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Job Creation & Investment Hot Topics at CEO Summit

16 December 2010 - Markets - Editor

In an effort to help the United States to 'climb out of recession', President Barack Obama held a 'CEO Summit' on Wednesday. The meeting, which lasted a number of hours, was attended by the CEOs of twenty companies with significant clout which are reportedly holding cash reserves adding up to around $1 trillion. Topics on the agenda included issues such as education, trade and regulation, with the main focus on getting said cash reserves flowing into the economy primarily through job creation and investment.

Among the companies being called upon by the President to participate in a shared agenda with the focus of moving the US economy forward, were Cisco Systems ($39.9 billion in reserve), Microsoft ($36.8 billion), Google (30.1 billion), Oracle ($23.6 billion), Ford ($21.9 billion), Pfizer ($19.3 billion), Johnson & Johnson ($18.9 billion), Intel ($18.3 billion), Hewlett-Packard ($14.7 billion), Amgen ($14.5 billion), Exxon Mobil ($13.3 billion), General Electric ($12.9 billion), Dell ($12.4 billion), IBM ($12.2 billion), Wal-Mart ($10.2 billion), Coca-Cola ($10.2 billion), Merck ($9.9 billion), Chevron ($9.4 billion), News Corp ($8.7 billion), and Boeing ($8.7 billion).

Speculation is rife as to how companies will utilize their cash reserves, with rumors of mergers and acquisitions in the air, and possibilities of increased dividend payments making investors sit up and take note. Surveys taken by analytics specialist Dealogic, indicate a marked increase in mergers and acquisitions in the third quarter of 2010 as compared with the same period in 2009 – a 68 percent increase in fact. While takeover bids on American Companies more than doubled, hitting a figure of $255 billion. At this stage the sectors most affected by this activity have been the technology sector, pharmaceutical sector, energy sector and consumer product sector. However, analysts agree that this could spread to other sectors as the economy moves forward. While speculation may be based on conjecture and guesswork, there is some agreement among experts that the pharmaceutical sector is worth focusing on, while the tech sector is assured of ongoing support.

Other options for companies to use cash reserves would be to engage in buybacks, repurchasing their own shares and thereby increasing earnings per share due to a reduction in outstanding shares on the open market, or boosting dividend payouts to shareholders. Both these strategies would not achieve the desired result of job creation and directing funds into the beleaguered economy. It remains to be seen whether the goals set out by President Obama will be attained.

 


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