Daily News Digest- 15th Oct'14

Thought of the Day:

Today in History:

Following made the Headlines:

India:

• Luxury Labels Stay Off Virtual Stores: Online marketplace may seem to be the new prime location for marketers in India, but makers of high-end luxury products are keeping away from the virtual retail world, for reasons ranging from brand exclusivity and fear of fakes to rule of the land. In fact, their only interest in online marketplace is fighting counterfeit products that are rampant. “Luxury is all about touch and feel. It is different from buying at the click of a button,“ said Sanjay Kapoor, MD at Genesis Luxury, which retails more than 10 luxury brands including Armani, Canali and Bottega Veneta in the country. Marketers point out that selling a pair of shoes for ₹500 is one thing and selling a ₹50,000 pair of Jimmy Choo shoes is an altogether different ballgame. Then there are issues like the government policy to not allow brands with foreign direct investment to sell online. One British luxury brand, which used to deliver products in India via its global website, for example, stopped doing so because under the country's policy an offline retail business with FDI cannot sell its products online. While the brand's spokesperson in India declined to comment on the matter, an executive who is not authorised to speak to the media said, “No point risking the business.“ Another reason luxury brands are reluctant to sell online is a fear that it may impact their credibility , say experts. That is because the online marketplace is primarily associated with discounts and is often seen as a dumping ground for unsold goods.

• Euphoria's Sen, Pepsi Staff to Make Anthem: PepsiCo has roped in Palash Sen, lead singer of the band Euphoria, to compose a `Pepsi anthem' with active participation of its employees who will sing it live. “This could set a precedent for other things. We expect the anthem to go beyond the realm of employees,“ Sen told ET. While he has created corporate anthems earlier, including one for Nasscom, Sen said this is the first time employees are being involved in creating the song. A PepsiCo spokesman said the move is aimed at driving employee en gagement within the company. “The anthem harnesses the power of crowd sourcing, the target audience in this case being the employees,“ he said. The `anthem' will be released on social media and is expected to be taken forward as mobile phone ringtones for employees, trade partners and bottling partners. Then, a music video of the anthem is expected to be released in different lanl guages on the beverage and snacks mak f er's own channel MTV Indies. “We are geared to harness the positive viral impact this can create. The anthem will also be made into a music video and both will be made available through ringtones video downloads and popularised across our social handles,“ the spokesman said. PepsiCo hopes the move will evolve into a music connect for the brand and engage with more young consumers.

• Baring, Carlyle & Temasek Front-runners to Buy CMS: Private equity heavyweights Carlyle, Baring Asia and Temasek are in advanced talks to buy Blackstone Group's majority stake in leading cash management services firm CMS Info Systems, valuing it at close to (₹2,400 crore)$400 million. Blackstone, which calls itself the world's biggest manager of alternative assets, owns 57% stake in the firm and had recently appointed Rothschild to help it find a buyer for its 5-year old investment. After a keenly contested bidding process involving eight of the top global buyout and sovereign wealth funds, three finally made the cut for the final rounds, said multiple sources aware of the development. Marquee names like KKR, Apax Partners, Apollo Management, Bain Capital and Advent were also in the fray to acquire the Blackstone stake, the sources added. The short-listed funds are currently conducting detailed diligence on the company and by next month, one among them will become the acquirer. With CMS doubling its market share since 2009 and growing at over 25% compounded annual growth rate (CAGR), most expect the sale to result in one of the most profitable exits for Blackstone which so far has had a patchy performance history. Originally set up in 1976 as CMS Computers to maintain IBM machines, CMS Info Systems was carved out of its parent in 2009, when Blackstone teamed up with former Microsoft India boss Rajiv Kaul to take control of the company for ₹250 crore. CMS provides cash management and systems integration services.

• Startups Duck as Storm Brews in Cloud Telephony Segment: Startups adopting cloud telephony for customer service are jittery about a very public battle between two leading players—Knowlarity and Exotel—who have accused each other of copying products as well as poaching clients and employees. Zivame, Naukri, Druva, redBus, CommonFloor and Ola are among the prominent startups that use cloud telephony services of either of these players. While a few are shifting loyalties, many startups are concerned about the effect this fight will have on their businesses. “Any new customer will become jittery by such rumours or social media wars amongst telephony players claiming shutdown of another,” said YourCabs CEO Rajath Kedilaya, an Exotel customer. “Customers will like to keep a backup as a telephone line is the key to a business.” Besides Knowlarity and Exotel, others such as OzoneTel, CallNet, VoiceTree, Ziffy and Resolvity are among the handful providers of virtual call centre services in India for small businesses like restaurants, web design shops, e-commerce firms and taxi providers.

• Dedicated eStore to Help Microsoft Harness India Mkt: Microsoft is the latest to join ranks of big brands launching their e-commerce stores in India. The company could launch the site as early as November, said a person who is working on the project. Microsoft operates an international online store that ships to multiple countries. The site sells all Microsoft products from software like its Office suite to its Xbox in markets like the US. However, in India, it just offers its software downloads through the global site. This will change once the India-focused site opens up. “They wanted to launch microsoftstore.in before Diwali but that is not going to happen. It will open up towards the end of November and will offer all the products of the company,“ said a person, who has knowledge of the plans. Last year, Microsoft launched an online flagship store on Chinese marketplace TMall. The company did not deny or confirm the development.`We do not have anything to share at this stage,“ a company spokesperson said.

• SRK boards e-com bus with Yepme: From Bollywood superstars to lead ing industrial ists, everyone wants a piece of the red-hot Indian online retail market. The latest to board the e-commerce gravy train is superstar actor Shah Rukh Khan who has signed on as the brand ambassador for fashion e-tailer Yepme in what will be his maiden association with an online commerce player. The deal with the Gurgaon-based company is structured in a way that lets the actor pick up a stake in Yepme going forward, an executive from the e-tailer told TOI. Yepme competes with the likes of Myntra (a part of Flipkart) and Rocket Internet's Jabong and is in the midst of closing a $30-million financing round with a consortium of four investors, including its two existing investors Helion Venture Partners and Capricorn Venture Partners. The e-tailer, which only sells private brands, plans to spend Rs 15-20 crore over the next three months on its multimedia advertising campaign featuring SRK in an attempt to fight its bigger rivals. Apparel and fashion sales online are estimated at about a billion dollars, rivaling electronics and mobiles, which have traditionally been the biggest draw online. The four-year-old company has got on board advertising agency McCann Erickson's Prasoon Joshi to work on the new campaign that goes live November 10. It's not been easy going for the online retailer, which had been in the market over the past six to eight months to raise fresh capital. Talking to TOI, Yepme's cofounder Sandeep Sharma said, in India, to raise growth capital from domestic investors when you have negative ebitda (a measure of the company's operating performance) is still a big challenge. “In July , we started exploring investors outside India and that's when things started to fall in place,“ he said.The fashion e-tailer has in all raised $21 million across three previous rounds, the last one being in December 2013. 

• IndiGo, GoAir to fly more in winter: Budget airlines IndiGo and GoAir will go against the grain and fly more this winter. Air India, Jet Airways and SpiceJet will cut flights. Departures per week this winter will, however, climb 3.5 per cent to 12,305 from 11,886 in 2013. Apart from IndiGo and GoAir, new airlines Air Costa, AirAsia and the yet to be launched Vistara will be adding to winter flights. Competition from the new airlines is expected to keep fares in check during the season despite a moderate rise in departures. IndiGo, the country’s largest budget airline, will increase flights by 25 per cent to 3,733 a week, up from 2,987 last winter. The airline is leasing two jetliners every month from Singapores Tiger Air between October and March to add to its fleet of 83 Airbus A320s. GoAir will increase weekly departures this winter by 12.6 per cent to 957. GoAir and IndiGo are the only two airlines making profits in the Indian aviation industry. A reason for flight cutbacks by other airlines is the aviation regulator’s decision to ban smaller aircraft at the Delhi airport during fog. The airport will be off limits for turboprops not compliant with CAT– IIIB like SpiceJet’s Bombardier Q400s, Jet Airways’ ATRs and Air India’s CRJs. SpiceJet will have to cut its winter schedule the most, by 16.2 per cent to 2,277 departures aweek. SpiceJet has 15 Bombadier Q400s in its fleet. Air Indias regional arm, Alliance Air, will slash 13.9 per cent of its flights to 210 this winter.

• Will Yahoo’s board save Marissa Mayer?: To hear the hedge funds circling the company tell it, the clock is running out for Mayer, and any day now they’ll be calling the shots on strategy. But of course, things are rarely so simple. Sure, Mayer alienated some advertisers. Sure, she disappointed her shareholders. And yes, it’s easy to question her judgment when it comes to hiring, investing and acquiring. But for all of her faults, she’s created allies where they count the most: the Yahoo board. In the summer of 2013, Mayer pushed out the activist investor Dan Loeb and his strongest allies; last summer she filled four empty slots with hand-picked executives. Those people—stock-brokerage pioneer Charles Schwab, former Wal-mart Inc. CEO Lee Scott, pharma executive Jane Shaw and Yahoo co-Founder David Filo—will presumably buy her time, even while the outside world wants her head. If you want to know when Mayer will be forced to bow to the activists, watch the board—because she works for them. They’re her moat. And they’ll decide whether she’ll stay long enough to turn Yahoo around.

International:

• Quiksilver Cofounder Bob McKnight to Retire: Bob McKnight, cofounder and executive chairman of Quiksilver Inc. and a pioneer of the West Coast surf and skate market, will retire from active duty at the end of the month. McKnight, 60, will remain a director of the company, which markets the Quiksilver, Roxy and DC brands, but retire from his role as chairman. Andy Mooney, 58, who succeeded McKnight as chief executive officer of the company in January 2013, will now succeed him as executive chairman. Pierre Agnes, 50, will assume the title of president, currently held by Mooney, while continuing in his current capacities as head of European operations and global head of apparel and accessories.

• Converse Files Broad Trademark Suit: Converse is taking on all comers in its battle to defend its sneaker design. The company, owned by Nike Inc., on Tuesday filed separate suits in Federal District Court for the Eastern District of New York against 31 manufacturers and retailers alleging that they had infringed on its Chuck Taylor sneaker design. Separately, it requested the U.S. International Trade Commission begin an investigation into the allegedly illegal importation or sale of products bearing its marks. The 31 defendants in the cases include footwear competitors such as Skechers, Fila and Aldo Group; fashion names such as Ralph Lauren, Tory Burch and Kitson, and retailers such as H&M, Kmart and Zulily. The defendants are accused of trademark infringement, false designation of origin, unfair competition, trademark dilution and unfair business practices.

• Farfetch Branches Out in Asia: The London-based online fashion marketplace Farfetch is extending its reach into Asia. Following the soft launch of a Japanese language site in August, Farfetch on Wednesday will reveal that Tokyo boutique Restir will join the site’s roster of over 300 independent retailers as its first Asian boutique. Restir was the winner of Farfetch’s Superstore 2014 competition, in which the site’s customers voted on which store they would most like to join the site. Restir won against five other boutiques in Dubai, Mexico City, Seoul, Shanghai and Cape Town. José Neves, chief executive officer and founder of Farfetch said that in signing Restir, Farfetch is “able to give access to [the boutique’s] unique viewpoint on fashion to a global audience, and in turn offer Restir a new global customer.” He noted that the launch will mark the first time that Restir’s private label collection, Le Ciel Bleu, will be available outside Japan.

• Macy's Opening Earlier on Thanksgiving: Macy’s will open stores at 6 p.m. on Thanksgiving, two hours prior to last year. Macy’s last Thanksgiving opened for business at 8 p.m., breaking a long-standing tradition of staying closed during the holiday. The previous year, the retailer opened at midnight on Black Friday. “With the growing customer-driven trend toward early shopping for Black Friday each year, Macy’s aims to accommodate customers who count on us to be there when they are ready to shop,” Macy’s told WWD. “In response to the significant, sustained customer interest in last year’s opening on Thanksgiving, both at Macy’s and at many other retailers, we will be opening our full-line department stores at 6 p.m. on Thanksgiving Day, Nov. 27.”

• J.C. Penney's Incoming CEO to Get $1.3M Base Salary: Marvin Ellison, the incoming president and chief executive officer designee of J.C. Penney Co. Inc., will receive an annual base salary of $1.3 million, according to a regulatory filing with the Securities and Exchange Commission. Ellison will also be entitled to receive other bonuses, such as a $4.1 million sign-on bonus. Starting in 2015 — Ellison starts at Penney’s Nov. 1 — he will be eligible to participate in the retailer’s performance-based annual bonus program. His target bonus opportunity will be 150 percent of his current base salary, or a range of nearly $2 million for fiscal 2015, with a maximum bonus opportunity of 300 percent of his current base salary, or a range of $3.9 million.

Tech:

• Samsung launches Galaxy Note 4 in India for Rs58,300: Korean handset maker Samsung on Tuesday launched its most expensive device in the country — Galaxy Note 4 — at about Rs58,300 as it looks to defend its turf in the multi-billion dollar smart devices market in India. Samsung had unveiled the Galaxy Note 4 last month in Berlin at the IFA Electronics show. At the launch price, the Note 4 is currently is most expensive device. The previous generation Note 3 (N900) is retailing at about Rs38,900 onwards, while its flagship Galaxy 5S is selling for about Rs36,000. “The Galaxy Note 4 is an example of Samsung’s commitment to deliver iconic and differentiated products. The Note 4 is innovation with the combination of an enhanced S Pen, large and vivid display and superior productivity features to provide the most refined Galaxy experience to our customers,” Samsung India VP (Mobile and IT) Asim Warsi told reporters in New Delhi. The phablet is hitting the market just ahead of Diwali and will face stiff competition from Apple’s new devices — iPhone 6 and iPhone 6 Plus, which will be available from 17 October.

• Skype introduces video messaging app Skype Qik: Skype Technologies SA, a telecommunication company owned by Microsoft Corp., on Tuesday introduced a new video messaging app, Skype Qik, the company said in a blog post. The app, which will be available for Windows, Android and iPhone, can run alongside Skype to share video messages with individuals and groups of friends. However, the exchanged messages will expire after two weeks. The app also lets users delete the video messages sent and block the contacts in case one doesn’t want to receive messages from someone. Earlier this month, Microsoft said it would stop certain services including calling facility from its application on mobile and landlines within India from 10 November. The company did not give any reasons.

• IT Cos Focus on Cyber Security Solutions: Indian IT companies are increasing their focus on cyber-security as they see demand rising for security solutions amid growing commerce on the internet. According to consultancy firm PwC, $4-5 billion worth of security services are being outsourced currently, a market that Indian IT companies are looking to capture. The cyber-security business is typically split into consulting, software solutions, implementation, and operations & maintenance. While consulting is driven by big firms and software by foreign companies, the last two aspects of cyber-security offer a big opportunity for Indian players. “Implementation is something that is getting outsourced as well and there you have Indian companies playing,“ Sivarama Krishnan, executive director at PwC, told ET. “Then you have operations & maintenance. That is the leg on which we see a lot of things come into the Indian companies. It is a big business for most of the IT companies.“ Indian companies are also looking to beef up their security verticals in view of the rising demand. “We are investing a lot in security. Cyber-security is going to be very important and we are already placing a big bet,“ N Chandrasekaran, chief executive at Tata Consultancy Services, India's biggest IT company, told ET in a recent interview. TCS has over 3,000 certified security personnel.

• Near-field Communications Solution Providers Happy with iPhone Platform: Apple’s decision to offer a mobile payment solution with the new range of iPhone has cheered up several Indian startups working with the technology behind it, called NFC, or near-field communications. NFC, a shortrange wireless technology that can transfer small amounts of data between devices held at proximity, will now finally to get consumers’ attention after a seemingly endless lull, said entrepreneurs. “Before Apple, NFC was kind of dead. Now the question mark over the technology has disappeared,“ said Raghvendra Saboo, CEO of Bangalore-based Linqs, which offers a solution to connect physical products to the smartphone via NFC. Other NFC solution providers such as Tagtual Technologies, Nearyou Leading Technologies and mobile payments solution provider iKaaz Software, too, expect Apple's entry to be a game changer. iKaaz -which has a brandagnostic NFC payments solution that eliminates the need to swipe credit cards and works in both emerging and developed markets — is particularly excited. “iPhone is not really popular here, and our low cost solution works great. The announcement is well aligned with our retail launch,” said Soma Sundaram, founder and CEO at iKaaz Software. Sundaram, a former Nokia executive, hopes the company will break even in 2017 and reach 3,500 merchants by the end of the next year. 

• Samsung not to restrict e-sales: Cracks seem to be appearing within the consumer goods industry over the mega discounts offered by online retailers like Flipkart, Amazon and Snapdeal. Samsung, the country's top electronics maker, has said it has no intention to block or restrict sales to online retailers even if they sell products at huge discounts to the brickand-mortar outlets. “Blocking and restricting (supplies), or anything like that, is not our approach,“ Asim Warsi, VP for mobile & IT at Samsung India, told TOI when asked whether the company plans any steps against e-tailers selling at huge discounts to the physical stores. “We do not play God in pricing. It is an open market and we are committed to open-market practice.“ Samsung's stance is different from the position adopted by other consumer goods companies like LG and Sony , which have warned online sellers of restrictions if they offer massive discounts to the prices prevailing at the physical stores. The larger section of consumer goods makers as well as associations representing brick-and-mortar showrooms have said that online sale events like `Big Billion Day' -where Flipkart sold goods at huge discounts to the market price -are detrimental to competition as etailers engage in “predatory“ prices. Warsi said that Samsung ensures that its goods are sold at “a reasonably and fairly uniform price“ to all its retailers, including its channel partners and online stores. “In the long term, consumers will ultimately decide on which channel they would want to use to buy products from.“

• Nokia hopes for early nod to sell facility: Nokia would like to sell off its manufacturing plant near Chennai at the earliest as its value is declining steadily. The Finland- based company, which recently sold its mobile devices business to Microsoft, has said that it would like to sell off the plant and put the money in escrow account till the litigation over the facility is over. The plant has been stuck in a ₹ 21,000- crore tax dispute between the company and the Income Tax Department. According to an agency report from Finland, which quoted Barry French, executive vice- president, marketing, communications and corporate affairs, Nokia, the company said if it is allowed to sell the factory, the money it gets from the sales would be invested in an escrow account, till the tax dispute is resolved.