Com­pa­nies in the news ... and how they were as­sessed

The Week - - City -

Qual­comm/broad­com: chips on the table

Tech­nol­ogy deals keep get­ting big­ger, said James Tit­comb in The Daily Tele­graph. The big­gest to date was last year’s $65bn sale of EMC to Dell, but that record could now be in dan­ger. This week, chip­maker Broad­com tabled a $130bn bid for its San Diego ri­val Qual­comm – the world’s lead­ing de­signer of smart­phone chips – which was promptly re­jected on the grounds that it didn’t value the com­pany highly enough. The $70-a-share offer is a 28% pre­mium to Qual­comm’s share price prior to news of the bid, but “barely above” its price a year ago. A re­cent dis­pute with Ap­ple over roy­alty pay­ments had seen shares drop 20%; hence, per­haps, Broad­com’s op­por­tunis­tic ap­proach. This record­break­ing bid “comes amid a flurry of deal-mak­ing in the $300bn mi­crochip in­dus­try”, said James Dean in The Times – and it could well turn hos­tile. If Broad­com gets its way, it would cre­ate the world’s third largest chip­maker, af­ter Sam­sung and In­tel. The semi­con­duc­tor in­dus­try has en­joyed “a barn­storm­ing run” on mar­kets this year, “re­flect­ing op­ti­mism over ris­ing de­mand for chips” in ev­ery­thing from smart­phones and self-driv­ing cars, to ar­ti­fi­cial in­tel­li­gence and bit­coin “min­ing”, said Michael Macken­zie in the FT. With so much to play for, the Qual­comm/broad­com saga could run and run.

John­ston Press: catch­ing a Sal­mond

The Scots­man news­pa­per op­posed in­de­pen­dence for Scot­land in the 2014 vote, said Maiya Kei­dan on Reuters. So how will it feel about hav­ing Alex Sal­mond in charge? That now looks like a very real prospect. The news­pa­per’s owner, John­ston Press, is un­der siege from its largest share­holder, the Cus­tos Group, to ditch its cur­rent man­age­ment and ap­point a new team chaired by the for­mer SNP First Min­is­ter. The be­lea­guered news­pa­per group, whose other lo­cal and regional publi­ca­tions in­clude The York­shire Post, was once “a stock mar­ket dar­ling, out­per­form­ing me­dia stocks across Europe as it scooped up news­pa­pers across Bri­tain”, said Iain Dey in The Sun­day Times. In early 2007, the shares topped £40; they’re now “more or less worth­less”. Why? Blame Google. Regional news­pa­per ex­ec­u­tives used to speak about the “three rivers of gold” – cars, jobs and houses. Those ad­verts all went on­line, along with an­other cru­cial rev­enue source: clas­si­fied ads. Chris­ten Ager-hanssen, the Nor­we­gian ac­tivist share­holder be­hind Cus­tos, says he has “lined up” as­set man­agers and pri­vate equity firms to take on John­ston’s “crip­pling” £220m debt. That will come as some re­lief. But plenty of peo­ple are won­der­ing what ex­actly Sal­mond can do to im­prove John­ston’s for­tunes.

Lon­don Stock Ex­change: Ro­let row

More than a fort­night af­ter the LSE an­nounced that its chief ex­ec­u­tive, Xavier Ro­let, is leav­ing next year, a row has bro­ken out over whether the French­man was “hus­tled un­hap­pily to­wards the exit”, says Nils Prat­ley in The Guardian. One long-stand­ing in­vestor, The Chil­dren’s In­vest­ment Fund (TCI), is de­mand­ing an­swers. The con­tin­u­ing si­lence of the LSE and chair­man Don­ald Bry­don on the sub­ject makes you won­der if TCI is “onto some­thing”. Ro­let is cred­ited with a stel­lar turn­around of the LSE, but if he was that good, why is he go­ing? “The af­fair would evap­o­rate in an in­stant if Ro­let de­clared that, ac­tu­ally, he wanted to leave.” But he hasn’t. “TCI should keep press­ing. It may turn out there is no mys­tery, but share­hold­ers de­serve bet­ter than the LSE’S lofty ob­fus­ca­tion.”

Quite in­ter­est­ing

Any rise in in­ter­est rates spells good news for savers af­ter a long famine, but don’t ex­pect many to “jump for joy” yet, said Char­lotte Nel­son of Money­facts in The Times. The banks are up to their old tricks – lift­ing the cost of bor­row­ing im­me­di­ately, while drag­ging their heels on im­prov­ing sav­ings rates. In­deed, “the link be­tween the base rate and sav­ings rates ap­pears to have been sev­ered”. HSBC and York­shire & Cly­des­dale have al­ready raised some of their mort­gage rates in line with the 0.25% rise. Mil­lions more mort­gage­hold­ers on stan­dard vari­able and tracker deals will see their bills tick up from 1 De­cem­ber. Ac­cord­ing to re­search by the on­line bro­ker Trus­sle, quoted on Money­wise, the quar­ter-point rise will see the av­er­age vari­able-rate bor­rower pay an ex­tra £198 per year.

Get fix­ing

Since this week’s rise is likely to be the be­gin­ning of a steady run of in­creases (es­tate agent Sav­ills pre­dicts a base rate of 2.25% by 2022), the best ad­vice for any­one on an SV mort­gage is to “run off to a mort­gage bro­ker and nab your­self a fixed-rate loan be­fore they all run out”, said John Ste­pek on Money­week.com. The best high-street deals are dis­ap­pear­ing fast. Last week, Bar­clays was of­fer­ing a fiveyear fixed rate of 1.65% with an £899 fee, said The Times. That has al­ready risen to 1.79%.

Houses and shares

The well-flagged prospect of an im­mi­nent rate rise has so far done noth­ing to dampen Bri­tain’s hous­ing mar­ket, said Emma Haslett in City AM. UK prices rose by 2.3% be­tween Au­gust and Oc­to­ber to hit their high­est on record, ac­cord­ing to Hal­i­fax fig­ures; the av­er­age UK house is now worth £225,826. Share­hold­ers also cheered the move, send­ing the FTSE 100 to a fresh record high of 7,560, said Daniel Grote on Ci­ty­wire. Or­di­nar­ily, ris­ing in­ter­est rates tend to boost the value of the pound. Not this time. Traders re­act­ing to the Bank’s cau­tious, “dovish” lan­guage sent the pound tum­bling 1.8% against the dol­lar – great news for FTSE 100 com­pa­nies, which de­rive about 70% of their col­lec­tive earn­ings over­seas. In­deed, par­tially thanks to the fall­ing pound, UK in­vestors saw “healthy re­turns from al­most all ma­jor mar­kets last week”.

Mort­gage in­ter­est rates are ris­ing fast

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