News Scan

Noteworthy

SAP, Microsoft To Release Joint Product

Microsoft Corp. and SAP AG -- the world's biggest independent software company and the world's largest provider of enterprise resource planning (ERP) systems, respectively -- announced that they will release a joint offering in the fourth quarter of 2005. The product, code named "Mendocino," will integrate Microsoft's popular Office suite with select data and functions within SAP's enterprise software. Users will be able to access corporate data via extended application menus and a "smart panel" within the Office work environment to perform tasks such as time management, budget monitoring, and T&E management.

Mark Smith, CEO and senior vice president of research with Ventana Research, says CFOs should note that the new product will offer only limited finance functionality. While the enhancements provided by Mendocino "can provide tighter integration of applications and technologies and easier access to information, they will not directly address financial processes for consolidation, budgeting and planning, reporting, compliance, and performance management," he reports.

More than 46,000 SAP installations worldwide run on Microsoft's Windows platform. While the two companies have a strategic relationship stretching back more than a decade, Mendocino will be their first jointly designed and developed application. Pricing for the new product had not been announced at press time.

Companies Turn Tight-Lipped on Earnings

Since The Coca-Cola Co. announced in December 2002 that it would no longer issue quarterly or annual earnings guidance, the roll call of companies that have done the same has grown substantially to include McDonald's, AT&T, Sun Microsystems, and Mattel. Though Coke made a one-time exception to its policy in September of last year, the trend away from offering earnings-per-share projections shows no signs of abating.

In the first quarter of this year, the National Investor Relations Institute (NIRI), a Vienna, Va.-based profession-al association of corporate officers and investor relations consultants, surveyed 527 of its corporate members to investigate their earnings guidance practices. Seventy-one percent of respondents said that their organization provides guidance, down from 77 percent in a comparable NIRI study in December 2003.

Among companies that do provide guidance, the study revealed a significant shift away from quarterly updates in favor of annual projections. The proportion of companies issuing only quarterly guidance fell from 53 percent in 2003 to 28 percent in this year's survey; the percentage of those providing only annual guidance rose to 28 percent from 16 percent in 2003. When asked if their company was considering discontinuing earnings guidance, 36 percent of respondents in 2005 answered yes, up from 19 percent in the earlier survey.

"In spite of a decline in the number of companies providing earnings guidance, a strong majority of companies still believe analysts and investors need some direction from the company to avoid increased stock price volatility," notes Louis M. Thompson, NIRI's president and CEO. "These results also say that a majority believe annualized guidance is increasingly important, whether or not they issue quarterly guidance."

Banks Moving to "Green" Lending

JPMorgan Chase & Co. announced in April that it has adopted a comprehensive environmental policy that includes the Equator Principles, an internationally recognized set of voluntary guidelines for financial institutions' project funding practices. The bank's private equity divisions will conduct an environmental review as part of their investment decision process for companies in environmentally sensitive industries. The move follows discussions with Rainforest Action Network and a group of JPMorgan shareholders that includes Christian Brothers Investment Services, Friends of the Earth and Trillium Asset Management.

Companies in a range of industries including mining, energy and forestry may find capital funding increasingly elusive in the next few years as more and more banks adopt "green" lending policies. Thirty banks worldwide have adopted the Equator Principles, including the Netherlands' ABN AMRO Bank N.V.; Britain's Barclays plc; and, in the United States, Citigroup and Bank of America. Toronto-based Scotiabank adopted the guidelines in January.