Hologic-Third Wave: Molecular diagnostic reagent merger (HOLX, TWTI)

Hologic, Inc. (NASDAQ: HOLX) has signed a definitive agreement to acquire Third Wave Technologies, Inc. (NASDAQ: TWTI) for a purchase price of $11.25 per share, or approximately $580 million in value. This represents about a 24% premium to Third Wave’s average trading price over the last three months. The Boards of Directors of both companies unanimously approved the transaction.

This merger is one of the more interesting in medical and diagnostic companies, despite neither company being a household name. Third Wave develops and markets molecular diagnostic reagents for a wide variety of DNA and RNA analysis applications for conditions such as Cystic Fibrosis, Hepatitis C, cardiovascular risk and other diseases. Its HPV market opportunity is a $200 million market and growth in excess of 40% in each of the past five years. Hologic believes the global market for HPV testing will increase to $800 million in the next few years.

Third Wave shareholders will receive an aggregate amount of an estimated $580 million in cash, assuming the conversion of Third Wave’s outstanding convertible notes, warrants and restricted stock. Hologic plans to finance this transaction with a $600 million loan in the form of a senior secured credit facility, and it has secured fully committed debt financing for the full consideration from Goldman, Sachs & Co.

Hologic expects the acquisition of Third Wave to help accelerate the growth of its diagnostics division, and once the pending FDA approval is granted it sees a higher diagnostic growth business for womens’ health. The company noted “If and when Third Wave’s HPV tests receive FDA approval, which we hope will be in the first half of calendar 2009, we will be well-positioned to take these products quickly and effectively to market.”

The transaction should close in the third calendar quarter of 2008, and is expected to be modestly dilutive to Hologic’s adjusted earnings per share in the first full year after closing, and increasingly accretive thereafter.

It is expected to be slightly dilutive to Hologic’s non-GAAP EPS in Fiscal 2008 and it anticipates $0.02 to $0.03 per share dilution to previous guidance, excluding acquisition-related charges. The acquisition is expected to be approximately $0.10 dilutive to non-GAAP EPS in Fiscal 2009 and to be accretive to non-GAAP EPS beginning in Fiscal 2010. The transaction is expected to be cash flow neutral in Fiscal 2009 as a result of the use of $160 million in acquired tax NOLs, including interest and financing expense of approximately $40 million from the term loan of approximately $600 million to finance the acquisition.

(taken from: here) [...]

MS Live Search Toolbar Will Be Default on HP Computers

Microsoft has announced that it has made a deal with Hewlett Packard, the world’s largest computer manufacturer, to distribute its Live Search Toolbar as a default on all the computers that the company will sell in the US and Canada.

Until now, HP computers were shipped with Yahoo as the default internet search engine. The agreement reminds of Microsoft’s failed attempt to acquire Yahoo! Inc. in a bid of more that $47 million, and the Redmond based company’s statement saying that after the negotiations came to a stop it would seek new ways to enhance its presence in the search related advertising market.

The toolbar that will be shipped with the HP computers will be built using Microsoft’s Silverlight Technology and will allow users to preview websites without leaving the web page they would be on. In addition to this, there will be shortcuts to some of HP’s web services, like its online photo service Snapfish.

The software giant has shown increasing interest in the growing search related ads market, where Google is by far the biggest player. In the last year, the three most used search engines in the US were Google, handling more that 60 percent of the requests, Yahoo, with about 20 percent and Microsoft with barely 10 percent.

Google has also made a similar deal with computer company Dell to sell its laptops with the company’s search page as the default one.

Microsoft said it expects the deal to make a large number of persons use its search engine. Last year the online services department was the only one where Microsoft announced losses.

(taken from: here) [...]

Garuda 'surprised' by EU ban extension

National flag carrier Garuda Indonesia was surprised to hear the European Commission's decision to extend the ban on the airline from entering European territory, the airline claiming to have carried out the necessary measures to improve safety.

Last Friday, the EU decided Garuda and other Indonesian airlines would remain blacklisted, saying Indonesian authorities and Garuda were yet "to demonstrate they had completed the corrective actions".

"Pending both this demonstration and the completion of remedial action by Garuda and the other airlines, it was decided that none of the Indonesian carriers could be withdrawn at this stage from the list," the EC said in a statement.

However, Garuda spokesman Pudjobroto said the decision was unexpected, especially after a Garuda delegation had informed the EU Commission on Transportation earlier this month of the progress it had made in its safety commitment.

"Garuda Indonesia was the only airline which had the opportunity to discuss safety improvements," he told The Jakarta Post.

He explained the delegation, spearheaded by President Director Emirsyah Sattar, met with the committee on April 3 in Brussels and claimed they were "impressed" with the airline.

"They acknowledged our changes and were happy we were about to receive a safety certificate from the IATA (International Air Transport Association)," he said, referring to International Operational Safety Certification (IOSA).

IATA is a group of 161 international airlines and Garuda is its sole Indonesian member.

An IOSA certificate recognizes the operation, maintenance, safety management, training and finance management of international standard airlines.

Pudjobroto said Garuda was set to receive the certificate next May, after going through 600 checks.

Indonesia was first on the EC's list in July last year after four deadly crashes, including one Garuda Boeing 737-400 in Yogyakarta on March 7, in which 21 passengers died and many others were injured.

The list of banned carriers, effective last Friday, includes those from Equatorial Guinea, Indonesia, the Kyrgyz Republic, Liberia, Sierra Leone, Swaziland and the Democratic Republic of Congo.

The EC said it would continue to closely monitor Garuda's corrective action progress.

(taken from: here) [...]

Note exchange marks effective RI-Japan EPA

Indonesia and Japan have effectively started bilateral economic cooperation under the Economic Partnership Agreement (EPA) framework starting on July 1.

The head of the economic cooperation division at Japan's Foreign Affairs Ministry, Takahiro Wakabayashi, and the trade attache at Indonesia's Embassy in Japan, Tulus Budhianto, exchanged on Sunday diplomatic notes to mark the cooperation.

"From the agreement, Indonesia will get strategic benefits including the acknowledgment of our products and services in the international market," said Tulus as quoted by Antara.

"The start of the EPA will be marked by a deployment of a thousand Indonesian nurses and housekeepers to help look after the elderly in Japan," he said.

Signed by President Susilo Bambang Yudhoyono and Japan's former Prime Minister Shinzo Abe in Aug. 20, 2007 in Jakarta, the EPA is a comprehensive economic agreement involving cooperation in several economic sectors.

Development in trade, energy, mining and intellectual property rights are just among the key issues arranged in the EPA.

In addition, the EPA will also involve the cutting or elimination of various import tariffs, as well as the provision of business facilities for increasing Japanese investment in new sectors in Indonesia.

The EPA also includes capacity-building programs for Indonesian industry and manpower.

According to the Industry Ministry, the automotive, electronics and construction sectors will receive an immediate boost from the tariff cuts, as many Japanese investment commitments are in these sectors.

According to the Trade Ministry, bilateral trade last year reached US$30.15 billion, up 10.69 percent from $27.24 billion a year earlier. The increase was supported by high oil, gas and commodity prices.

Indonesia's exports to Japan stood at $23.63 billion in 2007, up from $21.73 billion in 2006, while its imports reached $6.52 billion, an 18.33 percent increase from $5.52 billion in the previous year.

Trade Minister Mari Elka Pangestu has said the EPA would sustain Japan's existing investment in the country and attract new investment in the future, with an estimated $65 billion in new ventures being offered up until 2010.

Indonesia is Japan's sixth partner of the EPA after Singapore, Mexico, Malaysia, Chile and Thailand, which have earlier inked similar deals.

(taken from: here) [...]

Is Anybody in Control of the Economy?

Korea posted a US$1.56 billion current account deficit in April, a fifth consecutive month in the red since December of last year (US$1=W1,030). This is the first time this has happened since 1997, when a current account deficit depleted the foreign exchange reserves and pushed Korea to the brink of bankruptcy. A major reason for the deficit is the surge in crude oil prices during the first four months of this year, which caused oil import costs to rise by $10 billion compared to the same period a year ago.

Rises in crude and raw materials costs compounded by the weakening won have driven the inflation rate to the 4 percent range. Soaring oil prices have prompted cargo truck drivers to park their vehicles, and fishermen are keeping their boats ashore. Reeling from the impact of high prices, consumers have cut back on spending leaving restaurants and stores empty. Over 3,600 restaurants in Seoul alone have shut down so far this year.

The index of present economic conditions has painted a bleak picture for the third straight month, while the index pointing to future economic conditions six to seven months down the road has also been negative for a fifth consecutive month. The three major economic indices monitoring consumer prices, economic growth and current account balance are all showing warning signs. High-flying global oil prices and the economic slowdown resulting from the U.S. subprime mortgage crisis are beyond Korea's control, so there are limitations to what Seoul can do.

Yet the Korean government has not given up on its goal of achieving 6 percent economic growth this year. Indeed, it is fixated on its election pledge of 7 percent growth. That's why we are seeing the adverse effects of rising consumer prices as the government stuck to a weak won against the U.S. dollar in order to boost exports.

Of greater concern is the fact that there is no one to regulate and rectify these problems. A sign of this situation can be seen in the chief of the presidential office criticizing as "inadequate" a government plan to deal with soaring oil prices that came out of a prime ministerial meeting. At a meeting of presidential chief secretaries, participants are said to have voiced concerns that the chief economic secretary did not appear to be in control of the situation. There was also talk of disagreements between the head of the presidential office and the chairman of the National Competitiveness Reinforcement Committee over who controls deregulation and other mid-to-long-term economic policies. Cheong Wa Dae and the government are out of sync, while even the groups within the presidential office are not operating in tandem. In other words, nobody is in control of economic policy, which is why this administration appears so shaky in its handling of the economy.

(taken from: here) [...]

Arabian Perfumes - An Essence of Tradition

There are some things that add zest to life. Perfumes are one of them. They are associated with sophistication, culture and wellbeing. Perfumes have been around since at least the dawn of civilization.

The reasons why people wear perfumes are many and vary from person to person. Prime among them is attracting attention and having a feel-good effect. Man’s gradual loss of the sense of detecting pheromones from the opposite sex over the millennia probably contributed to the evolution of perfumes. Today perfumes do what pheromones did for our ancestors. The choice of perfumes reflects the personality of the wearer.

Umpteen books have been written on the beneficial effects of perfumes on the body and mind. Medical research has established that the odors we smell have a significant impact on the way we feel. “We know from brain wave frequency studies that smelling lavender increases alpha waves in the back of the head, and they are associated with relaxation,” says neurologist Dr. Alan Hirsch. “An odor such as jasmine increases beta waves in the front of the head, which are associated with a more alert state.”

Perfumes are both oil-based and synthetic and are applied to the body or heated in a clay pot that diffuses the aroma throughout the room. The earliest use of perfumes has been recorded in a cuneiform tablet from the 2nd millennium BC in Mesopotamia. A chemist by the name of Tapputi is mentioned in the tablet.

“Ancient Egypt was a very fragrant civilization,” says aromatic consultant John Steel. “They infused fragrant oils for massage, bathing and medicine, burned incense in religious ceremonies and used aromatic cedar oil to embalm their dead.”

But Abu Yusuf Yaqub bin Ishaaq Al-Kindi, the 9th Century Abbasid philosopher and scientist, is considered the founder of the perfume industry. He carried out extensive research and experiments in combining extracts from various aromatic plants and herbs to come out with a variety of products. He prepared a vast number of “recipes” for a wide range of perfumes.

Not surprisingly, the Middle East is regarded as the cradle of the perfume industry. The Crusaders took the knowledge of oriental medicine and perfumery to Europe in the 12th century. Alcohol-based synthetic perfumes, a comparatively recent innovation, today constitute the bulk of the $40 billion global perfume industry.

In the Middle East today, Ajmal Perfumes is synonymous with captivating perfumes, beauty products and high-quality Arabic fragrances for the body and home. It all began when Ajmal Ali, a rice farmer from the Indian state of Assam, came to Bombay to try his luck as a trader in perfumes. With the rice crop frequently failing owing to the vagaries of monsoon rains, life was tough in Assam. The abundance of agarwood or oudh in his native Assam gave young Ajmal Ali the idea that he could perhaps make a living out of trading in this natural resource, the prime ingredient of all oriental perfumes. With 500 rupees and some oudh oil as his starting capital, he left his hometown for Bombay with high hopes and aspirations.

In the tradition of great masters, Ajmal Ali worked in a dingy house in Bombay in the early 1950s blending perfumes and trying to find the right mixture that would impress the many Arab traders who visited India’s western shores and were fascinated by the country and its aromatic herbs. Half a century later, his son, Nazir Ajmal, today presides over the Dubai-based company which has an annual turnover of $167 million and is a regional corporate entity with a vast portfolio of over 100 of the finest and most captivating fragrances.

Since shifting its operations base from Bombay to Dubai in 1976, Ajmal Perfumes has established over 100 exclusive retail outlets across the Arabian Gulf and hundreds of dealerships across the globe. The company has invested over $10 million in a new 150,000 square-foot facility in Dubai that offers a high-tech automated production unit including a state-of-the-art research wing. Ajmal Perfumes is also the only regional perfume manufacturer authorized to issue quality certificates on behalf of the Saudi Arabian Standards Organization, or SASO.

Currently the company exports its products to 14 countries and has plans to increase the number to 20 by the end of this year. Chief Operations Officer Nazir Ajmal says the company creates fragrances in both sprays and oils and that they fall broadly into two categories — oriental and French or Western. Oriental fragrances tend to be highly concentrated and are usually five times stronger than the Western ones. But, explains Ajmal, oriental perfumery is constricted by the use of a limited number of ingredients whereas perfumers can work with many more ingredients in Western perfumery and, as such, be more creative and produce a diverse range of products.

The key ingredient of Ajmal’s products, of course, is oudh and this is not always readily available as it is found only in Southeast Asia and India’s Assam state. Oudh oil is the product of infected species of Aquilaria and Gyrinops trees. The trees frequently become infected with a parasite fungus or mold, Phialophora parasitica, and begin to produce an aromatic resin in response to this attack. The results are achieved by allowing plenty of time for the infection to fester. Eventually the tree dies and agarwood or oudh resin is chipped away in various grades of quality and sold.

How do you classify fragrances into those for use by men and women? Typically, fragrances for women tend to be stronger, says Ajmal. Floral notes are also associated with feminine scents. Men’s fragrances, on the other hand, are spicy and woody. Usage patterns have, however, blurred the lines lately and today a majority of fragrances are unisex.

To remain in business, perfume manufacturers have to be constantly innovative. In the case of Ajmal Perfumes, its marketing teams do considerable research on consumer taste and behavior and report that to Nazir Ajmal, who is also the chief perfumer. Based on the input, Ajmal then comes out with different blends. But ultimately, Ajmal admits, it is the market that decides the fate of a particular brand. In “ideal conditions” a typical fragrance should last for a year. Oils can be used for longer — up to five years if stored in glass containers.

Marketing perfumes is an art in itself. Aesthetics plays a big role in determining the shape of bottles and their color. New ideas and technological advancement in bottle designing help in choosing the final design.

In this part of the world, demand for fragrances soars during the months of Shabaan and Ramadan. But like music and art there will always be, wherever humans are, demand for perfumes from both connoisseurs and amateurs.

(taken from: here) [...]

Ford to make new subcompact in Mexico

American automaker to build Fiesta subcompact car near Mexico City, converting large truck factory to small car facility.

Ford Motor Co. plans to build its new Fiesta subcompact at a factory near Mexico City for sale in the United States, the company said Friday.

Ford (F, Fortune 500) plans to retool its Cuautitlan Assembly Plant from large-truck to small-car production as it moves to shift its factories from trucks toward more fuel-efficient vehicles, the company said.

The move is a blow to the United Auto Workers union, which last year approved a contract that granted concessions to the automaker. Earlier this year, UAW President Ron Gettelfinger said the union would try to convince Ford that its U.S. plants were competitive enough that the automaker could make money building its smallest cars in the U.S. Currently, all subcompacts sold in the United States seeking comment were left with UAW spokesman Roger Kerson.

The Fiesta is critical to Ford's effort to unify its global operations and sell versions of the same vehicle in markets worldwide. Three- and five-door hatchback versions will go on sale in Europe this fall and China by the end of the year. Other versions, including a four-door sedan, will reach the rest of Asia by 2009 and North America by 2010. Ford said Friday that a European hatchback model is being added to the North American lineup.

Ford has sold 12 million Fiestas since the vehicle was introduced in 1976. Although it's a familiar name to customers in Europe, Asia and South America, the Fiesta was only sold in the U.S. from 1978 to 1980.

Ford also said Friday that it plans a new diesel engine line at its at Chihuahua Engine Plant and a new joint venture transmission plant with Getrag in Guanajuato.

The Cuautitlan plant now makes trucks for the Mexican market, ranging from the Ford F-150 pickup to the F-550. The company plans to import trucks from the U.S. in the future to free factory capacity for the new small cars, it said in a statement.

Overall, Ford and its parts suppliers will invest $3 billion in Mexico as part of the Fiesta project, Ford said. About 4,500 Ford jobs should be created at the plants, the company said.

"Ford is absolutely committed to leveraging our global assets to accelerate the shift to more fuel-efficient small cars and powertrain technologies that people really want and value," Ford President and Chief Executive Alan Mulally said in a statement.

(taken from: here) [...]

An ill wind for gas prices

Traders say that even though you're already paying for the hurricane season, the price could spike to $6 a gallon if catastrophe strikes.

Batten down the hatches: hurricane season starts on June 1. It's expected to be a rough one, threatening to upend refineries and disrupt pipelines in the southern United States.

And that could send gas prices, already nearly 20% above what they were last year, soaring even higher.

That's what happened three years ago when the Gulf Coast was battered by two hurricanes - Katrina and Rita - in the span of a few weeks.

"With the market the way it is now, a move in crude because of a hurricane could really be exacerbated," said MF Global energy analyst Don Luke.

Peter Beutel, oil analyst at Cameron Hanover Beutel, said if a Katrina-like hurricane were to hit in July, gas prices could go as high as $5 or even $6.

"The last thing this market needs at this time is a hurricane, because we can't afford to lose any of our refining capacity at this point," said Beutel. "If anything bullish happens with the market in this state, it would make it go absolutely crazy."

Like any disruption to supply, when a hurricane takes out drilling platforms and refineries, supply and demand principles lead to a jump in crude oil gasoline prices.

But even before the start to hurricane season, speculative traders have started to send oil and gas prices higher in anticipation of a hit to supplies.

"We're already seeing a hurricane premium on gas of about five to 10 cents per gallon," said Alaron Trading energy analyst Phil Flynn. "Especially since Katrina, we've seen traders build that into prices."

The last huge gas spike caused by a hurricane happened in the late summer of 2005, when Katrina and Rita brought many Americans their first glimpse at $3 a gallon for regular gas. The destruction from Hurricane Katrina alone led gasoline prices to jump 46 cents, or 17%, in just one week to a national average of $3.11, according to the U.S. Energy Information Administration.

Though we may never again see two Category 5 hurricanes enter the Gulf of Mexico in the span of only a few weeks, it may not take a similar occurrence to see a similar boost in gas prices again. Oil prices have soared through the roof on seemingly any kind of bad news recently, so analysts admit that this hurricane season's effect on gas prices is difficult to predict.

On the other hand, if no hurricane hits this season, Beutel said gas prices may fall off a bit. But with hurricane season ending Nov. 30, we'll have to wait until December to find out.

"That would have some downward pressure on prices, but who knows where we'll be at that point - we could be a dollar higher or lower than where we are now," he said.

The perfect storm

The National Oceanic and Atmospheric Administration (NOAA) released its tropical storm forecast Thursday morning, saying there is a 65% chance of a stronger-than-average hurricane season and only a 10% chance that it will be weaker than normal. The outlook indicates a 60% to 70% chance of 12 to 16 named storms, with six to nine becoming hurricanes and two to five turning into major hurricanes.

But it doesn't take a strongly active hurricane season to cause major disruption to oil drilling and gasoline production in the Gulf.

"The makeup of a storm can have all the difference," said Flynn. "Slow moving storms have a tendency to churn up underground pipelines, so you don't need a category five to do a lot of damage."

Andy Radford, policy adviser for oil industry trade group American Petroleum Institute (API), said the average hurricane halts oil drilling production for over a week. Rig workers are forced to evacuate two to three days before the storm hits, and as soon as it's safe to return, they have to check for damage and restart production.

"When the offshore oil pumps get shut down, it takes a lot to get them back on," said Radford.

iReport.com: Are you taking extreme gas-saving steps?

He said those big storms in 2004 and 2005 did considerable damage to oil drilling platforms in the Gulf of Mexico, severely cutting into supply to gasoline refineries on the shore.

Though slow-moving, weak tropical storms over the Gulf of Mexico can halt oil drilling, powerful hurricanes that hit land can knock out refineries. That's because about 40% of U.S. refining capacity is located on the Gulf Coast, namely in oft-hit states like Texas and Louisiana. After Katrina and Rita, 30% of Gulf Coast refineries were shut down or operating with reductions.

"Because refining of crude oil into gasoline and other oil products is critical to meeting our nation's daily energy needs, disruptions in these operations can have an immediate impact on the nation's gasoline supply and petrochemicals," said Royal Dutch Shell Plc (RDSA) spokeswoman Robin Lebovitz.

And even though NOAA predicted a high number of strong, named storms for the 2008 season, no one can tell whether or not they will make landfall.

"You can have a very active season but none will make landfall, or a very inactive season but they all hit land," said NOAA spokesman Dennis Feltgen. "There's no way to predict if they will hit yet, because that science just doesn't exist."

It's rare for a refinery to be totally knocked out by a hurricane, but many are susceptible to wind and water damage that can limit supply to and from the facilities. Similar to offshore drilling platforms, refineries are sometimes shut down for more than a week before they can return to full operability, according to API Refining Issues Manager Cindy Schild.

Part of the reason Katrina and Rita led to such a spike in gas prices was that there weren't enough functional facilities to make up for the lost output. Although capacity at many U.S. oil refineries has been expanded, there hasn't been a new refinery built in the United States in three decades.

(taken from: here) [...]

Nationwide contest rewards young entrepreneurs

When she was 8 years old, Evelyn Espinoza sold bubble gum and other candy door-to-door in her Los Angeles neighborhood to earn money.

By sixth grade, her mom was buying the enterprising 12-year-old toys at a wholesale mart to resell at school.

Now 17, Espinoza is still hard at work. Her latest business venture, Hippie's Candles, was named the winner last week of the Los Angeles regional business-plan competition, and a $1,750 prize, at the event sponsored by the National Foundation for Teaching Entrepreneurship and the Merrill Lynch Foundation.

"Entrepreneurship is excellent," said Espinoza, who is in the NFTE entrepreneur-training class at Soledad Enrichment Action Girls Academy, a charter school in downtown Los Angeles.

"Money rules the society," she said. "Everyone wants money, and it's only right to learn how to make it in a legit way and to be your own boss."

Second place and $1,250 went to Crenshaw High School students Autumn Taylor and Ariana Drummond, both 18, for their Groovy Smoothie business -- a revival of a concept created by a former student.

Taylor and Drummond, who sell smoothies at special events, recently whipped up 300 at a multicultural bazaar at the school, bringing $800 in revenue and a profit of $600. They've trained other students to take over the enterprise next school year when the two head to college.

"Going through this program has taught me a lot of things that I won't have to mess up on when I go through this in the future," said Taylor, who will major in business economics at UCLA and would like to work in the music industry before starting her own music company.

Drummond, who will major in public relations and business management at Hampton University in Virginia, values the networking she learned through the program, which included job shadowing at Cushman & Wakefield Inc. and a field trip last week to Comcast Corp.

"My networking with the different mentors and people at Merrill Lynch and NFTE has taught me a basic understanding of getting to know individuals and learning how important relationships are in the business world," she said.

Monique Verduzco, 15, won third place and $750 for her business plan for an automotive care company called Magic Detailing Service. The student at Soledad Enrichment Action charter school in North Hills wants to study graphic arts in college.

The first- and second-place winners will head to New York in the fall to compete for a $10,000 prize with other young entrepreneurs from NFTE programs around the country. A pool of 20,000 young people participated in the regional competitions this year.

Last year, Torrance student Daniel Uribe won third place in the national competition after placing first in the Los Angeles regional match for his Lazer Bearings business plan. The venture sells high-performance, low-cost ceramic bearings for skateboards.

New York-based NFTE, which was started by an entrepreneur as a dropout prevention program, targets young people from low-income areas. The nonprofit provides curriculum and training to schools, after-school programs and organizations to teach business management, financial literacy, critical analysis and public speaking skills.

Merrill Lynch helped launch NFTE Greater Los Angeles in 2006 with a three-year grant.

"We're trying to help teach young people about investing in entrepreneurship, to help promote the importance of business knowledge and that sort of thing -- it's core to who we are as a company," said Garrett Gin, a Costa Mesa-based spokesman for Merrill Lynch & Co.'s western region and a regional NFTE judge.

Company employees volunteered to mentor Espinoza and other students in the Los Angeles program. The mentors served as financial advisors, helping the students run the numbers for their business plans, and worked with them to hone their presentations.

Locally, about 500 students competed in the high-school level business plan competition. Overall, there are 17 schools and one community organization using the NFTE curriculum in the Los Angeles area. About 2,000 local young people have participated since the program began.

Espinoza said she makes candles in the kitchen of her family's home using organic wax and various dyes and fragrances. The 11th-grader has learned to wait until she has an order "so I can make sure people pay for the supplies I use," she said.

Sounding like a seasoned business pro, she talked about "her basic unit," a six-inch pillar that sells for $17. Star shapes made of colored layers of wax and heart-shaped candles cost more.

Espinoza said she jotted down several ideas for her business, including making bird treats, before settling on candles. A friend helped teach her how to make them.

Espinoza would like to expand by making a catalog, adding to her candle selection and getting stores to buy her candles on consignment.

"I really see big things for this business," she said. " I'm just getting going."

Insurance enforcement

The first batch of 500 California employers' names has been sent to be checked against the state's workers' compensation insurance rolls under a pilot program meant to ferret out businesses that duck the state-mandated coverage.

As part of the new enforcement effort, every three months 500 business names will be pulled from sources that include the payroll database at the Employment Development Department and handed over to the Workers' Compensation Insurance Rating Bureau.

The program was created last year by the passage of a bill aimed at reducing the number of California businesses illegally operating without insurance to cover the cost of medical care and disability benefits for job-related injuries.

"The underground economy is ranked up there as what [small-business] employees feel is the biggest threat competitively in California," said John Duncan, director of the Department of Industrial Relations, which launched the program two weeks ago.

If a small business looks like it doesn't carry insurance, it will get a letter asking for proof of coverage. Those without it will be subject to a penalty.

California employers -- even those with a single employee -- must carry workers' compensation insurance unless they employ only family members. Qualified firms can self-insure.

For more information, see the state website at www.dir.ca .gov/dwc/employer.htm.

Equipment

For small businesses that need to acquire equipment but aren't sure how to best leverage their cash and credit to do so, a new website offers a solid overview of the options.

Business owners can read up on subjects such as whether to lease equipment or get a loan to buy it and what types of leases and financing are available.

About 80% of all businesses finance equipment to invest in capital assets while managing cash flow and their balance sheets, according to industry trade group Equipment Leasing and Finance Assn., which created the guide at www.equipmentfinance101.org.

For a small business, financed equipment can include computers, telephone systems, office equipment and related services and software.

Keep an eye on:

Paid sick days will be required for all employees who work seven or more days a year under a bill approved last week by the state Assembly. Small businesses would be able to limit paid sick days, which can be used to care for family members, to five per year.

The bill, AB 2716, now heads to the state Senate for consideration. It is opposed by the California Chamber of Commerce and, if passed, may face a veto by Gov. Arnold Schwarzenegger.

(taken from: here) [...]

Plumber to make £100m splash on Plus

Paul Davidson, the colourful entrepreneur known as the Plumber and famous for his battles with the Financial Services Authority, will this week return to the public market with his new pipe repair company.

Mr Davidson, who made his millions selling a device to paint behind radiators, will begin trading as Fluid Leader Group (FLG) on the Plus market on Tuesday.

The company, which has raised around £5.5m, mainly through selling a 12 per cent stake to Sheikh Faisal al-Qassimi, a member of the ruling family of Sharjah, part of the United Arab Emirates, is expected to have a market capitalisation of up to £100m, making it one of the biggest firms listed on Plus.

FLG sells a reinforcing system to end oil-pipe leakage that Mr Davidson claims will "revolutionise the market". "We are moving to Plus this week," he said, "but we plan to bypass AIM and go for a full listing within two years."

Mr Davidson, who owns 54 per cent of the shares in the company with his son, plans to grow the company through acquisitions and says he has targeted three UK companies.

"There are lots of opportunities out there and we intend to buy them up where possible," he said.

Mr Davidson is best known for a four-year battle with the FSA, which began when the watchdog attempted to fine him for market abuse. A tribunal finally dismissed the case, ordering the FSA to pay Mr Davidson £725,000 – the most humiliating climbdown in its history.

(taken from: here) [...]

Bank set to keep base rate at 5% as inflation continues to rise

Homeowners are likely to get little respite from high borrowing costs this week, with City economists predicting that the Bank of England will keep interest rates on hold when its rate-setting Monetary Policy Committee meets on Thursday.

The committee is expected to keep rates at 5 per cent despite calls for cuts to revive the economy, which many think teeters on the edge of recession.

Michael Taylor, senior economist at Lombard Street Research, said he expected rates to be kept on hold at 5 per cent for the rest of the year, constrained by rising inflation. It was likely, Mr Taylor said, that inflation would rise above 3 per cent in the next month, forcing the Bank's Governor, Mervyn King, to write a letter of explanation to the Chancellor, Alistair Darling.

Mr King has had to write only one such letter in the past.

"If the Bank of England starts cutting interest rates now, we will end up with a much worse inflation problem in the next few years," said Mr Taylor. "The committee has to remember the long-term picture."

The City will find out whether the 3 per cent level has been breached on 17 June, when the latest consumer price index is published.

In a poll of 20 economists by the financial news provider Bloomberg, 80 per cent said they believed the committee would hold rates at 5 per cent this week. The Bank has cut interest rates three times in the wake of the credit crunch, but kept them on hold at its last meeting because of fears of inflation, which has crept to 3 per cent – 1 per cent higher than its target.

Thursday's decision on rates will come just days after conflicting data showing both the largest monthly fall in house prices in 17 years and the fastest rise in retail prices in 16 years.

The Nationwide building society reported that house prices fell by 2.5 per cent in May – the biggest year-on-year drop since December 1992 – while the employers' organisation the CBI said that 56 per cent of retailers had reported higher selling prices in the past three months.

The chief executive of HSBC bank, Michael Geoghegan, last week called on the Bank of England to raise interest rates, saying: "Inflation is a long-term problem because there is no long-term will to solve it."

(taken from: here) [...]

Dell Turnaround Stoked by Emerging Market Sales

Dell Inc. (DELL) reported a solid first quarter with earnings of $.38 per share on $16.08 billion in revenue (see conference call transcript). The results beat Wall Street estimates of $.34 EPS and $15.68 billion in sales.

This is positive news for a company that has struggled greatly in the last few years, and could be read as a positive sign that the company’s turnaround strategy is paying off. Since Michael Dell returned as CEO, the company has worked to become more competitive by cutting costs. The clear emphasis of this cost cutting effort has been to reduce redundant employees and in the first quarter Dell aggressively cut 3700 jobs--bringing the total over the past year to 7000. Operating expenses dropped 7% from the fourth quarter, thanks in large part to this downsizing. The company hopes to attain $3 billion in cost savings by 2011.

Dell’s workforce reductions have not adversely affected sales as product shipments increased 22% in the quarter. A particular highlight was server sales, which increased 21%--three times the rate of growth of the industry as a whole. Furthermore, notebook unit sales grew at a stunning 43% clip; however, because of price cuts, revenue on notebooks did not keep up that pace, growing only 22%. Other business segments also made nice gains. The lone segment that struggled was desktop sales which dropped 5%. Dell has aggressively cut prices on many of its products, which boosted sales but negatively impacted margins.

Of particular interest, for the first time in Dell’s history, more than half of revenue came from sales outside of the U.S. Emerging markets such as China, India, Russia, Brazil and Latin America grew exceptionally fast. The weak dollar clearly had a big impact, but so too did Dell’s turnaround strategy of trying to aggressively grow market share in these up-and-coming, computer-buying nations/regions. Overseas growth was essential to Dell’s strong quarter because business spending on IT in the U.S. slowed almost to a halt, as companies bought only what was essential in the face of a weakened economic outlook.

Ockham Research currently rates Dell a Strong Buy, as it has fallen out favor with the market for some time and the company’s recovery appears to be underway. Price-to-cash flow is currently only 12.22, which is 50% of Dell’s historical average. Likewise, price-to-sales also demonstrates the current cheapness of the stock. We would consider a price-to-sales of 1.16 to 1.96 as normal for this stock, but the current number is only .749 times sales per share. Given current fundamentals, we would expect Dell to trade at about $35 per share. The current price would need to appreciate by fifty percent to bring these metrics into a normal standing.

Dell management apparently agrees that its stock is undervalued, as the company closed a $1.5 billion private placement in April in order to buy back stock. The company bought back more than $1 billion or 52 million shares in the first quarter. Furthermore, at quarter end, Dell had $9.8 billion in cash, so expect the company to continue to buy back stock aggressively in the second quarter.

(taken from: here) [...]

China Lifts Malaysian, Indonesian Palm Oil Sales

Consumption of palm oil by its No. 1 importer is expected to jump as rising global demand hikes prices for the cheapest of the edible oils

At an oil palm estate near Melaka Town in peninsular Malaysia, the harvesters are winding up the day. The Regent Estate, owned by IOI Corporation, employs around 300 workers in all. With the sky turning dark and little shelter out in the plantation, the harvesters hurry to avoid being caught in a tropical downpour.

One harvester, a Bangladeshi national, cuts down a final bunch of fruit from a palm. He swings his sickle—modified with an elongated, four-meter-long handle—and a cluster of yellowish-orange palm oil fruit falls from the tree. It hits the ground with a heavy thud.

Once these fruits are crushed and refined into palm oil, there is a good chance they will end up in China. IOI exported 230,000 tons of palm oil products to China last year, accounting for 6% of Malaysia's total palm oil exports to the country. Malaysia itself is responsible for 40% of world palm oil output.

The versatile commodity is used as cooking oil, in food and cosmetics processing, and myriad other industries. China, perhaps unsurprisingly, is the world's biggest importer of palm oil.

"If we look at the major importers, China has been number one for many years," said Ivy Ng, who researches palm oil plantation stocks at investment bank CIMB in Kuala Lumpur.

Palm oil, traditionally unglamorous, has lately become a hot commodity. According to investment bank Credit Suisse crude palm oil prices rose 38%—from US$917 a ton to US$1,265 a ton—over a 12-week period from the start of December. There haven't been highs like this since 1998.

China is a key driver of these towering prices. The disastrous snowstorms this winter mean the spring rapeseed harvest will likely be poorer than planned. Rapeseed is a major source of edible oil in China, and palm oil imports are expected to make up the difference. At the same time, broader trends, like China's increasingly wealthy population, also mean individuals are consuming more oil than before.

"China was consuming a very low amount of edible oil per person compared to some of the more developed countries," Ng said. "But over the past few years they've been catching up."

Increasing demand from China isn't the only reason for palm oil's current popularity. Demand is rising across the developing world while biofuel policies introduced in developed countries are another contributing factor. In Europe and the US, the commodity is a substitute for rapeseed and other edible oils, which are increasingly being used for fuel purposes.

Of the 17 types of edible oils and fats that are traded globally, palm oil remains the cheapest, going for US$300 less than soya oil, according to Credit Suisse.

The rivals
Palm oil's great rival in China is soybean oil, which is mainly imported from South America. China is the world's biggest soybean importer, buying 33.5 million tons last year, a CLSA report said. Soybean oil occupies 37% of the edible oils market in China, according to research firm Beijing Agribusiness, compared to palm oil's 21% share.

But palm oil has momentum on its side. In 2002, it overtook rapeseed oil to gain its current second-place position in terms of market share.

"Traditionally, the Chinese market is a big market for rapeseed oil; probably 15 years ago rapeseed oil was the number one oil, followed by soybean and then palm. But today the relationship has changed," said James Zhou, who heads Cargill's grain and oilseed supply chain unit in China.

History lessons
The fact that Southeast Asia and China are linked by palm oil is a quirk of geography and history. The plant is native to West Africa, and was first transported to Indonesia by the Dutch. In 1917, the first oil palm plantation was established in what is now peninsular Malaysia.

The Dutch transplantation turned out to be a felicitous move. According to Tan Teck Hock, an agronomist at IOI, oil palms grow best within five degrees latitude of the equator, and in areas with evenly distributed and heavy rainfall. Malaysia and Indonesian Borneo, in particular, with vast expanses of rainforest, were ideal candidates for plantations.

With China's rise, palm oil again seems to be benefiting from being in the right place at the right time.

"[Palm oil] is relatively cheap, and we can get palm oil from Malaysia, Indonesia, which is only about five to 11 days' voyage, depending on which part of China," said Cargill's Zhou. "Soybean oil is primarily from South America, it has a much longer voyage—40 to 45 days—and higher shipping freight costs."

The palm oil supply chain typically begins at an estate owned by one of the big plantation companies—firms like Singapore-listed Wilmar, Kuala Lumpur-listed Sime Darby or IOI.

Estates in Malaysia and Indonesia account for 90% of global palm oil output. In 2006, 65% of China's palm oil imports were from Malaysia, with nearly all the remainder coming from Indonesia, according to Beijing Agribusiness.

The plantation companies conduct agricultural research and planting at their estates. The palms are harvested for "fresh fruit bunches," the basic metric for estate output, which are transported to nearby mills for crushing and separation. Mills process the fruit bunches to produce crude palm oil and extract the fruit kernels before shipping it all to a refinery. The crude palm oil is bleached and deodorized to produce RBD palm oil. Kernel oil is turned into oleochemicals or specialty fats that are used in cosmetics and soap manufacturing, and in food processing as products like cocoa butter substitutes.

An additional step of fractionation produces palm olein, a liquid, and stearin, a solid. These are used for making things like margarine or as ingredients in ice cream, for example.

From Southeast Asian refineries, the oil is imported into China. Wilmar, which has most of its plantations in Indonesia, is responsible for some 60% of palm oil imports to China, according to Cargill's Zhou. Unlike most producers, Wilmar is vertically integrated, running its own estates and refineries as well as handling imports to China and even producing end-products for the China market. Zhou's own firm imports about 10% into the country, mainly for selling on to second-tier traders or end-users.

One of the main applications of palm oil in China is industrial frying. As such, the country is very reliant on RBD palm oil, which is prized for its resistance to oxidation. This allows users to fry many batches of food without it going rancid.

"Palm oil has a big advantage over soya bean oil or other oils," said Wong Chee Kuan, who runs Loders-Krokland, the specialty fats subsidiary of IOI Corp, in the Netherlands. "With palm oil you are able to fry much longer with less deterioration in quality of oil."

Fried and dried
One industry that does plenty of industrial frying is instant noodle manufacturing. Instant noodles have to be fried to remove moisture in order to be preserved. Hong Kong-listed Tingyi, which claims to be the biggest instant noodle producer in the world by volume, has 32 factories in China. It pumps out 9 billion packets of its Master Kong brand instant noodles a year. Tingyi buys refined palm oil from Malaysia and Indonesia.

According to Tingyi CFO Frank Lin, the palm oil price increases have eaten into the company's gross margins. He said palm oil makes up 12-18% of the cost of a packet of noodles. The higher-end the noodles and the more expensive the packaging, the lower the percentage. Instant noodles, in turn, make up about half of the company's annual turnover, which was US$2.3 billion in 2006.

"Our production costs and gross margin are squeezed by the rise in palm oil costs," he said.

Back at the estate, the harvesters are done for the day. They spent months learning how to wield their sickles efficiently—slicing a 20-kilogram fruit bunch off a 4-meter-tall tree is no easy task. But as China's demand for oil continues to rise, they can rest assured that they will have plenty more work in the coming years.

(taken from: here) [...]

British Retail Inflation at 16-Year High

A lethal combination of rising prices and falling sales has hit Britain's shops, according to the latest evidence from business leaders on the state of retailing.

Activity in the high street fell for a second consecutive month in May, according to the Confederation of British Industry, while retailers put up their prices at the fastest rate since 1992. Retail confidence and the employment outlook have also worsened slightly this month, the CBI Distributive Trades Survey revealed.

When asked about their year-on-year sales volumes, only 28 per cent of retailers said they had increased and 42 per cent said they had fallen. The resulting balance of minus 14 per cent is less severe than the minus 26 per cent reported last month.

Sales are expected to recover slightly next month, by a balance of 6 per cent.

More worryingly, prices of goods rose at their fastest rate in 16 years in the year to May, as shops passed on the extra costs of energy, food and raw materials. A positive balance of 56 per cent of companies said their average selling prices had gone up, the highest figure since May 1992.

A similar rate of price increases—a balance of 52 per cent—is expected next month. Food retailers, including the major supermarkets, had a good month, with a positive balance of 51 per cent reporting year-on-year growth. Clothing sales stabilised, while footwear and leather outlets enjoyed another successful month.

However, the number of people visiting high street shops in May was down 1.5 per cent on last year's total, according to the latest Retail Footfall Index from the research group Experian.

Ian McCafferty, the CBI's chief economic adviser, said: "It is encouraging that retailers can see some recovery in sales next month, but they are not optimistic about the business outlook and retail conditions are likely to remain tough."

The combination of stagnating sales co-existing with rising inflation—so-called "stagflation"—is a product of the unprecedented convergence of a credit crunch and a commodities crunch, which has squeezed profits and household incomes.

Earlier this month, the Bank of England warned that living standards would rise only very slowly over the next few years. Falls in consumer confidence and house prices confirm the outlook for the economy as a whole remains gloomy.

The conflicting data make the dilemma facing the Bank of England's Monetary Policy Committee, which will make its next decision on interest rates on Thursday, even more acute.

Michael Saunders, an analyst at Citi European Economics, said: "These readings, and the plunge in house prices, highlight the deteriorating prospects for the economy, but there are also signs that the inflation overshoot will be bigger and more protracted than the MPC has been expecting.

"The MPC has warned that an extended period of sub-trend growth is probably needed to bring inflation back to target. Very tough times lie ahead."

(taken from: here) [...]