India’s export-driven software services companies are shifting focus to emerging economies, such as the Middle East and Africa, where technology spending is growing twice as fast as in developed countries.
As the United States, which contributes more than half these companies’ sales, lurches towards recession in the wake of the subprime crisis, companies such as Satyam Computer Services Ltd, Infosys Technologies Ltd and Wipro are looking farther afield, as well as to their home market, to take up the slack.
Spending on information technology in Asia-Pacific, Latin America, the Middle East, Africa and Eastern Europe is on course to hit $1.1 trillion this year, up from $964 billion in 2007, according to research and advisory firm Gartner.
Spending in 2011 will reach $1.3 trillion, posting compounded annual growth of around 8.5 percent, compared with 4.3 percent growth in mature markets, the Gartner report added.
Many Indian companies, which forged close ties with the United States having rewritten the programming code that helped overcome the millennium ‘Y2K’ issue, have already started diversifying their customers.
Satyam, India’s fourth-largest software exporter, is negotiating a score of deals worth $10-$30 million in Asia-Pacific, the Middle East and Africa, its director Virender Aggarwal said.
“The deals we are seeing in emerging markets now are just the beginning,” said Tejas Doshi, analyst at broker Sushil Finance payday loans.
LESS IN U.S.
Two Hawaii newspapers managed to hold onto more paid circulation over the past year by increasing the number of papers distributed to hotel guests.
Circulation continued to slip at The Honolulu Advertiser, Hawaii's largest newspaper, but the paper held onto more paid readership than the national average.
The Advertiser reported a 0.2 percent decrease in average paid circulation of its Monday-Friday editions, falling from 140,647 to 140,331 in the six months ending March 30, 2008.
That is compared to the same to the six months ending March 31, 2007, according to a report this week by the Audit Bureau of Circulations.
The Advertiser's Sunday circulation declined 3.7 percent from 156,003 to 150,276 in the most recent period.
Nationally, weekday newspaper circulation declined 3.5 percent and Sunday circulation fell 4.5 percent.
The Advertiser and The Maui News, which saw its weekday circulation grow significantly, may have benefited from the departure of USA Today from daily distribution in Hawaii at the end of 2007. Newspapers typically offer deeply discounted newspapers to hotels for distribution to guests and USA Today was a favorite.
Before stopping printing and distribution in Hawaii, USA Today was selling about 12,000 weekday papers in the Islands, including about 8,600 to hotels no teletrak payday loans.
In the most recent audit, the Advertiser reported that its weekday distribution to hotels jumped 44 percent to 12,299 and its Sunday circulation climbed 18 percent to 6,665 over the same period a year ago.
At The Maui News, weekday circulation bucked the national trend and rose 5.8 percent, from 20,777 to 21,974. Sunday fell 0.5 percent from 25,343 to 25,209.
Nearly all of the weekday gain appears to come from hotel distribution. Sunday hotel circulation was up 11 percent to 2,895 and weekday circulation rose by 961 copies a day — a 53 percent increase — to 2,770.
The Garden Island on Kauai, the only other member of the audit bureau in Hawaii, had not had its circulation numbers posted as of Friday.
The state's other daily newspapers — the Honolulu Star-Bulletin, West Hawaii Today in Kona and the Hawaii Tribune Herald in Hilo — do not belong to the Audit Bureau of Circulations.
A circulation statement by the Star-Bulletin in March 2007 and verified by the Grant Thornton accounting firm put its daily circulation at 64,073 and Sunday at 60,158.
Clearwire and Sprint Nextel are planning to merge their wireless broadband units to create a new $14.55 billion wireless communications company.
The new company, to be named Clearwire, will receive a $3.2 billion investment from Intel Corp. (INTC, Fortune 500), Google Inc. (GOOG, Fortune 500), Comcast Corp. (CMCSA, Fortune 500), Time Warner Cable Inc. (TWX, Fortune 500) and Bright House Networks. The investment is based on a target price of $20 per Clearwire share and will give the companies a 22% stake in the new venture.
Sprint Nextel Corp. (S, Fortune 500) will be majority owner with a 51% equity stake, while existing Clearwire (CLWR) shareholders will receive about 27% interest.
Clearwire, which will concentrate on rolling out a mobile network based on the emerging WiMAX standard, will also receive an investment from Trilogy Equity Partners (TETFF), led by U.S. wireless industry veteran John Stanton.
WiMAX promises faster download speeds than the latest networks run by cell-phone operators, and it’s even seen as a potential competitor to fixed-line broadband.
Sprint and Clearwire, a startup founded by cellular pioneer Craig McCaw, had already announced their plans to build out networks using WiMAX technology, but had been looking for outside funding.
The new company will be led by Clearwire Chief Executive Benjamin Wolff, with Sprint Chief Technology Officer Barry West serving as president cash advance today. West also leads Sprint’s XOHM division.
The Kirkland, Wash.-based venture will house workers from Clearwire and Sprint’s XOHM unit and will have research and development and other operations located in Herndon, Va.
The deal, which has been approved by the boards of all companies involved, is expected to close during the fourth quarter.
Frontier Airlines' revenue passenger miles increased in April, the low-cost carrier reported Tuesday.
The airlines' mainline revenue passenger miles were 849.5 million, up 7.7 percent from April 2007.
Frontier carried 878,837 passengers in April, up 6.5 percent from the same month last year.
The airline's mainline passenger yield in April was 9.6 cents, a decrease from 6.3 cents in April 2007.
Revenue per available seat miles rang in at 7.81 cents, a 1.3 percent dip from the same month last year.
Mainline available seat miles in April jumped to roughly 1 billion, up 2.1 percent from the same month last year. As a result, the Denver-based carrier's load factor in April was 81.5 percent, up 4.3 points from April 2007 cash advance loan.
Frontier Airlines also reported passenger traffic results for its wholly owned subsidiary Lynx Aviation.
In April, Lynx Aviation carried 60,851 passengers, resulting in a passenger yield of 18.16 cents.
Passenger revenue per available seat mile was 10.53 cents in April. Lynx revenue passenger miles in April were 24.5 million, and available seat miles were 42.2 million. That resulted in 58 percent load factor.
The Federal Reserve said the proportion of U.S. banks making it tougher for companies and consumers to borrow approached a record in the past three months as the credit crunch deepened.
A net 70 percent of banks increased loan rates over their cost of funds for commercial and industrial borrowing, according to the central bank's quarterly survey of senior loan officers released today in Washington. That compares with 45 percent in the January survey, the Fed said.
The survey, conducted last month, was available to Fed policy makers last week when they cut interest rates by a quarter percentage point. Banks are restricting access to credit after financial firms posted more than $318 billion of losses and writedowns in the aftermath of the crisis sparked by subprime mortgages.
“The net fractions of domestic banks reporting tighter lending standards were close to, or above, historical highs for nearly all loan categories in the survey,'' today's Fed report said.
The survey covered 56 domestic banks and 21 foreign institutions. The American banks together have $6.1 trillion in assets, representing about 64 percent of the country's $9.5 trillion total for all domestically chartered, federally insured commercial banks.
Policy makers last week signaled that they are ready to hold off on further rate cuts as they assess the impact of the 3.25 percentage points of reductions since September. They dropped a reference to “downside'' risks to growth from their previous statement.
Impact on Growth
At the same time, officials acknowledged in their April 30 statement that “tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters.''
Traders anticipate that the Fed will leave its main interest rate unchanged at 2 percent through October, based on futures prices on the Chicago Board of Trade.
In commercial real estate, a net 80 percent of U.S. banks said they tightened lending standards, about the same as the January survey, both about the highest since the central bank began seeking information on the subject in 1990. A net 35 percent of U.S payday loan. banks reported slower demand, less than January's 47 percent.
For home loans, the proportion of U.S. banks making it tougher for prime borrowers, those with the best credit, rose to about 60 percent from 53 percent. About one-fourth of U.S. banks reported slower borrowing for prime mortgages and 30 percent said nontraditional loans were weaker, both “significantly smaller'' numbers of banks than in the January survey.
Mortgage Costs
The Fed's cumulative 3.25 percentage points of reductions in the benchmark short-term rate since September have failed to put much of a dent in the cost of a mortgage. The average rate on a 30-year fixed mortgage was 6.06 percent last week, down from 6.46 percent at the start of September though up from 5.45 percent in January, according to Freddie Mac.
In response to special survey questions on home-equity lines of credit, about half of U.S. banks said they tightened terms on existing loans, mainly because of declines in home values below appraised values, as well as increased defaults and changes in borrowers' finances.
Today's report comes amid signs the U.S. economy is weathering the housing and credit contractions. A report today showed service industries unexpectedly grew for the first time since December, while the economy as a whole expanded at a 0.6 percent annual pace in the first quarter, matching the pace of the last three months of 2007.
Fed Chairman Ben S. Bernanke is scheduled later today to speak in New York on mortgage foreclosures, his first public comments since last week's Federal Open Market Committee meeting.
Bernanke's speech coincides with the advance of legislation backed by Democrats that would create a program at the Federal Housing Administration insuring as much as $300 billion in refinanced mortgages. The House is scheduled to consider the bill on Wednesday.
Foreclosure filings rose 57 percent in March from a year earlier, according to Irvine, California-based RealtyTrac Inc.
A month after the Federal Reserve rescued Bear Stearns Cos. from bankruptcy, Chairman Ben S. Bernanke got an S.O.S. from Congress.
There is “a potential crisis in the student-loan market'' requiring “similar bold action,'' Chairman Christopher Dodd of Connecticut and six other Democrats wrote Bernanke. They want the Fed to swap Treasury notes for bonds backed by student loans. In a separate letter, Pennsylvania Democratic Representative Paul Kanjorski and 31 House members said they want Bernanke to channel money directly to education-finance firms.
Student loans are just the start. Former Fed officials and other Fed-watchers say that Bernanke's actions in saving Bear Stearns will expose the central bank to continuing pressure to use its $889 billion balance sheet to prop up companies or entire industries deemed important by politicians. The Fed satisfied Dodd's request today, expanding the swaps to include securities backed by student debt.
“It is appalling where we are right now,'' former St. Louis Fed President William Poole, who retired in March, said in an interview. The Fed has introduced “a backstop for the entire financial system.''
Critics argue that the result will be to foster greater risk-taking among investors emboldened by the belief that the government will bail them out of bad decisions.
The Fed's loans to Bear Stearns were “a rogue operation,'' said Anna Schwartz, who co-wrote “A Monetary History of the United States'' with the late Nobel laureate Milton Friedman.
`No Business'
“To me, it is an open and shut case,'' she said in an interview from her office in New York. “The Fed had no business intervening there.''
There are already indications that investors perceive the safety net to be widening as a result of the actions by Bernanke, 54, and New York Fed President Timothy Geithner. The Bear Stearns bailout and an emergency facility to loan directly to government bond dealers triggered a decline in measures of credit risk for investment banks and for Fannie Mae, the Washington-based, government-chartered company that is the nation's largest source of funds for home mortgages.
Yield differences between Fannie Mae's five-year debt and five-year U.S. Treasuries have fallen to 0.55 percentage point, from 1.15 percentage points on March 14, the day the Fed's Board of Governors invoked an emergency rule to lend $13 billion to Bear Stearns.
“The market understood that this is the method by which Fannie Mae and Freddie Mac could be bailed out if necessary,'' Poole said.
Wall Street Impact
The cost of default protection on Merrill Lynch & Co. debt fell to 1.4 percentage point by April 30 from 3.3 percentage points on March 14, CMA Datavision's credit-default swaps prices show. The cost of protection on Lehman Brothers Holdings Inc. securities has fallen to 1.5 percentage points from 4.5 percentage points over the same period.
Fed Board spokeswoman Michelle Smith declined to comment, as did New York Fed spokesman Calvin Mitchell.
On March 16, two days after the Fed provided its Bear loan, it agreed to finance $30 billion of the firm's illiquid assets to secure its takeover by JPMorgan Chase & Co.
The Standard & Poor's 500 Financials Index had lost 12 percent in the three weeks prior to March 14; Geithner defended the loans before the Senate Banking Committee on April 3, saying that the Fed needed to offset risks posed to the entire financial system.
`Everyday Life'
A systemic collapse on Wall Street would also mean “higher borrowing costs for housing, education, and the expenses of everyday life,'' Geithner, 46, said.
While the Fed must by law withdraw its financing backstop for investment banks once the credit crisis passes, investors will probably still bet on its readiness to intervene.
“There is no way to put the genie back in the bottle,'' Minneapolis Fed President Gary Stern said in an interview with Fox Business Network on April 18. “What worries me most about where we wind up is that we will have an expansion of the safety net without adequate incentives to contain it.''
Stern noted that he supported the Fed's moves to restore financial stability internet payday loans.
Fed Board officials haven't explained in detail how they plan to curtail moral hazard, the danger of encouraging investors to take on more risk out of confidence in a rescue.
Heat of Battle
“It is very hard in the middle of a crisis to know where to draw lines,'' said Harvard University professor Kenneth Rogoff, a former research director at the International Monetary Fund. “They reduced the immediate risk of a crisis, but upped the ante of raising the possibility of a bigger crisis down the road.''
Lawmakers plan to debate the management of risk and role of supervisors in coming weeks and months. House Financial Services Committee Chairman Barney Frank said April 23 that new rules are needed to deal with a lack of regulation of risk.
Geithner told Congress April 3 that the direct lending needs to be complemented with “a stronger set of incentives and requirements for the management of liquidity risk.''
The risk to the Fed is that it is routinely asked to step in and support insolvent companies whose creditors are on the run, economists say.
“Discount-window accommodation to insolvent institutions, whether banks or nonbanks, misallocates resources,'' Schwartz said in a 1992 lecture available on the St. Louis Fed Web site. “Institutions that have failed the market test of viability should not be supported by the Fed's money issues.''
`Moral-Hazard Problem'
Richmond Fed chief Jeffrey Lacker and policy adviser Marvin Goodfriend wrote in a 1999 paper that central bank lending creates ever-expanding expectations. “The rate of incidence of financial distress that calls for central bank lending should tend to increase over time,'' they wrote. That “creates a potentially severe moral-hazard problem.''
Whatever regulations and incentives the Fed tries to put in place now would be evaded by the market's innovation of new types of products, Goodfriend said in an interview. Investors would nonetheless still count on the safety net, he added.
“We have to start now to recognize the strategic instability of the path we are on,'' said Goodfriend, now a professor at Carnegie Mellon University's Tepper School of Business in Pittsburgh. The Fed needs to prepare markets for how it won't intervene, which it didn't do before the Bear Stearns meltdown, he said.
Lending Treasuries
The Fed also influenced market incentives when it introduced the so-called Term Securities Lending Facility. The program is designed to lend up to $200 billion of Treasury securities from the Fed's holdings to Wall Street bond dealers in return for commercial and residential mortgage bonds among other collateral. Congress has noticed the program favors mortgage credits, and Dodd asked the Fed to swap some of its $548 billion in Treasury holdings for bonds backed by student loans.
While Bernanke rebuffed Kanjorksi's request for direct loans in a March 31 letter, Fed officials today expanded the collateral they accept under the TSLF. The facility now includes all AAA rated asset-backed investments, including bonds backed by student loans. Former Fed officials say it is risky for the central bank to use its portfolio to address specific markets and satisfy Congress without saying where it will stop.
“If there is a public purpose in lending to investment banks, and taking dodgy mortgage securities as collateral, then it is a question of degree about other potential lending,'' Vincent Reinhart, former director of the Fed board's Division of Monetary Affairs, said in an interview. “That's the consequence of crossing a line that had been well established for three- quarters of a century.''
Federal Reserve officials are betting that seven interest-rate cuts and emergency loans to banks may be just about enough to pull the economy through the biggest financial crisis since the Great Depression.
The Fed's Open Market Committee lowered its benchmark rate by a quarter point to 2 percent yesterday, extending the most aggressive easing in two decades. At the same time, the Fed backed away from previous language signaling a preference for further cuts and described reductions to date as “substantial.''
Chairman Ben S. Bernanke is navigating between a faltering economic expansion and near-record oil and commodity prices that threaten to stoke inflation. The central bank didn't rule out further reductions, and it may take additional actions aimed at easing financial-market turmoil, such as expanding the size of cash-loan auctions for commercial banks.
“There's no urgency,'' said David Resler, chief economist at Nomura Securities International in New York. “It's pretty clear that they believe they've done a lot, and it's going to take some time for the full effects of their easing to work their way through and into the economy.''
Hours before the Fed decision, the Commerce Department reported that gross domestic product increased at an annual pace of 0.6 percent last quarter. Only an increase in inventories prevented the economy from contracting.
In March, the Fed began lending to Wall Street securities firms at the discount rate, now at 2.25 percent. It rescued Bear Stearns Cos. from bankruptcy in the first extension of credit to non-banks since the 1930s. The Fed also began auctioning up to $200 billion in loans of Treasury securities.
Paulson Optimistic
Treasury Secretary Henry Paulson, in an interview with Bloomberg Television yesterday, said the credit crisis probably is more than half over.
“They have been quite successful'' in easing the financial crisis, said William Ford, a former president of the Atlanta Fed who is now chairman of the finance department at Middle Tennessee State University. “There is no reason they couldn't continue to provide liquidity without lowering the fed funds rate,'' he added.
The FOMC next meets June 24-25 in Washington. Traders expect the Fed to leave the overnight lending rate between banks at 2 percent for the rest of the year, though they began to price in the chance of a quarter-point cut, placing 22 percent odds on that outcome in June. The same futures indicate traders see no chance the rate will be below 2 percent at year-end.
Cumulative Action
Yesterday's decision brings the Fed's cumulative reductions in the federal funds rate to 3.25 percentage points in seven cuts since September. In 2001, the central bank lowered the rate 11 times for a total of 4.75 points guaranteed payday loan.
Bernanke's predecessor, Alan Greenspan, has come under criticism from some economists this year for inflating the housing bubble by leaving rates too low for too long. Such concern may be keeping Bernanke, 54, a former Princeton University economics professor, from pushing them down further.
“The flak the Greenspan Fed got for going to 1 percent and staying there is going to keep Bernanke from going below 2,'' former Dallas Fed president Robert McTeer said in an interview with Bloomberg Television.
At this week's two-day meeting, Fed governors and district- bank presidents provided fresh quarterly economic forecasts, which will be disclosed in minutes to be released May 21.
“Economic activity remains weak,'' the FOMC statement said. “Tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters.''
Housing Recession
The economy has been the hobbled by the worst housing recession in a quarter century, and it shows little sign of abating. Investment in residential construction projects fell at an annual rate of 27 percent, the most since 1981.
At the same time, Fed officials reiterated their concern about rising prices, saying that “uncertainty about the inflation outlook remains high.'' They repeated language from the March 18 statement that policy makers expect inflation to slow, “reflecting a projected leveling-out of energy and other commodity prices.''
Crude oil futures fell this week after touching a record $119.93 a barrel on April 28. Prices are up 57 percent since Aug. 7, the last time the FOMC left interest rates unchanged at a meeting.
Two district-bank presidents dissented for the second straight gathering, while just four of 12 Fed banks asked for a cut in the discount rate, which covers direct loans to commercial banks and usually moves in tandem with the federal funds rate.
`Considerable Disagreement'
“There's considerable disagreement on the committee,'' said Brian Sack, a former Fed research manager who is now senior economist with Macroeconomic Advisers LLC in Washington. “The statement clearly conveys an expectation by this committee that they will pause at the next meeting,'' he added.
Dallas Fed President Richard Fisher dissented yesterday for the third straight meeting, while Philadelphia Fed President Charles Plosser voted against the FOMC rate cut for a second time. Janet Yellen, president of the San Francisco Fed, said last month that the Fed “will have to be careful not to leave monetary accommodation in place longer than it is needed.''
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