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3/22/2010
09:30 AM
Bob Evans
Bob Evans
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Does FedEx Profit Jump Signal Global Recovery?

With third-quarter profits up almost 150%, FedEx chairman and CEO Fred Smith said late last week that a global economic recovery "is well under way" and that his company plans to boost capital spending by 10% while also reinstating some employee-compensation programs suspended last year. Is it time for your company to invest for the upturn?

With third-quarter profits up almost 150%, FedEx chairman and CEO Fred Smith said late last week that a global economic recovery "is well under way" and that his company plans to boost capital spending by 10% while also reinstating some employee-compensation programs suspended last year. Is it time for your company to invest for the upturn?From a Wall Street Journal article:

FedEx and rival United Parcel Service Inc. are widely viewed as bellwethers for the global economy because the companies ship packages for nearly every industry, offering a look at the health of global commerce.

Air-freight service is booming at the companies amid a reduction in the amount of space that is available on container ships that travel between Asia and the U.S. Container-ship carriers have mothballed vessels to combat historic losses incurred during 2009.

Smith said the manufacturing sector and overall business spending is leading the turnaround, which resulted in an 18% increase in international air service for the quarter ended Feb. 28, the Journal reported.

That upswing was "led by Asian exports-which typically include clothes, furniture and other items-to the U.S.," the article said.

"Though consumers remain cautious, U.S. retail sales are improving," Mr. Smith said. "The increased consumer spending that began in late 2009 continues into this year."

Throughout its history, FedEx has been among the world's most aggressive and innovative users of IT not only to support its operations but also to identify new revenue opportunities, new ways of engaging customers in tapping into the information flow regarding their shipments, and weaving the business value of that information into every facet of their logistics, planning, and operations.

Longtime FedEx CIO Rob Carter nailed that concept several years ago in a discussion at the InformationWeek 500 Conference when he answered the question "what business are you in today" by saying, "FedEx is in the business of engineering time." To this day, that remains one of the most insightful and forward-looking articulations of the business value of IT that I've ever come across.

And going forward for FedEx, it looks like they're going to be able to help lots more customers engineer time as well in 2010: the company expects capital spending for fiscal 2010 to increase from $2.6 billion to $2.9 billion, including additional outlays for Boeing 777 aircraft, according to the Journal article. The company has also raised its earnings-per-share forecast for the fiscal year from a range of $3.45-$3.75 to a range of $3.60-$3.80.

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