Companies in the news ... and how they were assessed
Goldman Sachs: fried squid
It was a “tale of two banks” on Wall Street last week, as Morgan Stanley and Goldman Sachs reported their second-quarter results, said Brooke Masters in the Financial Times. Most of the gloom was being felt by Goldmanites. “Both banks are suffering from the long slowdown” in their fixed income, currencies and commodities (FICC) businesses, but traders reckon that Morgan Stanley is dealing with the problem better. Certainly, Goldman has been hit much harder than its peers: trading revenues were down by 40% on the same period last year. “According to an old Wall Street adage, one should never bet against Goldman Sachs,” said Iain Dey in The Sunday Times. But if the bank memorably christened the great “Vampire Squid” doesn’t “crush its rivals in the brutal business of trading, what is its purpose”? CEO Lloyd Blankfein “is thrashing around in all directions”, into areas far removed from the bank’s core business. Over the past year, he has bought Honest Dollar (a retirement savings business) and another firm that consolidates high-risk credit card debt, on the grounds that it’s easier to turn a profit lending to ordinary consumers. Classy stuff. “All empires come to an end eventually. The great Vampire Squid is increasingly looking more like a piece of breadcrumbed calamari.”
German carmakers: cartel probe
Congratulations if you’re the proud owner of a German automobile, said David Charter in The Times: you could be in for a windfall. “Millions of British motorists may be owed compensation for overpriced cars” following allegations, now under investigation by the European Commission, that leading German carmakers Volkswagen, BMW and Daimler operated a cartel. Last year, almost one in three new cars registered in Britain (about 800,000 vehicles) were made by German firms. Shares in the three car giants plunged this week, wiping some s10bn off valuations, as investors digested allegations of “decades of collusion”, said Alan Tovey in The Daily Telegraph. The three companies are alleged to have shared information about emissions, engines, brakes and other technologies in secret meetings dating back to the 1990s. “The whiff of scandal around the German car manufacturing industry” is intensifying, said Gwyn Topham in The Guardian. Investors are right to brace themselves. If the allegations are proved, the ensuing fines and compensation could eclipse the emissions scandal, which has so far cost VW s25bn worldwide.
Michael Kors/jimmy Choo: vampish deal
The American handbag maker Michael Kors was once a runaway leader in the “accessible luxury market”, said Elizabeth Paton in The New York Times. Of late, it has been left “exposed”, as customers have “gravitated towards brands at extremes of the style and price spectrum”. Now Michael Kors has bought Jimmy Choo for £896m from its German owner JAB Holding, betting that the London shoemaker can add a little glitter to its fortunes. Founded 20 years ago by Malaysian-born Jimmy Choo and the British entrepreneur Tamara Mellon, the shoemaker has the right upmarket credentials: its “vampish aesthetic” has been embraced by “celebrity patrons” from Princess Diana to Michelle Obama. Jimmy Choo’s staff seem keen on the deal, said Lisa Armstrong in The Daily Telegraph. The word from the fashion house is that even heading downmarket with Michael Kors is better than being “passed around by more venture capitalists”.