Bershidsky on Europe: Eurosceptics and an Adidas Warning
Here's today's look at some of the top stories on markets and politics in Europe:
Eurosceptic party likely to win seats in German parliament
The Alternative fuer Deutschland party, a new political force that favors kicking deeply indebted southern Eureopan nations out of the eurozone, is probably going to get into the Bundestag in the coming Sunday's general election, according to a recent poll. The INSA polling organization showed AfD getting more than the 5 percent of the vote required to win seats. Other polls put it just below the 5 percent mark. Chancellor Angela Merkel's coalition partners, the Free Democrats, are also in the gray area, unsure of a place in parliament. With Merkel's Christian Democrats poised to remain the largest party in the Bundestag but without an outright majority, the question is what coalition it will be able to form. At this point, a "grand coalition" with the second most popular party, the Social Democrats, is highly likely because the eurosceptics are taking away votes from the Free Democrats. Paradoxically, the AfD's success may lead to a more pro-European government than the current one.
Nokia chief to get big payout as he moves back to Miscrosoft
Outgoing Chief Executive Stephen Elop will get $25.4 million as a parting gift, 30 percent of it from Nokia and the rest from Microsoft. The package includes Elop's salary for the rest of his contract and issue equity compensation of $19.8 million. It is fitting that Microsoft has agreed to pay a lion's share of the compensation. A former Microsoft employee, Elop first committed the Finnish company to the production of Windows smartphones and then engineered the sale of its mobile phone business to Microsoft. The Redmond, Washington, company is now bringing him over to manage the new division. On the one hand, the payout reinforces suspicions -- shared by Finnish government officials -- that Elop was Microsoft's "Trojan horse" from the start. On the other hand, Windows Phone is an unpopular operating system and Nokia's handset business is a deeply troubled enterprise, so the sweetener may be a way to encourage Elop to do his best with it.
Air France KLM mulls Alitalia acquisition
The Franco-Dutch airline is considering a takeover of the Italian flag carrier, Alitalia, when the consortium that saved it from bankruptcy in 2008 is allowed to sell its shares in October. Its board of directors may decide on the plan next week. The consortium consists of companies whose primary business has nothing to do with aviation: a bank, a highway operator and a diversified industrial holding, and Alitalia has not fared well under its ownership: 2013 will be its sixth loss-making year in a row, and it may run out of cash by the end of the year. Air France KLM itself is in the midst of a restructuring program that includes drastic cost cuts, but at least it has a vision of what needs to be done to save a traditional airline. Interest from Air France KLM would be welcome news both to the investors and to Alitalia itself, but not to many of its staff, if the massive layoffs at AirFrance are any indication.
Adidas issues profit warning
Germany's Adidas, the world's second biggest sportswear manufacturer after Nike, warned investors they should expect a dividend payout of no more than $1.15 billion for 2013, down from the previous minimum estimate of $1.2 billion. The company, whose Adidas and Reebok brands are strong in Russia, Brazil, Argentina and Turkey, is suffering from the weakening of emerging-markets currencies and a slowdown in the golf market. Besides, the company is having difficulty moving to a new distribution facility near Moscow and has to lower its Russian sales projections. It is commonly thought that globalization is the best cure for European companies facing lower demand at home, but Adidas's troubles highlight the pitfalls of global expansion. The company, however, is still in great shape financially and in terms of sales: It is just that investors' expectations may have been too high.
France calls for EU regulation of U.S. Internet companies
France is calling on the European Commission to work out rules for Internet companies to ensure the profits they make in Europe are taxed in the EU. That would mean, in effect, taxing international data flow. French Technology Minister Fleur Pellerin, who is behind the proposals, also wants the EU to decree that digital entities like e-books and user profiles contained within closed ecosystems like Google's, Apple's and Amazon's be made transferable between systems. That, according to Pellerin, would help European companies compete with U.S. Internet giants. The plan, however, is not likely to be adopted by Brussels: It looks too much like an extortion attempt victimizing successful companies that won market share in Europe without any help from the local regulators.
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To contact the author on this story:
Leonid Bershidsky at email@example.com