Archive for July, 2007


Playboy springs into Macau

Thursday 26 July, 2007

Playboy Enterprises Inc., publisher of the most widely read men’s magazine, will open a 40,000 square-foot entertainment complex, including gaming facilities and bunny-suited waitresses, in Macau in late 2009.

Playboy Mansion Macao will include dining, entertainment and retail shops, company Chairman and Chief Executive Christie Hefner said in an interview in Hong Kong today. It will be part of the Macao Studio City complex, with the gaming operations run by casino operator Melco International Development Ltd., Hefner said in another interview today in Macau.

Billionaire Stanley Ho’s gaming monopoly ended in 2002 when the government awarded licenses to five other operators in the city, the only place in China where casinos are legal. By this year’s first quarter, 25 casinos were operating in the 26 square- kilometer (10 square-mile) territory, creating concern the industry may be starting to get crowded.

“I am less bullish about the ability of demand to soak up the capacity that’s coming on line for both retail and hotels,” said Peter Drolet, a Hong Kong-based analyst at UOB Kay Hian Pte.

Macao Studio City, a $2 billion joint venture between Hong Kong-listed ESun Holdings Ltd. and partners including Silver Point Capital LLC, is next to the Lotus Bridge, which will link Macau and the mainland Chinese city of Zhuhai. It will include a film studio, a million-square-foot shopping mall, and gaming and convention facilities.

Shares of Melco surged 6.8 percent to HK$11.60 a share in Hong Kong today, the biggest gain since April 3.

Macau’s Economy

“Macau has vast growing power as a travel destination, with the number of visitors expected to double between 2006 and 2011,” said Hefner, daughter of Playboy founder Hugh Hefner. “We will look for the most beautiful, personable women from Asia and the United States” to hire as Playboy Bunnies, she said.

The company may also use Macao Studio City to produce videos or TV shows, she said.

It was “too early” to disclose how much will be invested in Playboy Mansion Macao and how much gaming will contribute to its revenue, Hefner said. She also didn’t say how much Playboy will pay Melco to run the project’s gaming operations.

Executives of Melco, controlled by Stanley Ho’s son Lawrence Ho, weren’t immediately available for comment.

Macau’s economy grew 16.6 percent last year, compared with 6.9 percent in 2005 and 28.4 percent in 2004, the year the city’s first foreign-operated casino began operating.

Las Vegas

Playboy’s licensing unit benefited from the October debut of a gaming and cocktail lounge at the Palms resort in Las Vegas, the world’s first Playboy Club since a location closed in 1991 in Manila. The division will sign a deal to open a second venue this year, possibly in London or Macau, and increase its full-year profit and sales by as much as 25 percent, excluding artwork sales, Playboy said May 8.

Macau, with a population of 500,000, is the closest location for the 1.3 billion people in China to gamble legally in casinos.

When billionaires Sheldon Adelson of Las Vegas Sands, the world’s biggest casino-operator by value, and Steve Wynn entered Macau after the four-decade monopoly of Stanley Ho ended, they brought some of the pizzazz that’s made their base in Nevada’s desert famous.

Adelson, Wynn Resorts Ltd., and Kirk Kerkorian of MGM Mirage are building new resorts featuring artificial canals, singing gondoliers, luxury shopping malls and celebrity chefs, in contrast to the smoke-stained walls and frayed carpets of Ho’s decades-old flagship, the Hotel Lisboa.

Hugh & Marilyn

Gambling revenue in the former Portuguese colony surged 22 percent to $6.95 billion last year, surpassing the Las Vegas Strip, as it added seven new casinos, bringing the total to 24. Macau had 2,762 gaming tables in the year to Dec. 31, double that of the year before, according to the Web site of the city’s Gaming Inspection and Coordination Bureau.

The city’s gaming revenue may reach $8 billion in 2007, mainly driven by the scheduled opening of Las Vegas Sands’ Venetian Macao in the middle of this year, Jonathan Galaviz, a partner at Globalysis Ltd., wrote in a report in August. “Macao” is the Portuguese name for the city.

Adelson, chief executive officer of Las Vegas Sands, said he recouped his $260 million investment in Macau in eight months after opening the Sands Macao in 2004, the first U.S.-owned casino in the city.

Playboy is the world’s best selling men’s monthly magazine with paid circulation in the U.S. of 3 million, larger than that of Esquire, GQ and Men’s Journal combined, according its Web site.

The magazine was founded by Hugh Hefner in 1953 with U.S. actress Marilyn Monroe in the inaugural edition as “sweetheart of the month.” In the second issue, Hefner introduced the bunny logo, which underpins the Playboy brand.

An Indonesian court in April rejected a case filed against Playboy Enterprises’ local editor Erwin Arnada because the prosecutors failed to file charges under an eight-year-old law meant to regulate the media. Protests against the magazine in the nation with the world’s largest Muslim population led advertisers to withdraw from backing the magazine, which sells 40,000 copies a month.-Bloomberg

mm comment-I visited Macau in 2001 & can see how things have taken off since then. At that time, it was a Chinese destination for horse racing, which has now developed into full-fledged gambling. When I was there, the casinos, which were located right near where the ferry boats from Hong Kong docked, were pretty shabby. I rented a motor scooter & explored the whole island & found a few swanky resorts on the other side of the island. Being remotely located to the main city, I wonder how they work into the casino scene. fyi-Macau is a “Special Economic Zone” within China, much like Hong Kong. Interestingly, Macau is also a former Portugese colony so it has a bit of a European feel, with winding cobblestone streets, etc. It was a center for furniture production in Asia, although I would bet at least some of that has moved to the mainland.


new world work hours 24/7, almost literally

Wednesday 25 July, 2007

Time-zone shifters caught in loop

Workday never ends when you must deal with business cycles from around the world

It’s Sunday dinner in the Khanna family’s spotless three-bedroom condo, and the matriarch, Ritu, is happy. She munches a spicy stew of cauliflower, carrots and peas with her husband, Vivek, and their teenage son, Kanishka. She and Vivek swap memories of growing up in Calcutta and sip chardonnay.

Daylight slips away. Then, so does her husband.

“There it starts,” she says.

Vivek sits up a little straighter. His BlackBerry begins to buzz more frequently. He seems ready to spring from the table.

That’s because his attention is shifting to another place and time: Mumbai, nearly 9,000 miles away. There, it’s just before 9 a.m. Monday, 12 1/2 hours ahead of California, and he can imagine his colleagues at the back-office outsourcing company he works for filing into the office, turning on their computers, chatting about their weekends.

They will soon want to talk with Khanna, the company’s U.S. director of business development, about processing payroll forms, health-care claims and accounting vouchers. They might have leads to help him drum up more clients.

The 40-year-old multitasker will take their calls and e-mail from a desk in his garage, where he sits wedged between a foosball table and some bicycles, until 11 p.m. He will wake up to resume work before 5 a.m. so he can catch the end of the Indian workday.

“If you look at it,” he said, “I’m never at work, and I’m never off work.”

Khanna is a new breed of globalized worker, testing the limits of international commerce, his body and his family’s patience. It is an often overlooked side effect of sending jobs overseas: Work spread across many time zones demands that managers and co-workers attune to the world’s business cycle while living out of sync with those around them.

“It’s the sun-never-sets model,” said Jonathan Spira, chief analyst at Basex Inc., a business research firm in New York.

His company estimates that about half of the 46 million so-called knowledge workers in the U.S., a category that covers anyone whose primary job is to work with information, are engaged in some kind of time-zone shifting, extending the day beyond the normal 9 to 5.

Technology makes it all possible. Workers and managers can brainstorm, strategize and review via e-mail, instant messaging, cheap Internet-based phone calls and online videoconferencing.

Time-zone shifting means knowing that if you arranged your schedule to accommodate business in India, then dealing with Shanghai isn’t that much harder. Just add an extra 2 1/2 hours to your day.

Tacking on Japan, however, can be brutal, especially for a self-described “morning guy.” It’s only an hour later, Khanna said, but “the peak comes before dinner and goes through midnight.” He knows people who deal daily with India and Europe, plus clients in the U.S. It’s a killer combination, providing no predictable daily downtime.

“They have three eight-hour shifts,” he said, laughing.

One can get lost trying to figure out who’s where and what time it is there. From his office in the Silicon Valley, Alok Aggarwal, chairman of Evalueserve, a research and analysis firm, once miscalculated the time difference and missed a conference call with Tel Aviv. He thought the 9 p.m. appointment was at 9 a.m.

“I felt terrible for a couple of days,” he said.

His life’s “time complexity,” as he calls it, increased in September when the company, which has offices in New Delhi and Shanghai, added Chile. Setting up conference calls requires negotiation. Whose turn is it to get up at 4 a.m.? Last year, Aggarwal hung three extra clocks in his office: one for New York, one for India and one for Austria, where Evalueserve’s chief executive lives.

Many time-zone shifters erase all boundaries between work and life, never wanting customers or co-workers with urgent needs to feel they are not around or can’t be bothered. They sleep with their cell phones, Treos and BlackBerrys near their pillows.

Ritu Khanna tries to inject some balance into husband Vivek’s globalized workday. She has caught him checking his BlackBerry e-mail in the bathroom in the middle of the night. When the telephone rings at 3 a.m., Vivek is able to bounce awake on the first ring and strike a professional tone.

“Some country is awake all the time,” Ritu often tells him in a teasing voice. “When do we get to sleep?”

mm comment: I”ve lived this life when I was doing virtual international business development in Williams Bay, WI (pop 2100) for Computer Mail Services. I’d call Europe in the a.m. until 11:00, then across the Atlantic calling Latin America through the afternoon. @ night I’d be calling Asia & work my way westward until I was calling India before I went to bed. It’s the new reality. With cheap international telecom, e-mail, webex, etc., it’s possible to do business anywhere as long as the client is awake & available. It still feels a little weird to talk with someone for whom it’s already tomorrow. That just seems to be a strange time/space continuim.


competition for Boeing, other than Airbus

Thursday 19 July, 2007

Chicago-based Boeing Co. and France-based Airbus SAS have enjoyed the spoils from their duopoly in a record-breaking market. But now other countries want in.

Scott Carson, president and CEO of Boeing Commercial Airplanes, called this dynamic market “the new reality” in a market overview Monday. “Boeing has to adapt to that reality.”

That new reality, for Boeing, soon could mean facing tough competition from other players beyond Airbus. Russia and China are keen to establish themselves as aerospace powers.

Indeed, Boeing has hired more than 1,000 engineers in Russia, one of the countries with aerospace aspirations, and is helping a Russian manufacturer develop a regional jet.-Chicago Tribune 20 June, 2007
mm comment: historically, aerospace has been a tough industry, both domestically as well as internationally. In the past, Boeing dealt with McDonnell Douglas. Although now firmly entrenched because of government support, Airbus is a relatively new entrant. China hasn’t been a world-wide competitor as far as I know. I don’t think Aeroflot ever manufactured any world-class airplanes. Russian & Chinese space exploration haven’t exceeded our efforts. Airbus grew to compete with Boeing in a relatively short period of time. It will take awhile, but eventually the ex-communists could compete. 1 way to preclude that is to hire away their best engineers.


world wide dsl penetration

Thursday 19 July, 2007

Numbers Need More Precision
Countries may be closer than they appear in the rankings
Key Takeaway: Most countries are much closer together than the rankings suggest
Shara Evans’s remarkable labor of love is a 60 page report that looks deeply at how the broadband statistics are derived internationally. The handful of us who care about the details of the numbers will spend hours pouring over the analysis. Most interesting to everyone else is her discussion of “bands” – a set of nations essentially so close that they are identical even if one is ranked 4th and another 8th. There’s no simple test for the “margin of error” in data compiled from many sources, but clearly differences of a few percentage points could be data errors rather than actual results.

mm comment: statistics may lie, but the bigger issue is getting quality data across borders that is comparable. I also think we need more data. To look @ these general #’s out of context leaves something to be desired.

The OECD figures are carefully collected and sensibly analyzed. In general, they are highly accurate. In particular, I have looked several times over the years at individual numbers in the OECD tables I had reason to doubt, and confirmed them. However, Evans found reputable data sources in many of the countries with substantially different figures than the OECD, both higher and lower. Few countries have totally accurate official record collection, with definitions, dates and accuracy varying between the different sources. Some countries effectively separate business from residential figures, but other make arbitrary or no differentiation.

An extreme example of bad data from reputable sources is the Pew Study. This respected non-profit contacted 3,000 U.S. adults and claimed “the margin of error on the overall sample is +/- 2%.” They however had a massive error, claiming “As of March 2006, DSL connections constitute half (50%) of all home broadband connections and cable modems have a 41% share.” In fact, the cable share was then about 5 points higher than DSL, based on the audited financial statements of the companies filed with the SEC. Errors that large are rare, but available figures should be presumed precise to 1%, and errors of 5 points are certainly possible. (I have no clue on why Pew was so far off, only some of which is a high count of wireless. I hope they go back and check.)

I’ve long suspected that Beijing figures did not include many apartment complexes that were wired for 10 to 100 megabits by the builder. I’ve recently heard from Russia that similar “building provided” broadband is a very large factor not in the government count.

This study (and others less reputable) is already being abused to pretend that real policy failures are simply misinterpreted data. Korea, Singapore, Hong Kong and most of Scandinavia are well ahead. Canada, Taiwan and Switzerland are doing well. The U.S., UK, and Australia are significantly behind. Spain, Germany, and Italy have even lower penetration.

In Shara’s spirit, here’s a banded ordering based on households rather than population, using Point-Topic’s Global Broadband statistics. Point-Topic (like OECD) offers an highly accurate data set. P-T gives household as well as population rankings, which the OECD has avoided because the count of “households” is notoriously hard to pin down. Rankings by populations are generally similar, however.

Banded Country Ranking, by households

Band 1 Proving what’s possible
South Korea 89%
Hong Kong 84%
Iceland 76%

mm comment: note each of these countries has a highly dense population concentrated in 1 major urban center.

Band 2 Doing well
Netherlands 71%
Denmark 70%
Singapore 70%
Israel 69%
Switzerland 67%

mm comment: all of these countries are small, with populations concentrated in just a few cities. Is it fair to compare the vast US with such vastly different countries?

Band 3 Not embarrassing
Canada 62%
Taiwan 61%
Norway 60%
Finland 59%
France 56%
Japan 54%

mm comment: what’s amazing here is that countries like Canada, France, & Japan, with large land areas, have achieved such high penetration. I do think France’s earlier Minitel system gave them a predisposition to the internet.

Band 4 Muddling

UK 52%
Belgium 52%
Sweden 52%
Estonia 50%
USA 50%
Australia 50%

mm comment: if we could examine breakdowns of urban/rural, or broadband internet users as % of telephone &/or cable users, I think each would tell us a lot more about broadband penetration in large countries. I don’t know what it means, but interestingly, English-speaking countries do seem to be bunched together here.

Band 5 Disappointing
Spain 46%
Ireland 43%
Portugal 42%
Austria 42%
Slovenia 40%
Italy 39%
Germany 38%
New Zealand 34%

mm comment: A cultural context has to be taken into account as well. The big mediteranean countries are typically technology laggards. While the deutsch-sprecher (german-speakers) are tech savvy, they rarely jump on the bandwagon early on.

I have an item I held over explaining some of these numbers. Martin’s comment rural areas are lower was suggestive, because rural areas are also poor. The U.S. with a Gini coefficient of 45 has more relative poverty than any other developed country, which is a thoroughly unattractive explanation of why reason we are behind. In affluent countries like this, the key variable explaining take rate is price, which explains 50-80% of the differences. Price in turn is largely a function of competition – more than four (Korea, Japan, France) produces leaders, duopolies like the U.S. generally fall behind, and countries close to monopoly (Spain, Italy, and Germany until recently) have the worst results.

-dsl prime


swedish acquisition of Chicago-area-based Canadian co.

Thursday 19 July, 2007

SSAB Svenskt Staal AB, Sweden’s largest steelmaker, agreed to buy Ipsco Inc. for about $7.7 billion to become North America’s biggest maker of steel plate used in heavy-duty equipment and oil and gas pipelines.

SSAB will pay $160 a share, or 7.2 percent more than yesterday’s closing price for Lisle, Illinois-based Ipsco. The purchase will boost earnings and generate 600 million kronor ($89 million) of annual benefits, Stockholm-based SSAB said today in a statement. The deal may be completed in the third quarter.

Buying Ipsco will more than double SSAB’s output to about 7.4 million tons a year, adding 25 plants in the U.S. and Canada as demand rises for pipe used by energy explorers and plate in trucks and wind turbines. The acquisition follows U.S. Steel Corp.’s decision in March to buy Lone Star Technologies Inc. to gain access to 1 million tons of pipe for energy companies.

“The price tag seems reasonable,” said Lars Soderfjell, a Stockholm-based analyst at ABG Sundal Collier ASA who rates SSAB shares “hold.” “I am struggling to see where they are going to find synergies” of 600 million kronor a year.

The acquisition will make SSAB North America’s largest producer of steel plate, used to build ships and make Caterpillar Inc. trucks. SSAB will also become the second- largest maker of steel pipe for the oil and gas industry, trailing only Pittsburgh-based U.S. Steel.

mm comment: In an indirect way, this is a result of growth in BRIC, or at least China. Demand for this stuff is way up in BRIC & companies like ship-builders & Caterpillar are capitalizing on it. Suppliers to Caterpillar & ship-builders are making these moves.

Purchase Premiums

Steelmakers are paying ever-higher premiums to buy smaller competitors. SSAB’s offer including debt is 7.61 times Ipsco’s earnings before interest, tax, depreciation and amortization, or Ebitda, according to data compiled by Bloomberg. Mittal Steel Co.’s purchase of Arcelor SA last year was for 5.51 times Arcelor’s Ebitda.

“ The bid is a modest premium to IPS’s May 2 closing price, but values Ipsco at the higher end of recent steel industry transactions on an EBITDA basis,” Jarrett Bilous, an analyst at DBRS in Toronto, said today in a note to investors.

SSAB said it secured bank financing for the deal and will sell about 10 billion kronor of stock this year. Ipsco, incorporated in Regina, Saskatchewan, must win approval from holders of at least two-thirds of its shares. A Canadian court will rule on the fairness of the deal.

More Bidders

“The action will force any other potential bidders to surface quickly,” Arnold Ursaner, an analyst at CJS Securities in New York, said today in a note to investors. He’s advising clients not to sell the stock and wait for a higher bid.

Shares of Ipsco rose $8.64, or 5.8 percent, to $157.19 at 4:01 p.m. in New York Stock Exchange composite trading. They are up 50 percent in the past year and 20 percent since Ipsco announced it was in talks with a potential suitor on April 12.

Class A shares of SSAB plunged 13 kronor, or 5.3 percent, to 231 kronor in Stockholm, the biggest drop since Feb. 27. The shares have jumped 48 percent in the past year.

“There was some disappointment that it was not SSAB being bought,” said Claes Rasmuson, a Stockholm-based analyst at Swedbank Markets who rates the shares “neutral.”

Most of the 600 million kronor of benefits will come in the next two years from improved product mix and expansion opportunities in the U.S. and Asia, SSAB Chief Executive Officer Olof Faxander said at a press conference today in Stockholm.

`Niche Player’

“SSAB is similar to Ipsco in that it’s a niche player in the high-value-added end of the plate business,” said Michelle Applebaum, who runs a steel-equities research firm in Highland Park, Illinois. “It will also add the energy business.”

About 45 percent of Ipsco’s fourth-quarter sales were to energy companies that buy steel pipe and reinforced metal. The rest came from steel plate and other mill products sold to steel-service centers and customers in construction and transportation.

mm comment: Again, where are energy companies ramping up, (other than oilfields)? None other than the BRIC countries.

SSAB, which sells most of its steel in Europe, will generate almost half its revenue in North America after the takeover. Ipsco had $3.78 billion in North American sales last year, compared with $269 million for SSAB, which generated $4.2 billion globally.

mm comment: they may sell it in Europe & North America, but my suspicion is it’s ending up in BRIC countries.

World steel demand is expected to grow 5.9 percent this year to 1.18 billion metric tons, slowing from 8.5 percent growth last year, according to the Brussels-based International Iron & Steel Institute, which is funded by steelmakers.

Steel industry mergers and acquisitions are almost keeping pace with last year, when their value rose to a record after Mittal acquired Arcelor for $38.3 billion. SSAB’s takeover of Ipsco will push the value of the 142 deals done this year to $32 billion, compared with 122 transactions worth $45 billion in the same period last year, according to data compiled by Bloomberg.

Ipsco said its lead financial adviser was Goldman, Sachs & Co., with RBC Capital Markets as co-adviser. Legal counsel was Davis Polk & Wardwell and Osler Hoskin & Harcourt.

Greenhill & Co. and Handelsbanken Capital Markets are lead financial advisers to SSAB. White & Case is acting as U.S. counsel to SSAB and Bennett Jones is Canadian counsel.