Technology upgrade needed to stay competitive

M'sia must catch up technologically to stay competitive in E&E sector

By EUGENE MAHALINGAM
eugenicz@thestar.com.my

PETALING JAYA: Malaysia needs to step up its pace technologically if it wants to remain competitive in the electrical & electronics (E&E) sector, according to a report by RAM Rating Services Sdn Bhd.

“Malaysia must catch up technologically to compete against players that are higher up in the value chain, as reliance on lower-end operations will keep the local E&E industry in a vulnerable position.

“In this regard, we believe that investments, which are picking up again industry-wide to revitalise earlier plans halted amid the crisis and expand into new technologies, will enable local E&E players to tap new businesses,” RAM said.

The rating agency also noted that the Government’s efforts to boost the local E&E sector, such as the development of training centres and academic programmes, as well as focus incentives towards strategic segments of the value chain such as design testing and precision machining, were steps in the right direction.

“Nevertheless, it remains to be seen whether these initiatives are sufficient for the sector to leap to the next level,” RAM said.

According to the rating agency, the E&E industry is characterised by the need for continuous capital investments as well as technology upgrades.

“E&E players are required to continually develop new features and capabilities, which require them to also attract and retain developmental talent. As such, technological capabilities and the ability to be ahead of rapid technological changes are key to the success of E&E players.” it said.

It said those that were highly skilled in technology would have a competitive edge, thus making it easier for them to maintain their market positions.

RAM also said having a wide product mix would reduce the exposure of E&E players to just a single market.
“A broader and more diversified clientele also adds strength to a company as it would then be less vulnerable to the loss of any single key customer.

“In addition, more extensive geographical coverage is viewed positively as this would reduce the company’s vulnerability to economic cycles in a particular country.”

The rating agency also said that the competitiveness of an E&E company was underpinned by its operational efficiency.

“Cost structure is important for E&E companies because of pricing pressures, particularly from other emerging economies like China,” RAM said, adding that constant cost-reduction initiatives could offset such pressures.

“Improved operating efficiencies can be derived from cost-efficiency drivers such as economies of scale, mechanised operations or localised benefits, such as easy access to raw materials as well as cheap and skilled labour.”

RAM said the competitiveness of local E&E players had been diminishing when compared with regional counterparts in more technologically advanced economies and countries with lower production costs.

“Malaysia’s overall market share in the global E&E industry has been sliding amid intensifying competition, with the main threat being China’s booming E&E industry.

RAM highlighted that China had evolved into the world’s largest producer of consumer electronics, with exports charting a compound annual growth rate (CAGR) of 28% from 1998 to 2008, compared with Malaysia’s CAGR of 6% during the same period.

“Furthermore, China’s exports of industrial electronics show a CAGR of some 31% from 1998 to 2008, compared with Malaysia’s 8%.”

RAM said the local E&E segment also faced a shortage of skilled personnel, such as software and design engineers, which could hinder the industry’s long-term growth and competitiveness. “Additionally, the E&E industry in other emerging economies, such as Vietnam, are picking up fairly quickly.”

The rating agency also said there was a notable “technological gap” between Malaysia and countries such as Taiwan and Singapore, especially within the electronic components segment.

Jho Low, love him or hate him

ON THE BEAT WITH WONG CHUN WAI

Malaysians, and the world, will continue to hear about Low Taek Jho if his present flamboyant lifestyle continues.

Low: Wants to bring his Hollywood friends to visit Malaysia to promote the country.

US$1m before graduation -On the best stocks he had invested in, Mr Low said 'at the end of the day, it was all about returns and diversification'. -- PHOTO: THE STAR

LET’S admit it – a lot of us would like to be in the shoes of businessman Jho Low. He is flush with cash, parties with Hollywood celebrities and rubs shoulders with the most influential and powerful.

You either love or loathe the 28-year-old businessman who has been dubbed the international mystery man by the world media for his parties with Paris Hilton and Megan Fox and his penchant for expensive champagne.

I had the opportunity to meet this chubby Penangite last week at his office in one of the top floors of Petronas Twin Towers.

He was more interested in talking about how he made his money, mostly in the Middle East, and his friendship with Arab princes who studied with him at Harrow, an English boarding school that has produced seven prime ministers, and the Wharton School of Business at the University of Pennsylvania.

I was more interested in asking him about his exploits, if the word is appropriate, with Paris Hilton and his Hollywood friends.

It was obvious that Low Taek Jho wanted to clear the many media stories, mostly fabricated, that had been reported about him.

He tried to play down the hefty bills for his champagne, his parties and the limousines at his New York apartment, which he said he shares with 11 others.

But I couldn’t help feeling that Low wanted to say that as a single, young man who has made millions, he has the right to be a party animal.

Never mind if he is using his own money – or that of his Arab friends. His lifestyle may be seen as excessive and a waste by others in conservative Malaysia.

Low, who described himself as a businessman and entrepreneur, makes his money by making money for his clients. That’s what people who handle funds do, and he has a portfolio of rich clients.

He puts deals together for businessmen and even governments, using his extensive networking and mostly friendships from his school and university days.

No one can dispute his link with powerful Arab figures like Yousef Al Otaiba, who is currently the ambassador for the UAE to the United States and Mexico.

He talked about certain Hollywood celebrities as if they are his drinking buddies, which they are.

When asked if he had invited Mick Jagger, the Rolling Stones legend, to watch the World Cup in South Africa, his reply was: “I didn’t. I invited Leonardo (Dicaprio) who in turn invited Mick Jagger.”

Are actor Daniel Craig, who plays James Bond, and multi-millionaire rapper Sean “P. Diddy” Combs his neighbours at his apartments?

His reply was: “I don’t know but I have been inside the lift with Sean Combs.”

He denied having any romantic links with Paris Hilton nor any interest in her sister Nicole, saying he was a family friend of the Hiltons and that he handled their investment portfolio.

Low talked of bringing his Hollywood friends to visit Malaysia to promote the country, saying these people had millions of followers on their Twitter.

“Can you imagine the impact they can create for tourism when they promote Malaysia on their Tweets with their millions of followers?”

That would certainly be cheaper than placing advertisements on billboards and in the media, particularly when the international media would also follow these celebrities here.

An advocate of the Blue Ocean Strategy, he has put that on his status message of his Blackberry.
He also sees West Asia and China as massive markets.

Low sees himself as a loyal Malaysian who wants to bring Arab investors to his country, including to Johor’s Iskandar Development project.

But he has also invited criticism with his new-found fame.

His detractors have questioned his credibility and integrity and there are unflattering comments about how he conducts himself and his business deals.

Some have said he is hardly the brilliant financial strategist he has made himself out to be, brushing him off as merely a good salesman. They were outraged by the media prominence accorded to him, including by this newspaper.

But many of these critics have also admitted that they do not know him personally but picked up the negative remarks from friends or friends of friends or the blogs.

His friends, including some powerful figures, say he does not need to open himself to these criticisms as he could choose to stay away. After all, New York and Abu Dhabi are his two working bases.

Malaysians, and the world, will continue to hear about him if his present flamboyant lifestyle continues. He will make good copy for the media.

Hate him or love him, he has attracted attention. This writer has received endless telephone calls from media and business people who want to know him personally, and they include those who hate his guts.

Interest rate hikes starting to help ringgit

Household consumption is watched even though rates rise has not affected debt repayment

WHEN Bank Negara raised interest rates for the third time this year earlier this month, expectations were that the ringgit would appreciate.

That, together with the removal of China’s yen peg to the US dollar, led to suggestions that the ringgit could regain some of the buoyancy in its value against the US dollar that had seen the local currency emerge as one of the best-performing currencies this year.

There was also the school of thought that suggested those domestic interest rate hikes had created a buffer between rates in Malaysia and elsewhere that might see the local currency becoming a carry trade currency.
While the ringgit is not yet seen as a carry trade currency, its slow ascendency against the US has been seen after the third rate hike earlier this month.

After interest rates were raised by 25 basis points to 2.75% in the July 8 meeting of the Monetary Policy Committee, the ringgit saw a brief spurt against the dollar but has since see-sawed in a narrow band.

But that has changed a wee bit as the ringgit has strengthened to its highest level this year as RM3.18 to the dollar yesterday.

That pattern of trade has somewhat broken away from the initial pattern seen after the yuan ended its peg against the US dollar last month.

After a surge, the Chinese currency has traded within a narrow band of between 6.77 and 6.78 to the dollar.
Notwithstanding the slow rise towards the year high for the local currency, the interest rates hikes in recent months, which the central bank says is a move towards normalisation, has led to money entering Malaysia.

While higher domestic rates might have been the main factor, another was the fact that selected Asian currencies were the flavour of the month, given the economic malaise in Europe and the sluggishness of the US economy.

In a response from Bank Negara to StarBizWeek, the central bank says portfolio capital flows were influenced by both domestic and external factors. Domestically, the impressive 10.1% GDP growth in the first quarter of the year, talk of a stronger economy and the transformation of Malaysia into a high-income economy have whet the appetite of investors.

The central bank said in the first quarter of 2010, portfolio inflows amounted to US$3.4bil, a healthy gain from the US$1.4bil in the fourth quarter of 2009.

“Nevertheless, the pace of portfolio flows in recent months has been relatively modest, given the volatility arising from the European sovereign debt crisis and the lingering concerns over the global economic recovery,” says Bank Negara.

“Overall, the flows have been manageable and well-intermediated by the financial system.”

Bank Negara points out that because of the strength and depth of the domestic financial system, inflows are more effectively intermediated without causing undue risk to the economy.

It cites the fact that the ringgit bond market is one of the largest in this region, with a size of 94.1% of GDP.
Furthermore, the country’s Islamic bond market is also deeper than other markets, with the highest number of sukuk issuances recorded this year thus far.

“At the same time, Bank Negara has developed a robust surveillance system that enables us to monitor capital flows on a near real-time basis and Bank Negara is equipped with a wide range of monetary instruments to sterilise these inflows,” says the central bank.

“Bank Negara’s policy is solely to maintain orderly market conditions while at the same time ensure that the ringgit is not misaligned from its fundamentals so that it will not contribute to the build-up of internal and external imbalances.”

Bank Negara adds that interest rate differentials is a determinant of capital flows, but it is not the only one.
“Some of the other factors include economic growth prospects, exchange rate expectations, anticipated returns in the equity market and other investments, as well as investor sentiments,” it says.

The central bank adds that the overnight policy rate of 2.75% was broadly in line with other regional interest rates and that there are many other countries that have higher official interest rates.

The official borrowing rates of Indonesia, the Philippines, China, India and Australia are 6.5%, 4%, 5.31%, 5.5% and 4.5% respectively.

A recent report by Morgan Stanley suggests that the interest rate hike might also have been used as a tool to attract foreign capital to bolster the country’s foreign exchange reserves, which have not kept pace with the rise seen in the reserves of Malaysia’s neighbours.

Foreign exchange reserves saw a drop in the middle of last year and has basically plateaued from the last quarter of 2009.

While the hikes would lead to more capital flowing in, which is welcomed, considering the quantum of the fall, the country is comfortable with the level of reserves as data for the middle of June says it is sufficient to finance eight months of retained imports and 4.4 times the short-term external debt.

The interest rates hike, however, is seen to have an influence on the real sector as a means to cap skyrocketing property prices.

“One of the major assets facing some strong pressure has been the property market,” says RAM Holdings group chief economist Dr Yeah Kim Leng.

“We needed a tightening to prevent a further build-up in those asset prices.”

The effectiveness of a 75-basis-point rise in interest rates might not quell speculation on properties but with the household sector debt now at 76.6% of GDP, higher repayments for debt taken to buy cars, houses and for other consumption needs would bite into private consumption.

Yeah says the rate hike was a move towards a balance between consumption and savings.

The rise in household debt to GDP was partly due to the contraction of GDP of 1.7% in 2009 but authorities are confident that the financial asset side of the ledger remained sound as financial assets to debt was 2.44 times.

The ratio and growing affluence of households has allowed for increased access to financing and with gross non-performing loan ratio for household remaining low at 2.7% at the end of April 2010, over extension of debt might not be a problem just yet.

By JAGDEV SINGH SIDHU

jagdev@thestar.com.my

Tips on how to get loans

Banks tell how they rate credit worthiness of an application

EVERY year, the SMI Association of Malaysia receives complaints from its members about the difficulties of securing credit.

President Chua Tiam Wee says while companies with good track records do not face a major issue in this area, start-up companies and those with less-than-rosy track records continue to have doors shut on them.

Wee suggests two solutions. The first is his call on banks to evaluate the applications of small and medium enterprises (SMEs) carefully and to try to understand the nature of their business and industry.

The second is a call to empower SME Bank to collect deposits, along the lines of a commercial bank.
“This may then help the bank to increase lending to SMEs,” he says.

Chua says SME Bank currently relies on Government funding and its paid-up capital of about RM1.35bil is very small.

How does a bank rate the credit worthiness of an application?

AmBank (M) Bhd retail banking managing director Datuk Mohamed Azmi Mahmood says banks would generally assess five credit factors of an applicant.

These are character, capacity, capital, condition and collateral.

Azmi says character refers to the borrowers’ “willingness” to repay while capacity refers to their ability to generate adequate cashflow to repay the loan.

The remaining three factors – capital, condition and collateral – can be mitigated or compensated by the favourable economic climate and government-guaranteed schemes such as those under Credit Guarantee Corp (M) Bhd (CGC) and Syarikat Jaminan Pembiayaan Perniagaan Bhd, he says.

Azmi says borrowers must show good character, management competency and ability to repay existing loan obligations and other creditors.

“The lack of credit history for those applying for bank loans for the first time can be mitigated and compensated by relevant supporting documents such as updated financial accounts, bank statements and letter of award,” he says.

He says it is important that SMEs maintain proper book keeping to ensure that these documents are available when required, especially their audited financial accounts. “Loan applications from sectors or industries that the Government is promoting will also have a better chance of having their applications approved,” Azmi says.

He says SME loans make up a fourth of AmBank’s loan portfolio to corporates and enterprises last year.
Hong Leong Bank Bhd group managing director Yvonne Chia says loan applications that show good repayment capacity, acceptable business risks and account performance track records will be considered favourably.

She says financial assistance to SMEs comprised 40% of Hong Leong Bank’s business banking portfolio as at March 2010.

Meanwhile, HSBC Bank Malaysia Bhd deputy managing director (commercial banking and director sales) Thomas Varughese says one of the main reasons to reject an application is the lack of financial information that can show the sustainability or viability of a business.

For instance, he says, many SMEs do not pay enough attention to managing their financial position to portray a picture of success, or to show evidence of business continuity.

This makes it difficult to approve the application, Varughese says.

“Poor credit history of the SMEs, including that of its directors and/or guarantors is another issue,” he says.

Varughese says if the SMEs or their associated directors or guarantors have exhibited poor credit history, which is shown in missing payments on their existing loans including personal loans and credit cards, this will give a negative impression on the overall credit assessment.

To secure a loan, he says, SMEs should have a detailed business plan that explains why the loan is needed in the first place.

“It will also be helpful to provide information about the business (company or management profile), nature of the business and financial statements or accounts for at least the last two to three years,” he says.

Varughese says the provision of well-thought-through cashflow statements can also provide further evidence for the need for the financial assistance, adding that SMEs may visit HSBC website for guidance on how to apply for loans.

He says that as of last year, more than 22% of HSBC’s loan portfolio is SMEs loans.

Varughese says the bank is not keen to finance businesses that may be considered as unsustainable or destructive to the environment.

“At HSBC, we believe that being a sustainable business is not only about delivering profitable long-term growth, but also about maintaining a stable environment and building healthy, educated communities,” he says.

 By LEE KIAN SEONG  
lks@thestar.com.my

Jho Low’s interview captures world attention, Paris `not paid to party` with mystery billionaire, Bringing Hollywood to Malaysian shores

Jho Low’s interview captures world attention

'Penangites have a tremendous ability to succeed" - Lim Guan Eng, CM

  

Jho Low

PETALING JAYA: The world exclusive on Jho Low by The Star has caught the attention of the global media.

Gawker, an American website based in New York City, carried the interview of Low with The Star on its story “Paris Hilton’s mysterious Malaysian party boy tells all”.

The website reported that according to news, Low was paying US$1mil (RM3.18mil) to hang out with her in St Tropez but he told The Star he knew Paris primarily through her parents, whom he had met through his good friend.

The website picked up Low’s explanation on rumours of him renting an apartment in Park Imperial as well as Paris and her sister Nikki accompanying him to St Tropez.

The Newkerala.com, based in India, published the story on Low with the headline “Paris Hilton is just part of group, says Malay­sian businessman”.

The website reported that Low spent a long time in the interview dismissing talk that he was “wasting a lot of money partying”.

A Singapore website asianone.com published the interview with the headline “Paris Hilton’s Malaysian tycoon made his 1st million at 20”. 

Singapore’s The Straits Times, in its headline “US$1m before graduation”, also summarised the stories published in The Star.

Local dailies as well as news portals and television stations also picked up the interview. Petaling Jaya-based portal Malaysian Mirror headlined its lead story, “Big spender Jho Low speaks up”.

A day after the interview was published, the 28-year-old multilingual Penangite Low continued to get media attention.

New York Post in its story “Paris parties with Jho Low for free”, reported that Hilton denied she had been paid US$1mil to party with Low in St Tropez. Its website quoted a Hilton representative as saying that they were just friends and that Low had invited Paris and her sister Nicky out as friends.

Penang Chief Minister Lim Guan Eng is proud to note the accomplishments of Penangites who are based overseas, including the “well-connected” Low.

“Low is among many Penangites who have excelled internationally. This augurs well for the state as Penangites have shown they have a tremendous ability to succeed when given the necessary opportunities,” he said after opening the three-day National ICT Asso­ciation of Malaysia trade fair at the Penang International Sports Arena here.

Paris `not paid to party` with mystery billionaire

Paris Hilton pays a visit to the Late Show with David Letterman to present the 'Top 10 List'. Ed Sullivan Theater stage door in New York City. - Johns PkI / Splash News

By Daniela Elser Jul 30, 2010, 19:43 GMT

There is no truth to reports Paris Hilton was paid $1 million to party with a mysterious billionaire in the South of France, the New York Post reveals.

The heiress supposedly received the seven figure payday for whooping it up with Malaysian Jho Low in St Tropez. Rumour circulated that she was hired to lounge topless on his yacht and spray him with champagne at the exclusive club, Les Caves du Roy.

A spokesperson for the 29-year-old has baulked at the suggestion, saying, 'They are friends. Jho has invited Paris and her sister, Nicky, out to St. Tropez as friends. He has not paid her in any way, although he is extremely generous.'

Hilton has been enjoying a break on the Mediterranean.

Bringing Hollywood to Malaysian shores

KUALA LUMPUR: Making Hollywood movies in Malaysia is an important part of Jho Low’s plans to help attract investments to the country.

In an interview, Low tells of how he was getting his Hollywood friends like Academy Award winner Jamie Foxx and Leonardo diCaprio to use Malaysia as a location for movies.

DiCaprio: Among Low’s Hollywood friends who are interested in using Malaysia as a location for their future movies.

 

“They are very interested. It will have a tremendous impact on our tourism profile when this happens,” he said.

Low’s own entertainment company could be investing in such movies as they plan to set up a special entertainment fund that will invest in ventures from fashion to movies.

He also tells of another superstar friend – Usher – who wants to help him start a charity programme for children here to learn the business part of the entertainment industry.

Q: Where does the Wynton Group go from here?

A: Since I am now in the limelight, we expect to launch our new fund sometime in October. Firstly, there is an initial US$1bil real estate and hospitality fund, mainly for investing in real estate, hotels and hospitality projects around the world.
Secondly, we are also looking to launch a US$250mil entertainment fund because we believe there is some synergy between real estate and entertainment.

Q: Are we talking about movies, music or the whole spectrum?

A: The whole spectrum. So anything from fashion to movies and so forth. Lastly, we are also looking into a US$250mil general fund. When I mention all these fund sizes, it is initial first phase equity commitment that we are securing which means that actual fund sizes and purchasing power could be much larger.
An equity of US$1bil could have a potential purchasing power in excess of US$2bil or more after leverage. Coupled with this, our new headquarters will be based in Abu Dhabi and we have committed to 20,000sq ft in Sowwah Island in Abu Dhabi.
We are excited at the growth proposition of Abu Dhabi as a financial hub for the Middle East.

Q: Where is this fund set up?
A: It’s Cayman-based with a fund manager potentially based in either Abu Dhabi or the Caymans.

Q: What is this about you and Usher?
A: I have known Usher for a long time. I met him in New York and I was working with him on Usher’s New Look Foundation which is a charity that assists children who want careers in the business side of the entertainment industry.
I mentor these kids in terms of giving advise on writing business plans, which are things I learnt while at Wharton Business School. We have been talking for the last few months about bringing that programme to Malaysia.
Sometimes it appeals to the younger generation to get inspired by not business people but celebrities who have business acumen.

Q; Do you have a girlfriend?
A: Yes, my girlfriend is my work. Ask my friends and business partners and they will tell you that I sleep only three to four hours a day and I am always working. I love my work.

Q: A businessman once said that to find out where a business is based, all you have to do is to find out where the secretary is based. So, where is your secretary based?
A: My secretary travels with me everywhere I go. So I guess I am based all over the world, although my heart shall always be in Malaysia.

Related Stories:

Low dispels talk he received RM500mil airbase job - I'm not involved

The World's Most Valuable Brands

From Apple to Goldman Sachs, resilient brands can bounce back to be among the world's best.

In Pictures: The World's Most Valuable Brands

It will take more than a problem with antenna reception on the iPhone 4 to affect Apple's brand.

This is a company that has faced setbacks before and bounced back to become the world's most valuable brand--worth $57.4 billion, according to Forbes. In a list dominated by tech brands--they made up 30% of the top 50 ranked by Forbes--Apple ( AAPL - news - people ) squeaked by longtime nemesis Microsoft ( MSFT - news - people ), worth $56.6 billion, and Google ( GOOG - news - people ), which came in fifth on the list with a brand value of $39.7 billion. Steve Jobs' creation is among a number of resilient brands, including corporate ones, that have thrived despite business troubles or setbacks.

Apple shows just how a brand can survive and thrive even when a parent company stumbles. Apple's sales in the late 1990s plummeted 46% over a four-year stretch while the company lost money seven times over eight quarters. The stock was trading for less than $4 (split-adjusted) in 1997 before company cofounder Steve Jobs, who had been ousted, rejoined Apple.

The following year Apple released the iMac, the first in a string of monster hits over a dozen years. Sales over the past 12 months hit $57 billion, and net income was $12 billion. The stock is up 60-fold since 1997.
To identify the world's most valuable brands we looked at more than 100 with leadership positions in their respective industries. Forbes evaluated these brands along with Jeffrey Parkhurst, managing director of business strategy at Mindshare, a WPP ( WPPGY - news - people )-owned media agency. We required that brands have at least some presence in the United States, because if a brand is to be considered global, it needs to be a player in the United States.

Our first step was to determine earnings before interest and taxes for each brand.Forbes averaged those earnings over the past three years and subtracted from earnings a charge of 8% of the brand's capital employed, figuring a generic brand should be able to earn at least 8% on this capital.

Forbes applied the maximum corporate tax rate in the parent company's home country to that net earnings figure. Next, we allocated a percentage of those earnings to the brand based on the role brands play in each industry. (Brands are crucial when it comes to beverages and luxury goods, but not so much, say, with airlines, when price and convenience are more important.) To this net brand earning number, we applied the average price-to-earnings multiple over the past three years to arrive at the final brand value. For privately held outfits we applied an earnings multiple for a comparable public company.

Tech brands made a big showing on this with 30% of the top 50 brands, including four of the first five places in the rankings. Financial service brands and food and beverage brands each captured six spots. U.S. brands dominated the list.

Most large economies saw output decline in 2009, with the E.U., Japan and U.K. all falling at least 4% (the U.S. economy contracted 2.4%). The brands on our list fared a little better, with sales, on average, flat in 2009. Some brands were hit hard by the economic downturn as well as their own missteps.

Take for example No. 11-ranked Toyota ( TM - news - people ). The brand is worth $24.1 billion, but has been troubled over the past year with multiple recalls that affected a total of 10 million vehicles. Toyota's perceived quality score fell 20% in a survey this spring from Santa Barbara, Calif.-based ALG, which is the industry benchmark for residual values and depreciation data. "Toyota always promoted quality, and then [the recalls showed] they delivered exactly the opposite," says Mindshare's Parkhurst, who argues the fallout would not have been as bad if Toyota's brand promise all these years had to do with, say, horsepower.

Barring any more major setbacks, Parkhurst says he believes Toyota can bounce back over the next two years as the backlash against the brand has already ebbed. Even with the cloud of the safety recalls, Toyota sales jumped 17% in the first half of the year.

Company troubles don't always doom strong brands. Consider Marlboro. Cigarette brands have been on the ropes for years as government restrictions have made it increasingly difficult for tobacco companies to market their products. The settlement signed in 1998 between the four largest tobacco companies and 46 state Attorneys General severely limited tobacco marketing and called for the companies to shell out $206 billion over 25 years to the states to pay for health-care costs.

No tobacco brand has thrived like Marlboro since the settlement. The brand ranks No. 8 on our list, worth $29.1 billion. Marlboro's market share in the U.S. was 33.8% at the time of the settlement; today it's 42.8%, which is greater than the next 12 cigarette brands combined. Marlboro's message has been taken out of mainstream media. The brand, owned by Altria ( MO - news - people ) and Philip Morris International ( PM - news - people ), is now marketed directly to consumers and in places where they gather, with help from a database of the names of 25 million smokers.

Goldman Sachs ( GS - news - people ), meanwhile, has been called everything from evil to a vampire squid, but when it comes to investment banks, Goldman Sachs the brand still reigns supreme. It has been the lead bank in global mergers and acquisitions for eight of the past 10 years. Even with an SEC suit hanging over its head (the company has since settled, agreeing to pay $550 million), Goldman was once again the top M&A bank in the first half of 2010. It had an advisory role on $224 billion worth of deals, which represents 20% of global deal activity, according to Dealogic. The brand is worth $9.4 billion, and comes in at No. 45 on our list.

The United Way is the only nonprofit that makes our list, coming in at No. 26 with a brand value of $14.3 billion. The United Way was founded in 1887 and is made up of 1,800 local United Way chapters in 45 countries and territories. The economic downturn affected the charity as it did most other nonprofits, and donations fell 9% between 2006 and 2008. Yet with $4 billion in annual donations, the United Way is twice the size of the next biggest charity, the Salvation Army.

United Way of America CEO Brian Gallagher has transformed the century-old charity since he took over in 2002. At that time 50% of local United Ways defined fundraising as their primary objective, with the rest focused on community impact. Today 90% of United Ways are focused on community impact. In 2008 Gallagher announced a new plan to refocus the organization on three core issues: education, income and health, with specific metrics for measuring success in each area.

The value of brand names may soon take on a bigger role on the balance sheets of U.S. companies, according to James Gregory, CEO of CoreBrand, a global brand consulting firm. In the U.S. brands often get lumped in as part of goodwill when companies are bought and sold, but outside the U.S. brands can play a more prominent role on the balance sheet. The increasing calls for a standardized global accounting system present an opportunity for the role of brands on the balance sheet, says Gregory.

Kurt Badenhausen Research by Sarah Pivo and Ritika Sinha.
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In Pictures: The World's Most Valuable Brands

Researcher's Hack Can Make ATMs Spew Money

Armed with exploits, ATM hacker hits the jackpot

Game over' vulns spew cash on demand

Black Hat A startling percentage of the world's automated teller machines are vulnerable to physical and remote attacks that can steal administrative passwords and personal identification numbers to say nothing of huge amounts of cash, a security researcher said Wednesday.

At the Black Hat security conference in Las Vegas, Barnaby Jack, a security researcher with IOActive, demonstrated attacks against two unpatched models from two of the world's biggest ATM makers. One exploited software that uses the internet or phone lines to remotely administer a machine made by Tranax Technologies. Once Jack was in, he was able to install a rootkit that allowed him to view administrative passwords and account PINs and to force the machine to spit out a steady stream of dollar bills, something the researcher called “jackpotting.”

“It's time to give these devices an overhaul,” Jack told a standing room-only audience during day one of the two-day conference. “There hasn't been a secure development methodology from the get go. The simple fact is companies who manufacture the devices aren't Microsoft. They haven't had 10 years of continued attacks against them.”

In a second attack against a machine from Triton Systems, Jack used a key available for sale over the internet to access the model's internal components. He was then able to use a install his rootkit by inserting a USB drive that was preloaded with the malicious program.

Both Triton and Tranax have patched the vulnerabilities that were exploited in the demos. But in a press conference immediately following his talk, Jack said he was confident he could find similarly devastating flaws – including in machines made by other manufacturers as well.

Jack said he wasn't aware of real-world attacks that used his exploits, but this foiled attack from earlier this year appears to involve many of the same techniques.

“Every ATM I've looked at, I've found a game-over vulnerability that allows me to get cash from the machine,” he said.

To streamline his work, Jack developed an exploit kit he calls Dillinger, named after the 1930s bank robber. It can be used to access ATMs that are connected to the internet or the telephone system, which Jack said is true of most machines. The researcher has developed a rootkit dubbed Scrooge, which is installed once Dillinger has successfully penetrated a machine.

Jack said vulnerable ATMs can be located by war-dialing large numbers of phone numbers or sending specific queries to IP addresses. Those connected to ATMs will send responses that hackers can easily recognize.

Jack called on manufacturers to do a better job securing their machines. Upgrades for physical locks, executable signing at the operating system kernel level and more rigorous code reviews should all be implemented, he said.

The talk came one year after a similar one was pulled last year. Jack said the cancellation came because there weren't patches in place for the vulnerabilities he planned to demonstrate.
He said he was grateful for the extra year to research the vulnerabilities.


By Dan Goodin in Las Vegas MT
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