ARTICLES : Business, Economy & Technology

[teesra banda]

I thot of starting a thread to share good articles on BUSINESS, Economy and related areas.

M starting this by posting an article on Berkshire Hathaway & Warren Buffett.

[teesra banda]

A Finger on the Pulse of Berkshire Hathaway and Warren Buffett

Throughout the spring, the snowballing financial scandal at insurance giant American International Group has put the spotlight on the firm's partner in the improper deal, General Re Corp. Could the damage extend to Gen Re's owner, Berkshire Hathaway Inc. and its legendary chief, Warren Buffett?

The questions about Gen Re come on top of another that gets larger every year: Can Berkshire continue to deliver outsized returns to shareholders after 74-year-old Buffett, who has run the company for four decades, passes from the scene? Since 1965, Berkshire's average annual returns have been about double those of the Standard & Poor's 500.

Gen Re, a reinsurance giant with worldwide operations, is among Berkshire's largest units. In 2000, it provided a $500 million finite insurance policy that AIG used to improperly dress up its financial statements to bolster AIG's stock price. The scandal led AIG directors to force out their chairman and chief executive, Maurice Greenberg, and AIG has since reported a number of other accounting improprieties.

Greenberg, according to AIG, was directly involved in the finite-insurance deal with Gen Re. But it is not clear whether Gen Re executives knew that AIG improperly booked the deal, which in itself was legal. AIG had called the contract an insurance policy when it was in fact a loan. By mid-May, one Gen Re executive had been notified by regulators that he could face criminal charges, and Gen Re put him and a second executive on leave.

Buffett has been interviewed by regulators, but he has been described as a cooperating witness rather than a target of the investigation. In a March 29 statement, Berkshire said that "Mr. Buffett was not briefed on how the transactions were to be structured or on any improper use or purpose of the transactions."

Since the end of February, when the seriousness of the AIG scandal began to become apparent, Berkshire's stock has fallen about 8%, compared to a 1.6% drop in the Standard & Poor's 500.

Investing the Float

In 40 years, Buffett has converted Berkshire from a small New England textile manufacturer to a mammoth holding company. Among the publicly traded companies in its portfolio, the largest stakes in market value are in American Express ($8.5 billion), Coca-Cola ($8.3 billion) and Gillette ($4.3 billion). Its largest stakes as a percentage of shares outstanding are in The Washington Post (18.1%), Moody's (16.2%) and White Mountains Insurance (16%). Altogether, Berkshire's holdings in the publicly traded companies were worth $37.7 billion at the end of 2004, according to the company's annual report.


In addition, Berkshire has a number of wholly owned subsidiaries. That includes a number of insurers, whose size is measured by "float" -- the money on hand from insurance premiums received from customers and not yet paid out for claims. Gen Re is the largest of the insurance subsidiaries, with a $23.6 billion float. Next are Berkshire Hathaway Reinsurance ($13.9 billion) and Geico Insurance ($5.3 billion). Total float for these and other insurance operations is about $46 billion.


Reinsurers provide policies to other insurance companies, allowing them to cover potential claims that would be too large to pay on their own. Insurers of all types can make underwriting profits whenever the premiums exceed claims paid. But, typically, the lion's share of insurance-company profits comes from investing the float. Berkshire uses the float to invest in stocks and to buy whole companies.


Gen Re has not been the most successful Berkshire unit. Underwriting profit was a scant $3 million last year, compared to $970 million and $417 million at the smaller Geico and Berkshire Hathaway Reinsurance units.


But in his annual letter to shareholders this spring, Buffett blamed Gen Re's poor performance on bad decisions the company made before its current chairman and CEO, Joseph Brandon, took over three years ago. "At General Re, Joe Brandon has restored the long-admired culture of underwriting discipline that, for a time, had lost its way," Buffett wrote. "The excellent results he realized in 2004 on current business, however, were offset by adverse developments from the years before he took the helm."


The finite insurance deal with AIG was done under Brandon's predecessor. Any repercussions from that deal therefore do not seem likely to up-end Gen Re's current management. Fines or other financial penalties are not likely to do lasting damage, either, as Berkshire is sitting on $43 billion in cash.


But could Gen Re have been involved in other improper activities? "General Re is known as a pretty conservative operation," said Cummins, adding that unlike AIG, which has faced numerous questions about accounting practices and other matters over the years, Gen Re has a clean track record. "I would be mildly surprised if General Re had been into this in a major, major way. If this is the only involvement of General Re, I just don't see it as being a big deal. I think it will blow over." Siegel noted that Gen Re's business problems, mainly from writing policies that were too risky, probably turned out to be bigger than Buffett expected when he bought the company in 1998. But, he added, "I think he's got a better crew now."


Also, it is not unusual for a new Berkshire acquisition to have some troubles at the start. Buffett hunts for companies he can get at bargain prices, usually because they are beaten down by problems he views as soluble. After Berkshire picked up National Indemnity Company in 1980, for example, it suffered losses in four of the next five years, according to Berkshire's 2004 annual report. That was followed by 16 years of handsome profits. The only loss since 1984 was in 2001, when many insurers were hammered. "Indeed, had we not made this acquisition, Berkshire would be lucky to be worth half what it is today," Buffett said in his recent annual letter to shareholders.


Though Buffett is often described as a brilliant stock picker, publicly traded stocks now constitute less than half of Berkshire's net worth. And he is not an active stock trader; he generally buys only stocks he hopes to hold forever.


In recent years, Buffett also has become a big investor in currency markets. At the end of 2004, Berkshire owned $21.4 billion in foreign exchange contracts involving 12 currencies. He strongly believes that the U.S. current accounts deficit will cause the dollar to fall. Although the dollar climbed slightly last year, causing a $310 million loss on these bets, Buffet said he would stick with his bets against the dollar.


"The Buffett Way" of Investing

At 74, Buffett says he is in excellent health and has no plans to retire. Nor has he named a successor. But if he did leave the company, what would happen to it? Buffett is universally viewed as the key to Berkshire's fine performance. "He's obviously a very bright man," Siegel said. "He looks at things very rationally. He doesn't like to get his emotions involved."


While that sounds like a sensible practice anyone could emulate, it's very difficult to keep excitement, worry and other emotions from affecting decisions, Siegel added. Many books have been written about "The Buffett Way" of investing. But like most people at the top of their fields, Buffett has a talent that cannot be bottled, Siegel noted, and his departure would inevitably be something of a blow. He has no obvious successor: His long-time partner, Charlie Munger, is older.


On the other hand, many parts of Berkshire may be able to chug along quite well without Buffett. Although he is a hands-on investor, choosing companies and stocks very carefully, he is not a hands-on manager. His style is to put good executives into place, or keep the good ones he gets when he buys a company. He then leaves them free to manage with little interference from his famously lean corporate headquarters.


His departure could bring an end to the string of brilliant acquisitions. But not much is going on with that part of the company, anyway. "My hope was to make several multi-billion dollar acquisitions that would add new and significant streams of earnings to the many we already have," he said in his shareholders letter. "But I struck out. Additionally, I found very few attractive securities to buy. Berkshire therefore ended the year with $43 billion in cash equivalents."


While he promised to keep looking, he also said stock returns are likely to be smaller in the future than they were in the past. Hence, investors cannot count on dramatic gains in Berkshire even if Buffett stays on the job for some time.


Neither, however, should they expect Buffett's advancing age to have much effect on the share price. "Everyone knows he's not going to live forever," Siegel said. "That's built into the price.... The market is thinking, maybe he's got five to 10 years.... If we knew that Buffett was going to live forever, maybe the stock would be 10% higher."

Source : Wharton Business School

[catikon]

gr8 initiative dude !!!

[teesra banda]

Rankings of Best Global Brands in 2005 is out and again Coca-Cola leads the way with Brand worth of more than $67 bn.

I wonder when will an Indian brand feature in the list. But definitely someday will....

Refere to attachment for the complete list.....

Source : Interbrand

[Apprentice]

Wonderful article...great initative by teesra banda aka Vijay Singh!!!!!!

keep em coming!!!!

[teesra banda]

Goodwill Hunting: Financial Value of Marketing & PR


Can you put a dollar value on your marketing? It's no stretch of the imagination to say that marketing can enhance the perception of a company, but does it have a dollar value? One topic that really perks up the ears of the students in my business administration classes is the subject of the true financial value of marketing and public relations. It's counter-intuitive to assume—much less believe—that something as intrinsic as a brand image or as esoteric as proactive public relations could produce and retain value—true economic value—for a company.


Time and again I hear people questioning the true value of marketing. How does one put a dollar value on a function that doesn't directly contribute to the bottom line? Sales and revenue aren't always accurate indicators, because it's often difficult to tell what part of your marketing budget is the most effective. As the old saw goes, "I know I'm wasting half of my marketing dollars; I just don't know which half." After all, marketing doesn't really create anything. Most companies think of marketing as an indirect expense because it's not directly related to production.


Marketing Value = Goodwill
While many business students (and even some marketing practitioners) believe there is no concrete way to quantify the value of marketing and public relations, I believe there is a financial value to marketing and it stares you right in the face every time you look at the balance sheet. It's called goodwill. What is goodwill? It is simply the value of a company over and above the value of its assets. In short, goodwill is the price someone is willing to pay for a company, not what you could get by selling its components.

Here's an example. Arguably, one of the greatest cars ever made was the AC Cobra. The performance of the AC Cobra has not been duplicated, even in today's most expensive high-performance cars. Only about 200 Cobras were ever built. It was designed to be a street-legal race car of sorts. An AC Cobra in mint condition will fetch upwards of US$ 500,000. Break an AC Cobra down and sell its component pieces and you'll probably get $5,000. Is the car worth $500,000 or $5,000? All depends on whom you're asking. To a parts dealer, the car is worth $5,000, but to a car collector, it's probably worth the half million, because that's what someone who values AC Cobras is willing to pay for them.

A company might be worth $1 billion on paper, but if the market is willing to pay $10 billion, that is the value of the company. Herein lies the value of marketing and public relations. Marketing creates the value; public relations helps retain the value and keep it from deteriorating.

The Best of Times, the Worst of Times
When a company falls on hard times, the first department to receive wholesale cuts is marketing. In effect, when companies have fallen on hard times, they are voluntarily de-valuing their own company at a time when, in the face of competition, value should be trumpeted. In this sense, marketing should not be thought of as its components such as advertising, direct mail, premiums, couponing, etc. In hard times, or in good times, marketing should be thought of as "value." Marketing is goodwill. Goodwill is achieved through marketing, recruiting and product development and protected by public relations.

One relatively recent example is the HP-Compaq merger. Compaq was valued at nearly $25 billion at the time of the merger. Turns out, Compaq was not worth nearly as much goodwill as HP credited to it. In fact, shareholders received such little value in the HP-Compaq merger, HP will likely be forced to write off a major portion of the $14.5 billion in goodwill on its balance sheet, virtually shouting to the world that the merger was an unmitigated failure—to the detriment of both companies.

Let's explore that a little further. Of the $25 billion HP paid for Compaq, it was determined that $14.5 billion was goodwill, or the added value of the company. Compaq added that goodwill value to its balance sheet when the merger took place. The offsetting entry for the goodwill asset entry was probably retained earnings or some other line item in shareholder equity. Goodwill is an intangible asset, but since it has value, it can be depreciated just like any other asset. In short, since Compaq wasn't worth that much in goodwill, HP will have to write off the difference between the value it assumed and the value it actually got. That action will likely affect the bond rating along with a host of other financial indicators.

Yes, This Means You
Don't think because you're not a public company and you don't have "goodwill" on your balance sheet that you're not responsible for creating goodwill. Admittedly, goodwill comes into play most often when one company purchases another, but even the mom and pop grocery store on the corner has to create goodwill to survive.

Witness the recent public relations nightmare that Wendy's endured when a woman claimed to have found a piece of a finger in a bowl of Wendy's chili. It seemed to take the Wendy's PR machine forever to gear up. Wendy's investigated the store where the chili was served. Then it investigated all the stores in the area. Then it audited the processes of all its stores nationwide. Then they spent countless, precious, agonizing days trying to figure out if the finger had been cooked (for some reason). All the while, Wendy's was virtually silent. Anyone who has ever spent a day in the PR world knows that the quicker you start dispelling rumors and embarking on "damage control," the quicker you recover.

While this public relations and marketing disaster was going on, I was teaching a university class in Promotions Management. I asked a pointed question over the course of our discussion: "Would you eat at Wendy's today?" And then, "Would you buy Wendy's stock today?" Most students answered no to both questions. Suddenly, the light went on for some of them. The actual value of the Wendy's empire was decreasing before their very eyes, because it had decreased to them as well. It's fair to say the damage from this incident will have long-lasting effects.

I used this incident in my classroom to illustrate the value of goodwill and the role public relations plays in retaining that goodwill. Even though marketing has established the Wendy's brand, 30 years of marketing could not keep customers going to the restaurants while they thought they might be in danger of pulling a digit out of a bowl of chili. But companies can recover if they have a "reserve" of goodwill built up. Because Wendy's does have substantial goodwill in the community, some customers showed their support by showing up at Wendy's restaurants specifically to order the chili.

A situation like this makes even a massive company like Wendy's vulnerable. If McDonald's had had a mind to do so, they likely could have mounted a hostile takeover bid for Wendy's—and they would have gotten the empire much cheaper than they would have a week before this incident.

I predicted to my students that if the woman who claimed to find the finger in the chili was lying, Wendy's would have no choice but to land on her with both feet. Companies must vigorously protect the goodwill value they have spent years building. Just as Tylenol prosecuted the perpetrators of the cyanide hoax and just as Coca-Cola prosecuted the perpetrators of the infamous syringe hoax, the company had to protect its brand image by prosecuting those who had damaged it. Fortunately, those two companies have recovered from their public relations nightmares, and they likely even gained a few fans for how well they handled these incidents.

What company is next in line, and has it built enough goodwill to weather the storm?

Internal Goodwill
Let us not discount the value of internal goodwill. Some of the internal items that comprise the esoteric goodwill entry on the balance sheet are executive and managerial acumen and skill of the labor force. While these are all internal assets, they still create external value. The mantra of venture capitalists in leaner times has been, "I'd rather invest in a company with excellent management and a mediocre idea rather than a company with mediocre management and an excellent idea."

Goodwill, Addendum
It should be noted, for the sake of accuracy, that goodwill has many components and, by definition, most of them are intangible, as has already been stated. Among the items that comprise external goodwill is the company's identity.

It should also be noted that the executives in a company create internal goodwill value through investment in resources like training for the labor force, compensation packages for highly skilled executives and investment in political action committees and lobbyists to help pass laws amenable to the particular business the company is in. The value to the company is still external, but the source of the value is internal. Furthermore, executives create external goodwill value also through the investment in resources, but external resources are other companies and business blocks that hopefully create synergies such that the whole is greater than the sum of the two parts. There hasn't been a tremendous amount of evidence lately that major mergers do, in fact, create that synergy. Conclusion
Marketing and public relations have a clear-cut financial value. The components that make up that value are admittedly esoteric, difficult to quantify and often up for debate, but the potential value is there. You need look no farther than your balance sheet to find it.

SOURCE : INTERBRAND

[atouchofcrypticthunder]

Hey guys,

This speech that you read below might just stary off a little from the actually name of this thread. But since this thread is slowly gaining popularity I thought id add this "MUST READ" speech by Steve Jobs. It has , I must say, influenced me. Im sure once your done you'd be inspired. Read on..

'You've got to find what you love,' Jobs says

This is the text of the Commencement address by Steve Jobs, CEO of Apple Computer and of Pixar Animation Studios, delivered on June 12, 2005.

I am honored to be with you today at your commencement from one of the finest universities in the world. I never graduated from college. Truth be told, this is the closest I've ever gotten to a college graduation. Today I want to tell you three stories from my life. That's it. No big deal. Just three stories.

The first story is about connecting the dots.

I dropped out of Reed College after the first 6 months, but then stayed around as a drop-in for another 18 months or so before I really quit. So why did I drop out?

It started before I was born. My biological mother was a young, unwed college graduate student, and she decided to put me up for adoption. She felt very strongly that I should be adopted by college graduates, so everything was all set for me to be adopted at birth by a lawyer and his wife. Except that when I popped out they decided at the last minute that they really wanted a girl. So my parents, who were on a waiting list, got a call in the middle of the night asking: "We have an unexpected baby boy; do you want him?" They said: "Of course." My biological mother later found out that my mother had never graduated from college and that my father had never graduated from high school. She refused to sign the final adoption papers. She only relented a few months later when my parents promised that I would someday go to college.

And 17 years later I did go to college. But I naively chose a college that was almost as expensive as Stanford, and all of my working-class parents' savings were being spent on my college tuition. After six months, I couldn't see the value in it. I had no idea what I wanted to do with my life and no idea how college was going to help me figure it out. And here I was spending all of the money my parents had saved their entire life. So I decided to drop out and trust that it would all work out OK. It was pretty scary at the time, but looking back it was one of the best decisions I ever made. The minute I dropped out I could stop taking the required classes that didn't interest me, and begin dropping in on the ones that looked interesting.

It wasn't all romantic. I didn't have a dorm room, so I slept on the floor in friends' rooms, I returned coke bottles for the 5¢ deposits to buy food with, and I would walk the 7 miles across town every Sunday night to get one good meal a week at the Hare Krishna temple. I loved it. And much of what I stumbled into by following my curiosity and intuition turned out to be priceless later on. Let me give you one example:

Reed College at that time offered perhaps the best calligraphy instruction in the country. Throughout the campus every poster, every label on every drawer, was beautifully hand calligraphed. Because I had dropped out and didn't have to take the normal classes, I decided to take a calligraphy class to learn how to do this. I learned about serif and san serif typefaces, about varying the amount of space between different letter combinations, about what makes great typography great. It was beautiful, historical, artistically subtle in a way that science can't capture, and I found it fascinating.

None of this had even a hope of any practical application in my life. But ten years later, when we were designing the first Macintosh computer, it all came back to me. And we designed it all into the Mac. It was the first computer with beautiful typography. If I had never dropped in on that single course in college, the Mac would have never had multiple typefaces or proportionally spaced fonts. And since Windows just copied the Mac, its likely that no personal computer would have them. If I had never dropped out, I would have never dropped in on this calligraphy class, and personal computers might not have the wonderful typography that they do. Of course it was impossible to connect the dots looking forward when I was in college. But it was very, very clear looking backwards ten years later.

Again, you can't connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something - your gut, destiny, life, karma, whatever. This approach has never let me down, and it has made all the difference in my life.

My second story is about love and loss.

I was lucky – I found what I loved to do early in life. Woz and I started Apple in my parents garage when I was 20. We worked hard, and in 10 years Apple had grown from just the two of us in a garage into a $2 billion company with over 4000 employees. We had just released our finest creation - the Macintosh - a year earlier, and I had just turned 30. And then I got fired. How can you get fired from a company you started? Well, as Apple grew we hired someone who I thought was very talented to run the company with me, and for the first year or so things went well. But then our visions of the future began to diverge and eventually we had a falling out. When we did, our Board of Directors sided with him. So at 30 I was out. And very publicly out. What had been the focus of my entire adult life was gone, and it was devastating.

I really didn't know what to do for a few months. I felt that I had let the previous generation of entrepreneurs down - that I had dropped the baton as it was being passed to me. I met with David Packard and Bob Noyce and tried to apologize for screwing up so badly. I was a very public failure, and I even thought about running away from the valley. But something slowly began to dawn on me – I still loved what I did. The turn of events at Apple had not changed that one bit. I had been rejected, but I was still in love. And so I decided to start over.


..contd in the next post ...

[atouchofcrypticthunder]

I didn't see it then, but it turned out that getting fired from Apple was the best thing that could have ever happened to me. The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods of my life.

During the next five years, I started a company named NeXT, another company named Pixar, and fell in love with an amazing woman who would become my wife. Pixar went on to create the worlds first computer animated feature film, Toy Story, and is now the most successful animation studio in the world. In a remarkable turn of events, Apple bought NeXT, I retuned to Apple, and the technology we developed at NeXT is at the heart of Apple's current renaissance. And Laurene and I have a wonderful family together.

I'm pretty sure none of this would have happened if I hadn't been fired from Apple. It was awful tasting medicine, but I guess the patient needed it. Sometimes life hits you in the head with a brick. Don't lose faith. I'm convinced that the only thing that kept me going was that I loved what I did. You've got to find what you love. And that is as true for your work as it is for your lovers. Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. If you haven't found it yet, keep looking. Don't settle. As with all matters of the heart, you'll know when you find it. And, like any great relationship, it just gets better and better as the years roll on. So keep looking until you find it. Don't settle.

My third story is about death.

When I was 17, I read a quote that went something like: "If you live each day as if it was your last, someday you'll most certainly be right." It made an impression on me, and since then, for the past 33 years, I have looked in the mirror every morning and asked myself: "If today were the last day of my life, would I want to do what I am about to do today?" And whenever the answer has been "No" for too many days in a row, I know I need to change something.

Remembering that I'll be dead soon is the most important tool I've ever encountered to help me make the big choices in life. Because almost everything – all external expectations, all pride, all fear of embarrassment or failure - these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart.

About a year ago I was diagnosed with cancer. I had a scan at 7:30 in the morning, and it clearly showed a tumor on my pancreas. I didn't even know what a pancreas was. The doctors told me this was almost certainly a type of cancer that is incurable, and that I should expect to live no longer than three to six months. My doctor advised me to go home and get my affairs in order, which is doctor's code for prepare to die. It means to try to tell your kids everything you thought you'd have the next 10 years to tell them in just a few months. It means to make sure everything is buttoned up so that it will be as easy as possible for your family. It means to say your goodbyes.

I lived with that diagnosis all day. Later that evening I had a biopsy, where they stuck an endoscope down my throat, through my stomach and into my intestines, put a needle into my pancreas and got a few cells from the tumor. I was sedated, but my wife, who was there, told me that when they viewed the cells under a microscope the doctors started crying because it turned out to be a very rare form of pancreatic cancer that is curable with surgery. I had the surgery and I'm fine now.

This was the closest I've been to facing death, and I hope its the closest I get for a few more decades. Having lived through it, I can now say this to you with a bit more certainty than when death was a useful but purely intellectual concept:

No one wants to die. Even people who want to go to heaven don't want to die to get there. And yet death is the destination we all share. No one has ever escaped it. And that is as it should be, because Death is very likely the single best invention of Life. It is Life's change agent. It clears out the old to make way for the new. Right now the new is you, but someday not too long from now, you will gradually become the old and be cleared away. Sorry to be so dramatic, but it is quite true.

Your time is limited, so don't waste it living someone else's life. Don't be trapped by dogma - which is living with the results of other people's thinking. Don't let the noise of other's opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.

When I was young, there was an amazing publication called The Whole Earth Catalog, which was one of the bibles of my generation. It was created by a fellow named Stewart Brand not far from here in Menlo Park, and he brought it to life with his poetic touch. This was in the late 1960's, before personal computers and desktop publishing, so it was all made with typewriters, scissors, and polaroid cameras. It was sort of like Google in paperback form, 35 years before Google came along: it was idealistic, and overflowing with neat tools and great notions.

Stewart and his team put out several issues of The Whole Earth Catalog, and then when it had run its course, they put out a final issue. It was the mid-1970s, and I was your age. On the back cover of their final issue was a photograph of an early morning country road, the kind you might find yourself hitchhiking on if you were so adventurous. Beneath it were the words: "Stay Hungry. Stay Foolish." It was their farewell message as they signed off. Stay Hungry. Stay Foolish. And I have always wished that for myself. And now, as you graduate to begin anew, I wish that for you.

Stay Hungry. Stay Foolish.

Thank you all very much.


Regards,


Roshan

[teesra banda]

Originally Posted by atouchofcrypticthunder

Hey guys,

This speech that you read below might just stary off a little from the actually name of this thread. But since this thread is slowly gaining popularity I thought id add this "MUST READ" speech by Steve Jobs. It has , I must say, influenced me. Im sure once your done you'd be inspired. Read on..

...

Finally i found someone other than ME posting article on this thread....Thanx atouchofcrypticthunder...

Keep 'em coming !!!

[atouchofcrypticthunder]

Hey Teesra,

Yup mate you'll be getting more such intresting articles from me for sure.

Take Care!

Regards,

Roshan