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Turbulence Ahead For Qantas – US-FOREX.US

Forex-Publisher — Thu, 20 Aug 2009 03:14:47 +0000

HONG KONG -
Since Qantas Airways cannot see through the clouds ahead, the flying kangaroo has turned on the emergency navigation system and readied a cost-cutting parachute to lighten its load for a safe landing.
Because “high levels of volatility in the economic outlook, industry capacity, passenger demand, fuel prices and exchange rates continue,” Qantas Airways
said Tuesday that it could not provide a clear business picture or any profit guidance for its investors, even though it has spotted signs of passenger volume improvements in the second half of 2009.
Its vision blurred by uncertainties on all fronts, Qantas announced its latest cost-reduction program, aimed at saving 1.5 billion Australian dollars permanently over three years. The Australian airline plans to save 500 million Australian dollars in the current 2009/2010 financial year.
Chief Executive Alan Joyce said the fresh round of cost-trimming measures “will focus on Qantas’ operations and improving efficiencies across a range of areas, including sales and distribution, fuel conservation, aircraft utilisation and schedule, and procurement.” Joyce didn’t rule out the possibility of further layoffs.Rising fuel costs are still the major operational burden troubling the airline. “We are also keeping a close watch on oil and fuel prices,” Joyce said. “While well below the record levels seen in 2008, they remain volatile and are trending upwards. For 2010, the Qantas Group has hedged 80 per cent of fuel costs at a worst-case price of 89 per barrel.”
The largest air-carrier in Australia on Tuesday reported its annual profit fell 87% to 181 million Australian dollars for the year ended this June. The figure beat market estimates of around 140 million Australian dollars, and was near the top range of Qantas’ own profit forecast of 100 million- 200 million Australian dollars , which was revised in April when the airline revealed its second major cost-cutting scheme.
Nevertheless, after deducting the 288 million Australian dollars of pre-tax profit booked for the half-year out from Qantas’ full year account, the airline lost 107.0 million Australian dollars in the six months ended this June.
“During the second half, the environment deteriorated, with domestic and international competitor capacity continuing to grow and demand in key markets softening quickly as the global slowdown hit,” said Chief Executive Alan Joyce, adding, “This was compounded by one-off events during the year, including protracted industrial action, H1N1 influenza and the costs associated with introducing the new Qantas A380.”
These one-off items caused real pain to Qantas. The strikes staged by the aircraft engineers union resulted in a maintenance backlog costing 130 million Australian dollars . The impact of the swine flu epidemic: 45 million Australian dollars . Introduction of the new Qantas A380 brought a bill of 37 million Australian dollars .
The half-yearly loss in the second half marked Qantas’ first loss in six years, matching the forecast of International Air Transport Association , which projected in June that the entire aviation industry could lose 9 billion in 2009, with an operating loss of 1.7 billion. The Geneva-based association estimated that most airlines around the globe will sink under the profit horizon the first time in six years since the industry posted an operating loss of 1.4 billion and a net loss of 7.5 billion in 2003.
To make sure it can fly through the financial turbulence, Qantas has been making bold efforts to layoff unnecessary workers and to ground planes to reduce over-capacity. Since the middle of last year, about 3,250 workers were sacked, nearly 10% of Qantas’ global workforce of 34,000 full time staff.
In June, Qantas canceled orders for 15 Boeing
787-9 aircraft and delayed the delivery of 15 smaller 787-8 aircraft by four years. To fully utilize its idle planes, Qantas announced Tuesday that it would lease four additional A330-200 aircraft on six-year terms to its low-cost subsidiary, Jetstar, for long-haul international travel, with the first to be delivered in November 2010.

Ongoing Struggle At LOreal – US-FOREX.US

Forex-Publisher — Thu, 20 Aug 2009 03:14:43 +0000

Billionaire Liliane Bettencourt, L’Oreal’s largest shareholder, does not have much to look forward to this year. Not only will her private life be scrutinized in a much-publicized legal battle between her daughter Francoise and photographer Francois-Marie Banier-who stands accused of wheedling nearly 1.4 billion out of the 86-year-old Liliane-but the woeful performance of L’Oreal is also not expected to improve. It is no secret that the company has suffered from its strong exposure to mature markets like the United States, where consumers are no longer quite so ready to shell out for Maybelline cosmetics or Kerastase hair care, but even the “green shoots” of economic recovery later this year are unlikely to change things. L’Oreal’s profitability is falling as it spends more on advertising and promotion to try to offset sluggish sales, and analysts think demand might not fully recover until 2010.”Any revenue growth we expect to be anemic at best [in the second half of 2009],” said Alex Molloy, an analyst at Credit Suisse. “Margins we now expect to show little or no recovery.”Although L’Oreal
did report slightly better sales growth in the second quarter, up 2.6%, than in the first quarter, up 0.3%, the cost to its bottom line from increased advertising will only become clear when it reports a full breakdown of six-month results on August 28. Molloy expects profits to be down 16.5%, to 1 billion euros , and for the whole of 2009 sees L’Oreal earnings down 9% over the year, to 1.9 billion euros . Shares of L’Oreal were down 0.6%, or 38 euro cents , to 58.91 euros , during morning trading in Paris on Wednesday. The stock is trading at a price-to-earnings multiple of 18, higher than rival Beiersdorf
, which owns the Nivea cosmetics brand, and Henkel
, owner of the Fa and Theramed brands. Sanford C. Bernstein Andrew Wood ranks L’Oreal as the worst of the European consumer goods sector, rating it “underperform.” “It is still expensive,” he told clients on Thursday, “and we see further downside from here.”

Green Light For GameStop – US-FOREX.US

Forex-Publisher — Thu, 20 Aug 2009 03:14:39 +0000

It’s a tough business if customers aren’t buying what you’re selling. This summer videogame sales have fallen sharply from last year, defying the prerecession assumption that the industry is growing so fast that nothing can stop it. Investors will get a look at the fallout when GameStop reports earnings on Thursday morning. The retailer is a popular hangout for gamers looking for the latest Xbox title or hoping to swap a conquered game for another used one. Despite the downturn, analyst Arvind Bhatia of Sterne Agee thinks GameStop is a go for investors.Sales of games and gaming hardware fell sharply last month. Software was down 26% in July compared with the year-ago period, according to research firm NPD, well below what Bhatia and other analysts had expected. A weaker slate of games from the major publishers coupled with still-high prices for popular game consoles like the Microsoft
Xbox 360, the Sony
PlayStation 3 and the Nintendo
Wii likely played a role. But the economic downturn has taken a toll on what consumers buy and discretionary purchases are taking a backseat to groceries and rent.That has led Bhatia to reverse his predictions for the industry, guessing that total game sales will fall 3% this year instead of rise by the same amount. GameStop
will feel the pinch. He thinks same-store sales, a common way to measure retail performance, fell 16% last quarter from the same period in 2008. Competition for used games, a very profitable business, may lower GameStop’s healthy margins. Overall, Bhatia thinks the firm will report earnings per share of 23 cents, well below the 28 to 33 cents GameStop itself had predicted and the Wall Street consensus of 30 cents.So why is the stock a buy? Industry sales data are no secret, and the sleepy summer is priced into GameStop’s shares, says Bhatia. Many analysts expect console makers to lower their prices this fall , and that should boost game sales, too. A strong lineup of eagerly awaited blockbusters is due out in the coming months, luring gamers into stores. Finally, GameStop’s second-hand business is a strong one and the firm dominates the market. Bhatia thinks the shares are worth 31, a 25% premium to their closing price on Tuesday.

Germanys Electric Car P.R. Stunt – US-FOREX.US

Forex-Publisher — Thu, 20 Aug 2009 03:14:36 +0000

European carmakers are struggling to reinvent themselves in an effort to fight falls in sales; on Wednesday Berlin predicted 1 million electric cars on Germany’s roads by 2020, as Europe’s largest economy tries to create a positive impact on the ailing automotive sector. But adding electric cars to the mix won’t do the trick, say analysts.”The program is aimed at having a positive impact on investment decisions, give producers security and support the sale of electric cars,” according to a copy of the plan obtained by the Associated Press.According to press reports, specifics on the finances are still to be discussed among the country’s legislators, but the idea has already faced criticism from industry analysts. “At a first glance this sounds rather like a nice p.r. story,” said Gregor Claussen, an analyst with Commerzbank. “But more will have to follow. Without the help and the right framework from the politics, it will not work,” the analyst said. Analysts also believe the push for the market will be too small to even be noticed. “This plan envisions 1 million electric cars in 2020 on Germany’s roads, which means that from now until 2020 only 1 million electric cars will be sold in sum in Germany. Keeping in mind that this year alone about 3.7 million cars will be sold in Germany, the 1 million additional sales will have only a minor effect,” said Heiko Moehringer, an analyst with LBBW. Contrary to foreseeing a substantial increase in sales, analysts have been expressing their concerns about a looming drop in demand as scrapping schemes-which have artificially boosted demand-expire in Germany and across Europe. LBBW estimates sales in Germany will fall from 3.7 million cars to 2.8 million units sold next year.
Yet carmakers in Germany are still going ahead with their plans to produce electric cars. Volkswagen
hopes to introduce its first electric cars on the market in 2013, while Daimler AG is working with California electric car maker Tesla Motors on developing better battery and electric drive systems for vehicles destined for the consumer market.
The Associated Press contributed to this article.

Switzerland Caves In To IRS Demands – US-FOREX.US

Forex-Publisher — Thu, 20 Aug 2009 03:14:32 +0000

To assist the U.S. government Switzerland has lifted its veil of secrecy and has agreed to give 4,450 banking client names to the Internal Revenue Service. The international crackdown on tax evasion has been gaining ever more momentum as governments, smarting from the economic crisis, seek to claw back as much revenue as they can. As a result, Swiss banking is crumbling and Switzerland’s reputation for financial discretion is suffering as well.The agreement between Switzerland and the United States announced on Wednesday could set a precedent for American authorities to go after more names, from more Swiss banks. Until now, Switzerland has, like other tax haven countries, only shared banking records with foreign law enforcement agencies if they’re investigating an action that would be considered criminal under Swiss law. Switzerland hasn’t changed any of its laws but has changed its interpretation of existing laws that cover “tax fraud and the like.” It won’t be known how far-reaching this precedent will be for another 90 days; Swiss and U.S. authorities are keeping some of it secret because the IRS is hoping that U.S. depositors in tax haven nations will come clean on their own.In its essence, Wednesday’s deal came from a diplomatic dance that saw Switzerland agree to reinterpret what it classed as tax evasion. It allows UBS
to give up account information requested by the IRS to the Swiss Financial Tax Administration to then release to the IRS, without breaking Swiss law. The newly tailored agreement is based on terms of a double-taxation agreement that has existed between the United States and Switzerland since 1996 but which on its own has done little to help the IRS identify tax evaders. Now clauses in the new agreement could allow the IRS go against other Swiss banks if they can assemble similar sorts of information to request of the Swiss government. “There are further avenues for the DOJ and IRS to pursue,” said Richard Murphy of the British tax consultancy Tax Research. Both Switzerland’s and UBS’ reputation for banking secrecy has already been permanently scarred. But confirmation that the IRS will get names from UBS will compel a flood of more wealthy individuals who have Swiss bank accounts to come forward to meet the voluntary disclosure deadline set by the IRS of Sept. 23, a date agency announced on Wednesday. Those who fess up after that deadline will face harsher penalties. Many offshore banking clients have until now been in wait-and-see mode for the outcome of the UBS case. Robert McKenzie, a partner at law firm Arnstein & Lehr and former officer with the IRS Collection Division, is currently advising approximately 50 such clients on the IRS disclosure issue-some are not clients of UBS but of other offshore banks and are concerned about the impact of the Swiss bank’s case.
Yet around 15 of them have wanted to wait for Wednesday’s final announcement. Unbelievably, there was hope that UBS might actually win its case against the IRS. McKenzie says a recurring comment among lawyer circles is that a surprising number of clients have been procrastinating on disclosure. Waiting seems to be a mistake, since UBS will notify only 500 clients within the next 90 days that their account details will be given to the IRS-most UBS clients will still be in the dark on Wednesday about whether they are one of the 4,450. “What happens if the IRS serves Credit Suisse
next,” said McKenzie, “and tells it to give us the clients that meet this criteria meet with Swiss government, and you’re past the Sept, 23 deadline?” Cue harsher penalties. UBS account holders will be allowed to appeal the decision to disclose their names in court, but three sources consulted by Forbes, including one at UBS, suggested that most of these appeals would be unsuccessful. Swiss banking clients may think that the best thing to do is consult their tax advisor, but that’s where things could also get complicated. “Every time I bring a person into the IRS for voluntary disclosure-let’s take a client with a Cayman Islands account-I have to give them the name of the tax advisor, or the people who advised those clients,” said McKenzie. With more advisors coming forward for voluntary disclosure ahead of the Sept. 23 deadline, the IRS has a growing database of advisors from whom it can request names of all U.S. clients they have assisted in setting up offshore banking accounts or trusts. McKenzie says appeals against such requests will fail-his own attempts to prevent the IRS from disclosing the names of tax clients advised by former accounting firm Arthur Anderson failed in September 2003. The DOJ’s recent statement on California resident John McCarthy, the fourth U.S. citizen to turn himself into the DOJ as a client with a secret bank account with UBS, also raises questions about people who have advised clients with such accounts. The DOJ’s statement on McCarthy says that UBS “worked closely with his Swiss lawyer to keep McCarthy’s funds from leaving Switzerland and helped McCarthy move additional monies out of the United States undetected by the federal government.” Assuming that Swiss lawyers who help Americans evade tax services are committing wire offenses, are they subject to extradition proceedings or even arrest if they travel to the United States? “If the U.S. decides to go down that route and make Swiss individuals criminally liable for what they’re doing, that’s going to have a radical impact on practice inside Switzerland itself,” said Murphy. There are currently 929 lawyers listed as financial intermediaries in Switzerland, according to the Swiss Financial Action Task Force.

The New ETF Darlings – US-FOREX.US

Forex-Publisher — Thu, 20 Aug 2009 03:14:28 +0000

After the stock market lost 37% last year, retail investors have developed a taste for comparatively stodgy fixed-income assets, especially exchange-traded funds. Assets under management by fixed-income ETFs climbed 47%, to 83 billion, this year, according to Barclay’s data. That gain outpaced the 17% jump in assets held by all U.S. ETFs.”Some people are feeling gun shy with equities,” said Tom Graves, equity analyst at Standard & Poor’s. Graves and others believe that investors, nervous from watching stock investments in their retirement accounts swing, have taken to less volatile bond markets, where high-rated corporate securities with near certain yields of 6% can look more appealing than betting on stocks. ETFs are usually the cheapest route, offering lower fees than managed bond mutual funds or open-end index funds.Of iShares’ four most-popular ETFs in July, two were bond funds, according to Morningstar: the iShares Barclays TIPS Bond
, which follows an inflation-linked index, and iShares Barclays 1-3 Year Credit Bond
, a corporate credit fund.Where the money goes, fund managers soon follow. At least 14 new fixed-income funds were started this year. Bond giant Pacific Investment Management Company launched its first bond ETF in June, the 1-3 Year U.S. Treasury Index Fund
. Vanguard also unveiled seven new bond index funds earlier this month. Expected to become available by the end of the year, the Vanguard funds will track a range of corporate and government bond indexes and be available as ETFs.
Fixed-income funds’ appeal is also partly a result of corporate bonds’ spectacular run. Speculative-grade notes from companies with heavy debt burdens have soared 38% this year and junk bond ETFs have become popular picks on investing blogs. The flow of money into such funds may be evidence of retail investors chasing returns, but that’s not why Vanguard and PIMCO are offering new fixed-income ETFs, said Daniel Wiener, chairman of Adviser Investments.
“They see this is where indexing is heading,” Wiener said. As a result, Vanguard, whose name is synonymous with index funds, wants to compete in the young and growing ETF field, now dominated by iShares and State Street
.
Wiener sees the development of fixed-income ETFs following the same trajectory as open-end bond index funds. They seemed to lag behind stock market funds in assets and variety. Vanguard introduced its Total Bond Market fund in 1986. It took six years to get 1 billion in assets and held 5 billion by the end of 1997, according to his data. Everybody knew about Vanguard’s stock index funds, he said, “but it took years for the Total Bond Market to gain momentum. It’s like people didn’t figure out that if indexing worked in stocks, then it would work in bonds.”

High Hopes For Metals – US-FOREX.US

Forex-Publisher — Thu, 20 Aug 2009 03:14:24 +0000

While recent pullbacks across raw materials may stoke fears of the bubble bursting, commodities bulls are undeterred. Inventories, after all, are extremely low and will have to be replenished once demand improves. Until then, volatility is just part of the game.Fears that China’s inventory build is over and that the economic recovery won’t be as robust may pressure prices of industrial metals in the near-term, but the sector’s long-term growth prospects remain promising. Thus far, China has been a main driver behind metals price growth but, according to Barclays Capital analyst Kevin Norrish, “the potential still exists for a significant boost to global metals consumption over the coming months as the industrialized work manufacturing sector recovers from double-digit declines registered in the first half of 2009.”The firm hiked its price forecasts for the metals on Wednesday, citing expectations for demand among developed countries that will be swifter than the market is anticipating. “We expect metal inventories to be rundown through the second half of 2009 with the recovery in OECD demand likely to be sharp and strong,” said analyst Gayle Berry. On Wednesday, the Materials SPDR
exchange-traded fund closed ahead by 35 cents, or 1.2%, at 29.44; and the SPDR S&P Metals and Mining
ETF closed up by 22 cents, or 0.6%, at 40.17. Year-to-date, the funds have gained nearly 30% and 45%, respectively.

Bonds Still Have Legs – US-FOREX.US

Forex-Publisher — Tue, 18 Aug 2009 22:59:52 +0000

All types of bonds have soared this year, from the debt of speculative-grade companies to the bonds cities and states sell to pay for schools. You might think that, the 38% return so far this year for junk bonds would mark the end of a run. But to Robert Tipp, chief investment strategist for Prudential Fixed Income Management, nearly all varieties of bonds still hold promise, even Treasurys. “We’ve come back a lot,” Tipp said, “but there’s still a long way to go.”At a gathering of Prudential’s
investment managers on Tuesday, Tipp and others discussed their outlook for the economy. All agreed that the worst had passed. “The Great Recession is over,” declared Edward Keon, a portfolio manager for Quantitative Management Associates. Another point of agreement: When economic growth returns, it will likely set a slow pace, so the investment managers expect the Federal Reserve to keep a lid on interest rates for the near future. “There’s no risk of the Fed taking away the punch bowl soon,” Tipp said. That means investments in corporate and municipal bonds should continue to perform well. Low interest rates, for instance, make it easier for companies and municipalities to refinance debt and avoid default.
One bond fund managed by Prudential, the Dryden Total Return Bond Fund, includes a mix of mortgage-backed, corporate and government bonds. As of its most recent regulatory filing, it owned debt from Goldman Sachs
, Bank of America
and JP Morgan Chase
at the end of April. Thirty-year bonds from Freddie Mac are its largest holding.
Tipp believes corporate debt hasn’t completely recovered from the sell-off that followed Lehman Brothers’ bankruptcy, when bond prices seemed to forecast another Great Depression. The average junk bond currently pays 9 percentage points over comparable Treasurys, a spread Tipp expects to fall. Before that spread dropped below 10% in July the entire junk bond market appeared “distressed” – usually a sign of a company’s impending collapse .
While inflation fears and looming bond sales keep some from buying Treasury debt, Tipp sees value in the long 30-year bond, which currently pays 4.35%. If the recession lasts longer, such safe haven securities may start climbing again. On the other hand, if the economy rebounds and the Fed raises rates, longer-dated Treasury bonds would be the least vulnerable. He’s avoiding shorter-dated Treasurys, which could get crushed if the Fed raises rates.

Retailers Cut As Consumers Hold Back – US-FOREX.US

Forex-Publisher — Fri, 14 Aug 2009 23:51:00 +0000

Economic indicators may point to gradual economic improvements but to consumers facing weak wages, default, unemployment and eroding asset values, there’s little comfort in a “less-bad” economy. With private consumption accounting for roughly 70% of U.S. economic activity, a recovery without the consumer doesn’t promise to be much of a recovery at all. The consumer conundrum was evident in Thursday’s spate of retail earnings reports as several chains topped analysts’ profit expectations-lifting outlooks in some cases-but saw little reason to feel confident about sales growth in coming quarters. Retailers have been able to cut costs and slash inventories to deliver better than expected performance but that can only go on for so long.”Overall, our customers are more disciplined in their spending,” Walmart
’s president, Mike Duke, said during the company conference call on Thursday. “There’s a new normal now where people are saving more, consuming less, and being more frugal and thoughtful in their purchases.” Such trends bode well for discounters like Walmart, which exceeded analysts’ profit expectations but missed sales estimates with a 1.4% decline. Earnings fell for department store Kohl’s
but results were better-than-expected. The company also said future sales would depend on its ability to cater to shoppers that are less willing to spend. The company disappointed the market with third- and fourth-quarter guidance that was lower than what analysts’ have been projecting. The lower forecasts, however, reflected costs associated with store openings planned for the fall as the company puts stores up in locations acquired from Mervyn’s, which went bankrupt last summer.Cost-cutting helped Nordstrom
meet the Street’s estimates despite a 27% decline in second-quarter profits and a 6% drop in sales, which weren’t as weak as feared because of the strong response to its anniversary sale. The results prompted Nordstrom to raise its full-year earnings outlook to between 1.50 and 1.65 a share, from 1.25 to 1.50 a share. Analysts, who remain cautious on upscale retailers in the coming months, had been projecting a 2009 profit of 1.48 a share.On Friday, the market will see whether cost-cutting helped teen retailer Abercrombie & Fitch
post better than a 7-cent loss and sales of 647 million. Department store J.C. Penney
also reports on Friday and is projected to post a 1-cent per share loss on sales of 3.9 billion. Thomson Reuters contributed to this article.

The Cool Hand Of Technology – US-FOREX.US

Forex-Publisher — Fri, 14 Aug 2009 23:50:54 +0000

A young engineer slips a glove on his right hand and wiggles it around at the wrist, then curls in his fingers. A shiny, black robotic hand mounted upright on his desk whirs and clicks as it mirrors his “real” hand with rapid movements. Very cool. But ask any of the other engineers what they think this hand could be used for and they have one, enthusiastic response: “Everything.”That’s a problem for Shadow Robot, the tiny London company that has been developing this robotic hand, considered one of the most dexterous in the world, for more than decade. It proudly counts NASA and the British defense department as clients, along with several universities. But the device has yet to be put to practical use or find itself a market, much less make a profit. Rich Walker, the company’s 38-year-old managing director, wants to change that. Shadow Robot’s hand is unique in its lifelike size and complexity. Its joints comprise 24 different degrees of freedom and are powered by “air muscles,” which consist of tiny rubber tubes covered in a plastic mesh. When the tubes inflate, the mesh contracts, moving a tendon in a certain way. The technology is also easily compatible with other systems.Most other robotic hands, as developed by competitors like Barrett Technologies and Germany’s Schunk Group, are simpler or larger. Barrett’s hand has three fingers and is mainly used for manufacturing, while it also sells a robotic arm used for performing surgery. There are around 11 or 12 multinational companies in the world today selling 99% of the world’s robotic arms, says Bill Townsend, the founder and CEO of Barrett. About 70% of them are used for making cars, and 30% are for other industrial manufacturing. But Shadow Robot’s hand is so dexterous, Townsend notes, it is better suited to “emerging applications” that are more human friendly than his machines.
“Emerging” describes it well. Over the course of a decade, Shadow Robot has sold about a dozen hands retailing at approximately 100,000 pounds each, but most of its clients have been so intrigued by its human-like qualities that they buy just to research it. NASA has been cagey about what it’s doing with the hand, Walker says, but he knows the agency took it apart immediately after purchase.
Britain’s Ministry of Defense isn’t doing such reverse surgery. It paid Shadow Robot 200,000 pounds to build and develop a robotic hand that could be integrated onto another robot used to defuse bombs, though it won’t give the company much more information than that. This seems to be along the lines of where Walker, a Cambridge math graduate with dreadlocks down to his waist, wants to take the company: robots that can do things any human hand could, but shouldn’t because it’s too dangerous, including working with hazardous materials. He also imagines specialists using the hand to fix things from great distances-even many miles-with the help of a video camera.
This is still years in the future, though. After a decade of struggling along with 250,000 pounds investment capital from founder Richard Greenhill and another director, Shadow Robot is currently at that difficult stage met by many high-tech companies, where the people behind it start to realize they cannot continue to just make cool-looking technology anymore-they have to make money too. Shadow Robot has never made a profit. Most years it has either booked a loss or broken even; it only started being funded by its own sales last year. Recently its accounts have started to show some promise. Shadow brought in revenues of 100,000 pounds in 2007, then 350,000 pounds in 2008 and is projecting sales of 700,000 pounds this year. A big chunk of that, or 200,000 pounds , will come from the sale of a hand to Britain’s Ministry of Defense, and another 150,000 pounds is the first installment of a four-year research contract with the European Union, via a lengthy grant application through Pierre et Marie Curie university in Paris. Shadow Robot is 50% owned by 66-year-old Greenhill, who was able to fund it until 2008 with money from a stock photography firm he started with his wife. The rest of the company is owned by its eight, full-time employees.Greenhill is the ultimate geek. He would happily continue tinkering with his robots for the remainder of his life and finds the notion of making money from them jarring and a “commercial pipe dream,” according to Walker. One reason for his view may be the difficulty he had making money from robots in the past: he set up an educational robotics company in the early 1980s, which quickly folded. For many years Greenhill’s anti-commercial stance bothered Walker and the company’s main board member, Nick Singer, a banjo-playing design engineer who took care of about a third of Shadow’s funding in the 1990s. After a number of heated discussions-”We provided hours of entertainment,” Walker says of himself and Greenhill-he and Singer finally confronted the founder last year. “Greenhill didn’t want to run a business. Singer and I felt that a commercial approach would enable us to get the company off the rocks financially, and Greenhill agreed to step back.” The company’s advisors recommended that Walker take over.
It was a stark change in roles. Walker had first met Greenhill when he was just 15 and attending a summer camp devoted to computers. He became something of a protégé for the older inventor, and went on to spend his summers working with Greenhill and his small team of robot enthusiasts out of the attic of the founder’s home in Islington, North London. While Walker has pulled away from robotics designing and started managing the office and accounts, Greenhill also pulled away geographically – he spends much of his time in the English mountains of Cumbria, hiking in remote areas with no mobile phone access. Occasionally he lends his advice to the company on research. This may be a good thing if Shadow is to succeed. “Richard is a visionary,” says Walker. “And his long-term goal is building humanoid robots that will do everything.” But while the protégé likes that long-term goal too, he wants to add “shorter goals and road maps and plans.” With Greenhill having come up with the new ideas to prove people wrong, Walker wants to avoid reinventing the wheel. Whereas the founder avoided books, his energetic successor walks out of the library with 12 of them, all about business and marketing. “A few years ago we were focused inwards and assuming that people would find out about us. We thought that if you built a better mousetrap the world would beat a path to your door.” Now Walker, a lover of metaphors, is the one knocking on doors and picking up the phone to companies or people he reads about in trade magazines. He tried hiring sales people, but found that research departments were put off by their pitches, so he stopped. Now Walker takes care of much of the selling himself, as well as of the grant applications; for three months out of the year he spends 75% of his time applying for grants. He’s learned to spend as much of the rest of his time attending trade fairs, meeting potential customers, or reminding an engineer to drop a line to someone who could find their robotic hand useful. It’s how they got that Ministry of Defense contract. “You sow bread on the water and eventually something bites.”With the company now refocused, Walker is trying to find other markets to tap besides defense. The Defense gig has the potential to become much bigger, but until that is confirmed he’s sniffing around in biomedicine, nuclear energy and hazardous waste. Gaining traction in those markets has been difficult, but Walker at least knows that Shadow Hand is a product that could one day minimize risk to humans, in war zones or with hazardous materials. More importantly, he’s caught on to the basic principle behind running a business: “If you don’t have somebody that’s interested in what you’re doing, there’s not a lot of point doing it.”