The fourth quarter statistical report have released, global PC shipment declined first time in these six years

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The situation that PC industry fears to face has finally come to them. According to a recent report from IDC-International Data Corp in US, global PC shipment in the fourth quarter of 2008 has declined 0.4% compare with that of the year before. This is the first time for PC shipment appears to be decrease after PC industry show continuing growth in six years. IDC also predicted that this year the PC sales would go down 5.3%.

Currently the economic depression has spread from US to Mid-East and Asia, at the same time, Microsoft will release their new operation system, Windows 2, at least until the end of this year. Seems there is lack of good news to stimulate the market, IDC estimated that the whole market would recover gradually at least until 2010.

Regard to the sales of individual company, HP still occupied the highest market share while the shipment slightly grew 3.1. The performance of Acer and Toshiba were excellent among the all, the shipment grew 25.3% and 20.2%, respectively, ranked the third and the fifth of market share now. However both Dell and Lenovo seems meet some difficulties on their sales. Dell sales didn’t go well even in their home, US, the shipment decreased 6.3% while shipment for Lenovo decreased 4.8%.

Edited By Vicky Yin

Google annual bonus replaced with G1 phone

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The cold wind of US financial winter has blown from the Wall Street in east coast to Silicon Valley, California. Even Google, the internet search engine giant has affect by it. In the past, every year Google gave 1000 cash bonus before Christmas, but this year, this annual bonus was replaced with Google new product, G1 phone.Google has launched G1 phone to compete with Apple iPhone. It runs on Android, Its own mobile operating system. The sale record of this new product was nothing to brag about after it was put into the market in this October, and the responses from the insiders is lukewarm as well. IT people called it “an unattractive and uninspiring piece of plastic”.

However, Google used the word “dream phone” to describe G1. In the Email which was send to Googlers, it said: “it’s a great way to thank everyone for their hard work. In the past, we’ve done this in cash. This year, we’ve decided to give Googlers a different kind of present – a Dream phone”.

Google has 20,123 employees all over the world, among them, 85%, includes the employees in US, Western Europe, Eastern Europe, Canada, Singapore, Japan and Australia, will receive G1 phone. To the other areas where G1 can not enter because of legal issue, the employees will receive 400 US dollars cash per person.

Besides reducing the bonus, Google used to consider about reducing the staffs. Comparing with HP, Yahoo and other It companies which have started to cut staffs, Google still have rich strength, business income of the company has exceeded 21 billions dollars in the third Quarter of this year. However, the growth speed of this quarter was slowing, only 3%.

Edited By Vicky Yin

Silicon valley needs to develop innovative web applications to overcome the global financial difficulty

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Since September, the Global Financial Crisis impacts Silicon Valley greatly; The world largest IT Industry group has planned to lay off employees to cut down as much cost as possible. Many well known industries like HP, Yahoo, AMD, etc.. , and also include other new born IT companies in Silicon Valley have already started to cutback in personnel.

The reason of why financial crisis did such a huge damage on IT industry is simple. From the virtual economy to real economy, and from Government to individuals, we all are bound with IT technology closely. And the financial companies are the big buyers of IT industries. 20% of IT technology is made for financial industry, and automotive industries are also important customers for them. Many Silicon Valley’s clients are automobile manufacturers in Detroit. And when these industries have financial problem, IT industries also lose the sale.

Some analysts said: The Silicon valley will face a serious financial problem next year, just like economic bubble burst of web industries few years ago. But some other analysts said that the financial crisis just impacted IT indirectly, and didn’t damage industries as seriously as we thought. IT Market will go through a slow growth and will be fully recovered late next year. The situation is not as bad as web economic bubble few years ago.

The financial crisis also impacted the new IT industries, many of new companies lay off staffs and delay their development plan to cut down as much cost as possible enable to survive. This will help to control any over-investment and make the Web industries run on the reasonable path.
However, some experts also worried that this can also stop many innovations because companies become too careful and conservative. Some experts believe that IT industry still has great development potential. For example, many governments are actively upgrading their IT infrastructures which are include internet speed, network security and reliability etc.. And industries should start to develop new web applications to grab the market.

Many industries have great expectation on Obama’s new government. Obama has announced a new economic rebuild plan and that will be the biggest plan from 50 years to build and upgrade whole Country’s IT infrastructures, include the hardware, software and internet broadband.

Silicon Valley still has the ability to recover their business because they have creativities and innovations. With correct decisions and management, Silicon may overcome the current situation and again become the main force of USA’s economic recovery and be the leader of global IT Industries.

Edited By Henry Lu

5 minutes let you understand the causes of US financial crisis

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This is a on-line article

I wish this article can help many people understand how the mortgage loan related to financial crisis this time.

The article is very easy to understand, I believe that even the housewives and normal office workers can grasp it. I wish through this article, people can get to know what is depreciating in this crisis, why the stock and funds in your hand devalue so much this time.

1 Gearing or Leverage

Currently, in order to made excess profits, many investment banks adopt 20-30 times gearing operation. We assume that the own capital of bank A is 3 billions, 30 times gearing is 90 billion. In other words, bank A used 3 billion capital as mortgage to borrow 90 billion as investment capital. If the profit of their investment were 5%, then A would gain 4.5 billion as profit. To A, this is excess profit which is 150% of his own capital. However, on the contrary, if the loss of the investment were 5%, then A would lose all his capital and carry 1.5 billion debts as well.

2 CDS Contract

Because the risk of gearing operation is high, according to the normal regulation, bank should not adopt this kind of high risk operation. However, someone find a way to use this gearing investment to buy “insurance”. This kind of insurance is called CDS. We assume that in order to avoid the risk of gearing, bank A found organization B, organization B could be another bank, or an insurance company, etc.

A said to B: “How about you help me to buy the default insurance using my mortgage? I will pay you 50 millions insurance fees every year, for 10 years. In total it is 500 millions. If my investment doesn’t default, you can take the insurance fee for free, but if I default, you should give me compensation.” A thought that if I do not default, I can earn 4.5 billion. But if I default, the insurance company will pay the loss for me. Therefore to A, either way is a net gain.

B is very smart as well, he didn’t accept the invitation of A immediately. Instead, he went back and does a statistical analysis; he found that the risk of default is less than 1%. If he found 100 clients, he would gain 50 billion insurance fees, even among them there were one default, the compensation would be less than 5 billions, if there were two default, B still could earn 40billions.

Both A and B felt this business is beneficial for them, so they made agreement happily.

3 CDS Market

After B made this business, C felt envy. C came to B and said:” How about you sell these 100 CDSs to me? I will pay you 200 millions for each contract, in total it is 20 billions.” B thought: that I have to wait for 10 years to get these 40 billions, now if I sell it I can have 20 billion immediately without risks, what a bargain!

Therefore, B and C made the deal at once.

In the end, CDS can be sold and bought in the financial market just like stocks. Actually after C got these CDSs, he didn’t mean to gain 20 billion after 10 years. Instead, he price them 22billion and sell them out.

D saw the products and thought that 40billion minus 22billion equals 18 billions, there’s still 18 billion profits can earn. This is not too expensive for initial offerings, so he bought quickly.

Therefore C earned 200 millions.

After that, these CDSs were sold in the market many times and now the market value of these CDSs is 62 trillion US dollars.

4 Subprime Mortgages

A,B,C,D all earned big money, but where dose these money come from? Originally, all these money from the profits of A and the other investors like A. And most of their profits are from subprime mortgage in US. Many people say that this crisis caused by the fact that all the mortgages were given to the poor, but I don’t agree with it.

In my point of view, most of the subprime mortgages were given to the normal US real estate investors. The capital they had was just enough for them to buy their own houses. But when they saw that the house price increased dramatically, they started to think about investing in real estate. Therefore they mortgaged their own house and use the loan to invest the real estate.

The interests of this kind of loan are more than 8%-9%. It is very difficult for them to afford by their own income. However they can keep mortgaging the house to the banks, paying the interest with the loan.

At that time, A felt happy, because his investment was helping him earning money.

B also felt happy, because the default rate is very low, his insurance business can still go on,and C, D E, F who followed them are also earning money.

5 Subprime Mortgage Crises

When the housing price reach certain level it cannot go up anymore, there are no successors follow up. Then the real estate investors felt anxious, because although he can’t sell out the house, he still had to pay the high interests. Finally, he cannot help but leaving the houses to the bank, default happened.

A felt sorry, but he thought even he cannot earn big money, but he still won’t loss too much, he still held the insurance from B. B didn’t feel worry as well, because he had sold it to C. Then where is this CDS? It was in the hand of G.

G just bought 100 CDSs from F by 30 billion, before he sold them out, out of sudden, he received this news that these CDSs have been degraded, and there were 20 contracts default. This is far higher than 1% or 2% default rate estimated at very beginning. For each default contracts, G had to pay 5 billion for compensation, in total it would be 100 billion. Plus 30 billion CDS acquisition cost, the total loss for G is 130 billion. Although G is top 10 organizations in US. He still cannot afford such great loss, and now G was facing bankrupt.

6 Financial Crisis

If G bankrupt, then 50 millions insurance A bought was waste. The worse thing is because A was using gearing operation, according to the result we mentioned before; A would lose all the money and carry great debts. Therefore, A also faced bankrupt.

Besides A, A2 A3… A20 all nearly bankrupted. So G, A, A2…A20 all came to finance minister of US and cried to him: ” G cannot bankrupt, if he bankrupt, we will all die.” Finance minister saw the situation and he nationalized G. So the compensation for A, A 20, total 100 billion was pay by US tax payers.

7 USD Crises

Before, we mentioned that the market price of 100 CDSs was 30 billion. But the total market value of CDSs was 62 trillion. We assume that if there is 10% default, then there will be 6 trillion default CDSs. This is 200 times of 30 billion. After US government purchased 30 million CDSs he would loss 20 trillions. If US government doesn’t want to lose, then he will see A 20. A 1, A 22, etc, bankrupt one by one. Neither way, he cannot avoid USD depreciating greatly.

The figures used in the assumptions may be different from the real situation, but we cannot underestimate the severity of the consequence of US financial crisis.

Edited By Vicky Yin

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