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|The lowly computer a victim of modernity|
Article Date: November 03, 2008
What is a computer? Difficult question. Processing power has become
so abundant that running shoes now calculate distances jogged, cars tell
drivers where to turn, while unsupervised robots can trim a garden's
technological idyll does not bode well for makers of computers. Apple,
designer of TV boxes and iPhones, does not even refer to itself as a
computer manufacturer any more.
That, for the past five years, has made PCs mostly low-margin commodity items, as selling prices have come down. It also left laptops as the main source for PC makers' growth and profits.
laptops, too, are now under attack. The rise of low-specification
netbooks - small, cheap and designed mainly for web surfing - has
exploded since Taiwan's Asustek Computer launched its Eee PC and sold
350,000 of them in the fourth quarter of 2007.
When price becomes the dominant feature of any competitive market, profits do not last long. Because of this, asking computer manufacturers what they actually make becomes a rather more existential problem.
In one bound it was free - although at a price.
Unlike Royal Bank of Scotland, Lloyds TSB and HBOS, Barclays has avoided the UK government's bank recapitalisation programme.
Yet it is paying well over the odds for the £7.3bn (Dh43.3 bn) it is raising in the race to raise its capital ratios.
whereas its peers pay 12 per cent on the government's preference shares
and can redeem them at any time, Barclays is locked into paying 14 per
cent until 2019 on the £3bn of securities issued to Qatar Holding and
Abu Dhabi's Shaikh Mansour Bin Zayed Al Nahyan, Minister of Presidential
Then there is £4.3bn of convertible notes which have to convert by June. These carry a 9.75 per cent coupon. Including fees and commissions, the overall cost to Barclays of this quasi-equity will top 16 per cent in the first year, Collins Stewart estimates.
This is a heavy price to pay for "self-determination", as Barclays describes its actions. It would prefer expensive money from supportive strategic shareholders than to have to swallow government diktats about executive pay and bank policy.
John Varley, chief executive, hints that avoiding such circumscriptions gives the bank more flexibility to resume paying its dividend; the implication is that it can begin payouts again sooner than its partly nationalised peers.
Yet if Barclays thinks having this freedom enhances its investment case, it had better think again. Investors have already made up their minds.The 18 per cent fall in Barclays' share price yesterday signals that, in its quest to go it alone, it has already given away far too much.