What’s Important in the Financial World (4/6/2012) Samsung Profits, JCPenney Layoffs

JCPenney (NYSE: JCP) will cut 900 jobs at its headquarters, which is about 13% of the total. New CEO Ron Johnson, formerly of Apple (NASDAQ: AAPL), claims this will turn the crippled retailer into more of a “start-up.” Successful start-ups rarely lay off people. Johnson also has decided to alter the way JCPenney prices most of its merchandise. This will make it easier for shoppers to find deals, he says. The real problem is that people cannot find deals if they do not go to stores in the first place. The retailer’s stock is just short of flat this year. Wall St. has reject the new strategy.

Spain’s Austerity Plan

Spain’s political leaders will present EU budget directors with its plan to comply with new austerity measures. It needs to hurry the process. Spain’s bond yields have risen to unsustainable levels as capital markets have deserted its paper. Yields on its 10-year notes have risen to 5.84%. Spain’s budget deficit target for next year is 3% of gross domestic product. The government may be able to control expenses, but these are not the greatest threat to compliance with its budget. Unemployment in Spain is above 20%. Among younger workers, the figure is as high as 50%. The jobless problems and a collapse in real estate values means that cuts will be far from sufficient for Spain to make austerity the sole aspect of its economic solution.

Microsoft Presses App Makers

Several media sources report that Microsoft (NASDAQ: MSFT) has given app developers financial incentives to create software for its Windows Mobile OS. The operating system, combined with phones from Nokia (NYSE: NOK), are the last-ditch effort to salvage the strategically important business. Microsoft competes with the Apple and Google (NASDAQ: GOOG) Android app stores. The two mobile platforms are distributed widely enough for app makers to have a chance at highly profitable businesses. For Windows app developers, the profits may all be in the up-front payments.

Samsung Expects Record Profit

Also in the world of smartphones and consumer electronics, Samsung said it expects a record first quarter profit of $5.15 billion. It gives most of the credit to sales of its handsets and tablets. Samsung has emerged as the only wireless device company with a line of products broad and popular enough to compete with those from Apple. Samsung also has the leverage of size. It is expected to pass Nokia to become the number one handset maker in the world, which will give it a strong presence on every continent. Samsung is far from making the kind of income Apple does, but, unlike many competitors, it is not losing money to stay in the game.

Douglas A. McIntyre