In d i v i d u a l!A s s i g n m e n t !
Name: Akta Gupta
GDGWI ID: 100100
Course: BBA Business Studies
Module: Industrial Organization
Module Code: ECON331
Module Leader: Mr. Prawesh Singh
Japan's Softbank snaps up Sprint in $20 billion deal
Starbucks opens spectacular flagship store in Mumbai, honouring the dynamic
culture of India
Huawei to invest $150 million in Bangalore R&D centre
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Japan's Softbank snaps up Sprint in $20 billion deal
By Mari Saito and Tim Kelly and Nicola Leske
Mon Oct 15, 2012 7:58pm EDT
(Reuters) - Japanese mobile operator Softbank Corp said it will buy about 70 percent
of Sprint Nextel Corp for $20.1 billion, giving Softbank the American toehold it has
long desired and Sprint the capital to expand its network and potentially buy peers.
The deal for the third-largest U.S. wireless carrier represents the most a Japanese firm
has spent on an overseas acquisition.
Announced by Softbank's billionaire founder and chief Masayoshi Son and Sprint
Chief Executive Dan Hesse at a packed news conference in Tokyo on Monday, the
transaction gives Softbank entry into a U.S. market that is still growing, while Japan's
market is stagnating.
Part of the deal involves a direct infusion of billions of dollars into Sprint, giving it
the firepower to buy peers and build out its 4G network to compete in a market
dominated by AT&T Inc and Verizon Wireless.
Shares in one of those potential targets, Clearwire Corp, surged 12 percent to $2.60 in
afternoon trading. Sprint owns 48 percent of Clearwire, and while Softbank said no
action was required, most analysts and investors see a Sprint-Clearwire tie-up as an
inevitable consequence of the Softbank deal.
One way or another, analysts have long said the U.S. telecommunications industry
needed to consolidate, but few looked to Japan as a catalyst. Some investors and
rating agencies worried that Softbank is biting off more than it can chew.
But the 55-year-old Son, a rare risk-taker in Japan's often cautious business circles, is
betting U.S. growth can offer relief from cut-throat competition in Japan's saturated
mobile market. Combined, Softbank and Sprint will have 96 million users.
"It could be safe if you do nothing, and our challenge in the U.S. is not going to be
easy at all. We must enter a new market, one with a different culture, and we must
start again from zero after all we have built," Son told the news conference.
"But not taking this challenge will be a bigger risk."
The financing is highly complex, involving at least three steps with two entities as
well as a debt conversion.
Softbank's newly created U.S. subsidiary New Sprint will buy $3.1 billion in old
Sprint convertible bonds to start. After shareholders and regulators approve the
proposed deal, Softbank will then buy $4.9 billion in New Sprint shares. The two
together represent the $8 billion infusion directly into Sprint.
On top of that, 55 percent of existing Sprint shares would be exchanged for $7.30 per
share in cash, representing a further $12.1 billion. A source close to the matter, who
declined to be named publicly, said shareholders would actually be offered a choice
between taking the cash or shares in the new company - though there will be caps in
place so Softbank would not pay out more cash or give up more stock than planned.
The transactions are to be completed by mid-2013, at which point New Sprint will be
a publicly traded company and the old Sprint will survive as its subsidiary.
A second person familiar with the negotiations told Reuters that one reason for the
deal's complex structure, and for the use of the convertible debt, was the desire to
infuse some capital into Sprint in short order without having to wait for regulatory
approvals for the full investment.
Sprint fell 1.3 percent to $5.65 in afternoon trading after surging last week on the first
reports of a pending deal. The offer, while a substantial premium, is still less than
some observers had hoped. A fund manager at T. Rowe Price, a top-15 Sprint
shareholder, told Reuters last week he thought Sprint would be worth $10 a share in
Hesse, who will stay on as Sprint CEO, said the Softbank investment would give
Sprint opportunities it hadn't had since he joined the firm in late-2007, and enable the
U.S. firm to play a bigger role in future market consolidation.
"This is pro-competitive and pro-consumer in the U.S. because it creates a stronger
No. 3 ... it competes with the duopoly of AT&T and Verizon," he said.
Hesse, one of the few corporate CEOs in America to star in his own company's
commercials, also acknowledged the financial challenges Sprint has faced -- which
the new capital could fix quickly.
"Sprint has been engaged in turnaround since 2008. We have been at a disadvantage
due to our debt," he said on an investor call Monday morning.
But it was not all serious, as the American took some time for a bit of levity with his
Asian counterparts. At the press conference, Hesse noted it was the first time he had
seen his long-time acquaintance Son with a tie on.
Later in the day, Hesse sent a note to Sprint staff, listing the positives of the deal,
while directors held calls with their various units to talk about what Sprint could do
faster or better - like its network build-out - with the extra capital.
Softbank shares tumbled more than 8 percent on Monday before closing down 5.3
percent to their lowest finish in five months. The stock has lost more than one-fifth of
its value - or $8.7 billion - since news first surfaced late last week about its interest in
On Monday, credit rating agency Moody's said it was reviewing Softbank's ratings for
a possible downgrade, but some analysts said Son's gamble might pay off in the end.
"It's the same (market) reaction as when Softbank said it was going to buy Vodafone a
few years ago. Everyone came out and said it was far too expensive," Fumiyuki
Nakanishi, general manager of investment and research at SMBC Friend Securities,
said ahead of the announcement.
Softbank bought Vodafone's Japan unit for $15.5 billion in 2006.
"Son made a company worth 3 trillion yen, and now it will be worth 6 trillion yen.
That's quite impressive, and I think investors will realize he's making the right
decision down the road," said Nakanishi.
Four banks - Mizuho Financial Group Inc, Sumitomo Mitsui Financial Group,
Mitsubishi UFJ Financial GroupM and Deutsche Bank - have approved loans totaling
1.65 trillion yen ($21.1 billion) to Softbank, three sources with direct knowledge of
the matter told Reuters.
Standard & Poor's has warned the deal "may undermine Softbank's financial risk
profile" and pressure its free operating cash flow for the next few years.
Reflecting the concerns, Softbank's 5-year credit default swap spreads - the cost of
protecting its debt against default - widened to 267/327 basis points from around 160
basis points before the deal, and yields on its yen bonds have risen sharply.
NO CLEARWIRE OBLIGATION
Sprint is going through a $7 billion upgrade of one of its networks, while closing its
Nextel iDen network, which makes Softbank's capital especially useful. But the
Clearwire question looms large as well.
Macquarie analyst Kevin Smithen, in a note to clients, described Softbank as the
"white knight" that could give Clearwire management and investors a successful exit,
though he also warned the company may drive a hard bargain in negotiations.
According to the second source, one thing Softbank's Son liked about Sprint was the
benefit of the affiliation with Clearwire, without the need for full ownership.
An alliance with Sprint could also give Softbank leverage when dealing with Apple
Inc, helping bolster its domestic position against KDDI Corp, which also offers the
iPhone in Japan, and market leader NTT Docomo, which has yet to offer the Apple
The Sprint deal takes outbound deals by Japanese firms to a record $75 billion this
year, according to Thomson Reuters data, underscoring a strong appetite for overseas
assets seemingly unaffected by signs of slowing global growth.
This is not the first Japanese foray into telecoms overseas. NTT Docomo racked up
big losses after a string of failed investments in names like AT&T Wireless and
Taiwan mobile operator KG Telecom in the late 1990s and early 2000s.
Raine Group LLC, a boutique merchant bank focused on the technology, media and
telecoms sector, and Mizuho Securities were lead financial advisers to Softbank.
Deutsche Bank also acted as an adviser to the firm.
Softbank Telecom Corporation (formerly known as Japan Telecom Company
Limited) is a telecommunications and Internet service provider company based in
Japan founded in 1981. It provides telecommunication services to individual
consumers and businesses at large. Some of the fields in which Softbank serves are
broadband, e-commerce, fixed-line, financing, marketing, etc. It has been working
aggressively over the years in terms of growth and pricing strategies and is the third
largest mobile service provider in Japan. Also, it was the official IPhone services
provider to the consumers in Japan until IPhone 4S was launched. The company is
known to own stake in about 960 mobile Internet companies over the world, most of
which is in Asia.
Sprint Corporation was found in 1937 whose merger with Nextel Communications
resulted in the formation of Sprint Nextel Corporation in 2005. It is the third largest
service provider in US. Sprint Nextel serves a wide range of wireline and wireless
communications services in United States, the U.S Virgin Islands and Puerto Rico.
Some of the brands offered by Sprint Nextel are Boost Mobile, payLo, Assurance
Wireless and Virgin Mobile. In the second quarter of 2012, it was known to have a
customer base of 56 million people and is rated the No.1 by the American Customer
Satisfaction Index among all the national carriers for the last four years. But, in the
second quarter it lost $1.37 billion and is expecting to make further losses in the
coming quarters. Sprint Nextel also has a huge financial debt, which is forecasted to
mature in the coming months. Due to the financial distress in which Sprint Nextel
finds itself, it is seen to merge with Softbank Telecom Corporation for $20.1 billion.
A merger is a state where two firms come together to form a single entity and the
shareholders of the companies are allowed to keep interest in the new company.
According to the Minority Business Development Agency, the few benefits a
company could attain from a merger is getting access to financial support for building
assets; building on economies of scale and improved efficiency; attaining skills,
knowledge and industry intelligence that the company may not have otherwise or find
it difficult to develop; if a company is underperforming, a merger with a growing or a
stable company could support it and prevent permanent decline; increasing the
customer base and increased market share; adding more products to the portfolio;
reducing costs through added expertise; accelerated growth and ability to fight
competition. Though merger can be seen as an advantage to the company, there could
be certain disadvantages attached with this action. There are possibilities of
inefficiency being developed due to different working cultures and styles, it could
result in a monopoly which would though strengthen the firm but weaken the market
as it is known that a monopolistic firm may provide low quality products as there is
reduced competition. It may result in employees being laid off, as duplication of
activities would not be required resulting in jobs being lost and the bargaining power
of the company will increase resulting in loss to suppliers.
According to the merger deal, Softbank will own 70% stake in Sprint Nextel for $20.1
billion where it will buy $3.1 billion worth convertible bonds from Sprint and $4.9
billion worth shares in New Sprint which would be the Softbank and Sprint subsidiary
in the US resulting in a total of $8 billion invested directly in Sprint. Another $12.1
billion worth shares will be bought from existing shareholders for $7.30 per share that
accounts for 55% of the existing shares of Sprint. The shareholders would be given an
option of selling the shares in exchange for cash or for shares in the new company
that is New Sprint. As per the news released, this investment would help Sprint
Nextel build a 4G network so that it can compete with the market leaders that are
AT&T and Verizon wireless. Due to this merger, Softbank finds itself in having a
stake in Clearwire Corporation that is a wireless provider in the US, Spain and
Belgium where Sprint owns 48%.
Due to market speculations of the deal, the share prices of the companies were seen to
fluctuate. The share value of Clearwire Corporation’s rose by 12% to $2.60 the
afternoon the information of the merger was declared while the share value of Sprint
fell by 1.3% to $5.65. As the news of Softbank’s interest in Sprint surfaced, Softbank
lost $8.7 billion in the stock market and its share price reach the lowest in the last 5
months. This is because investors feel that Softbank’s decision is not appropriate as
Sprint is under financial debt and has a declining market value. But analysts claim
that this speculation will fail in the upcoming days as Softbank has proved investors
wrong in 2006 when they felt that Softbank has bought the Japan unit of Vodafone for
an overpriced deal but was seen to be a success and paid well to rise the value of
Softbank from ¥3 trillion in 2006 to ¥6 trillion in 2012. The past successes and
growth of Softbank may help it gain customer confidence and bring back investors.
Through this merger, the firms wish to change their position of being the 3rd largest in
the respective realm to the third largest wireless firm in the world. This deal will put
Softbank ahead of its competitor KDDI in Japan and also give the challenge to grow
in the culturally different environment.
To analyze this merger, we aim to find the reason why Softbank decided to merge
with Sprint, which was a declining firm and not any other US firm which could have
provided similar benefits to Softbank. Firstly, it would be cheaper for Softbank to
merge with a declining firm than a growing firm such as AT&T and Verizon.
Secondly, Softbank and Sprint has many similarities as they both are Smartphone and
tablet service providers and thus can develop synergies. They also offer similar
products that are devices like HTC, Samsung, LG, RIM and Kyocera along with
Apple products. Thirdly, Sprint is the largest shareholder company for Clearwire that
has a sizeable market in the US. Having a 70% stake in Sprint gives access to
Clearwire which is working on the next generation network operating TD LTE
technology, which is similar to the network plan’s of Softbank for the future.
Fourthly, Other companies are allowed to resell their access to Sprint’s network by
Sprint through an arrangement called mobile virtual network operator. Sprint is the
market leader in this segment and could provide an opportunity to Softbank to grow
its brands and Lastly, Softbank’s rival firm NTT Docomo is seen to have close
connections with AT&T due to their previous merger and working styles, this
connection could help New Sprint (merger subsidiary of Sprint and Softbank)
compete in the US market against AT&T, thus fighting NTT Docomo.
This deal is important for Sprint Nextel as well, as it will provide it with the funds to
overcome its financial debt and also help it grow by building its 4G networks where it
needs $7 billion and the capital from Softbank will support this upgrade. Sprint is
behind AT&T and Verizon in the 4G LTE deployments and workings with Softbank
will open doors for it to work against them and make improvements in the network
offered. Working with Softbank will give Sprint access to Japanese style of working
which is known for quality and may open doors in the future if it wishes to invest in
Japan. This deal makes Sprint a strong player in the US and it can push the
competition against AT&T and Verizon further through its aggressive strategy and
This merger will help revive Sprint Nextel’s balance sheet and provide it with capital
to overcome the financial debt it may drown in, while giving access to the Japanese
firm to the growing U.S telecom industry as the Japanese market seems to mature.
The basic motive of this horizontal merger is to develop synergy between the two
firms, reviving Sprint Nextel and building a network for Softbank in the US.
When we seek the reaction of the Sprint competitor AT&T and Verizon to this
merger, we can say that they are not very pleased with the plan of Sprint merging and
growing in terms of size and capital, as it would become highly competitive. Also,
after the merger, Sprint will have the funds to offer unlimited data plans for
smartphones to its customers that AT&T and Verizon have stopped to offer to its new
customers. Also, this negative response to this merger is because in 2011, Sprint
Nextel voiced out their concern against the merger of AT&T and T-mobile suggesting
that it would result in a extreme duopolistic market in the telecommunication industry
as they would be left with just Verizon which is the market leader, AT&T and the
crucially small Sprint Nextel which resulted in the elimination of the deal. Due to this
action, AT&T is sharing a similar sentiment for the merger of Softbank with Sprint
Nextel, as this merger would make Sprint almost at the same position at which AT&T
is. The Vice-President of AT&T expressed this discomfort over the merger by staying
that this merger would give a foreign company power in the national wireless service
spectrum thus reduce the control the local companies have over the industry. This,
though true to is a strategic statement used by AT&T to influence the authority to
eliminate the merger proposal.
A result of this merger is that Sprint and Softbank combined can compete more
efficiently against the US telecom giants AT&T and Verizon as the combined revenue
of Sprint and Softbank is about $32 Billion in the first half of the year which is almost
equal to that of AT&T and close to Verizon’s $37 billion. This merger also helped
both the firms have a larger number of subscribers. Sprint and Softbank, together have
96 million customers that are close to AT&T’s 105 million and Verizon’s 111
But this deal may results in problems from Sprint as on today (before the New Sprit is
set up) as customers and employees may be uncertain of the result of the merger. This
uncertainty could result in the top employees of Sprint leaving the job, as they may be
worried of their roles and position in the new firm. These complexities could harm the
business today even before the merger is complete. As the customers may be unsure
of the New Sprint and the services they may receive from them, there is a possibility
of them changing their service provider that would affect the revenue of the company,
thus affecting the operations of the company. Thus the company needs to persuade the
employees and the customers by raising employee morale and motivating key
employees to stay until the merger is complete.
It can also be seen that the benefits that a Sprint and Softbank would enjoy by this
merger as similar to the theoretical benefits of a merger stated by the Minority
Business Development Agency. Thus we can say that this merger is following
industry norms and if approved may enjoy these benefits
Starbucks opens spectacular flagship store in Mumbai,
honouring the dynamic culture of India
October 19, 2012
Mumbai: Tata Starbucks, the 50:50 joint ventures between Starbucks Coffee
Company and Tata Global Beverages, today opened its doors to the first Starbucks
store in India. This flagship store is located at the historic Elphinstone Building at
Horniman Circle, Mumbai and marks the beginning of the iconic brand’s India
journey. In addition to the flagship store, Tata Starbucks will launch two more stores
next week at Oberoi Mall and the Taj Mahal Palace annexe in Mumbai.
“We are proud to enter the Indian market with Tata Global Beverages, a global
company that shares many of the same values that Starbucks was founded on more
than 40 years ago,” said Howard Schultz, chairman, president and CEO, Starbucks
Coffee Company. “Our first flagship store in Mumbai is an amazing celebration of
great coffee, rich Indian heritage and community. Together, the two companies are
bringing an unparalleled experience to Indian customers. We are investing for the
long-term and see great potential for accelerated growth in India.”
“This is a historic moment for Tata Global Beverages and Starbucks,” said RK
Krishna Kumar, vice chairman, Tata Global Beverages. “Both companies have a
history of delivering product innovation and the highest quality experience to
customers around the globe. We are delighted to come together today and transform
the coffee experience for consumers across India, while providing a community
gathering place to connect with family and friends.”
In addition to the exceptional third place experience Starbucks is known for globally,
the two companies are proud to offer Indian Espresso Roast, sourced locally through
the coffee sourcing and roasting agreement with Tata Coffee. The Indian Espresso
Roast will be a hallmark feature of all Starbucks stores in the market and highlights
the quality espresso available in India. As part of the agreement, Starbucks and Tata
Coffee will work towards developing and improving the profile of Indian-grown
arabica coffees around the world by elevating the stature of Indian coffee, as well as
improving the quality of coffee through sustainable practices and advanced agronomy
Commenting on the first Tata Starbucks store, Avani Saglani Davda, CEO, Tata
Starbucks, stated, “We are honoured to open our doors to customers today and look
forward to sharing our passion for high-quality, locally sourced and roasted espresso,
as well as the uplifting moments of connection Starbucks baristas are known for
around the globe. Tata Starbucks is committed to investing in the communities where
it does business and creating a great work environment for its people.” The unique
flagship store is owned and operated by the joint venture and branded as Starbucks
Coffee - A Tata Alliance. Strategically located, the store is designed to reflect
Starbucks coffee heritage and embrace the local culture, with artifacts, Indian
teakwood furniture, floor design and interiors created by local craftsmen and artists.
The extensive product portfolio includes Starbucks signature espresso-based
beverages, as well as Starbucks VIA Ready Brew and Starbucks Reserves. The store
will also offer Tata Tazo and Himalayan mineral water, and its broad food offering
boasts a wide selection of 42 items, which includes western favourites as well as
locally relevant flavours reflected in items such as the elaichi mawa croissant, murg
tikka panini, tandoori paneer roll and the signature Star Club.
Deepening its commitment to community, Tata Starbucks will work to improve the
lives of coffee growing communities in the state of Karnataka. The joint venture,
through an initial financial commitment, will work to support Swastha, a school for
children with special needs (in partnership with the Coorg Foundation). Additionally,
Tata Starbucks will work on initiatives that include the promotion of responsible
agronomy practices and training of local farmers, technicians and agronomists to
improve their coffee-growing and milling skills.
Along with exploring social projects that could positively impact the communities in
the coffee growing regions where Tata Global Beverages is active, the joint venture is
committed to supporting the local community near the store. Towards this, Tata
Starbucks is proud to be developing a cultural hub at Horniman Circle where local
artists can come together. The first step in the development of this cultural centre was
the community service project to clean up the area and prepare it for future
development, which took place with Starbucks partners earlier this month.
Tata Global Beverages and Starbucks Coffee Company announced the strategic joint
venture – Tata Starbucks, to open as Starbucks stores in India in January 2012.
According to Desai, N (2011), a joint venture (JV) is an arrangement between two or
more parties to set up another business where they co-operate to achieve a monetary
objective or run the business. Starbucks Coffee Company and the Tata Coffee did a
similar act with a 50:50 joint venture and open Tata Starbucks in 2012.
Starbucks Corporation is a coffeehouse originating in the United States. Jerry
Baldwin, Zev Siegel and Gordon Bowker in Seattle, Washington first set up
Starbucks in 1971 that sold specialty coffee equipment and premium coffee beans. In
1981, Howard Schultz who was then a sales representative at Hammerplast was
attracted by Starbucks operations and joined it as the head of marketing. On his visit
to Milan, he developed a fascination for the coffee culture that was built there.
Convinced that his idea to copy the same culture would be a success, he left
Starbucks, as he did not receive a positive response from the founders of Starbucks to
rebuild the Italian coffee culture at Starbucks. He opened a coffee house named
Giornale which was a success and later bought Starbucks in 1987 for $3.7 million. He
renamed his coffee house as Starbucks and continued to build on the “third place”
experience for the customers. It opened 125 stores by 1992. In 1992, the company
went public and by 1997 it grew tenfold. From the beginning, Starbucks has been
committed to sourcing and roasting Arabica coffee of the highest quality in the world.
Starbucks today has about 7500 stores, which are self-operated and 5500 licensed
stores in about 39 countries.
“Tata Coffee Limited” is a subsidiary of the Tata Global beverages and is owned by
the Tata Group and has an annual turnover of about US$1.4 billion. Tata Coffee
Limited is the largest coffee plantation company in the world. It caters to all fields in
the coffee making business such as growing, curing of the coffee and tea to be
manufactured, selling and marketing. It also has its own estates where it grows coffee
and exports green coffee, manufacturers, sells and exports instant coffee under its
own brand name in India. In terms of exporting, it is the second largest in India for
instant coffee and has the largest coffee plantation in Asia. The production is about
10000MT of Arabica and Robusta coffee grown in about 19 estates of South India
and has a capacity of 6000MT for making instant coffee with two facilities. The
places where it exports are Europe, North America, Middle East and Asia. In terms of
certification, it is triple certified which are Rainforest Alliance, Utz and SA8000,
which reinforces their commitment towards the environment and people.
Starbucks struck a deal with Tata Coffee in late 2011, for sourcing green coffee beans
from their Coorg facility and is exploring opening coffee shops in India with a Joint
venture with Tata Coffee. The first Tata Starbucks started by the end of October 2012
at the Horniman Circle, Mumbai and had planned to open two more outlets at the
Oberoi Mall and the Taj Mahal Palace, Mumbai, which did materialize.
Starbucks in the aim to build the “third place” experience between home and work in
India with Tata coffee offering locally sourced Indian Espresso Roast. The stores
which are strategically located are said to reflect the coffee culture at Starbucks and
welcomes the Indian culture with Indian artifacts, furniture made form Indian
teakwood, the interiors and designing along with the flooring done by local craftsman
and artists. Tata Starbucks to cater to the taste buds of the Indian Consumer have
offered a combination western favorites on the menu along with the local Indian tastes
in the list of its 42 selections like murg tikka Panini, elaichi mawa croissant, tandoori
paneer roll, etc. The stores will also serve Tata products like the Himalayan mineral
water and Tata Tazo.
In order to serve the community, which Starbucks and Tata are known for, they would
work together to elevating the profile of the Indian Arabica coffee all over the world
that would. They would work together for the Karnataka state coffee growing
community and improve their lives. They would also work together and cater to
children with special needs under the NGO Swastha in the Coorg Foundation. Along
with this, they would work towards improving farming practices and training and
education farmers about new technology so that they can improve their milling skills
and the coffee grown. These actions will add to the brand value of this joint venture
that may provide benefits in the coming future.
According to Terjesen, S, some of the benefits a company is expected to attain from a
joint venture is access to new resources, distribution channels, staff, finance, capacity,
technology, and intellectual properties.
Starbucks, which has a global footprint, had strong reasons to eye the Indian
consumer market and adding profits to their balance sheet. The entry of Starbucks to
India may seem highly profitable to them as India has a huge consumer market. After
Starbucks recent success in China, entering India is highly logical and maybe fruitful
in the long run. Along with the increasing consumer market to which Starbucks
wishes to cater for its benefit, another reason why Starbucks wishes to enter India is
because according to a survey conducted by ENAM Securities, the average spending
of an Indian consumer from his final consumption expenditure on eating out is 51%.
Due to this, India saw many foreign companies entering it, like Lavazza entered India
by acquiring Barista and Gloria Jeans which is an Australian brand has also opened a
number of cafes. Starbucks, if did not take an action may loose out the coffeedrinking consumers to the competitors. Also, according to the Time Magazine Story,
the Indian Coffee drinking market is growing at a rate of 23-14% annually, which
could be highly beneficial for the beverage companies.
Starbucks choose to form a joint venture with the Tata group since the Tata group is
known to have considerable experience in the field of retailing as it has successful
retail chains like Westside, Landmark, Titan and Croma. This experience adds as a
benefit to Starbucks as Tata would have studied the Indian retail market well during
its course of existence. Also, Starbucks had a sourcing agreement with Tata for a year
now, and their relations were quiet comfortable, which becomes a reason for the joint
venture. Also as Howard Schultz (President and CEO of Starbucks) stated, “Tata
Global Beverages, a global company that shares many of the same values that
Starbucks was founded on”, which suggests that they have similar work cultures and
ethics that makes management easy. According to the 50:50 joint venture between
Starbucks and Tata Coffee, Starbucks will be setting cafes and stores in the Tata
Group’s properties such as retail outlets, hotels and malls apart from sourcing and
roasting coffee beans from Tata’s Kodagu Coffee facility and work towards
improving the coffee culture in India. This availability of property for setting up the
café will result in cost reduction as real estate as the most expensive parts for a retail
business. Another advantage of Starbucks joining Tata Group is that it will now be
working with Tajsats as well, which is an in-flight catering business.
These benefits result is adding distribution channels, finance and exploring of new
territories like catering for Starbucks, which would improve its market value.
Through this, Tata Global beverages that was in the business of production and sale of
beverages, is now moving into retail of coffee, thus exploring new areas by adding
innovation. This move of forming a joint venture resulted in a more than 10% hike in
the stock value of Tata Global Beverages the day after the news of its JV with
Starbucks was released. Through this we can say that this joint venture is giving
immediate returns to Tata Global beverages and its stakeholders that may result
boosting investor confidence towards the Tata Starbucks venture. This joint venture
will help Tata Coffee grow on a faster scale, as Tata coffee will be sold in Tata
Starbucks as well as Starbucks branches overseas. According to a statement passed by
Howard Schultz, Starbucks plans to stay in India for a long term, and this alliance of
Tata Coffee with Starbucks could help it in getting access to various modes of selling
coffee overseas. Also, after this deal, Tata Coffee will be Asia’s biggest publicly
traded coffee grower, which gives it strong market dominance globally.
Thus it can be seen that both the companies have an advantage by sharing synergies
with each other and growing together.
But, in this entry of Starbucks in India, it has to face tough competition from its
competitors, Café Coffee Day (CCD) that is the market leader, Barista, Costa Coffee,
etc. It is an evident scenario that customers will tend to move towards Starbucks as it
is an international brand and customers would wish to try it. This could create
troubles for the local players as the youth to whom these companies generally target
would wish to try something new which may result in them moving to Starbucks to
experience the “third place”. To avoid loosing customers to their new competitor, the
local companies would have to change their functioning in certain ways, maybe by
introducing new items on the menu, changing the look of the cafes, revamping the
experience the customers received from them, etc. to fight this new competition,
Barista has already played its cards and has introduced new items on the menu and
changing interiors of the café. They have also indulged in a new brand ambassador
since the October 2012. CCD is seen to follow suite in the coming days as it is
working on changing the new and marketing the company on a larger scale. It is
known that Starbucks caters to the premium market segment of coffee drinkers, and
its competitor, CCD belongs to the affordable segment. CCD in the revamped menu is
offering premium delites as well to the customer to cater to different segments. Also,
they are working on increasing their market presence by increasing the number of
stores to 2000 by 2014. Though it seems evident to the market analysts that this
reaction is due to the entry of Starbucks, they companies claim it to be an expansion
strategy and not act due to Starbucks arrival.
But Starbucks may also be adversely affected by the industry presence and love for
CCD in India where customers have built tastes for products and may wish to
continue to work towards brand loyalty. Also, the growth strategies of CCD and
Barista may hinder Starbucks growth as these two market dominators can be seen in
almost all parts of India which has the presence of a coffee culture and this may
become a problem for Starbucks. Starbucks may have to indulge in marketing to show
its market presence and gain the coffee retail market in India.
Thus it can be seen that Starbucks is affecting the local competitors due to whom they
are indulging in growth strategies. Also, Starbucks and Tata Coffee are seen to benefit
form this joint venture and their benefits and theoretically similar. Through this we
can claim that this joint venture is meeting industry models.
Huawei to invest $150 million in Bangalore R&D centre
BANGALORE, AUG. 30:
Chinese telecom equipment maker Huawei will invest $150 million in its research and
development (R&D) centre coming up in Bangalore.
The centre, being built over one million sq feet can seat about 4,000 people, according
to the company whose revenues were at $32 billion in 2011.
Huawei officials did not give out specific hiring plans, but said that they would pick
up telecom engineers and networking specialists whenever there was a need. The
development centre will cater to Huawei’s enterprise, telecom operators and
cellphone business segments. Scott Sykes, Vice-President, Corporate Media Affairs,
Huawei Technologies, told Business Line: “We see demand coming from 4G rollout
in India, and the centre will work on our NextGen smartphone handsets.”
Last year, Huawei started making smartphones and, according to company officials,
has sold 60 million smartphones till date. The India centre will work on technologies
that can increase battery life in smartphones. This is because the battery life of most
handsets in the market last not more than a day.
“We already have smartphones that come with two days of battery life and are
looking to further reduce the form factor in a smartphone and provide better quality
battery life and run on the latest networks.”
At the Mobile World Congress in Barcelona earlier this year, Huawei launched its
slimmest smartphone at 6.68mm weighing about 110 gm.
According to the Statement of Financial Accounting Standards No. 2, (1974),
Research can be defined as the critical investigation or planned search which aims at
discovering new knowledge with an aim that the discovered knowledge can be put to
use for developing new products, services, processes, techniques or bringing about a
substantial change in the existing process or products. It defines development as the
productive use of this research to design a new product or make an improvement in
the existing product which maybe for sale or self-use. This development would
include activities like designing a conceptual framework, designing and testing
product alternatives, prototype construction and functioning of pilot plants. These
would not include activities such as making minor alternations in the product or
making slight changes in the manufacturing process or production lines. Though these
may bring about significant improvements, these do not include market research or
testing due to which they cannot be claimed to be developments.
Investing in research and development (R&D) is a highly complex and risky
procedure that incurs high costs and do not guarantee any returns. Most of the R&D
projects tend to fail, as they do not provide the expected financial return. But the
projects that are successful tend to pay off for the costs incurred in the R&D of the
projects, which were not a success or could not be materialized. Investing in R&D
could give long term benefits to the companies as the companies generally tend to
patents their R&D which helps them in gaining a competitive advantage, increase
customer base and compete efficiently in the market.
To take advantage of the above benefits a company could gain due to investing in
R&D, Huawei, which is a Chinese telecom equipment maker, invested $150 million
at its upcoming Bangalore centre. Huawei was founded in 1987 by Ren Zhengfei,
which initially focused towards operating as a sales representative for a Hong Kong
company. After Huawei gained enough experience, knowledge and resources on the
private branch exchange business from the business partner, in 1992 it moved towards
the mainstream telecommunication market and launched C&C08 digital switch. The
company has grown over the years and has received international contracts that have
been profitable. It was also included in the Global Fortune 500’s 2010 list when it
made an annuals sale of US$21.8 billion and a profit of US$2.67 billion.
On the research and development front, the company has spent over CNY100 billion
on R&D over the last decade and has about 62000 employees, which is more than
44% of the employees working with Hauwei. It has 23 research centers in Germany,
Sweden, the UK, Italy, India, Russia and France. Also, the company has continuously
been working to have a competitive edge over its competitors as it was seen to file for
57572 patent licenses till 2011 of which it was awarded 23522 patents licenses where
90% are invention patents. It set up its R&D plant in Bangalore in 1999 and is now
launching another R&D centre in Bangalore by investing $150 million.
As per the news released by The Hindu, the centre will be built upon 1 million sq.ft
and would have seating for 4000 people. Though hiring plans have not been declared
but the company aims at mainly hiring telecom engineers and specialists in
networking. Huawei introduced smartphones in 2011 and has sold 60 million smart
phones. This branch will cater to working towards increasing the battery life of
smartphones for Hauwei as most of the smartphones in the market do not last for
more than a day. Huawei already deals with smartphones that comes with two days of
battery life but wishes to improve the quality of the battery life so that it can run on
the latest networks. Also, Huawei sees a rise in the demand for smartphones in India
after the 4G will be rolled out, due to which they wish to work towards the next
generation of smartphones that provide long battery lives.
India has been a bullish market for most investors over the years and considering that
the global recession did not make a drastic impact on the India, it becomes a land for
huge investments due to which international firms have been eyeing India for growth.
Also, according to the Zinnov Management Consulting, in 2008, the R&D cost in
India has reduced by 6% and is expected to further fall by 10-12%. This fall in cost
would interest investors who would desire to build on the R&D at lower costs.
The basic aim of any company behind investing in R&D is to generate future returns
along with being able to capture the latest technology to compete in the market. This
investment of Huawei in India to set up an R&D center is because it claims that India
has “great technical talent” and would help it grow globally. Through this R&D
centre, they wish to develop designs and technologies that would provide long battery
life along with being able to have multiple functions. It is a common scenario of cell
phones running out of battery due to excessive use to internet on the cell phones,
Huawei at this R&D centre wishes to develop technology which would help combat
this situation and customers could enjoy a longer battery life even with operating 4G
on their smartphones. In future, if Huawei is able to develop the desired technology, it
could patent it that would be a competitive advantage to the company against its
competitors Cisco and ZTE.
India would be interested in Huawei setting up its R&D plant as it would help
generate employment and over the years this centre is wished to improve the quality
of smartphones circulated around India. The Indian employees working at Huawei
would also be benefited as Huawei is neither a public nor a private company but is
owned by the employees. It works on the bases of Employee Shareholding scheme
and thus with the growth of the company, the employees would also grow. The Indian
economy would benefit from the foreign investment as it would support infrastructure
and the R&D would make India more competitive in terms of technology, globally.
It can also be seen that building this R&D centre by Huawei in Bangalore can be a
reaction to Cisco’s growth in R&D who set up a similar R&D centre of 1 million Sq.ft
in 2007 in Bangalore. Huawei is trying to compete with Cisco on the same platform
of indulging in R&D and hiring the best talent available in the market. Also, it was
seen that Cisco stated that its R&D centre would have the potential to provide revenue
worth $1 billion by 2012. Huawei, being a staunch competitor may wish to add
similar returns to their balance sheet and thus would have initiated this investment
hoping for growth.
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Big Risk, Big Reward: Felix Baumgartner and Red Bull Deserve
All The Marketing
Dan Bigman, Forbes Staff
Ask an ad guy: In this cynical, media-soaked age it’s tough to get anyone’s attention
anymore. What it takes to really break through: authenticity. Brands telling their own
stories, friends recommending what to buy, and on and on. That’s what’s hot. (That,
and Google ads).
Blame it on the media business, blame it on three generations reared on blanketed
advertising, but that’s what’s left, increasingly. We’ve so supersaturated the world
with messaging–from blinking banner ads to cookie cutter car spots (wet roads,
anyone?) to covering every surface of at least New York City with someone trying to
sell us something–that almost nothing sticks anymore. You’ve got to be totally
clueless to see why people are turned off by all this. In the apex of the age of
consumerism, we’re just drowning in pitches to buy.
Then comes today, with Red Bull. Yeah, as one friend just said to me, “I thought it
was just some stunt,” — and it was. But what a stunt. Jumping from a balloon in nearspace to fall more than 23 miles while breaking the sound barrier, risking his life,
setting records, Heroic Stuff! The Right Stuff! And all brought to you by Red Bull.
In this new age of attempted authenticity (just act natural! CEOs Tweeting! People
Like my new product!) they just absolutely killed it by being absolutely, totally, truly,
over-the-top authentic. They backed a guy in an insanely risky, old-school kind of
venture that was elegantly simple in its principles (go higher than anyone else, jump,
live) yet so hair-raisingly sophisticated in its execution (pressure suit, capsule, hours
of countdown, etc.) that it grabbed the world’s attention and kept a good part of it on
pins and needles for a week, and talking about their brand. Why’d we watch, why’d
we care? ‘Cause it was, in the words of Van Morrisson circa 1971, really, really,
really, real (Lord have mercy).
You can’t tell immediately how many views this live stream of the jump on their site
pulled in, but over on the YouTube live stream, at the peak of coverage, there were 8
million concurrent viewers from around the world watching. The walkup videos in the
months ahead of today pulled in more than 5 million views, and got shared, of course,
like crazy. Red Bull hasn’t said what all this cost, and it couldn’t have been cheap, but
it certainly would be in line with a couple minute spots on the Super Bowl.
Sponsoring someone to jump from a record height certainly won’t work for other
brands. Every month I get a “Red Bull Bulletin” magazine in my inbox at work,
chronicling its cadre of extreme sports athletes (is athletes really the right word
here?), and I put their full marketing muscle behind everything from base jumping to
constructing massive half-pipes in the middle of nowhere for Shawn White to train on
(though he moved to another sponsor in 2011.)
They’ve spent years and many millions establishing this kind of stunt as core to their
brand DNA, so it didn’t surprise anyone when they took up Baumgartner’s cause. Nor
did they seem late to the party or like anyone was selling out. Because they weren’t.
Red Bull sponsors as much of this stuff as National Geographic. The result is a home
run. My guess is that for every buck they spent on this thing, they garnered what, $20
in media? $50? More? They’ve lit up Twitter and Google News today and they’ll
likely end up on the front page of every major newspaper on earth tomorrow. As they
say, you can’t buy that kind of press, no matter how many emails you send to us. Will
the stunt sell more Red Bull? Yeah, I bet it will. And it’ll keep people talking for a
long time to come.
Perhaps the biggest danger here? That another, more mainstream brand will try to
copycat it. A warning to everyone in Midtown Manhattan tomorrow who kicks off the
Monday brainstorming session with discussion of how they can horn in on Red Bull’s
success: These people are professionals. Do not try this at home.
Red Bull's space jump stunt with Felix Baumgartner 'worth
£100m' in ad spend
By Emma Rowley, and Rebecca Clancy
5:36PM BST 15 Oct 2012
The energy drink company's risk-taking marketing is paying off as industry insiders
suggest its space jump could be worth £100m to the brand.
As Felix Baumgartner dropped through the sound barrier on Sunday, his 24-mile
freefall from the edge of space did not just signal world records breaking.
For relieved Red Bull executives, his safe landing represented tens of millions of
pounds of media coverage. One advertising executive guessed the exposure could be
worth £10m in the UK and as much as £100m worldwide. To put that in context, a 30second ad slot during the US Super Bowl, the most prime time you can get, costs
The jump marked Red Bull’s most ambitious attempt yet to harness its caffeinated
soft drink to the qualities of speed and adventure, following on from events ranging
from a motorcyclist jumping on to the Arc de Triomphe to planes racing a slalom
course metres above the Thames.
“I’m completely in awe of Red Bull as a brand,” said marketing guru Mark
Borkowski. “Very few brands would have the appetite to do something so risky.”
It must help that rather than being answerable to shareholders, Red Bull is privately
owned and led by “maverick” Dietrich Mateschitz, the Austrian toothpaste marketer
who adapted Asia’s tonic drinks to Western taste. In a soft drinks market dominated
by Coca-Cola and Pepsi, he has pioneered “experiential” marketing, where companies
use events to define their brand and build loyalty.
Cisco to buy cloud-networking start-up Meraki for $1.2 bn
Reuters Nov 19, 2012, 07.42AM IST
Networking equipment company Cisco Systems Inc said it will buy privately held
cloud networking company Meraki for $1.2 billion in cash as part of its cloud and
Cisco said the acquisition of Meraki, which was founded in 2006 by members of
MIT's Laboratory for Computer Science, is expected to close in the second quarter of
Cisco's 2013 fiscal year and is subject to regulatory approval.
Cisco's second quarter runs until the end of January. Meraki - funded by Sequoia
Capital and Google Inc - offers Wi-Fi technology, switching, security and mobile
device management from the cloud with a focus on mid-sized businesses.
"This is a very logical move for Cisco," said ZK research analyst Zeus Kerravala.
He said the deal will allow Cisco to offer alternative solutions to traditional Wi-Fi
deployment models like smaller competitors, such as Aruba Networks and Ruckus
Wireless , which debuted on Friday.
"Cisco didn't really have anything to counter that before," Kerravala noted.
Meraki's Chief Executive Sanjit Biswas said in a letter to employees posted on the
company website that Cisco had approached the company several weeks ago.
The company's founders had at first rejected the offer in favor of continuing Meraki's
strategy aimed at an initial public listing.
"After several weeks of consideration, we decided late last week that joining Cisco
was the right path for Meraki," Biswas said.
He also said that Meraki had achieved a $100 million bookings run rate, grown to 330
employees and had a positive cash flow.
OPEC lowers medium-term demand forecast over eurozone
AFP Nov 8, 2012, 09.04PM IST
VIENNA: Oil cartel OPEC lowered on Thursday its medium-term forecast for global
oil demand, citing "growing concern" about economic growth especially in the
By 2016, demand was expected to reach 91.8 million barrels per day (mbpd), the
Organisation of Petroleum Exporting Countries said in its annual World Oil Outlook
Last year, it had forecast average daily demand at 92.9 million barrels within four
OPEC said that in its last two reports it had taken a "more positive view on how
quickly a recovery would occur, leading to upward revisions in medium-term oil
demand prospects," based on "the extraordinary monetary and fiscal stimulus that
were put in place."
It said: "This year, however, there is growing concern about immediate prospects for
economic growth, particularly in the eurozone."
Risks from the region "have heightened as a result of expanding public deficits,
weakening economic growth, deleveraging in the banking system, as well as policy
indecisiveness," OPEC secretary-general Abdullah El-Badri added in a foreword.
While the US seemed to be faring better, slow growth in developed countries was
threatening to spill over into developing countries, he warned.
OPEC also lowered its long-term oil demand forecast Thursday, seeing it average
107.3 mbpd by 2035, 2.4 mbpd lower than the 109.7 mbpd it had forecast last year.
The cartel blamed this on technological developments that would impact especially
the transportation sector, as well as on higher oil prices.
Nevertheless, the forecasts in OPEC's latest report still see a hike in demand over the
next two decades, with most of the growth -- in both the medium- and long-term -due to occur in Asia.
This year, demand is expected at 88.81 mbpd, followed by 89.60 mbpd in 2013.
Starbucks effect? CCD, Barista souping up
Nov 16, 2012| By Nupur Anand, DNA
It’s difficult for rival coffee retailers not to be worried about the extremely long
queues outside Starbucks. They graciously say the market’s big enough for one more
But behind the stoicism lies hectic marketing activities.
Industry sources said all cafe chains are cranking out plans to revamp menu and offer
better experience to consumers.
To wit, Barista has introduced new items on the menu, changed the store interiors,
and roped in a new brand ambassador in the last one month.
The chain has also tied up with publishing house Penguin for book launches.
Cafe Coffee Day (CCD), the market leader in India, is also believed to be going
through a similar exercise. Sources said it will soon have a new menu and is stepping
up advertising and marketing campaign.
CCD, which is positioned in the affordable segment, is now also changing interiors in
an attempt to cater to the premium segment, which is where Starbucks is positioned.
The Bangalore-based chain also plans to add 592 stores and hit the 2,000 mark by the
end of 2014.
Another person in the know said similar activities are ongoing at Aussie chain Gloria
All of them, to top it, are betting big on brand merchandising – a strength that only
Starbucks can boast of in the coffee market in India right now.
Barista and CCD officials refused to call it the Starbucks effect and preferred to say
they are in any case in expansion mode.
Harminder Sahni of Wazir Advisors, a hospitality consultancy, said all cafe chains are
now beginning to focus on brand building.
“With something like Starbucks here — which has a magnetic brand pull —others
can’t afford to sit idle. Earlier, the focus was only on expansion and more store
openings. Now they are changing the focus on brand building activities in order to
compete. And the marketing activities are on back of that,” he adds.
Analysts believe the long queues at Starbucks are, well, too long to be sustainable.
“That’s what rivals are banking on,” said Saloni Nangia of Technopak Advisors.
“Once the euphoria and curiosity ebbs, Starbucks would want to be in a position to
cater to a larger customer base,” she said.
Technopak estimates the cafe market in India at $230 million and expects it to
maintain an annual growth rate of 13-14% for the next five years. India, however,
remains a pre-dominantly tea-drinking market.
Not surprisingly, experts suggest the coffee chains would soon be slugging out for a
larger share of that brew.
This at a time when even Starbucks has acquired Teavana, and is changing its
positioning from being a coffee chain primarily.
Tata Starbucks readies for India entry by end of October
Namrata Singh, TNN Sep 28, 2012, 10.48AM IST
MUMBAI: Tata Starbucks, the 50:50 joint venture between Starbucks Coffee
Company and Tata Global Beverages has confirmed that the first store in India will
open in the Horniman Circle area of Mumbai by the end of October 2012.
The store will also be the first Starbucks location to feature espresso sourced and
roasted locally from India through the coffee sourcing and roasting agreement with
"We are delighted to be able to announce our progress toward opening our first store
in India and to introduce locally sourced espresso," said John Culver, president,
Starbucks China and Asia Pacific, in a statement.
Tata Global Beverages is a company known for bringing memorable tea consumption
moments to consumers in India, stated Harish Bhat, CEO, Tata Global Beverages.
The joint venture is in line with Tata Global Beverages' strategy of growing through
strategic alliances in addition to organic growth.
"We are excited about the opportunity to innovate in the retail space and bring new
beverage moments to more consumers,'' he added.
Tata Starbucks will own and operate Starbucks cafes in India.
Tata Starbucks also announced the appointment of Avani Saglani Davda as CEO.
Avani, who has worked for the Tata companies for more than ten years, joined the
Tata Group as a TAS (Tata Administrative Service) probationer in 2002. Most
recently, she worked in the vice chairman's office for Tata Global Beverages, where
she was responsible for driving and facilitating key strategies and initiatives for the
company as well as marketing and business development assignments.
Taro bites Sun Pharma’s higher buy-out offer
NEW DELHI, August 13, 2012
On completion of merger, Taro will become a privately held company, wholly-owned
by affiliates of Sun Pharma
The board of Israel-based Taro Pharmaceutical has agreed to sell the remaining stake
of the company to Sun Pharmaceutical and its affiliates for an enhanced price of
$39.50 a share.
“The merger agreement was approved by Taro’s board of directors based upon the
recommendations and approvals of the Special Committee of Taro’s Board of
Directors and the Audit Committee of Taro’s Board of Directors,” Sun
Pharmaceutical Industries said in a statement. The merger agreement provides that all
shareholders of Taro other than Sun Pharma and its affiliates will receive a cash
payment of $39.50 a share upon the closure of the merger deal, it added. The raised
buy-out offer by Sun Pharma is over 61 per cent from its earlier offer of $24.50 a
On completion of the merger, Taro would become a privately held company, whollyowned by affiliates of Sun Pharma and its shares would not be traded on the New
York Stock Exchange, Sun Pharma said.
Last month, Taro’s board had rejected the Sun Pharma’s October 18, 2011, offer to
purchase all the outstanding shares of the Israeli firm that would have entailed an
outgo of $367.5 million (over Rs.1,810 crore).
This was after the special committee of Taro’s board said the offer price was
Sun Pharma had acquired a controlling stake in Taro in September, 2010.
The closing of the merger is subject to certain terms and conditions customary for
transactions of this type, including the affirmative vote at the shareholder meeting to
be convened to approve the merger, the company said.
Shares of Sun Pharmaceutical Industries were trading at Rs.682.05 on the BSE.
Competition panel unsure on airline cartel
Mumbai, September 20, 2012
The Competition Commission on Thursday said it could take a relook at the issue of
cartelisation in the airline industry in terms of hike in airfares but maintained that
ticket prices generally moved up due to a mismatch between supply and demand.
“The Commission looked at the airfares some time ago, but we found that the fares
had moved up and down more because of the market play dynamics and not because
of anti-competitive practices, that they had formed a cartel,” its chairman Ashok
Chawla said on the sidelines of an event organised by industry lobby FICCI here. “So,
if the need arises, the Commission will look into the issue again.”
Maintaining that the aviation sector was going through a “bit of turmoil”, he said
there was a volatility in demand and supply, mainly on account of two large airlines
reducing capacity for certain reasons.
He was apparently indicating at cash-strapped Kingfisher and Air India which have
reduced capacity for financial problems as well as strikes.
“So when the number of players in a sector goes down, there is always volatility in
demand and supply. And that seems to be the main thing happening in the aviation
He also pointed out that the fares move up and down, mainly during the festive
seasons or when there was more demand.
“That need not be a competition issue. In fact, it may reflect more robust
competition,” the Competition Commission chief said.
Judge to hear Samsung phones ban case on Dec 6
SAN FRANCISCO, AUG 30
The judge in the landmark Apple-Samsung case set a December 6 hearing on punitive
damages to the US firm for patent infringement and on whether to ban eight Samsung
phones in the US market.
Judge Lucy Koh said in an order yesterday she would bypass proceedings on
preliminary injunction and go directly to Apple’s request for a permanent ban on sales
of certain phones by the South Korean electronics giant.
The December 6 hearing will also include debate on whether to triple the jury award
of over $1 billion.
Because the jury last week found that Samsung “willfully” infringed on Apple patents
for its iconic iPhone, the judge may triple the award as a punitive measure.
Apple has asked the court to ban some of the newer 4G phones from Samsung’s
Galaxy line as well as the Droid Charge sold through Verizon.
The case does not include Samsung’s newest Galaxy S III, which was released
subsequent to the suit but which is facing separate litigation.
Apple asked the US District Court in San Jose, California to ban the Galaxy S 4G,
Galaxy S2 AT&T model, Galaxy S2 Skyrocket, Galaxy S2 T—Mobile model, Galaxy
S2 Epic 4G, Galaxy S Showcase, Droid Charge and Galaxy Prevail.
Samsung meanwhile asked the court to dissolve an injunction on its Galaxy Tab 10.1,
after the jury found it did not infringe on Apple’s design patent for the iPad tablet.
Koh said she would probably hear arguments on that motion on September 20.
She said in yesterday’s order that she would ask the parties for briefs on a permanent
injunction sought by Apple, bypassing the temporary injunction in the interest of
Samsung has pledged to fight the proposed ban.
Samsung has lost a court case, not the Asian market
N Madhavan , Hindustan Times
September 02, 2012
Economics is a funny thing in which sometimes, losers can be winners in another
sense. That is the feeling I got last week after Apple won an intellectual property case
in the US against Samsung involving a series of patents. The award of $1 billion in
damages to Apple will only make ateeny addition to the iPad and iPhone maker’s
huge cash chest, but it clearly established the company founded by the late Steve Jobs
as the King of Cool in the gadget market. However, in market economics, two other
things also matter. One is the return one gets on investments made, and the other the
market share. The basic market wisdom is that there is always room for two in the
same product category. Going by that logic, it seems Samsung stays in the reckoning
for at least the No. 2 slot in high-end smartphones in the foreseeable future.
Respected technology site Arstechnica citing IDC and NPC data, said last month that
in the April-June quarter, Samsung held a 30% share worldwide, while Apple held
17%. But in the US, Apple led with 31% while Samsung held 24%.
Google’s Android mobile platform is what enabled Samsung to win the global market
at low costs, unlike Apple, which has invested huge amounts in developing and
nurturing its own iOS platform.
Samsung has been in the dock for mimicking Apple in its design features like the
curved rectangle interface and the “pinch” zoom on the touchscreen. But beyond cool
factors like these, smartphones are about various utilities and applications (apps)
My argument is that Apple will remain the premium product, but the second premium
slot (even if it loses some money and market share now) is something Samsung has
gained at much lower costs by riding piggyback on Android. Meanwhile, Samsung is
also keeping its options open. It quietly launched its own Windows-based smartphone
last week, ahead of a September 5 unveiling of the next big Windows gizmo from the
Cash-rich Google has initiated quiet talks to settle some patent disputes with Apple on
the Android platform. If Google picks up the tab for some of the potential disputes
(Apple has sued Samsung again in a fresh dispute), it could contain Samsung’s
Sure, the Korean company has lost some of its premium sheen in the court dispute,
but there is plenty of room left in value-for-money markets in Asia, which as a whole
is much bigger than the US. India alone has 900 million mobile connections
Just as Microsoft’s IBM-PC compatible and Windows desktops stole the thunder from
Apple outside the US, other brands including HTC, Samsung and Nokia do stand a
chance in taking on Asia. For this, they must realise a basic lesson: you cannot be
charging a fat premium for copycat features. If they drop the prices a little while
innovating a little more, Samsung, HTC and Nokia can have a great time in Asia.