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ANA AREA ESTEBAN ASSIGNMENT II
INTERNAL GROWTH
Apple's Incredible Efficient Growth
Organic growth is the term coined for growing internally, not via merger or acquisition. Apple has embraced this strategy over its existence, averaging only about 1 acquisition per year during the past 25 years. In contrast - during the past four years alone - Microsoft bought 45 companies, Google 40, and Cisco 30. At first blush it would seem that since Apple isn't 'buying growth' like all of the above-mentioned companies, they must be spending healthily on research and development— after all, high-end products with a superior user experience are expensive to design, right?
Turns out, Apple's run of incredible products (and growth) has been achieved with a staggeringly low R&D spend. How low? Apple only spent $4.6 billion on R&D over the past four years, while revenues soared from $25 billion to $43 billion.
In contrast, Microsoft spent 700% that amount on R&D during the same period, a whopping $31 billion, while growing at an anemic pace, despite flippant M&A. Likewise Cisco and Intel spent about 400% as much as Apple on R&D
- $19 billion and $23 billion respectively. These are astounding differences above Apple's research and development spend, especially considering that during this period Apple developed the iPhone and iPad.
In fact it's rumored that Apple brought the iPhone to market for a mere $150 million, doing so organically without acquisition outside of a touch gesture recognition company named FingerWorks.
This begs the question: how in the world did Apple grow the iPhone platform organically from zero into the most profitable cell phone business in the world with so little investment?
Such incredible execution can't really be boiled down to a strategy, but if you talk to employees at Apple, it's clear they feel that they need to innovate, a need that Apple
really embraced after nearly dying in the late 1990s. Innovation became ingrained in Apple's collective DNA— they learned to innovate in order to survive.
Surviving also bred an ability to focus, a focus which translates into capital efficiency because Apple is self-aware enough to stay within its bounds. Money isn't spent on hair- brain ideas like the Courier, dumped down the drain on money-losing internet businesses, or spent ad-hoc on random acquisitions.
In contrast, innovation and survival absolutely have not been an imperative for Microsoft or Intel since the 1980's - PC processors and Windows are each cash flow monopolies. Google is great at producing innovative products, but despite 70 acquisitions has failed to diversify its revenue stream, still getting around 95% of revenues from search.
It's pretty clear that Apple is in a league of its own in terms of capital efficiency. Competitors are spending staggering sums on both M&A and R&D with limited results. Meanwhile Apple is innovating internally at a fraction of the cost, while cherry-picking strategic investments which tightly complement its core platforms.
It will be interesting to see whether Apple builds out its cloud strategy from within or uses strategic acquisitions to do so. John Gruber summarized how Apple is falling behind Google on this front.
If Apple's track record of finding ways to efficiently innovate is any indication, they will be able to figure it out. And if you correlate future performance with past execution in making more with less, it's not even a contest—Apple should continue to outpace its rivals hands down.
Sources: http://www.businessinsider.com/apple-and-efficiently- growing-its-future-2010-5 By: Steve Cheney 24, May 2010
TAKEOVER BID
obsolete in Europe as it already is in the U.S.,” Moffett wrote in a research note. “Notably, the word ‘satellite’ never even appears in the investor presentation that accompanies this morning’s conference call, almost as if they are hoping no one notices.”
Moffett also observed that the Sky bid does not rule out Comcast trying to stir up a bidding war with Disney for the other Fox assets.
“The notion that Comcast might make a topping bid for Fox has weighed heavily on Comcast shares, which have entirely missed the market rebound in the days since their continued interest was first reported,” he wrote.
Source: http://variety.com/2018/biz/news/comcast-disney-fox-sky- takeover-bid-1202711607/ By:Cynthia Littleton , 27 February, 2018
MERGER
British Airways and Iberia sign merger
agreement
British Airways and Spanish airline Iberia have signed a deal to merge and create one of the world's biggest airline groups. The merger, which was provisionally agreed in November last year, is expected to be completed by the end of this year. In a statement, the two companies said the merger would benefit shareholders, employees and customers. It is expected to save the airlines 400m euros ($533m; £350m) a year. The new company will be called International Airlines Group, but the BA and Iberia brands will continue to operate as normal. The company will have its headquarters in London, with BA shareholders retaining 55% ownership of the company. Further consolidation In total, the group will operate 419 aircraft, flying to more than 200 destinations, and carry a total of 62 million passengers a year, BA said. BA chief executive Willie Walsh said the merger would be good for customers.
"The merged company will provide customers with a larger combined network," he said. Iberia's chairman and chief executive Antonio Vazquez said the merger was a key move. "This is an important step in the process towards creating one of the world's leading global airlines that will be better equipped to compete with other major airlines and participate in future industry consolidation," he said. The merger is seen as a chance for the two airlines to cut costs following two very tough years for the airline industry. Both BA and Iberia are expected to report heavy losses this year, with BA predicted to announce its biggest annual loss since privatisation. The airlines are also regarded as a good match, having few overlapping routes. The merger will also allow the company to compete more effectively with other European giants including Air France- KLM and Germany's Lufthansa. The signing of the merger deal follows reports on Wednesday that two US airlines - US Airways and United Airlines - were also in talks over a possible merger. New alliances Analysts welcomed the move in light of the current economic environment in which global airlines are struggling for survival. "The merger makes huge sense for passengers and airlines alike. It will allow participating airlines to spread their cost base, something they desperately need to do," said Ashley Steel, global chair for transport and infrastructure at KPMG. Along with other observers, Mr Steel said that the merger was a stepping stone towards a transatlantic alliance with American Airlines. The new partners may even cast their net wider, said Stephen Furlong at Davy Stockbrokers: "The tie-up with American is the next thing on BA and Iberia's agenda now and this agreement brings that closer, but they are probably looking at European and Asian carriers too." The Unite union, which represents thousands of BA workers, said it supported the deal, but "not at any cost". "Mergers mean synergies, and synergies usually mean job losses and the levelling down of terms and conditions," said Steve Turner, Unite national officer for civil aviation.
Startup costs, which include construction and equipment
expenses, average between $955,708 and $2.3 million,
according to McDonald's. The total is determined by the
geography and size of the restaurant, as well as by the
selection of kitchen equipment, signage, style of decor,
and landscaping, the company says.
Franchisees must pay 40% of the startup costs with cash
and other non-borrowed resources, while the rest can be
financed.
In addition to those costs, McDonald's charges a $45,
franchisee fee and an ongoing monthly service fee equal
to 4% of gross sales. Franchisees must also pay rent to
the company, which is a percentage of monthly sales.
Franchisees have historically paid about 8.5% of sales in
rent costs, though some pay as much as 12%, according
to a 2013 Bloomberg report.
McDonald's franchisee startup costs are similar to those
of KFC, Wendy's, and Taco Bell.
Subway, by comparison, is far less expensive, costing
between $116,000 and $262,850, according to the
company. Subway also requires minimum liquid assets of
only $30,000 to $90,000.
Source: http://www.businessinsider.com/what-it-costs-to-open-a- mcdonalds-2014-11 By: Hayley Peterson 18 November 2014
ACQUISITION
Santander buys struggling Spanish bank
Popular for €
Spanish banking giant Santander has stepped in to the rescue ailing rival Banco Popular by taking over the failing lender for €1 in a watershed deal masterminded by EU regulators to avoid a damaging collapse.
Santander will tap its shareholders for €7bn in a rights issue to raise the capital needed to shore-up Popular’s finances in a dramatic private sector rescue of Spain’s sixth-largest lender.
It will inflict losses of approximately €3.3bn on bond investors and shareholders but crucially will avoid a taxpayer bailout.
“This deal is good for Spain and it's good for Europe,” said Ana Botin, Santander’s chairman and one of the banking industry’s most influential figures.
Santander has a track-record of buying up troubled lenders, a strategy that has transformed it into a major player in the UK banking market.
In 2008 it took over struggling Alliance & Leicester for £1.3bn and also acquired the savings book of collapsed Bradford & Bingley. Thirteen years ago it also bought troubled Abbey National for £8bn.
The last-ditch Popular rescue is significant because it marks the first big test of the Single Resolution Board (SRB), the Brussels body that was established two and a half years ago to deal with banking meltdowns in a way that shields taxpayers.
During the financial crisis governments around the world were forced to spend trillions of pounds on bailouts of failing lenders, including Royal Bank of Scotland and Lloyds Banking Group in the UK. Since then, regulators have revamped the rules to stop banks turning to taxpayers if they run into trouble again.
There has been growing concern about loss-making Popular amid fears it would collapse under €37bn of bad property loans it has made. Customers have been withdrawing deposits in a run that has seen billions of euros pulled in recent weeks and efforts by its new chairman, Emilio Saracho, to sell the bank had come to naught.
With Popular’s position looking increasingly precarious, the European Central Bank decided overnight that the lender
preferential subscription rights. The rights issue is underwritten.
The integration of Santander and Popular will significantly enhance Santander’s franchises in both Spain and Portugal. In Spain the bank will become the leading bank by both lending and deposits, serving over 17 million customers with a credit market share of c.20%. The combined business, which will operate under the Santander brand, will have a 25% market share in SME lending in Spain - a key driver of economic growth for the country.
Growing the SME franchise in Spain is a key strategic priority for the Group. The transaction will improve the diversification of business lines in the country and increase exposure to more profitable business segments at a positive stage in the economic cycle.
In Portugal, the integration of Popular with Santander Totta will accelerate growth and strengthen market shares in both lending and deposits, enhancing Totta’s position as the leading privately owned bank in the country, with over 4 million customers.
The acquisition is expected to generate a return on investment of 13-14% in 2020, and an increase in Earnings Per Share (EPS) in 2019. The combined business will benefit from increased profitability with strong potential for further revenue growth. The expected cost synergies of close to €500 million per year from 2020 will lead to efficiency ratios that are among the best in both Spain and Portugal.
The acquisition meets Santander’s strategic and financial investment criteria, with future enhancements expected in all key financial performance metrics for the Group. It is also consistent with our ongoing commitment to consider add-on acquisitions within our core markets where they add value to customers and shareholders.
To bring Popular’s provisions and capital in line with the rest of the Group, Santander will make additional provisions for non-performing assets of €7.9 billion, including €7.2 billion for real estate. This will increase coverage for real estate
assets and real estate non-performing loans from 45% to 69%, significantly above peer average (52%). The Group expects to reduce Popular’s real estate exposure significantly as it has done at Banco Santander in recent years.
Following completion of these actions, the impact on the Group’s CET1 capital ratio is expected to be neutral, while the transaction will significantly enhance Santander’s capacity to generate capital organically going forward. Santander maintains its commitment to increase its CET capital ratio to above 11% in 2018.
The combined entity will be led by the current management team of Santander Spain with Rami Aboukhair as CEO.
Source:https://www.santander.com/csgs/Satellite/CFWCSancomQP01/ en_GB/Corporate/Press-room/Santander-News/2017/06/07/ Santander-acquires-Popular--becoming-the-leading-bank-in- Spain.html By: Pressreleases of Santander.
OUTSOURCING
Why is Google outsourcing IT functions
to India?
As businesses evolve and adapt, many companies adopt outsourcing strategies to help control expenses, stay in front of competition, and propose innovative solutions without sacrificing quality. India has become a worldwide hub for offshore back-office services as large companies in the U.S, Europe and Australia are increasingly shifting their call centre operations, IT services, and other business procedures to India.
Over the past few months’ tech giant Google, has stepped up its outsourcing plan and has been allocating more processes to companies such Cognizant, which presently has a majority of its personnel in India. The concept of outsourcing is not anything original for Google, the business has been sending out software maintenance and
behind the global pre-eminence of the Android operating system for smartphones.
The deal, announced late Sunday, comes amid a proliferation of patent litigation among technology companies and so-called patent trolls, who buy up patents to enforce intellectual property rights — through the courts, if needed.
“By working together on agreements like this, companies can reduce the potential for litigation and focus instead on innovation,” Allen Lo, deputy general counsel for patents at Google, said in a news release.
Google and Samsung said the agreement covered existing patents as well as some that would be filed during the next 10 years. Although a “broad range of technologies and business areas” are covered, the deal does not cover every patent that each company holds.
The companies did not disclose terms of the arrangement, including whether there would be a financial consideration for the use of each other’s
While the deal deepens ties between Google and Samsung on certain technologies, they will not be able to use the patents that are covered to strengthen their case in existing litigation with other parties, according to a person briefed on the details, speaking on condition of anonymity because the agreement is confidential.
Samsung has been locked in a range of patent disputes with Apple, its archrival in the smartphone business. Apple and Google have been fighting a patent battle involving Motorola Mobility, which Google acquired in 2012.
On Monday, Samsung also agreed to pay the Swedish telecom company Ericsson roughly $650 million and future undisclosed royalties to resolve a separate patent dispute. Ericsson had sued Samsung over alleged patent infringements in 2012, which led Samsung to file a counter- claim. The agreement on Monday resolves these legal issues, and will allow Samsung to license patents related to
mobile network infrastructure and handset touch-screens from Ericsson.
In a separate issue, a patent owner called the Rockstar Consortium, which was formed by Apple, Microsoft and other companies, has sued Google, Samsung and other companies involved in Android.
Last week, a jury in a federal court in Texas ruled against Google and for a concern named SimpleAir, which is seeking $125 million in damages stemming from what it contends are violations of a patent dealing with push notification technology for smartphones.
“Samsung and Google are showing the rest of the industry that there is more to gain from cooperating than engaging in unnecessary patent disputes,” Seungho Ahn, head of Samsung’s Intellectual Property Center, said in a news release.
Google, which developed Android software, and Samsung, the leading maker of phones that use the operating system, have had a highly productive though largely unofficial partnership until now. Android had an 81 percent share of the global market for smartphone operating systems in the third quarter of 2013, according to the research firm International Data Corporation, well ahead of its nearest rival, Apple’s iOS, with 13 percent.
Yet there has been frequent speculation that either Samsung or Google might prefer to unravel the relationship and develop an integrated smartphone ecosystem blending hardware and software, along the lines of Apple. Google has begun selling Android phones under the Motorola brand name, while Samsung has been working on a mobile operating system called Tizen, along with several partners.
Tizen suffered a setback this month when one of its backers, the Japanese mobile operator NTT Docomo, said it had dropped plans to introduce phones with the operating system this year. But Samsung has sent out invitations to journalists for a preview of Tizen devices at an industry conference in Barcelona, Spain, next month.
the best state-of-the-art converged technologies and services to our customers," said Klaus Kleinfeld, the chief executive of Siemens. Nokia Siemens Networks will have its headquarters in Finland and be led by Simon Beresford-Wylie, currently in charge of Nokia's networks division. The new company will also have a regional headquarters in Munich. "The communications industry is converging, and a strong and independent Nokia Siemens Networks will be ideally positioned to help customers lower costs and grow revenue while managing the challenges of converging technology," said Nokia's Olli-Pekka Kallasvuo, who will serve as chairman of the new firm. Analysts said pulling off the merger would be tricky. "I like the idea but I think it's risky. On the wireless side Nokia is sub-scale and putting them together will help," Richard Windsor of Normura told Reuters. "But in wireline (fixed-line) Nokia has no business whatsoever and it's now being tasked with turning around a business that Siemens failed to do over the last six years. I don't say they can't do it, but it will be tricky." Paul MacGregor, UK managing director of the global project management consultancy PIPC, said: "This will be an expensive and risky merger and tough for management to get real value out of the business in what is an increasingly competitive space." "In the short term, shareholders could suffer as this is a long-haul deal where all the benefits seem to centre on economies of scale and hitting the rapidly converging fixed and wireless markets." This is the second big merger in the telecoms equipment sector this year. In April, Alcatel of France and Lucent of the US announced a merger, leading to talk of further consolidation as telephone equipment makers come under pressure from Asian firms such as China's Huawei. Since you’re here …
… we have a small favour to ask. More people are reading the Guardian than ever but advertising revenues across the media are falling fast. And unlike many news organisations, we haven’t put up a paywall – we want to keep our journalism as open as we can. So you can see why we need
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Source:https://www.theguardian.com/business/2006/jun/19/ money.mobilephones By:Marktran 19 June 2006
cooperation ONE WORLD
