Government: Part of solution or the problem?
NEW YORK (Reuters) - A new U.S. administration is shaking up policies running from the environment to taxes, drawing kudos from major companies like Verizon (VZ.N) and Corning (GLW.N) but worrying smaller ones like Symantec (SYMC.O) and Sybase (SY.N).
Industry chieftains at the Reuters Global Technology Summit in New York debated this week the impact of the Obama administration's tax policies, bailout, and government regulation and policing of business.
Some railed against attempts to chip away at the deficit by cracking down on offshore tax havens. Others say a heavy government hand will hurt competitiveness at a time hardware and software firms are slugging it out for a slice of a stagnant pie.
"The policies today are starting to make very little sense as it comes to business friendliness," said John Chen, chief executive of database software company Sybase (SY.N). "The government is getting so deep into operational details of the financial institutions."
Chen blasted potential legislation that may raise taxes on foreign earnings. The administration also seeks to crack down on offshore practices by treating certain U.S. companies in tax havens abroad as domestic corporations, taxed on their income -- a measure that will likely raise costs.
"The increase in tax rate ..., worldwide tax, that actually weakens the U.S. That's a huge concern."
Enrique Salem, chief executive of software security company Symantec, echoed that concern.
"I don't believe taxing foreign profits is the right way to go," Salem said of the plan, which would hit his bottom line. "It doesn't help the competitiveness of the United States."
HELP US
Others, however, welcomed government interference, calling it essential to galvanizing growth as the United States grapples with its worst recession in decades.
IBM (IBM.N) Chief Financial Officer Mark Loughridge said he was making no predictions but declared that $3 trillion of stimulus around the world has to make a difference.
"I would think that would start to ... return us to a more stable environment," he told Reuters.
Others pointed to policies that would benefit the segment in which they operate. Verizon (VZ.N) Chief Financial Officer John Killian said his company's cash flows will benefit from an extension into 2009 of a special tax depreciation allowance: a tax break that flows to its bottom line.
"That ... (incentivizes) businesses to continue to invest in their networks," he said.
Corning got really specific. As the car market tanked, so did the market for the catalytic converters that tamp down noxious exhaust fumes. Corning, which makes the guts of these devices, saw its order book shrivel.
Corning Chief Financial Officer Jim Flaws was encouraged by new regulations requiring catalytic converters for the diesel engines of off-road vehicles like tractors and construction vehicles, starting in 2011.
"Emission laws have been very favorable to us and created a great business, and continue to do so," he said. "Regulation helps us."
The government is also taking a tougher stance on antitrust actions, versus the more hands-off approach of the last administration.
This month, Justice Department antitrust chief Christine Varney said authorities were ready to ramp up enforcement. Her comments came days before the European Commission hit Intel (INTC.O) with a record 1.06 billion euro fine for competing unfairly against Advanced Micro Devices (AMD.N).
AMD Chief Executive Dirk Meyer said he expected no "light switch" effect on his business. But Nvidia (NVDA.O) lashed out at Intel, which makes 80 percent of the world's processors.
CEO Jen-Hsun Huang lashed out at Intel's pricing policies. Nvidia pairs Intel's Atom chip with one of its graphics chips, but Huang said Intel charges him $45 for an individual Atom, but only $25 for a three-chip Atom set.
"That seems pretty unfair," he said. "We ought to be able to compete and serve that market."
(Reporting by David Lawsky; Editing by Edwin Chan)
