2009 has seen the end of Nortel (formely Canada's Northern Electric, who manufactured Canada's first gramaphones in 1900), which filed for bankruptcy protection in January.
Ericsson is now paying $1.13bn for Nortel's assets. The auction of its CDMA business and LTE (Long Term Evolution) Access assets was concluded on July 25th 2009. Some dubiety still exists over its Metro Ethernet Networks business, described as one of Nortel's "crown jewels".
Where did Nortel go wrong? What mistakes were made in Nortel's strategy/execution?
Sunday, 26 July 2009
Monday, 13 July 2009
CIT, the symbolic bridge between Wall St and Main St, verges on collapse as Washington wavers on issue of Moral Hazard
The score: CIT group styles itself as a "bridge between Wall Street and Main Street". Based in NY, CIT is a lender to small and mid-sized companies, which received $2.3bn in taxpayer funds in December (reported by CNN). Jul09, over six months later, it is trying to persuade policymakers/regulators to extend the aid package. CIT share price has been slashed 37% in the past month to $1.35. CDS has skyrocketed. Lawyers have apparently been hired to explore a bankruptcy filing.
Washington is in a quandary - what should it do? You are Washington.
on the one hand,
a) you need to hold the private sector accountable for its actions.
On the other hand,
b) you need to evaluate the impact of non-intervention on the health of the financial system.
The old issue of moral hazard and bailouts.
The cash crunch faced by CIT is described by CNN as follows: "Like many finance companies, CIT funded its operations by borrowing in the debt markets. Question: to what extent did debt market funding contribute to CIT's collapse?
But the collapse of Lehman all but closed those markets to finance companies -- prompting CIT and bigger players, ranging from Goldman Sachs (GS, Fortune 500) and American Express (AXP, Fortune 500), to hurriedly convert themselves to banks." The problem with debt is you have to keep paying it off. CIT has $1bn in debt to pay off next month.
Washington is in a quandary - what should it do? You are Washington.
on the one hand,
a) you need to hold the private sector accountable for its actions.
On the other hand,
b) you need to evaluate the impact of non-intervention on the health of the financial system.
The old issue of moral hazard and bailouts.
The cash crunch faced by CIT is described by CNN as follows: "Like many finance companies, CIT funded its operations by borrowing in the debt markets. Question: to what extent did debt market funding contribute to CIT's collapse?
But the collapse of Lehman all but closed those markets to finance companies -- prompting CIT and bigger players, ranging from Goldman Sachs (GS, Fortune 500) and American Express (AXP, Fortune 500), to hurriedly convert themselves to banks." The problem with debt is you have to keep paying it off. CIT has $1bn in debt to pay off next month.
Saturday, 11 July 2009
Banks Risky Funding Sources
When Nevada's Silver State Bank failed in September around two thirds of its loan portfolio comprised real estate development and construction loans. The practice of "hot money" or brokered deposits has also been blamed for small bank failures in the US.
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