Possibilities Shrouded in Silence
Muhammad is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Procter & Gamble (NYSE: PG) has become an introvert. Regardless of the fact that this player secures a domineering position in the mainstream industry, it has since resorted to unusual silence. Since the fall of May and the rise of June, the only shred of upstream news that seems to be circling the internet and other media powerhouses is the Rajat Gupta case. Nonetheless, its silence speaks more than you can imagine. That is why I call it tactful silence.
Of Rajat Gupta and Confidentiality Concerns
Rajat Gupta, a former director at Goldman Sachs (NYSE: GS) and Procter & Gamble, is at the mercy of a judicial system that is known to show no clemency towards persons void of integrity. Raj Rajaratnam knows the story all too well. The hedge fund manager was convicted on charges of insider-trading. Rajaratnam was sentenced to a lengthy 11 years behind bars.
Rajat Gupta is, therefore, pretty shaken up especially after considering that his alleged crimes are tied to Rajaratnam. He is fully aware of the magnitude of his alleged crime. Although lawyers are in his full defense, I am not quite sure that Procter & Gamble together with Goldman Sachs rally the same spirit. Let the silence not fool you. In the actual sense, the silence speaks tones. Linguists have actually coined a name for it- nonverbal cues, I suppose.
In my opinion, I believe that Procter’s silence on the matter is inclined towards tact. It shows that Procter & Gamble knows how to work its way around the judicial system and elusively press for its desires. After all, Rajat Gupta allegedly leaked corporate secrets and if guilty, could impose a lot of harm to Procter & Gamble.
By keeping mum on the issue, it facilitates the frictionless flow of court procedures and enhances the chances of truthful convictions and persecutions.
With the current twist of events in the global economy, players have to bolster operations. It is obligatory to streamline operations and focus on the long term. Procter & Gamble is doing exactly this. Jon Moeller, the chief financial officer, late last month made it clear that Procter & Gamble would set its focus on its core lines of business come next fiscal year. He further exclaimed that no more money would be pumped into growth initiatives citing that Procter was overzealous in doing so.
Spending in the upcoming fiscal year will be predominantly directed towards forty of its largest business lines. This means that most spending will exhibit a slant towards China and North America come next fiscal year. Apparently, investors had urged Procter & Gamble, sometime back, to put a leash on its current expansion into emerging markets and focus on its primary business lines. In a way, Procter & Gamble has heeded investors’ call.
In person, I believe that the prospects couldn’t get any better. First of all, P&G has left investors smiling. Investors play a crucial role in determining the direction of growth and as such should be treated with importance. P&G has done this. Therefore, tranquility will prevail within its borders.
When it comes to China and North America, the strategy couldn’t be anything less than incredible. By focusing on core areas of business, operations are streamlined and risk is snuffed out. This is particularly crucial with the current ripples in the world economy. Emerging markets are not too promising as hard economic times typically tend to shrink the consumer market in developed countries. This unpredictability is actually the main risk and if not handled the way it has been handled right now, can lead to losses in the excess of billions.
Focusing on China, prospects seem to be revived as P&G CEO, Robert McDonald, has been elected chair of U.S.-China Business Council. Of course, the council doesn’t bear reservations for bias. Nonetheless, Procter & Gamble will still benefit from McDonald’s appointment. McDonald being a high ranking member of the council will definitely attract prying eyes into his backyard. Procter & Gamble will therefore receive a lot of attention from China. This is more than beneficial as China happens to be one of P&G’s most rewarding markets.
As a round up, I would say that streamlining operations coupled with the McDonald appointment in China are close to sure signs of prosperity in the future. The silence is merely a transition.
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