Leo Apotheker’s 11-Month Rise and Fall as CEO of Hewlett-Packard: Timeline

By Xu Wang - Sep 23, 2011 11:01 AM GMT+0700

Hewlett-Packard Co. (HPQ) ousted Chief Executive Officer Leo Apotheker yesterday, tapping director and former EBay Inc. CEO Meg Whitman to replace him. Before Sept. 21, when Bloomberg reported that he might be fired, the company’s stock had plunged 47 percent on his watch. The following timeline chronicles Apotheker’s tenure.

Feb. 7, 2010: Apotheker resigns from SAP AG after 10 months as CEO. He presided over SAP’s first annual revenue decline since 2003 as customers, hit by the recession, delayed software purchases. During his time as CEO, SAP slashed more than 3,000 jobs, its first major cuts since the company was created.

Aug. 6, 2010: Hewlett-Packard CEO Mark Hurd resigns after an investigation found he had a personal relationship with a contractor who received numerous inappropriate payments from the company. Chief Financial Officer Cathie Lesjak takes over as interim CEO.

Aug. 9, 2010: Oracle CEO Larry Ellison says “the HP board just made the worst personnel decision since the idiots on the Apple board fired Steve Jobs,” by forcing out Hurd, Ellison’s friend.

Sept. 6, 2010: Oracle Corp. hires Hurd as a president and board member, reporting to Ellison.

Sept. 7, 2010: Hewlett-Packard sues to block Hurd from working at Oracle, saying the appointment may cause Hewlett-Packard to lose customers, trade secrets and its competitive advantage.

Sept. 20, 2010: Hewlett-Packard and Oracle say they resolved litigation over Hurd’s job at Oracle.

Sept. 30, 2010: Hewlett-Packard names Apotheker president and CEO. It also appoints Ray Lane, a managing partner at Kleiner Perkins Caufield & Byers, as chairman.

Oct. 1, 2010: Ellison tells the Wall Street Journal that “HP had several good internal candidates...but instead they pick a guy who was recently fired because he did such a bad job of running SAP.” He adds, “The HP board needs to resign en masse...right away. The madness must stop.”

Jan. 5, 2011: Hewlett-Packard Chief Marketing Officer Michael Mendenhall resigns, replaced by Bill Wohl, a vice president for communications at SAP.

Jan. 20, 2011: Hewlett-Packard announces a board shakeup in the wake of criticism over the way it handled Hurd’s departure. Four directors leave, and Whitman is among five new members named. Whitman joins the board after a failed bid to become California’s governor.

Feb. 9, 2011: Hewlett-Packard unveils the TouchPad tablet computer, which runs the WebOS software it acquired in its purchase of Palm Inc. in 2010 for $1.2 billion.

Feb. 22, 2011: Hewlett-Packard lowers its 2011 revenue forecast to $130 billion to $131.5 billion, the first of three reductions under Apotheker. The company also misses analysts’ estimates with its second-quarter sales and profit projections. Shares plunge the most in more than six years when markets open the next day.

March 9, 2011: Apotheker says he will put WebOS software in every PC shipped by Hewlett-Packard. He also plans to use acquisitions to expand in software and will reverse Hurd’s emphasis on cost-cutting. “HP has lost its soul,” he says.

March 14, 2011: Apotheker raises Hewlett-Packard’s dividend for the first time since 1998, increasing it 50 percent to 12 cents a share. The company also announces plans to introduce a cloud- computing service.

March 22, 2011: Oracle says it will stop all software development on Intel Corp.’s Itanium chip, a product Hewlett- Packard uses in its servers. Oracle gained a rival chip called Sparc through its 2010 purchase of Sun Microsystems Inc.

March 23, 2011: Hewlett-Packard, the biggest producer of servers that use Itanium, says Oracle’s plan to drop support for the chip is a “shameless gambit” that jeopardizes customers and will cost hundreds of millions of dollars in lost productivity.

April 18, 2011: Hewlett-Packard says Thomas Hogan, executive vice president for enterprise business sales and marketing, has decided to leave. Jan Zadak will assume that role on May 1, the company says.

May 17, 2011: Hewlett-Packard cuts its fiscal 2011 sales forecast for the second time on Apotheker’s watch, to a range of $129 billion to $130 billion. The company also forecasts full- year earnings excluding some items that missed analysts’ estimates as consumers shun PCs and services margins narrow.

May 20, 2011: Hewlett-Packard Senior Vice President Marius Haas is departing for private-equity firm KKR & Co., two people familiar with the matter say.

June 1, 2011: Leo Apotheker says Hewlett-Packard will consider licensing the WebOS software to other device manufacturers.

June 8, 2011: Hewlett-Packard sends a letter to Oracle demanding that the software maker keep supporting Intel’s Itanium chip.

June 15, 2011: Hewlett-Packard sues Oracle, claiming that Oracle has moved from partner to “bitter antagonist.” The suit cites Oracle’s hiring of Hurd last year, and the announcement that it would no longer support its database software on Hewlett-Packard servers that use the Itanium chip.

June 29, 2011: Oracle asks a California judge to reject an effort by Hewlett-Packard to seal court filings in the lawsuit over Hurd and the Itanium chip.

July 11, 2011: Apotheker reorganizes the PC unit as part of a push to broaden use of the WebOS software gained in its Palm acquisition. Jon Rubinstein, Palm’s former CEO, is put in charge of product development for PCs, tablets and smartphones. Senior Vice President Stephen DeWitt is tapped to lead a new unit devoted to expanding use of WebOS.

July 21, 2011: Hewlett-Packard says it will buy back $10 billion of its stock to buoy its languishing shares. Before the announcement, the shares had dropped 14 percent in 2011.

Aug. 18, 2011: In a sweeping overhaul, Hewlett-Packard agrees to buy software maker Autonomy Corp. for $10.3 billion and says it is considering a spinoff of its PC unit. The company also discontinues products running WebOS. Apotheker trims the fiscal 2011 sales forecast for the third time, to a range of $127.2 billion to $127.6 billion.

Aug. 30, 2011: Oracle accuses Hewlett-Packard of fraud and libel, saying a settlement agreement between the two companies over Oracle’s hiring of Hurd was unfair. Oracle also claims Hewlett-Packard defamed the company by saying it bullies customers.

Sept. 9, 2011: Dominique Senequier, a director with ties to Apotheker, will leave the board in March, Hewlett-Packard says in a regulatory filing.

Sept. 22, 2011: Hewlett-Packard names Whitman as CEO, and Chairman Ray Lane becomes executive chairman. During her decade as CEO at EBay, she took the company public and pioneered e- commerce for small businesses. Yet in the final years of her tenure, she couldn’t halt a slowdown in sales growth.

To contact the reporter on this story: Xu Wang in New York at xwang206@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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A.M. Kitco Metals Roundup: Comex Gold Sharply Lower on Follow-Through Selling Pressure; Technical Damage Inflicted

(Kitco News) - Comex December gold futures prices are trading sharply lower again Friday and hit a fresh six-week low. Strong follow-through selling pressure from big losses suffered Thursday is featured. Significant near-term technical damage has now been inflicted in gold, while silver has absorbed more serious chart damage. Strong gains in the U.S. dollar index recently, along with a large drop in crude oil prices, have worked to put solid downside price pressure on the precious metals markets. December gold last traded down $45.00 an ounce at $1,697.00 an ounce. Spot gold last traded down $43.10 an ounce at $1,693.50. December Comex silver last traded down $3.95 at $32.63 an ounce.

Many traders and investors in many markets are scared. They are wondering what will happen during the session Friday, during the weekend and come next Monday morning. Many traders have adopted a "when in doubt, get out" mentality due to the keener uncertainty in the market place at present. Margin calls to traders from their brokers are also forcing liquidation in the market place. There's an old trading adage that says when there is "blood in the street," that's the time to be a buyer. It can be argued the market place is seeing, or is close to seeing, blood in the street for many individual markets, including the precious metals.

The world stock markets are seeing more selling pressure Friday, following strong losses Thursday, and in the wake of the unimpressive FOMC statement from the U.S. Fed on Wednesday, and amid weak economic data coming out of Europe and China. All of the above are feeding notions that the world's major economies are on the verge of another recession, or may be already there.

The U.S. dollar index is trading firmer Friday morning after hitting a fresh seven-month high Thursday. Perceived safe-haven moves into the greenback from investors worldwide has been featured the past couple days. The dollar index bulls have the solid near-term technical advantage. At the moment, the stronger U.S. dollar index is a major bearish factor for the gold market.

Crude oil futures prices are trading solidly lower again early Friday and hit a fresh six-week low of $77.80 a barrel overnight. Crude oil bears have downside momentum and that's also a significantly bearish factor for the precious metals markets.

The European Union sovereign debt situation remains not far from the front burner of the market place. There is now increasing talk in the market place that Greece will default on its debt sooner rather than later. While talks on the matter are ongoing among EU and IMF officials, no concrete, viable plan for Greece has been produced. The EU debt situation remains an underlying bullish underlying factor for gold, but it's likely that the present problems regarding EU debt have likely been mostly factored into present market prices.

There is no major U.S. economic data due for release Friday.

The London A.M. gold fixing was $1,730.00 versus the previous P.M. fixing of $1,722.00.

Technically, December gold futures bears have quickly gained downside momentum as prices Friday fell to a fresh six-week low. Importantly, the gold market bulls were unable to defend what was strong technical support at the August spike low of $1,705.40. That has produced significant near-term technical damage to also suggest a bearish double-top reversal pattern has formed on the daily bar chart. Gold prices are also now in a three-week-old downtrend on the daily bar chart. This week has seen the near-term technical picture turn bleaker for the bulls, but the longer-term technical posture of the gold market has been little affected. Bulls' next upside technical objective is to produce a close above solid technical resistance at $1,800.00. Bears' next near-term downside price objective is closing prices below solid technical support at $1,600.00. First resistance is seen at $1,705.40 and then at $1,725.00. First support is seen at the overnight low of $1,687.20 and then at $1,675.00.

December silver prices hit a fresh seven-month low of $32.305 overnight and very serious near-term technical damage has been inflicted. Prices are in a steep five-week-old downtrend on the daily bar chart. Bulls' next upside price objective is producing a close above strong technical resistance at $37.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at $30.00. First resistance is seen at $33.00 and then at $34.00. Next support is seen at the overnight low of $32.305 and then at $32.00.

Follow me on Twitter to immediately get the very latest market developments. If you are not on board, then you are not getting key analysis and perspective as fast or as often as you could! Follow me on Twitter to get my very timely intra-day and after-hours briefs on precious metals price action. The precious markets will remain very active. If you want market analysis fast, and in after-hours trading, then follow my up-to-the-second precious metals market perspective on Twitter. It's free, too. My account is @jimwyckoff .

By Jim Wyckoff, contributing to Kitco News; jwyckoff@kitco.com

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BofA Said to Seek $800 Million in Deal to Divest Pizza Assets

By Hugh Son and Cristina Alesci - Sep 23, 2011 11:00 AM GMT+0700

Bank of America Corp. (BAC), the lender divesting assets to raise capital, is in exclusive talks to sell its stake in the biggest U.S. Pizza Hut franchisee for more than $800 million, said two people with knowledge of the discussions.

Two private-equity firms teamed up to bid for NPC International Inc., which operates 1,140 Pizza Hut restaurants, said the people, who declined to be identified because the talks are confidential. One hurdle in closing the transaction is arranging debt financing for Overland Park, Kansas-based NPC as credit markets for buyouts tighten, the people said.

“They’ve got to do two things -- reduce riskier assets and continue to reallocate capital to other businesses,” said Jonathan Finger, whose family-owned investment company, Finger Interests Ltd., owns 1.1 million Bank of America shares. “These asset sales achieve both those goals, it’s a step in the right direction to slim the company down.”

Bank of America Chief Executive Officer Brian T. Moynihan has agreed to sell almost $50 billion in assets and units ahead of stricter international rules on capital. The firm said in April it was unwinding its flagship buyout fund because private- equity holdings will require a larger capital cushion under recommendations from the Basel Committee on Banking Supervision.

Jerry Dubrowski, a spokesman for the Charlotte, North Carolina-based lender, declined to comment. Troy Cook, NPC’s chief financial officer, didn’t return messages seeking comment.

28 States

The bank inherited NPC in its 2009 takeover of Merrill Lynch & Co., which bought the pizza purveyor in May 2006 for $615 million, according to a filing. NPC was founded in 1962 and accounts for about one-fifth of U.S. Pizza Hut restaurants, the firm said in August. Its stores are spread across 28 states, mostly in the Midwest and South, with about 26,000 employees.

The price being negotiated may be a premium to what fast- food franchise operators typically trade for. Rivals may be valued at 6 to 7 times earnings before interest, tax, depreciation and amortization, said Bryan Hunt, a Wells Fargo & Co. analyst. That would mean about $630 million to $735 million for NPC, which posted $105.5 million in Ebitda last year.

NPC is “highly leveraged,” which could hurt the firm’s ability to raise capital or repay debt, the company said in a February regulatory filing. The operator said it had $402.4 million in loans at year-end, $44.2 million in cash and $58.1 million available under a credit facility.

Asset Sales

Bank of America accelerated asset sales amid concern that the firm, which reported a record $8.8 billion second-quarter loss, will have to issue stock to bolster capital. The lender has lost more than half its market value this year. Moynihan has said repeatedly that the bank will reach capital targets by divesting assets deemed less important to customers, rather than issuing shares or divesting core units.

Bank of America agreed last week to sell its stake in U.S. hospital operator HCA Holdings Inc., another asset acquired by Merrill Lynch’s private-equity arm in 2006. Bank of America had $3 billion in proceeds from that investment, including dividends and a March initial public offering, the firm said.

Last month, the bank announced deals to divest a Canadian credit-card unit for C$7.5 billion ($7.3 billion) and sell about half its stake in China Construction Bank Corp., the world’s second-biggest lender by market value, for $8.3 billion in proceeds.

Moynihan is shrinking the bank through an initiative known as Project New BAC, which involves slashing 30,000 jobs from consumer banking and back-office operations. The firm expects to trim $5 billion in annual expenses by the end of 2013.

“We don’t have to be the biggest company out there,” Moynihan said at a Sept. 12 investor conference in New York. “We can get out of things we don’t need to do, make the company leaner, more straightforward, more driven.”

To contact the reporters on this story: Hugh Son in New York at hson1@bloomberg.net; Cristina Alesci in New York at calesci2@bloomberg.net

To contact the editors responsible for this story: Dan Kraut at dkraut2@bloomberg.net; Rick Green at rgreen18@bloomberg.net

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Marcellus Gas Drillers Face Potential ‘Chaos’ in Pennsylvania Legal Ruling

By Jim Polson and Mike Lee - Sep 23, 2011 11:01 AM GMT+0700

A Pennsylvania appeals court ruling has raised questions about who can claim ownership of natural gas embedded in the Marcellus shale formation, potentially putting in doubt the legitimacy of thousands of drilling leases.

The state’s Superior Court said Pennsylvania law governing ownership of oil and gas rights isn’t clear and a lower-court judge should solicit expert opinions in a case pitting current landowners against the heirs to an 1881 deed.

“Dozens of energy companies have invested billions of dollars in leasing shale gas production rights in Pennsylvania,” Larry Nettles, an attorney with the Houston- based law firm Vinson & Elkins LLP, said in a telephone interview. “This opinion calls into question whether they have those rights.”

For more than a century, Pennsylvania has required landowners to consider oil and gas rights separate from more general “mineral rights” when transferring ownership of resources beneath the surface of their property. The defendants in the title dispute argued shale gas is different and should be considered part of the mineral rights because it is contained inside rock.

The Superior Court, the second-highest court in the state, ruled Sept. 7 that current law doesn’t sufficiently address whether “Marcellus shale constitutes a mineral,” the question that’s now to be hashed out by the lower court.

Wrong Owner?

Until the case is decided, oil and gas companies will face uncertainty about whether they’ve signed drilling leases with the right people, legal experts say. Owners of oil and gas rights who signed leases with gas producers could find that they don’t own the gas after all.

“If, somehow, shale gas is different, that would be a sea change in Pennsylvania law,” David Fine, a Harrisburg, Pennsylvania-based attorney for K&L Gates LLP, said yesterday in a telephone interview. “The issue is whether they’ve entered into a lease with someone and somebody else is going to find a problem with the title.”

The case may take as long as two years to wind through the courts, Fine said.

“There could be waves of litigation,” said Nettles, the Vinson & Elkins attorney, who predicted the opinion would be overturned or set aside.

Creating ‘Chaos’

Oil and gas companies may need to check the title to thousands of oil and gas properties they’ve leased, said David Poole, general counsel of Range Resources Corp. (RRC) Range, based in Fort Worth, Texas, drilled one of the first Marcellus wells in 2004 and has leased 1.2 million acres in Pennsylvania. Poole said the Pennsylvania legislature may have to act if the courts don’t clear up the question.

“If the courts keep changing the rules in a property law area, it creates chaos,” Poole said in an interview.

The gas industry, which has leased millions of acres in the state to drill wells, is monitoring progress of the case through Pennsylvania’s courts, Kathryn Z. Klaber, president of the Marcellus Shale Coalition, a 200-company group that includes producers Royal Dutch Shell Plc (RDSA), Statoil ASA (STL), and Chevron Corp. (CVX), said in an e-mailed statement yesterday.

An 1881 deed for 244 acres in Susquehanna County is at the heart of the lawsuit. The deed transferred “half the minerals and petroleum oils” under the land to Charles Powers, whose heirs say that entitles them to half of the gas. The current landowners, John E. and Mary Josephine Butler, say they own all the gas because the deed transferring minerals to Powers’s heirs failed to mention gas.

Lower Court Ruling

A lower court sided with the Butlers, relying on previous rulings that established ownership of oil or gas doesn’t change hands unless it’s specified in a deed. Powers’s heirs argued in court that the deed gave them the right to other minerals such as coal -- and that they own the gas trapped in the shale the same way they would own the gas trapped in a coal seam.

John Butler, 73, a retired dairy farmer and land surveyor, said in an interview that he is discussing with his attorney whether to appeal the Superior Court decision to the state Supreme Court. Michael John Giangrieco, a Montrose, Pennsylvania-based attorney representing the Butlers, wasn’t available for comment yesterday, according to his office.

Laurence M. Kelly, a Montrose, Pennsylvania, attorney for the Powers’s heirs, didn’t immediately return a telephone message seeking comment on the case.

The effect of the case “is only uncertainty,” Russell L. Schetroma, a Meadville, Pennsylvania-based attorney for Steptoe & Johnson LLP wrote in a Sept. 16 note on the firm’s web site.

Supreme Court Petition

One option would be for a trade association or gas producer to petition the Pennsylvania Supreme Court to hear an expedited appeal of the case, Ken Komoroski, an attorney in Pittsburgh with Fulbright & Jaworski LLP, said in an interview.

Gas production in Pennsylvania increased to about 2.8 billion cubic feet a day in July, up from about 0.6 billion cubic feet in January 2010, according to the U.S. Energy Information Administration. About 218,000 Pennsylvanians worked in Marcellus Shale-related industries at year-end, helping drive the state’s unemployment rate below the national average, the Pennsylvania Department of Labor and Industry said in a September report.

The case is John E. and Mary Josephine Butler v. Charles Powers Estate et al, 1795-mda-2010, Superior Court of Pennsylvania.

To contact the reporters on this story: Jim Polson in New York at jpolson@bloomberg.net; Mike Lee in Dallas at mlee326@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

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French, German Bank Credit Default Wagers Soar

By Abigail Moses and John Glover - Sep 23, 2011 4:15 PM GMT+0700

Trading in credit-default swaps insuring the biggest German and French banks’ debt is soaring as the euro-region crisis spreads.

Deutsche Bank AG (DBK), Germany’s biggest lender, was the most- traded company of 1,000 issuers tracked by the Depository Trust & Clearing Corp. in the week through Sept. 16, up from 12th the week before. Credit Agricole SA (ACA) climbed to seventh place from 43rd, while Societe Generale (GLE) SA soared to eighth from 58th.

Banks hold more than half of the bonds issued by other lenders and are hedging that risk in the credit-swaps market. U.S. lenders Wells Fargo & Co. (WFC), JPMorgan Chase & Co. (JPM) and Morgan Stanley (MS) also jumped into the top 10 most-traded companies, according to the DTCC, amid speculation the world’s largest economy is headed for another recession.

“In this game, Greece is the mouse and the elephant in the room is the banks,” said Alberto Gallo, head of European credit strategy at Royal Bank of Scotland Group Plc in London. “The problem is that the banks hold each other’s bonds.”

Traders bought and sold 83 credit-default swap contracts on Deutsche Bank last week, covering a daily average of $270 million of debt, up from $150 million in the past month, according to New York-based DTCC, which runs a central registry for the market.

Swaps covering a daily average of $160 million of Credit Agricole’s debt traded, up from $120 million in the past month, while contracts linked to SocGen jumped to $150 million from $130 million, DTCC data show.

Outstanding Trades

A total of 5,967 trades are outstanding on Deutsche Bank, covering $5.4 billion of debt, up from $5.1 billion three months ago, DTCC data show. Outstanding swap volumes on Credit Agricole and SocGen are little changed in the quarter, covering $2.9 billion of debt each.

Banks hold 56 percent of the bonds issued by other lenders, according to RBS calculations based on European Central Bank data. They’re also suffering because of their holdings of securities issued by the euro region’s most-indebted governments.

The crisis has spawned as much as 300 billion euros ($406 billion) in credit risk for European banks, the International Monetary Fund said this week as it called for capital injections to support markets. Greece, Ireland and Portugal have already sought international bailouts and speculation is increasing that the next countries to fall will be Spain and Italy.

Standard & Poor’s cut ratings or lowered the outlooks on Italian banks including UniCredit SpA (UCG), the nation’s biggest, this week after the government’s credit was downgraded for the first time in five years.

‘Major Event’

“The Italian downgrade was a major event,” said Gary Jenkins, head of fixed income at Evolution Securities Ltd. in London. That the nation wasn’t on review for a downgrade, typically the first step in cutting a rating, “is extremely unusual and in itself shows S&P’s concern,” he said.

Credit Agricole and SocGen had their long-term credit ratings cut one level by Moody’s Investors Service on Sept. 14. French and German banks have the biggest holdings of Greek debt, according to the Basel, Switzerland-based Bank for International Settlements.

Moody’s lowering of Bank of America Corp. and Wells Fargo’s ratings on Sept. 21 also helped push European bank-bond yield spreads wider, with the Barclays Capital Euro Aggregate Banking Senior Index climbing to a record 339 basis points, from 322 in the previous session.

Record Risk

The cost of insuring European bank bonds using credit- default swaps rose to a record this month, with the Markit iTraxx Financial Index of default swaps on the senior debt of 25 lenders and insurers climbing to as high as 314 basis points on Sept. 12, according to JPMorgan. The gauge fell three basis points to 299 as of 10 a.m. in London today.

Swaps on Deutsche Bank jumped to a record 225 basis points on Sept. 12, and now cost 210 basis points, from 96 basis points on July 1, according to CMA prices. Credit Agricole rose to an all-time high 322 basis points this month and are now at 310, from 130 at the beginning of July. Contracts tied to SocGen’s debt jumped to a record 435 in September, from 128 at the start of this quarter and are now at 413, according to CMA.

Credit-default swaps allow investors to hedge against debt losses or speculate on creditworthiness. A basis point on a contract protecting 10 million euros of debt for five years is equivalent to 1,000 euros a year.

“People who bought protection on banks and sovereigns have trades that are in the money now,” said Peter Tchir, founder of hedge fund TF Market Advisors in New York. “Now they’re getting nervous and buying more protection.”

To contact the reporters on this story: Abigail Moses in London at Amoses5@bloomberg.net; John Glover in London at johnglover@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at Parmstrong10@bloomberg.net

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HP’s Whitman Sticks to Strategy Begun by Apotheker to Stem 47% Stock Drop

By Aaron Ricadela - Sep 22, 2011 7:11 PM PT

Hewlett-Packard Co. (HPQ) Chief Executive Officer Meg Whitman plans to stick by strategies set in motion by her predecessor, Leo Apotheker, betting that investors prefer steady leadership to another unsettling change of course.

Whitman, in her first interview as Hewlett-Packard’s CEO, said the company stands by plans to acquire U.K. software marker Autonomy Corp. for $10.3 billion. The company also will continue to explore whether to sell or spin off the personal-computer division, she said. Those moves were announced on Aug. 18.

“It does not signal a change in the strategy,” Whitman said yesterday of her appointment. “We are behind the actions that were taken on Aug. 18. We are firmly committed to Autonomy.”

Whitman is hewing to those plans to avoid alienating shareholders who were fed up with the about-faces that characterized Apotheker’s reign. Still, Hewlett-Packard is overpaying for Autonomy and it shouldn’t have announced a possible PC unit sale without a concrete plan in place, said Chris Whitmore, an analyst at Deutsche Bank AG.

“We’re going to get more of the same from a Meg Whitman- led HP as we did from a Leo-led HP,” said Whitmore, who is based in San Francisco and has a “sell” rating on Hewlett- Packard. “The board isn’t going to change the strategy and is going to continue down this path, which frankly was the fear.”

Apotheker, CEO for less than 11 months, was ousted yesterday after cutting sales forecasts three times and making strategy shifts that blindsided investors. Palo Alto, California-based Hewlett-Packard also said Chairman Ray Lane will become executive chairman.

‘Heavily Scrutinized’

Whitman’s challenge will be boosting revenue while assuaging the investors whose dismay fueled a 47 percent plunge in Hewlett-Packard stock under Apotheker. She said the company will decide the outcome of the PC business as soon as possible.

“We’ll make a decision as fast as we possibly can,” she said in the interview. “We understand uncertainty doesn’t help the business, doesn’t help customers, doesn’t help shareholders.”

Her experience at consumer-oriented companies such as EBay Inc. (EBAY), Procter & Gamble Co. (PG) and Hasbro Inc. (HAS) may leave her ill- equipped to run Hewlett-Packard’s business-computing divisions, said Shaw Wu, an analyst at Sterne, Agee & Leach Inc. in San Francisco.

“She’s going to be heavily scrutinized,” said Wu, who has a “neutral” rating on the shares. “She doesn’t have the background to turn around HP.”

Whitman as Communicator

An estimated 25 percent of Hewlett-Packard’s sales come from consumers, Wu said. “What about the other 75 percent?”

Whitman defended her record at the helm of EBay.

“I have run a large company -- not obviously as large as HP, but I have run a very large company,” she said. “While I don’t have years of experience in an enterprise business, I bought a lot of software. I was one of the largest enterprise customers in Silicon Valley.”

“That’s like saying, ‘I’ve bought an iPhone, so I can run Apple Inc. (AAPL)” said Whitmore at Deutsche Bank.

Whitman will need to take Hewlett-Packard’s disparate operating groups -- including data-center computing gear, technology services, printers, and software -- and get them working as a team, Lane said in the interview. He also lauded Whitman’s ability to communicate company strategy.

“The market’s a little confused because we’re in so many different businesses,” he said. “This is 90 percent about leadership, communications and operating execution.”

Internet Pioneer

Lane, who considered becoming the CEO himself, said Hewlett-Packard executives weren’t working well under Apotheker. To explain why the board picked an outsider, Lane said on a conference call that internal managers “were not ready” to become CEO.

The stock jumped 6.7 percent on Sept. 21 after Bloomberg reported that Apotheker would be ousted, evidence that shareholders were relieved to see his tenure end. Hewlett- Packard fell $1.18, or 4.9 percent, to $22.80 yesterday on the New York Stock Exchange.

Whitman, 55, is credited with helping build EBay into the world’s largest Internet auctioneer, with a market value of about $40 billion. She took the company public and built an online storefront that helped thousands of small businesses peddle their wares. Yet in her final years at EBay, she couldn’t reverse a slowdown in sales growth and overpaid for Skype Technologies SA after a bidding war with Google Inc. and Yahoo! Inc. EBay later wrote down Skype’s value.

Pressure on Apotheker

Whitman joined Hewlett-Packard’s board in January after a failed bid to become California’s governor last year. Before EBay, Whitman worked as an executive at the toy company Hasbro, the floral service FTD Inc., footwear maker Stride Rite Corp. and Walt Disney Co. (DIS)

Hewlett-Packard had revenue of more than $126 billion in the past fiscal year, almost 14 times the size of EBay’s sales.

“It’s not clear to me that someone who spent 30 years in the consumer space is the right person for an enterprise technology company,” said Dana Stalder, a partner at venture- capital firm Matrix Partners in Palo Alto. Stalder worked under Whitman for seven years at EBay.

Pressure on Apotheker intensified when in August he announced the overhaul that included the Autonomy deal and possible spinoff. He also killed off the company’s WebOS tablets and smartphones, five months after vowing to put the operating system on a full range of the company’s computers.

Hewlett-Packard Forecasts

Hewlett-Packard Chief Financial Officer Cathie Lesjak, who served as interim CEO before Apotheker, said yesterday on a conference call that the company was no longer confident in its fourth-quarter sales guidance. Hewlett-Packard is sticking by its profit forecast, she said.

The company said in August that fourth-quarter revenue would be $32.1 billion to $32.5 billion, with earnings of $1.12 to $1.16 a share, excluding some costs. According to Bloomberg data, analysts are predicting sales of $32.2 billion and profit of $1.14 for the period.

The board weighed whether to oust Apotheker for six to eight weeks, Lane said in the interview.

Apotheker stands to receive cash severance of at least $7.2 million, a figure that could be higher if his annual bonus was set above the minimum $2.4 million laid out in the employment agreement. Including his $1.1 million in salary received for the first year, along with a $4 million cash signing bonus and a $4.6 million relocation payment, Apotheker will have earned about $34.7 million in cash and stock for less than a year’s work.

‘Investors Wound Up’

“Not bad for a short-term job, unless you’re a HP shareholder,” said Brian Foley, a compensation consultant in White Plains, New York. “This is yet another ex-CEO of Hewlett- Packard who does very well despite the circumstances.”

Apotheker joined Hewlett-Packard after Mark Hurd departed as CEO amid a scandal over a personal relationship with a company contractor. Hurd now is a co-president at Oracle.

A steady hand may be just what Hewlett-Packard needs, said Jayson Noland, an analyst at Robert W. Baird & Co. in San Francisco. He has a “neutral” rating on the stock.

“The board is directionally behind the plan Apotheker’s put in place,” Noland said. “It’s just the execution of that plan that has investors wound up.”

To contact the reporter on this story: Aaron Ricadela in San Francisco at aricadela@bloomberg.net.

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net.

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Fed’s ‘Operation Twist’ Fails to Reassure Investors

By Joshua Zumbrun and Scott Lanman - Sep 22, 2011 9:00 PM PT

The Federal Reserve’s plan to buy longer-term Treasuries has succeeded in bringing down interest rates while not convincing investors the unorthodox monetary policy will strengthen economic growth.

Stocks fell for a second day yesterday as investors sought safe assets after the Fed announced it would shift $400 billion of its Treasury securities holdings into longer-term debt. Treasury 30-year bonds rallied, sending yields to the lowest level in almost three years. The Dow Jones Industrial Average had its biggest two-day loss since December 2008.

Chairman Ben S. Bernanke and his policy-making colleagues cited “significant downside risks” to the outlook in their Sept. 21 statement and announced a program that economists say will provide at most a small boost to the recovery. The Fed has not done an adequate job explaining to investors how the program will help, said Jerry Webman, chief economist at OppenheimerFunds Inc. in New York.

“It would be helpful if someone would lay out exactly the economic mechanism that gets us from yet lower interest rates to actual economic activity,” said Webman, whose firm has $177 billion in assets under management. “Tell us why this is supposed to work because we’re missing something here. The market is obviously missing something here.”

The stock fall after the announcement of the Fed’s policy known as “Operation Twist” contrasts with the reaction to the second round of quantitative easing, when the S&P 500 rose 24 percent from the day Bernanke first signaled the policy in August 2010 to its conclusion in June. That rise in equities helped strengthen the economy, Webman said.

Yields Decline

Yields on 30-year Treasuries declined to 2.8 percent yesterday in New York from 3.2 percent on Sept. 20. Stocks tumbled, with the Standard & Poor’s 500 index falling 3.2 percent in New York to 1,129.56, following a 2.9 percent drop the day before. The Dow lost 3.5 percent to 10,733.83.

The Fed should instead put more pressure on fiscal authorities to revive growth and outline a clear policy strategy, including setting a target for inflation, said Greg Hess, a former Fed researcher.

“The Fed needs to be answering questions, or providing confidence out there that answers questions, not just creating new ones,” said Hess, a professor and faculty dean at Claremont McKenna College in Claremont, California. “That’s why I think the response is negative and that’s why you’re seeing volatility rise.”

Stock Volatility

The Chicago Board Options Exchange Volatility Index, a benchmark measure of stock volatility known as the VIX, jumped 10.8 percent to 41.35 in New York yesterday, bringing its four- day increase to 33 percent.

“The downside risks stem from situations such as Europe, the tax law and so forth,” said former St. Louis Fed President William Poole. “The Fed can’t offset those. It is not within the realm of monetary policy.”

Bernanke should instead devote an entire speech to other issues that are holding back the recovery, such as tax policy and regulations, and make clear that the Fed is powerless to deal with them, Poole said.

“For the Fed to be doing these things that are extremely unlikely to have much current impact, it damages the Fed’s credibility,” Poole, a senior fellow with the Cato Institute in Washington, said in a telephone interview.

Economists in a Bloomberg News survey before the Fed’s meeting had low expectations for the action dubbed Operation Twist, with 61 percent saying the move would probably fail to reduce the 9.1 percent unemployment rate. Among those, 15 percent predicted it would be “somewhat harmful.” None of the 42 economists in the survey said the move would be “very effective.”

Home Loans

The central bank posted answers to “frequently asked questions” on its website, saying that the program should help lower costs for home loans, corporate bonds and other consumer and business lending. The plan “will provide additional stimulus to support the economic recovery but the effect is difficult to estimate precisely,” the Fed said.

The central bank purchased $2.3 trillion in debt from December 2008 through June in two rounds of so-called quantitative easing aimed at lowering borrowing costs for companies and consumers with the benchmark interest rate already at zero. The Fed lowered its target interest rate to zero, also in December 2008, and in August it pledged to hold rates there through mid-2013.

Policy Options

With “Operation Twist” the Fed stopped short of some monetary policy options such as a third round of quantitative easing, a move seen as unlikely this year by 79 percent of economists in the Sept. 14-16 Bloomberg survey. Another option for the central bank comes from Chicago Fed President Charles Evans who supports tolerating a higher rate of inflation until unemployment falls below 7.5 percent.

Separately, the Fed released a study yesterday showing that low mortgage rates in 2009 and 2010 did not lead to as much home refinancing as anticipated, underscoring the difficulty in spurring economic growth through interest-rate reductions.

The housing market remains “depressed,” in the FOMC’s words, even after three years of low mortgage rates. New-home sales fell for the third straight month in July to an annual pace of 298,000, just above the record low pace of 278,000 sales in August 2010. The national average 30-year fixed-rate mortgage is at 4.09 percent, the lowest on record in a Freddie Mac index.

The central bank probably has limited expectations for the policy, Alan Blinder, a former Fed vice chairman, said in an interview yesterday on Bloomberg Television.

‘Throwing Sticks’

Through Operation Twist, Bernanke is “throwing sticks and stones and pea-shooters and BB guns and whatever he’s got at the weak economy in the effort to make marginal improvements,” said Blinder, a professor at Princeton University. “I don’t expect any miracles from it, and frankly neither do they.”

Bernanke may have more success in spurring growth by signaling that interest rates will increase next year, which would get more people to borrow money now, said David Kelly, who helps oversee $408 billion as chief market strategist for JPMorgan Funds in New York.

“The public realizes that the Fed’s action is completely incapable of helping the economy out,” Kelly said of Operation Twist. “Ben Bernanke is at least trying to do the right thing. He just doesn’t know what the right thing is.”

To contact the reporters on this story: Joshua Zumbrun in Washington at jzumbrun@bloomberb.net; Scott Lanman in Washington at slanman@bloomberg.net.

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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Apple Falling Behind Store Target in China May Be Opportunity for Android

By Bloomberg News - Sep 22, 2011 10:37 PM PT

Apple Inc. (AAPL) is opening stores in the China region at a quarter the pace it forecast 19 months ago, giving rival makers of smartphones and tablet computers time to gain users in the world’s biggest mobile-phone market.

Apple opened its third store in Shanghai today and will open its first one in Hong Kong tomorrow, bringing the total to six in a region with the company’s highest-grossing outlets. That compares with the 25 stores that Ron Johnson, then Apple’s head of retail, said last year it targeted by February 2012.

The iPhone maker is only “scratching the surface” of Chinese demand after sales in the region surged six-fold to $3.8 billion last quarter, Apple Chief Executive Officer Tim Cook said in July. Still, delays in store openings may give makers of smartphones and tablets equipped with Google Inc. (GOOG)’s Android software room to gain market share, said Shaun Rein, managing director of China Market Research Group.

“In many ways they are still behind the curve, and they are opening stores too slowly,” said Rein, whose Shanghai-based company advises retailers and other clients about operating businesses in China. “Before, Apple had clear dominance in terms of technology, but now the gap is being lowered because of Android.”

Apple is expanding distribution of its products including the iPhone and iPad in China as competition with Android device makers including Samsung Electronics Co. and Lenovo Group Ltd. (992) intensifies. Kristin Huguet, a spokeswoman at Apple, declined to give the company’s latest target for store openings in China.

Leaving for Penney

The company, the world’s biggest by market value, accounted for 13 percent of China’s smartphone market by shipments in the second quarter, third behind Nokia Oyj (NOK1V)’s 36 percent and Samsung’s 15 percent, according to estimates at research firm Gartner Inc. Apple ranks first worldwide, according to researcher Strategy Analytics.

Apple aimed to have as many as 25 stores in the China region over two years, Johnson said Feb. 25, 2010, when the Cupertino, California-based company only had one store in the mainland. Johnson left in June to become J.C. Penney Co.’s chief executive officer.

“I don’t think anyone really expected them to come up with 25 stores in 24 months,” said David Wolf, CEO of Wolf Group Asia, a Beijing-based marketing strategy consulting firm. “Apple set a very high bar for themselves in a market where the logistical challenges are profound.”

‘Larger, Better’

China’s Jiefang Daily, citing Johnson, reported this February that the company may delay the 25-store target to focus on “larger and better” locations. Apple’s Huguet declined to confirm or deny the comments.

“They have been quite cautious so far,” said Sun Peilin, an analyst at research firm Analysys International in Beijing. “For Apple, they have now seen the benefits and potential of the market, and I think they will speed up the store openings.”

The new Shanghai store is the company’s biggest in China. The one in Hong Kong is located at the International Finance Center in the central business district.

“It’s a big store, and the design is quite good,” said Cui Lizhen, who traveled from his home province of Jilin and waited 40 hours outside the new outlet in Shanghai before the opening at 9:00 a.m. local time today.

In Hong Kong, about 10 people camped outside Apple’s store with their backpacks and folding chairs at 7:45 a.m. local time today, more than 25 hours before the opening tomorrow.

Retail Partners

A lack of stores hasn’t stopped growth. Shipments of the iPhone, Apple’s best-selling product, jumped to 2 million in China in the second quarter, compared with 300,000 a year earlier, according to Gartner analyst Sandy Shen. The figures include sales through unauthorized channels, or the so-called gray market, she said.

Having more stores would mean higher sales not only at the company’s own retail locations, Wolf said. The “halo” effect of the stores boosts the image of the products and lifts sales even at the resellers, he said.

Apple has more than 900 sales agents in mainland China, including stores operated by Studio A Inc., a unit of Taiwan’s Cheng Uei Precision Industry Co. That company’s chairman is Gou Tai-chiang, brother of billionaire Terry Gou, head of Apple supplier Foxconn Technology Group. In 2009, Apple started selling the iPhone through China Unicom (Hong Kong) Ltd., its carrier partner in China.

Apple’s distribution network in China has failed to keep up with demand, forcing customers to buy from vendors not sanctioned by the company. Only half of the 1.07 million Apple iPads sold in China in the second quarter were through authorized vendors, according to Analysys.

Apple may have scaled back the pace of store openings in China to focus on flagship locations, Wolf said.

“Location is important and iconic,” he said. “Apple’s performance is excellent, but not quite outstanding. I’d give them a strong B+.”

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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Capita Buys Police Outsourcing Company Cedar From Advanced for $23 Million

By Katie Linsell - Sep 23, 2011 1:16 AM PT

Capita Group Plc (CPI), the provider of a criminal-records service for the U.K. Home Office, agreed to buy Cedar HR Software Ltd. from Advanced Computer Software Group for 15 million pounds ($23.1 million).

Cedar HR Software, which became part of Advanced in February 2010, provides duty management software to 30 police forces in the U.K., had sales of 6.2 million pounds in the 12 months through February, Capita said in a statement. Advanced Computer Software said in a separate statement it will use the cash to reduce its net debt.

Cedar is Capita’s third recent acquisition of a company providing outsourcing services to police authorities after buying SunGard Public Sector Ltd. last year and Beat Systems Ltd. this year.

“This acquisition adds both innovation and breadth to our solutions for police forces,” said Andy Parker, joint chief operating officer of London-based Capita, whose biggest clients include Greater Manchester, North Yorkshire and Thames Valley police.

Capita rose 0.3 percent to 715 pence in London trading as of 9.11 a.m.

To contact the reporter on this story: Katie Linsell in London at Klinsell@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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Commodities Poised for Biggest Weekly Loss in Four Months on Growth Risks

By Sharon Lindores - Sep 23, 2011 2:35 AM PT
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Immediate-delivery gold was 0.2 percent higher at $1,743.18 an ounce after yesterday dropping to a four-week low. Photographer: Paul Taggart/Bloomberg

Commodities were set for their worst week in more than four months as copper and tin tumbled on deepening concern that policy makers are running out of tools to avert another global recession, hurting demand for metals, fuel and food. Soybeans dropped.

The Standard & Poor’s GSCI Index of 24 commodities is down 6.7 percent for this week, the most since May 6. The index was up 0.3 percent at 10:34 a.m. in London. Silver dropped 6.9 percent today, copper was down 3.3 percent and nickel slumped 3.6 percent. The London Metal Exchange index of six industrial, or base, metals fell yesterday the most since Aug. 31, 2010.

Central bankers and finance ministers will discuss the economic outlook today at the annual meetings of the International Monetary Fund and World Bank in Washington. The Federal Reserve on Sept. 21 said it will replace $400 billion of short-term debt with longer-term Treasuries, saying it sees “significant downside risks” to growth.

“There is no doubt still plenty of room for base metal prices to fall,” William Adams, head of research at the London- based BullionDesk.com, wrote in a report today. “Given the extent of the drop in the past 36 hours and in the weeks before, there may well be some consolidation and potential for a rebound.”

Slowing Growth

The world economy will expand 4 percent this year and next, the International Monetary Fund said on Sept. 20, cutting forecasts made in June for a 4.3 percent expansion and 4.5 percent in 2012.

Three-month copper on the London Metal Exchange fell as much as 7.3 percent to $7,115.75 a metric ton, the lowest price since August last year. Prices declined for a sixth day and have slumped 26 percent from the record $10,190 on Feb. 15. Tin plunged as much as 14 percent to $17,000 a ton.

Manufacturing in China, the world’s largest metals user, may shrink for a third month in September, according to a preliminary index of purchasing managers from HSBC Holdings Plc and Markit Economics released yesterday. The initial reading for this month was 49.4, compared with a final 49.9 for August and 49.3 for July. Figures below 50 signal a contraction.

“It’s all about a lack of confidence,” Jonathan Barratt, a managing director of Commodity Broking Services Pty in Sydney, said by telephone today. “It’s going to get a little bit darker before the dawn.”

The GSCI index has fallen 8.6 percent so far in the third quarter, heading for the biggest quarterly drop since the fourth quarter of 2008.

Oil, Gold

November-delivery oil lost as much as 1 percent to $79.70 a barrel on the New York Mercantile Exchange, before rebounding 0.7 percent. The price is still down 8 percent this week, set for the biggest loss since Aug. 5. Soybeans for November delivery dropped as much as 2.3 percent to $12.50 a bushel on the Chicago Board of Trade.

Immediate-delivery gold dropped as much as 1.1 percent to $1,720.53 an ounce, the lowest price since Aug. 25, and last traded at $1,733.35. Spot silver tumbled as much as 4.5 percent to $34.27 an ounce. Gold for December delivery decreased 1.1 percent to $1,722.30 an ounce on the Comex in New York.

To contact the reporter on this story: Sharon Lindores in London at slindores@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.

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Whitman Will Stick to Apotheker’s HP Strategies

By Aaron Ricadela - Sep 22, 2011 7:11 PM PT
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Meg Whitman’s challenge will be to boost revenue while allaying the concerns of investors whose dismay left Hewlett-Packard stock 47 percent lower under Leo Apotheker. Photographer: Axel Schmidt/AFP/Getty Images

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Sept. 22 (Bloomberg) -- Meg Whitman, chief executive officer of Hewlett-Packard Co., and Ray Lane, executive chairman, talk with Bloomberg's Aaron Ricadela about management changes at the company and business outlook. Hewlett-Packard replaced CEO Leo Apotheker with Whitman, asking the former head of an e-commerce company to turn around a computer maker plagued by slowing growth and management missteps. (Source: Bloomberg)

Hewlett-Packard Co. (HPQ) Chief Executive Officer Meg Whitman plans to stick by strategies set in motion by her predecessor, Leo Apotheker, betting that investors prefer steady leadership to another unsettling change of course.

Whitman, in her first interview as Hewlett-Packard’s CEO, said the company stands by plans to acquire U.K. software marker Autonomy Corp. for $10.3 billion. The company also will continue to explore whether to sell or spin off the personal-computer division, she said. Those moves were announced on Aug. 18.

“It does not signal a change in the strategy,” Whitman said yesterday of her appointment. “We are behind the actions that were taken on Aug. 18. We are firmly committed to Autonomy.”

Whitman is hewing to those plans to avoid alienating shareholders who were fed up with the about-faces that characterized Apotheker’s reign. Still, Hewlett-Packard is overpaying for Autonomy and it shouldn’t have announced a possible PC unit sale without a concrete plan in place, said Chris Whitmore, an analyst at Deutsche Bank AG.

“We’re going to get more of the same from a Meg Whitman- led HP as we did from a Leo-led HP,” said Whitmore, who is based in San Francisco and has a “sell” rating on Hewlett- Packard. “The board isn’t going to change the strategy and is going to continue down this path, which frankly was the fear.”

Apotheker, CEO for less than 11 months, was ousted yesterday after cutting sales forecasts three times and making strategy shifts that blindsided investors. Palo Alto, California-based Hewlett-Packard also said Chairman Ray Lane will become executive chairman.

‘Heavily Scrutinized’

Whitman’s challenge will be boosting revenue while assuaging the investors whose dismay fueled a 47 percent plunge in Hewlett-Packard stock under Apotheker. She said the company will decide the outcome of the PC business as soon as possible.

“We’ll make a decision as fast as we possibly can,” she said in the interview. “We understand uncertainty doesn’t help the business, doesn’t help customers, doesn’t help shareholders.”

Her experience at consumer-oriented companies such as EBay Inc. (EBAY), Procter & Gamble Co. (PG) and Hasbro Inc. (HAS) may leave her ill- equipped to run Hewlett-Packard’s business-computing divisions, said Shaw Wu, an analyst at Sterne, Agee & Leach Inc. in San Francisco.

“She’s going to be heavily scrutinized,” said Wu, who has a “neutral” rating on the shares. “She doesn’t have the background to turn around HP.”

Whitman as Communicator

An estimated 25 percent of Hewlett-Packard’s sales come from consumers, Wu said. “What about the other 75 percent?”

Whitman defended her record at the helm of EBay.

“I have run a large company -- not obviously as large as HP, but I have run a very large company,” she said. “While I don’t have years of experience in an enterprise business, I bought a lot of software. I was one of the largest enterprise customers in Silicon Valley.”

“That’s like saying, ‘I’ve bought an iPhone, so I can run Apple Inc. (AAPL)” said Whitmore at Deutsche Bank.

Whitman will need to take Hewlett-Packard’s disparate operating groups -- including data-center computing gear, technology services, printers, and software -- and get them working as a team, Lane said in the interview. He also lauded Whitman’s ability to communicate company strategy.

“The market’s a little confused because we’re in so many different businesses,” he said. “This is 90 percent about leadership, communications and operating execution.”

Internet Pioneer

Lane, who considered becoming the CEO himself, said Hewlett-Packard executives weren’t working well under Apotheker. To explain why the board picked an outsider, Lane said on a conference call that internal managers “were not ready” to become CEO.

The stock jumped 6.7 percent on Sept. 21 after Bloomberg reported that Apotheker would be ousted, evidence that shareholders were relieved to see his tenure end. Hewlett- Packard fell $1.18, or 4.9 percent, to $22.80 yesterday on the New York Stock Exchange.

Whitman, 55, is credited with helping build EBay into the world’s largest Internet auctioneer, with a market value of about $40 billion. She took the company public and built an online storefront that helped thousands of small businesses peddle their wares. Yet in her final years at EBay, she couldn’t reverse a slowdown in sales growth and overpaid for Skype Technologies SA after a bidding war with Google Inc. and Yahoo! Inc. EBay later wrote down Skype’s value.

Pressure on Apotheker

Whitman joined Hewlett-Packard’s board in January after a failed bid to become California’s governor last year. Before EBay, Whitman worked as an executive at the toy company Hasbro, the floral service FTD Inc., footwear maker Stride Rite Corp. and Walt Disney Co. (DIS)

Hewlett-Packard had revenue of more than $126 billion in the past fiscal year, almost 14 times the size of EBay’s sales.

“It’s not clear to me that someone who spent 30 years in the consumer space is the right person for an enterprise technology company,” said Dana Stalder, a partner at venture- capital firm Matrix Partners in Palo Alto. Stalder worked under Whitman for seven years at EBay.

Pressure on Apotheker intensified when in August he announced the overhaul that included the Autonomy deal and possible spinoff. He also killed off the company’s WebOS tablets and smartphones, five months after vowing to put the operating system on a full range of the company’s computers.

Hewlett-Packard Forecasts

Hewlett-Packard Chief Financial Officer Cathie Lesjak, who served as interim CEO before Apotheker, said yesterday on a conference call that the company was no longer confident in its fourth-quarter sales guidance. Hewlett-Packard is sticking by its profit forecast, she said.

The company said in August that fourth-quarter revenue would be $32.1 billion to $32.5 billion, with earnings of $1.12 to $1.16 a share, excluding some costs. According to Bloomberg data, analysts are predicting sales of $32.2 billion and profit of $1.14 for the period.

The board weighed whether to oust Apotheker for six to eight weeks, Lane said in the interview.

Apotheker stands to receive cash severance of at least $7.2 million, a figure that could be higher if his annual bonus was set above the minimum $2.4 million laid out in the employment agreement. Including his $1.1 million in salary received for the first year, along with a $4 million cash signing bonus and a $4.6 million relocation payment, Apotheker will have earned about $34.7 million in cash and stock for less than a year’s work.

‘Investors Wound Up’

“Not bad for a short-term job, unless you’re a HP shareholder,” said Brian Foley, a compensation consultant in White Plains, New York. “This is yet another ex-CEO of Hewlett- Packard who does very well despite the circumstances.”

Apotheker joined Hewlett-Packard after Mark Hurd departed as CEO amid a scandal over a personal relationship with a company contractor. Hurd now is a co-president at Oracle.

A steady hand may be just what Hewlett-Packard needs, said Jayson Noland, an analyst at Robert W. Baird & Co. in San Francisco. He has a “neutral” rating on the stock.

“The board is directionally behind the plan Apotheker’s put in place,” Noland said. “It’s just the execution of that plan that has investors wound up.”

To contact the reporter on this story: Aaron Ricadela in San Francisco at aricadela@bloomberg.net.

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net.

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U.S. House Passes Spending, Disaster Aid Plan

By Laura Litvan - Sep 22, 2011 10:34 PM PT

The Republican-led House passed a stopgap spending bill containing federal disaster aid two days after rank-and-file party members helped defeat a nearly identical measure, offering no resolution to a fight with Senate Democrats that threatens a government shutdown.

The measure, passed 219-203 early today, would provide $3.65 billion in aid to victims of Hurricane Irene and other natural disasters as part of a measure funding the government until Nov. 18. Democrats who control the Senate say they won’t accept legislation they say doesn’t provide enough for disaster victims and contains offsetting spending cuts they reject.

The House measure “is not an honest effort at compromise” and will be rejected by the Senate, that chamber’s Majority Leader Harry Reid said in a statement late yesterday.

The stopgap measure would implement budget levels agreed to last month in a compromise to raise the debt ceiling. Tea Party- backed lawmakers helped defeat the bill Sept. 21 because they said it spends too much.

The Federal Emergency Management Agency says it needs additional funding to aid victims of Hurricane Irene by Sept. 27. The rest of the government will run out of money Sept. 30 and Congress plans to be out of session next week for Rosh Hashanah, the Jewish new year.

House Majority Leader Eric Cantor, a Virginia Republican, said lawmakers may have to work into this weekend to find an agreement.

Green-Technology Program

Democrats object to a proposed $1.5 billion cut in a green- technology auto-loan program to offset some of the cost of the disaster assistance.

The latest measure is identical to the defeated bill except that it also would rescind $100 million from a program that provided a $535 million federal loan guarantee to Solyndra LLC, which filed for bankruptcy protection this month.

Two days ago, 48 House Republicans unhappy with the measure’s overall cost joined 182 Democrats opposed to the proposed cut in the auto industry-loan program to derail the measure, 230-195. The vote was another setback for Speaker John Boehner, who has faced challenges in managing a large freshmen class of Tea Party-backed Republicans that earlier this year threatened a shutdown and a default on obligations to government bondholders.

In today’s vote shortly after midnight, 213 Republicans and six Democrats supported the slightly revised measure, while 24 Republicans and 179 Democrats opposed it.

‘No Threat’

Boehner of Ohio said at a news conference yesterday there is “no threat” of a government shutdown.

“I have no fear in allowing the House to work its will,” Boehner told reporters. “Does it make my life a little more difficult? Yes it does.”

The speaker “has a true governing problem” on his hands, Sarah Binder, a senior fellow at the Brookings Institution in Washington, said yesterday. “There are two dozen House Republicans who have voted against the April budget deal, the August deficit deal and the continuing resolution.”

Senator Richard Durbin of Illinois, the second-ranking Democratic leader, said, “We’re watching the Tea Party shut- down movie for the third time this year.”

House Minority Leader Nancy Pelosi of California told reporters that Democrats would oppose all efforts to offset disaster aid with other cuts.

Weary Public

The dispute carries political risk for Republicans because polls show the public is weary of the rancor that marked previous battles over the budget. Disapproval ratings for Congress are at historic highs, and Republicans are faring worse than Democrats in polls.

In a Sept. 10-15 CBS News/New York Times poll, 72 percent of adults surveyed disapproved of the job performance of Republicans in Congress and just 19 percent approved. Democrats had a disapproval rating of 63 percent and an approval rating of 28 percent. The poll of 1,452 adults had a margin of error of plus or minus 3 percentage points.

The higher disapproval ratings for Republicans stem largely from perceptions that Boehner and other party leaders are unwilling to compromise with Democrats on key issues, said Michael Dimock, research director of the Pew Research Center.

Market Drop

Stocks tumbled and Treasury 10-year yields dropped to a record amid concern central banks are running out of tools to prevent another recession. The Dow Jones Industrial Average fell 391.01, or 3.5 percent, to 10,733.83. Ten-year Treasury yields fell as low as 1.6961 percent, the lowest since Federal Reserve figures began in 1953.

Republicans said the earlier version of the bill was designed to pass with the support of Democrats, complaining that lawmakers such as Norm Dicks of Washington, the ranking member of the Appropriations Committee, withdrew their backing.

Tennessee Representative Jim Cooper said he and some other Democrats may accept a “less partisan” offset for disaster spending. Republicans “don’t have to poke us in the eye,” he said.

Democrats got a boost from the U.S. Chamber of Commerce, which said in a letter to senators that the auto-loan program “promotes manufacturing in the U.S. and is an important component of America’s energy security.”

Republican leaders were only able to lift the borrowing cap last month with the help of Democrats. The new legislation would set spending levels for the “discretionary” budget for the upcoming fiscal year agreed to as part of the debt limit deal. Democrats say they have no intention of reopening that debate.

Senator Charles Schumer of New York said, “You can’t shake hands on an agreement at the end of July and then they say ‘oh no, it’s up for negotiation again’ in September.”

The measure is H.R. 2608.

To contact the reporters on this story: Laura Litvan in Washington at llitvan@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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Apple Opens New China Stores But Trails Target

By Bloomberg News - Sep 22, 2011 10:37 PM PT

Apple Inc. (AAPL) is opening stores in the China region at a quarter the pace it forecast 19 months ago, giving rival makers of smartphones and tablet computers time to gain users in the world’s biggest mobile-phone market.

Apple opened its third store in Shanghai today and will open its first one in Hong Kong tomorrow, bringing the total to six in a region with the company’s highest-grossing outlets. That compares with the 25 stores that Ron Johnson, then Apple’s head of retail, said last year it targeted by February 2012.

The iPhone maker is only “scratching the surface” of Chinese demand after sales in the region surged six-fold to $3.8 billion last quarter, Apple Chief Executive Officer Tim Cook said in July. Still, delays in store openings may give makers of smartphones and tablets equipped with Google Inc. (GOOG)’s Android software room to gain market share, said Shaun Rein, managing director of China Market Research Group.

“In many ways they are still behind the curve, and they are opening stores too slowly,” said Rein, whose Shanghai-based company advises retailers and other clients about operating businesses in China. “Before, Apple had clear dominance in terms of technology, but now the gap is being lowered because of Android.”

Apple is expanding distribution of its products including the iPhone and iPad in China as competition with Android device makers including Samsung Electronics Co. and Lenovo Group Ltd. (992) intensifies. Kristin Huguet, a spokeswoman at Apple, declined to give the company’s latest target for store openings in China.

Leaving for Penney

The company, the world’s biggest by market value, accounted for 13 percent of China’s smartphone market by shipments in the second quarter, third behind Nokia Oyj (NOK1V)’s 36 percent and Samsung’s 15 percent, according to estimates at research firm Gartner Inc. Apple ranks first worldwide, according to researcher Strategy Analytics.

Apple aimed to have as many as 25 stores in the China region over two years, Johnson said Feb. 25, 2010, when the Cupertino, California-based company only had one store in the mainland. Johnson left in June to become J.C. Penney Co.’s chief executive officer.

“I don’t think anyone really expected them to come up with 25 stores in 24 months,” said David Wolf, CEO of Wolf Group Asia, a Beijing-based marketing strategy consulting firm. “Apple set a very high bar for themselves in a market where the logistical challenges are profound.”

‘Larger, Better’

China’s Jiefang Daily, citing Johnson, reported this February that the company may delay the 25-store target to focus on “larger and better” locations. Apple’s Huguet declined to confirm or deny the comments.

“They have been quite cautious so far,” said Sun Peilin, an analyst at research firm Analysys International in Beijing. “For Apple, they have now seen the benefits and potential of the market, and I think they will speed up the store openings.”

The new Shanghai store is the company’s biggest in China. The one in Hong Kong is located at the International Finance Center in the central business district.

“It’s a big store, and the design is quite good,” said Cui Lizhen, who traveled from his home province of Jilin and waited 40 hours outside the new outlet in Shanghai before the opening at 9:00 a.m. local time today.

In Hong Kong, about 10 people camped outside Apple’s store with their backpacks and folding chairs at 7:45 a.m. local time today, more than 25 hours before the opening tomorrow.

Retail Partners

A lack of stores hasn’t stopped growth. Shipments of the iPhone, Apple’s best-selling product, jumped to 2 million in China in the second quarter, compared with 300,000 a year earlier, according to Gartner analyst Sandy Shen. The figures include sales through unauthorized channels, or the so-called gray market, she said.

Having more stores would mean higher sales not only at the company’s own retail locations, Wolf said. The “halo” effect of the stores boosts the image of the products and lifts sales even at the resellers, he said.

Apple has more than 900 sales agents in mainland China, including stores operated by Studio A Inc., a unit of Taiwan’s Cheng Uei Precision Industry Co. That company’s chairman is Gou Tai-chiang, brother of billionaire Terry Gou, head of Apple supplier Foxconn Technology Group. In 2009, Apple started selling the iPhone through China Unicom (Hong Kong) Ltd., its carrier partner in China.

Apple’s distribution network in China has failed to keep up with demand, forcing customers to buy from vendors not sanctioned by the company. Only half of the 1.07 million Apple iPads sold in China in the second quarter were through authorized vendors, according to Analysys.

Apple may have scaled back the pace of store openings in China to focus on flagship locations, Wolf said.

“Location is important and iconic,” he said. “Apple’s performance is excellent, but not quite outstanding. I’d give them a strong B+.”

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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G-20 Vows to Tackle ‘Renewed’ Global Risks

By Scott Rose and Cheyenne Hopkins - Sep 22, 2011 11:03 PM PT
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Nicolas Sarkozy, president of France. Photographer: Jock Fistick/Bloomberg

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Sept. 23 (Bloomberg) -- Group of 20 finance chiefs pledged to address rising risks to the global economy and pushed Europe to contain its sovereign debt crisis after concern the world is on the brink of another recession sent stocks tumbling. Bloomberg's Linda Yueh reports on Bloomberg Television's "First Look" with Linzie Janis. (Source: Bloomberg)

Group of 20 finance chiefs pledged to address rising risks to the global economy and pushed Europe to contain its sovereign debt crisis after concern the world is on the brink of another recession sent stocks tumbling.

Policy makers are “committed to a strong and coordinated international response to address the renewed challenges facing the global economy,” G-20 finance ministers and central bank governors said in a statement late yesterday in Washington. Many urged Europe to implement a July promise to expand the powers of a rescue fund, Japanese Finance Minister Jun Azumi said.

The previously unplanned communique suggests authorities are alert to worries among investors, while they stopped short of outlining fresh policies to buoy growth. The worsening European debt turmoil and threat of a U.S. slump yesterday pushed the MSCI All-Country World Index of 45 nations into a bear market for the first time in more than two years.

“Verbal support without any concrete action is no longer convincing,” said Joe Lau, an economist at Societe Generale (GLE) SA in Hong Kong. “Investors are now looking for viable credible actions from policy makers and, given the amount of nervousness and uncertainty out there, that may not even be enough.”

While stocks came off their lows after the G-20 statement was released during the Asian day, the MSCI Asia Pacific Ex Japan index headed for its lowest close since June 2010.

Europe’s Pledge

The euro region vowed in the G-20 statement to increase the flexibility of the European Financial Stability Facility and to “maximize its impact” by the time the group next meets Oct. 14-15. Some officials signaled earlier in the day they may use leverage to increase the firepower of the EFSF, which was designed to stem the sovereign-debt crisis.

The G-20 officials cited “financial system fragility” and “heightened downside risks from sovereign stresses” among the threats to growth. They said they will ensure banks are adequately capitalized and have access to liquidity, while reiterating an aversion to volatility in currency markets.

The statement was released as the International Monetary Fund and World Bank prepare to start their annual meetings today, with data this week highlighting economic weakness around the globe.

U.S. consumer confidence dropped last week to its lowest point since the recession ended in 2009, and the output of European service companies and manufacturers this month shrank for the first time in more than two years. FedEx Corp. (FDX), an economic bellwether delivering goods from financial documents to pharmaceuticals, cut its full-year profit forecast as demand dropped in the U.S. and Asia.

‘Danger Zone’

“The world is in a danger zone,” World Bank President Robert Zoellick told reporters. Pacific Investment Management Co. Chief Executive Officer Mohamed El-Erian warned a fresh financial crisis is brewing, and Royal Bank of Scotland Group Plc predicted a euro-area recession will begin in the fourth quarter.

European authorities have drawn the most criticism for failing to contain a debt crisis that began in Greece two years ago and has since left that country on the verge of default, Portugal and Ireland requiring bailouts, and speculators threatening to dump the bonds of Italy and Spain.

Message for Sarkozy

In a sign of growing international irritation, U.K. Prime Minister David Cameron and five other G-20 leaders yesterday wrote to French President Nicolas Sarkozy to demand European governments “act swiftly to resolve the euro crisis” and consider “all possible options to ensure long-term stability in the world’s second-largest international currency.” Sarkozy is the current G-20 chairman.

In Washington, officials from China and Japan, the second- and third-biggest economies, indicated that their support for Europe will have limits and the region needs to solve the debt crisis itself. Japan’s Azumi said that while his nation can buy EFSF bonds if needed, there is no “blank check.”

“At the margin we can do quite a bit to help,” Chinese central bank Deputy Governor Yi Gang said in a panel discussion at the IMF. At the same time, “the real solution of the European sovereign debt crisis has to be done by Europeans themselves.”

Finance officials from Brazil, Russia, India, China and South Africa -- the so-called BRICS -- said in a statement they are “open to consider, if necessary, providing support through the IMF or other international financial institutions in order to address the present challenges to financial stability.”

Geithner’s Prediction

The European Central Bank may act to address risks to growth as soon as next month should economic data disappoint, Governing Council member Luc Coene said in an interview yesterday. An interest-rate cut isn’t ruled out, and the extension of long-term loans to banks is another possibility, he said.

U.S. Treasury Secretary Timothy F. Geithner predicted Europe will act “with more force” to end its troubles.

For now, European parliaments are focused on approving a plan to widen the scope of the 440-billion euro ($593 billion) EFSF to allow it to buy the debt of stressed euro-area governments, aid troubled banks and offer credit lines. Its current role is to sell bonds to fund rescue loans for cash- strapped governments.

The ratification process, which has so far been completed by just six nations, has drawn fire from some investors for being protracted and failing to provide the fund with enough cash to prevent the turmoil spreading beyond Greece. Curbing the scope of policy makers to do more is the suspicion that taxpayers in AAA-rated countries such as Germany and Finland would balk at stumping up even more rescue money.

Europe’s Options

Speculation has grown that Europe may eventually ratchet up the fund’s spending power through leverage, with European Union Monetary Affairs Commissioner Olli Rehn and French Finance Minister Francois Baroin indicating yesterday they may be willing to do so. One proposal is for the facility to use the bonds it sells as collateral to borrow more cash from the ECB.

Another idea is to mimic a U.S. program established following the 2008 collapse of Lehman Brothers Holdings Inc. by allowing the fund to offer the ECB credit protection for buying more sovereign bonds.

“It is very important that we look at the possibility of leveraging the EFSF resources and funding to have a stronger impact and make it more effective,” Rehn said. Baroin said separately that policy makers “need the right firewall to prevent contagion” and can discuss giving the fund “the necessary strength.”

To contact the reporters on this story: Scott Rose in Moscow at rrose10@bloomberg.net; Cheyenne Hopkins in Washington at chopkins19@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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Europe Mulls Increasing Rescue Fund Firepower

By Mark Deen and Shamim Adam - Sep 22, 2011 1:50 PM PT
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Francois Baroin, France's finance minister, right, speaks with Christine Lagarde, managing director of the International Monetary Fund (IMF), during a meeting of the G7 finance ministers and members of the Deauville Partnership in Marseille, France, on Sept. 10, 2011. Photographer: Chris Ratcliffe/Bloomberg

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Sept. 22 (Bloomberg) -- Richard Clarida, global strategic adviser at Pacific Investment Management Co., talks about the outlook for global monetary policy. He speaks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)

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Sept. 22 (Bloomberg) -- International Monetary Fund Managing Director Christine Lagarde talks about "downside risks" for the global economy, the IMF's mission and goals for its annual meetings in Washington this week, and the European sovereign-debt crisis. Lagarde, speaking with Tom Keene on Bloomberg Television's "InBusiness With Margaret Brennan," also discusses IMF funding and her experience in preparing for her new job. (Source: Bloomberg)

European finance chiefs said they may use leverage to increase the financial firepower of their regional bailout fund as a selloff in stocks signaled renewed concern that policy makers are failing to ward off a global economic slump.

The call to consider raising their fund’s ammunition -- made by French Finance Minister Francois Baroin and European Union Commissioner Olli Rehn -- suggests Europe’s policy makers are alert to concern among investors and foreign governments that they now lack the muscle to quell their debt turmoil if it spreads toward Italy and Spain.

How to tackle Europe’s woes will top the agenda when finance ministers and central bankers from the Group of 20 nations gather for dinner in Washington tonight ahead of the annual meetings of the International Monetary Fund and World Bank. They convene after global stocks entered a bear market and Pacific Investment Management Co. Chief Executive Officer Mohamed El-Erian warned the world is on the brink of another financial crisis.

“There has been a significant increase in the financial requirements of international intervention,” El-Erian said in Washington. “You need a lot more firepower in order to be a circuit breaker.”

July Plan

European parliaments are now focused on approving a July plan to expand the scope of the 440-billion euro ($593 billion) European Financial Stability Facility to allow it to buy the debt of stressed euro-area governments, aid troubled banks and offer credit lines. Its current role is to sell bonds to fund rescue loans for cash-strapped governments.

The ratification process has drawn fire from some investors for being protracted and failing to provide the fund with enough cash to prevent the crisis leaking beyond Greece. Curbing the scope of policy makers to do more is the suspicion taxpayers in AAA-rated countries such as Germany and Finland would balk at stumping up even more rescue cash.

That has fanned speculation Europe may eventually ratchet up the fund’s spending power, perhaps by using the bonds it sells as collateral to borrow more cash from the European Central Bank. Another proposal is to mimic a U.S. program established following the 2008 collapse of Lehman Brothers Holdings Inc. by allowing the fund to offer the ECB credit protection for buying more sovereign bonds.

EFSF Resources

“It is very important that we look at the possibility of leveraging the EFSF resources and funding to have a stronger impact and make it more effective,” EU Monetary Affairs Commissioner Rehn said in Washington. Baroin said separately that policy makers “need the right firewall to prevent contagion” and can discuss giving the fund “the necessary strength.”

German officials have so far rejected using the ECB to increase the power of the bailout fund, warning it could push the central bank further into the realm of fiscal policy. Former German Finance Minister Hans Eichel nevertheless suggested today that the rescue fund be given “unlimited powers” to convince investors that leaders are determined to beat the crisis.

“If it had unlimited power, it would calm the market,” Eichel said at a panel discussion in Bloomberg LP’s London office organized by GLG Research. “The risk with unlimited powers is lower than if it has limited funds.”

Credit Crisis

U.S. Treasury Secretary Timothy F. Geithner, who said in an interview this week that Europe will adopt some of the same measures the U.S. used to combat its credit crisis, today predicted it will act “with more force” to end its troubles.

Until governments act, IMF Managing Director Christine Lagarde said in a Bloomberg Television interview with Tom Keene that the ECB must continue to provide “solid, reliable” funding for troubled economies.

In a sign currently-stronger economies may be willing to support the weak, finance officials from Brazil, Russia, India, China and South Africa -- the so-called BRICS -- said in a statement that they are “open to consider, if necessary, providing support through the IMF or other international financial institutions in order to address the present challenges to financial stability.”

There may be limits to what they’re willing to do. China can support the European and global economies only “at the margin” and Europe must find its own the solution to its crisis, Chinese central bank Deputy Governor Yi Gang said in Washington.

‘Decisive Action’

U.K. Prime Minister David Cameron and five other G-20 leaders wrote to French President Nicolas Sarkozy to urge him to use his chairmanship of the body to find agreement on “decisive action” to support growth.

The risk of not doing so was underscored by a fall in Treasury 10-year yields to a record and a dip in oil below $80 a barrel. The MSCI All-Country World Index extended its losses from its May peak beyond 20 percent and emerging-market stocks plunged the most in almost three years. FedEx Corp., an economic bellwether that delivers goods ranging from pharmaceuticals to financial documents, cut its full-year profit forecast as demand dropped in the U.S. and Asia.

“The world is in a danger zone,” World Bank President Robert Zoellick told reporters.

To contact the reporters on this story: Mark Deen in Washington at markdeen@bloomberg.net Shamim Adam in Washington at sadam2@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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