What's Important in the Financial World (1/5/2011) Pepsi Layoffs, Kodak Patents

Eastman Kodak (NYSE: EK), established nearly 140 years ago, soon may declare Chapter 11. It is burdened by debt, loses money and has been unable to license most of its 1,100 patents. It hopes a bankruptcy judge will handle an auction of its intellectual property. The digital assets might have value to other companies in the software and hardware IP wars. There is a question about why firms like Microsoft (NASDAQ: MSFT), Google (NASDAQ: GOOG) and Apple (NASDAQ: AAPL) have not been aggressive buyers already. Perhaps Kodak has overplayed its hand. Its IP may not be worth much at all.

French Bond Auction

France staged a bond auction, and there was an increase in the yields it had to pay. That indicates that investors are worried about the nation’s financial future and its AAA bond rating. Ten-year notes were sold at a yield of 3.29%, up from 3.18% at the last auction on December 1. Thirty-year note yields rose to 4.5% from 3.94% in December. The news is not good for more financially troubled countries like Italy and Spain. France’s rates might have set a firewall, if they had remained reasonably low. That would have been an indication that international capital market investors had a tiny bit more confidence in sovereign paper issued by nations in the eurozone. That, however, did not happen at the French auction.

Pepsi Layoffs

Pepsico (NYSE: PEP) may lay off 4,000 people and cut pension contributions, according to rumors published in The New York Post. This would be about 1% of the firm’s employee base. There is a great deal of pressure on CEO Indra K. Nooyi . She has not been able to improve the growth of Pepsi’s core soda business, and some investors believe her turn at the helm should end. Cost cuts and layoffs usually help boost the fortunes of big company management. It rarely lasts if sales do not increase.

Strait of Hormuz

Oil remains well above $100 a barrel on worries that Iran could try to shut the Strait of Hormuz. Speculators believe that crude could rise to $150 quickly if that happens. If oil stayed at that price for any time, it would derail the weak global economic recovery. Western naval forces may decide that it is worth the risk of armed conflict to keep the waterway open.

Douglas A. McIntyre