Interview: G.M. & Crude oil
>> general motors may sell its stake in its commercial mortgaging unit. g.m. will still maintain a significant equity stake in the subsidiary. the company tried to sell the unit for $2 billion a couple of years ago. the carmaker forecasted its biggest quarterly loss in 13 years.
>> there are a lot of reasons in 2005, intensive pricing environment, pull-ahead sales into the last quarter, rising interest rates, legacy costs, skyrocketing healthcare costs but we’re not going to dwell on any of those or use them as excuses. we’re going to concentrate on how to overcome them.
>> not going to dwell on it but he painted a picture of not-so-good health. g.m. shares have plunged 15% since announcing the quarterly loss last week and face a negative cash flow of two billion so far this year. general motors down 19.2% to 28.66. richard perle faces a lawsuit for his role in the alleged looting of the chicago media company hollinger. perle says he has gotten and responded to the warning from the agency. perle was assistant secretary of defense and adviser to u.s. defense second donald rumsfeld during president bush’s first term. morgan stanley lost a round in a $2.75 billion lawsuit concerning bankrupt sunbeam corp. a judge ruled that morgan stanley helped sunbeam falsely inflate numbers. financier ronald perelman claims that sunbeam tricked him into selling coleman. sunbeam filed for bankruptcy protection in 2001. the judge in the case granted part of perelman’s request, saying the securities and exchange commission violated orders to turn in documents in the case. indonesia has postponed its $1 billion bond sale according it a person inside the deal. the government was manning to price the―planning to price the bonds today. the decision comes as borrowing costs for developing nations rise. southeast asia’s biggest economy is hoping to improve its credit rating as the economy grows the fastest in nine years. crude oil tumbled more than $2 a barrel in new york, a precipitous move, by the way, if you’re following energy markets . what does it mean for australian stocks? david tweed is standing by in sydney. $2, that’s a big drop for a daily session. i guess that will hit woodside and santos and the other petroleum plays.
>> biggest drop this year, bernie. for the crude oil price. and one would expect it to drag the australian market down, given the fact that the market is heavily weighted towards oil and energy stocks. energy stocks have been the best performing stocks in australia so far this year. b.h.p. gets 20% of sales revenue from oil and gas activities and b.h.p., you can see, has been outperforming rio tinto purely because of its oil activities. rio tinto, of course, doesn’t have any. b.h.p. shares dropped 3.7% or night in new york. that left it around 1.6% below its close in australia yesterday and could mean, if b.h.p. goes down, it could drag the rest of the market with it. given the fact that b.h.p. is australia’s biggest company representing 8.4% of the index. so it will be interesting to see, because we also do have the asx index futures indicating up .1%. we’ll have to wait for the open. woodside petroleum may drop, as well as santos. i couple of things to point out, we have companies going ex-dividend today, including a.n.p., telstra and woolworth. i also wanted to quickly mention to you a report by merrill lynch today on rio tinto, put out a report called diamonds are a girl’s best friend, speaking about the outlook for rio tinto’s diamond business, that the outlook is bullish after discussing this with the head of the diamond division and they might find investors finding the rio tinto price weak, on concern of interest rates rising in the world and the high oil price at the moment.
>> david, we just have news out in new zealand, here. alan bollard, reserve governor, has been in the headlines because he was on record expecting the economy to grow in q-4. we got .2% growth less than expected. that’s the reaction so far today?
>> immediate reaction, bernie, i can see, looking at my screen, a drop in the new zealand dollar against the u.s. dollar. the bond market hasn’t reacted yet but the drop in the u.s -- in the new zealand dollar does indicate immediately that that less than expected g.d.p. growth means that there’s less chance that new zealand will have to put up interest rates this year, that’s the immediate reaction.
>> we’ll check up on stock market reaction in a little bit. appreciate that, david. after the break, we’ll look at the economy in new zealand with greg muir, which i remember of pumpkin patch.
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Interview: P.S.P & iPod
playstation portable versus the nintendo game boy. in the u.s.a., sony is launching its video game player tomorrow, taking dead aim at nin endo. we’ll speak with an industry analyst in a moment. the headlines this thursday, the dollar up, hitting a 52-week high in new york. faster-than-expected c.p.i. triggers expectation expectations the fed will hike interest rates faster than expected. oil prices plummet, dropping more than $2 a barrel, the biggest loss of the year. the u.s. department of energy says that stockpiles rose to their highest level in nearly three years. exxon-mobil leads the dow lower and semiconductors helped lift the s&p and nasdaq composite index. in this neck of the woods, land prices are rising in tokyo for the first time in nearly two decades. average residential land prices in tokyo’s five million wards rose 1.4% last year. prices for commercial real estate gained .5%, the first increase in 14 years. japan has had four recessions since land and other asset prices began tumbling in the late 1980’s. speaking of tokyo, sony, the japanese multimedia company, is releasing the p.s.p., or playstation portable in america later today. the world’s second largest consumer electronics maker expects u.s. sales of p.s.p. to top a million units within days of release. the playstation portable is the biggest game product debut by sony in almost five years. joining us this morning, p.j. mcnealy, covers the video game industry for american technology research. how is the p.s.p. going to do? is america gearing up? is it the neatest thing to americans since sliced bread or what?
>> it’s definitely a hot product. this will sell out tonight and over the summertime and be a hot product into the fall. sony, we think, will struggle to meet demand for the product because it is a slick, new device and fun, new, and exciting for the hard core gamming market to get jazzed up about.
>> the p.s.p. has some functions similar to the ipod from apple. they might add more connectivity to it in the future. it will it make up for lost ground from the ipod?
>> the ipod really does have a pretty distinct and significant market right now with the music player market . we think that early on, the playstation portable is focused on primarily the video gaming market and not necessarily the music market . i don’t think you’re going to see people right now trading in their ipods to buy a p.s.p. if anything, you’ll see them buying one of each so they can may video games or listen to music in the near term.
>> in terms of the titles available for the p.s.p., video games are all about content and the stuff you can get on the screen into the system. is it enticing?
>> sure. this device is a very nice, very slick screen, slick display. the games that play on it early on are looking pretty good and with any new console or platform, what happens is the games early on look pretty good but they’re only going to get better as developers learn how to utilize the screen size with better magnification. the screen looks great. it’s a decent lineup at launch. i think you’ll see a lot of hard core people buying it early on before it becomes more of a mainstream device in 2006.
>> p.j., i gather i can’t take my xbox disk and shove them into the p.s.p. because they use a different format, universal media disk or u.m.d. how ubiquitous will the u.m.d. get or will it go the way of the beta max?
>> the u.m.d. is part of a specific strategy. sony in general is going vertical with the playstation portable where the u.m.d. is something they’ve created. they’re using their screen display and handhelds and also a memory stick, a sony proprietary format. the u.m.d. is something they want to control because they’re concerned about piracy. they’re not going to allow consumers to take blank u.m.d.’s and burn content. they’re the only persons putting movies on to the u.m.d. format and games on to the format and something you won’t see widely utilized outside of the p.s.p. any time soon.
>> $249 plus another 8% to 10% depending on where you live in terms of state and local sales taxes. how is this price point going to reverberate with americans?
>> sony has really tried hard to position this thing as a value pack after the japanese launch of the p.s.p. really, they had a two-tiered approach to the japanese market with a standalone device for $180, $190 and the value pack for $250. we think the value pack, as it’s called here, will sell just fine. this device, the hard core enthusiast would pay north of that price point to buy and now for the first one million in the u.s., they’ve thrown in a copy of “spider-man 2” to help appease people but i don’t think the price point will be a deterrent for anybody any time soon, at least through the holiday of 2006 as they focus on the $239 price point for the p.s.p.
>> how far is the launch of the p.s.p. and expected revenues and bottom line going to help sony?
>> company is going through contortions, just changed their c.e.o. >>. is this going to be a saving grace for the company or a drop in the bucket?
>> i don’t think it’s necessarily a saving grace as it is just a buoy and necessary platform for sony. sony’s been undergoing transition for the past two years to get to 2006 and 2007 because of heavy investment in cell processor and chip technology there. the cell processor is the processor to be used with the playstation 3 and consumer electronic devices in 2006 and 2007 so the p.s.p. coming out in 2005 is a midpoint to generate enthusiasm and be a handheld guinea pig for sony with sony music and pictures on it and part of their vertical approach to media distribution and so from that standpoint they’ll look closely to see the update with the service like sony connect and it’s more tweaking and experimenting with business models preparing for the playstation 3 and other electronic devices in 2007.
>> p.j., we appreciate your time. p.j. mcnealy, american tech research from mountain view, california. still ahead, new zealand’s q-4 g.d.p. data is minutes away. economists surveyed by bloomberg say the expansion was only about half what the central bank governor said it would be.
