International
Monday Newspaper Review - Irish Business News and International Stories
By Finfacts Team
Dec 11, 2006, 08:17

The Irish Independent reports that sweeping changes outlined by a government watchdog today will mean lower legal costs for consumers.

The Irish Independent also reports that millions of euro are to be raked in under a new scheme which is being seen as the first step towards a congestion charge for Dublin.

The Irish Times reports that Goodbody Stockbrokers' private clients' business is planning to join forces with Northern Irish builder, Taggart, in a €300 million property development venture.

The move will bring its total investment commitments in Northern Ireland to close to €750 million.

Goodbody is already a substantial shareholder in the Banbridge Retail Park, and last summer, bought over 90 acres of development land close to Belfast.

Goodbody and Taggart are planning a joint venture that will see them buy sites close to the city and develop housing there over the next five to seven years.

The overall investment, calculated at £200 million (€295 million), will be funded through a mixture of equity and bank loans.

The stockbroker is seeking £22 million from private backers interested in investing in the development.

The cash will be used to help fund the purchase of three sites within 16 km of Belfast.

Two of the sites are at Templepatrick and Carryduff, while the purchase of a third site is close to being agreed. It is five miles east of the city.

The total bill for the sites will come to £27.5 million. Goodbody investors will pay £22 million, or 80 per cent, while Taggart will pay £5.5 million.

The pair plan to develop 265 houses across the three sites.

The sites have outline planning permission and the joint venture intends to seek full permission for the development of the sites in the new year.

The joint venture will borrow the money to fund the development of the sites. The overall package will consist of about 30 per cent equity and 70 per cent debt.

Commenting on the deal yesterday, Goodbody's head of private clients, Éamonn Glancy, said that the firm believes that Northern Ireland offers good potential for investment.

"We are paying between £1.2 million and £1.3 million an acre, while in Dublin we would be paying around €20 million an acre," he said.

"There's very good value and building costs are much lower."

Mr Glancy added that the rate of house building in the North was well behind that of the Republic.

He said that the rate in Northern Ireland was eight for every 1,000 people, while in the Republic the rate is running at about 20 per 1,000.

Goodbody Stockbrokers is also planning to open an office in Belfast to service its corporate finance and private clients businesses in the North.

Mr Glancy said that it would go ahead with this plan early in the new year.

The stockbroking firm has strong links with the area. It acts for quoted companies like broadcaster UTV energy company Viridian and digital camera manufacturer Andor Technologies.

The company also has a considerable private clients business in Northern Ireland, Mr Glancy added.

The Irish Times also reports that Irish businesses have the most difficulty in recruiting foreign-born workers to senior management and professional positions, a new study has found.

The EU-wide study, the Irish section of which will be launched today by authors PricewaterhouseCoopers (PwC), finds that the goal of the Lisbon agenda to increase the ability of employers to plug skills gaps by recruiting from other EU member states is not being met. Some 47 per cent of Irish companies said it was difficult to recruit senior managers from abroad, compared with the EU-wide average of 22 per cent.

The findings come in spite of Ireland having one of the most open labour markets in Europe. "While Ireland opened up its borders to nationals of EU accession countries in May 2004, companies are telling us that there is still an insufficient pool of labour to meet their skills needs in certain sectors," said PwC director Ann Bolster yesterday.

Some 73 per cent of Irish firms said that foreign workers are an important source when they are looking for appropriate skills for their business.

The key obstacles to recruiting abroad, cited by three-quarters of Irish employers, included language skills, differences in tax systems and healthcare benefits and poor cross-border recognition of professional qualifications.

A further one-third of employers said potential career difficulties for spouses and the absence from family and friends had prevented foreign professionals from taking up offers of employment here.

"Ireland now lags behind many other EU countries in not having a favourable expatriate tax regime following the curtailment of the remittance basis of taxation for foreign workers in the 2006 Finance Act," Mary O'Hara, partner at PwC, said yesterday.

Some 445 employers, 30 of them with Irish operations, were surveyed for the report across 15 countries.

The Irish Examiner reports that Northern Ireland business is powering ahead faster than its trading partners, according to a new report.

Both activity and new business increased at their sharpest rates in November since the summer of 2004.

Strong demand for goods has put pressure on capacity, prompting companies to add to their workforces.

The latest Ulster Bank Purchase Managers’ Index provided evidence of a healthy private sector economy in the North.

Pat McArdle, the bank’s chief economist, said: “The Christmas cheer continued in November as Northern Ireland grew faster than its trading partners for the first time in a good while.

“While others, like the UK and Republic of Ireland, fell back or stalled, Northern Ireland powered ahead driven by a surge of activity in construction.”

He said this was timely as construction south of the Border was slowing which should ensure an ample supply of labour, adding: “Activity growth rates were ahead of the UK in most areas, a welcome change from the recent pattern. Northern Ireland has moved smartly from one of the poorer-performing British regions to fifth from top.”

That bodes well for the Quarterly Employment Survey, which should see employment reaching new highs, he predicted.

Business activity in the province increased in November for the 44thsuccessive month, with growth broad-based and the strongest in more than two years, said the bank report.

Overall activity increased at a stronger rate than the national average for the first time since September 2004, with growth largely attributed by panellists to higher volumes of incoming new business.

The data highlighted a 28-month peak in the pace of new business growth, as demand strengthened in line with improved economic conditions. The strong rise in sales tested capacity at a number of companies last month. Overall, volumes of work outstanding increased robustly and at the sharpest rate for 27 months.

Inflation rates accelerated in November to their highest since July — driven by the rising costs of energy, raw materials and transport as well as wage pressures.

Meanwhile, efforts to protect margins from higher costs were highlighted by a further marked increase in output charges.

The Financial Times reports that European governments have again defied pressure to cut state aid payments to the private sector, according to a report showing they spent a total of €64bn (£43bn) on subsidies last year.

The latest figures, to be revealed by the European Commission on Monday, will come as a disappointment to Brussels, which has waged a long and often acrimonious campaign for “less and better-targeted state aid”.

All but the smallest of state aid payments must be notified and approved by the Brussels regulator, which has argued repeatedly that subsidies often end up ­distorting competition and lead to an inefficient use of capital.

The Commission’s powers in this area have frequently sparked clashes with member states, for example when France bailed out Alstom, the engineering group, or Germany was fighting to defend the special protection enjoyed by the publicly-owned Landesbanken.

Brussels’ hard line against government aid paid off in the late 1990s and overall state aid in the EU dropped to less than €50bn a year in 2000 and 2001.

More recently, however, governments have again raised their support for the private sector, with the 25 EU member states spending €63.8bn on subsidies in 2005, almost unchanged from the previous year.

Germany was again by far the biggest spender, accounting for €20.3bn of subsidies. It was followed by France with €9.7bn, Italy with €6.4bn and Britain with €4.5bn.

Malta emerges as the most generous country when subsidies are calculated as a share of gross domestic product, with 3.1 per cent, followed by Hungary, Finland and Sweden.

In spite of the setback on total aid payments, the Commission can claim some success in its drive to reduce the most distortive types of subsidies, such as payments to individual ailing companies.

Monday’s report will find that half the EU’s member states now distribute more than 90 per cent of their government aid through “horizontal” schemes such as programmes to aid research and development or the environment.

Such schemes that benefit more than one company are viewed as less distorting by the Commission.

By contrast, rescue and restructuring aid – which is used to bail out and reinvigorate failing companies – accounted for only €15.5bn of subsidies, and was centred once again on groups in Germany, France, Spain, Britain and Italy, the EU’s five biggest economies.

The FT reports that Tata Steel on Sunday night increased its offer for Corus by 10 per cent in an agreed deal that values the Anglo-Dutch steelmaker at £5.5bn ($10.8bn) including debt.

The announcement by India’s biggest private sector steelmaker adds up to a pre-emptive strike against Companhia Siderúrgica Nacional, Brazil’s second-biggest steelmaker. CSN has said it was ready to make a bid for Corus at 475p a share, above the Indian group’s initial bid but some way below Sunday night’s offer.

Jim Leng, Corus’s chairman, said his board had reviewed the new proposals from Tata and was “pleased to recommend this to Corus shareholders”.

Ratan Tata, chairman of Tata Steel, said: “We remain convinced of the compelling strategic rationale of this partnership and the revised terms deliver substantial additional value to Corus shareholders.”

The move puts pressure on Benjamin Steinbruch, chairman of CSN, to come up with a new offer above the 500p a share valuation of the revised Tata bid. He said last month CSN was considering a bid that valued the steelmaker at 475p a share.

Even without a formal offer the Corus board, meeting on Sunday, had been ready to recommend to shareholders the CSN approach, a person acquainted with the matter said. However, when Tata said it was ready to table a 500p a share bid, the board decided to recommend this offer only.

CSN has until December 20 – the date of a shareholders’ meeting planned by Corus at which they will be asked to consider the new Tata bid – to come up with a new bid above 500p.

The new offer values the equity of Corus at £4.7bn, against the £4.3bn value of Tata’s original offer made in October. Adding £800m of debt gives a total value for the deal of £5.5bn.

Elsewhere in the sector, Mittal Steel – the world’s biggest steelmaker – in June agreed a deal to buy Arcelor of Luxembourg for €26.9bn (£18.1bn) in the biggest takeover in the industry so far.

The New York Times reports that for Global Alpha, the $10 billion hedge fund run by Goldman Sachs, 2005 was a stellar year. By the close of the year, the fund, which manages money for some of the firm’s wealthiest clients and employees, was up 40 percent after fees, a performance that helped contribute almost $600 million to Goldman’s 2006 first-quarter earnings.

This year has been different.

Through November, Global Alpha was down almost 11 percent. The average fund in Global Alpha’s style of investing, known as equity-market neutral (meaning its returns should not be similar to those of the stock market), is up 5.8 percent for the year, according to Hedge Fund Research, a research group based in Chicago. By comparison, the Standard & Poor’s 500-stock index was up 12 percent through November.

For hedge fund investors, 2006 has been a year when many fears were realized. A $9 billion blue-chip hedge fund collapsed in the space of a week and Goldman’s woes revealed a painful truth of investing in these secretive, lightly regulated, high-fee investments: hedge-fund investing is hard, and no one — not even Goldman Sachs — is infallible.

This year “is the third straight year that the global equity markets and long-only managers outperformed hedge funds,” said Christy Wood, senior investment officer for global equities at the California Public Employees’ Retirement System. “If you threw all these in an index fund net of fees, you would have done better than if you put it in the hedge fund industry.”

So is Calpers pulling back? Not at all. Ms. Wood helps to oversee $4 billion in hedge fund investments and has another $3.5 billion to invest. She is satisfied that hedge funds have delivered exactly what Calpers wants from them: equitylike performance with bondlike risk.

“We are looking for a return stream that doesn’t behave like any others we have,” she said.

Calpers is not alone. More than $110 billion flooded into the hedge fund industry in 2006 through the third quarter, compared with $47 billion last year and a record $99 billion in 2002, according to Hedge Fund Research. Institutions like Calpers are fueling that growth.

In one way, hedge funds are victims of their own success. More managers chasing more returns in more corners around the globe means big returns are harder to come by.

And yet, money continues to pour into hedge funds, with fees generally unaffected. Like any year, some of those funds went to managers who soared, and some went to others who flopped. For Goldman, the lackluster returns of Global Alpha will not hurt its 2006 earnings, which are expected to set a record (again).

“The fund is expected to be volatile and there have been volatile periods in the past,” said Peter Rose, a Goldman spokesman. “Over all since inception, the fund has given investors very positive returns.”

Another major fund, with a different strategy, faces a far different year-end. Atticus Global, a fund within Atticus Capital, was up 11.5 percent in November and 32.2 percent for the year, according to one investor. A spokesman declined to comment.

Founded by a former right wing on the Harvard hockey team, Timothy R. Barakett, Atticus Capital has benefited from its outsize performance. At $4 billion at the end of 2004, the fund has more than $13 billion today.

Its style — buying large positions in stocks — is risky, and this year paid off well.

For instance, Atticus Management owned or controlled through options, 9.9 percent of Phelps Dodge, according to federal filings. When Freeport McMoRan Copper and Gold announced in late November that it would acquire Phelps, Atticus made more than $510 million in a weekend, and much more on its longer-term investment. (Since hedge fund managers take 20 percent of the profits, Mr. Barakett himself made more than $100 million.) Other bets, like a large stake in the NYSE Group, have surged as well.

But big bets can also go the other way. It was only three months ago that Amaranth Advisors, a once-highflying fund that started the year with more than $9 billion in assets, disclosed that it lost more than $6.5 billion on bad bets in the natural gas market.

The lesson of Amaranth — that big bets with big leverage translate into enormous risk — has seemingly been lost as the markets have soared.

“If there’s a lesson in 2006 — and no one talks about it anymore — it’s that leverage is a very dangerous thing,” said Stewart R. Massey, founding partner of Massey, Quick & Company, an investment advisory firm in Morristown, N.J. “And there’s too much out there.”

For many funds, the markets and the pains associated with fast growth have hampered returns. North Sound Capital, founded by Thomas McAuley, an alumnus of Tiger Management, informed investors last week that the fund, which peaked at $2.9 billion earlier this year, will end the year with $1.4 billion, as investors have taken nearly $1 billion out of the fund. Its Legacy International fund, which was up 7 percent in 2005 and has had an 11 percent annualized return since inception, is down 3.1 percent this year through November. At least half a dozen research analysts have left, as lower returns clearly mean less incentive compensation to go around.

Many investors thought the fund got too big too quickly. Others chalked up the numbers to a bad year. The result, however, was investors flocking to the doors.

“The market is becoming increasingly bifurcated between the institutional and the individual marketplace,” Ms. Wood said. “Institutions are looking for a low-volatility, absolute-return stream. And then there are the people who want big returns, big risks, with 20-25 percent returns.”

Goldman’s Global Alpha, for example, may not face the same redemptions as North Sound, in spite of the fact that its performance is far worse than that of Legacy International. Global Alpha’s investors are wealthy Goldman Sachs clients who may be less likely to move their money out as fast. And Global Alpha markets itself as a risky fund, a caveat borne out in recent years (up 40 percent in 2005, down 11 percent through November in 2006).

So while clients may be disappointed, they cannot be completely surprised.

The NYT also reports that in late May, more than five million Web users vanished.

The disappearing act came when Nielsen/NetRatings, a leading company in measuring Internet traffic, sharply cut its previously reported statistics for the financial Web site Entrepreneur.com to 2 million unique visitors in April, from 7.6 million.

Why the change? For millions of Web surfers, Entrepreneur.com visited them — and not the other way around, the measurement company said.

As computer users visited other sites, new browser windows popped up containing articles from Entrepreneur.com, according to Scott Ross, senior product manager for Nielsen/NetRatings.

Pop-up windows appear all over the Internet, including the Web site of The New York Times. But they are typically used as advertising to pitch a product or a service.

Entrepreneur.com’s pop-ups were unusual because they contained news content, like articles on how to start a small business, making them hard to distinguish from an intentional visit to Entrepreneur.com’s site. This hailstorm of pop-ups more than tripled Entrepreneur’s reported traffic before it was detected and factored out a month later.

The technique of using pop-ups to gain readers underscores just how important sheer numbers have become in the online media business. Advertisers are shifting their marketing dollars to the Internet, but the rates they pay are low compared with traditional media.

Consequently, publishers who have struggled for years to find a way to make money online are taking aggressive steps to get their Web pages in front of as many eyes as possible.

Entrepreneur.com, owned by Entrepreneur Media in Irvine, Calif., did not return calls seeking comment. But it is not the only online publisher to use pop-ups, according to Benjamin G. Edelman, a Harvard doctoral student who has compiled a large database by installing on his computer many kinds of software, known as adware, that generates pop-ups.

(Mr. Edelman has also provided expert testimony on behalf of publishers, including The New York Times Company and other newspaper concerns, in a lawsuit involving adware. The publishers had sued to prevent pop-ups, by the Gator Corporation, from appearing on their Web sites. The suit was settled in 2003 under terms that were not disclosed.)

Other sites that appear to have used pop-ups for content in the last year include Concierge.com, the Web site of Condé Nast Traveler magazine; ForbesAutos.com, part of the Forbes financial publishing group; and Heavy.com, a popular humor site, Mr. Edelman said.

The concern over pop-up content goes beyond traffic numbers. Many advertisers pay premium prices to reach readers of certain Web sites. Through pop-ups, these advertisers may find their orders are being fulfilled with low-cost page views that users never requested and may never have seen.

This list of sites surprised Scott Symonds, vice president for media at Agency.com, who advises companies on where to spend their online advertising budgets. Pop-ups delivered by adware are usually seen as a “nuisance form of advertising,” and most mainstream publishers avoid them, he said.

“You would hope that publishers of high-quality content would use advertising techniques that were in keeping with that,” Mr. Symonds said. He added, though, that pop-ups could be a legitimate way to reach new viewers if the publisher took certain precautions, like not using pop-ups to inflate traffic or satisfy orders from advertisers.

There are legal issues as well. Many sellers of pop-up ads have been sued by regulators and consumers, who say the software to allow pop-ups is often installed without a users’ consent. The adware hitches a ride on another application, like a game or a screen saver, and the pop-up function can be buried in the fine print. Sometimes it is never disclosed.

“You can almost look at it like steroids,” Mr. Ross said of pop-up content, which his firm calls “non-user-requested” traffic. Others in the online media business call it “push traffic,” because Web pages are actively pushed to computer users who do not request them.

Used indiscriminately, push traffic is like printing extra copies of a magazine and tossing them onto doorsteps or, because pop-ups can be intentionally hidden behind other windows, simply dropping them in an alley.

Mr. Ross and executives at comScore, a rival measurement company, say they can usually detect such activity and remove it from their data. But both companies concede that they cannot catch everything.

“It is a cat-and-mouse game,” said Magid M. Abraham, comScore’s chief executive.

In the case of Concierge.com, which has articles on luxury resorts and expensive spas, the site recently bought pop-up services from Zango, one of the largest adware companies. In one case, Zango’s software caused a page featuring “Hot List Hotels 2006” and other travel articles (created by Concierge.com) to appear unexpectedly while Mr. Edelman was browsing other sites, he said.

Concierge.com declined to comment, but Zango has faced harsh criticism from the Federal Trade Commission. In early November, Zango agreed to pay a $3 million fine to settle the commission’s charges that it had used unfair and deceptive practices to install its software on personal computers and to make it difficult to remove.

“If consumers choose to receive pop-up ads, so be it,” Lydia B. Parnes, director of the commission’s Bureau of Consumer Protection, said in announcing the Nov. 3 settlement. “But it violates federal law to secretly install software that forces consumers to get pop-ups that disrupt their computer use.”

Zango, based in Bellevue, Wash., said that third-party affiliates were the source of the problems and that it had long since cut ties with them. Zango also said it had operated within the requirements of the F.T.C. settlement, including verifying computer users’ consent, since Jan. 1 and had hired an outside auditor to confirm its compliance.

Zango’s chief executive, Keith Smith, said he would not identify or discuss any of his company’s clients. Asked about Zango’s potential as a tool to inflate traffic numbers, he said that publishers and measurement companies need to work out the issue themselves. “The measurement piece is still evolving,” he said.

Zango is just one of the adware providers that work with online publishers. Until late last year, ForbesAutos.com, an auto-related offshoot of the financial site Forbes.com, was using the services of eXact Advertising, whose adware is sometimes bundled with free games and other applications.

Screen images from December 2005 show several cases in which eXact delivered unsolicited pages — in one instance, a review of a BMW Z4 coupe — from ForbesAutos.com. The pages were actually “pop-unders,” positioned so they were mostly obscured by the main browser window, to be revealed when that window was closed.

Forbes.com declined to say how long it used pop-ups or how many pages were generated that way, but Jim Spanfeller, Forbes.com’s chief executive, said they accounted for a “very small fraction” of its page views. He also said the site abandoned the practice last year.

“We decided in 2005 to stop using pop-ups of any sort, delivered by adware or otherwise, for site promotion after determining they were of less utility than other efforts,” Mr. Spanfeller said. A spokeswoman for eXact Advertising declined to comment.

Heavy.com, a site that tries to attract young men with its irreverent video clips and animation, is also a page popper, though the company says it has taken steps to avoid inflating traffic statistics or upsetting advertisers. Citing data from Hitwise, a traffic measurement company, Heavy.com said that in October it was the second-largest entertainment video site after YouTube.com. Rather than rely on videos alone, though, the site has also been using pop-ups to position its pages in front of users.

In a recent session, Mr. Edelman said he saw two Heavy.com pages appear on his screen within the space of a minute, each generated from a separate piece of adware. In one case, the Heavy.com home page appeared while he was browsing Netflix, the video rental service.

Some users seem to be bombarded by Heavy.com pop-ups. “HELP! tons of pop-ups from heavy.com and webcrawl.com!!” was the plea posted a few weeks ago in the forums of SpywareInfo.com, which offers advice on shedding unwanted software.

Heavy.com acknowledges using pop-ups, but Andy Morris, a spokesman for the company, said it did not use adware or condone its use. Instead, Heavy.com works with ad networks whose member sites initiate the pop-ups, a practice it calls an “effective marketing tool.”

Presented with Mr. Edelman’s pop-up examples, Mr. Morris said they were not generated at Heavy.com’s request. In some cases, he said, the site has been used by “unscrupulous third-party Web operators” that tried to use its videos as bait; in others, Heavy.com worked with ad networks that then violated the terms of their agreement by using adware.

“Quite simply, we’ve been ripped off,” Mr. Morris said.

Heavy.com said its advertisers were never charged for pop-up pages and that the pop-ups did not inflate its traffic because it flagged those pages so that comScore could exclude them from its statistics. ComScore confirmed this arrangement.

“They did the honorable thing,” Mr. Abraham said.

But Nielsen/NetRatings was unaware of Heavy.com’s pop-up campaign until recently, a NetRatings spokeswoman said. When it began excluding those pop-ups in October, Heavy.com’s traffic dropped 35 percent from the previous month, to 1.8 million, although NetRatings said it was unclear how much of the decline was related to removing the pop-ups. (ComScore reported 7.8 million visitors to Heavy.com in October, more than four times the NetRatings number and a large gap even in the inexact world of Web measurement.)

Heavy.com strongly disputes the accuracy of the NetRatings data. Among other things, it argues that the company does a poor job of tracking sites like Heavy.com that use Flash multimedia software throughout their pages. It also said that NetRatings had relatively few college students, who are a large part of Heavy.com’s audience, in its survey group.