Saturday, January 31, 2009

Is Vignette Preparing for Sale?

Vignette Corporation (NASDAQ:VIGN), an Austin, Texas-based web content management business, does not anticipate a sale despite speculation it is a takeout target, SVP Dave Dutch said in an interview.

Autonomy of the UK acquired Vignette’s only pure play peer in the content management space last week, renewing rumors it could be taken out, especially as its stock price hovers near its 52-week low. Vignette’s market capitalization is USD 166.5m, down from USD 330m 12 months ago. Interwoven was acquired for a 36% premium, which was equal to its 52-week high.

If Vignette were to sell in 2009, it would likely happen in the next 60 days while Vignette’s stock price is so low. As I mentioned earlier, Vignette’s low stock price could draw offers from vendors like EMC, HP, IBM, and Oracle if they want to expand their “industrial strength” web content management (WCM) capabilities. IBM has a fixed content offering, and Vignette could expand its content management solutions to the Internet.

Vignette’s Dutch said the company is focused on growth, not a sale, as evidenced by the investment it has made in upgrading its technology platform to enterprise grade Java from Sun Microsystems. Asked about potential buyers in the space, he said Microsoft and IBM also have content management products so are unlikely to make acquisitions. SAP of Germany is yet to make a move, he noted. He said the sale of Interwoven did not necessarily make Vignette a more likely target because Interwoven was focused on a different vertical with its legal compliance offering.

Vignette has been rumored to be a target for Hewlett-Packard for the past 12 to 24 months. Vignette’s solid maintenance revenues and customer base make it a likely candidate for acquisition.  HP CEO has grown through large acquisitions aggressively; While HP has document management services, Vignette’s offering is more mature so may be an attractive upgrade. It may also be bundled into EDS’ content management services offerings.  A more distant possibility is Google buying Vignette to build out the infrastructure side of its online business. Cisco Systems is increasing its presence in the web and may be interested in Vignette to augment its offering with a web management component too.

 Vignette may also appeal to Open Text Corporation of Canada, which has a mid-range web content offering, but does not have a “heavy metal” web content offering. Omniture, a web-testing analytics company, could also be a logical buyer.

 Dutch said Vignette has not retained a bank, but works “opportunistically” with advisors. The company tends to work with smaller banks. Vignette’s general counsel contracts out legal work where appropriate to various individuals, he said. Vignette is currently looking at making buys while values are low, Dutch said. It has nearly USD 150m in cash.

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Friday, January 30, 2009

Autonomy buys Interwoven for $775m; Who will be Next? Vignette or Open Text or Autonomy itself?

Enterprise Information/Content Management (ECM/EIM) Industry Consolidates at Full Speed

British enterprise search and information management company Autonomy has bought US-based content management firm Interwoven for $775m. The combined entity will have $713M in sales operating with 35% margin.

Interwoven is not coming cheap: it is costing Autonomy a 36% premium on Interwoven's average share price in the preceding 30 days. But Interwoven is doing well – they are growing and profitable, with high-quality products and a good customer base. According to Gartner and Forrester, they are a pioneer and market leader in the web content management space that has benefited from corporate migration to Web 2.0. They currently power over 100,000 corporate web sites, intranets and extranets globally.

 Autonomy is paying for Interwoven with a mixture of stock and cash. It is placing 21.6 million new shares, or 10% of its share capital, with institutional investors. The shares rose 6.58 per cent to £11.01 when the news was announced. The deal is also being funded with a new revolving credit facility with Barclays Bank and from the two companies' cash reserves. Autonomy has said that after the deal closes it will have "at least" $75m cash left in the bank.

At the analyst briefing, Autonomy said the combined entity will have a customer base of over 20,000, giving it scale as well as cross-selling opportunities. Autonomy was particularly attracted by Interwoven's strength in the legal sector thanks to their acquisition of iManage -- Autonomy has been making way with products of its own aimed at compliance with legal and regulatory obligations.  They have over 1200 of the top law firms and 11 of top 30 accounting firms as customers.  E-discovery is a sizeable market projected to grow at double-digits in the current corporate litigation-rich environment. In addition, Autonomy expects to be able to save around $40m per annum in the first year as a result of these synergies.

As far as the strategic rationale goes, Autonomy accelerates the ongoing consolidation in the enterprise information management industry creating a $0.7B independent competitor to Open Text, another vendor that has grown through acquisitions aiming to be acquired by a larger infrastructure provider. Secondly, the deal combines Autonomy’s core technology expertise with Interwoven’s vertical industry expertise and marketing presence. Autonomy, a leader in context-based desktop search company, believes that more traditional content management systems are not good at understanding the meaning or context of the content, while Autonomy's IDOL technology is designed to do just that;  Interwoven’s products know what the customer interactions are, and Autonomy’s IDOL will allow them to know what they mean.  Thirdly, the combined client base will provide scale and attractive cross-selling/up-selling opportunities into 4,600 customers globally. Finally, thanks to both companies track record at successfully and rapidly integrating acquisition, this should be highly accretive in the next two quarters.

Undoubtedly, this acquisition could accelerate the pace of acquisitions in the space; We could see Open Text making a bid at Vignette that has failed to consistent deliver earnings unlike Autonomy and Open Text.  They are two largest independent enterprise information vendors rushing to reach the magic $1B mark through flawless execution of both organic and inorganic growth despite a recession economy. After the Interwoven announcement, Vignette as a takeover target now has no choice but to look for a buyer to survive.  What we are seeing in the industry right now, is the rapid commoditization of the low-end of the market by Microsoft moving up with SharePoint, which leaves Open Text and Autonomy about 18 months before the next Share Point release which is typically bundled in the enterprise license of MS Office.  In the high-end of the market we have the usual suspects namely, IBM/FileNet, EMC/Documentum, and Oracle/Stellent, each of which already cherry-picked the best Enterprise Content Management (ECM) vendors.  Now we could see more transactions from SAP, HP or even Oracle.  Given its long-standing OEM relationship with Open Text, SAP should emerge as a likely acquirer should any other vendor approach them in the near future.  Having completed the Business Objects acquisition, SAP CEO publicly announced that an ECM acquisition would likely follow.  However, the wild card will always be HP; Under the leadership of Mark Hurd, HP has successfully made sizeable services and software acquisitions to drive sustainable growth.

These are very interesting times indeed.  Keep following the latest on my blog….more analysis is on the way on Vignette and Open Text and what they could do next.

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Sunday, January 25, 2009

The Future of the Global Financial System: A Near-Term Outlook and Long-Term Scenarios

Davos Forum 2009 will be held next week. Since my last attendance in World Economic Forum event in Istanbul in October, I started closely following WEF’s thought leadership;  On January 15, 2009, the World Economic Forum released an interesting report: The Future of the Global Financial System: A Near-Term Outlook and Long-Term Scenarios.” to explore the driving forces that are shaping the global financial system and how these forces might affect governance and industry structure.

The phase one report identifies a near-term industry outlook characterized by an expanded scope for regulatory oversight, back to basics in the banking sector, some restructuring by alternative investment firms and the emergence of a new set of winners and losers.

Over the long-term, a range of external forces and critical uncertainties will further shape the industry. In particular, the WEF study found that the pace of power shifts from today’s advanced economies to the emerging world and the degree of international coordination on financial policy are the two most critical uncertainties for the future of the global financial system. The report therefore explores four challenging scenarios.

Driving forces and critical uncertainties

In phase one of the New Financial Architecture project, the World Economic Forum engaged more than 250 industry practitioners, policy-makers and academics in workshops, interviews and participation in a survey to identify and prioritize the key driving forces expected to shape the future of the global financial system between today and 2020. The engagement process resulted in an inventory of 34 prioritized driving forces.

Key driving forces on the future of wholesale financial markets

Four scenarios for the future of the global financial system

*  Financial regionalism is a world in which post-crisis blame-shifting and the threat of further economic contagion create three major blocs on trade and financial policy, forcing global companies to construct tripartite strategies to operate globally.

*  Fragmented protectionism is a world characterized by division, conflict, currency controls and a race-to-the bottom dynamic that only serves to deepen the long-term effects of the financial crisis.

*  Re-engineered Western-centrism is a highly coordinated and financially homogenous world that has yet to face up to the realities of shifting power and the dangers of regulating for the last crisis rather than the next.

*  Rebalanced multilateralism is a world in which initial barriers to coordination and disagreement over effective risk management approaches are overcome in the context of rapidly shifting geo-economic power.

Phase two priorities

In phase two of the New Financial Architecture project, the World Economic Forum will work closely with industry stakeholders to delve deeper into the implications of this analysis, with the goal of exploring collaborative strategies and areas of systemic improvement. This will involve an examination of the potential future sources of systemic risk, as well as opportunities to reposition the industry for sustainable, long-term growth in ways that maximize the stability and prosperity of both the financial and real economies.

Transition from phase one to phase two  

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Saturday, January 24, 2009

Despite first drop in 5 years for venture capital investing, investments in clean energy surging

U.S. venture capitalists invested $28.3 billion in 3,808 deals last year, the first yearly decline in investments since 2003, according to the latest MoneyTree Report.

The decline was spread across all industries and companies with a few exceptions. Investments in clean technology companies rose 50 percent in 2008, and investments in seed stage companies -- very young companies -- received more money than they have since 2000.

Otherwise, investments in media and technology services companies were up, Internet investments were flat, and life sciences, software, telecommunications and semiconductor investments were down.

Six of the year's top 10 deals were in Bay Area companies -- all of them in clean technology. They include Nanosolar in San Jose, Solyndra in Fremont, OptiSolar in Hayward, BrightSource Energy in Oakland, Reardon Commerce in Foster City and Pacific Biosciences of California in Menlo Park.


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Wednesday, January 21, 2009

Barack Obama’s inaugural speech

I had to post Obama’s historic and inspirational speech on my blog.  Obama was sworn in president at an extremely difficult time with high expectations to deliver the “change we believe in” promise.  He faces great expectations at home and abroad to steer the economy out of the world’s first global recession and financial crisis, to re-align the U.S. foreign policy stance and global standing on issues like credit crunch, climate change, and nuclear proliferation.  I sure hope he will deliver on people’s hopes soon…


Barack Obama’s inaugural speech

Published: January 20 2009

The inaugural speech in full

My fellow citizens, I stand here today humbled by the task before us, grateful for the trust you have bestowed, mindful of the sacrifices borne by our ancestors. I thank President Bush for his service to our nation, as well as the generosity and co-operation he has shown throughout this transition.

Forty-four Americans have now taken the presidential oath. The words have been spoken during rising tides of prosperity and the still waters of peace. Yet every so often the oath is taken amidst gathering clouds and raging storms. At these moments, America has carried on not simply because of the skill or vision of those in high office, but because We the People have re mained faithful to the ideals of our forbears, and true to our founding documents.

So it has been. So it must be with this generation of Americans.

That we are in the midst of crisis is now well understood. Our nation is at war, against a far-reaching network of violence and hatred. Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age. Homes have been lost, jobs shed, businesses shuttered. Our healthcare is too costly; our schools fail too many; and each day brings further evidence that the ways we use energy strengthen our adversaries and threaten our planet.

These are the indicators of crisis, subject to data and statistics. Less measurable but no less profound is a sapping of confidence across our land – a nagging fear that America’s decline is inevitable and that the next generation must lower its sights.

Today I say to you that the challenges we face are real. They are serious and they are many. They will not be met easily or in a short span of time. But know this, America: they will be met.

On this day, we gather because we have chosen hope over fear, unity of purpose over conflict and discord. On this day, we come to proclaim an end to the petty grievances and false promises, the recriminations and worn out dogmas, that for far too long have strangled our politics.

We remain a young nation but, in the words of Scripture, the time has come to set aside childish things. The time has come to reaffirm our enduring spirit; to choose our better history; to carry forward that precious gift, that noble idea, passed on from generation to generation: the God-given promise that all are equal, all are free and all deserve a chance to pursue their full measure of happiness.

In reaffirming the greatness of our nation, we understand that greatness is never a given. It must be earned. Our journey has never been one of short cuts or settling for less. It has not been the path for the faint-hearted – for those who prefer leisure over work, or seek only the pleasures of riches and fame. Rather, it has been the risk-takers, the doers, the makers of things – some celebrated but more often men and women obscure in their labour, who have carried us up the long, rugged path towards prosperity and freedom.

For us, they packed up their few worldly possessions and travelled across oceans in search of a new life. For us, they toiled in sweatshops and settled the west, endured the lash of the whip and ploughed the hard earth.

For us, they fought and died, in places like Concord and Gettysburg, Normandy and Khe Sanh.

Time and again these men and women struggled and sacrificed and worked till their hands were raw so that we might live a better life. They saw America as bigger than the sum of our individual ambitions, greater than all the differences of birth or wealth or faction.

This is the journey we continue today. We remain the most prosperous, powerful nation on earth. Our workers are no less productive than when this crisis began. Our minds are no less inventive, our goods and services no less needed than they were last week or last month or last year. Our capacity remains undiminished. But our time of standing pat, of protecting narrow interests and putting off unpleasant decisions – that time has surely passed. Starting today, we must pick ourselves up, dust ourselves off and begin again the work of remaking America.

For everywhere we look, there is work to be done. The state of our economy calls for action, bold and swift, and we will act – not only to create new jobs, but to lay a new foundation for growth. We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together. We will restore science to its rightful place, and wield technology’s wonders to raise healthcare’s quality and lower its cost. We will harness the sun and the winds and the soil to fuel our cars and run our factories. And we will transform our schools and colleges and universities to meet the demands of a new age. All this we can do. All this we will do.

Now, there are some who question the scale of our ambitions – who suggest that our system cannot tolerate too many big plans. Their memories are short. For they have forgotten what this country has already done; what free men and women can achieve when imagination is joined to common purpose, and necessity to courage.

What the cynics fail to understand is that the ground has shifted beneath them – that the stale political arguments that have consumed us for so long no longer apply. The question we ask today is not whether our government is too big or too small, but whether it works – whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified. Where the answer is Yes, we intend to move forward. Where the answer is No, programmes will end. Those of us who manage the public’s dollars will be held to account – to spend wisely, reform bad habits and do our business in the light of day – because only then can we restore the vital trust between a people and its government.

Nor is the question before us whether the market is a force for good or ill. Its power to generate wealth and expand freedom is unmatched, but this crisis has reminded us that without a watchful eye the market can spin out of control – and that a nation cannot prosper long when it favours only the prosperous. The success of our economy has always depended not just on the size of our gross domestic product but on the reach of our prosperity, on our ability to extend opportunity to every willing heart – not out of charity, but because it is the surest route to our common good.

As for our common defence, we reject as false the choice between our safety and our ideals. Our founding fathers, faced with perils that we can scarcely imagine, drafted a charter to assure the rule of law and the rights of man, a charter expanded by the blood of generations. Those ideals still light the world, and we will not give them up for expedience’s sake. And so to all the other peoples and governments who are watching today, from the grandest capitals to the small village where my father was born: know that America is a friend of each nation and every man, woman, and child who seeks a future of peace and dignity, and we are ready to lead once more.

Recall that earlier generations faced down fascism and communism not just with missiles and tanks, but with sturdy alliances and enduring convictions. They understood that our power alone cannot protect us, nor does it entitle us to do as we please. Instead, they knew that our power grows through its prudent use; our security emanates from the justness of our cause, the force of our example, the tempering qualities of humility and restraint.

We are the keepers of this legacy. Guided by these principles once more, we can meet those new threats that demand even greater effort – even greater co-operation and understanding between nations. We will begin to responsibly leave Iraq to its people, and forge a hard-earned peace in Afghanistan. With old friends and former foes, we will work tirelessly to lessen the nuclear threat, and roll back the spectre of a warming planet. We will not apologise for our way of life, nor will we waver in its defence, and for those who seek to advance their aims by inducing terror and slaughtering innocents, we say to you now that our spirit is stronger and cannot be broken; you cannot outlast us, and we will defeat you.

For we know that our patchwork heritage is a strength, not a weakness. We are a nation of Christians and Muslims, Jews and Hindus – and non-believers. We are shaped by every language and culture, drawn from every end of this earth; and because we have tasted the bitter swill of civil war and segregation, and emerged from that dark chapter stronger and more united, we cannot help but believe that the old hatreds shall some day pass; that the lines of tribe shall soon dissolve; that as the world grows smaller, our common humanity shall reveal itself; and that America must play its role in ushering in a new era of peace. To the Muslim world, we seek a new way forward, based on mutual interest and mutual respect. To those leaders around the globe who seek to sow conflict, or blame their society’s ills on the west: know that your people will judge you on what you can build, not what you destroy. To those who cling to power through corruption and deceit and the silencing of dissent, know that you are on the wrong side of history, but that we will extend a hand if you are willing to unclench your fist.

To the people of poor nations, we pledge to work alongside you to make your farms flourish and let clean waters flow, to nourish starved bodies and feed hungry minds. And to those nations like ours that enjoy relative plenty, we say we can no longer afford indifference to the suffering outside our borders; nor can we consume the world’s resources without regard to effect. For the world has changed, and we must change with it.

As we consider the road that unfolds before us, we remember with humble gratitude those brave Americans who, at this very hour, patrol far-off deserts and distant mountains. They have something to tell us, just as the fallen heroes who lie in Arlington whisper through the ages. We honour them not only because they are guardians of our liberty, but because they embody the spirit of service: a willingness to find meaning in something greater than themselves. And yet, at this moment – a moment that will define a generation – it is precisely this spirit that must inhabit us all.

For as much as government can do and must do, it is ultimately the faith and determination of the American people upon which this nation relies. It is the kindness to take in a stranger when the levees break, the selflessness of workers who would rather cut their hours than see a friend lose their job, which sees us through our darkest hours. It is the firefighter’s courage to storm a stairway filled with smoke, but also a parent’s willingness to nurture a child, that finally decides our fate.

Our challenges may be new. The instruments with which we meet them may be new. But those values upon which our success depends – honesty and hard work, courage and fair play, tolerance and curiosity, loyalty and patriotism – these things are old. These things are true. They have been the quiet force of progress throughout our history. What is demanded, then, is a return to these truths. What is required of us now is a new era of responsibility – a recognition, on the part of every American, that we have duties to ourselves, our nation and the world, duties that we do not grudgingly accept but rather seize gladly, firm in the know ledge that there is nothing so satisfying to the spirit, so defining of our character, than giving our all to a difficult task.

This is the price and the promise of citizenship.

This is the source of our confidence – the knowledge that God calls on us to shape an uncertain destiny.

This is the meaning of our liberty and our creed – why men and women and child ren of every race and every faith can join in celebration across this magnificent mall, and why a man whose father less than 60 years ago might not have been served at a local restaurant can now stand before you to take a most sacred oath.

So let us mark this day with remembrance, of who we are and how far we have travelled.

In the year of America’s birth, in the coldest of months, a small band of patriots huddled by dying campfires on the shores of an icy river. The capital was abandoned. The enemy was advancing. The snow was stained with blood. At a moment when the outcome of our revolution was most in doubt, the father of our nation ordered these words be read to the people:

“Let it be told to the future world ... that in the depth of winter, when nothing but hope and virtue could survive ... that the city and the country, alarmed at one common danger, came forth to meet [it].”

America: in the face of our common dangers, in this winter of our hardship, let us remember these timeless words.

With hope and virtue, let us brave once more the icy currents and endure what storms may come.

Let it be said by our children’s children that when we were tested we refused to let this journey end, that we did not turn back, nor did we falter; and with eyes fixed on the horizon and God’s grace upon us, we carried forth that great gift of freedom and delivered it safely to future generations. Thank you. God bless you. And God bless the United States of America.

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Friday, January 16, 2009

Navigating the First Global Economic Recession

This has appeared on Roubini's site far Mr. Doom has proved right about his economic forecasts; It looks like 2009 will be a tough year marking the deepening of the world's first global recession:

 "With the industrial world already in outright recession and the emerging world navigating towards a hard landing (growth well below potential) we expect global growth to be flat (around -0.5%) in 2009. This will be the worst global recession in decades as the fallout of the most severe financial crisis since the Great Depression took a toll first on the U.S. and then – via a variety of channels of recoupling – on the rest of the global economy. 

We forecast that the 
United States economy is only half way through a recession that started in December 2007 and will be the longest and most severe in the post war period.  U.S. GDP will continue to contract throughout all of 2009 for a cumulative output loss of 5%.
One last look at 2008 will reveal a very weak fourth quarter with GDP growth contracting about -6%, in the wake of a sharp fall in personal consumption and private domestic investment. We see the real GDP growth contraction playing out through the year as follows: Q1 2009 -5%; Q2 2009 -4%; Q3 2009. -2.5%; Q4 2009 -1%, adding up to a yearly real GDP growth of -3.4% for the U.S. in 2009; our forecast is much worse than the current consensus forecast seeing a growth recovery in the second half of 2009; we also predict significantly weak growth recovery – well below potential - in 2010. 
Canada entered recession at the end of 2008, and the outlook for 2009 is likely to be worse, with the economy contracting by an estimated 1.5-2% for the year.
In 2009, 
Latin American countries will face a significant slowdown in economic growth. A combination of negative external shocks will slow down regional GDP growth to 0.8% in 2009. Under our scenario, all countries in the region will experience significant deceleration of economic activity in 2009. We expectArgentina and Mexico to shift into negative growth territory on a year-over-year basis. For the region as a whole, recovery will likely begin between the first and second quarters of 2010.
The latest cyclical upswing in the 
Eurozone (incl. large four GermanyFranceItalySpain) was largely driven by a temporary but powerful boost to domestic investment from disappearing risk premia in the aftermath of the adoption of the single currency, and by external demand from a buoyant world economy. Both demand sources fizzled out by the second half of 2008, leaving the Eurozone as a whole and its largest members exposed to diverging deleveraging patterns in the face of suboptimal EMU-wide automatic fiscal stabilizer mechanisms. The latest record low readings of leading and sentiment indicators point to a severe recession ahead in 2009 that shapes up to be worse than the 1992/93 crisis. For the Eurozone we expect a below consensus y/y contraction in real GDP of around –2.5%, with negative growth in each of the four quarters of the year.
 United Kingdom economy is poised to shrink in 2009. Our forecast of a -2.3% growth in real GDP is below consensus as we do not expect a recovery in the second half of the year. Despite the relative resilience of consumer spending, investment should continue to collapse and the housing sector is yet to reach a bottom.
Nordics, whose growth has outpaced other developed economies in recent years, are poised for much slower growth in 2009 and most likely an outright recession in most of the countries in this region. After growing faster than the world for the past decade as convergence occurs, Eastern Europe is set to slow abruptly in 2009. Countries with the largest current-account deficits—notably Estonia, Latvia, Lithuania,RomaniaBulgaria — are the most exposed to sharp corrections.  Estonia and Latvia are already in the midst of sharp recessions, and Latvia turned to the IMF for help in December to avert crisis. The risk of an outright financial crisis is high in a number of countries in this region.
The combination of global credit headwinds and lower oil prices have dampened growth prospects in the
Commonwealth of Independent States (CIS) (ex-Russia) with growth expected to slow to about 2% in 2009, with Ukraine and Kazakhstan being hardest hit by the crisis. With oil prices remaining well below half of the 2008 level, we expect Russian output to contract by 2.5-3% in 2009 as manufacturing contracts and Russia’s inflow-fueled consumption slows sharply.
Given its reliance on exports and capital flows to fuel growth Asia faces a gloomy 2009 amidst a G-7 recession. We expect 
Asia ex-Japan’s growth to slow down sharply to 3.8% in 2009. Hong Kong,Singapore and Taiwan will remain in recession through H1 2009, which might extend into Q3 2009 while the ASEAN economies will slow significantly from the 2004-07 growth trends. We believe China will experience a hard landing in 2009, with growth unlikely to exceed 5%, a sharp slowdown from the 10% average of the last 5 years. The reversal of capital flows and high credit cost will pull down India’s growth significantly to around 5% in 2009 from an estimated 6% in 2008.
Japan’s domestic demand continues to be an unreliable growth driver, and its export machine - the growth engine of recent years - is stalling given the global contraction and a stronger yen. Consequently, we foresee real GDP growth contracting 2.5% in 2009 after almost flat growth for 2008 as a whole.
Australia's recession will likely end in 2009 after starting in Q4 2008. Average annual GDP growth in 2009 will be flat to sluggish (0-1%) after registering an estimated 1.6% in 2008. New Zealand may have a tougher time than Australia during the global recession, with GDP expected to contract 1% in 2009 after growing around 1% in 2008.
Given that the global recession will reduce demand for 
Middle East and North Africa’s resource and non-resource exports, and the global liquidity crunch will reduce capital inflows, growth is expected to slow to an average of 3% in 2009 from almost 6% in 2008.
GCC countries will witness a significant dip in their hydrocarbon receipts, terms of trade, and current account surplus positions in 2009. Average real GDP growth in the GCC may slow to 2.5% in 2009. Israel’s growth is expected to slow significantly in 2009 to around 1% and we would not rule out a contraction.
Sub-Saharan Africa’s growth will slow to around 3.5% in 2009 from an average pace of 5% over the last decade as the reduction in global demand will reduce exports and capital inflows, including development assistance. Growth in South Africa in 2009 is set to slow to around 1% with several quarters of negative growth as mining output contracts.
Commodity prices, which already fell sharply in the second half of 2008, will face further price pressure in 2009.  We estimate an average WTI oil price of $30-40 a barrel in 2009, as the fall in demand continues to outstrip supply cuts and production delays." 

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Sunday, January 11, 2009

Obama Releases Stimulus Analysis

I have posted Obama’s economic stimulus plan:

Note that about half-a-million new employment will be created in the energy industry with heavy emphasis on renewables such as solar, wind, geothermal and biomass. 

Obama Releases Stimulus Analysis

Associated Press

WASHINGTON -- Facing growing criticism of his economic recovery plan, President-elect Barack Obama made public Saturday a detailed analysis by his economic advisers that estimates the $775 billion plan of tax cuts and new spending would create 3.5 million jobs over the next two years.

With an eye on Mr. Obama having immediate access to bailout money already approved by Congress when he becomes president, his economic team and the Bush administration have discussed having Treasury Secretary Henry Paulson ask lawmakers for access to the $350 billion remaining in the fund.

White House spokeswoman Dana Perino said the administration hasn't decided whether to make such a request, which would be made within the next week. Under the terms of the legislation creating the fund, Congress would have 15 days to reject the request.

The Obama transition team also has asked Neel Kashkari, the head of the rescue program at the Treasury Department, to remain in that position for a short time after the inauguration to help assure a smooth transition, according to an Obama official.

The 14-page analysis of Mr. Obama's $775 billion plan, which was posted on the Internet, concedes that the estimates are "subject to significant margins of error," both because of the assumptions that went into their economic models and because no one knows the final outlines of the package that will emerge from Congress. (Read the full report.)

"These numbers are a stark reminder that we simply cannot continue on our current path," Mr. Obama said in his weekly radio and YouTube broadcast address.

"If nothing is done, economists from across the spectrum tell us that this recession could linger for years and the unemployment rate could reach double digits -- and they warn that our nation could lose the competitive edge that has served as a foundation for our strength and standing in the world," he said.

Mr. Obama, who previously has provided few details of the massive spending and tax cut plan, released the report one day after the unemployment rate jumped to 7.2 percent, the highest in 16 years. The nation lost 524,000 jobs in December, bringing the total job loss for last year to 2.6 million, the largest since World War II.

If Congress fails to enact a big economic stimulus plan, Mr. Obama's advisers estimated that another 3 million to 4 million jobs will disappear before the recession ends.

As lawmaker criticisms of parts of his plan grew during the week, Mr. Obama agreed Friday to modest changes in his proposed tax cuts. Democratic congressional officials said his aides came under pressure in closed-door talks to jettison or significantly alter a proposed tax credit for creating jobs, and to include relief for upper middle-class families hit by the alternative minimum tax.

The new report is likely to intensify debate over the economic recovery plan even more, as economists outside the Obama team begin delving into the analysis. The report, for example, estimates that the unemployment rate at the end of 2010 would be 1.8 percentage points lower if the plan is enacted.

Top Democrats on Capitol Hill say there is far more agreement than disagreement on the major parts of the recovery plan: aid to cash-strapped state governments, $500-$1,000 tax cuts for most workers and working couples, and a huge spending package blending old fashioned public works projects with aid to the poor and unemployed and a variety of other initiatives.

The new report provides detailed breakdowns of how many jobs each part of the plan would create, even going so far as to provide estimates that more than 40% of the new jobs would go to women and that 90% of them would be created in the private sector. It also provides estimates of how many new jobs would be created in each different sector of the economy.

"It's not too late to change course -- but only if we take immediate and dramatic action," Mr. Obama said. "Our first job is to put people back to work and get our economy working again."

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Tuesday, January 06, 2009

The Year in Solar: A Mix of Victories and Woes

The chief economist at the International Energy Agency and my friend Fatih Birol gave an excellent speech in Istanbul during the last week of december presenting his latest work - The World Energy Outlook 2008:

According to Fatih, soon after 2010, renewables will become the 2nd-largest source of electricity behind coal, thanks to government support, prospects for higher fossil-fuel prices & declining investment costs...Similarly, I am very upbeat on particularly solar despite declining oil prices and credit crunch...because given his alarmingly distrubing global warming scenarios, the world has no other option to survive....

I liked the following overview of the solar industry in 2008 by greentech media:

The Year in Solar: A Mix of Victories and Woes

More government incentives are becoming available to boost solar energy projects in 2008, while new solar technologies are making their market debuts. But the credit crunch has caused no small amount of heartaches.

 It can be hard for many solar companies to feel peppy these days. The economic meltdown has bred fears of lending and spending, leading to a depressing outlook for 2009.

But the year also passed with highlights for an industry that is riding the wave of public enthusiasm for clean energy. Investors placed huge bets to enable entrepreneurs to investigate promising technologies. Many solar companies experienced double-digit growth in sales and profits.

Companies that set out to challenge the market dominance of the crystalline silicon technology reached milestones by starting mass production and lining up customers.

Here is a look at the top solar trends of 2008:

Solar Tax Credit Gets Eight-year Extension: The U.S. Congress extended a tax credit and got rid of rules that previously prevent utilities from getting the tax credit. Consumers also will receive more tax benefits than before. Solar technologies remain expensive, so government support is crucial for the industry's growth and for turning the United States into an even larger solar market.

A Fistful of Venture Capital: Venture capitalists pumped nearly $1.6 billion into solar companies in the third quarter alone. That was out of the $2.9 billion total for greentech investments for that period, according to Greentech Media's Venture Power Report. The $1.6 billion was more than the $1.05 billion investors put into solar companies for the entire 2007.

Companies that develop thin-film panels using copper indium gallium and selenium or cadmium tellurium received some of the largest rounds. SoloPower and AVA Solar each raised more than $100 million this year, while Nanosolar took in $300 million.

Rise and Fall of the Spanish Empire: Spain was a hot market in 2008, thanks to its government's policy requiring utilities to buy solar power at premium prices set by the government. Then government decided to reduce those prices and cap the amount of solar power capacity that can be installed nationwide from late September through 2009. That move triggered a frenzy to install solar power plants before the September deadline. It also led to fraud allegations that many developers claimed to have completed their projects when in fact they didn't.

The government hasn't announced its calculations of how much solar power was added in 2008. Some analysts believe it's under 1 gigawatt while others said it's more. The new cap will limit the installations nationwide to 500 megawatts.

Follow Spain's Lead – Sort Of: Spain and Germany proved that government policies are critical to create a growing new solar market. So other countries that also want to encourage solar power use – and reduce greenhouse gas emissions in the process – have adopted similar measures to require utilities to sell renewable energy.

The United Kingdom passed an energy bill this year to create such an incentives program, which is typically called feed-in tariff. The French government expanded its feed-in tariff policy. Japan, meanwhile, is looking at re-introducing a feed-in tariff it gutted a few years back.

Cheaper Polysilicon Cometh: Throughout 2008, analysts have been predicting that the prices for polysilicon, the key raw material for most of the solar panels on the market today, will fall significantly in 2009. That's because a materials shortage has attracted new and existing polysilicon producers to build factories this year.

Market research firm New Energy Finance looked at long-term polysilicon contracts earlier this year and found that the medium for polysilicon delivery in 2009 will be as much as 43 percent lower than the medium delivery price for 2008.

Solar Panel Glut?:  Many analysts also believe that an oversupply of panels could happen in 2009. But evidence showed that it might already be happening. The solar industry produced way more panels this year than it installed, and that gap is likely to widen in 2009, reported iSuppli, a market research firm, this month.

The report echoed a similar take by another solar analyst, Paula Mints of Navigant Consulting, who said the rush to sell panels to the booming Spanish market has led to an oversupply of panels. Earlier this month, a Spanish newspaper ran an article describing Chinese ships loaded with solar panels that had to be resold.

Renewable Energy Mandates: A growing number of states now require their utilities to sell renewable power by certain deadlines. States such as Michigan passed such a mandate whileCalifornia and Massachusetts strengthened their requirements during 2008.

In response, utilities have scrambled to sign power purchase agreements with solar energy developers or build their own solar power plants. The Pacific Gas and Electric Co. in California is due to receive its first delivery of solar power on Jan. 1, 2009.

Just Say No to Solar?: Solar energy is renewable, so why would anyone oppose it? The thing is, building large solar power plants and transmission lines to move solar electricity around is costly and can pit solar companies and utilities against environmental and consumer advocates.

The controversial project to build a $1.9 billion transmission line from California's inland desert to the coast provides a glimpse of the regulatory battles to come. Critics fought to prevent the line from running through a state park and contended that the project is too costly (the cost will be passed on to ratepayers). Supporters said it would bring more solar, geothermal and other renewable power to the masses.

Making Residential Solar Affordable: The potentially large residential solar market in the United States has lured many new installers. A growing number of state and local solar incentives has boosted business for these companies, which also offer leasing or other financing options to make a solar energy system more affordable. Just four months after launching its leasing program in 2008, two-year-old SolarCity said 90 percent of the company's sales were from the program.

More Thin Films: Thin-film solar companies, which use very little or no silicon in producing solar cells, have started to prove that their technologies aren't just nifty-sounding theories – thin-films advocates say they can produce cheaper solar cells and assemble them into panels than makers of conventional crystalline silicon cells and panels. But crystalline silicon cells are more efficient at converting sunlight into electricity

Fremont, Calif.-based Solyndra, which uses copper indium gallium and selenium (CIGS) as the key ingredients to convert sunlight to electricity, came out of the stealth mode earlier this year to announce it had begun mass production and lined up customers. Global Solar Energy, another CIGS player, also started running its first commercial factory in 2008. The first commercial solar energy system using Global Solar's cells also was installed – at the company's factory in Tucson, Ariz. Several companies that use amorphous silicon as the key ingredient also have begun mass production this year.

Surviving Financial Woes: The credit crunch brought on by the fall of a slew of investment banks darkened many solar companies' outlook for 2009. Companies such as Q-Cells, Renesola, Solon and Suntech Power Holdings have had to cut their sales and production estimates after their customers delayed deliveries or simply couldn't find loans to make the purchases.

The surge of the U.S. dollar against the euro also prompted SunPower and First Solar to warn of lower sales in the near future. At this point, it's difficult to predict when the economy will recover. Already, the Solar Energy Industry Association, which represents solar companies in the United States, is lobbying Congress to get more than $30 billion for companies developing solar power plants. 

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