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Author: skywalker   |   Latest post: Fri, 22 Sep 2017, 11:44 AM

 

Wall Street Breakfast: Samsung Faces Strategic Challenge

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Samsung Group heir Jay Y. Lee will be indicted tomorrow, according to South Korea's special prosecutor, after he was arrested over his alleged role in the nation's widening corruption scandal. It throws the firm into a leadership crisis for the first time in its corporate history, and is a huge blow to Samsung Electronics (OTC:SSNLF), the key unit where Lee serves as vice chairman. Other key executives may also be arrested at the sprawling conglomerate.

Economy

Eurozone finance ministers and the IMF seem likely to miss next week's deadline to agree on a €7B bailout for Greece. The two sides remain at loggerheads over an IMF demand that Athens be granted debt relief and easier surplus targets, meaning a pact may now be months away. While Greece won't face bankruptcy trouble until July, eurozone officials were racing to strike a deal so the drama wouldn't be forced into the upcoming Dutch and French elections.

More trouble? Spain's public debt rose by €6.3B in December. According to Reuters' calculations using National Statistic Institute data for gross domestic product, that increase meant debt as a percentage of economic output stood at 100% at the end of 2016. The government said in a statement it estimated the year-end rate at 98.98%, using its latest GDP forecasts.

The country is rushing "over the cliff's edge," Tony Blair warned in a rallying cry to opponents of Brexit, urging them to fight Theresa May's plans to take Britain out of the EU. "I agree the will of the people should prevail... But as these terms become clear, it is their right to change their mind," the former prime minister said. "The road we're going down is not simply hard Brexit. It is Brexit at any cost."

French bonds are being traded at volumes not seen since the eurozone crisis as the tumultuous presidential election race takes another twist. Socialist Party presidential candidate Benoit Hamon is now in talks with far-left candidate Jean-Luc Melenchon about a united ticket. On average, about €16B government bonds have been traded each day in February, double the €8B average recorded last year by Trax.

Complications in restructuring Saudi Arabia's state-owned oil company and disentangling its finances from those of the government are slowing the march toward what is expected to be the biggest IPO in history. The hotly anticipated listing of a minority stake in Saudi Aramco (Private:ARMCO) is now unlikely to happen until late 2018 at the earliest, WSJ reports, and if foreign advisers have their way, it won't happen until 2019.

Stocks

Toshiba shares sank 10% overnight after S&P Global said it could slash the conglomerate's rating several notches if financial support from lenders includes any form of debt restructuring. Any further downgrade would prompt banks to charge Toshiba (OTCPK:TOSYY) even higher rates for credit, at a time when it's dealing with a crippling nuclear writedown and still working to recover from a financial scandal in 2015.

Seeking to avoid a repeat of last year's disastrous recall, Samsung Electronics (OTC:SSNLF) is adding a third battery supplier for its next flagship smartphone, the Galaxy S8. According to WSJ, the tech giant will use lithium-ion packs from a unit of Sony (NYSE:SNE), in addition to its two longtime suppliers: Samsung SDI (OTC:SSDIY) and Amperex Technology (OTCPK:TTDKY).

All that remains of Hanjin Shipping will be liquidated following a South Korean court order which pulled the plug on the company. Previously the world's seventh-largest container shipper, Hanjin (OTC:HNJSF) applied for court receivership in late August after its creditor banks halted further support. Its troubles can be traced to the global financial crisis in 2008 and a more recent downturn in trade.

Kicking off manufacturing in India, Apple (NASDAQ:AAPL) will soon start assembling the 4-inch iPhone SE at its new Bengaluru plant, a facility that's being set up by contract manufacturer Wistron (OTC:WICOF). The company is targeting an initial production of 300K-400K units, according to the Economic Times, and will go ahead with the plan without waiting for the government’s nod on a list of tax concessions.

Amazon might be muscling its way into delivery services, but this is not necessarily a competitive issue for traditional logistics companies, according Ross McCullough, UPS's president for Asia Pacific. "[AMZN is] investing in areas where there are shortages of capability in markets and if we don't have the capability... or if a competitors of ours doesn't have it, they're going to put it in to serve their customers," he told CNBC's Managing Asia.

Just days after Verizon (NYSE:VZ) began offering unlimited plans for the first time since 2011, AT&T (NYSE:T) is opening up its unlimited wireless data plans to all potential customers, not just those who buy its television service. The move leaves all four national wireless carriers, including T-Mobile (NASDAQ:TMUS) and Sprint (NYSE:S), offering the same plan and leaving price and network claims as the major differences.

When Google launched Project Loon a few years ago, the idea was to provide internet access to underserved areas with the help of a series of balloons that would constantly circumnavigate the earth. But the team recently found a way to keep the Loons in one spot for an extended time, accelerating the project's path toward becoming an actual commercial operation. It follows moves across Alphabet (GOOG, GOOGL) to curb costs at its riskier, more expensive projects.

General Motors CEO Mary Barra made assurances at Opel's headquarters in Germany that the carmaker is to remain an independent company and leave current management in place in any deal with France's PSA Group (OTCPK:PEUGF), Manager Magazin reports. The two companies previously said they were in talks regarding a PSA purchase of GM's European car operations, a move that could shake up the global auto industry.

Volkswagen delivered nearly half a million vehicles in January - down almost 5% from the previous year - but an executive for the automaker said the decline was "solely due to special effects in China," where deliveries slipped 11.8%. Positive trends were seen in Europe and the U.S., where VW (OTCPK:VLKAY) brand deliveries rose by over 4% and 17%, respectively.

A Florida man has been charged over making at least 10 explosive devices in hopes of blowing up Targets (NYSE:TGT) along the East Coast. Mark Barnett "theorized the company's stock value would plunge after the explosions, allowing him to cheaply acquire shares before an eventual rebound in prices." He paid someone $10,000 to place the bombs on shelves, but before the plan moved forward, the man went to the authorities and explained the situation.

Theranos is on the rocks. The embattled blood diagnostics firm did not have any material revenue in 2015 or 2016, WSJ reports, and hasn't set aside funds for any potential liability that could arise from its pending legal challenges. Theranos (Private:THERA) also had only $200M of cash on hand at the end of 2016, less than a quarter of the funding it raised from investors and partners.

Thursday's Key Earnings

Duke Energy (NYSE:DUK) +2.8% following in-line earnings.
WebMD (NASDAQ:WBMD) +3.8% AH pursuing strategic options.

Today's Markets

In Asia, Japan -0.6%. Hong Kong -0.3%. China -0.9%. India +0.6%.
In Europe, at midday, London +0.2%. Paris -0.8%. Frankfurt -0.2%.
Futures at 6:20, Dow -0.2%. S&P -0.2%. Nasdaq -0.1%. Crude -0.5% to $53.49. Gold flat at $1241.10.
Ten-year Treasury Yield -2 bps to 2.42%

Today's Economic Calendar

10:00 E-Commerce Retail Sales
10:00 Leading Indicators
1:00 PM Baker-Hughes Rig Count

 

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