Groupon Seeks $11.4B Market Value in IPO

By Douglas MacMillan and Lee Spears - Oct 21, 2011 11:48 PM GMT+0700

Groupon Inc., the largest online- coupon site, is seeking a valuation of $11.4 billion in its U.S. initial public offering, less than half the $25 billion it considered earlier this year after internal missteps and stock- market swings left some investors leery of the stock.

The Chicago-based company is offering 30 million shares of Class A common stock at $16 to $18 apiece, a regulatory filing today showed. At the high end of the range, Groupon would raise $540 million, compared with the $750 million it filed to raise in June. The total valuation is based on 632.8 million outstanding common shares after the offer.

The lower valuation reflects waning investor demand, said Michael Holland, chairman of Holland & Co. Since filing to go public, Groupon has drawn regulatory scrutiny, restated results and lost executives. The company delayed plans to pitch the offering to investors in September as stock markets sank and it needed time to address regulators’ questions about an unconventional accounting method, people with knowledge of the matter said then.

“Investor perception of Groupon’s attractiveness has deteriorated significantly, as evidenced by the price,” said Holland, whose New York firm oversees more than $4 billion. “It’s not a favored time to be coming to market with an IPO, so if they want to persist and come to market, they’re going to have to meet buyers’ demands.”

Meetings With Investors

The company is set to meet with investors as soon as the week of Oct. 24 to gauge demand for the IPO, people familiar with the matter have said. The offering is set for completion on Nov. 3, Bloomberg data show.

Groupon’s IPO would be only the fourth in the U.S. since the beginning of September as slumping stocks and high volatility made it difficult to go public. Still, companies have continued to file for offerings this year, leading to the biggest U.S. backlog in a decade as of the end of last quarter, according to Renaissance Capital LLC, the Greenwich, Connecticut-based IPO research and investment firm.

The IPO will leave almost 5 percent of Groupon’s common shares public as the coupon provider follows Internet companies including LinkedIn Corp. and Pandora Media Inc. in offering less than one-tenth of their stock to the public. A so-called “low float” limits the amount of shares available to meet investor demand, boosting the stock price.

Price to Sales

The high end of Groupon’s offering range would value the company at almost 9 times sales over the last 12 months, calculated using financial results disclosed in the filing. That’s less than half the price-to-sales multiple of about 24 for LinkedIn, Bloomberg data show. Shares of the Mountain View, California-based professional-networking site have almost doubled since LinkedIn debuted in May.

Pandora Media Inc., the online music provider that went public in June, is valued at about 12 times sales over the past four quarters, Bloomberg data show.

Groupon’s value may be difficult for investors to predict “given it’s a new business model where long-term profitability and margin levels are unclear,” said Jack Neele, a fund manager at Robeco Groep NV, which had the equivalent of about $208 billion under management at the end of last year.

All of the shares in the offering are being sold by Groupon, which will use the estimated net proceeds of about $479 million, its filing shows. Groupon may use the cash for acquisitions, the filing said.

Early Discussions

Executives met with bankers to discuss an IPO valuing the company at as much as $25 billion, people with knowledge of the discussions said in March. Groupon announced a $950 million round of financing, including venture-capital and private-equity investment, after rejecting a $6 billion takeover bid from Google Inc. in December.

Groupon reported revenue of $430.2 million in the three months through September, an increase of 9.6 percent from the quarter that ended in June. That represents slower growth than in the second quarter, when sales rose 33 percent sequentially.

The net loss in the third quarter narrowed to $10.6 million from $49 million a year earlier, according to the filing. The net loss in the nine months ended Sept. 30 was $238.1 million.

The number of subscribers to Groupon’s e-mail list climbed 24 percent during the third quarter to 142.9 million, the filing showed. The company said a total of 29.5 million people had purchased its coupons as of the end of September.

Morgan Stanley (MS), Goldman Sachs Group Inc. (GS) and Credit Suisse Group AG (CSGN) are leading Groupon’s offering. The stock will trade on the Nasdaq Stock Market under the symbol GRPN.

To contact the reporters on this story: Douglas Macmillan in New York at dmacmillan3@bloomberg.net; Lee Spears in New York at lspears3@bloomberg.net

To contact the editors responsible for this story: Jennifer Sondag at jsondag@bloomberg.net; Tom Giles at tgiles5@bloomberg.net

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Payrolls Declined in 25 U.S. States, Led by NC Q By Bob Willis - Oct 21, 2011 9:43 PM GMT+0700

By Bob Willis - Oct 21, 2011 9:43 PM GMT+0700

Payrolls fell in 25 U.S. states in September, led by North Carolina and Ohio, a sign the weakness in the job market is broad-based.

Employers cut staff by 22,200 in North Carolina last month and by 21,600 in Ohio, according to Labor Department data issued today in Washington. The report also showed the jobless rate decreased in 25 states. Nevada continued to lead the nation in unemployment with a rate of 13.4 percent.

The economy needs to generate faster sustained job growth to lower unemployment and spur the consumer spending that makes up about 70 percent of the economy. A Labor Department report on Oct. 7 showed employers added 103,000 payrolls last month, almost half of them telecommunications workers returning from a strike, and the jobless rate was 9.1 percent for a third month.

“The majority of states will likely continue to grapple with a high unemployment for the foreseeable future as economic activity stagnates,” Anika Khan, an economist at Wells Fargo Securities Inc. in Charlotte, North Carolina, said before the report. “A genuine recovery will not likely begin until employment and income growth stabilize.”

After Nevada, the jobless rate was highest in California at 11.9 percent and Michigan at 11.1 percent.

The biggest job gains last month occurred in Florida, where employers boosted payrolls by 23,300. Employment in Texas rose by 15,400 workers and increased in Louisiana by 14,100.

Over the past 12 months, 47 states gained jobs, while two, Delaware and Georgia, showed a decline.

Elevated Unemployment

Unemployment has exceeded 8 percent since February 2009, the longest stretch of such elevated joblessness since monthly records began in 1948. Through September, the economy had recovered about 2.09 million of the 8.75 million jobs lost as a result of the 18-month recession that ended in June 2009.

Payrolls grew an average 96,000 a month in the July-to- September period, about the same as in the second quarter and down from 166,000 in the first three months of the year.

Sustained increases of around 200,000 a month are needed to bring unemployment down about a percentage point over a year, according to Eric Green, chief market economist at TD Securities Inc. in New York.

Political infighting over the budget and mounting fear of a default in Europe caused the Standard & Poor’s 500 Index to plummet 16 percent from July 22 to Aug. 22, prompting companies and consumers to cut back. The Federal Reserve last month announced more unconventional measures to boost growth while President Barack Obama is campaigning to get Congress to approve elements of a new jobs proposal the Senate shelved last week.

Cutting Payrolls

Businesses slashing staff include Bank of America Corp. The Charlotte, North Carolina-based lender is cutting 30,000 jobs, including at its unit servicing mortgages.

Some companies will see more hiring. Ford Motor Co.’s U.S. hourly workers this week voted 63 percent in favor of a four- year contract that creates 12,000 new jobs and gives each as much as $10,000 in payments this year, according to the United Auto Workers.

State and local employment data are derived independently from the national statistics, which are typically released on the first Friday of every month. The state figures are subject to larger sampling errors because they come from smaller surveys, making the national figures more reliable, according to the government’s Bureau of Labor Statistics.

                 Payrolls, Unemployment by State  ===========================================================                  Unemp.    Change in Nonfarm Payrolls from: State             Rate    1 Month    6 Months    1 Year =========================================================== Nevada             13.4%     1,800        300     11,000 California         11.9%    11,800     52,500    250,700 Michigan           11.1%   -14,200      1,700     65,300 South Carolina     11.0%    -1,000        200     16,100 Florida            10.6%    23,300     52,700     93,500 Mississippi        10.6%     7,300       -400      9,700 North Carolina     10.5%   -22,200    -26,800      9,700 Rhode Island       10.5%    -1,700       -600          0 Georgia            10.3%    -7,100    -17,500    -22,300 Illinois           10.0%     1,600     -9,400     44,400 Alabama             9.8%     2,900       -600      2,800 ==============================================================                  Unemp.       Change in Nonfarm Payrolls from: State             Rate    1 Month    6 Months    1 Year ============================================================== Tennessee           9.8%     6,300     13,000     28,800 Kentucky            9.7%    -2,900      3,000     23,200 Oregon              9.6%      -600       -600     27,000 New Jersey          9.2%   -11,100     13,200     17,700 Arizona             9.1%    10,400     33,200     57,700 Ohio                9.1%   -21,600      9,200     66,800 Washington          9.1%    -4,400      8,800     44,800 Idaho               9.0%       600       -600      7,900 Connecticut         8.9%     3,400      3,700     10,400 Indiana             8.9%     7,800    -12,300      6,800 Missouri            8.7%    -4,000    -11,100        900 Texas               8.5%    15,400     85,900    248,500 Arkansas            8.3%    -1,600     -5,000     10,600 Colorado            8.3%    -3,900     14,500     23,100 Pennsylvania        8.3%   -15,800       -100     48,300 West Virginia       8.2%    -1,000      1,900      3,900 Delaware            8.1%    -1,300     -6,200     -6,100 ==============================================================                  Unemp.       Change in Nonfarm Payrolls from: State             Rate    1 Month    6 Months    1 Year ============================================================== New York            8.0%     8,800     67,500     98,100 Wisconsin           7.8%   -12,400     -4,100     21,200 Montana             7.7%       300      6,700      7,400 Alaska              7.6%       900        900      5,300 Maine               7.5%     3,000      3,100      6,900 Maryland            7.4%     6,800     18,600     12,300 Utah                7.4%      -400     23,000     35,200 Massachusetts       7.3%    -2,300     23,200     48,700 Louisiana           6.9%    14,100     40,100     44,900 Minnesota           6.9%    -7,400     24,300     38,200 Kansas              6.7%         0     11,600      7,900 New Mexico          6.6%    -5,700     -1,300      2,700 Virginia            6.5%    -4,700    -19,100      2,000 Hawaii              6.4%     6,300      2,600      9,700 Iowa                6.0%    -5,700      2,700     18,000 Oklahoma            5.9%      -800     23,000     43,100 Vermont             5.8%       700     -1,100      6,200 ==============================================================                  Unemp.       Change in Nonfarm Payrolls from: State             Rate    1 Month    6 Months    1 Year ============================================================== Wyoming             5.8%       900      7,800      8,400 New Hampshire       5.4%    -5,400        600      5,300 South Dakota        4.6%       600      3,600      3,100 Nebraska            4.2%     1,500     11,000     21,500 North Dakota        3.5%     1,400      9,500     20,000 =============================================================== NOTE: All figures seasonally adjusted. 

To contact the reporters on this story: Bob Willis in Washington at bwillis@bloomberg.net;

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

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Jobs Threatened ‘Thermonuclear War’ on Google

By Peter Burrows - Oct 21, 2011 11:01 AM GMT+0700

Apple Inc. (AAPL) co-founder Steve Jobs said he was “willing to go thermonuclear war” on Google Inc. (GOOG)’s Android software, saying that its features amounted to “grand theft,” the Associated Press reported.

Jobs, then Apple’s CEO, said he would “spend every penny of Apple’s $40 billion in the bank, to right this wrong,” according to the AP’s account of his biography, “Steve Jobs,” by Walter Isaacson. Jobs died on Oct. 5.

Tension between the two companies escalated as Google used the Android operating system to follow Apple into the burgeoning market for smartphones. The rivalry forced Eric Schmidt, then CEO of Google, to resign from Apple’s board in 2009.

“I’m going to destroy Android, because it’s a stolen product,” Jobs said in the book, according to the AP. “I’m willing to go thermonuclear war on this.”

The authorized biography, due to be released on Oct. 24, also sheds new light on Jobs’s combat against cancer. The executive had secret treatments for the disease even though he was telling people he was cured, Isaacson told CBS News.

Jobs regretted the decision to initially refuse surgery for pancreatic cancer, Isaacson told CBS News’s “60 Minutes,” according to interview excerpts released yesterday.

“He said, ‘I didn’t want my body to be opened ... I didn’t want to be violated in that way.’ He’s regretful about it,” Isaacson said. “I think that he kind of felt that if you ignore something, if you don’t want something to exist, you can have magical thinking ... We talked about this a lot.”

Putting Off Surgery

Jobs had a slow-growing form of pancreatic cancer and put off surgery for nine months while he sought out spiritual and dietary therapies against the advice of his wife, Isaacson said. Once he had the surgery he told his employees about it while playing down the seriousness of his condition, CBS said.

“I will not require any chemotherapy or radiation treatments,” Jobs wrote in an Aug. 1, 2004, e-mail from his hospital bed to employees of Cupertino, California-based Apple. He said then that he was cured after having successful surgery to remove a cancerous tumor from his pancreas.

In a commencement speech at Stanford University in June 2005, he said that he’d been diagnosed “about a year ago.” He didn’t mention the nine-month delay.

Doctors told Jobs that his illness was “curable” through an operation, Jobs said in that address.

“I had the surgery, and thankfully, I’m fine,” he said.

Steve Dowling, a spokesman for Apple, declined to comment. The interview, conducted by correspondent Steve Kroft, will be broadcast on Oct. 23. The network posted a 1 minute, 25 second- long excerpt. “Steve Jobs” was published by Simon & Schuster, also owned by New York-based CBS.

Disclosure Timing

Jobs probably should have told shareholders that he had cancer when it was first diagnosed, said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. From a governance perspective, how he decided to treat the illness was up to him, Elson said.

“He probably should have disclosed it, and everyone would have assumed he would do everything he could to keep himself alive,” said Elson. “The question is whether he misled people because he himself was misled, or did he do it on purpose. I tend to give wide latitude on these things. No one wants to believe they’re dying.”

The biographer said that Jobs, who was adopted, met the man who turned out to be his biological father without knowing who he was.

Jobs’s Search

Jobs found his biological mother and sister, the novelist Mona Simpson, according to Isaacson. Simpson then identified their father, Abdulfattah “John” Jandali, who managed a coffee shop.

Jandali told Simpson he wished she had met him earlier, when he ran a bigger Mediterranean restaurant in Silicon Valley. She hadn’t told him Jobs was his son.

“Everyone used to come there,” Jandali told Simpson, according to Isaacson. “Even Steve Jobs used to eat here. Yeah, he was a great tipper.”

“60 Minutes” will broadcast a voice recording of Isaacson interviewing Jobs about his decision to ask Simpson to keep his identity private.

“When I was looking for my biological mother, obviously, you know, I was looking for my biological father at the same time, and I learned a little bit about him and I didn’t like what I learned,” Jobs said. “I asked her to not tell him that we ever met ... not tell him anything about me.”

To contact the reporter on this story: Peter Burrows in San Francisco at pburrows@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net; Tom Giles at tgiles5@bloomberg.net

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S&P 500 Rises to August Levels on Europe Optimism

By Rita Nazareth - Oct 21, 2011 9:44 PM GMT+0700

U.S. stocks advanced, sending the Standard & Poor’s 500 Index toward the highest level since August, on speculation European leaders are moving closer to an agreement to contain its sovereign debt crisis.

Bank of America Corp. (BAC) and Morgan Stanley rallied at least 1.9 percent, following gains in European lenders. McDonald’s Corp. (MCD), the world’s biggest restaurant chain, added 2.8 percent after profit jumped 8.6 percent as U.S. store sales increased. Honeywell International Inc. (HON) rose 4.6 percent as a recovery in commercial aerospace helped earnings climb 44 percent.

The S&P 500 added 1.7 percent to 1,236.52 as of 10:42 a.m. New York time, the highest on a closing basis since Aug. 3, two days before S&P stripped the U.S. of its AAA credit rating. The benchmark gauge was up 1 percent this week. The Dow Jones Industrial Average advanced 198.14 points, or 1.7 percent, to 11,739.92 today, erasing its 2011 decline.

“The market is really looking for something to grasp as the European saga continues,” Malcolm Polley, who oversees $1.1 billion as chief investment officer at Stewart Capital in Indiana, Pennsylvania, said in a telephone interview. “They are saying that -- we may have a resolution. We don’t know that it will be the case because we’ve heard that story before. Hopefully they will finalize it.”

Gains accelerated after the S&P 500 climbed past 1,233.10, its intraday peak on Oct. 18 and the highest level since Aug. 4. Three rallies since the U.S. government was stripped of its AAA credit rating by S&P have stopped around 1,220, data compiled by Bloomberg show.

Burst of Trading

A burst of trading in E-Mini S&P 500 futures occurred after the index reached 1,233.10, according to data compiled by Bloomberg. Volume jumped to 31,774 contracts during 10:17 a.m. New York time, the most for any minute of the day at that point.

“The path of least resistance is higher,” Christopher Verrone, head of technical analysis at New York-based Strategas Research Partners, said in a telephone interview. I’m interested to see what happens in the 1,260-1,270 range. That is when we’ll get more information on how durable this advance is.’’

European finance ministers meet in Brussels today to lay the groundwork for an Oct. 23 gathering of government leaders that had been the deadline for a solution to the debt crisis. A further summit was scheduled for Oct. 26 yesterday after Germany and France said the European Union needs more time to seal a “global and ambitious” accord. In the U.S., Federal Reserve Governor Daniel Tarullo said the central bank should consider resuming purchases of mortgage bonds to boost growth.

‘Want Satisfaction’

“While we won’t get a definitive response from the Europeans this weekend on how best to deal next with their debt crisis, officials are still holding out hope that just a few extra days will complete the job,” Peter Boockvar, an equity strategist at Miller Tabak & Co., wrote in a note today. “Markets are assuming something. Whether what is put in place actually works or not is a different discussion, markets just want satisfaction now.”

American banks rallied following gains in European lenders. Bank of America added 1.9 percent to $6.60. Morgan Stanley (MS) rose 3.4 percent to $17.18.

Investors also monitored third-quarter earnings reports. Profit for S&P 500 companies will climb 17 percent in the third quarter and rise 18 percent to a record $99.27 for all of 2011, according to analyst estimates compiled by Bloomberg yesterday. About three quarters of the S&P 500 companies that reported results since Oct. 11 beat analysts’ estimates.

McDouble Burger

McDonald’s added 2.8 percent to $91.51. Chief Executive Officer Jim Skinner has sought to draw American diners with low- priced menu items, such as the $1 McDouble burger, as the nation’s 9.1 percent unemployment rate saps consumer confidence. Sales in the U.S. were driven by fruit smoothies, Chicken McNuggets and breakfast foods, the company said.

Honeywell climbed 4.6 percent to $50.67 as the company also increased its full-year forecast. Honeywell and other U.S. manufacturers have posted earnings growth this year amid a slowing economy by keeping costs in check and expanding abroad. Aerospace sales rose 8 percent in the quarter, the company said.

Seagate Technology Plc (STX) surged 21 percent to $14.64. The world’s largest maker of computer disk drives reported first- quarter earnings excluding some item of 34 cents a share, beating the average analyst estimate by 8.3 percent, Bloomberg data show. The company had its rating raised at ThinkEquity Partners and Robert W. Baird & Co.

Energy, Raw Materials

Energy and raw material producers gained as the S&P GSCI Index of commodities advanced 2 percent. Alcoa Inc. (AA), the largest U.S. aluminum producer, rose 2.1 percent to $10.16. ConocoPhillips (COP) added 2.1 percent to $71.71.

General Electric Co. (GE) dropped 1.5 percent to $16.38 even as earnings climbed in the third quarter as the finance unit’s gains blunted tighter profit margins in the energy business.

Companies transporting holiday merchandise may outperform the stock market as a rise in consumer spending indicates seasonal shopping may be better than forecast.

Retailers were cautious when they placed orders this summer amid concerns the economy was “falling apart” and headed for a double-dip recession, said David Ross, a Baltimore-based transportation analyst at Stifel Nicolaus & Co. Even though September retail sales rose the most in seven months, shares of trucking and airfreight companies still reflect pessimistic forecasts, he said.

“There is a greater chance of a positive holiday-shopping surprise than a negative one,” said Ross, who maintains “buy” ratings on United Parcel Service Inc. (UPS) and Old Dominion Freight Line Inc. If retailers are caught short after under-ordering, the peak shipping period -- typically July through September -- will occur later, he said.

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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Stocks Gain in Europe Before Debt Summit; U.S. Futures, Commodities Climb

By Andrew Rummer - Oct 21, 2011 5:58 PM GMT+0700

Play Video

Oct. 21 (Bloomberg) -- Steve Brice, chief investment strategist at Standard Chartered Plc, talks about the outlook for a European rescue fund to fight the region's debt crisis, and its potential implications for financial markets. Brice speaks with Susan Li on Bloomberg Television's "First Up."(Source: Bloomberg)

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Oct. 21 (Bloomberg) -- Uwe Parpart, head of research at Reorient Financial Markets Ltd., talks about Europe's sovereign debt crisis and its implications for Asian economies and financial markets. Parpart speaks in Hong Kong with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)

European stocks, U.S. index futures and commodities advanced amid speculation policy makers are moving closer to a deal to contain the euro-area debt crisis. The euro and Italian bonds pared losses.

The Stoxx Europe 600 Index climbed 0.9 percent at 11:57 a.m. in London, paring a weekly loss. Standard & Poor’s 500 Index futures added 0.4 percent. Copper jumped 4 percent after slumping 6.6 percent yesterday. The euro slipped 0.2 percent to $1.3759 after depreciating as much as 0.6 percent. The yield on Italian 10-year government bonds dropped to 5.95 percent.

European finance ministers meet in Brussels today to lay the groundwork for an Oct. 23 gathering of government leaders that had been the deadline for a solution to the debt crisis. A further summit was scheduled for Oct. 26 yesterday after Germany and France said the European Union needs more time to seal a “global and ambitious” accord.

“Markets have pretty much discounted a poor outcome coming into this so the potential for a short-term rally or surprise on the upside is definitely there,” Steve Brice, chief investment strategist at Standard Chartered Plc in Singapore, said in a Bloomberg Television interview.

$1.3 Trillion

European governments may deploy as much as 940 billion euros ($1.3 trillion) to fight the debt crisis, two people familiar with the discussions said yesterday. Negotiations on combining the EU’s temporary and permanent rescue funds as of mid-2012, while scrapping a ceiling on bailout spending, accelerated this week after efforts to leverage the temporary fund ran into European Central Bank opposition and provoked the French-German clash.

About five shares advanced for every one that fell on the Stoxx 600, helping the gauge pare its weekly loss to 1.5 percent. UniCredit SpA and BNP Paribas SA, the biggest banks in Italy and France, led a rebound in financial shares, climbing more than 2.5 percent.

The increase in S&P 500 futures indicated the U.S. gauge will rise for a second day. Microsoft Corp. (MSFT) slipped 0.7 percent in pre-market New York trading after the world’s largest software maker reported per-share earnings that were in line with analysts’ predictions.

Copper gained for the first day this week, to $7,005 a metric ton, after falling 11 percent the previous four days. Arabica coffee jumped to $2.35 a pound, with inventories of the beans at the lowest since March 2000, according to ICE Futures U.S. in New York.

Qaddafi Death

Brent oil in New York fell 0.2 percent to $109.54 a barrel. Libya’s state-run National Oil Corp. said Muammar Qaddafi’s death will help the return of crude output.

The MSCI Emerging Markets Index climbed 0.3 percent, after yesterday’s 2.7 percent drop. South Korea’s Kospi Index (KOSPI) added 1.8 percent on speculation company earnings will withstand a slowing global economy. The Shanghai Composite Index retreated 0.6 percent, capping the benchmark index’s steepest weekly drop in five months, on speculation slowing economic growth and the nation’s tighter monetary policies are hurting earnings.

The franc gained 0.4 percent against the euro and 0.2 percent versus the dollar. The Dollar Index, which tracks the U.S. currency against six trading partners, slipped less than 0.1 percent for a fourth day of losses.

Italy’s 10-year bond yield dropped five basis points to 5.95 percent. Spanish 10-year bonds snapped a nine-day decline, with yields falling two basis points to 5.50 percent.

ECB Bond Buying

The ECB bought small amounts of Spanish and Italian government debt today, according to two people with direct knowledge of the transactions, who asked not to be identified because the deals are confidential.

The cost to insure against default on French debt rose for a second day with credit -default swaps increasing two basis points to 191, according to data provider CMA. Contracts on Germany climbed two basis points to 93, Italy was up 5 basis points to 461 and Spain added two to 388.5 basis points.

“There’s a lot of information and a lot of uncertainty whether this weekend’s meeting will come out with a definitive plan,” said Stephen Halmarick, the Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about $150 billion. “The market is still very unsure and very uncertain.”

German business confidence fell to a 16-month low in October as the euro region’s worsening debt crisis threatened to push the economy into recession. The Munich-based Ifo institute’s business climate index, based on a survey of 7,000 executives, dropped to 106.4, the lowest since June 2010, from 107.4 in September.

S&P said in a report today that France is among euro-region sovereigns likely to be downgraded in a stressed economic scenario. The ratings of Spain, Italy, Ireland and Portugal would also be reduced by one or two levels in either of two stress scenarios, the New York-based ratings firm said.

To contact the reporter on this story: Andrew Rummer in London at arummer@bloomberg.net

To contact the editor responsible for this story: Chris Nagi at chrisnagi@bloomberg.net

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Berlusconi’s Bank Choice Risks France Tensions

By Lorenzo Totaro - Oct 21, 2011 2:34 PM GMT+0700

Italian Prime Minister Silvio Berlusconi’s surprise nomination of Ignazio Visco to run the Bank of Italy sets up a possible clash with French President Nicolas Sarkozy over the composition of the European Central Bank’s Executive Board.

Berlusconi chose Visco, a 30-year veteran of the Bank of Italy, to succeed Mario Draghi, who is to become president of the ECB when Jean-Claude Trichet’s term ends this month. The Italian premier had indicated he might choose ECB Executive Board member Lorenzo Bini Smaghi for the post, which would free up a seat on the ECB’s decision-making board for a Frenchman.

Sarkozy had made removing Bini Smaghi from the board a condition of his support for Draghi’s ECB candidacy, which was key to convincing German Chancellor Angela Merkel to back the Italian for the top ECB post. Bini Smaghi had refused to resign from the Executive Board before the end of his term in 2013. Berlusconi will have the chance to explain his decision to Sarkozy at a European Union summit in Brussels on Oct. 23.

“You wonder how in these musical chairs they’re going to make room for Bini Smaghi,” said Riccardo Barbieri, chief European economist at Mizuho International Plc in London. “There must have been conversations with the people involved in the process that would lead to the rebalancing that France was looking for on the ECB board.”

Political Paralysis

Visco’s nomination to a six-year term ends a four-month deadlock over Draghi’s successor that reflected divisions in the government at a time when Berlusconi is struggling to convince investors that he can act to tame the euro-region’s second- biggest debt after Greece. Berlusconi is under pressure to maintain good relations with Draghi as the ECB has been backstopping Italian bonds since August after yields rose to euro-era records on concern Italy would be engulfed by the region’s debt crisis.

The nomination of Visco, 61, comes with the yield on Italy’s 10-year bond at 6.04 percent, the highest since the before the ECB started buying Italian debt on Aug. 8. Berlusconi’s inability to decide on a Bank of Italy governor, four months after Draghi secured the ECB nomination, highlighted the political gridlock that has hampered Italy’s response to the spread of the debt crisis and fueled the jump in borrowing costs.

Other Candidates

Berlusconi and Finance Minister Giulio Tremonti clashed over the appointment, with the premier initially backing Bank of Italy Director General Fabrizio Saccomanni, the candidate favored by Draghi, and Tremonti preferring Treasury Director General Vittorio Grilli, newspaper Il Sole 24 Ore reported on Sept. 28.

Grilli, who is from Milan, was also supported by Umberto Bossi, leader of the Northern League, which holds the key to Berlusconi’s parliamentary majority, who said he preferred Grilli because he was a “Milanese.”

Choosing Visco allows Berlusconi to appease Draghi and Italian President Giorgio Napolitano, who had pushed for an internal candidate, rather than a political appointee. He also can partially satisfy Tremonti by denying the post to Saccomanni, Draghi’s favored choice for the position, newspapers including La Repubblica reported today. The choice leaves the issue of Bini Smaghi unresolved.

‘Victory’ for Draghi

Members of the government and opposition leaders praised the decision. “With the nomination of Ignazio Visco, Draghi has had another success and the independence of the Bank of Italy was maintained, even if a little tarnished,” said Italo Bocchino, secretary of the Future and Liberty for Italy party.

Berlusconi on Oct. 18 said that Bini Smaghi was on his “shortlist,” the only Bank of Italy candidate he cited by name that day. Berlusconi decided that he would nominate Bini Smaghi for the position yesterday, a deputy minister in his government said on condition of anonymity. The premier appears to have changed his mind after meetings with top members of his Cabinet, including Tremonti and Bossi, last night in Rome.

“You have the whole Bini Smaghi thing coming back to the fore,” Marc Ostwald, a fixed-income strategist at Monument Securities Ltd. in London, said in an e-mail. “The French obviously feel they should have a French member” on the board, “and this nomination doesn’t solve the problem.”

Defending Independence

Amid pressure from France and Italy to step down, Bini Smaghi said in a speech at the Vatican on June 16 that ECB officials must have “personal independence, which ensures the security of tenure of the members of the decision-making bodies for the whole term of office.” An ECB spokesman, asking not to be identified in line with policy, declined to comment last night on Bini Smaghi.

When EU leaders confirmed Draghi, 64, to succeed Trichet on June 24, Berlusconi pledged to nominate his successor the following week. Visco, a former chief economist at the Paris- based Organization for Economic Cooperation and Development, wasn’t among the three candidates he cited by name: Bini Smaghi, Saccomanni and Grilli.

Visco hails from Naples, a southern city often criticized by the Northern League for its organized crime and chronic garbage problems. Still, Roberto Calderoli, one of the Northern League’s Cabinet members, praised Visco last night as a solid economist with the “pragmatic” qualities of a northern Italian, Ansa newswire reported.

Calls for Reform

Visco is one of three deputy directors-general at the Bank of Italy. He started his career at the central bank in 1972 and holds a degree in economics from the University of Rome and a doctorate from the University of Pennsylvania.

In his most recent public comments before the Senate in Rome on Aug. 30, Visco called for structural moves to overhaul Italy’s economy, whose growth has lagged behind the euro-area average for the past decade, after the government approved 54 billion euros ($74 billion) in austerity measures to help tame debt of about 120 percent of gross domestic product.

The spending cuts and tax increases “will have inevitable restrictive effects on the economy,” Visco said. “The growth in international commerce is unlikely to return quickly to the high levels of before the crisis. We therefore risk a period of stagnation, which will slow the reduction of the debt.”

The Bank of Italy’s Board of Directors is set to meet Oct. 24 to give a non-binding opinion on Visco’s candidacy to Italian President Giorgio Napolitano, who must give final approval before Visco gets the job.

To contact the reporter on this story: Lorenzo Totaro in Rome at ltotaro@bloomberg.net

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

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EU Considers Wielding $1.3T to Break Debt Impasse

By James G. Neuger and Tony Czuczka - Oct 21, 2011 2:23 PM GMT+0700

European governments may unleash as much as 940 billion euros ($1.3 trillion) to fight the debt crisis, seeking to break a deadlock between Germany and France that is forcing leaders to hold two summits within four days.

Negotiations on combining the European Union’s temporary and planned permanent rescue funds as of mid-2012, while scrapping a ceiling on bailout spending, accelerated this week after efforts to leverage the temporary fund ran into European Central Bank opposition and provoked the French-German clash, two people familiar with the discussions said. They declined to be identified because political leaders will have to decide.

The option may be one way out of the impasse between Europe’s two biggest economies as President Barack Obama presses for them to find a solution. Finance ministers meet in Brussels today from about 2 p.m. to lay the groundwork for an Oct. 23 meeting of government leaders that had been the deadline for a solution to the debt crisis. A summit for Oct. 26 was set yesterday after Germany and France said the EU needs more time to seal a “global and ambitious” accord.

“The market wants the euro crisis solved yesterday, and the politicians and finance ministries seem to be saying ‘yes we can, but no we won’t,’” Chris Rupkey, an economist at Bank of Tokyo-Mitsubishi UFJ Ltd., said in an e-mail. “Europe has the wealth to deal with Greece, it is just that the process is incredibly complex.”

Disclosure of the dual-use option helped reverse declines in U.S. stocks and the euro yesterday. The Euro Stoxx 50 Index added 1 percent, led by banks, at 9:20 a.m. in Brussels.

Greek Vote

In Greece, Prime Minister George Papandreou won a parliamentary vote late yesterday on further austerity measures to secure more aid under the 2010 bailout. As hooded protesters threw rocks and battled riot police outside the parliament in Athens, one man died of heart failure after a rock hit him on the head, the government said.

EU officials weighing deeper losses for Greek bondholders in a revamped bailout are concerned that any investor involvement risks further roiling markets, say people familiar with the deliberations.

Greece has accumulated at least 20 billion euros in additional financing needs since a 159 billion-euro package was set in July, because of a deepening recession and delays in enacting the plan, said the people, who declined to be identified because leaders have yet to agree on their strategy.

Debt Options

The EU is considering five scenarios, ranging from sticking with July’s voluntary swap to a so-called hard restructuring, where investors could be forced to exchange Greek bonds for new ones at 50 percent of their value, the people said.

Greek two-year notes currently trade at less than 40 percent of face value.

The 440 billion-euro European Financial Stability Facility has already spent or committed about 160 billion euros, including loans to Greece that will run for up to 30 years. Instead of replacing it with the European Stability Mechanism, which will hold 500 billion euros, in mid-2013, a consensus is emerging on merging the two funds, the people said.

The ESM will operate with paid-in capital as opposed to the EFSF, which sells bonds guaranteed by governments.

The 500 billion-euro total was deemed sufficient when Greece, Ireland and Portugal were the primary victims of the debt crisis. Widening bond spreads in Italy, Spain, Belgium and France upended that calculation.

Credit Lines

Standard & Poor’s said France is among euro-region sovereigns likely to be downgraded in a stressed economic scenario. The sovereign ratings of Spain, Italy, Ireland and Portugal would also be reduced by another one or two levels in either of New York-based S&P’s two stress scenarios, it said in a report.

The EFSF may be authorized to provide credit lines of as much as 10 percent of a country’s economy, according to a proposal prepared for this week’s meetings. By that measure, credit lines for Spain and Italy, countries that required ECB support, could reach 270 billion euros ($371 billion).

“EFSF will need to be leveraged up,” Lael Brainard, the U.S. Treasury’s undersecretary for international affairs, said to a Senate subcommittee yesterday in Washington.

Germany and France, the euro region’s biggest financial backers, are at odds over how to do that. The fund’s tasks include recapitalization of banks and buying bonds in primary and secondary markets.

Franco-German Dispute

France favors creating a bank out of the EFSF, boosting its financial clout with backing from the ECB, a proposal that Germany rejects, Finance Minister Wolfgang Schaeuble told lawmakers in Berlin this week. French Prime Minister Francois Fillon said yesterday that the euro region should agree to use leverage to make the fund “massive.”

The focus on the lending ceiling came after central bankers ruled out giving the EFSF a banking license, blocking the most potent option for scaling it up. France has pushed Germany to go beyond a less powerful, ECB-backed option of using it to insure 20 percent to 30 percent of new bond issues.

Still, the 280 billion euros left in the EFSF cannot be wholly committed to bond insurance, since that would drain the fund to zero, the people said. Instead, finance ministers are likely to decide on the use of the EFSF’s instruments on a case- by-case basis, the people said.

German Chancellor Angela Merkel and French President Nicolas Sarkozy face growing pressure from the U.S. and other global partners to end the wrangling. Obama and British Prime Minister David Cameron discussed the debt crisis with Merkel and Sarkozy yesterday on a call.

“Chancellor Merkel and President Sarkozy fully understand the urgency of the issues in the Eurozone,” a White House statement said. The two plan to meet one-on-one in Brussels tomorrow on the eve of the first summit.

To contact the reporters on this story: James G. Neuger in Brussels at jneuger@bloomberg.net; Tony Czuczka in Berlin at aczuczka@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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Qaddafi’s Death Vindicates Coalition: Obama

By Nicole Gaouette - Oct 21, 2011 11:00 AM GMT+0700

President Barack Obama said the death of Muammar Qaddafi is a vindication of his brand of coalition-based global leadership as allied officials also expressed satisfaction with the outcome in Libya.

Critics in Congress assailed the administration for entering the conflict with NATO, describing it as “leading from behind.” Others argued that the president didn’t have the right to start a war without congressional approval. Administration officials such as Secretary of State Hillary Clinton said that the military campaign was “limited intervention,” not war.

Now, after almost eight months of coalition bombing runs and financial and materiel support for the post-Qaddafi National Transition Council, the U.S. mission to give Libyans a chance to “determine their destiny” has succeeded, the president said.

“Without putting a single U.S. service member on the ground, we achieved our objectives, and our NATO mission will soon come to an end,” Obama said yesterday at the White House.

“We did exactly what we said we were going to do in Libya,” Obama said. “ I think it underscores the capacity of us to work together as an international community,” the president said, adding that partnerships can make the U.S. “even more effective.”

Obama, back in Washington a day after an early election campaign bus tour, said Qaddafi’s fall was another display of the strength of America’s global leadership during his tenure.

Obama’s Leadership

“We’ve taken our al-Qaeda leaders and we’ve put them on the path to defeat,” Obama said. “We’re winding down the war in Iraq and have begun a transition in Afghanistan. And now, working in Libya with friends and allies, we’ve demonstrated what collective action can achieve in the 21st century.”

Leaders from countries such as Britain and France echoed Obama’s claims of victory and validation about the end of the Libyan dictator’s 42-year turn on the international stage.

“Well I think we’ve felt vindicated all along,” British Foreign Secretary William Hague said on the BBC yesterday. “The real gamble,” he said, would have been to do nothing in March when Qaddafi was threatening the rebel stronghold of Benghazi.

On Canada’s CBC television, Prime Minister Stephen Harper declared that “Qaddafi’s days are over. Never again will he be in a position to support terrorism or to turn guns on his own people.”

NATO Secretary General Anders Fogh Rasmussen said the leader’s death showed that “NATO and our partners have successfully implemented the historic mandate of the United Nations to protect the people of Libya.”

Chavez Disagrees

The acclaim was not universal. In Venezuela, President Hugo Chavez said Qaddafi was a “martyr” and a “great fighter” whose death was an “assassination,” according to the Agence France-Presse news agency. The Libyan leader awarded Chavez with the “al Qaddafi International Human Rights” award in 2004.

Qaddafi’s death follows the flight of Tunisia’s President Zine El Abidine Ben Ali from power on Jan. 14 after large-scale protests. Egyptian President Hosni Mubarak was ousted in April after three decades in power.

Egypt’s interim ruling authority yesterday called on Libya’s NTC to “turn over a new page” to rebuild the country and offered assistance to its “Libyan brothers,” the semi- official newspaper Al Ahram reported.

Obama, Harper, Hague and Rasmussen all said Qaddafi’s death would mean the end of the NATO-led mission.

End of Mission

“We will terminate our mission in coordination with the United Nations” and the NTC, Rasmussen said. With the reported fall of Qaddafi-loyalist strongholds Bani Walid and Sirte, “that moment has now moved much closer,” the NATO leader said.

Action in Libya was authorized by a UN resolution that allowed NATO to take all necessary measures to protect civilians. The step was taken after the Gulf Cooperation Council and the Arab League asked the West for help in dealing with Qaddafi’s assault on his own citizens.

Arab-American groups, including the Arab-American Anti- Discrimination Committee, welcomed the start of a new era for Libya. U.S. lawmakers in both parties reacted positively to the news about Qaddafi.

Senator John McCain, the Arizona Republican who was his party’s presidential candidate against Democrat Obama in 2008 and was an early advocate of intervention to help Libya’s rebels, said the U.S. “must now deepen our support for the Libyan people as they work to make the next phase of their democratic revolution as successful as the fight to free their country.”

Securing Libyan Weapons

Michigan Representative Mike Rogers, the Republican chairman of the House Permanent Select Committee on Intelligence, said Qaddafi’s death closed an important chapter for the families of those killed in 1988 by the bombing of Pan Am flight 103 over Lockerbie, Scotland, and warned about the need to secure Libya’s chemical stockpile and conventional weapons such as missiles that can bring down aircraft.

House Minority Leader Nancy Pelosi, a California Democrat, praised the “strong action taken by the United States, led by President Obama, and NATO, the United Nations and the Arab League proves the power of the world community working together.”

Republican Critic

For some Republicans, including Senate Minority Whip Jon Kyl, an Arizona Republican, Obama’s handling of the Libya situation fell short. Kyl told reporters yesterday that the president “wanted to lead from behind and let others do the job.”

Senator Chris Coons, a Delaware Democrat and chairman of the Foreign Relations subcommittee that oversees Africa, said the Libya campaign was “appropriately measured,” given fiscal constraints and engagement in Afghanistan and Iraq.

The Democratic chairman of the Senate Foreign Relations Committee, Massachusetts Senator John Kerry, said “it is undeniable that the NATO campaign prevented a massacre” and contributed to Qaddafi’s downfall without “suffering a single American fatality.”

The praise contrasted with the tone of debates earlier this year when Kerry’s committee rejected Obama’s argument that involvement in Libya didn’t require congressional approval because it didn’t constitute full-blown hostilities.

The 1973 War Powers Resolution demands congressional authorization within 60 days of first military strikes.

An April 1 Justice Department memo said Obama had the constitutional authority to use military force in Libya because he could “reasonably determine” intervention was in the national interest.

Yesterday, U.S. District Judge Reggie Walton ruled that members of the House of Representatives who had said Obama violated the War Powers Act in Libya had failed to demonstrate that they had the right to sue executive branch officials.

To contact the reporter on this story: Nicole Gaouette in Washington at ngaouette@bloomberg.net.

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

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Asian Stocks Swing Between Gains, Losses Ahead of Europe Crisis Summits

By Yoshiaki Nohara and Masaaki Iwamoto - Oct 21, 2011 12:39 PM GMT+0700

Asian stocks swung between gains and losses on speculation European policy makers will struggle to reach a resolution while they consider deploying $1.3 trillion to fight the region’s debt crisis.

Fanuc Corp. (6954), a Japanese manufacturer of industrial robots that gets 75 percent of its sales abroad, rose 2.2 percent after an index of manufacturing in Philadelphia unexpectedly increased. Hynix Semiconductor Inc. (000660), the world’s second-largest maker of computer memory chips, rose 8.6 percent in Seoul after a research company said Apple Inc. used the company’s NAND-flash chips in the iPhone for the first time. Mitsui & Co. led losses in Japanese traders as commodity prices headed for the first weekly loss in three weeks.

The MSCI Asia Pacific Index rose 0.3 percent to 115.51 at 2:37 p.m. in Tokyo after falling as much as 0.3 percent. About half of the stocks on the benchmark gauge rose ahead of a European debt summit this weekend. The measure has dropped 1.4 percent this week.

“It looks like European leaders are making progress, but there’s still a long way to go,” said Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about $150 billion. “The market remains very vulnerable.”

Futures on the Standard & Poor’s 500 Index gained 0.2 percent today. The index rose 0.5 percent yesterday in New York after a report that Europe may combine temporary and permanent rescue funds to make as much as 940 billion euros ($1.3 trillion) available to fight the crisis, according to two people familiar with the matter.

Second Summit

Gains were limited on concern European policymakers will struggle to reach a resolution at the Oct. 23 summit. German Chancellor Angela Merkel and French President Nicolas Sarkozy said in a joint statement they want agreement on a “comprehensive and ambitious” plan as the European Union prepares for a second summit within three days of this weekend’s meeting.

“There’s a lot of information and a lot of uncertainty whether this weekend’s meeting will come out with a definitive plan or there’s more to come after that,” Colonial’s Halmarick said.

Factory-machinery makers rose after the Federal Reserve Bank of Philadelphia’s general economic index increased to 8.7 from minus 17.5 last month, the biggest one-month rebound in 31 years.

Fanuc gained 2.2 percent to 12,150 yen. Mitsubishi Electric Corp., which makes 25 percent of revenue from factory automation equipment, rose 2.3 percent to 709 yen.

Japan’s Nikkei 225 Stock Average fell 0.1 percent after rising as much as 0.2 percent. Australia’s S&P/ASX 200 lost 0.1 percent. Hong Kong’s Hang Seng Index (HSI) was little changed after swinging between a gain of 0.6 percent and a drop of 0.3 percent.

Samsung, Hynix

South Korea’s Kospi Index (KOSPI) added 1.7 percent on speculation the nation’s earnings will withstand a slowdown in the global economy. Samsung Electronics Co., the world’s second-biggest handset maker, rose 1.2 percent to 918,000 won on a Wall Street Journal report that its smartphone shipments beat Apple Inc’s in the last quarter.

Hynix Semiconductor rose 8.6 percent to 22,850 won in Seoul after research company IHS iSuppli said Apple used the company’s NAND-flash chips in the iPhone for the first time.

LG Display Co., the world’s second-largest maker of liquid- crystal displays, jumped 6.7 percent to 24,000 won after analysts from LIG Investment & Securities Co. and Hyundai Securities Co. said losses will narrow in the current quarter.

The MSCI Asia Pacific Index declined 16 percent this year through yesterday amid concern Europe’s debt crisis will damage the banking system and U.S. growth is sputtering. That compares with slides of 3.4 percent by the S&P 500 and 16 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 11.7 times estimated earnings on average, compared with 12.2 times for the S&P 500 and 10 times for the Stoxx 600.

Japanese trading companies fell after the Thomson Reuters/Jefferies CRB Index of raw materials fell 1 percent yesterday, set for a 3 percent weekly loss. Mitsui & Co. dropped 3.8 percent to 1,051 yen, while Mitsubishi Corp. (8058) slid 2.8 percent to 1,474 yen, while Itochu Corp. (8001) lost 2.2 percent to 728 yen.

To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Masaaki Iwamoto in Tokyo at miwamoto4@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net

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Capcom Expects Mobile-Phone Games to Generate 30% of Profit in a Few Years

By Naoko Fujimura and Masatsugu Horie - Oct 21, 2011 8:53 AM GMT+0700

Capcom Co. expects the proportion of its profit generated by “Smurfs’ Village” and other games played on mobile phones to rise to 30 percent as users of Apple Inc. (AAPL)’s iPhone and Google Inc.’s Android system download titles.

Capcom, creator of the “Resident Evil” video series, in May forecast mobile-phone games will make up 6.6 percent of operating profit in the year ending March. That proportion will probably increase about five-fold “in a few years,” Chairman Kenzo Tsujimoto said yesterday in an interview.

Tsujimoto, 70, said purchasing Canada’s Cosmic Infinity Inc., developer of the “Who Wants to Be a Millionaire” handset game, in 2006 gave Osaka-based Capcom a head start in the sector. “That allowed us to wait in ambush,” he said.

The company is building up its line of games played on Facebook and other social-networking sites as the sector reshapes Japan’s $10.6 billion video-game market. The domestic market for social gaming will almost triple to 305 billion yen ($4 billion) in 2013, according to Mitsubishi UFJ Morgan Stanley Securities Co.

“The gaming population is expanding thanks to the rising popularity of applications played with smartphones,” Tsujimoto said. “We hope these casual users will eventually start to play games on video-game consoles.”

The company forecasts operating profit, or sales minus the cost of goods and administrative expenses, of 12.1 billion yen for this fiscal year, down 15 percent from a year earlier.

‘Tectonic’

Capcom, which introduced the Beeline Interactive brand for social games this year, began last month offering “Smurfs’ Village,” in which users cultivate land and build a town with the blue characters, to smartphones that run on the Android operating system. The title has already had more than 15 million downloads via Apple Inc.’s App Store, Capcom said.

“The video-game industry has seen about 10 ‘tectonic movements’ in the past 40 years,” with perhaps the biggest being the shift from pinball machines and juke boxes to arcade machines that use sophisticated chips, said Tsujimoto, who founded Capcom in 1983. The rise in social games played on mobile devices may be the next shift, he said.

Capcom fell 0.4 percent to 1,948 yen as of the 10:48 a.m. on the Tokyo Stock Exchange. The shares have jumped 49 percent this year, compared with a 15 percent drop in the benchmark Nikkei 225 Stock Average.

To contact the reporters on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net; Masatsugu Horie in Osaka at mhorie3@bloomberg.net

To contact the editors responsible for this story: Drew Gibson at dgibson2@bloomberg.net; Anand Krishnamoorthy at anandk@bloomberg.net

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Libyans Cheer Qaddafi’s Death as Step Toward Democracy After 42-Year Reign

By Caroline Alexander, Ola Galal and Mariam Fam - Oct 21, 2011 12:02 PM GMT+0700

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Oct. 20 (Bloomberg) -- Former Libyan dictator Muammar Qaddafi died after being captured by forces led by the Misrata Military Council, the group said. Details of his detention and death will be announced today in a news conference, said the council in an e-mailed statement. Lara Setrakian reports on Bloomberg Television's "In the Loop." (Source: Bloomberg)

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Oct. 21 (Bloomberg) -- Kurt Volker, former U.S. ambassador to the North Atlantic Treaty Organization, talks about the death of Muammar Qaddafi. Exuberant Libyans waving flags and assault rifles poured into the streets of Tripoli and other cities to celebrate the death of Qaddafi, who ruled by force of arms and personality for 42 years. Volker speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

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Oct. 21 (Bloomberg) -- Kamran Bokhari, an analyst at geopolitical analysis firm Stratfor, talks about the death of Muammar Qaddafi. Exuberant Libyans waving flags and assault rifles poured into the streets of Tripoli and other cities to celebrate the death of Qaddafi, who ruled by force of arms and personality for 42 years. Bokhari speaks from Toronto with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

Exuberant Libyans waving flags and assault rifles poured into the streets of Tripoli and other cities to celebrate the death of Muammar Qaddafi, who ruled by force of arms and personality for 42 years.

His attempt to escape the holdout coastal city of Sirte, the scene of heavy fighting in recent weeks, was foiled by French warplanes, which spotted and blocked his convoy of SUVs until Libyan fighters reached the scene, according to French Defense Minister Gerard Longuet.

In the celebrations, men held their children while fighters flashed victory signs and fired weapons into the air, as people danced to the new national anthem. In the evening, fireworks lit up the capital’s sky.

“Years of tyranny and dictatorship have now been closed,” Abdel Hafiz Ghoga, National Transitional Council vice chairman, told reporters in Benghazi.

Qaddafi’s son Mutassim died after being shot in the neck, according to an e-mail from the Misrata Military Council, whose fighters led the assault on Sirte and act independently of the NTC. Anti-Qaddafi forces were reported to be chasing two convoys, one of which was said to carry another Qaddafi son, his once heir-apparent Saif al-Islam, according to Ahmed Bani, an NTC defense spokesman.

‘Momentous Day’

Western leaders cheered the conclusion of the hunt for Qaddafi, which will allow NATO to end its operations, even as analysts cautioned that Libya’s political divisions may jeopardize its democratic ambitions.

U.S. President Barack Obama, in remarks at the White House, called it a “momentous day” in Libyan history and said the oil-producing North African nation now must follow the “long and winding road to full democracy.”

“A new page opens for the Libyan people, that of reconciliation in unity and liberty,” said French President Nicolas Sarkozy, who was at the forefront of Western efforts to aid the Libyan uprising.

The circumstances of Qaddafi’s death were unclear. Broadcasters carried images purporting to show Qaddafi, alive and standing after his capture, and later his corpse. Mahmoud Jibril, the acting prime minister, was cited by CNN as saying that Qaddafi was captured alive and was killed in crossfire as he was driven away in a vehicle.

Amnesty International, a human rights group, called on the NTC to make public “the full facts” on how Qaddafi died. “It is essential to conduct a full, independent and impartial inquiry to establish” whether Qaddafi was killed during combat or after he was captured, the organization said on its website.

Arab Spring

The uprising was part of the region’s so-called Arab Spring, which also unseated the leaders of Egypt and Tunisia. While Africa’s largest oil reserves may enable Libya to rebuild its economy faster than Egypt and Tunisia, the challenge facing the interim government is political as it struggles to unite the factions that challenged Qaddafi’s rule since February.

The NTC has said that control of Sirte will begin an eight- month countdown to elections for a national council, a first step toward a promised democratic system.

“The transition will probably be even more difficult compared to Egypt or Tunisia, because there’s no clear leadership, the power is very fragmented, there are big interests at stake and there’s no institution strong enough to handle all this,” Nicolo Sartori, an energy and defense analyst at Rome’s Institute for International Affairs, said in a phone interview.

Oil Output

Nuri Berruien, the chairman of Libya’s state-run National Oil Corp., said Qaddafi’s death will expedite the nation’s efforts to return to normal crude-output levels.

“A lot of things will return quickly after this good news,” he said yesterday by mobile telephone from Libya.

Oil prices dipped at around noon London time on news of Qaddafi’s capture and injuries, before advancing later. Crude oil for November delivery fell 66 cents to settle at $85.45 a barrel on the New York Mercantile Exchange.

Libyan oil output, which fell from 1.6 million barrels a day to zero during the uprising, may reach 600,000 barrels a day by the end of the year, according to the International Energy Agency in Paris.

After Tripoli’s fall, Qaddafi had issued statements that he preferred to die a martyr. His loyalists massed in Sirte, strategically important because of its airport and harbor, and in Bani Walid.

‘Suspect Convoy’

A French Dassault Aviation SA (AM) Mirage 2000 jet fired its cannon ahead of the suspect convoy to make it stop as the vehicles sought to leave Sirte, Longuet said at a briefing in Paris. It did not fire directly on the convoy, he said.

“It was a suspect convoy and the goal was to stop it so it could be inspected,” he said. Libyan forces then attacked the convoy, he said.

“It was our courageous revolutionaries who have killed the tyrant and not NATO,” Bani said on Al Arabiya television.

On a visit to Libya Oct. 18, U.S. Secretary of State Hillary Clinton, in response to a question from a young Libyan, said that the U.S. hoped Qaddafi could “be captured or killed soon so that you don’t have to fear him any longer.”

Clinton also urged the transitional leadership and Libyans who supported the anti-Qaddafi cause to refrain from vigilantism and to use the justice system, not the streets, to deal with those accused of atrocities during the eight-month rebellion.

Sirte Falls

The Misrata forces said they had defeated the last of Qaddafi’s loyalists in Sirte, ending weeks of battles that erupted last month after talks on the town’s surrender broke down.

The interim government attributed the tenacity of loyalists in Sirte to the presence of senior Qaddafi aides, including Mutassim. About 17 of Qaddafi’s closest aides were captured in Sirte during the final battle, said a top Libyan envoy to the U.K., Mahmud Nacua.

“Today Libya’s future begins,” he told reporters in London. “The people are looking forward to a very promising future.”

Pope Benedict XVI said the death of Qaddafi after a “bloody fight” marks the end of an “oppressive” regime that must pave the way for a transition without retaliation. NATO Secretary General Anders Fogh Rasumussen in a statement urged the NTC “to prevent reprisals against civilians and show restraint in dealing with defeated pro-Qaddafi forces.”

Obama said the demise of Qaddafi’s regime vindicates his strategy of bringing together allies to act, meeting its objectives without putting U.S. troops on the ground.

‘Collective Action’

“We’ve demonstrated what collective action can achieve in the 21st century,” Obama said. The NATO mission in Libya “will soon come to an end.”

U.K. Prime Minister David Cameron welcomed the death of Qaddafi, urging people to think of the victims of his deposed Libyan regime.

“Today is a day to remember all Colonel Qaddafi’s victims,” Cameron told reporters outside his London residence, listing those killed in the Lockerbie bombing, British policewoman Yvonne Fletcher and people killed by the Irish Republican Army, which Qaddafi supplied with Semtex explosive, as well as those killed in Libya.

To contact the reporters on this story: Caroline Alexander in London at calexander1@bloomberg.net; Ola Galal in Benghazi at ogalal@bloomberg.net; Mariam Fam in Cairo at mfam1@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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Jobs Put Off Surgery for Nine Months: Biographer

By Peter Burrows - Oct 21, 2011 7:10 AM GMT+0700
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A makeshift shrine to commemorate Steve Jobs, co-founder and former chief executive officer of Apple Inc., sits outside the company's store in Beijing on Oct. 6, 2011. Photographer: Adam Dean/Bloomberg

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Oct. 20 (Bloomberg) -- Bloomberg's Tom Giles talks about an authorized biography of Apple Inc. co-founder Steve Jobs to be released Oct. 24. Jobs, who died on Oct. 5, had secret treatments for pancreatic cancer while telling people he was cured, his biographer Walter Isaacson told CBS News's "60 Minutes," according to excerpts released today. Giles speaks with Emily Chang on Bloomberg Television's "Bloomberg West." (Video excerpts courtesy of CBS News. Source: Bloomberg)

Apple Inc. (AAPL) Chief Executive Officer Steve Jobs had secret treatments for pancreatic cancer while telling people he was cured, his biographer told CBS News.

Jobs, who died on Oct. 5, regretted the decision to initially refuse surgery for pancreatic cancer, Walter Isaacson, who wrote an authorized biography, told CBS News’s “60 Minutes,” according to interview excerpts released today.

“He said, ‘I didn’t want my body to be opened ... I didn’t want to be violated in that way.’ He’s regretful about it,” Isaacson said. “I think that he kind of felt that if you ignore something, if you don’t want something to exist, you can have magical thinking ... We talked about this a lot.”

Jobs had a slow-growing form of pancreatic cancer and put off surgery for nine months while he sought out spiritual and dietary therapies against the advice of his wife, Isaacson said. Once he had the surgery he told his employees about it while playing down the seriousness of his condition, CBS said.

“I will not require any chemotherapy or radiation treatments,” Jobs wrote in an Aug. 1, 2004, e-mail from his hospital bed to employees of Cupertino, California-based Apple. He said then that he was cured after having successful surgery to remove a cancerous tumor from his pancreas.

Steve Dowling, a spokesman for Apple, declined to comment. The interview, conducted by correspondent Steve Kroft, will be broadcast on Oct. 23. The network posted a 1 minute, 25 second- long excerpt. Simon & Schuster, the book publisher also owned by New York-based CBS, will release “Steve Jobs” on Oct. 24.

Disclosure’s Timing

Jobs probably should have disclosed to shareholders that he had cancer when it was first diagnosed, said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. From a governance perspective, how he decided to treat the illness was up to him, Elson said.

“He probably should have disclosed it, and everyone would have assumed he would do everything he could to keep himself alive,” said Elson. “The question is whether he misled people because he himself was misled, or did he do it on purpose. I tend to give wide latitude on these things. No one wants to believe they’re dying.”

The biographer said that Jobs, who was adopted, met the man who turned out to be his biological father without knowing who he was.

Jobs found his biological mother and sister, the novelist Mona Simpson, according to Isaacson. Simpson then identified their father, Abdulfattah “John” Jandali, who managed a coffee shop.

Jobs’s Father

Jandali told Simpson he wished she had met him earlier, when he ran a bigger Mediterranean restaurant in Silicon Valley. She hadn’t told him Jobs was his son.

“Everyone used to come there,” Jandali told Simpson, according to Isaacson. “Even Steve Jobs used to eat here. Yeah, he was a great tipper.”

“60 Minutes” will broadcast a voice recording of Isaacson interviewing Jobs about his decision to ask Simpson to keep his identity private.

“When I was looking for my biological mother, obviously, you know, I was looking for my biological father at the same time, and I learned a little bit about him and I didn’t like what I learned,” Jobs said. “I asked her to not tell him that we ever met ... not tell him anything about me.”

To contact the reporter on this story: Peter Burrows in San Francisco at pburrows@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net; Tom Giles at tgiles5@bloomberg.net

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Microsoft Beats Estimates on Business Demand

By Adam Satariano and Dina Bass - Oct 21, 2011 11:01 AM GMT+0700
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Employees cheer before customers enter at the grand opening of a new Microsoft Store at University Village in Seattle on Oct. 20, 2011. Photographer: Stuart Isett/ Bloomberg

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Oct. 21 (Bloomberg) -- David Garrity, principal at GVA Research LLC, talks about the outlook for Microsoft Corp. Microsoft, the world’s largest software maker, reported first-quarter sales that topped analysts’ predictions as companies invested in Office and server programs, outweighing poor consumer demand for computers. Garrity speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

Microsoft Corp. (MSFT), the largest software maker, reported first-quarter sales that topped analysts’ predictions as companies invested in Office and server programs, outweighing poor consumer demand for computers.

Sales rose 7.3 percent to $17.4 billion, compared with the $17.2 billion average analyst estimate compiled by Bloomberg. Net income in the period that ended in September rose 6.1 percent to $5.74 billion, or 68 cents a share, from $5.41 billion, or 62 cents, a year earlier, Microsoft said yesterday in a statement. Profit met the average 68-cent projection.

Corporate customers are buying Office productivity software as well as the Windows operating system and databases for their networks. Microsoft is also benefiting from the revenue that comes from multiyear contracts sold to businesses. That’s helped compensate for waning consumer personal-computer purchases.

“People are still buying billions of dollars worth of Microsoft products every month,” said Colin Gillis, an analyst with BGC Partners in New York. “This is not going away.”

Microsoft, little changed in extended trading, fell 9 cents to close at $27.04 in U.S. trading yesterday. The shares had declined 3.1 percent this year before today.

Redmond, Washington-based Microsoft said operating expenses in the year that started July 1 will rise to $28.6 billion to $29.2 billion, above the $28 billion to $28.6 billion it forecast in April and reiterated in July.

Unearned revenue, a measure of future sales, was $15.7 billion in the first quarter, above the $15.5 billion average analyst estimate compiled by Bloomberg.

‘Bit of Relief’

Microsoft is bearing up well, even amid sluggish economic growth and lackluster demand for personal computers, said Tony Ursillo, an analyst in Boston at Loomis Sayles & Co., which owns Microsoft shares.

“The results might be viewed as a bit of a relief, given the ongoing concerns about the PC market and the macroeconomic environment,” Ursillo said.

Corporations are buying machines pre-loaded with Windows 7 and upgrading to Office 2010, which was released more than a year ago. Server software like the Windows version for corporate networks and the SQL database are also propelling revenue growth.

Business division sales, mostly consisting of Office software, rose 7.7 percent to $5.62 billion, compared with the $5.5 billion analysts had expected. Server unit sales rose 10 percent to $4.25 billion. Analysts had projected $4.3 billion.

Budgets ‘Squeezed’

Spending by businesses may slow down if the economy doesn’t improve, said Josh Olson, a technology analyst at Edward Jones & Co.

“Enterprise budgets are going to be squeezed to some extent going forward,” Olson said. “The picture isn’t as rosy as we had thought six months back.”

PC weakness held back growth at Microsoft’s Windows division, where sales rose 1.7 percent to $4.87 billion, shy of the $4.9 billion average analyst estimate compiled by Bloomberg.

Total PC shipments rose less than forecast in the third quarter, dragged down by disappointing back-to-school sales, economic frailty and a shift to tablets and smartphones, according to Gartner Inc. Shipments climbed 3.2 percent, below the 5.1 percent growth it previously projected.

A total of 91.8 million PCs were shipped in the period. Apple Inc. (AAPL) sold 11.1 million iPad tablets at the same time, setting a record for the product.

PC Weakness

The PC market will grow 4.2 percent to 361.6 million units this year as consumers buy fewer machines, according to market researcher IDC. In the same period, the smartphone market will jump 55 percent to 472 million units, making it bigger than PCs by that measure for the first time, IDC said.

Demand for tablets is taking a bigger toll on low-memory netbook computers than on standard PCs that run Windows, said Bill Koefoed, general manager of investor relations at Microsoft.

“When people need to do work, to create content, they are using a PC,” he said.

Even so, Microsoft is rushing to complete a new version of Windows capable of running smaller, thinner tablet computers with battery life to rival that of the iPad. The company showed the new software at a conference in September and got some encouraging reviews. It won’t be ready until next year, people familiar with the matter said in March.

Jane Snorek, a senior research analyst at Nuveen Asset Management, which owns Microsoft shares, said that may help the company gain a foothold in the tablet market.

“I don’t think the stock does anything until that gets resolved,” Snorek said.

To contact the reporters on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net; Dina Bass in Seattle at dbass2@bloomberg.net

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

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Gold Pares Worst Week in a Month as Commodities Advance on European Plan

By Glenys Sim - Oct 21, 2011 9:23 AM GMT+0700

Gold gained for the first time in five days, trimming its worst weekly performance in a month, as optimism that European leaders have a plan to fight the region’s debt crisis drove commodities higher.

Bullion for immediate delivery rose as much as 0.6 percent to $1,629.70 an ounce and traded at $1,629.22 at 10:17 a.m. in Singapore. The metal is down 3.1 percent this week, the biggest drop since the week ending Sept. 23. December-delivery gold also gained for the first day in five, climbing as much as 1.1 percent to $1,630.90 in New York.

“Uncertainty in the gold market has led to shifts from day to day as the yellow metal moves with base metals on risk-off, trading more like a commodity, and then moves with U.S. dollars as investors seek safe-haven assets,” James Steel, an analyst at HSBC Securities USA Inc., wrote in a note. “This could continue in the short term.”

Asian stocks gained and three-month copper on the London Metal Exchange advanced for the first time in five days as two people familiar with the matter said that European governments may pool as much as 940 billion euros ($1.3 trillion) to stem the crisis. German Chancellor Angela Merkel and French President Nicolas Sarkozy said in a joint statement yesterday that they want leaders to agree on an “ambitious” plan.

Cash silver climbed 0.8 percent to $30.85 an ounce. Spot platinum gained 0.7 percent to $1,505.25 an ounce and palladium rose 1.4 percent to $595.50 an ounce.

To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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