2011年6月30日 星期四

Apple's Flashy Music Margins


Apple's success in digital music is no flash in the pan.
Google andAmazon.com, each recently unveiling virtual lockers for digital music, face big obstacles taking on Apple. Most obviously, that's because of its already dominant position through iTunes. Less obvious: Apple's approach is potentially cheaper for consumers and much more lucrative for the company. Apple is effectively making a bet on the falling cost of flash memory, while the Google and Amazon efforts expose consumers to the rising cost of Internet bandwidth.
Google's and Amazon's services involve users streaming content from cloud-based servers to their devices. That allows users to listen to their music collection from their PCs at work, for instance, or on a mobile device with a Web connection. But with wireless operators introducing usage-based pricing for data, frequent streaming could add to cellphone bills. AT&T's wireless service, for instance, charges $25 a month for two gigabytes of data and $10 for each additional gigabyte.
Apple's strategy, on the other hand, rests on consumers storing their content locally on their devices. Its new iCloud service allows consumers to easily sync their music collections to any of their Apple devices. Aside from the initial sync, a Web connection isn't necessary.
This new service may prompt consumers to get the most storage possible on their various devices to ensure they have the space to hold everything. That means big profits for Apple, because it sharply marks up the cost of the NAND flash memory-storage chips used on its mobile devices.
Consider: Apple charges $100 more for an iPad or an iPhone with 32 gigabytes of storage than for one with 16 gigabytes. But that extra 16 GB of NAND flash likely costs Apple around $15. Gartner's research director for NAND flash and solid state drives, Joe Unsworth, estimates Apple pays about 90 cents for a gigabyte of NAND.
Admittedly, a 64 GB iPad is only $100 more than a 32 GB device, suggesting a slightly lower NAND markup. Even so, Apple's retail prices imply gross margins as high as 85% on NAND, compared with its overall gross margin of 41.4% in the March quarter. Moreover, NAND prices are likely to fall sharply, as new flash fabrication facilities come on line. Mr. Unsworth estimates the price of NAND fell about 18% in 2010 and predicts it will drop another 30% this year, 36% next year and 39% in 2013.
Bandwidth costs, however, are likely to go up, at least in wireless where capacity is scarce. And while consumers can use Wi-Fi networks to avoid cellular bandwidth charges, streaming via Wi-Fi may eventually come at a cost, too. Landline-based broadband operators will likely eventually introduce usage-based pricing.
For Google and Amazon, taking a bite out of Apple's market share in music could be painful.
Write to Martin Peers at martin.peers@wsj.com

Growing Debts of China's Local Governments


How much debt have China's local governments taken on?
A report by China's National Audit Office, published Monday, says that local governments are in the hole for $1.7 trillion, the equivalent of 27% of gross domestic product at the end of 2010. At first sight, that is reassuringly nestled between numbers in reports from other arms of the government. According to the Chinese press, the Banking Regulatory Commission put the total at $1.4 trillion. A report by the Central Bank hinted at a total of $2.2 trillion.
But appearances may be deceptive. The National Audit Office report looks at total local government debt. Within that estimate, the auditors say debt taken on by local government financing vehicles—entities set up and backed by local governments to get round constraints on their borrowing—accounts for $764 billion, a little less than half of the total.
But the numbers reported by the banking regulator and central bank reflected exclusively debt taken on by local government financing vehicles, excluding other sources of debt. So on the subject of how much debt has been taken on by these shadowy shell companies, the three reports come to radically different conclusions, with the National Audit Office estimate considerably lower than the others.
Professor Victor Shih of Northwestern University, an expert in China's local government debt, suggests that a more realistic view of the total comes from adding up the estimate of debt taken on by local government departments and organizations—independent of the financing vehicles—in the Audit Office report, and debt taken on by financing vehicles in the People's Bank of China report. That suggests local government debt at the end of 2010 could be close to $2.6 trillion, or 42% of GDP.
That number is a lot less reassuring that the headline figure from the National Audit Office report. In the context of low central government debt, a high economic growth rate, and significant assets on the other side of the local governments' balance sheet it does not suggest a debt crisis. But it does mean a substantial chunk of the bill for China's investment-driven growth is yet to be paid.
Write to Tom Orlik at Thomas.orlik@wsj.com

China Risks Being Next Property-Bubble Blow Up


BEIJING—A recent decline in Chinese real-estate prices is starting to shake confidence in the country's economic vitality and open a debate about whether the country's economy is over-leveraged. That's what made the real-estate bubble's aftermath so painful for the U.S. and Japan.
Just two months ago, China expert Nicholas Lardy dismissed concerns about what he labeled a "so-called property bubble" during a conference at the Peterson Institute for International Economics in Washington.
Now, he says a housing downturn could produce a "major, major economic correction" in China, a view shared by other mainstream economists.
What changed? A growing realization that much of China's massive stimulus spending and lending of 2009 and 2010 ended up in land purchases, driving up prices in an unsustainable fashion. And a recognition that the Chinese economic system routinely produces bubbles and is unlikely to change any time soon.
Zuma Press
The Tongmuling public rental house project in Guiyang, capital of southwest China's Guizhou Province
The government keeps bank deposit rates well below the rate of inflation to benefit state-owned banks and other firms, which have the political power to defend the status quo. With few financial alternatives to beat inflation, Chinese savers buy real estate, even if supply soars ahead of demand.
Between 2006 and 2010, investment in residential property jumped by half to about 9% of China's gross domestic product, according to Mr. Lardy. During that time, real-estate prices in major cities in China roughly doubled.
During the next three to five years, says UBS economist Wang Tao, prices are bound to head sharply upward again because of the paucity of alternative investments for Chinese savers and the reliance of local governments on land sales for revenue. At some point, she figures, the boom could give way to a bust.
Mr. Lardy expects the cycle to play out more quickly. Kynikos Associates short-seller James Chanos has been predicting for two years that a crash is imminent. No one knows for sure, of course. A number of events could trigger a big selloff, including a sharp rise in interest rates, the emergence of other investment options and higher taxes on property.
Estimates of how badly the economy could be damaged by a real-estate slump reflect different views of the structure of the Chinese economy.
The strength of the real-estate market directly affects the construction, steel, concrete, power and appliance industries. In all, about 50% of China's GDP is linked to the fate of its real-estate market, says Standard Chartered economist Stephen Green.
While a downturn would batter the economy, Mr. Green said, it wouldn't be as devastating as the burst bubbles in the U.S. and Japan. In those cases, falling real-estate prices caused bad debt to mushroom, crippling the banking industry, too, and drying up credit.
However, in China, far fewer consumers use debt to buy homes. There isn't a Chinese equivalent of the U.S. subprime mortgage.
Other analysts say there are far more leveraged purchases of real estate than recognized in the official statistics.
To fight the effects of the global downturn, Chinese state-owned banks, on government orders, lent about $3 trillion mostly to giant state-owned enterprises. The money was reported to have largely financed infrastructure projects, such as China's ambitious high-speed railway network.
But many of the loans wound up financing real-estate purchases instead, said Deng Yongheng, director of the Institute of Real Estate Studies at the National University of Singapore.
Prices at auctions for residential land in eight major cities doubled in 2009 largely because of highly leveraged purchases by state-owned companies, he and three co-authors calculate. In March 2010, state-owned companies bid up the price of one piece of Beijing land to 10 times the asking price, according to one analyst.
The magnitude of the leveraged purchases is hard to gauge.
One indication: Shortly after the Beijing land sale, the Chinese agency that oversees state-owned companies ordered 78 firms—whose charters had nothing to do with real estate—to cease buying and selling property. Nearly a year later, in February 2011, state-owned Xinhua news agency reported that just 14 firms had left the business and another 20 were expected to get out later in the year.
A spokesman for the agency said that the firms needed time to finish their projects, but added that there isn't any prohibition against companies owned by provinces or municipalities to continue to invest in real estate.
Over the past year, Beijing has put in place measures to temper real-estate sales, including raising the minimum down payment for mortgages on second homes to 60% and enacting China's first property tax. A number of economists forecast those steps will drive down prices about 10% by year-end. With demand drying up for apartments, real-estate developers are starting to invest in mines, reports state-run China Daily.
But few expect the anti-bubble measures to last, given concern by the government and Communist Party about sustaining growth, which they see as a key to social stability.
Late last week, an HSBC manufacturing activity index registered an 11-month low. The government's official purchasing manager's index, which usually lines up with the HSBC data, is due to be published Friday.
Charlene Chu, a Fitch Ratings Service analyst in Beijing, who has documented how China's official statistics understate total lending, said state-owned firms have taken on heavy real-estate debt. Thus a sharp fall in prices would produce a raft of nonperforming loans and "would have an outsized impact on Chinese banks."
In other words, a real-estate collapse could lead to a banking crisis—the kind of woes that have undermined the U.S. and Japan.
Write to Bob Davis at bob.davis@wsj.com

2011年6月28日 星期二

Hong Kong's property market: Sell now?

27 June 2011   FINANCE ASIA

By Lara Wozniak

Protestors are on the streets all around the world these days. In Europe people are angered by harsh austerity measures, in the Middle East they are trying to topple failed governments and on the mainland protests are invariably sparked by some form of brutality — driving over a protestor in Mongolia or pushing around a pregnant street vendor in Guangzhou. The world’s masses seem to be taking to the streets.
Except in Hong Kong, where life goes on in its disconnected-from-the-woes-of-the-rest-of-the-globe bubble, which is of course encapsulated in another bubble: the housing one. Property prices remain outlandishly high, despite signs around the world that the economic outlook isn’t exactly rosy.
The reasons are myriad, yet simple. The masses are provided with subsidised public housing. The next layer, the middle class, owns housing that is then rented out, often to foreigners whose companies enable them to discount the rent from their taxes, providing enough of a subsidy to let them rent a small flat with a maid’s room for the same price they would pay back home for a McMansion with a garden, pool and two-car garage in the suburbs of a major metropolitan area. Their landlord doesn’t need to work, but rather lives off the rental income. Then there’s the next layer — housing owned by wealthier Hong Kong families or corporations that is rented to companies that pay outlandish rents for their senior expat staff. The company writes it off as a business cost and the Hong Kong family or business laughs all the way to the bank.
The Hong Kong Monetary Authority (HKMA) has tried to keep the genie in the bottle through policy measures. On June 10, Norman Chan, the chief executive of the HKMA, announced the latest tightening measures: with immediate effect, a 50% down payment will be needed for transactions of more than HK$10 million ($1.3 million), from the previous limit of HK$12 million. Down payments of 40% are needed for homes costing between HK$7million and HK$10 million (previously the band was between HK$8 million and HK$12 million) and subject to a maximum mortgage cap of HK$5 million. A 30% down payment is still applicable for homes below HK$7 million (previously HK$8 million). The HKMA also imposed a new rule, lifting the down payment requirement by 10% for mortgage applications with principal income sourced outside Hong Kong, but of course if this is targeted at mainland buyers (more on them later) it’s meaningless, as most don’t borrow from Hong Kong banks anyway. As a result, analysts have generally viewed such tightening measures as having a limited effect.
Rating agencies such as Standard & Poor’s forecast a stable outlook for Hong Kong’s property market, though sensibly warn that the market is vulnerable to external shocks. S&P notes that the credit profiles of rated developers have a reasonable buffer thanks to that recurring rental income from a diverse population.
But it cautions about the possibility of a “sharp correction in prices”, noting in a June 14 report that “affordability has deteriorated because of high prices and could weaken further if interest rates rise from their current low levels”. The rating agency further points out that “strong liquidity could reverse because capital flows are fickle. Hong Kong is susceptible to external shocks, due to its open economy and free capital movement”.
External shocks to watch out for include “a sharp rise in interest rates, a hard landing in China’s economy, and a significant adjustment in equity markets", Christopher Lee, director corporate ratings for S&P, said in an interview.
The China connection
The recent financial crisis underscored one of the most important buyers in the Hong Kong market of late: mainland Chinese. During the crisis, Chinese investors flooded to Hong Kong, snapping up property, particularly in the high-end residential sector. And the influx continues.
According to Centaline, 24.9% of all primary transactions were by mainland buyers in the first four months of 2011, up from 24.1% in the second half of 2010. They are most active in the high-end property market, making up 38.1% of buyers in the primary market and 22% in the secondary market for transactions above HK$12 million, an increase from 33.8% and 20.8% in the second half of 2010, respectively.
That’s good for Hong Kong developers, but bad for renters or other potential buyers, who have stood on the sideline watching prices skyrocket. But a shock to China’s economic and credit conditions could trigger a correction in the high-end property market, which would then have a knock-on effect in mass-market prices, notes S&P. That shock might already be in the works. In the same report, S&P downgraded China property, pointing out worsening borrowing conditions.
If the mainland market cools and oversupply ensues, cash-strapped developers could fall into a price war to attract customers, who might then reconsider buying back home rather than in Hong Kong.
For our readers, many of whom have tried to play the Hong Kong property market by buying property here in the hopes of flipping it before leaving, it’s possible you’re sitting on — or nearing — the peak of this cycle.
“We believe the various measures that have been put up have brought a cooling effect to the secondary market, and thus transaction volume will stay low given a reduction in both supply and demand, continuing policy risks and concerns about potential asset bubbles,” explained Ken Yeung, Citi’s Hong Kong real estate analyst.
“Prices that are supported by thin transaction volumes may not be sustainable,” added S&P’s Lee.
Of course, it depends on what you own — and are trying to sell. Colliers International reasons that supply-demand imbalances and inflationary pressure continue to drive rents upwards. The average luxury rent increased 3.62% quarter-on-quarter in the first quarter of 2011 to HK$45.42 per sq ft per month, only 0.7% below the previous peak in mid-2008.
“In spite of the market consolidation in terms of sales volume during the short-to-medium run, the sustained low-interest-rate environment, rising inflation and tight luxury residential supply will drive the price growth for luxury residential further. Luxury residential property prices are forecast to grow 6% in the next 12 months,” Colliers forecast in a recent property report.
Some property specialists (particularly those who aren’t employed by companies trying to sell you property) note that the so-called supply shortage in Hong Kong is a myth. By some estimates there are as many as 200,000 empty flats in the city — certainly not a shortage that warrants price hikes. So why the high prices? Landlords are willing to sit on empty (unrented) supply.
“Prices have been sustained by the flood of liquidity and currently very low interest rates,” said Lee. “There may not be a shortage of apartments, but landlords are not renting them at below market rates. Therefore, prices are sustained by expectations of prices remaining high or continuing to grow.”
In other words, market fundamentals be damned. Given the eternal optimism of Hong Kong developers and sellers, trying to time the market is even more difficult in Hong Kong than anywhere else, and in the best of situations it is as safe a game as juggling lit firecrackers. The high could be this week, or a year from now, or five years from now. But given the global skittishness, it’s perhaps time to take a look at how much you’ve made from a property investment, and question if it’s good enough.
© Haymarket Media Limited. All rights reserved.

2011年6月27日 星期一

Little Shelter for China in Affordable Housing


For investors worried about a China real-estate crash laying waste to their portfolios, affordable housing will provide some basic shelter.
The government has promised to start 10 million affordable homes over the course of 2011, up from 5.9 million in 2010. That suggests construction of about 5.4 billion square feet of housing, the equivalent of 30% of total new housing starts in 2010. But the headline figure overstates the actual boost to construction from the program.
Rosealea Yao, a specialist on the Chinese housing market at research firm Dragonomics, calculates that only eight million new homes represent actual new construction. To get to its impressive 10 million figure, Ms. Yao reckons the government is adding two million to the total by reclassifying homes built by companies or government departments for employees as affordable housing.
Even for the eight million homes that do represent a genuine supply boost, finding the cash to fund the building will be easier said than done. The central government is stumping up only $15 billion of the $215 billion total cost. That leaves local government and employers scrambling to make up the difference. And they need to do so with tight budgets and weak incentives to invest.
For local governments, the mandate is to use cash from sales of land to cover their share of the cost. But data from the Ministry of Land and Resources show revenue from land sales for the first five months of the year down 11% year on year.
As important, incentives to invest in affordable housing are weak. That is especially true for the rental housing that makes up four million of the promised 10 million total. For some projects, rental income will be inadequate to cover anything more than interest payments and maintenance. Without enough income to repay principle on the loans, banks are understandably reluctant to lend.
It isn't all bad news. A smaller building program than first appears still represents significant investment. The government is moving to ease financing constraints, with a new regulation making it easier for local government financing vehicles to raise funds for affordable housing projects. Top level commitment from Premier Wen Jiabao also makes a difference.
But China's affordable housing effort merely will soften the fall in investment from the commercial sector, preventing a collapse rather than pushing growth higher. Investors who bet on the China growth story will not find themselves on the street. But after the luxury conditions enjoyed during the real-estate boom, a shift into public housing may be difficult to stomach.
Write to Tom Orlik at Thomas.orlik@wsj.com

2011年6月26日 星期日


2011/06/27 10:14 時報資訊

【時報記者任珮云台北報導】益通 (3452) 董監改選,英業達集團取得3席董事,英業達集團會長葉國一親任董事。英業達除取得3席董事外,2席監察人由葉國一兒子葉力誠及英業達 (2356) 監察人程賢和擔任,現任總經理徐信群出任益通董事長,並延攬聯電 (2303) 前總經理溫清章擔任總經理,宣告英業達正式掌控益通經營權。益通早盤追價買盤進場,開盤半小時也直衝漲停。
葉國一表示,有鑑過去電腦製造業經驗,在太陽能版圖上,有機會還是會朝垂直整合路線走,無論上、下游都思考過。他透露早先曾與投入太陽能產業的台玻 (1802) 、友達 (2409) 談合作,何況友達轉投資的料源廠早就是益通合作夥伴。
益通現有600MW(Mega Watt,百萬瓦)產能,有360MW為先進產能,另外240MW總計8條產線屬舊產線,每條僅30MW,未來將逐步更新為每條60MW產線,屆時8條產線產能可提高至480MW,總產能可達840MW。

NOK, NOK, Which Suppliers Are There?

JUNE 10, 2011    the wall street journal  

Tectonic shifts in the mobile handset market raise a serious question for investors: Which suppliers are on the wrong side of fault lines? The issue has developed new urgency since the earthquake that struck Nokia last week.
The Finnish handset maker, which once was undisputed king of the industry, said sales and profits would be "substantially" below previous estimates. According to Gartner, its market share of global handsets fell to 25% in the first quarter from 31% a year before. Its share of high-end smartphones has plummeted even faster.
Aftershocks are already being felt. Texas Instruments, among the biggest suppliers of chips to Nokia, said Wednesday that its revenue and earnings will also miss expectations. It blamed the entire shortfall on its struggling Finnish customer. Analyst Chris Caso of Susquehanna said in a note to clients that TI's commentary about Nokia is "surprisingly bad," even after Nokia's comments last week. TI's stock was little impacted, though, since it is winding down its so-called "cellular baseband" chip business. This makes up the bulk of its sales to Nokia.
But there are other big Nokia suppliers that could feel the heat, too, according to data from IHS iSuppli, including chip makers RF Micro Devices and STMicroelectronics. While both companies also sell chips to Samsung, whose handset business is stronger, they sell far more to Nokia.
Not all of Nokia's chip suppliers are drifting out to sea. The wireless-chip business that Intelbought from Infineon Technologies, for example, may be a Nokia supplier, but it does bigger business with Samsung and Apple.
LCD displays are another market for investors to keep their eye on. Here, they should be most concerned about Taiwan's AU Optronics, says IHS iSuppli analyst Vinita Jakhanwal, because it has tied its fortunes to Nokia more than others.
Nor is Nokia the only handset maker in a difficult competitive position. Research in Motion is also losing share in smartphones. Its key chip supplier is Marvell Technology. Like the other chip companies above, Marvell sells chips into many devices besides mobile phones. Still, its mobile business is largely tied to RIM and, as a result, will continue to face problems, the company has warned.
The mobile-phone market is, of course, still growing fast overall, particularly at the high end. But investors should do their homework to ensure component suppliers aren't tethered too tightly to Nokia or RIM.
Write to Rolfe Winkler at rolfe.winkler@wsj.com

台灣風電業 有望稱霸世界

2011.06.27   【經濟日報╱記者張義宮/台北報導】



2011年6月25日 星期六

Motion Sickness Plagues BlackBerry Holders


There's good news and bad news for Research In Motion shareholders. As Tuesday's recovery suggested, the plunge in RIM stock is likely over for now. The bad news: It will likely fall much further eventually.
Having lost half its value since Jan. 1, RIM is now trading at just 5.4 times expected 2012 earnings. That isn't surprising. Given its smartphone market-share declines and failure to keep up with consumer tastes, RIM's trajectory is beginning to look like that of handset rivals Nokiaand Motorola over the past decade. Both are now struggling to turn themselves around.
[rimherd0622]Bloomberg News
Michael Lazaridis, co-founder of Research In Motion, addresses the audience at the BlackBerry World conference in May.
Precisely what that means for RIM's share value is tough to quantify. There is a possibility its new operating system, due next year, will restore momentum. Even if that doesn't happen, RIM retains many loyal customers who are unlikely to give up their BlackBerrys anytime soon.
The most loyal are likely to include certain enterprise customers, such as those in the defense industry and government, who put a high priority on the security of RIM's proprietary email service. Gartner analyst Ken Dulaney estimates this kind of customer probably accounts for about 15% of BlackBerry users. Another likely band of loyalists will be those who don't feel comfortable with touch-screen keyboards.
Bloomberg News; Getty Images
These loyal customers will upgrade their BlackBerrys every few years. But more important are the recurring per-subscriber fees RIM receives from carriers. These are paid because RIM's BlackBerry email service, which routes messages through its own data centers, takes pressure off carriers' overloaded wireless networks. These payments are the primary source of RIM's service revenue, which accounted for 20% of total revenue in the May quarter. And the profit impact is likely much higher. ThinkEquity analyst Mark McKechnie estimates that, by next fiscal year, service revenue, combined with revenue from the much-smaller software business, will account for 24% of revenue but a mammoth 71% of RIM's operating profit. The danger: If RIM's loses handset customers, this revenue will also suffer over time.
The hard-core loyalists, combined with the intellectual property behind its email service, could make RIM an attractive buyout target for rivals. Trouble is, the most obvious buyer is probablyMicrosoft, for whom enterprise customers are already important. But its alliance with Nokia and a recent deal to buy Skype would likely make another risky Microsoft deal unlikely. After all, it would be taking on a big risk that handset sales continue to suffer.
RIM's co-chief executives, Jim Balsillie and Mike Lazaridis, could also be huge obstacles to a deal. The two together own about 10% of the stock, far more than any other shareholder, according to FactSet. Just as the two have rebuffed recent suggestions that they switch to a single CEO arrangement, they are unlikely to want to sell until the situation gets dire. RIM's best chance for a turnaround is an infusion of fresh blood. Without such a catalyst, RIM will remain downwardly mobile.
Write to Martin Peers at martin.peers@wsj.com

2011年6月24日 星期五

AstraZeneca's Too-Concentrated Solution


Most big pharma companies nowadays are looking to diversify. Not AstraZeneca, which believes in sticking to its knitting. That is reflected in Wednesday's $1.8 billion sale of its medical-devices unit AstraTech to U.S. dental specialist Dentsply International.
Admittedly, the U.K.-based drug company, with a market capitalization of $68 billion, was already heavily focused on prescription drugs. The sale has increased that concentration. That is a bold strategy, given AstraZeneca's poor track record in recent launches. The outlook for its shares now rests on the fate of a handful of key products. For investors, which currently reward more-diversified rivals with higher share-price multiples, it may be too much to swallow.
AstraZeneca's revenues are already forecast to fall more sharply than its peers' in coming years, as a higher proportion of its drugs face generic competition. And the market may be too optimistic on the outlook for its bestseller Crestor. The cholesterol treatment—responsible for 17% of group sales—faces competition from generic Lipitor this year. The market is pricing in flat U.S. sales until 2015, but the decline could be as steep as 40%, shaving as much as 6%-8% off 2015 earnings.
Meanwhile, AstraZeneca has yet to prove it can boost sales through drug launches. New treatments for infant lung disease and high cholesterol were discontinued last year. The market believes its brightest pipeline hope, Brilinta—a blood thinner and potential blockbuster—will gain U.S. approval in July. But the risks on approval are high, and prescriptions by U.S. physicians in the event of success are hard to estimate. Differing sales forecasts for Brilinta alone could see 2014 earnings revised upward or downward by 5%.
Sure, AstraZeneca's shares have other attractions: Market expectations for a new diabetes treatment, which could be approved this year, are low. AstraZeneca got a good price for AstraTech. At 17 times trailing earnings before interest, taxes, depreciation and amortization, AstraTech was sold at a higher multiple than recent deals in the sector, and above the 12-14 times at which listed peers trade. Proceeds from the sale could swell the $4 billion share buyback already announced for 2011.
And AstraZeneca currently trades at a 10%-12% discount to large-cap peers, based on 2012 earnings. But that doesn't adequately reflect the risk its earnings could fall as much as 5% in coming years, versus 1.9% growth at peers, notes Nomura. For investors, AstraZeneca may prove too-concentrated a risk.
Write to Hester Plumridge at Hester.Plumridge@dowjones.com

Nokia Maps New Ad Focus


Nokia Corp. is preparing a new weapon in the fight for its survival: mobile advertising.
The struggling Finnish handset maker wants to use a new partnership with Microsoft Corp. to make its flagging Navteq map unit a force in mobile advertising, a fast-growing market that is expected to more than double in size this year to $3.3 billion.
Bloomberg News
CEO Stephen Elop, left, in February announcing Nokia would make smartphones using Windows.
Nokia paid $8.1 billion for Chicago-based Navteq in 2007, hoping to create a foothold in the then-booming market for navigation services. But the deal backfired after Google Inc. and others introduced similar services online for free.
Now Nokia is betting that its Microsoft link can help make Navteq a success. On Wednesday, it said it would combine its mobile-location and commerce-services business with Navteq into one unit.
"We will provide next generation social-location applications and commerce to differentiate Nokia," said Nokia Chief Executive Stephen Elop, in a statement.
While still a nascent field, companies see big dollars in mobile advertising, but like any advertising business, scale is required to compete. To better compete against Apple Inc. and Google in the competitive world of smartphones, Mr. Elop announced in February that Nokia would make smartphones using Microsoft's Windows Phone software.
As part of the Microsoft deal, Nokia will also get a cut of mobile advertising revenue. The ads could be connected to specific searches made by users. If a customer searches for a pizza parlor on a smartphone, for example, an ad for a nearby Italian restaurant might appear. The companies hope that combining Microsoft's Windows smartphones and other properties with Nokia's and Navteq's will create a large enough ad business to challenge Google and other leading industry players.
"We think we have distinct advantages through our parent company's distribution and through this new Microsoft partnership," Christopher Rothey, vice president of advertising for Navteq, said in a recent interview. "We are looking for ways to place more location-based advertising, and Microsoft is a significant opportunity in that regard."
It is unclear exactly how Nokia will participate in advertising revenue generated from its partnership with Microsoft. A Nokia spokesman said the two companies are still in "the planning stages in terms of how we bring together the assets, which assets are brought together and the actual details on revenue sharing."
Nokia has long struggled to justify the price it paid for Navteq, particularly after Google shocked the market in 2009 by offering free turn-by-turn navigation on smartphones. Nokia matched Google last year.Google is tough competition in mobile advertising, since acquiring AdMob, a mobile advertising firm, in 2009 for $750 million. Nokia's mapping unit, which grew sales 23% to €232 million ($335 million) in the first quarter, represents 2% of Nokia's total revenue and operates at a loss.
Since 2009 Navteq has spearheaded a location-based mobile advertising service called LocationPoint, which delivers advertising via icons on Navteq's maps, mobile applications and other methods. Navteq has already struck several deals to expand its network, including inking Samsung Electronics Co. and Research in Motion Ltd., maker of Blackberry, as publishers, where it can serve ads. It has also signed Poynt Corp. and Telmap Ltd., which make smartphone applications that connect users to local businesses. Navteq also launched its LocationPoint service in South Africa and China. Nokia says these efforts will continue under its new business unit.
The key to mobile advertising, Mr. Rothey said, is to know what's around people, citing that Navteq has collected globally roughly 57 million points of interest such as restaurants, stores, gas stations. With that information, the company can serve a coupon or another type of ad to a person's phone for a store nearby, for example. With one button users can map a route to the business, call it or save the location, and the company then tracks such information for its advertising customers.
The challenge, analysts say, is that advertisers aren't interested, unless companies present them with a sizable, but also local audience within a short distance of the business. That means the more phones they can serve ads to, the more money they make.
Navteq's advertising network can reach over 150 million consumers globally. Mr. Rothey cites not just Microsoft smartphones, but also its Xbox franchise and its other online properties as potential areas where location-based ads could be placed.
There are indications that the company is making progress in mobile advertising. Nokia's mobile advertising click-through rates, a measure of success, are higher than the industry average. According to Inneractive, a mobile ad analytics firm, the click through rate on Nokia handsets was 3.32% compared to an average of 1.88% in May.
Write to Christopher Lawton at christopher.lawton@wsj.com