Making Expansion Into Asia Profitable a Tricky Business

As many Am Law 200 firms look beyond mainland China to Asian markets less populated by U.S. law firms, Duane Morris is entering the country for the first time with its planned Shanghai location.

Making Expansion Into Asia Profitable a Tricky Business

As many Am Law 200 firms look beyond mainland China to Asian markets less populated by U.S. law firms, Duane Morris is entering the country for the first time with its planned Shanghai location.

Major Expansion Ahead at The Washington Post

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Economic Expansion Slows Down in Japan

TOKYO — Japan’s economic growth slowed in the quarter that ended in June to an annualized rate of 2.6 percent, government data showed Monday, clouding the outlook for the economic policies of Prime Minister Shinzo Abe and raising concerns that he may put off moves to tackle the country’s enormous public debt.

This was the third consecutive quarter of growth for Japan’s gross domestic product of about $5 trillion, the third-largest in the world, after those of the United States and China.

Still, the expansion fell short of analysts’ expectations for Japan, whose economy grew at a robust pace of 3.8 percent in the previous quarter, helped by the Abe government’s monetary and fiscal stimulus drive.

Economists polled by Reuters had expected Japan’s economy to grow at a similarly healthy clip in the April-to-June quarter. But weak capital expenditure, reflecting continued caution among Japanese corporations about the country’s long-term prospects, slowed growth, according to figures released by the Cabinet Office.

Compared with the previous quarter, the Japanese economy grew 0.6 percent.

Private consumption rose a better-than-expected 0.8 percent over the previous quarter, as a brightening mood in Japan pushed up spending on food, travel and luxury products. But capital expenditure fell 0.1 percent, below a market forecast for a 0.7 percent increase.

“Corporations’ cautious attitudes was the main factor limiting growth,” Harumi Taguchi, principal economist at the research firm IHS, said in a note. Companies, he added, “remained hesitant to increase capital expenditure and continued to cut inventory in light of the slow recovery of exports and uncertainty regarding the sustainability of the economic recovery.”

Though export growth slowed in the quarter, shipments were expected to pick up as recovery gathered steam overseas, Mr. Taguchi said, especially in the United States and Europe.

A weaker yen has also assisted Japanese exports.

Less robust growth in China, Japan’s largest trading partner, is a concern. A spat over islands in the East China Sea that are claimed by both countries, has also hurt trade between the two countries.

Signs of slowing growth could strengthen the hand of critics of Mr. Abe’s economic drive, known as Abenomics, which has relied heavily on monetary stimulus and government spending to revive growth in Japan’s long-deflationary economy.

Mr. Abe has promised to follow up with market deregulation and the easing of trade barriers to raise the long-term growth potential.

Weaker growth could also derail Japan’s plans to raise taxes and pare back soaring government debt, which reached ¥1 quadrillion, or $10.3 trillion, in the latest quarter, more than twice the size of its economy.

To start easing that debt burden, the government plans to raise the sales tax to 8 percent next April, from the current level of 5 percent, and to 10 percent in October 2015.

According to government calculations, raising the sales tax could double tax receipts to more than 5 percent of gross domestic product, compared with the current 2 percent to 3 percent.

Whether Japan goes ahead with raising the tax will depend on how sustainable the government deems economic growth to be. Under the current plan, the increase will be implemented if it is likely that the economy can sustain at least 2 percent real G.D.P. growth for the next decade.

Mr. Abe said Monday that he remained confident on Japan’s economic prospects and that he would stay on course with economic overhauls. He has been noncommittal about the consumption tax, however.

“The economy has been steadily rising,” he said at a news conference. “I’ll continue to focus on the economy, implementing further growth strategies in the autumn.”

Some economists warn that raising taxes too soon could derail Japan’s nascent recovery.

“A tightening in fiscal policy would almost certainly snuff out the current cyclical rebound,” Duncan Wooldridge and Silvia Liu, economists at UBS, said in a note to clients before the G.D.P. numbers.

“The desire for fiscal consolidation in the long run must not sacrifice the war on deflation in the short run,” the note continued. “To hike or not to hike the consumption tax is the only policy which matters over the next four quarters.”

Verizon Reports 23% Profit Gain, Aided by Wireless Expansion

A surge in wireless subscribers and smartphone sales, combined with more subscribers to its digital TV and Internet services, propelled the company to a profit of $2.25 billion in the second quarter, up 23 percent from the same period a year earlier.

Verizon, which is based in New York, said investment in its fourth-generation wireless network, called LTE, helped its growth. For its wireless business, the company added 941,000 contract subscribers, the most valuable type of customer.

The company also reported improved smartphone sales, partly on the back of demand for the iPhone. In the quarter, Verizon sold 7.5 million smartphones, including 3.9 million iPhones. In the year-ago quarter it sold 5.9 million smartphones, including 2.7 million iPhones.

Like other wireless carriers, though, Verizon appears to be keeping an eye on industry data showing that fewer people are upgrading to new smartphones year after year. To combat that trend, two of its top competitors, AT&T and T-Mobile USA, recently announced plans that would make it cheaper for customers to upgrade their phones before the typical two-year wait.

On Thursday, Verizon, the No. 1 wireless carrier, announced a similar plan. Verizon’s program, called Edge, will allow customers to pick the phone they want and then sign up for a monthly payment plan. The full price of the phone will be spread over 24 months. The customer can upgrade in as little as six months by paying off 50 percent of the original phone by then.

“Our customers have been asking for another option,” said Francis J. Shammo, Verizon’s chief financial officer, on the company’s earnings call. He said some people did not want to wait two years before buying a new smartphone.

But Verizon’s early-upgrade plan appears likely to attract only a small portion of the market, the high-spenders who must have the latest and greatest smartphones. Craig Moffett, an analyst at Moffett Research, said that plan was unlikely to add much to the company’s profits. But Verizon’s move, he said, shows that it is reacting to T-Mobile, the fourth-largest American carrier, which was the first carrier to introduce early-upgrade plans.

“I think T-Mobile’s plan is taking share, and they have to do something about it,” he said.

Over all, Verizon’s revenue rose 4.3 percent, to $29.8 billion, compared with the same quarter a year ago. The company’s net income was 78 cents a share, compared with 64 cents a share in the period a year ago. After excluding a one-time gain related to pension benefits, Verizon’s net income was 73 cents a share, beating analyst expectations of 72 cents, according to data from Thomson Reuters. Shares of the company were down 1.5 percent to close at $49.97 on Thursday.

Verizon is planning to invest even more money in the 4G network. It said it would increase capital spending this year to between $16.4 billion and $16.6 billion, an increase from its original plan to spend $16.2 billion.

The company also said that it added 161,000 subscribers to its Internet service and 140,000 to its video service. Verizon’s Internet service now has 5.8 million subscribers and its video service has 5 million.

With Houston Opening, Reed Smith Forgoes Typical Expansion Strategy

After years of trying to find a merger partner to help it launch in Houston, Reed Smith decided it didn't want to wait any longer and instead moved to open an office from scratch.

With Hire of 15 Lawyers, Hinckley Allen Expansion Continues

In a climate where clients seek a wider range of expertise from the law firms they hire, along with the economies of scale that only a larger operation can provide, it's not at all unusual to see large chunks of one firm join forces with another.

Exhibit A: earlier this month, there were widespread reports in the Connecticut legal community that 15 lawyers at the Farmington firm of Levy & Droney are moving to the Hartford office of Providence, R.I.-based Hinckley Allen & Snyder, effective January 1.

The attorneys being absorbed by the regional firm, including name partners Coleman B. Levy and John F. Droney, will make the move to the Stilts Building in downtown Hartford. The remaining five Levy & Droney lawyers will be left to fend for themselves. Levy & Droney, a 38-year-old firm that has ranked in the top 25 in Connecticut in terms of annual gross revenues, will reportedly be dissolved in the process.

The move will boost the size of Hinckley Allen's Hartford office to about 35 lawyers. Hinckley Allen, which will have about 155 attorneys once the hirings take place, also has offices in Boston, Concord, N.H., and Albany, N.Y.

The firm entered the Connecticut market with a similar bulk hiring effort in 2008, when it acquired 25 lawyers from the now-defunct New Haven law firm of Tyler Cooper.

Marc A. Crisafulli, managing partner for Hinckley Allen, declined to discuss the most recent hiring deal. But he said the firm has been methodical in expanding its business plan in Connecticut, starting with the Tyler Cooper acquisitions five years ago. That entry into the Connecticut market, he said, was 13 years in the making.

"In Connecticut, like all of our markets, we're always looking to add good people to add to our culture and help us build a more successful firm for the future," Crisafulli said.

The firm's culture, he said, is not one based on growth just for the sake of growing, but rather one built on long-term sustainability. "We're looking for people who are interested in the collective practice of law."

Without discussing the Levy & Droney hires specifically, Crisafulli acknowledged making a decision to bring in lawyers from a single law firm can be a way to add clients, while gaining lawyers who share Hinckley Allen's vision. "For us, it generally starts with people who are known to us," he said. "Usually, someone in our firm has worked with them and has a good personal connection. When we get people that come from smaller firms, it's usually that they are entrepreneurial, they have great client relationships, but they can't provide all the types of services that address the needs of their clients."

For example, Crisafulli said, a smaller firm might have a corporate client who needs expertise in federal law governing pensions under the Employee Retirement Income Security Act. "With ERISA, you can't have someone doing that part time," he said. "If you're a smaller firm, you're not going to have an expert on hand who can help that client. But a firm like ours can."

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Osborne Clarke to Open Brussels Base for European Expansion

Osborne Clarke looks set to open its own office in Brussels as the national law firm pushes ahead with European expansion plans despite entering early-stage merger talks with Field Fisher Waterhouse.

The top 50 U.K. firm is planning to set up its own base in the Belgian capital in early 2013 after loosening ties with former local alliance partner De Wolf & Partners earlier this year when it revealed plans to merge with several members of its former alliance.

Its Spanish and Italian partners -- Osborne Clarke Spain and SLA Studio Legale Associato -- have joined Osborne Clarke, while it has cut off ties with other alliance members: Dutch firm Ploum Lodder Princen and French outfit Stehlin & Associes.

Osborne Clarke had already announced plans to launch its own office in Paris, but had not previously suggested it would also open in Belgium.

In addition to its European expansion plans, the Bristol-headquartered firm is also continuing its hiring spree in the U.K. by planning to make around 10 partner hires during the current financial year.

Most of these are expected to be in Osborne Clarke's London office, with litigation, corporate and commercial all earmarked for growth. This follows on from the 10 partners hired last year.

Osborne Clarke chief executive Simon Beswick commented: "In addition to our U.K. hires, we will look to make a number of appointments in our German and Italian offices while our two new offices in Spain (Madrid and Barcelona) will be going through an integration program involving 20 lawyers."

Legal Week revealed earlier this month that Osborne Clarke and Field Fisher had begun preliminary merger talks.