Norris McLaughlin & Marcus, P.A.

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REWIND: International Business News #45

Posted on November 21st, 2012 | Author:

  • Hewlett-Packard created ripples in the U.S. stock market with an announcement that it would have to write down $8.8 billion of value of Autonomy, a British software company bought by HP last year.  HP claims that the write down is a result of “serious accounting improprieties” and misrepresentations in financial data provided to HP prior to its acquisition of the British company, causing HP to overpay for the acquisition.  Shares of HP dropped by 13% upon release of the news, and led to a decline in the NASDAQ composite.  For their part, former executives of Autonomy deny HP’s allegations, stating that HP conducted a rigorous due diligence process prior to the acquisition.  In addition, the executives blame any loss in value in Autonomy on mismanagement by HP.
  • Swedish furniture company Ikea Group is one step closer to entering the Indian market.  Through a decision of the Indian Foreign Investment Promotion Board, Ikea received clearance on its proposal to open 25 wholly-owned stores across the country, representing an investment of approximately $1.9 billion.  Approval of the proposal, which will be largest single-brand investment in India, was made possible following a decision of the Indian government last year that allows for foreign entities to wholly-own and establish a retail venture within India where the company sells only its own brand of goods.  Previously, foreign companies were limited to owning a maximum of 51% of a joint venture with an Indian entity.  The proposal will now be reviewed by the country’s Cabinet Committee on Economic Affairs.
  • Credit rating agency Moody’s Investor’s Services downgraded France’s sovereign debt rating from its typical Aaa rating to a Aa1 rating.  Moody’s cited France’s “deteriorating economic prospects” and uncertain economic future as the reasons for the downgrade. The downgrade by Moody’s comes months after Standard & Poor’s downgraded France’s rating in January.  As the downgrade could impact France’s ability to borrow money and its role as an investment prospect, France’s Finance Minister, Pierre Moscovici, has indicated the country will undertake reforms.
  • Asian nations indicated an interest to form a regional trade bloc that would include the powerful nation of China.  The proposed Regional Comprehensive Economic Partnership would involve 16 nations, including many that are currently part of ASEAN, the Association of South East Asian Nations.  The United States, through the Obama Administration, has been advocating the formation of the Trans-Pacific Partnership in the region, but that trade bloc would exclude China.  The desire to remove barriers to trade seem evident in the region, as in addition to the Regional Comprehensive Economic Partnership and the Trans-Pacific Partnership, China, South Korea and Japan initiated tri-lateral talks to form a trade partnership, as well.  Still geo-political issues may present an obstacle to the formation of trade blocs.  The most looming dispute involves control over the South China Sea, a vital route for trade coming into and out of the region.  China claims ownership over the Sea, as do several smaller countries, such as Malaysia, the Philippines, and Vietnam.