Intellectual Thoughts by Sanjay Panda: August 2007

Yahoo Mail lets e-mailers text-message to phones

Yahoo Inc said on Sunday it was giving its e-mail users more ways to reach friends and online contacts by allowing them to trade messages with mobile phone users.The new e-mail-to-phone connection is one of the features the Internet media giant plans to add as it makes available to the more than 250 million Yahoo Mail users a new version of the world's most popular e-mail program in coming weeks.

Already this year Yahoo has been testing another feature that lets its e-mail users communicate using conventional e-mail or via instant messages using either Yahoo Messenger or Microsoft Live Messenger.( Gmail has the facility long back though..)

Yahoo is scrambling to make its services more relevant as many Internet users spend more and more time on social networks like MySpace, YouTube and Facebook and less time passing through portals like Yahoo, or Microsoft Corp's MSN.

The new version of Yahoo Mail gives users three options for communicating with contacts -- e-mail, online instant-messaging or text-messaging to mobile phone users. Users can switch between the three, depending on which is most convenient.

Initially, the text-messaging feature will be available to Yahoo Mail members in the United States, Canada, India and the Philippines. To text a friend, users simply enter a mobile phone number, type a text message in Yahoo Mail and hit send.

Yahoo Mail had 254 million users in July, according to audience measurement firm comScore Inc, while Microsoft Windows Live Hotmail had 224 million. Yahoo Messenger was used by 93 million in July.

Existing users will be prompted to upgrade, although users of slower dial-up connections or those comfortable with Yahoo's 'classic' e-mail can continue to use the older version.

The key difference with the older e-mail program is how the new service lets users 'drag and drop' e-mail into folders, speeding the time it takes to sort through incoming messages.

Search features are also improved, allowing Yahoo Mail users to narrow results to find a specific sender, folder, date, attachment type or message status. So a search can, say, find all photos in Yahoo Mail tagged with a person's name.

Powering the future,- Alternate energy

Once dismissed as kooky ideas spawned by impractical environmentalists, alternative energies are now part of the energy plans and policies of most nations. “Governments all over the world recognise the importance of renewable energy as fossil fuels are finite,” & now aggressively planning investments in renewable energy projects. “Worldwide, the renewable energy industry is growing at 20-30 per cent per annum. Demand exceeds supply in some sectors such as wind energy, and companies are generating returns in excess of their cost of capital.

Fifteen European Union nations, including Spain and Germany, who are world leaders in renewables, have committed to generating 20 per cent of the energy using alternative technologies by 2020. India has also put in place several renewable initiatives and the country is now the world’s fourth-largest generator of wind energy with an installed capacity of 7,093 MW.

Entrepreneurs are venturing into solar power because of the phenomenal growth potential. The United Nations Environment Programme Report (2007) states that renewable energy projects received a record $100 billion (Rs 4,40,000 crore then) in investment in 2006, up from $80 billion (Rs 360,000 crore then) in 2005. Interestingly, venture capitalists are now some of the biggest investors in alternative energy, and their track record of almost single-handedly creating the computer and bio-technology industries is also boosting the industry’s prospects. With glaciers melting, weather patterns changing and the hole in the ozone layer getting larger, western public opinion is increasingly pushing politicians to search for greener energy. In Asian countries such as India and China, there are also more mercantile reasons to follow suit.

India currently produces 130,000 MW of energy a year and this figure will need to double within the next decade. The cost of building the mostly coal-fired plants slated to produce this energy will be a staggering Rs 5,34,000 crore. The environmental and health costs will be even steeper. India is already the world’s fifth-largest polluter, and hospitals across the country are reporting sharp increases in lung and breathing problems, from asthma to cancer. India’s oil bill has also shot up from $7.5 billion (Rs 26,250 crore then) in 1996 to a whopping $50 billion (Rs 2,20,000 crore). By 2010, when Indian consumers are estimated to own 15 million cars, the country’s oil consumption will be twice today’s 2.1 million barrels a day, the US Energy Information Administration says. With global oil production barely 1 million barrels over the global consumption rate of 81 million barrels a day, the surge in demand from India (and China) could eventually lead global demand to outstrip supply, causing fuel prices to shoot up to $100 a barrel. This could cause India’s oil bill to quadruple to $200 billion a year by 2025! More significantly, India will be the only major economy in the world other than Japan importing 90 per cent of its oil needs, a strategic lacuna.

So why hasn’t the alternative energy revolution already happened? Until, recently, the technology just wasn’t there and the cost of producing a MW of wind or solar power was up to five times that of fossil fuels. Now, the costs are evening out, but the challenge for the alternative energy industry is to achieve the scale necessary to become competitive. Standing in the way of this is the powerful oil and gas lobby, which has consistently tried to tie down the alternative energy industry like a bonsai tree. There are only two ways of combating the environmental and human cost of using fossil fuels. “If the government levies an energy tax, like a tax on the pollution caused due to use of conventional energy, it can then try to cover the (environmental and human) cost. This is a rational option but not a social one, as the common man will suffer. The alternative is to provide renewable energy a privileged market: no taxes, zero interest rates, and a new tariff law.”

According to US media reports, the Bush administration, after a series of meetings with a group of energy industry representatives and lobbyists, drew up a controversial National Energy Plan, which doled out $33 billion in public subsidies and tax cuts to the oil, coal, and nuclear power industries. In India, the privatisation of oil exploration has also created a huge anti-alternative energy lobby led by oil companies such as Reliance, Essar Oil and Videocon, in cahoots with auto companies. A sign of their power came when New Delhi recently withdrew a Rs 1 lakh per car subsidy it was about to give the Reva, India’s first electric car.

More importantly, supporters of alternative energy insist that the “full cost” of using fossil fuels is hidden — and could even be higher than the cost of many alternative technologies — because the health, environmental, and defence costs associated with using fossil fuels are not built into their purchase cost. For example, The US-based International Center for Technology Advancement says a gallon of gasoline in the US that costs consumers about $3 (Rs 120) would end up costing the nation about $15 (Rs 600), if the full cost of the medical costs associated with treating people suffering from pollution-related illness, the economic costs of the days lost at work because of people ill with pollution-related problems, the cost of cleaning up the environmental damages caused by fossil fuels and astronomical defence costs associated with oil security were added up.

Given the oil and auto industries have more than a trillion dollars in revenues and have planned investments of nearly $50 billion by 2010, Governments are worry that hurting these industries could dampen growth and damage other industries, such as shipping and ports, steel, petrochemicals, auto ancillaries, and rubber. But supporters of alternative energy, say these losses would be balanced by the totally new industries renewables would create, in the same way that the IT revolution initially cost jobs and killed some industries, such as answering services, but went on to boost global growth.

Significantly, with renewable energy technology maturing and awareness rising, many consumers are sidestepping such policy conundrums and turning into early adopters of these technologies. Still, no alternative energy technology is even close to fulfilling its full promise. More than technological changes, consumers will have to change their attitudes and habits before alternative energy can become what it should — the only energy. Imagine mankind powered by infinite renewable energy. The benefits are driving governments, businesses and individuals all over the world to follow that dream. They know there is no real alternative.


The crisis of confidence

The old-fashioned financial system was like Old Maid, a parlour game once beloved of small children. The banks were like players, dealt hands from a pack of cards, which they swapped among each other. At the end, one player was left holding a lonely queen—a bad debt, if you will—and lost. Over the past few decades the game has changed. Securitisation has snipped the old maid into pieces; new faces, such as hedge funds, have joined the party, enabling the banks to distribute those pieces among a larger number of players. When the game is over, lots of players are left holding small losses instead of one player holding a big one.
During two exceedingly prosperous decades, that theory seemed to work just fine. But the swings in almost all financial markets this month have made dispersed risk suddenly morph into dispersed mistrust. The uncertainty has been magnified .Meanwhile, collateralised-debt obligations (CDOs), made up of clumps of those securities and laced with leverage, have become almost impossible to trade. So none of the players really knows how much he has lost. While this uncertainty lasts, investors are taking it out on the banks that peddled the securities by dumping their shares; and the banks are taking it out on those they sold them to by demanding more collateral on their loans. The banks have even grown cagey about lending to each other.
The doubts burst into the open on August 9th when central banks were forced to inject liquidity into the overnight money markets because banks were charging punitive rates to lend to each other. At first, the problems appeared more serious among European banks. The pain in America was concentrated in the largest hedge funds, including those run by Wall Street’s biggest name, Goldman Sachs. Increasingly, however, analysts worry about the exposure of American, Canadian and Asian banks.
On Wednesday August 15th shares in Countrywide Financial, a large American mortgage lender, fell 13% after an analyst gave warning of possible funding difficulties. Despite liquidity injections by the Federal Reserve on August 15th, the S&P 500 index fell 1.4%. The heavy selling spread to Asian and European stocks on August 16th.
Every crisis begets finger-pointing, and the blame now is falling on the rating agencies that helped structure these exotic instruments. Currently, they are guided by a voluntary code that aims to tackle potential conflicts of interest. The biggest is that the agencies are paid by the firms they rate. Rating CDOs was a profitable business.
If these securities are now downgraded, banks could be forced to offload lots of illiquid instruments into a falling market—one of the fastest ways to lose money yet devised. But if there are no buyers, banks may have to sell something else to shore up their balance sheets.
Something like this indiscriminate selling has been affecting hedge funds over the past couple of weeks. Faced with more demanding standards from their banks and investors, some have been forced to unwind positions in order to realise cash. That has led to unusual movements in debt and equity markets, which have only got some funds deeper into trouble. Quantitative funds have been hardest hit, as investment models that had made money for ages briefly proved worse than useless.
Since banks lend to hedge funds, any problems there quickly become their concern. On top of this, both Bear Stearns and Goldman Sachs have found that when funds bearing their name get into trouble the desire to preserve their reputations soon leads to a rescue. Sometimes risk is not as far away from the banks as it seems.
At the end of Old Maid as banks used to play it, the loser would take a big write-off and then everyone could start playing again. In the new version, the use of leverage means the game is being played with hundreds of packs of cards and by thousands of different players. Working out who has won and who has lost in this round will take a long time.

Sanofi Drug Hits New Hurdle With Indian Knockoffs

Sanofi-Aventis SA's "Acomplia" the weight- loss pill, linked to suicide, is becoming popular in generic form from India which may end the product's chances of ever reaching the U.S., where it has been delayed by regulators.

Cipla Ltd. and Ranbaxy Laboratories Ltd. are among six drugmakers exploiting a loophole in India patent laws, selling copies of the medicine under names like Slimona and Defat. The pills are sold without prescription for as little as 12 cents. Sanofi had predicted Acomplia would generate $3 billion a year. Sanofi's earnings have dropped for four straight quarters. The drugmaker is losing patent protection on older medicines such as the sleep pill Ambien. Sanofi withdrew its U.S. marketing application for Acomplia on June 29 after the FDA raised safety concerns.

Under Indian intellectual property law, pharmaceutical companies can use a process called reverse engineering to make drugs patented before 1995. The patent on Acomplia, which regulates hunger impulses, dates to 1994. Sanofi received approval to sell Acomplia in India in May, the same month as the generic-drug makers.

The Indian regulator approved rimonabant, or generic Acomplia, requiring patients get a prescription and medical advice on its risks. Those include depression and anxiety --side effects that were serious enough to prompt an FDA panel of advisers to reject the pill.

India is growing obese. Almost a third of women and more than a fifth of men living in urban areas are considered overweight, according to a government survey last year.

Obesity can lead to high blood pressure and diabetes, to which South Asians have a genetic predisposition. Indian men are three to four times more likely than East Asian, African American, Hispanic or Caucasian men to develop insulin resistance that leads to diabetes, according to a study last year in the Proceedings of the National Academy of Sciences.

Torrent Pharmaceuticals Ltd. started selling its version, Rimoslim, two months ago and aims to sell 100 million rupees' worth within 12 months. Rimoslim is an extremely affordable therapy for the masses.


Are India Inc`s global M&A's worth it?

Most of the big-ticket acquisitions made by Indian companies were through the leveraged buy-outs (LBO’s) route funded partly by private equity funds, financial institutions and, of course, through internal resources. It has to be borne in mind that for takeovers by India Inc worth several billion dollars, the outflow of dollars has been minimal. At the same time, the charge of the private equity funds and others on the profitability and assets of the merged or acquired company will be substantial, which has to be paid through the future profits or cash flow of the company.

The pertinent question is whether our corporations have overstretched themselves. First, we feel that India Inc is now in an unprecedented trajectory of growth, where it focuses on both domestic and global markets somewhat in a similar manner. The concept of a dominant leader in the domestic market will soon undergo a change thanks to a gradual reduction of the tariff wall. Sooner or later, imports are going to be cheaper than what they are now. That would mean that corporations, to stay in the race, should be competitive both domestically and internationally. The effort of India Inc to go global is not only symbolic of its strength and reach but also a calibrated policy to shore up its competitiveness by achieving economies of scale and scope.

Secondly, in many areas, especially in the knowledge-driven industry, we have to consolidate ourselves. Our IT majors are reckoned everywhere. Yet, their size and scope are small compared to Microsoft, Dell or IBM. The result is that many-a-time, we have to be content with the status of a vendor or sub-contractor to large American and European corporations. That stage should change and in certain areas, we can emerge as global players and prove our worth in executing high-end projects. M&As are the preferred route to achieve that position.

Thirdly, a paradigm shift is taking place in the image of India, which has been considered mainly as a supplier of goods and services, including software services. We have to emerge as a strong manufacturing hub, capable of producing high quality and price competitive manufactured goods. Slowly, we are making progress towards that. We are reckoned as a major player in steel, foundry, auto components and so on, thanks to some of the LBOs carried out in recent months.

That list has to expand and can be accomplished through the M&A route rather than by setting up greenfield projects in an alien land.

The flip side of the spectrum is what happens when there is a global recession? We cannot become a global player and also insulate ourselves from its fallouts. It is a cyclical reality. Fortunately, now India have enough foreign exchange reserves to bail us out in case of a global slowdown.