Opening Bell: 10.6.06

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Starbucks to serve up music on iTunes (The Inquirer)
Maybe we really don't get it, but Starbucks' efforts to become something more than a coffee shop have always seemed misguided. The company's attempts to "leverage the brand" for entertainment purposes, selling music and movies, has never really gone anywhere. Akeelah and the Bee anyone? It's not much different that Coca-Cola, which has tried to slap its name on all kinds of things, and hasn't gone anywhere either. So now exclusive Starbucks music will be available on iTunes, which doesn't make it seem so exclusive anymore. In addition to its bold move into cyberspace, the company says it wants to triple its existing worldwide stores to 40,000, and that more of its stores will be set up so serve warm food. Why doesn't that sound appetizing?
Regulator swoops on Ryanair bid (Telegraph)
There are many reasons to think that Ryanair's bid for rival Irish airline Aer Lingus isn't going to get very far. For one thing, Aer Lingus doesn't like it at all, which means that they'll fight it tooth and nail. Second, there's going to be a high degree of regulatory scrutiny on this one . EU regulators already have a testy relationship with Ryanair Its been involved in multiple controversies, such as its opposition to generous reimbursements in the event of a cancellation, and the subsidies it receives from secondary or tertiary airports to fly to them, which allows the company to keep prices very low. And it's not a good sign that even before the Lingus bid, there had already been talk that Ryanair was engaging in uncompetitive practices, i.e. compete too hard.
Strong increase in retail market (Chicago Tribune)
Economists are famous for their ability to look a set of data and the arbitrary exclude something from it. So, for example, you hear about ex- food and energy inflation data (supposedly because those two things are so volatile). Now they're looking at retail ex- Wal-Mart. It makes sense in a way, since the company is really an economy unto its own, where the iron grip of the economy has little presence, why not ignore it in the data. Perhaps we could have an ex- big box to get Kmart and Target out of there. Or an ex- Whole Foods, to exclude the yuppies. As for the overall strength in the economy, analysts say lower gasoline prices are to thank, though you'd think that Wal-Mart shoppers would be the most sensitive to this, and Wal-Mart was the laggard holding up the rear.
Outrageous Fashion, And Why It Matters
If only all R&D were so sexy. The Journal has a nice article discussing Paris' fashion week, and the relationship between outlandish styles, and the broader commercial endeavor of fashion houses. As you know from being a shopper, the wild things you see on runways don't usually translate to anything you'd see in a store. And an obvious reason is that edgy fashion is about creating buzz for a brand or a designer, more so than showing something that could be for sale. But beyond that, these fashion events are like the scientific research labs at IBM engaging in "pure science". They allow the companies to have the brightest minds in their employ, as the freedom lures them away from the academic world. And while there they can interact with others, share ideas, and through the network of smart people, make important breakthroughs for the company. In fact, many people jump between fashion design to semiconductor design because the skill set is remarkably similar.


Mittal Steel USA idling 2 furnaces in response to reduction in demand (AP)
Mittal Steel USA said it would idle two blast furnaces due to what it see as a reduction in demand. "Reduction in demand", wait, does that mean slowdown? Is that why commodities have been falling so precipitously lately? Or does the Bush administration manipulate the steel market, too? Tempering the negativity, Mittal said it would not lay off any workers, and would take the opportunity to perform maintenance on the furnace, in hopes that product will pick up again soon.
Tribune ousts L.A. publisher (Chicago Tribune)
For the last several weeks, there's been a little spat between the executives at the Tribune Co. and the publisher of the LA Times, one of the company's papers. Tribune management wanted to see some staff cuts at the paper, while the paper's publisher (probably because he wanted to be popular with the staff, and wanted a movie about himself made one day) steadfastly refused, which was a rare high-profile case of corporate insubordination. All this stuff about preserving the newsroom, or not making cuts, is a little obnoxious. What is it about journalists that they think of themselves as defenders of democracy that somehow should exist outside the marketplace? In the end, management wrote the publisher's check, and in the end, they fired the guy.
Subsidies Keep Airlines Flying to Small Towns (NYT)
As mentioned in the Ryan Air piece above, one of the controversies surrounding the company is their agreements with small airports to collect taxpayer-funded subsidies in exchange for flying to them. We apparently have something here, but with a twist (a twist that won't surprise you one bit). Ever since the airlines were deregulated, in 1978, the federal government has given money to small, rural towns, so that they can subsidize air travel to and from their airports. And of course, the fact that nobody ever flies to these towns, or that a flight may takeoff hasn't caused anyone to question the wisdom of the plan. We have all kinds subsidies to small towns. For years, we've all had to pay a ridiculous tax on phone service, so that people in rural areas can get phones. We also subsidize home insurance in places with a high likelihood of natural disasters -- which ends up making the inevitable disasters extremely costly and, well, disastrous. The idea that people should just live where they live and deal with the consequences of that choice is rather foreign to us. But in a way, all these government expenditures are good, since they all represent things that could be cut in a budget emergency.
Rolls-Royce puts brakes on A380 engine work (Reuters)
With the Airbus A380 suspended basically indefinitely, Rolls-Royce realizes it probably shouldn't bother producing many engines for the plane. The company announced it would suspend production until further notice, but said it would hold off on announcing layoffs or any impact on its financials. The company still makes engines for other Airbus planes -- ones that are actually being built -- as well as engines for ships and other vehicles.

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