Dr. Miguel Mesquita da Cunha

GLG News by Dr. Miguel Mesquita da Cunha, Consultant

Microsoft v. European Commission: a victory for innovation & for the consummer

September 20, 2007

Analysis of:Microsoft's Big European Defeat: What Now? | www.businessweek.com

By restricting Microsoft's ability to bundle unrelated features (such as media players, server software) to Windows, the EU ruling will bolster competition & innovation in the software industry.   The judgement further asserts that companies may not unfairly prevent rival products from functioning properly with their offerings.   More generaly, the ruling confirms the EC legal power to pursue abuses of market dominance.

Wrong, dear FT: Investors should beware of Royal

February 26, 2007

Analysis of:Why business need not worry too much about Royal | www.ft.com

French business and equities would take a plunge if Ms. Royal were elected President in April next.

Ms. Royal’s personal economic views are statist & interventionist; if elected she would have to govern with an alliance of unreconstructed Socialists and Communists. 

Far from reforming products, services and labor markets, a Royal administration would most probably impose extra burdens on companies and entrepreneurship.

Car fumes: do not panic (yet…)

February 6, 2007

Analysis of:Car industry facing 18% CO2 cut | news.bbc.co.uk

The European Commission plans to propose measures to bring emissions of greenhouse gases from the average new car down to 120g of CO2 per kilometer by 2012 - 25% below the 2005 level of 162g/km.

Final provisions will depend on a host of complex negotiations, but the overall trend is clear:  the competitive advantage for car manufacturers to offer more efficient engines is likely to become ever more pronounced in the years ahead.

Total nuclear plans: a long-term solution to the Suez connundrum?

February 5, 2007

Analysis of:Total says it is certain to enter nuclear sector | www.ft.com

Total’s incoming CEO has declared his company’s intention to enter the nuclear electricity business. Given France’s wealth of nuclear expertise, Total seems better positioned than many other oil companies to acquire this new competence.  

Yet, Total may be tempted to buy, as opposed to build up internally, the array of skills required; though this may seem a long shot, an eventual purchase of Suez, [whose subsidiary Tractebel has been in the nuclear industry for over 30 years and produces 5800 MWe in four nuclear plants] would with one stroke bring Total the required know-how.

New fuel standards in the EU

February 2, 2007

Analysis of:Stricter fuel standards to combat climate change and reduce air pollution | europa.eu

In the context of the new EU overall energy and environmental strategy, the European Commission proposed on 31 January a revision to the 1998 fuel quality directive that will have far-reaching implications for the oil industry. Oil industry representatives are up in arms, claiming that the proposed changes are too onerous and that the car industry should shoulder more of the effort. These proposals will now be discussed by member states and the European Parliament, with a view to adopting legally binding decisions by the end of the year.

One can expect vigorous lobbying from both sides in the months ahead. On current form however, the car industry tends to carry more political influence than the oil business. The gist of the Commission proposals is thus likely to be enacted.

EU energy & environment policies: a competitive advantage for European companies

January 31, 2007

Analysis of:Companies must adapt or die in a changing climate | www.ft.com

This short and sharp article should be carefully considered by any senior manager worth his salt. “Companies that prosper in an environment of changing climate and policies will tend to be those that are early to recognise its importance and inexorability, foresee at least some of the implications for their industry and take appropriate steps well in advance.”

Such is very much the prevailing view within the European Commission:  though EU climate change policies are being designed primarily to tackle global warming, they will also aim to endow EU companies with the comparative advantage of being amongst the first to devise and to implement innovative energy-saving technologies and practices.

Energy & climate change at the forefront of the EU agenda

January 31, 2007

Analysis of:Brussels climbdown on car emissions | www.ft.com

The related areas of energy policy & climate change are now firmly at the forefront of the European Commission’s program for the years ahead. Despite tactical retreats, as on CO₂ emissions targets for the motor industry, the overall trend points towards significant liberalization of energy markets, accompanied by stringent action on the environment. Yet, the final shape of legislation remains open to debate; countries, companies and industries can use their lobbying power to influence legislative outcomes, as the car industry has just done.

New oil: keep it in perspective

September 11, 2006

Analysis of:Chevron strikes oil in 'biggest US find' | www.telegraph.co.uk

If duly confirmed by subsequent tests, the discovery announced on Sept. 5th of a new oil field in the Gulf of Mexico will undoubtedly prove a boost for the companies involved, [Chevron, Statoil & Devon Energy], & probably for companies active in adjacent areas [such as Shell & BP].

Yet, things should be kept in perspective.    It is impossible still to ascertain the size of the find, but its eventual exploitation will prove technically challenging & will entail high costs that will inevitably weigh on operational margins.

Furthermore, oil, gas & coal will not suffice to meet soaring world energy demand, even taking into account new discoveries.    It therefore makes eminent business sense to pay keen attention to the profits potential held by renewable sources of energy, including wind, solar & biofuels.

GdF-Suez: Merci, M. Knight !

September 11, 2006

Analysis of:Knight confident of blocking merger | www.ft.com

In a letter to Prime Minister de Villepin, Eric Knight asserts that the GdF-Suez merger, as currently proposed, significantly undervalues Suez (quite apart from posing significant political risks for the government).   He further suggests an alternative that would leave France with a European energy champion and a new Lyonnaise des Eaux (combining Suez Environment and SES) as an independent public company that would be larger than Véolia.

Given the apparent strength of Mr. Knight’s arguments & the track record of KVAM as an ‘activist’ investor, one would have thought the letter would have sparked acute interest & debate in France – but it raised none.    If however Mr. Knight succeeds in persuading enough Suez Shareholders to block the mooted merger, thus wrecking all the government’s current efforts, ministers & the powers that be in France will only have themselves to blame for their smugness.

Extractive industries: a nimbler future for companies under political threat

September 5, 2006

Analysis of:Analysts: Venezuela Move Hurts Profits | www.topix.net

Left-leaning or nationalistic governments in countries like Venezuela, Bolivia, Peru, Chad, are attempting to reclaim larger shares of revenue from extractive industries activities, often through stiff tax increases.    Companies in the oil, gas, coal, mineral ores industries are seeing their business plans significantly upset.  

If ideological-driven moves against Western extractive companies were to widen, politics, higher-tech skills, & movable assets would become relatively more valuable than hitherto, as titles of property or legal agreements remain inherently subject to sovereign risk.

Artic oil: hot resources under the ice

September 1, 2006

Analysis of:Statoil Says Norwegian Continental Shelf Important for the World | www.oilvoice.com

There may be twice more oil & gas in an area of the Barents Sea disputed between Norway & Russia than the whole Norwegian reserves.   With energy demand & prices shooting up, these reserves are most enticing, despite the hurdles & costs associated with deep offshore drilling in glacial surroundings.

Whenever exploration pick ups in earnest, Norwegian companies like Statoil & Norsk Hydro should benefit from their superior technology & greater experience in offshore operations.

Chemical links between politics & money

August 31, 2006

Analysis of:Chemicals industry moves ahead with R&D agenda | www.wbcsd.org

Industry participants at the European Technology Platform (ETP) for Sustainable Chemistry (SusChem) have adopted a plan to focus European R&D spending on eight promising areas for the chemical & biotechnological industries.

SusChem being one of the most successful & politically-savvy ETPs, one can expect the SusChem plan to be well taken into account in the € 48bn EU Research Framework Programme (FP7, 2006-2013).

 

 

E.On-Endessa: from business bid brawl to political battle royal

August 31, 2006

Analysis of:EU may challenge Spain on Endesa deal | www.iht.com

The E.On-Endessa bid brawl is turning into a legal & political battle royal. The stakes are mounting regarding European Union (EU) energy policy; EU competition law; & the autonomy of EU member states.

It is impossible to predict how much further legal & political confrontation there will be before a settlement.  But given the significance of issues at hand, one should expect the European Commission (EC) to ensure that E.On ultimately prevails.

Green growth

August 21, 2006

Analysis of:Wall-Mart sees green | money.cnn.com

Wal-Mart's conversion to green is much to be commended. There are direct gains aplenty in reducing a company’s energy & other raw materials consumption, minimising waste, & indirect – but no less important – benefits in enhancing its image as a responsible, trustworthy business.

It must however be noted that Wal-Mart is only belatedly catching up on a trend that has already saved billions to some of its major world competitors.

‘Green policies’ represent a significant competitivity factor; however, whilst green technologies can normally be implemented regardless of location, their payback can be much enhanced by accompanying ‘softer’ measures that must be tailored to each specific market & culture.

The dogfight will rage on

August 21, 2006

Analysis of:Boeing flips to loss | www.washingtonpost.com

The aircraft industry is in rude health, with demand at a record high.

Airbus has been ahead of Boeing for the last few years, but it is about to be overtaken by its American competitor. Yet, gross sales or delivery figures are far too blunt a measure of the financial impact of current operations.

As both EADS (Airbus’ parent company) & Boeing have major defence divisions, governments will surreptitiously prop them up whenever needed. Expect the dogfight to rage on for a very long time.

Market Insight: Nuclear energy revives uranium industry

August 7, 2006

Analysis of:Energy: new things are bubbling up | www.ft.com

Given the correlation between world energy prices in general & that of oil, & with world energy demand forecast to increase by 50% between 2005 & 2030, there is surging interest in all non-fossil sources of energy.

Renewables will likely receive a significant boost from the EU Strategic Energy Review currently being prepared by the EC.

Yet, a net increase in nuclear power production will be indispensable to avoid higher dependency on oil. In such a high fixed-costs industry, utilities require a fair degree of certainty on future energy policy.   Given the time it takes to complete a new plant, binding decisions must be taken in the next few years.

Economic fitness: when pain yields gain

August 3, 2006

Analysis of:Odds shorten on ECB rate rise | www.ft.com

A European Central Bank rate rise to 3%, with more to follow, is hardly controversial, but its consequences will be felt unevenly.

Smaller, dynamic economies like Ireland, Spain or even Finland, would benefit from cooling down.   By contrast, the three main euroland economies, Germany, France & Italy, will suffer:  higher interest rates will make it harder to reduce unemployment & will lead to either higher deficits or higher taxes.

Yet, there will be a silver lining: despite predictable outbursts against the ECB, politicians in these three countries will cite the ECB’s stern line against inflation as a further reason why their public & parliamentary opinion must accept painful, structural reforms.

Finally, the ECB stand is certain to buttress hawks in the governing councils of non-euro European central banks.

Black gold: the pit overtakes the derrick

August 2, 2006

Analysis of:Coal May Surpass Oil as Better Bet on Demand for Cheaper Fuel | www.bloomberg.com

There are converging signals that coal, which currently provides over 24% of global primary energy needs and generates 40% of the world's electricity, may overtake oil as the best performing energy investment.  This, as most everything to do with the economics of energy, results from the interaction of three main variables:

·The physical availability of resources
·The technologies required to make good use of them
·The geo-political maze.

Western governments, keenly concerned with energy security, are giving coal place of pride in their energy plans.  Yet, companies poised to benefit handsomely from a coal revival are as likely to be in germane industries than in the coal mining industry proper: shipping lines & port operators, railways, turbines, testing & engineering consultants & contractors.

Steering the EU ship of state: steady does it.

August 2, 2006

Analysis of:Brussels falters in drive to cut red tape | www.ft.com

There is no doubt that the European Commission is committed to root & branch deregulation, as part of its drive to genuinely enhancing EU productivity & competitiveness, & that it is supported by a majority of member states.

Whilst ‘headline’ progress has been slower than forecast, there is no reason to doubt the depth & strength of the reform process under way.   Barring exceptional international circumstances, it is most likely that reforms afoot will indeed be seen through.

Falling heroes & sentimental blindness

August 1, 2006

Analysis of:Microsoft sees the beginning of the end for PCs | www.ft.com

The PC – around which Microsoft built its empire – is not dead, but the markets for other digital devices, which Microsoft does not dominate, are growing much faster.  This should serve as a flashing amber light for Microsoft’s leadership.

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