Economic Calendar

Monday, October 10, 2011

Taxing Millionaires Casts Dems as Class ‘Warriors’

By Mike Dorning - Oct 10, 2011 11:00 AM GMT+0700

Democrats have turned to an agenda that Republicans are calling class warfare, as President Barack Obama presses a “Buffett Rule” to tax the rich, Senate Democrats offer a millionaires’ tax instead and party leaders fulminate against Bank of America’s $5 debit-card service fee.

Campaigning for re-election, Obama welcomes the charge.

“Then guess what? I’m a warrior for the middle class,” he declared Sept. 22, standing at a Cincinnati bridge linking the home states of the Republican leaders of the House and Senate and setting a new course for his own party.

“The president tried to be the great conciliator and suffered politically for it,” said Dan Schnur, director of the Jesse M. Unruh Institute of Politics at the University of Southern California and a former adviser to Republican Senator John McCain. “The message this fall is no more Mr. Nice Guy.”

As the Occupy Wall Street protests that have gained strength in recent weeks expanded to Washington, Obama offered a measure of solidarity, saying in an Oct. 6 news conference the demonstrators were “giving voice to a more broad-based frustration about how our financial system works.”

“Americans understand that not everybody has been following the rules,” said Obama, who stopped short of endorsing the protests. “These days a lot of folks that are doing the right thing aren’t rewarded, and a lot of folks who aren’t doing the right thing are rewarded.”

The populist causes Obama and his Democratic allies are beginning to champion may provide some inoculation against the broad public frustration with the economy that is shaping the contest for the White House in 2012.

A New Turn

This is the latest turn for a president who over the course of his tenure in office has oscillated in his public relationship with the nation’s business elite between chastising “fat-cat” bankers for large bonuses taken during the financial crisis and traveling to U.S. Chamber of Commerce headquarters to court corporate leaders.

Tension over how harshly to deal with the financial establishment has played out behind the scenes since Obama’s early days in office. Political aides such as former senior adviser David Axelrod and former White House Press Secretary Robert Gibbs argued for tougher rhetoric against banks in the aftermath of bailouts while a softer line was urged by economic aides such as Treasury Secretary Timothy Geithner and former National Economic Council Director Larry Summers.

House Majority Leader Eric Cantor criticizes the comfort Democrats provide to those he says would divide the country.

Comforting ‘Mobs’

“If you read the newspapers today, I, for one, am increasingly concerned about the growing mobs occupying Wall Street and the other cities across the country,” Cantor, a Virginia Republican, said Oct. 7 at a “Values Voter Summit” in Washington organized by the Family Research Council’s advocacy arm. “Believe it or not, some in this town have actually condoned the pitting of Americans against Americans.’

The Democrats’ populist stance also complements a potential line of attack against the candidate many Democratic strategists believe is most likely to win the Republican presidential nomination, Mitt Romney. The extent of the former private equity executive’s personal wealth was underscored with the disclosure in August that he had applied for permits to quadruple the size of a $12 million oceanfront home he owns in the La Jolla section of San Diego, California.

Democratic political strategist Paul Begala already has come up with a sharp-edged corollary to the “Buffett Rule” Obama has proposed for a tax overhaul which holds that wealthy taxpayers shouldn’t pay a lower rate than middle-class workers.

‘Romney Rule’

Begala calls it the “Romney Rule,” under which millionaires “pay a lower tax rate than maids.” Like Warren Buffett, the chairman of Berkshire Hathaway Inc., Romney receives most of his income from investments, typically taxed at a lower rate than wages.

Obama has little to lose by alienating Wall Street. While the president enjoyed strong support from the financial industry in his last election bid, much of that money has switched sides to the Republicans, mostly Romney. At least 100 of Obama’s Wall Street donors from 2008 are now with Romney.

The populist turn “is long overdue,” said Andrew Baumann, a vice president of the Washington-based Democratic polling firm Greenberg Quinlan Rosner. His firm has been advising clients, including House, Senate and gubernatorial candidates, to focus their campaigns on “a priorities debate about whose side you’re on.”

“This is where you want to go in an election like this, where the economy is bad and not likely to get better,” Baumann said.

Economic Troubles

Democrats’ hopes of easing Americans’ economic pain in time for the president’s re-election have faded. Growth weakened during the first half of the year to its slowest pace since the recovery began, escalating concern over the European debt crisis has roiled financial markets, and worries of a double-dip recession are mounting.

While payroll growth in September beat forecasters’ expectations and added 103,000 jobs, the pace barely kept up with population growth and didn’t budge the unemployment rate from 9.1 percent, where it has been stuck for three months. The median forecast for the average unemployment rate during the election year isn’t much lower, at 8.8 percent, according to a Bloomberg survey of economists taken in September.

The slow progress has hardened economic divisions.

Among Democrats, 59 percent say the country is split between “haves” and have-nots,” up from 47 percent who said so in April 2009. Among independents, the portion is 47 percent, up from 32 percent in 2009, according to a poll conducted by the Pew Research Center Sept. 22-25.

Standards of Living

Of greater political consequence, standards of living have been falling for the nation overall. Per capita real disposable personal income -- the average after-inflation value of the amount of money going into Americans’ pockets -- has dropped 0.5 percent during the 12 months ended in August and is lower than it was when Obama took office in January 2009.

Income growth has been the best economic predictor of presidential election results since 1952, according to research by Douglas Hibbs, a former government professor at Harvard University and economics professor at Sweden’s Gothenburg University. Hibbs tested factors such as per-capita real disposable personal income growth and fatalities in foreign wars against a range of models using other economic data.

‘Pent-Up Anger’

Senator Dick Durbin, an Illinois Democrat who was one of Obama’s early supporters, cites public frustration with growing disparities between the wealthy and working class.

“What you hear being expressed in many places -- on the floor of the Senate, in the House, even in the streets -- is this pent-up anger over the inequality of income in this country and the difficulties working families face,” said Durbin, second-ranking Democratic leader in the Senate. “It’s a cumulative impact this economy has had on working families: They are falling farther and farther behind.”

After Bank of America imposed a new $5-a-month fee for accountholders who use debit cards, Durbin went to the Senate floor Oct. 4 to urge customers to “get the heck out of that bank.” Representative Brad Miller, a North Carolina Democrat, followed up by introducing legislation to bar banks from charging customers fees to close accounts.

Vice President Joe Biden tapped public anger over the nation’s $700 billion bank bailout in denouncing the debit-card fee, which the bank said it was charging to recoup income lost by a new law limiting debit-card transaction costs for retailers.

Public Perceptions

“Look, the American people know -- they don’t guess -- they know the reason the CEO of the Bank of America or any other body in that business is in the business is because they -- that guy making 50,000 bucks -- bailed him out,” Biden said Oct. 6 at a forum in Washington.

He went on to question whether banks are “paying their fair share of the bargain” while “middle class people are getting killed.”

Only a year ago, Senate Democratic leaders avoided a vote on ending the Bush administration’s tax cuts for the wealthy as midterm congressional elections loomed. Last week, Senate Majority Leader Harry Reid, a Nevada Democrat, coupled a 5 percent surtax on people who earn at least $1 million to Obama’s jobs plan, inviting a vote on the proposal as a line of demarcation against Republican opponents.

Shift in Stance

For the president, the new approach represents a break from the “above-the-fray” stance he took in July and August during debt-limit negotiations with Republican congressional leaders, when he showed a willingness to give ground on traditional Democratic priorities such as Medicare and Social Security to try to forge a broad bargain on long-term deficits, according to Schnur, who was a campaign adviser to McCain, a senator from Arizona, in his 2000 presidential campaign.

The more confrontational approach carries a risk of clashing with the public persona of a political figure who was introduced to the nation as a unifying figure and has mostly eschewed divisive public rhetoric, Schnur said.

“As much as Obama knows intellectually this is the right political path to take, it’s still not who he is,” Schnur said. “At heart, he’s still a conciliator.”

To contact the reporter on this story: Mike Dorning in Washington D.C. at

To contact the editor responsible for this story: Mark Silva at


Netflix Advances After Retreat From Plan to Split DVD, Streaming Business

By Ronald Grover - Oct 10, 2011 7:22 PM GMT+0700
Enlarge image Netflix Nixes Plan to Split DVDs From Streaming

Netflix on Sept. 15 cut its projected subscriber numbers for the third quarter by 1 million, a reflection of customer reaction to the price increase. Photographer: Justin Sullivan/Getty Images

Oct. 10 (Bloomberg) -- Porter Bibb, managing partner at Mediatech Capital Partners LLC, talks about the prospects for Netflix Inc. Netflix, reacting to customer anger, retreated from a decision to split its mail-order DVD service from its Internet streaming and will continue to run both from a single website. Bibb speaks with Matt Miller on Bloomberg Television's "Inside Track." (Source: Bloomberg)

Netflix Inc. (NFLX), reacting to customer anger, retreated from a decision to split its mail-order DVD service from its Internet streaming and will continue to run both from a single website. The shares climbed in early trading.

“Consumers value the simplicity Netflix has always offered and we respect that,” co-founder and Chief Executive Officer Reed Hastings said today in an e-mailed statement. “There is a difference between moving quickly -- which Netflix has done very well for years -- and moving too fast, which is what we did in this case.”

Customers will be able to access the streaming and mail- order services from, with one account and password, the Los Gatos California-based company said in the statement. Netflix on Sept. 18 said people who wanted DVDs would have to sign up for a new service called Qwikster, requiring a separate account and billing.

The change is an acknowledgement of the anger Los Gatos, California-based Netflix triggered in subscribers, first with a plan to raise prices and the subsequent Sept. 18 announcement detailing the separation of the services.

Netflix shares rose as much as 10 percent in early trading, after falling 4.9 percent to $117.21 on Oct. 7 in New York trading. The stock had tumbled 62 percent from its high in July before today.

On July 12, Netflix said people who want streaming and DVDs would have to pay $7.99 a month for each service, a 60 percent increase for people who previously got both. Today’s statement didn’t mention that price change.

Subscriber Forecast

“We’ve ruffled a lot of feathers,” Chief Financial Officer David Wells said on Sept. 21 at a Goldman Sachs Group Inc. conference. The company has been “humbled” by customer reaction to the changes, he said.

Netflix on Sept. 15 cut its projected subscriber numbers for the third quarter by 1 million, a reflection of customer reaction to the price increase. Of those, the company said 9.8 million streamed movies, 12 million received both services and 2.2 million ordered DVDs by mail only.

John Malone’s Starz LLC on Sept. 1 said it was ending talks to renew a streaming accord with Netflix. Starz supplies recent Walt Disney Co. and Sony Corp. (6758) movies to Netflix for online viewing under a contract that expires in February.

Hastings in Sept. 18 blog post apologized for the company’s handling of a July price change and also unveiled details of the plan to split the two businesses.

“I slid into arrogance based on past success,” Hastings wrote at the time.

Explaining the split, he said the DVD and streaming operations “are becoming two quite different businesses, with very different cost structures, different benefits that need to be marketed differently, and we need to let each grow and operate independently.”

Netflix posted the announcement of today’s change in its plans on the corporate blog and also sent e-mails to its subscribers, according to the statement.

To contact the reporter on this story: Ronald Grover in Los Angeles at

To contact the editor responsible for this story: Anthony Palazzo at


Apple IPhone 4S Pre-Orders Top 1M in Single Day

By Lisa Rapaport and Xu Wang - Oct 10, 2011 8:45 PM GMT+0700
Enlarge image Apple Says IPhone 4S Pre-Orders Top 1 Million in Single Day

The iPhone 4S, announced this week, will feature an A5 dual-core CPU and dual-core graphics chip that work "7 times faster" than on the iPhone 4; features a new camera with advanced optics; 1080p HD resolution video recording; and Siri, an intelligent assistant. Photograph: Apple/MCT/Newscom

Apple Inc. (AAPL) received more than one million pre-orders for the iPhone 4S in a single day, 67 percent more than for the previous version of the device.

Demand for the phone, introduced a day before Apple co- founder Steve Jobs passed away, is a tribute to the technology icon’s legacy, said William Choi, an analyst at Janney Montgomery Scott LLC.

“It’s the last phone developed with Steve Jobs at Apple,” Choi said in a telephone interview today. “There are definitely some sentiments at play here.”

The rush also signals pent-up demand for the new model, which followed the previous version by 16 months -- longer than usual. Apple unveiled the iPhone 4S last week, pricing it at $199, $299 and $399, depending on the features. The device comes with new voice-command features and a higher-resolution camera.

It has an A5 chip that will make graphics seven times faster than the old processor and an “intelligent antenna system” for improved call quality. The phone works with both CDMA and GSM wireless standards, used in different parts of the world, and will have up to 8 hours of talk time on one charge.

The new model will be the first Apple product release since the Oct. 5 death of Jobs. The iPhone represents the company’s biggest source of revenue, accounting for about half of sales.

In Stores Oct. 14

The iPhone 4S will be available at Apple retail stores in the U.S. beginning at 8 a.m. local time on Oct. 14, the Cupertino, California-based company said today in a statement.

For the first time, the device is available from all three of the largest U.S. carriers. AT&T Inc. (T) said Oct. 7 that it received more than 200,000 pre-orders for the iPhone 4S in 12 hours, marking the company’s most successful debut yet for the Apple Inc. device. The other two are Verizon Wireless and Sprint Nextel Corp. (S)

Adding Sprint as a carrier has helped boost pre-orders, said Jeffrey Fidacaro, an analyst at Susquehanna International Group, in a telephone interview today. So has the timing of the release.

“People are buying the phone to honor Steve Jobs and support the company,” he said. Sprint has an opportunity to add 6 million users a year, he said.

Apple rose 2.7 percent to $379.84 at 9:38 a.m. New York time in U.S. trading. The stock had increased 15 percent this year before today.

To contact the reporters on this story: Lisa Rapaport in New York at; Xu Wang in New York at

To contact the editors responsible for this story: Tom Giles at


Asia Stocks Rise as Germany, France Pledge Support for Banks Amid Crisis

By Shani Raja - Oct 10, 2011 6:01 PM GMT+0700

Oct. 10 (Bloomberg) -- Nick Maroutsos, a Sydney-based money manager and co-founder at Kapstream Capital, talks about the outlook for financial markets and the U.S. economy. Maroutsos speaks with Susan Li and John Dawson on Bloomberg Television's "First Up." (Source: Bloomberg)

Asian stocks rose as the heads of Europe’s two biggest economies pledged to support banks amid a debt crisis that threatens global growth. Shares of Chinese companies fell on speculation the country will maintain tighter monetary policy.

Samsung Electronics Co., the world’s second-biggest maker of mobile phones, rose 1.6 percent in Seoul and Hanjin Heavy Industries & Construction Co., which gets 45 percent of its revenue overseas, surged 15 percent. Rio Tinto Group, the world’s second-largest mining company by sales, added 1.5 percent in Sydney as commodity prices rose. China Overseas Land & Investment fell 3.5 percent on concern the nation’s housing market is weakening.

The MSCI Asia Pacific Excluding Japan Index gained 1 percent to 386.23 as of 6:56 p.m. in Hong Kong. About four stocks gained for every three that fell. German Chancellor Angela Merkel said European leaders would do “everything necessary” to ensure banks have adequate capital. The measure sank as much as 0.3 percent after Hong Kong’s Hang Seng Index opened and Chinese equities resumed trade after a holiday.

“The Europeans have been talking a lot about doing everything they can to solve the debt crisis, but we still haven’t seen any detail,” said Nader Naeimi, a Sydney-based strategist for AMP Capital Investors Ltd. “In China, housing- market weakness, together with expectations for further monetary tightening continues to stoke fear of a hard landing for the economy.”

Prudent Policy

Australia’s S&P/ASX 200 Index gained 0.9 percent and South Korea’s Kospi Index added 0.4 percent. Japanese markets were closed for a public holiday. India’s Sensex Index increased 2 percent, led by Tata Motors Ltd.

The Hang Seng Index (HSI) closed little changed. The gauge declined as much as 1.5 percent after the Beijing Morning Post reported that Chinese central bank adviser Zhou Qiren said the country should maintain a prudent monetary policy. The Shanghai Composite Index fell 0.6 percent as the country’s markets resumed trading after a week-long holiday.

Futures on the Standard & Poor’s 500 Index rose 1.2 percent today. In New York, the gauge fell 0.8 percent on Oct. 7 as concern that Europe’s debt crisis will worsen overshadowed faster-than-forecast growth in American employment.

Financial stocks had the biggest decline in the S&P 500 among 10 industries after Fitch Ratings downgraded Italy and Spain. The S&P 500 last week came within 1 percent of extending its decline from its April peak to 20 percent, the common definition of a bear market.

‘Light Optimism’

At the weekend, Germany’s Merkel joined French President Nicolas Sarkozy in trying to persuade investors they can stamp out the debt crisis roiling global markets. At a joint press conference in Berlin, Sarkozy set a deadline of the Nov. 3 Group of 20 summit to deliver a response that addresses the immediate debt crisis in Greece, and what he called the structural defects in the 17-nation euro area. No details were provided.

“There is some light optimism on the back of the statements from Sarkozy and Merkel that they will have a euro stability plan by month-end,” said Angus Gluskie, who manages more than $300 million at White Funds Management in Sydney.

Samsung rose 1.6 percent to 874,000 won in Seoul. Hanjin Heavy surged 15 percent to 18,400 won. LG Display Co. jumped 6 percent to 21,250 won after Shinhan Investment Corp. said the world’s No. 2 maker of liquid-crystal displays would narrow its operating loss in the fourth quarter and return to profit in the second quarter of 2012.

Li & Fung Ltd., the world’s biggest supplier of clothes and toys to retailers, gained 1.5 percent to HK$13.20 in Hong Kong, while in Sydney, Billabong International Ltd., a global surfwear maker, advanced 0.6 percent to A$3.65.

Copper, Oil

Rio Tinto, the world’s No.2 mining company by sales, gained 1.5 percent to A$67.40. Australia’s biggest steelmakers also climbed, with BlueScope Ltd. advancing 3.1 percent to 84.5 Australian cents and OneSteel Ltd. rising 1.9 percent to A$1.34. Cnooc Ltd., China’s largest offshore oil explorer, added 2.8 percent to HK$13.20 in Hong Kong.

Copper rose for the third straight day in New York on Oct. 7. New York-traded oil futures gained 0.5 percent after Labor Department figures showed U.S. employers added more payrolls than forecast in September, easing concern the economy is slowing. The jobless rate held at 9.1 percent.

The London Metal Exchange Index of prices for six industrial metals, including copper and aluminum, added 1.4 percent. Today, copper futures rose as much as 2.2 percent and oil as much as 1.2 percent.

Uranium Stocks

Uranium producers also climbed in Sydney. Extract Resources Ltd. (EXT) jumped 10 percent to A$8.86 before trading in its shares was halted pending an announcement. China Guangdong Nuclear Power Group Co. may revive a bid for Kalahari Minerals Plc, which owns 43 percent of Extract, Reuters reported, citing a person familiar with the situation.

Rival Paladin Energy Ltd. (PDN) gained 10 percent to A$1.71 and Energy Resources of Australia Ltd., a uranium producer controlled by Rio Tinto Group, rose 6.5 percent to A$3.26.

The MSCI Asia Pacific ex-Japan Index dropped 20 percent this year through Oct. 7, compared with an 8.1 percent loss for the S&P 500 and a 16 percent decline for the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 10.7 times estimated earnings on average, compared with 11.6 times for the S&P 500 and 9.8 times for the Stoxx 600.

Hong Kong Shares

Hong Kong shares declined today after Chinese central bank adviser Zhou Qiren said the country should stick to a prudent monetary policy because small companies will have a better development environment only if inflation is thoroughly curbed, according to the Beijing Morning Post report.

Separately, the official Xinhua News Agency reported yesterday that China’s home prices will gradually ease because of rising inventories and a drop in property-market transactions. The housing market slumped during the National Day holiday, typically a strong period for housing sales, Xinhua said.

Among property developers, China Overseas slipped 3.5 percent to HK$12.24. Agile Property Holdings Ltd., which develops land in Guangdong province, tumbled 8.8 percent to HK$5.47. Guangzhou R&F Properties Co., the biggest developer in the southern Chinese city, dropped 2 percent to HK$6.29.

Some energy companies slumped in Hong Kong after China cut fuel prices for the first time this year. PetroChina Co., the country’s largest oil producer and Asia’s biggest company by market value, dropped 1.4 percent to HK$9.18. China Petroleum & Chemical Corp., the refiner known as Sinopec, fell 4.4 percent to HK$7.16.

Separately, China Petrochemical Corp., parent of Sinopec, agreed to buy Daylight Energy Ltd. for about C$2.2 billion ($2.1 billion) in cash to add oil and gas assets in Canada, the Calgary, Alberta-based company said yesterday in a statement.

To contact the reporter on this story: Shani Raja in Sydney at

To contact the editor responsible for this story: Nick Gentle at


U.S. Corporate Profit Rebound Loses Steam

By Thomas Black - Oct 10, 2011 6:12 PM GMT+0700

This year’s rebound in corporate earnings is losing steam as slower economic growth and greater strain on consumers threaten sales and profit margins at companies from Texas Instruments Inc. (TXN) to Google Inc. (GOOG)

Earnings per share for the Standard & Poor’s 500, excluding financial companies, rose 14 percent in the third quarter, the smallest gain since the end of 2009, analysts’ estimates compiled by Bloomberg show. That compares with 19 percent in the second quarter and 20 percent in the first. Analysts have begun reducing forecasts for the current quarter and beyond. S&P 500 futures rose today, indicating the index will extend last week’s rally.

Chipmaker Texas Instruments and air conditioner maker Ingersoll Rand Plc are among companies that have lowered their guidance because of faltering demand. With U.S. unemployment stuck above 9 percent, political squabbling about the government debt ceiling and a downgrade of the nation’s credit rating, confidence has been sapped, said Matt McCormick, who helps manage $4 billion with Bahl & Gaynor Inc. in Cincinnati.

“What started in August as a crisis of confidence hasn’t been resolved,” McCormick said. “This is a grind-it-out economy. We’re in a situation where it’s still going to take several years to rebuild our economic house.”

S&P 500 earnings excluding financials are forecast to slow to 12 percent growth in the fourth quarter and 9 percent in the first quarter. The U.S. economy will expand 1.6 percent this year after growing 3 percent in 2010, according to the average of 66 economist forecasts. Consumer spending slowed in August to 0.2 percent as incomes dropped for the first time since October 2009, and the Bloomberg Consumer Comfort Index showed the worst quarterly performance in more than two years.

Global Equities

Global equities have lost about $6 trillion in value since Aug. 5, when S&P stripped the U.S. of its top AAA credit rating. The S&P 500 tumbled 14 percent in the three months ended in September, the Stoxx Europe 600 Index fell 17 percent, while the MSCI Asia Pacific Index plunged 16 percent, their biggest quarterly drops since the peak of the financial crisis in 2008.

Alcoa Inc. (AA), the biggest U.S. aluminum producer, will report earnings Oct. 11 after U.S. markets close, the first member of the Dow Jones Industrial Average to do so for the third quarter. While aluminum has declined from 2011 peaks, average prices rose in the past year, helping drive profit to what analysts say will be 23 cents a share, from 9 cents a year earlier.

Low-Grade Recession

“Good corporate earnings or surprisingly better-than- expected earnings would really be a win in this market, which seems to be selling at a level that has at least built in a low- grade recession,” said Mark Luschini, chief investment strategist for Philadelphia-based Janney Montgomery Scott LLC, which manages $54 billion.

Existing earnings estimates may not provide much use to investors, said Gary Flam, who helps manage $6.5 billion for Bel Air Investment Advisors LLC in Los Angeles. Expectations for S&P 500 earnings growth had been ratcheted down from 16 percent at the end of July, making it easier for companies to meet or beat estimates even as demand cools, Flam said.

‘Heightened Uncertainty’

As of Oct. 7, 174 companies had lowered third-quarter earnings outlooks among the 436 that had provided guidance for the period, according to data compiled by Bloomberg. At least 59 had raised, with the remainder primarily standing pat. More than looking at this past quarters’ earnings, investors want companies to give them a peek into the future, Flam said.

“In a time of heightened uncertainty, people are trying to get some clarity and conviction and that’s going to come from what management is saying about the outlook,” Flam said. “It’s not necessarily what you did in the third quarter. It’s what does the future hold.”

Texas Instruments, the largest producer of analog chips for medical devices and e-book readers, lowered the top range of its third-quarter earnings forecast to 60 cents a share from 65 cents on Sept. 8. Sami Kiriaki, who runs the Dallas-based company’s power-management unit, later cited a slowdown “across many products, many markets and many customers.”

Intel Corp. (INTC), whose processors run more than 80 percent of the world’s personal computers, may also have suffered last quarter as consumers pushed off laptop purchases or turned to alternative devices such as Apple Inc. (AAPL)’s iPad.

“We’re seeing weak demand across so many market segments,” said Chris Caso, a New York-based analyst for Susquehanna International Group. He has a “neutral” rating on Intel’s stock and said he doesn’t own any of the shares.

Euro-Area Economy

Flagging U.S. purchases of air conditioners, golf carts and security systems forced Swords, Ireland-based company Ingersoll Rand to reduce the top range of its earnings forecast for the third quarter by 15 cents to 80 cents and its sales outlook by $200 million to $3.95 billion.

The euro-area economy has also lost momentum with growth in the 17-nation bloc slowing to 0.2 percent in the second quarter from 0.8 percent in the first. Earnings per share for Stoxx Europe 600 companies are projected to have gained 5.8 percent in the third quarter from a year earlier, the slowest pace since 2009 and down from an average 18 percent increase in the second quarter.

Royal Philips Electronics NV, the Amsterdam-based maker of lighting equipment and consumer electronics, may say net income slumped to 84 million euros ($112 million) from 524 million euros when it reports Oct. 17. Sales likely slipped to 5.4 billion euros from 6.16 billion euros, the survey of analysts showed.

Siemens, Lufthansa

Munich-based Siemens AG (SIE), Europe’s largest engineering company and a Philips competitor, has said that growth will come down in the second half as industrial customers cut back.

Airlines Deutsche Lufthansa AG (LHA) in Germany and Finnair Oyj (FIA1S) in Finland cut their profit forecasts in the past month as results fell short of expectations and forward bookings sagged. U.K.-based Flybe Group Plc (FLYB), Europe’s biggest regional airline, said Oct. 5 that first-half revenue missed its forecast.

In the U.S., United Continental Holdings Inc. (UAL) and Delta Air Lines Inc. (DAL) have said they are worried that travel demand may weaken at the end of this year and leading into 2012 if the economy worsens, and they’re trimming capacity to lower costs.

European leaders have been meeting to discuss ways to fortify undercapitalized banks and stem sovereign-debt woes, which broke out in Greece in late 2009. U.S. President Barack Obama last week called the European debt crisis “the biggest headwind” to his nation’s economic recovery.

Greece, Portugal

In response to the debt crisis, spending cuts have been pursued in Greece, Portugal and Ireland, damping economic outlooks. In the U.K., Tesco Plc (TSCO) reported its worst domestic sales performance in at least six years. Children’s retailer Mothercare Plc (MTC) and Premier Foods Plc (PFD), the U.K.’s largest foodmaker, have said they would miss forecasts.

The three biggest luxury carmakers -- Daimler AG (DAI)’s Mercedes-Benz, Bayerische Motoren Werke AG (BMW) and Volkswagen AG (VOW)’s Audi -- are reporting a cooling in sales growth after a first- half boom that has nudged them toward all-time sales highs.

Fiat SpA (F), Italy’s largest automaker and the owner of Chrysler Group LLC, has scrapped its 2011 domestic car sales forecast, with Chief Executive Officer Sergio Marchionne saying last month that the “Italian market hasn’t been so weak since the 1980s.”

Financial Companies

Financial companies may be a drag on earnings growth as well because the market for initial public offerings has dried up, acquisition activity has slowed and fixed income has been hurt by low yields, said Luschini of Janney Montgomery. Analysts’ forecasts for S&P 500 earnings-per-share growth that includes financials have dropped to 12 percent this month from 18 percent in July, according to Bloomberg data.

Goldman Sachs Group Inc. (GS), JPMorgan Chase & Co. (JPM) and other banks that rely on trading and investment-banking may report lower earnings compared with the second quarter because deal volume fell and investors fled riskier assets to protect against Europe’s debt crisis and the specter of another U.S. recession. Jefferies Group Inc. (JEF), which last month said fiscal third-quarter fixed-income trading plunged 85 percent from the second quarter, called August “outright brutal.”

“European concerns have extended beyond the periphery,” driving down trading profits, Guy Moszkowski, an analyst in New York with Bank of America Corp. (BAC), said in a Sept. 26 note.

Companies with mortgage-banking units may fair better as efforts by the Federal Reserve to keep borrowing costs low prompt more lending, Richard Ramsden, an analyst at Goldman Sachs in New York, said in a Sept. 28 note. Wells Fargo & Co. (WFC), the biggest U.S. home lender, may post adjusted earnings per share of 72 cents on Oct. 17, compared with 70 cents in the second quarter, according to the average of estimates.

GE Earnings

General Electric Co. (GE) should post an earnings rise of 2 cents a share to 31 cents, led by higher profit at the Fairfield, Connecticut-based company’s finance unit.

The economy still is expanding and profit margins are still benefiting from cost reductions, said Tobias Levkovich, chief U.S. equity strategist for Citigroup Inc. in New York.

“We’re looking at an uneven patch of growth,” Levkovich said. “I don’t expect to see really bad earnings here.”

McDonald’s, Toyota

As the economy slows, investors are seeking companies that sell basic goods and pay high dividends, said McCormick of Bahl & Gaynor. Oak Brook, Illinois-based McDonald’s Corp. (MCD) benefits when consumers turn to restaurants that can save them money, he said. The world’s largest restaurant chain is forecast to report earnings per share of $1.42 in the quarter, up from $1.29 a year ago.

Toyota Motor Corp. (7203), Asia’s largest carmaker, may boost profit as it ramps up production that was disrupted by Japan’s March earthquake. The company may report net income of about 103 billion yen ($1.3 billion) in the quarter ended Sept. 30, compared with 98.7 billion yen a year earlier.

“Toyota has rebounded from the quake, and what will be important for the carmaker now is to keep up with demand,” said Issei Takahashi, a Credit Suisse Securities Japan Ltd. analyst.

Samsung Electronics Co., the world’s second-largest maker of mobile phones, is counting on its Galaxy mobile devices with Google’s Android operating system to boost revenue as profit from its chips and flat-screen panels falls. The Suwon, South Korea-based company, Apple’s closest competitor in smartphones, gave preliminary results on Oct. 7 that showed operating profit in the three months ended in September fell to 4.2 trillion won ($3.6 billion), down from 4.86 trillion won a year earlier. Full results will be reported later this month.

Microsoft, Google

Apple, whose founder Steve Jobs died Oct. 5, is defying the consumer slowdown with higher sales of iPhones and iPads. The Cupertino, California-based company’s adjusted earnings per share for its most recent fiscal quarter is forecast to jump to $7.23 from $4.64 a year earlier, analysts’ estimates show.

Microsoft Corp. (MSFT) sales are projected by analysts to rise 7 percent to $17.3 billion, as corporate purchases of Office software and server programs make up for weaker consumer demand for personal computers.

While Google is benefiting from gains in the search-engine market, the industry is showing signs of a slowdown. Spending on U.S. search advertising rose 7 percent in the third quarter, down from 12 percent growth in the second quarter, according to IgnitionOne Inc., an online marketing company.

‘Consumer Strain’

“The data shows consumer strain in response to perceived weaker economic conditions,” Jordan Rohan, an analyst at Stifel Nicolaus & Co. in New York, said in an Oct. 5 research note in which he downgraded Google to “hold” from “buy.”

Analysts project Google to have third-quarter earnings minus some items of $8.76, up 15 percent from the $7.64 reported a year earlier. Fourth-quarter earnings should also rise 15 percent to $10.07. That’s a slowdown from 36 percent growth in the second quarter and 20 percent in the first.

With demand slowing, earnings this quarter will give investors a good idea which companies are better equipped to face a downturn, McCormick of Bahl & Gaynor said.

“When you look at what has happened since August --whether it be the debt negotiations, the downgrade, the continued mess in Europe and the volatility -- it’s logical to conclude that that will have an impact on economic activity and earnings,” McCormick of Bahl & Gaynor said. “I think you’re going to see stronger companies begin to separate themselves from their weaker competitors.”

To contact the reporter on this story: Thomas Black in Monterrey at

To contact the editors responsible for this story: Ed Dufner at; Kevin Miller at


Egypt on Alert After Night of Deadly Clashes

By Mariam Fam - Oct 10, 2011 5:03 PM GMT+0700

Egyptian security forces deployed outside government buildings in central Cairo after a night of clashes between Coptic Christian protesters and security forces that left at least 24 dead.

The violence began when several hundred Egyptian Christians protesting a recent attack on a church came under assault by people in plain clothes and were later confronted by security forces. Protests continued late into the night with the military imposing a curfew until 7 a.m. in the center of the capital.

“This was not violence between Christians and the army, nor was it violence between Christians and Muslims, there were thugs involved,” said Father Youssef Samir, a Coptic priest surveying the damage. Police in riot gear directed traffic today along the Nile, where an upturned, burnt-out car and smashed glass remained from the violence.

Egyptian shares dropped to the lowest level in more than two years. The benchmark EGX 30 Index slumped 3.1 percent to 3,803.62 at 11:18 a.m. in Cairo, the lowest intraday level since March 2009. Orascom Construction Industries (OCIC), the country’s biggest publicly traded builder, lost 2.2 percent. Citadel Capital SAE headed for the lowest close since listing in December 2009.

Discrimination against Copts, who make up about 10 percent of the population of Egypt, had been encouraged by the government of former president Hosni Mubarak, according to a U.S. State Department report on religious freedom published last year. Some Christians say this policy has continued under the military council which took power after Mubarak was ousted in February.

Church Protest

Coptic Christians had gathered to protest the demolition on Oct. 1 of a church in Aswan, in southern Egypt, said Samuel Sobhi, 34, who joined friends and relatives of the dead today in the Coptic Hospital in central Cairo. At least 24 people were killed and 272 injured in the violence, the state-run Middle East News Agency reported today, citing Health Ministry figures.

The demonstrations started peacefully with a march in the Shoubra district but degenerated when protesters came under attack by men in plainclothes who pelted them with stones, witnesses including Sobhi said. Demonstrators later clashed with security forces in the center of the city, where many were killed and injured by gunfire and by armored vehicles driving into the crowd, he said.

‘Grip on Power’

“The army created this because they wanted to tighten their grip on power, they want people to forget all about elections and all about democracy,” said Sobhi.

Prime Minister Essam Sharaf said in a televised speech that the clashes were “unjustified violence” that “raised fear and concerns about the future of this homeland” and the country’s transition to democracy.

Some protesters may have snatched weapons from soldiers and turned them on the military, in addition to throwing rocks and bottles, the Associated Press reported late yesterday. Egyptian security forces arrested dozens of protesters near the state television building, according to MENA. Protests also broke out in four other provinces in Egypt, according to Al Arabiya television.

Mubarak’s regime had failed to prosecute perpetrators of violence against Coptic Christians in a number of cases and failed to address laws, particularly with respect to church construction and renovation, which discriminate against Christians, according to the State Department report.

“What is happening now is not clashes between Muslims and Christians but attempts to spark chaos and strife among the homeland sons,” Prime Minister Sharaf wrote on his Facebook page. “I call upon Egyptians to not respond to the calls for strife.”

Sharaf was in contact with military leaders and church officials, attempting to contain the crisis, MENA said.

To contact the reporters on this story:

To contact the reporter on this story: Mariam Fam in Cairo at


European Stocks Advance on Merkel, Sarkozy Debt Pledge; U.S. Futures Gain

By Adria Cimino - Oct 10, 2011 6:27 PM GMT+0700

European stocks advanced, extending a two-week gain for the Stoxx Europe 600 Index, as energy companies rallied after the leaders of Germany and France gave themselves three weeks to create a plan to recapitalize banks. U.S. index futures and Asian shares rose.

A gauge of energy companies was among the best performers in the Stoxx 600 after HSBC Holdings Plc upgraded Premier Oil Plc. (PMO) BP Plc contributed the most to the gauge’s advance. Erste Group Bank AG (EBS) plunged 13 percent after saying it will post a full-year loss because of writedowns at its units in Hungary and Romania. Dexia SA (DEXB) may be active when trading in the shares resumes after Belgium stepped in to shore up the company.

The benchmark Stoxx 600 advanced 0.7 percent to 233.59 at 12:25 p.m. in London. Futures on the Standard & Poor’s 500 Index expiring in December climbed 1.4 percent, while the MSCI Asia Pacific Index added 0.6 percent.

“I believe they will come up with something,” Andy Brough, executive director at Schroder Investment Management Ltd. in London, which has about $324 billion in assets under management, said in a Bloomberg Television interview. “What the market wants to see is can we get a position and move forward.”

Angela Merkel and Nicolas Sarkozy, racing to stamp out the sovereign-debt crisis that threatens to engulf the financial system, set an end-of-October deadline to devise a plan to recapitalize banks, get Greece on the right track and fix Europe’s economic governance.

Recapitalizing Lenders

“By the end of the month, we will have responded to the crisis issue and to the vision issue,” France’s president said in Berlin yesterday at a joint briefing with the German chancellor before they dined at her office. Sarkozy said they will deliver a plan by the Nov. 3 Group of 20 summit.

The Stoxx 600 advanced 2.6 percent last week as the Bank of England expanded its bond-purchase program and after Merkel said she’s ready to discuss recapitalizing lenders. The gauge has still retreated 20 percent since this year’s high on Feb. 17 and is trading at 9.8 times its companies’ estimated earnings, near the cheapest since March 2009, according to data compiled by Bloomberg.

Energy stocks jumped 1.9 percent, for the second-best performance among the 19 industry groups in the Stoxx 600. BP added 2.3 percent to 402.7 pence.

Premier Oil gained 2.9 percent to 371.1 pence. HSBC lifted its recommendation on the stock to “overweight” from “underweight.”

Ferrovial Shares Surge

Ferrovial SA (FER) gained 4.7 percent to 8.92 euros. The company agreed to sell 5.9 percent of BAA’s parent company, FGP Topco Ltd. to two of Alinda Capital Partners’ funds, reducing its indirect holding in the owner of London’s Heathrow airport to 49.99 percent.

Maurel SA rallied 4.1 percent to 13.24 euros. The company said it has found oil sandstones at a well at the Sabanero license in Colombia and oil samples taken have confirmed the field extension to the north east. In a statement, Maurel said it will drill three more wells in 2011 and 2012.

ABB Ltd. (ABBN), the world’s largest maker of power-transmission gear, added 2.2 percent to 16.78 francs. Jefferies Group Inc., raised its recommendation on the company’s shares to “buy” from “hold.”

Erste Group, eastern Europe’s second-biggest lender, slumped 13 percent to 18.01 euros, its largest slump since May 2009. The bank said it will post a full-year loss of as much as 800 million euros ($1.1 billion) after writedowns on its Hungarian and Romanian units.

Raiffeisen Bank International AG (RBI), eastern Europe’s third- biggest lender, plunged 6.8 percent to 20.73 euros.

Dexia May Move

Dexia may be active when it resumes trading this afternoon after being suspended on Oct. 6. The Belgian federal government will pay 4 billion euros for the local unit and guarantee 60 percent of a so-called bad bank to be set up for Dexia’s troubled assets, Finance Minister Didier Reynders said. The sale will cut Dexia’s short-term funding requirement by more than 14 billion euros, the French-Belgian bank said.

The dismantling of Dexia, once the world’s leading lender to municipalities, became inevitable after concern over European sovereign-debt holdings caused its short-term funding to evaporate.

Konecranes Oyj (KCR1V) sank 4.7 percent to 14.58 euros. The company cut its forecast for full-year operating profit, excluding restructuring costs, saying it will be flat compared with last year. The company had predicted an increase in operating profit this year.

CSM (CSM) NV slumped 19 percent to 11.39 euros after the company said that it will fall short of its 2011 forecasts. CSM also said it plans a restructuring program of about 50 million euros.

To contact the reporter on this story: Adria Cimino in Paris at

To contact the editor responsible for this story: Andrew Rummer at


No Recession for U.S. as Forecasts Improve

By Rich Miller and Vivien Lou Chen - Oct 10, 2011 5:34 PM GMT+0700

The U.S. has likely dodged a recession for now, even though it’s too early to sound the all- clear for the economy.

A string of stronger-than-projected statistics -- capped by the news on Oct. 7 of a 103,000 rise in payrolls last month -- has prompted economists at Goldman Sachs Group Inc. and Macroeconomic Advisers LLC to raise their growth forecasts for third quarter growth to 2.5 percent from about 2 percent. That’s nearly double the second quarter’s 1.3 percent rate and would be the fastest growth in a year.

“The U.S. economy doesn’t look like it’s double-dipping at all,” said Allen Sinai, president of Decision Economics Inc. in New York. “But it is a crummy recovery.”

That recovery still faces what economist Chris Rupkey in New York calls “a lot of headwinds.” These range from the sovereign-debt crisis in the euro zone -- and increasing likelihood of a recession there -- to political gridlock in the U.S. over the budget.

“We can skirt a recession,” said Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. “But if headlines worsen in Europe and cause a major stock-market rout, it could lead to a loss of confidence here on the part of businesses and consumers and make forecasts for a recession a reality.”

Crisis Plan

European stocks and the euro rose after German and French leaders pledged to devise a plan to stem the debt crisis in three weeks. U.S. stock futures also gained.

The unsettled outlook may push U.S. Treasury bond yields back down as investors seek safety in the debt of the world’s largest economy. The yield on the 30-year bond remains on course to fall to about 2.5 percent, according to Christopher Hine, vice president of technical analysis at Credit Suisse Securities in London.

“The bull trend is still there,” he said in an Oct. 7 conference call with clients.

The long bond ended trading at 3.017 percent in New York on Oct. 7, after touching 2.69 percent Oct. 4, the lowest since January 2009. Yields rose as concerns about a recession ebbed.

The Standard & Poor’s 500 Index will face difficulty trading above 1,200 in the next few weeks as investors seek to determine the impact of the European crisis on U.S. corporate earnings, Sinai said. Business with Europe represents about 20 to 25 percent of operating profits for companies in the S&P, Sinai said.

Futures Rise

S&P 500 futures added 1.4 percent as of 11:24 a.m. in London, while the Stoxx Europe 600 Index rose 0.6 percent, extending a three-day, 6.7 percent jump. The S&P 500 had climbed as much as 0.6 percent on Oct. 7 on the back of the jobs numbers before being erasing gains after Fitch Ratings downgraded the foreign and local currency long-term issuer default ratings for Spain and Italy.

The euro advanced 1.6 percent against the dollar and strengthened 1.5 percent versus the yen after German Chancellor Angela Merkel said European leaders will do “everything necessary” to ensure that banks have enough capital.

Exceeded Forecasts

The 103,000 gain in September payrolls announced by the Labor Department was more than economists had forecast and followed an upwardly revised gain of 57,000 for August. Private employment climbed 137,000 and included the return of 45,000 striking workers at Verizon Communications Inc.

“The continued forward momentum in private job growth should ease concerns that the U.S. will slip into recession in the second half of this year,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York.

The latest numbers bring the jobs data in line with what other statistics are suggesting: Gross domestic product is growing “very slowly,” not contracting, he said.

Construction spending rebounded in August, propelled by the biggest jump in state and local government outlays in more than two years. Manufacturing accelerated in September, helped by gains in exports and production.

“For the first time in eight months, we revised upward our forecast of GDP growth over the second half, to just shy of 2.5 percent,” economists at St. Louis-based Macroeconomic Advisers said in a report last week. In September, they were predicting second-half growth under 2 percent.

The drags on the economy in the first half of the year -- higher gasoline prices and supply-chain disruptions from the earthquake and tsunami in Japan -- are dissipating, giving growth a lift, Feroli said.

Upward Revision

The average price for unleaded gasoline fell almost 20 cents, or 5.4 percent, in September to $3.43 a gallon, according to AAA, the nation’s largest motoring group.

The automobile industry has been an obvious beneficiary. Car and truck sales rose to a seasonally adjusted annualized rate of 13.1 million in September, according to Autodata Corp. That’s the highest since April’s 13.2 million, when lost output caused by the tsunami started restraining supply.

With vehicle production and inventories recovering for Toyota Motor Corp. (7203) and Honda Motor Co., the fourth quarter may be the year’s strongest, Al Castignetti, Nissan Motor Co.’s vice president of U.S. sales, said in an Oct. 3 telephone interview.

“People who have been sitting on the fence are likely to get back in the market,” he said.

While the U.S. is “shaking off” the first-half drags, it faces risks from events at home and overseas, Feroli said.

‘Edge of Recession’

The debt crisis in Europe will “likely slow the economy to the edge of recession by early 2012,” Andrew Tilton, senior economist at Goldman Sachs in New York, said in note last week to clients. He sees growth falling to a half percent in the first quarter of 2012.

A mild recession in the euro zone could shave as much as a half percentage point off U.S. expansion, said Nariman Behravesh, chief economist in Lexington, Massachusetts, at IHS Inc. The direct effect on trade likely would be small, he said. U.S. exports to the euro area were equivalent to less than 2 percent of GDP last year.

Greater consequences could come from the financial links between the two economies and the impact of the crisis on the U.S. stock market and general confidence.

“Europe is so large and so closely integrated with the U.S. and world economies that a severe crisis in Europe could cause significant damage by undermining confidence and weakening demand,” Treasury Secretary Timothy F. Geithner said Oct. 6 in testimony to the Senate Banking Committee. That would pose a “significant risk to global recovery.”


Policy makers in Europe aren’t the only officials on the spot, according to Diane Swonk, chief economist at Mesirow Financial Inc. in Chicago. Authorities in the U.S. also need to act, she said. If a Congressional supercommittee can’t come up with the more than $1 trillion in budget savings required by November, “that further undermines confidence in our own government,” she said.

The U.S. also faces a big fiscal squeeze in 2012 from the scheduled expiration in December of a payroll-tax cut, extended unemployment benefits and a business-tax credit.

“We have a very big tightening on track for next year,” Feroli said. He put the amounts involved at about $350 billion, or the equivalent of about 2 percent of GDP.

President Barack Obama has offered a $447 billion jobs plan that includes an expansion of the payroll-tax cuts in 2012 and an extension of the unemployment benefits. It faces resistance in the House of Representatives, where Republicans hold the majority and oppose the tax increases Obama proposed to pay for the program.

“We’re still laboring under the fallout from the bursting of the housing and credit bubble,” Jan Hatzius, chief economist for Goldman Sachs in New York, told Bloomberg Television on Oct. 7. “In the aftermath of that, unfortunately, you’re often in a weak position for a long time.”

To contact the reporters on this story: Richard Miller in Washington at; Vivien Lou Chen in San Francisco at

To contact the editor responsible for this story: Chris Wellisz at


Microsoft Phones to Get More Marketing Dollars

By Dina Bass - Oct 10, 2011 11:01 AM GMT+0700

Microsoft Corp. (MSFT), trying to reverse disappointing sales for its Windows Phone, is counting on Samsung Electronics Co. and other manufacturing partners to step up retailer incentives and boost in-store promotions.

Both Samsung and HTC Corp. have committed to increasing marketing budgets for the phones, said Andy Lees, president of Microsoft’s mobile unit, in an interview. While the manufacturers will determine how the money is spent, some of it will probably go toward spurring retail staff to tout Windows Phone models, he said. New handsets with the new Windows Phone 7.5 will go on sale in the coming weeks, Lees said.

Since the release of the previous version last October, the Windows Phone has missed the company’s sales expectations, and Microsoft has continued to lose ground to Apple Inc. (AAPL)’s iPhone and devices based on Google Inc. (GOOG)’s Android. Microsoft needs to do a better job of marketing the new software, which is much improved, said Michael Gartenberg, an analyst at Gartner Inc.

“From a technical perspective, it really does put them on par with the other competitors, but a lot of times Microsoft gets it right with the technology and then fumbles the marketing message,” he said. Mobile-phone retailers haven’t cooperated in the past, Gartenberg said. “If you went to store they showed you anything other than a Windows Phone. If you asked for a Windows Phone, they tried to talk you out of it.”

Retail Rules

Microsoft is especially reliant on the carriers’ retail salespeople in the U.S., where more than 80 percent of phones are sold by stores owned by mobile operators, Lees said. In other countries, a larger percentage of handsets are sold by the phone makers themselves. He didn’t specify what form the incentives might take.

Windows Phone 7.5, also known as Mango, was released last month to existing Windows handset customers. In addition to more aggressive marketing, Microsoft’s partnership with Nokia Oyj (NOK1V) will help sales, Lees said. Nokia announced earlier this year that it would base its handsets on Windows Phone software, a bid to reinvigorate its smartphone strategy. Nokia directly or indirectly controls more than 6,000 stores, Lees said.

Gartner forecasts that Microsoft will become the No. 2 smartphone operating system in 2015, with market share of 20 percent. That would vault it past Apple’s iOS, with Android remaining in the top spot. Achim Berg, head of Windows Phone marketing, said at a September conference in Berlin that the 20 percent share may be a conservative estimate.

First Quarter

Next year, Microsoft will account for 11 percent of the market, up from 5.6 percent this year, Gartner said in an April report. Lees declined to forecast numbers himself, except to say he expects market share to rise starting in the first quarter of 2012.

Manufacturers plan to produce a Windows phone that uses the high-speed wireless technology known as long-term evolution, or LTE, in the “not-too-distant future,” Lees said. That will make mobile carriers more eager to promote the Windows Phone.

Cheaper models also will be produced, giving a boost to the operating system, Lees said. While handset makers and the carriers determine prices and subsidies, consumers should see Windows Phone devices for less than $100 in the U.S., he said.

“The stars are really starting to align for us,” Lees said.

To contact the reporter on this story: Dina Bass in Seattle at

To contact the editor responsible for this story: Tom Giles at


U.S. Stock Futures Rise on Merkel Bank Pledge

By Nikolaj Gammeltoft and Joanna Ossinger - Oct 10, 2011 6:41 PM GMT+0700

Enlarge image Angela Merkel and Nicolas Sarkozy

Angela Merkel, Germany's chancellor, right, and Nicolas Sarkozy, France's president. Photographer: Michele Tantussi/Bloomberg

Oct. 10 (Bloomberg) -- Jonathan Golub, chief U.S. market strategist at UBS Securities LLC, talks about the outlook for U.S. stocks, corporate earnings and Europe's debt crisis. Golub speaks with Matt Miller and Carol Massar on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

U.S. stock futures gained, indicating the Standard & Poor’s 500 Index will extend last week’s rally, after German Chancellor Angela Merkel said European leaders will do “everything necessary” to ensure that banks have adequate capital.

Financial shares may move after Bank of America Corp. (BAC) and Morgan Stanley (MS) rose in early New York trading. General Electric Co. (GE), the world’s third-biggest supplier of wind turbines, increased 1.5 percent in Germany. Microchip Technology Inc. (MCHP), the maker of programmable semiconductors, jumped 2.5 percent.

S&P 500 futures expiring in December advanced 15.8, or 1.4 percent, to 1,170.70 at 7:22 a.m. New York time. Contracts on the Dow Jones Industrial Average rose 138, or 1.3 percent to 11,204.

Merkel joined French President Nicolas Sarkozy to persuade investors they can stamp out the debt crisis roiling global markets. At a joint press conference in Berlin, Sarkozy set a Nov. 3 deadline to devise a plan to recapitalize banks, get Greece on the right track and fix Europe’s economic governance.

“We are focusing on major U.S. equities now, looking past the European stock markets because there’s too much volatility there,” Tim Hartzell, who oversees about $350 million as chief investment officer for Houston-based Sequent Asset Management, said in a telephone interview. “The Fed is still accommodative and we’re entering into an election year, when politicians are usually pulling various levers to make the economy grow.”

Weekly Gain

U.S. stocks rose 2.1 percent last week, breaking a two-week losing streak and driving the S&P 500 up from the brink of a bear market, amid optimism European leaders will tame the region’s debt crisis and after American economic data improved. The stock index surged 6 percent between Oct. 3 and Oct. 6, the biggest three-day rally since August.

The U.S. may have dodged a recession for now, even though it’s too early to sound the all-clear for the economy. A string of stronger-than-projected statistics -- capped by the news on Oct. 7 that payrolls increased by 103,000 last month -- has prompted economists at Goldman Sachs Group Inc. (GS) and Macroeconomic Advisers LLC to raise their forecasts for third- quarter growth to 2.5 percent from about 2 percent. That’s nearly double the second quarter’s 1.3 percent rate and will be the fastest growth in a year.

Bank of America rose 2.9 percent to $6.07, while Morgan Stanley gained 1 percent to $14.38. Goldman Sachs Group Inc. increased 0.3 percent to $93 in German trading.

General Electric Gains

General Electric gained 1.5 percent to $15.74 in German trading after it announced its first investment in Indian renewable energy generation. GE Energy Financial Services will build wind farms with Greenko Group Plc for $115 million. The deal expands GE’s $6 billion portfolio of global clean-energy investment into a country that added the most new wind capacity last year after China and the U.S.

Microchip Technology climbed 2.5 percent to $34.52 in German trading after Barron’s said the shares may rise to $40 as the company continues to profit and pay dividends amid difficult economic conditions.

Netflix Inc. (NFLX), the online and mail-order video service, gained 2.2 percent to $119.75 after Tony Wible, an analyst at Janney Montgomery Scott LLC, raised the stock to “neutral” from “sell.”

AT&T Inc. (T), the second-largest U.S. wireless operator, increased 2.5 percent to $29.15 after saying it received more than 200,000 preorders for the iPhone 4S in 12 hours, marking the company’s most successful debut yet for the Apple Inc. (AAPL) device. Apple rose 1.5 percent to $375.23 in early New York trading.

Google Inc. (GOOG), owner of the world’s most popular search engine, climbed 1.8 percent to $524.22 after the Wall Street Journal reported the company remains in the bidding Hulu after Yahoo! dropped out.

To contact the reporters on this story: Nikolaj Gammeltoft in New York at; Joanna Ossinger in New York at

To contact the editor responsible for this story: Nick Baker at


Republican Candidates Dismiss Criticism of Romney as Mormon ‘Cult’ Member

By Holly Rosenkrantz - Oct 10, 2011 11:00 AM GMT+0700

Republican presidential candidates dismissed a Baptist minister’s criticism of their party frontrunner Mitt Romney’s Mormon faith, saying his religion shouldn’t be a campaign issue.

“This is so inconsequential as far as this campaign is concerned,” Representative Michele Bachmann, of Minnesota, said on CNN’s “State of the Union” program. “To make a big issue out of this is ridiculous.”

Businessman Herman Cain said “I’m not running for theologian-in-chief” when asked about Romney’s religion on the CNN program yesterday. “I am not going to do an analysis of Mormonism versus Christianity for the sake of answering that,” he said, adding “it’s not going to boost this economy.”

Robert Jeffress, a Baptist minister from Dallas, told reporters at a “Values Voter Summit” in Washington last week that Romney, a Mormon, is “a good, moral person, but someone who is part of a cult.” Jeffress supports Romney’s rival Rick Perry, the Texas governor, and introduced Perry at the meeting.

Romney responded that religious differences shouldn’t divide Republicans and urged civility in the party’s 2012 presidential nomination process.

“Poisonous language does not advance our cause,” Romney, a former Massachusetts governor, said at the values voter event, which is held by evangelical Christians, an important voting bloc in the Republican nominating contests. “Decency and civility is a value, too,” he said.

Not a Cult

Perry “does not believe Mormonism is a cult,” spokesman Mark Miner said in a statement.

The annual evangelical gathering focuses on efforts to “champion traditional values,” limit government and cut federal spending. Self-described evangelicals accounted for 44 percent of Republican primary voters in the 2008 campaign, according to exit polling.

Former House Speaker Newt Gingrich, who is also seeking the Republican nomination, said the minister’s comments about Mormonism were “inappropriate,” speaking yesterday on the CBS “Face the Nation” program. On “Fox News Sunday,” Rick Santorum, a former Pennsylvania senator, said he doesn’t think Mormonism is a cult and that “every Mormon I know is a good and decent person.”

“I believe they believe they are Christians based on their definition, but getting into whether or not they’re more Christian than another group, I don’t think that’s relevant to this campaign,” Cain said on the CBS program.

Ron Paul Wins

Representative Ron Paul of Texas, also seeking the 2012 Republican nomination, won a straw poll held at the summit with 37 percent of the votes cast, according to Paul’s campaign. Cain received 23 percent of the votes, followed by Santorum with 16 percent, and Perry and Bachmann each with 8 percent. Romney won the 2007 straw poll with 27.6 percent of the votes, according to the Family Research Council, which organizes the summit.

Republican candidates on the Sunday talk shows focused on the ailing economy, criticizing President Barack Obama’s proposal to impose a surtax on millionaires.

“It’s a very bad idea, because remember, that’s on top of all of the other tax increases that President Obama is putting on this same group of people who are the job creators in this country,” Bachmann said on CNN.

Economy and Jobs

At the evangelical summit, Romney also focused most of his comments on the economy and jobs, criticizing Obama’s economic stimulus program. Perry at the same event spotlighted his call for lower taxes on businesses and a freeze on pending government regulations, as well as promoting Texas’s job-growth record during his almost 11 years as governor.

Perry has dropped in opinion polls after drawing attacks from his Republican opponents in recent debates. A Washington Post-ABC News poll of Republicans and Republican-leaning independents taken Sept. 29-Oct. 2 gave Perry 16 percent, a decline of 13 percentage points since early September. Romney led the Republican field with 25 percent. Perry was tied for second in the survey with Cain.

Cain chastised the “Occupy Wall Street” protests at the summit. He said the demonstrators are “anti-capitalism” and “anti-free-market.”

“We know that the unions and certain union-related organizations have been behind these protests,” Cain said on CBS yesterday. “It’s coordinated to create a distraction so people won’t focus on the failed policies of this administration.”

Taking Somebody’s Cadillac

He also said the protesters are “jealous” Americans who “play the victim card” and “want to take somebody else’s Cadillac.”

Bachmann said she saw “a lot of signs” from the American Federation of State, County and Municipal Employees when she went to a protest in Washington last week.

“I don’t know how spontaneous these protests are, but they should be directed at the White House,” she said on CNN.

House Minority Leader Nancy Pelosi said on ABC’s “This Week” yesterday that passing Obama’s jobs bill is the best way to improve the economy and reduce the joblessness that is prompting the protests.

“It’s really important that President Obama get out there very strongly, very clearly, about what this jobs bill does and what it means to kitchen-table concerns of the American people,” said Pelosi, a California Democrat.

House Budget Committee Chairman Paul Ryan, speaking on NBC’s “Meet the Press,” said Obama’s jobs ideas “have already proven to fail.”

“He’s running around this country campaigning on a bill that he knows won’t pass,” said Ryan, a Wisconsin Republican.

To contact the reporter on this story: Holly Rosenkrantz in Washington at

To contact the editor responsible for this story: Mark Silva at


Jobs’s Death Turns Eyes on Apple’s $76B Cash

By Ari Levy and Adam Satariano - Oct 10, 2011 11:01 AM GMT+0700
Bloomberg Markets Magazine
Enlarge image Jobs’s Death Increases Plea for Releasing $76 Billion Cash

The company has used the money to buy long-term supplies of certain critical components, such as memory chips and touch-screen panels. Photographer: Jerome Favre/Bloomberg

At a meeting with Apple Inc. (AAPL) finance chief Peter Oppenheimer this year, investor Kishore Rao asked the company to tap its billions in cash to pay a dividend.

Oppenheimer had heard the request before and explained that Apple is keeping its powder dry for “strategic opportunities,” without elaborating on what those could be, Rao said. The stock had almost doubled in the year before that meeting, and Oppenheimer argued Apple has been a good steward of its cash and investments, currently worth $76.2 billion.

The drumbeat to open that treasure chest may now grow louder following the Oct. 5 death of Steve Jobs, Apple’s former chief executive officer. Jobs, who rescued Apple from near- bankruptcy and turned it into the most valuable technology company, engendered faith in his insistence on hoarding cash. In his absence, as the stockpile grows, Oppenheimer faces renewed calls to fund a dividend or stock buyback.

“They don’t need all that cash,” said Keith Goddard, CEO of Tulsa, Oklahoma-based Capital Advisors Inc., whose largest holding is Apple. “It won’t change their growth rate to pay a dividend.”

Apple, which almost couldn’t make payroll when Jobs returned as CEO in 1997, has more than doubled its cash and investments in the past two years, fueled by sales of the iPhone and iPad. Jobs resisted returning money to shareholders as he pushed Apple into new markets.

Component Supplies

The company has used the money to buy long-term supplies of certain critical components, such as memory chips and touch- screen panels. Oppenheimer, 48, said in January that Apple would spend about $3.9 billion over the next two years on unspecified component prepayment and capital expenditures.

Steve Dowling, a spokesman for Cupertino, California-based Apple, reiterated the company’s longstanding position that it has a good track record of managing cash and is keeping it available for potential strategic opportunities.

Cisco Systems Inc. (CSCO) started paying a dividend earlier this year when its cash and investments reached about $40 billion. And Apple’s competitors, including Microsoft Corp. (MSFT) and Google Inc., have devoted their cash to making big acquisitions -- something Apple has avoided. As sales keep growing, the company will have to find ways to spend its capital, said Ryan Jacob, chairman of Jacob Asset Management in New York.

“They have a high-class problem,” said Jacob, whose firm owns Apple shares. “They’re generating so much quarter after quarter, and it’s just growing.”

Soaring Profit

Profit more than doubled to $7.31 billion in the third quarter, adding to Apple’s coffers. The stock has climbed 15 percent this year, defying a stock-market slump and concerns about Apple’s CEO succession. With a valuation of $342.8 billion, Apple is almost 60 percent bigger than the second most valuable technology company, Microsoft.

Rao, the investor who met with Oppenheimer, complimented the company for its overall business performance. He said dipping in to its cash wouldn’t affect Apple’s long-term plans.

“We have a slight difference of opinion on whether they have sufficient cash to meet all their strategic objectives,” Rao, a research principal at Sustainable Growth Advisers in Stamford, Connecticut, said in an interview. “We think they do and say they can be paying a dividend.”

Prior to joining Apple, Oppenheimer served in the finance department of Automatic Data Processing Inc. (ADP), the provider of payroll services, and as a consultant at Coopers & Lybrand. He has a bachelor’s degree from California Polytechnic University in San Luis Obispo and a master’s in business administration from the University of Santa Clara.

‘Conservative and Cautious’

Oppenheimer arrived at Apple in 1996 as controller of the Americas and was promoted the following year to vice president and later to corporate controller. As chief financial officer, he oversees investor relations, tax information and internal audits.

“Peter is pretty conservative and cautious, and he’s managing the company’s financial resources in the same way,” Rao said.

Oppenheimer took the CFO job in 2004 when Fred Anderson retired. At the time, the company had about $5 billion in cash and investments. That number almost tripled over the next three years to $13.8 billion and then soared again in the following three years to more than $40 billion by mid-2010.

“It’s been ridiculous for a long time, whether it’s $75 billion or $35 billion or $25 billion,” said Andy Hargreaves, an analyst at Pacific Crest Securities in Portland, Oregon, who recommends Apple stock and doesn’t own it himself. “Apparently the board feels nothing has been necessary to this point.”

New IPhone

The day before Jobs’s death, CEO Tim Cook unveiled the iPhone 4S, which has an upgraded processor, camera and software. He also introduced a voice-recognition system called Siri that turns the device into a hands-free personal assistant.

That technology came from the acquisition of Siri Inc. last year for an undisclosed sum. While Apple will continue buying companies to gain technologies, it’s unlikely to spend much of its cash on big deals, Hargreaves said.

“That just hasn’t been their style historically,” he said. “It’s questionable what they could buy to add a lot of value.”

To contact the reporters on this story: Ari Levy in San Francisco at;

To contact the reporters on this story: Adam Satariano in San Francisco at


Alibaba in Talks With Temasek for Yahoo Stake

By Serena Saitto, Cathy Chan and Jeffrey McCracken - Oct 10, 2011 11:39 AM GMT+0700

Alibaba Group Holding Ltd. has talked with Singapore’s Temasek Holdings Pte about providing financing to buy the 40 percent stake in itself held by Yahoo! Inc., according to people familiar with the matter.

Temasek, the state-owned investment company, may help fund an offer in return for a bigger share of privately owned Alibaba Group, said the people, who declined to be identified because the discussions are confidential. Temasek isn’t interested in owning Yahoo, one person said.

Temasek’s backing would aid Alibaba Group Chairman Jack Ma’s bid to gain more control of the company he founded and increase its investments in China. The S$193 billion ($147 billion) sovereign wealth investor said in July that it’s “bullish” on China and is seeking more deals there.

“As an existing investor in Alibaba, Temasek may be interested in increasing its ownership,” said Victor Yip, an analyst at UOB-Kay Hian in Hong Kong. “This is just one of the many proposals that are flying around involving Yahoo.”

The possible bid to buy Yahoo out of Alibaba, China’s biggest e-commerce company that was valued at $32 billion in an investment by Temasek last month, came after the U.S. shareholder fired Chief Executive Officer Carol Bartz and started a review of its strategy. Bartz last year turned down efforts by Alibaba to buy shares held by Yahoo, straining relations with Ma.

Alibaba-Temasek Arrangement Ltd. (1688), the Hong Kong-listed unit of Alibaba Group, fell 2.5 percent to HK$7.72 at the midday break, compared with the benchmark index’s 0.5 percent drop.

In 2005, Yahoo paid $1 billion, together with its operations in China, to acquire its holding in Alibaba.

The Alibaba-Temasek arrangement would likely be part of a possible takeover bid for Yahoo with private-equity firm Silver Lake and Russia’s Digital Sky Technologies, another person said. Alibaba, Silver Lake and DST have discussed forming a group to make an offer, people with knowledge of the situation said last week. Silver Lake has let Yahoo know of its efforts and is trying to line up financing to pursue the deal, the people said.

No clear deal structure or consortium has yet emerged, and a bid for Yahoo might not materialize, said the people.

“We don’t comment on market speculation,” said Stephen Forshaw, a spokesman for Temasek. Spokespeople for Yahoo and Hangzhou-based Alibaba declined to comment.

Yahoo’s advisers at Goldman Sachs Group Inc. are sending out select financial data to certain parties, one person said. The company is not yet requiring interested parties to sign confidentiality agreements and hasn’t created a so-called data room where bidders could dig further into Yahoo’s business, said the person.

Alibaba Interest

Other private-equity funds are considering an investment in Yahoo and more than one of group of investors might bid or split the assets of the Sunnyvale, California-based Internet company, said the people.

The Singapore investment firm had 22 percent of its assets invested in telecommunications, media and technology, down from 24 percent the year before.

Alibaba offered to buy some of the shares held by Yahoo last year, with the companies failing to come to an agreement as talks ended in June 2010. Ma said in May that the breakdown in the discussions undermined his confidence in Yahoo.

Alibaba, which operates businesses including Taobao, China’s biggest online shopping site, and the commerce site for businesses, is always interested in buying Yahoo’s shares, Joseph Tsai, the Chinese company’s chief financial officer, said in May.

‘Very Interested’

In July, Alibaba said it reached an agreement with Yahoo and another shareholder, Japan’s Softbank Corp., over compensation accruing to the spinoff of the Alipay affiliate, China’s most-used online-payment operator. The accord ended a four-month dispute centered on the 2010 transfer of Alipay to a private company owned by Ma, a transaction that Yahoo said lacked board approval.

Alibaba’s Ma said this month he’s “very interested” in Yahoo and has held discussions with the company and other potential buyers. Yahoo, the biggest U.S. Web portal, said in a September memo to employees that its advisers have fielded inquiries from “multiple parties” interested in unspecified options.

Temasek, Silver Lake and DST offered to buy as much as $1.6 billion of Alibaba stock from the Chinese company’s employees last month, two people close to the situation said at the time. The transaction values Alibaba at $32 billion, the people said.

To contact the reporters on this story: Serena Saitto in New York at; Cathy Chan in Hong Kong at; Jeffrey McCracken in New York at

To contact the editor responsible for this story: Jennifer Sondag at; Tom Giles at; Philip Lagerkranser at +852-2977-6626 or