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BUSINESS/BIZ WATCH | MARCH 16, 1998 VOL. 151 NO. 11 |
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Biz Watch By THOMAS K. GROSE AND NINA PLANCK SELLING POPULATION CONTROL IN CHINA Sometimes recognizing an opportunity is a no-brainer. A match between the makers of Durex, the world's best-selling condom brand, and the 1.2 billion Chinese market seems destined to prosper. Though half the world's vasectomies are performed in China, which has a stringent one-child-per-family policy, condoms are increasingly attractive as pre-marital sex becomes more common and awareness about sexually transmitted diseases grows. These social changes, plus rising consumer affluence and a swelling urban population, make China the second-largest condom market and one of the fastest-growing. London International Group and Qingdao Latex Company spent two years negotiating a $7 million joint venture to produce, distribute and sell China's first commercially marketed condoms, starting with 144 million per year. China's state-run United Rubber Corp. produces 1.25 billion condoms a year, but quality is poor and marketing nonexistent--condoms are distributed free, but only to married couples. The new Sino-British venture will sell the product to everyone in drug stores with modern advertising. Not only shareholders, but also state planners, will wish them well. TECH STOCKS CATCH A BUG FROM INTEL Last week's news must have wiped the smile off Intel Chairman Andy Grove's face. His company, which supplies microchips for 85% of the world's computers, issued an unexpected warning of lower profits. After Intel's sneeze, stock markets from Hong Kong to London to New York got sick, and most high-tech stocks were infected. Because Intel is the world's dominant chipmaker, its results are considered a harbinger for the entire personal-computer industry. The technology sector had absorbed several bruising market sessions since the Asian economic crisis in October created worries that falling consumer demand along the Pacific Rim would depress PC sales. But technology shares rebounded and helped propel world markets to new highs in the last month. Intel's alert has now erased much of that confidence. Intel said its first-quarter revenues would total about $5.9 billion--down 10% from the same period last year. It had been predicting a slight revenue increase for the quarter. Initially, the company's stock fell to 75 5/8, a drop of 10 3/16, while the Dow Jones Industrial Average fell 94.91 points and the tech-heavy Nasdaq fell 47.78 points, its third worst day ever. By week's end, however, Intel's stock had reached 78 1/8 at close. It's possible that demand for PCs will remain healthy--the industry still forecasts growth of 12% to 15% this year. But Intel faces tougher competition in the "sub-$1,000" segment of the computer market, where it doesn't enjoy such a commanding position and must sell cheaper chips. To become a bigger force in that business, Intel introduced its new low-cost Celeron chip. If that product doesn't catch on quickly, then the outlook for Intel shares--and technology stocks in general--could continue to be less than chipper. IS IT REAL? LOOK FOR THE SIGNATURE Would a diamond by any other name shine as bright? Not in the minds of the people at De Beers, the South African mining giant that dominates the market for the precious stone. Apparently wishing to amend its famous slogan to suggest that only a De Beers diamond is forever, the group developed technology to inscribe a tiny brand name and a security number on the flat top of a gem. The idea is to help consumers guard against buying non-De Beers diamonds or--God forbid--synthetic gems. Invisible to the eye, even when aided by a jeweler's loupe, the inscription will be legible only with a patented reading tool. The signatures will be test-marketed in Manchester, England this June. The plan may be less a consumer-protection scheme than a gimmick to help boost business. De Beers' profits slipped 9% last year when brisk sales in the U.S. didn't make up for a decline in recession-plagued Asia. The savvy cartel responded to sluggish demand in the time-honored manner: it reduced diamond supplies at its London sales. De Beers noted that the diamond industry was "appreciative" of the reduced supply, which would continue until "market conditions improve." Any economist would agree that control of supply has more impact on price than a brand name.
ON-LINE MARKETS Revenues from Internet shopping are expected to rise sharply (projections in millions)
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2002 Source: Datamonitor
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