial operations.

The Journal charges for access to its online edition, and News Corp Chief Executive Rupert Murdoch has redoubled his international newspaper empire’s efforts to charge for news online. The Journal recently began charging for many of its articles for people who read them on mobile devices.

(Reporting by Robert MacMillan. Additional reporting by Jim Finkle; Editing by Tim Dobbyn)

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Sales of newly built U.S. single-family homes unexpectedly tumbled 3.6 percent in September in their first drop since March, but the inventory of new homes available at the end of the month shrank to the smallest in 27 years, government data showed on Wednesday.

September single-family home sales totaled 402,000 units at an annual pace. Analysts polled by Reuters had expected new home sales to rise to a 440,000 unit annual pace from a revised 417,000 units in August, which was originally reported as 429,000 units faxless payday advance.

The median sales price rose in September to $204,800 from $199,900, while the average sales price rose to $282,600 from $256,500.

(Reporting by Lisa Lambert, Editing by Chizu Nomiyama)

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Britain’s economy contracted unexpectedly in the third quarter of this year, squashing hopes of an end to the downturn and instead making the current recession the longest on record, official data showed Friday.

The Office for National Statistics said British gross domestic product fell by 0.4 percent between July and September, versus analysts’ expectations of a 0.2 percent rise, meaning the economy has contracted for six successive quarters for the first time since records began in 1955.

Year-on-year, output shrank by 5.2 percent, only marginally better than the record 5.5 percent annual fall registered in the second quarter. The quarterly decline between April and June was unrevised at 0.6 percent.

With an election due by next June, the length of the recession will be an embarrassment to Prime Minister Gordon Brown’s ruling Labour Party, particularly as many of Britain’s major trading partners are already out of recession.

The government has forecast that growth will resume by the end of the year and is counting on a stronger rebound in the coming years than most independent forecasters.

The ONS said there had been a peak-to-trough GDP fall of 5.9 percent during the current recession, compared to 6.0 percent between the second quarter of 1979 and the first quarter of 1981 — a period when there were some quarters of growth.

A surprise decline in the services sector was a key factor behind Friday’s disappointing figures. The sector contracted by 0.2 percent over the quarter, with the distribution, hotels and catering sub-sector leading the decline with a 1.0 percent quarterly drop.

Economists had already expected industrial output to be weak, following a sharp monthly drop in August, and the GDP data bore this out. Industrial production fell by 0.7 percent over the quarter, taking its annual decline to 10.4 percent.

(Reporting by David Milliken and Christina Fincher)

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Investors eager to cash in on the prospect of a revival of merger & acquisition (M&A) activity could see their efforts go to waste as access to financing remains a major obstacle hampering bids.

Analysts urge caution against being too quick to buy into M&A target plays on the prospect of sweetened bids or successful deals, as holding on to them may be of little value in the long run in the absence of catalysts to drive M&A activity.

Equity markets were given a boost by the revival of long-mooted bid plans, including a $16.7 billion bid by Kraft Foods Inc for Cadbury Plc and Abbott Laboratories’ $6.6 billion bid for Solvay SA’s pharmaceutical unit.

Last Thursday, Cisco Systems Inc offered to buy Norwegian video-conferencing equipment maker Tandberg ASA for $3 billion, the latest in a rash of corporate takeovers after a lean period of a year and a half during the financial crisis.

The prospect of a sweetened bid has helped Cadbury’s share appreciate almost 41 percent since the Kraft plan was first mooted in early September as investors sought to cash in on a revised offer for the confectionary firm.

Analysts, however, argue many would-be bidders face a bumpy ride in securing financing for M&A deals, leaving investors with little prospect for making gains on the back of enhanced bids.

“The heavily leveraged debt finance vehicles which were used to fund M&A activity up until summer 2007 are just not there any more,” said Peter Dixon, economist at Commerzbank. “Nobody is prepared to load up on debt and banks are very wary of finance.”

M&A HYPE

Despite the hype surrounding the re-emergence of M&A deals, global activity remains low. The value of deals fell 54 percent to $369.3 billion in the third quarter from the same quarter in 2008, according to Thomson Reuters data.

Howard Wheeldon, partner at BGC Partners, said he did not expect a real resurgence until well into 2010.

“Funding remains difficult, with rights issues for acquisition purposes acceptable if properly reasoned as a sensible consolidation opportunity, but only to a much lesser extent for strategic reasoning,” Wheeldon said.

As European shares had 45 percent of their value wiped out at the height of the financial crisis at the end of 2008, the argument that stocks were cheap gained supporters.

By August last year, stocks in the DJ Stoxx 600 index .STOXX were trading on just 6.8 times historic earnings, according to Thomson Reuters data. Since then they have clawed back to trade at around 14 times, near levels seen before the crisis first struck in June 2007, casting doubt over the argument that target companies are still cheap.

“Markets are well overvalued right now given the immediate outlook and prospects … a mini bubble if you like and one that at some point is bound to burst,” said Wheeldon.

Still, the prospect of M&A has the ability to further boost markets to drive higher as bid talk hots up. 

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The Toronto stock market closed lower yesterday and lost ground for the week, weighed down by a sell-off of BlackBerry maker Research In Motion Ltd. stock after the market heavyweight delivered a disappointing earnings report.

The S&P/TSX composite index lost 73.37 points to close at 11,212.39, with market support coming from mining and consumer stocks in particular.

The TSX lost 233.56 points, or 2.04 per cent, this week amid worries about the sustainability of this year’s rally in the wake of a sharp drop in Canadian retail sales in July, a slide in American durable goods orders and news that reminded investors that a recovery in the housing sector will be difficult.

RIM shares tumbled $15.12 or 16.77 per cent to $75.04 after coming up short on expectations for revenue, new subscribers and outlook.

The Canadian dollar was 0.23 of a U.S. cent lower to 91.6 cents (U.S.)

The energy sector was ahead 0.38 per cent as oil prices rose slightly after demand concerns shaved almost $6 a barrel over the previous two sessions.

The November crude contract on the new York Mercantile Exchange was up 13 cents to $66.02 a barrel. The base metals sector was ahead 1 per cent as December copper added three cents at $2 faxless cash advance.74 a pound. The TSX Venture Exchange was up 3.28 points to 1,259.64.

New York markets were lower following more U.S. economic data that cast further doubt on the strength of an economic recovery.

The Dow Jones industrials index was down 42.25 points to 9,665.19 after the U.S. Commerce Department reported that orders for durable goods dropped 2.4 per cent in August, worse than the 0.5 per cent increase forecast.

The Nasdaq composite index was weighed down by RIM’s earnings report, falling 16.69 points to 2,090.92, while the S&P 500 index declined 6.4 points to 1,044.38.

The December gold contract on the Nymex declined $7.30 to $991.60 an ounce, taking the gold sector down 0.76 per cent. On the TSX, Goldcorp Inc. faded 90 cents to $42.05.

Strength came from the consumer staples sector, with Shoppers Drug Mart up 64 cents (Canadian) to $44.20 and Alimentation Couche Tard Inc. 67 cents higher at $19.30.

The financial sector was flat but Scotiabank ran ahead 61 cents to $47.69.

The Canadian Press

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General Motors Co said on Tuesday it planned to restore about 3,000 jobs at U.S. assembly plants and related facilities and is getting set to raise North American production by up to 45 percent next year.

GM said it would add shifts at three assembly plants as the automaker consolidates production from plants that are closing or retooling, a process that would not add immediately to its production schedule for 2009.

But GM expects to increase North American production to about 2.8 million vehicles in 2010, up about 40 percent to 45 percent from 2009. GM had sharply curtailed North American production around its government-guided reorganization.

GM said it would add shifts at three U.S. assembly plants next year, restoring 2,400 jobs, and expected to restore 600 jobs at related facilities across the United States that produce engines, transmissions, stampings and castings.

The addition of shifts at plants in Kansas, Indiana and Michigan comes at a time when U.S. auto industry sales are thought to have hit bottom and manufacturers are raising production to restore depleted vehicle inventories.

U.S. dealer inventories were trimmed sharply after the federal government’s “cash for clunkers” program lifted sales in July and August with incentives of up to $4,500 to turn in gas-guzzling vehicles and buy new more fuel-efficient models.

GM has been addressing severely low inventories resulting from a combination of the “clunkers” program that ran from late July through the first three weeks of August and production cutbacks around its government-funded reorganization.

Mark LaNeve, GM’s vice president of U.S. sales, said U.S. auto sales for GM and the industry have been slow, a situation expected with the end of the “clunkers” program.

“Our year-over-year comps will be difficult on both the fleet and retail side, but both accounts will get better beginning in October right through the fourth quarter,” LaNeve said.

GM said it would add a shift at its assembly plant in Fairfax, Kansas, in January. Fairfax will become the sole builder of the Chevrolet Malibu sedan when GM ends production in Orion, Michigan, to retool that plant for a new small car.

In April, GM plans to add a shift of heavy-duty pickup production in Fort Wayne, Indiana. The company is closing its Pontiac, Michigan, plant at the end of September.

GM also plans to add production of the Chevrolet Traverse SUV at its Lansing Delta Township, Michigan, plant in April. Production of the Traverse at GM’s plant in Spring Hill, Tennessee, will end in November, and that plant will be put on standby status.

GM will draw from its pool of laid off workers first to fill the positions and expects virtually all of the spots to be filled by workers now on layoff or who would be subject to layoff once other plants are idled, executives said.

Earlier in September, GM said it expected to build 535,000 vehicles in North America in the third quarter and 655,000 in the fourth quarter, down about 20 percent from a year ago.

GM expects U.S. auto industry sales of about 10.5 million vehicles in 2009, down from about 13.2 million last year. It expects U.S. auto industry sales of 11.5 million to 12 million in 2010.

(Reporting by David Bailey and Bernie Woodall; editing by Lisa Von Ahn and Andre Grenon)

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More than a year before stock markets crashed in the fall of 2008, Paul Dau noticed a steep drop in the number of customers entering his furniture store on Manchester Road in Ellisville.

Instead of whole-room makeovers, they might buy a few pieces of furniture. As time went on, even those purchases dwindled.

By the end of 2008, sales were off 18 percent. As 2009 started, the numbers got worse.

"There were evenings I didn’t sleep well," said Dau. As the fourth-generation of his family to run Dau Home Furnishings, he determined long ago not to see it close on his watch.
He cut his own pay. Then did it again. And once more in April.

"You do what you have to do,” he said.

But increased traffic and sales in the past few months are raising the optimism of some furnishings dealers, including Dau, who thinks he might soon be able to restore at least part of his salary.

"I do feel confident that we’ve bottomed out and we’re turning," he said.

It’s been a dreary decade for the home decor business.

"Ever since 9/11, it’s been in a spiral," said Jackie Hirschhaut, vice president of marketing for the American Home Furnishings Alliance, the nation’s largest trade association for furniture manufacturers.

Then came last year’s market meltdown.

People put off purchases and delayed projects. Nationally, sales by furniture and home furnishing stores totaled $7.7 billion in June, down more than 10 percent from last year and almost 20 percent from June 2007.

"For many mainstream consumers there’s just a lot of uncertainty," Hirschhaut said. "They may be working now, but there are no guarantees."

Changing customer habits forced many businesses to find new strategies to survive.

In addition to his pay cuts, Dau trimmed inventory by almost 20 percent, slashed advertising by nearly a third and reviewed every contract, from building maintenance to snow removal. Because he didn’t want to cut his 18-member staff, Dau used warehouse employees instead of contractors to trim bushes, wash windows and perform other duties. He cut back some full-time positions to part-time jobs and didn’t replace two employees who left.

"What hits you most is concern for all these families," he said of his employees. "They need their incomes to run their households. That’s the scary thing weighing on you."

Brook Dubman, who owns Carol House Furniture stores in Valley Park and Maryland Heights, said that despite a small decline in traffic and sales in the wake of the recession he’d also avoided laying off any of the company’s 140 employees.

"We didn’t change the way we did anything,” he said. "I think that helped us do better."

Customers often linger longer over decisions to buy and make smaller purchases, but Dubman said that traffic and sales in August were up substantially over last year and that September started off well.

"Our Labor Day weekend was gang busters,” Dubman said. "I’m pretty optimistic that we will be consistently better."

If not for his wealthier clients, Alan Richardson wonders if he’d still be in business instant payday loan.

The owner of English Living, situated on Washington Avenue in downtown St. Louis, said that since the first of the year the entry-level home buyers and younger home owners who used to be a substantial part of his customer base have all but disappeared.

"The only thing that kept us going well through that was the high-end … very-upscale clients … that are spending a lot of money on their home," Richardson said. "They were our biggest contributors through some pretty tough times."

Although he said sales were "exceptionally slow" in July and August, Richardson saw an increase in traffic that has translated into sales in September.

"In the first ten days of this month we did as much as we did in all of July, and that’s unusual," Richardson said.

But he’s not ready to declare the dark days over.

"We’ve had slow downs before," he said. "The strange thing about this one is you’ll have days you think it’s starting to turn and then it all stops again."

Bruce Bernstein bought a 39-year-old company a few months before the 2008 crash. He immediately sought to re-brand Sunshine Drapery and Interior Design as up to date and offering the highest-quality products.

While still offering sales, the company eliminated the 85 percent discounts the previous owners promoted. Bernstein also updated what he called the company’s "industrial looking" website and reached agreement with a furniture chain to allow Sunshine displays in their stores and to refer business to each other.

He trimmed his fabric inventory, cut hours and laid off and brought back some of his 60 or so employees as the sewing workload required.

Sales the last three months are running about two percent ahead of last year, he said.

"If I had continued on the same route as the previous owner … I don’t know if we would be getting the same business,” he said.

Not everyone struggled through the downturn.

In Belleville, Mueller Furniture Company saw a double-digit increase in sales last year and is on pace to do the same this year.

Owner Lynwood Mueller credited Scott Air Force Base, two nearby hospitals and area school districts, among others, for providing a steady supply of customers. Mueller said much of his merchandise was American made, a point the store emphasizes in its marketing. "People seem to respond to that," he said.

Mueller said that if anything, he’d increased his advertising and promotion in the recent downturn and emphasized customer service. "When times are tough, I think people appreciate that more," he said.

It has helped the family business endure difficult days in the past. Mueller’s grandfather opened the store just two years before the stock market crashed in 1929 and plunged the country into the Great Depression. When the younger Mueller entered the business in the mid-1970s, Belleville was home to 11 furniture stores, he said. One moved. The others closed.

"We’re a survivor," he said.

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