Economic Calendar

Wednesday, December 28, 2011

Singapore Press Says Yahoo! ‘Deliberately’ Committed Plagiarism

By Shamim Adam and Andrea Tan - Dec 28, 2011 7:39 PM GMT+0700

Singapore Press Holdings Ltd., embroiled in a legal tussle with Yahoo! Inc. as both accused each other of copyright infringement, said the Internet company “deliberately” reproduced its news content without permission.

“Yahoo had over an extended period of time consistently and deliberately committed plagiarism by substantially reproducing the words and expressions used in SPH’s articles without permission,” Singapore Press said in a statement to the stock exchange today. Yahoo was “free-riding” on the newspaper publisher to boost its website page views and advertising revenue, according to the statement.

Singapore Press sued Yahoo’s Southeast Asia unit Nov. 18, claiming the company reproduced 23 articles from newspapers including the Straits Times from November 2010 to October 2011 without authorization. On Dec. 13, Yahoo denied breaching copyright laws and counter-sued Singapore Press for wrongly using its images and articles on a website.

“SPH is determined to pursue this suit vigorously and to protect its copyrighted works,” the newspaper publisher said after filing its defense to the Singapore High Court today in response to Yahoo’s countersuit.

Yahoo said in a defense filed to the Singapore court Dec. 13 the articles that Singapore Press claimed were reproduced without authorization were insubstantial and insignificant.

“There is an important public interest in respect of the right of the public to be informed of current events in Singapore,” the Sunnyvale, California-based Internet company said. “Copyright law does not protect facts and information.”

Negotiations Collapsed

Yahoo approached Singapore Press in April 2009 for a license to reproduce news content, and negotiations between the two companies broke down last year, according to the publisher’s lawsuit. The Internet company relied on Singapore Press’s articles to provide content on its website to raise traffic and build readership without having to expend financial resources, according to the lawsuit.

“These acts of infringement were committed by Yahoo to direct and maximize traffic to its website in order to drive up its page views and advertising revenue,” Singapore Press said today. “This was not done for the public interest, as claimed by Yahoo, but instead in furtherance of its own vested financial interest.”

Singapore Press deliberately kept silent until a letter from its lawyers Nov. 4, causing Yahoo to continue with the alleged infringement for a year as it believed the publisher had no complaints, according to the Internet company’s filing.

The case is Singapore Press Holdings Ltd. (SPH) v Yahoo! Southeast Asia Ltd. S831/2011 in the Singapore High Court.

To contact the reporters on this story: Shamim Adam in Singapore at; Andrea Tan in Singapore at

To contact the editor responsible for this story: Douglas Wong at


Deflation Grip Returns in Japan as Production Declines: Economy

By Aki Ito - Dec 28, 2011 12:47 PM GMT+0700

Japan’s rebound from the March earthquake and tsunami sputtered in November as production and retail sales tumbled, deepening the nation’s return to the deflation that first took hold a decade ago.

Industrial output slumped 2.6 percent from October, more than all the forecasts in a Bloomberg News survey of 29 economists, a government report showed today in Tokyo. Retail sales slid 2.1 percent. Consumer prices excluding fresh food fell 0.2 percent from a year earlier after a 0.1 percent decline the previous month.

The weakening economy, hurt by Europe’s debt crisis and plans by companies from Panasonic Corp. to Nissan Motor Co. to shift production abroad, may undermine Prime Minister Yoshihiko Noda’s plan to raise taxes and cut the world’s largest debt burden. Lawmakers told reporters in Tokyo today that a tax panel set up by Noda’s party has proposed doubling the nation’s sales tax by 2015, a move opposed by some ruling party members who’ve threatened to quit over the issue.

“Fundamentally, Japan’s economy is on a downward slope,” said Yoshimasa Maruyama, chief economist at Itochu Corp. “Exports are falling and negatively impacting Japan’s economy due to the global slowdown.”

To stoke demand and help rebuilding efforts, Japan’s government has approved four supplementary budgets since the March 11 earthquake and tsunami, worth around 20 trillion yen ($257 billion). A separate budget account will also be created for the fiscal year starting April 1 to pay for reconstruction.

Tax Spat

To help fill government coffers, Noda is pushing for a tax panel to decide on what to do about the sales tax by this week.

The Democratic Party of Japan plans to raise the tax from 5 percent to 8 percent in October 2013, and to 10 percent in April 2015, lawmakers Takeshi Miyazaki and Motoyuki Odachi said after leaving a meeting of the panel today.

A rebellion within the party over plans for the levy adds to troubles for Noda after two of his ministers were censured by the upper house earlier this month. Nine DPJ members submitted their resignation today, the DPJ’s acting secretary general, Shinji Tarutoko, told reporters.

Asian stocks fell for a second day, with the regional benchmark index headed for the worst year since 2008, after a report showed U.S. housing prices fell, damping the earnings outlook for Asian exporters. The MSCI Asia Pacific Index (MXAP) dropped 0.7 percent to 112.89 as of 1:02 p.m. in Tokyo. The measure has fallen 18 percent this year.

Stocks Drop

The Nikkei 225 Stock Average, which has declined 17 percent in the past twelve months, fell less than 0.1 percent to 8,439.55 as of 12:35 p.m. in Tokyo after swinging between gains and losses more than 15 times. The broader Topix Index fell 0.2 percent to 723.01 after rising as much as 0.1 percent.

Other reports in the Asia-Pacific region today showed confidence among South Korean manufacturers dropping to a 30- month low as Europe’s sovereign-debt crisis and the death of North Korean leader Kim Jong Il, who is being laid to rest today, cloud the outlook. In the Philippines, the trade deficit narrowed to $932 million, the National Statistics Office said.

In Europe, a report may show retail sales in Sweden last month fell 0.3 percent from a month earlier.

Floods Hit Production

The second consecutive drop in Japan’s consumer prices occurs against a backdrop of weakening global demand and the yen’s advance against the dollar. The yen has strengthened almost 6 percent in the past 12 months, the best performer among Group of 10 currencies. The dollar fetched 77.80 yen as of 11 a.m. in Tokyo from 77.88.

The yen’s gain has exacerbated woes caused by Thailand’s worst flooding in almost 70 years. The floods contributed to the drop in production, crippling the output in Southeast Asia of Japanese companies such as Sony Corp. (6758) and Honda Motor Co.

“The big drop in the numbers this time is due more to the Thai flooding than to the global economy,” Itochu’s Maruyama said. “In terms of the production numbers now, basically it’s on a downward trend in the long run.”

The biggest seasonally adjusted monthly drops in industrial production were in the information electronics industry, with overall output dropping 23.7 percent, today’s figures show. Passenger car output slid 12.6 percent; iron and steel production declined 1.2 percent.

Japan’s manufacturers said they planned on boosting output by 4.8 percent in December and 3.4 percent in January, signaling optimism over the outlook as disruptions from the floods in Thailand ease.

Recovery Stalling

“Industrial production is unlikely to recover to” levels seen before the 2008 global financial crisis, Junko Nishioka, chief Japan economist at RBS Securities Japan Ltd., said before today’s reports.

Other data also suggest Japan’s recovery may be stalling. Exports fell for the second straight month in November from a year earlier and capital spending in the third quarter dropped 9.8 percent. Large manufacturers are more concerned about business prospects, with the Bank of Japan’s Tankan quarterly index of corporate sentiment falling to minus 4 this month. A negative figure indicates pessimists outnumber optimists.

The financial situation in the euro area, Japan’s third- biggest export destination, also shows no sign of improving, with 10-year Italian government bonds hovering around 7 percent. Fitch Ratings on Dec. 17 lowered the credit outlook of Spain, Italy and AAA-rated France, citing Europe’s failure to find a “comprehensive solution” to its crisis.

The appreciation of the yen is hurting exports, Japan’s finance minister, Jun Azumi, said on Dec. 24. The finance minister has indicated he’s prepared to sell the currency in the foreign-exchange markets. The Finance Ministry said last week that it plans to raise the issuance limit for bills to fund intervention to an unprecedented 195 trillion yen.

To contact the reporter on this story: Aki Ito in Tokyo at

To contact the editor responsible for this story: Paul Panckhurst at


U.S. Stock-Index Futures Gain as Italy Sells Debt

By Tom Stoukas - Dec 28, 2011 7:27 PM GMT+0700

U.S. stock futures gained, indicating the Standard & Poor’s 500 Index will rise for a sixth day, as declining borrowing costs at an auction of Italian bonds eased concern about Europe’s debt crisis.

Google Inc. (GOOG) advanced 0.7 percent after a report that its social-networking service Google+ is adding 625,000 users a day. Citigroup Inc. increased 0.6 percent as a court agreed to the Securities and Exchange Commission’s request to delay a suit against the bank.

S&P 500 futures expiring in March rose 0.3 percent to 1,263.6 at 7:23 a.m. in New York, having earlier retreated as much as 0.4 percent. Dow Jones Industrial Average futures climbed 28 points, or 0.2 percent, to 12,247.

Italy sold 9 billion euros ($11.8 billion) of six-month Treasury bills at a rate of 3.251 percent, down from 6.504 percent at the last auction of similar maturity securities on Nov. 25. Demand was 1.7 times the amount for sale, compared with 1.47 times last month.

The S&P 500 closed little changed yesterday as better-than- estimated consumer confidence data offset a decline in home prices and concern about Europe’s debt crisis.

The gauge is headed for the best fourth quarter since 1999, rising 12 percent since the end of September, on better-than- forecast U.S. economic data and steps taken by European leaders to tame the region’s debt crisis.

Fed Briefings

Federal Reserve Chairman Ben S. Bernanke could double press briefings to improve understanding of policy changes that may include signaling interest rates will stay near zero longer, economists said.

Adding briefings “is a viable option because Bernanke has been an effective communicator” of policy aims, said Sam Bullard, senior economist at Wells Fargo Securities. Fed officials may also replace their pledge to keep the benchmark rate close to zero through mid-2013 with a description of circumstances under which rates would rise, said Keith Hembre, chief economist at Nuveen Asset Management in Minneapolis.

Google rose 0.7 percent to $644.63 in German trading. The company is adding 625,000 users a day to Google+, which may total 400 million members by the end of next year, according to independent analysis of its growth.

The site’s popularity has accelerated in recent weeks, with almost a quarter of its total user base joining in December alone, said Paul B. Allen , the founder of Inc., who tracks the numbers as Google+’s “unofficial statistician.”

Citigroup (C) climbed 0.6 percent to $27.07 in pre-market New York trading. The SEC’s suit against the bank will remain on hold while a federal appeals court considers whether to review a judge’s rejection of a $285 million settlement in the case.

To contact the reporter on this story: Tom Stoukas in Athens at

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


Kim Jong Un Walks Weeping by Father’s Hearse Through North Korean Capital

By Sangwon Yoon and Patrick Harrington - Dec 28, 2011 8:15 PM GMT+0700

Kim Jong Un, successor to North Korean dictator Kim Jong Il, walked weeping alongside a hearse carrying the body of his father through the snow-covered streets of Pyongyang ahead of a national memorial service tomorrow that ends two days of mourning meant to bolster the new leader.

A black limousine carrying a giant portrait of Kim, who developed nuclear weapons during his 17-year reign while more than 1 million of his people starved to death, led a motorcade with the coffin draped in a red flag. State television broadcast the scene in which thousands of soldiers massed in formation while citizens lined the city’s wide avenues during the three- hour funeral.

State media have sketched the image of a Kim Jong Un solidifying his hold on the succession, referring to him as “supreme leader of the revolutionary armed forces” and “great successor” to his late father and grandfather. The stability of North Korea, which has the world’s fourth-largest army and 70 submarines, may depend on Kim Jong Un’s ability to establish a firm grip on the regime.

“Kim Jong Un walked the hearse himself with his hand on the hood, while surrounded by key elders of the North Korean elite,” said Kim Yong Hyun, a professor of North Korea studies at Dongguk University in Seoul. “Authorities are trying to indirectly communicate to the people that the transition is stable, that the new leader is stable.”

Red banners that read “Hail Comrade Kim Jong Il!” and “Great leader Kim Jong Il Is Immortal!” were draped over buildings in streets lined with citizens dressed in dark, heavy coats to shield against the winter cold.

White Chrysanthemums

People en route to the ceremony carried white Chrysanthemum flowers through falling snow, said Gunter Unterbeck, a German national who’s lived in the North Korean capital since 1996. Children without real flowers made them from paper.

The procession followed the same route as the 1994 funeral of Kim Il Sung, North Korea’s first leader and Kim Jong Un’s grandfather, who’s beaming portrait was also paraded through the streets at the head of a motorcade. Unlike his father, who was kept behind the scenes during the funeral of Kim Il Sung, Kim Jong Un featured prominently in the ceremony.

The aim was “to make him better known to the North Korean people,” said Baek Seung Joo, a North Korea specialist at the Korea Institute of Defense Analyses. “Average North Koreans do not know much about Kim Jong Un and by having him take the lead they were trying to build recognition as well as loyalty toward him.”

‘Power Dynamic’

Jang Song Thaek, the vice chairman of the National Defense Commission and Kim Jong Un’s uncle, walked behind his nephew. They were followed by Kim Ki Nam, secretary of the Central Committee of the Workers’ Party, and Choe Thae Bok, chairman of the Supreme People’s Assembly. On the other side of the hearse and dressed in military uniform were Ri Yong Ho, chief of the general staff of the Korean People’s Army and Kim Yong Chun, vice-chairman of the National Defense Commission.

Watching how people are aligned around Kim Jong Un, who is thought to be 28 or 29 years old, “we can have a clue on the power dynamic in the North Korean leadership,” said Paik Hak Soon, a director of inter-Korean relations at the Seongnam, South Korea-based Sejong Institute research group.

The TV broadcast showed some people wailing uncontrollably while others stood motionless with somber expressions as snow fell. “A national tragedy has happened, how could the sky not cry,” a soldier in uniform told state television.

A notice in today’s newspaper said all social life would stop for three minutes from noon, including trains and cars, said Unterbeck. People were busy cleaning the streets and buildings this morning, he said.

Recognition And Loyalty

Soldiers held back some mourners who surged toward the roadway as the motorcade approached. Kim Jong Un and his entourage walked by the hearse for a short part of its journey, which covered 40 kilometers (25 miles) through the city, according to KCNA.

Russian scientists who maintain Vladimir Lenin’s corpse are in North Korea embalming Kim Jong Il, Russian News Service radio reported. Specialists from the Moscow-based Center for Biomedical Technologies also embalmed Kim Il Sung and other Communist leaders including the Soviet Union’s Josef Stalin and Vietnam’s Ho Chi Minh, the station said on its website.

No government officials from Seoul will pay condolences, according to the Unification Ministry, which oversees policy toward North Korea. Lee Hee Ho, the 89-year-old widow of former South Korean President Kim Dae Jung, and Hyundai Group Chairwoman Hyun Jeong Eun led a private group of 18 South Koreans on a two-day visit, where state media showed them being greeted by Kim Jong Un on Dec. 26.

Protest Balloons

Concerns the political outlook in the North could worsen contributed to a slump in consumer confidence in South Korea, which fell to a three-month low in December, a survey released yesterday showed. The Kospi (KOSPI) slid 3.4 percent on Dec. 19 when the death of North Korean leader Kim Jong Il was announced, then rallied 4 percent the next two trading days.

South Korean civic groups and defectors from the North today said they launched balloons that will float across the border to deliver leaflets criticizing Kim Jong Il and his successor. North Korea has previously said such acts could ignite a war.

In addition to the national memorial service tomorrow, there will be a nationwide three minutes of silence, and gun volleys will be fired in Pyongyang and in provincial seats, KCNA said.

Observers around the world scrutinized the images for signs of changes in the regime’s power hierarchy under its new leader.

It is difficult to tell whether a regency-type system will develop, led by Kim Jong Un’s uncle Jang Song Thaek, who walked behind his nephew in the motorcade, said Dongguk University’s Kim. “For now, it’s evident that the system is being centered around Kim Jong Un,” he said.

To contact the reporters on this story: Sangwon Yoon in Seoul at; Patrick Harrington in Tokyo at

To contact the editor responsible for this story: Peter Hirschberg at


Italy Bonds Rise as Borrowing Cost Falls at Auction; Stocks, Futures Gain

By Michael Shanahan - Dec 28, 2011 7:45 PM GMT+0700

Dec. 28 (Bloomberg) -- Steve Bernstein, an advisor with Primus Capital, talks about the outlook for Asian markets in 2012, the European debt crisis and his investment strategy. Bernstein spoke with Rishaad Salamat, John Dawson, Mia Saini and David Ingles in Hong Kong on Dec. 23 on Bloomberg Television's "Asia Edge." (Source: Bloomberg)

Italian 10-year bonds rose for the first time in five days as the nation’s borrowing costs plunged at an auction of 9 billion euros ($11.8 billion) of debt. European stocks and U.S. equity index (MXAP) futures advanced.

The rate on 10-year Italian bonds fell 14 basis points to 6.85 percent after losing as much as 25 points. Similar- maturity Spanish yields dropped 24 basis points to 5.10 percent. The yen climbed against 11 of its 16 most-active peers and advanced 0.3 percent versus the euro at 7:43 a.m. in New York. The Stoxx Europe 600 Index climbed 0.5 percent and Standard & Poor’s 500 Index futures added 0.3 percent. Gold for immediate delivery fell for a second day.

Italy sold the 179-day bills at a rate of 3.251 percent, down from 6.504 percent at the last auction on Nov. 25. Demand was 1.7 times the amount offered, compared with 1.47 times last month. Economic reports showed Japan’s industrial output dropped and confidence among South Korean manufacturers sank to a 30- month low. The U.K. faces the “toughest” employment market in two decades, the Chartered Institute of Personnel and Development said.

“Italy was able to halve the rates from the previous auction,” said David Schnautz, a fixed-income strategist at Commerzbank AG in London. “The next stop is tomorrow’s bond auction and today’s result is a good omen for that. It should be comforting for the market.”

Italy will seek to sell bonds maturing in 2014, 2018, 2021 and 2022 tomorrow. The nation’s 10-year bond yields climbed to 7 percent yesterday, the level that spurred Greece, Ireland and Portugal to seek bailouts. A report tomorrow may show Italian business confidence dipped to the lowest in almost two years.

Financial Markets

The S&P 500 was poised to rally for a sixth straight day, its longest streak in more than a year. The FTSE 100 Index rose 0.7 percent in the U.K., where financial markets were shut the previous two days for holidays. Germany’s DAX Index rose 0.1 percent.

The Stoxx 600 has dropped 12 percent this year, compared with an 18 percent slump in the MSCI Asia-Pacific Index and a 0.6 percent gain in the S&P 500. The MSCI Asia-Pacific retreated 0.5 percent today.

Japan’s industrial output slumped 2.6 percent in November from October, more than all the forecasts in a Bloomberg survey of 29 economists. The Bank of Korea said an index (MXEF) of manufacturers’ expectations for January was 79, the lowest since July 2009. Thailand’s industrial output sank the most in more than a decade in November, government data showed.

Treasury 10-year yields were little changed at 2 percent, while German bunds declined, pushing the 10-year yield two basis points higher to 1.94 percent. German debt has returned 9.3 percent this year, the most since 2008, according to indexes compiled by the European Federation of Financial Analysts Societies and Bloomberg. Italian debt lost 6.1 percent, while Treasuries made a profit of 9.2 percent, the indexes show.

Global Growth

Gold for immediate delivery was down 0.4 percent at $1,586.79 an ounce, the lowest since Dec. 16. Oil in New York dropped 0.6 percent to $100.78 a barrel, the first decline in seven sessions. Cotton jumped 2.2 percent to 89.84 cents a pound.

Oil earlier traded near the highest level in six weeks after Iran threatened to block the Strait of Hormuz, increasing concern that global supplies will be curbed. Futures have climbed 11 percent this year.

The S&P 500 was little changed yesterday following last week’s 3.7 percent rally. The Conference Board’s index of consumer confidence rose to 64.5, exceeding all estimates in a Bloomberg survey and reaching the highest reading since April, figures from the New York-based private research group showed yesterday.

The MSCI Emerging Markets Index dropped 0.5 percent, heading for its biggest decline in a week. South Korea’s Kospi index fell 0.9 percent, down for a third day. India’s Sensex (SENSEX) decreased 0.9 percent before a report this week that may show the nation’s current-account deficit widened to a record. Hungary’s BUX Index retreated 1.1 percent, Poland’s WIG20 decreased 0.6 percent and Turkey’s ISE National 100 Index slipped 0.2 percent.

To contact the reporter on this story: Michael Shanahan in London at

To contact the editor responsible for this story: Michael P. Regan at


U.K. Seen Facing Toughest Employment Market in Two Decades, Forecast Says

By Gregory Viscusi - Dec 28, 2011 7:01 AM GMT+0700

Britain faces the “toughest” job market in two decades with the number of working people likely to fall by 120,000 in 2012, the Chartered Institute of Personnel and Development said.

“The U.K. jobs market will be weaker than at any time since the recession of the early 1990s,” John Philpott, chief economic adviser at the CIPD, an association for human-resource professionals, said in a statement. “The combination of worsening job shortages for people without work, mounting job insecurity and a further fall in real earnings for those in work may test the resilience and resolve of the U.K. workforce far more than it did in the recession of 2008-9.”

The number of people out of work will reach 2.85 million by the end of 2012, with the unemployment rate rising to 8.8 percent, the CIPD said. Government measures to boost youth employment and to get the long-term jobless back to work may help the targeted populations, though won’t have a net effect on total employment, it said.

British unemployment rose to a 17-year high in the three months through October, with 2.64 million people out of work and a jobless rate of 8.3 percent, the Office for National Statistics said earlier this month.

To contact the reporter on this story: Gregory Viscusi in Paris at

To contact the editor responsible for this story: James Hertling at


‘Mismanaged’ Sears Loses Customers to Macy’s

By Cotten Timberlake and Miles Weiss - Dec 28, 2011 12:00 PM GMT+0700

When Kmart acquired Sears (SHLD) in 2005, Chairman Edward Lampert said the new company would have the geographic reach and scale to compete with Wal-Mart Stores Inc.

The billionaire hedge fund manager has since presided over 18 consecutive quarters of declining sales. He’s on his fourth chief executive. While Sears Holdings Corp. shares soared in the first few months after the merger, they’ve fallen 55 percent in 2011 alone.

Sears “has been a mismanaged asset,” Gregory Melich, an analyst at International Strategy & Investment, said in a Bloomberg Television interview yesterday. “A lot of traditional department stores have reinvigorated themselves through merchandising, through changing their locations; you think of Macy’s. You haven’t seen that from Sears.”

Yesterday, the largest U.S. department store chain reported that it would close as many as 120 locations after same-store sales fell 5.2 percent in the eight weeks ended Dec. 25. By contrast, such sales in the department-store sector will climb an estimated 4 percent in November and December, compared with the same period a year ago, according to the International Council of Shopping Centers, a New York-based trade group.

The shares plunged, falling 27 percent to $33.38 yesterday in New York, the largest drop since April 29, 2003.

Since becoming chairman in 2005, Lampert, 49, has reduced costs, closing 171 large U.S. stores and cutting the headcount by about 12 percent. Sears employed 312,000 people as of January, down from 355,000 in June 2006, according to data compiled by Bloomberg. Meanwhile, his hedge funds have made money on the original investment.

Ceding Customers

He has tried one strategy after another. An initial push involved converting 400 Kmart stores to a format called Sears Essentials with grocery and convenience items. Sears Grand, another concept, hewed to a superstore model. All have failed to reverse falling sales and ceded customers to the likes of Wal- Mart (WMT) and Macy’s.

“At Sears, a lot of what we sell is tied to housing,” Chris Brathwaite, a Sears Holdings spokesman, said in a telephone interview yesterday. “The recession has had an impact on our company, like most retailers.” The closings will allow the Hoffman Estates, Illinois-based company to focus on “better-performing stores,” he said.

Steve Lipin, a spokesman for Lampert, didn’t return a call seeking comment.

Buffett Inspiration

Lampert founded his hedge fund ESL Partners in 1989, taking inspiration for his approach to finding undervalued stocks from the shareholder letters of Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc. Lampert has specialized in buying stakes in beaten-down retailers, some of which he helped turn around by either collaborating with or shaking up management.

Lampert’s hedge funds bought Kmart Corp. bonds and bank loans and then swapped the debt for stock in a bankruptcy reorganization in 2003. At the same time, Lampert’s funds were also building a 15 percent stake in Sears, Roebuck & Co. by purchasing shares on the open market.

When Kmart acquired Sears in 2005 to form Sears Holdings Corp., Lampert and his funds initially held a 39.4 percent stake, comprised of about 64.6 million shares. Based on what the funds paid for their Kmart stake, as well as the average trading price during the quarters that they bought Sears stock, the funds spent an estimated $1 billion on the investment.

Profitable Investment

Even after this year’s slump in the stock, Sears has been a profitable investment for Lampert. His hedge funds paid about $16 a share for the stake in the chain, based on regulatory filings and Bloomberg calculations.

When Lampert announced his plan to buy the department store chain in November 2004, he said Sears’s service and products were “every bit as good as any of the competition.”

Both Sears and Kmart were struggling at the time. Sears’s annual sales were stuck at $41 billion in each of the four years ending in 2003. Kmart had emerged from bankruptcy after failing to compete with Wal-Mart’s lower prices.

Now Sears is turning upside down a strategy that has prevailed for most of its 118-year history. It’s accelerating franchising efforts -- including Sears Hometown and Sears Auto stores. It’s leasing space to such retailers as Forever 21. And it’s allowing other retailers to sell the popular DieHard, Craftsman and Kenmore products and licensing those brands.

Capital Starved

In the meantime, the larger stores have been starved of capital investment and customers have defected, according to Gary Balter, an analyst with Credit Suisse Group AG in New York.

Sears is spending less than a quarter of the $8 a square foot that retailers typically invest to maintain stores, according to International Strategy & Investment Group. In an August report, the New York-based firm put Sears and Kmart at the bottom of the list of a dozen retailers ranked by sales per square foot and operating profitability.

Earnings before interest, taxes, depreciation and amortization in the fourth quarter will be less than half of last year’s $933 million, Sears said yesterday.

Lampert is a self-styled merchant who has found it difficult to cede managerial control to experienced retail managers, said Jay Margolis, a former executive with Limited Brands Inc. and Reebok International Ltd.

“Sears has just lagged way behind,” Margolis said yesterday on Bloomberg Television. “There is no energy there. We have not seen the results. We have not seen the change in the product. He has found it difficult to let go.”

Dwindling Cash

Cash had dwindled to $624 million at the end of the third quarter, compared with $790 million a year earlier.

“If the vendors are comfortable shipping to them, they could go on for years,” Balter said. “Their balance sheet is fine. But it’s usually vendors who decide and if they pull the plug, then the company has no choice and they have to file” for bankruptcy protection.

Closing the Kmart and Sears stores will generate $140 million to $170 million of cash from inventory sales and leasing or sales of the locations, Sears said yesterday. The chain plans to reduce fixed costs by $100 million to $200 million.

The company will incur non-cash expenses of as much as $2.4 billion in the fourth quarter to write down the value of potential tax benefits and goodwill.

Sears didn’t specify which stores will be closed. In his annual investor letters, Lampert has identified the smaller Hometown and Sears Outlet stores as sources of growth and profit. The company opened 122 of those “specialty” stores last year, he said in his 2011 letter, and now has 945 -- less than a quarter of the total.

Web Operations

New CEO Lou D’Ambrosio, hired in February, is ramping up Web operations. Online sales via Sears’s various websites grew 30 percent year-over-year in the second quarter of this year, and 22 percent in the first quarter. To jog that growth, Sears has given salesmen in 450 of its stores more than 5,000 iPads and 11,000 iPod Touches to help them track inventory and customer orders, and added free wireless access.

“If they can just create enough cash flow to get through the downturn, at some point there is going to be a huge uptick in appliance sales,” Paul Swinand, an analyst with Morningstar Inc. in Chicago, said in a telephone interview. “They just have to make sure that when that happens they are not cut off at the knees, and that it doesn’t all go to Home Depot and Best Buy.”

Sears is to report fourth-quarter earnings on Feb. 23.

“The market is assuming there’s more bad news to come,” Swinand said.

To contact the reporters on this story: Cotten Timberlake in Washington at; Miles Weiss in Washington at

To contact the editor responsible for this story: Robin Ajello at


Apple May Hurt Shareholders With Patent War

By Peter Burrows - Dec 28, 2011 12:01 PM GMT+0700

Steve Jobs, the co-founder of Apple (AAPL) Inc., told his biographer that he’d rather wage “thermonuclear war” with Google Inc. than make deals to share its technology with the maker of the Android operating system.

That was no empty threat. In the 18 months before Jobs died on Oct. 5, Apple sued HTC Corp. (2498), Samsung Electronics Co. and Motorola Mobility Inc., the three largest Android users. It alleged that the phone makers stole Apple’s technology and asked courts to make them stop.

Now, as rulings start coming in, it might be time for a détente that helps Apple maximize the value of its patents, said Kevin Rivette, a managing partner at 3LP Advisors LLC, a firm that advises on intellectual property. When courts side with Apple and impose bans on infringing products, competitors can often devise workarounds; in cases where Apple doesn’t win import restrictions, it would be better off striking settlements that ensure access to a competitor’s innovation, he said.

“A scorched-earth strategy is bad news because it doesn’t optimize the value of their patents -- because people will get around them,” said Rivette, whose clients include Android licensees. “It’s like a dam. Using their patents to keep rivals out of the market is like putting rocks in a stream. The stream is going to find a way around. Wouldn’t it be better to direct where the water goes?”

Steve Dowling, a spokesman for Cupertino, California-based Apple, declined to comment for this story.

Early Victories

For a time, Apple’s strategy looked sound. In October, an Australian court banned the sale of Samsung’s Galaxy 10.1 tablet in that country, and the U.S. International Trade Commission agreed to consider an import ban on sales of certain HTC devices.

Then the tide began to turn. Apple suffered a setback Nov. 30 when a higher Australian court overturned the ruling against Samsung. On Dec. 22, a German judge said he was unlikely to uphold an import ban on a version of the Galaxy, which Samsung had modified in response to a ban on the original design.

The ITC gave Apple only a partial victory on Dec. 19 by ruling that HTC had violated only one of four patents Apple said it infringed. The patent covered so-called data detection, a feature that helps users make a call, send an e-mail or find an address on a map with a single keystroke.

Can’t Last?

HTC decided to drop the feature. That’s a significant loss for HTC, since the capability has come to be an expected part of using a smartphone. Still, the ruling reinforced predictions that Apple won’t succeed forever in preventing Android rivals from selling gadgets with the now-familiar hallmarks of Apple’s pioneering devices. These include touch screens and app stores.

Legal history isn’t on Apple’s side, said Marshall Phelps, former head of intellectual property at International Business Machines Corp. (IBM) and Microsoft Corp.

“Nobody has ever kept competitors out of any market with patents,” in part because software can usually be slightly changed to find a non-infringing alternative, he said.

Exceptions, he said, include an IBM patent that characterized the basic architecture of a computer and Texas Instruments Inc.’s original patent for the integrated circuit, or computer chip. IBM was ordered by the U.S. Department of Justice to license its patent, while Texas Instruments decided to do the same, which has resulted in billions of dollars in royalties, Phelps said.

Many of Apple’s patents, by contrast, relate to the look and feel of devices or particular ways of using a machine, rather than a basic technology breakthrough.

Shift Ahead

The question on the minds of many patent lawyers isn’t whether Apple should adapt its legal stance, but when. For now, the company’s approach is costing rivals millions of dollars in fees, distracting management and preventing them from emulating Apple’s products more boldly, said Ron Epstein, a former attorney at Intel Corp. who now runs patent licensing firm Epicenter IP Group.

Apple’s patent portfolio remains strong compared with those of rivals, thanks both to the innovations that went into groundbreaking products such as the iPhone and iPad, and to the effectiveness of Apple’s legal department in obtaining patents for those innovations, said Christopher Marlett, chairman and co-founder of MDB Capital Group, an investment bank that advises companies on buying and selling patents.

“Apple has the patents, the money and the expertise to go to war,” Marlett said. “I just don’t see why Apple would seek détente, since they’re the clear leader. Until they’re hit with an injunction by Google (GOOG) or Samsung, they don’t need to get serious about licensing.”

Right Back at You

Still, as more companies pour resources into the booming mobile-devices market, Apple should eventually cut deals to ensure access to rivals’ innovations as well, Epstein said.

“How long can you beat everyone else over the head before they can do the same to me?” he said.

Tim Cook, who took over in August when Jobs announced he would be unable to come back as CEO, has many other ways to take advantage of the company’s patent portfolio. The company could probably collect as much as $10 in royalties for every device sold, more than the amount analysts speculate Microsoft (MSFT) receives from Samsung and HTC, which use its mobile technology, said Rivette at 3LP.

Other Arrangements

With $81 billion in cash and investments, Apple has little need for more. Instead, the company could pursue out-of-court settlements that would help it take on Android in other ways, Rivette said. The company could offer to drop its more than two dozen patent claims against Samsung in exchange for an agreement to hold off using Apple technology for six months or a year, he said. Cook could also try to get price breaks or guarantees that would give it greater access to Samsung parts, Rivette said.

Apple and Samsung also could agree to focus on different parts of the market. For example, Apple might make iPad-sized devices while agreeing to stay out of the market for smaller devices with 7-inch displays that could compete with Amazon (AMZN).com Inc.’s new Android-based Fire tablet, Rivette said.

If Apple agreed to let Samsung include Apple’s proprietary iTunes software in such a device -- an unprecedented and unlikely step, he said -- Samsung’s sales would probably increase. That would help slow gains by Amazon, whose push into hardware makes it a threat to Apple. The move also would make Samsung more reliant on Apple, lessening its dependence on Google.

‘Divided Loyalties’

“If I’m Apple, I want divided loyalties” from Android licensees, Rivette said. “At this point, it would make more sense for Apple to build an ecosystem that everyone can live in. If you’re going to license, why not go for the big deal where you lock down supply chains, get your technologies broadly adopted and slow down competitors? That is the game.”

Apple should pursue such settlements soon, before it winds up in need of other companies’ technology, Rivette said. The ITC is expected to rule in September on an import ban on Apple and Research In Motion Ltd. (RIMM)’s mobile devices, for improper use of a photo preview feature patented by Eastman Kodak Co. (EK)

If the Commission decides there was infringement of the Kodak patent, Apple would need to settle the dispute by licensing the technology or buying some or all of Kodak’s patent portfolio to continue selling its products in the U.S. Because Kodak has been actively trying to sell its portfolio of 1,100 patents in recent months, Apple runs the risk that they may be purchased by Google, Samsung or another competitor.

Google Maps

While Apple is working on its own location-tracking technology, many iPhone and iPad users now rely on Google mapping tools to get directions or find the nearest coffee shop, by way of a partnership between Apple and Google that predates the rise of Android. Nokia Oyj, Microsoft and Skyhook Inc. also hold valuable patents for tools that keep tabs on a device’s whereabouts. Apple has made little headway in social networking and may need deals with companies such as Facebook Inc. to add features that help users connect with one another. “If Apple wanted to get into social networking, they’d have a big problem,” said Ron Laurie, managing director of Inflexion Point Strategy, a Palo Alto, California-based intellectual property consulting firm.

Working toward settlements sooner would help Apple and its rivals maintain the fast pace of innovation that has fueled the mobile-device market, he said.

“At some point, there has to be some kind of settlement, some kind of peace,” Laurie said.

To contact the reporter on this story: Peter Burrows in San Francisco at

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


European Stocks Advance After Italy’s Borrowing Costs Decline

By Corinne Gretler - Dec 28, 2011 6:42 PM GMT+0700

European stocks climbed for a fourth day after Italy’s borrowing costs fell at a debt sale, easing concern that the region’s sovereign-debt crisis may worsen. U.S. index futures advanced, while Asian shares dropped.

Banca Popolare di Milano and Banca Monte dei Paschi di Siena SpA (BMPS) led a rally in Italian lenders. Tesco Plc (TSCO), the U.K.’s largest supermarket chain, jumped 2.2 percent. Xstrata Plc (XTA) declined as copper pared a four-day gain.

The benchmark Stoxx Europe 600 Index gained 0.5 percent to 243.04 at 11:40 a.m. in London. The gauge rallied 2 percent in the previous three sessions as investors turned attention from the debt crisis to U.S. data that showed the recovery in the world’s largest economy is gathering pace. Futures on the Standard & Poor’s 500 Index expiring in March added 0.2 percent. The MSCI Asia Pacific Index retreated 0.5 percent.

“The odds to have a real problem in Italy in 2012 are much lower today than what they were three or four months ago,” said Jean-Paul Jeckelmann, chief investment officer at Banque Bonhote & Cie. in Neuchatel, Switzerland, who helps manage $1.4 billion in equities. “While today sets a hopeful basis, the real test is what happens with the long-term financing, which is much more difficult for investors and banks to carry in their books.”

Italian Debt Auction

Italy today sold 9 billion euros ($11.8 billion) of six- month Treasury bills at half the yield it paid at an auction of the securities last month. The Rome-based Treasury sold the 179- day bills at a rate of 3.251 percent, down from 6.504 percent on Nov. 25. Demand was 1.7 times the amount on offer, compared with 1.47 times last month.

Italy also sold 1.733 billion euros of 2013 notes today to yield 4.853 percent, compared with a yield of 7.814 percent at the last auction on Nov. 25. The bid-to-cover ratio was 2.24, compared with 1.59 last month. Tomorrow Italy will auction four different securities, including a 10-year bond.

Britain faces the “toughest” job market in two decades with the number of working people likely to fall by 120,000 in 2012, the Chartered Institute of Personnel and Development said.

“The U.K. jobs market will be weaker than at any time since the recession of the early 1990s,” John Philpott, chief economic adviser at the CIPD, an association for human-resource professionals, said in a statement. “The combination of worsening job shortages for people without work, mounting job insecurity and a further fall in real earnings for those in work may test the resilience and resolve of the U.K. workforce far more than it did in the recession of 2008-9.”

Greek Elections

Greece will hold national elections at the end of April, state-run Athens News Agency reported, citing Finance Minister Evangelos Venizelos. The new poll date provides the government of Prime Minister Lucas Papademos more time to complete a new financing agreement and a debt swap, the newswire reported.

National Bank of Greece SA (ETE), the country’s biggest lender, rallied 4.3 percent to 1.69 euros and EFG Eurobank Ergasias SA (EUROB) jumped 6.9 percent to 38.5 euro cents.

Banca Popolare di Milano rose 2.4 percent to 31.2 euro cents and Banca Monte dei Paschi di Siena increased 2.7 percent to 25.9 euro cents. Azimut Holding SpA (AZM), which offers investment management services, jumped 2.9 percent to 6.22 euros.

Tesco gained 2.2 percent to 399.5 pence as a gauge of European (SXXP) retailers was the among the best performers of the 19 industry groups in the Stoxx 600. Debenhams Plc (DEB) added 4.1 percent to 58.9 pence while Dufry AG, the operator of duty-free shops, gained 1.2 percent to 85.90 Swiss francs.

Holiday Shopping

U.K. shopper numbers for the Boxing Day of Dec. 26 rose 22 percent from a year earlier, market researcher Experian FootFall reported yesterday.

Bayerische Motoren Werke AG (BMW), the world’s biggest maker of luxury cars, fell 0.9 percent to 52.34 euros and Porsche AG dropped 1.5 percent to 41.57 euros. Daimler AG slid 0.7 percent to 34.17 euros.

Xstrata lost 0.8 percent to 972.1 pence. Copper retreated in London after a report that industrial production declined in Japan, curbing demand for industrial metals.

Deutsche Bank AG (DBK) and Commerzbank AG (CBK), Germany’s biggest lenders, declined 1.8 percent to 29.21 euros and 1.4 percent to 1.30 euros respectively. Societe Generale SA slipped 1 percent to 16.67 euros.

To contact the reporter on this story: Corinne Gretler in Zurich at

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


BRIC Decade Ends With Record Fund Outflows

By Michael Patterson and Shiyin Chen - Dec 28, 2011 3:35 PM GMT+0700
Enlarge image BRIC Decade Ends With Record Stock Fund Outflows

A member of the event staff walks past a BRICS sign ahead of the summitt in Sanya, Hainan Province, China, on April 12, 2011. Photographer: Qilai Shen/Bloomberg

Dec. 27 (Bloomberg) -- Mary Ann Bartels, head of technical and market analysis at Bank of America Merrill Lynch, discusses the outlook for the stock market, currencies, gold prices and investment strategy. Bartels speaks with Sara Eisen and Scarlet Fu on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

In the past decade, mutual funds poured almost $70 billion into Brazil, Russia, India and China, stocks more than quadrupled gains in the Standard & Poor’s 500 Index and the economies grew four times faster than America’s.

Now Goldman Sachs Group Inc. (GS), which coined the term BRIC, says the best is over for the largest emerging markets.

BRIC funds recorded $15 billion of outflows this year as the MSCI BRIC Index sank 24 percent, EPFR Global data show. The gauge, which beat the S&P 500 by 390 percentage points from November 2001 through September 2010, has trailed the measure for five straight quarters, the longest stretch since Goldman Sachs forecast the countries would join the U.S. and Japan as the top economies by 2050.

“In emerging markets, we’re waiting for things to get worse before they get better,” said Michael Shaoul, the chairman of Marketfield Asset Management in New York who predicted in February that developing-nation stocks would fall this year. The $845 million Marketfield Fund (VONEMBI) has topped 97 percent of peers in 2011, data compiled by Bloomberg show.

BRIC indexes may fall another 20 percent next year, buffeted by the liquidity squeeze stemming from Europe’s sovereign debt crisis, Arjuna Mahendran, the Singapore-based head of Asia investment strategy at HSBC Private Bank, which oversees about $499 billion, said in an interview. Nations such as Indonesia, Nigeria and Turkey may overshadow the BRICS in the next five years as they expand from lower levels of growth, he said.

BRICs Slowdown

“The slowdown we’re seeing in the BRICs will continue for most of the first half,” Mahendran said. “Compared to the U.S., corporate profits haven’t been that good as companies face higher wages, higher interest rates and currency volatility, and at best, we’ll only start to see the effects of monetary policy loosening in the second half of 2012.”

Gross domestic product in the four countries rose at the slowest pace in almost two years last quarter and Goldman Sachs said this month that their potential economic growth rates have probably peaked because of a smaller supply of new workers. Even as Brazilian and Russian policy makers start to lower borrowing costs, profit growth in the MSCI index will slow to 5 percent next year from 19 percent in 2011, trailing the S&P 500 by five percentage points, according to more than 12,000 analyst estimates compiled by Bloomberg.

Average economic growth in the BRIC countries will decelerate to 6.1 percent next year from a high of 9.7 percent in 2007, according to September estimates by the International Monetary Fund. That would narrow the gap over America’s expansion to 4.3 percentage points, the smallest since 2004, the IMF data show. Global GDP may increase 4 percent next year, restrained by 1.1 percent growth in the euro area, the Washington-based fund said.

‘Meaningfully Slower’

Slowing exports to Europe and government restrictions on real-estate investment are curbing the expansion in China, the biggest emerging economy. India’s growth has been hampered by the fastest interest-rate increases since 1935 and the rupee’s decline to a record low, which fueled inflation and deterred foreign investment. Brazil and Russia, whose growth during the past decade was spurred by surging commodity demand, have been hurt by falling metals prices and the slowdown in China.

“In emerging markets across the board, all the numbers are pointing toward meaningfully slower growth” next year, Rajiv Jain, who oversees about $15 billion as a money manager at Vontobel Asset Management Inc. in New York, said in a Dec. 5 phone interview.

Jain’s emerging-market equity fund beat 98 percent of peers this year, buoyed by holdings of beverage and tobacco companies whose profits are resilient to economic slowdowns.

2011 Losses

The BSE India Sensitive Index led declines among BRIC equity gauges this year, falling 23 percent. China’s Shanghai Composite Index also dropped 23 percent, while Russia’s Micex retreated 18 percent and Brazil’s Bovespa sank 16 percent. The 21-country MSCI Emerging Markets Index (MXEF) lost 20 percent, while the S&P 500 gained 0.6 percent.

The MSCI BRIC Index slid 0.8 percent as of 8:30 a.m. in London and the MSCI Emerging Markets Index dipped 0.6 percent, set for the lowest close in a week. The Shanghai Composite gained 0.2 percent, the Sensex dropped 1.1 percent, while the Micex was little changed.

Egypt’s EGX30 Index (EGX30) tumbled 49 percent this year, the biggest decline in emerging markets, as political turmoil stifled tourism and deterred foreign investment following the popular uprising that ousted President Hosni Mubarak. The Philippine Stock Exchange Index posted this year’s largest gain, advancing 3.2 percent after higher consumer spending countered the global economic slowdown.

Peak Expansions

Longer-term economic growth rates in the BRIC nations are poised to drop as their working-age populations increase more slowly and then eventually shrink, according to a Goldman Sachs report on Dec. 7 titled “The BRICs 10 Years On: Halfway Through The Great Transformation.”

“We have likely seen the peak in potential growth for the BRICs as a group,” Dominic Wilson, an economist at Goldman Sachs, wrote in the report. Wilson made the New York-based firm’s first detailed long-term forecasts for the BRIC nations in 2003, two years after Jim O’Neill, then head of economic research, coined the term.

O’Neill, now chairman of Goldman Sachs’s asset-management unit, declined an interview request for this story. His latest book, “The Growth Map,” talks of “rosy prospects” for the BRICs as well as the potential of the “Next Eleven” most populous emerging economies.

Fund Flows

Goldman Sachs’s bullish outlook for the BRIC nations proved prescient as the economies expanded at an average pace of 6.6 percent during the past decade, more than four times faster than America, according to IMF data. Investors poured about $67 billion into Brazil, Russia, India, China and BRIC mutual funds from 2001 to 2010, data compiled by Cambridge, Massachusetts- based EPFR Global show.

This year’s fund outflows were the biggest on an annual basis since at least 1996, according to EPFR Global. India equity funds recorded about $4 billion of net withdrawals, while China funds lost $3.6 billion. Investors pulled $2.2 billion from Brazil, $326 million from Russia and $5.3 billion from funds that invest in all four of the BRIC countries. All emerging-market funds tracked by EPFR Global had about $47 billion of outflows, leaving assets under management at $605 billion.

Rate Cuts

Large fund outflows are a contrarian indicator because they may signal pessimistic investors have already sold, setting the stage for a trough in share prices, according to Jonathan Garner, the chief Asia and emerging-market strategist at Morgan Stanley in Hong Kong. Emerging-market funds recorded about $48 billion of outflows in the five months ended October 2008, when developing-nation stocks began a rally that sent the MSCI emerging-market index up 108 percent in 12 months.

Emerging-market stocks will probably outperform U.S. equities next year as central banks in developing countries cut interest rates to stimulate economic growth, said James Paulsen, the chief investment strategist at Wells Capital Management in Minneapolis. The MSCI emerging-markets gauge (MXBRIC) rose an average 35 percent after the BRIC nations began cutting interest rates in 2003, 2005 and 2008.

Brazil has reduced its benchmark Selic interest rate by 1.5 percentage points since August to 11 percent. China lowered banks’ reserve requirements in November for the first time since 2008, while forwards contracts in Russia and India show that traders are betting on interest-rate cuts in the next 12 months.

In the U.S., the Federal Reserve has pledged to hold interest rates near zero until at least mid-2013.

Easing Policies

“I like the emerging markets better than anything right now,” Paulsen said in a Dec. 7 interview on Bloomberg Television. “Most of these emerging-market policy officials are turning to easing policies.”

While the MSCI BRIC index has dropped to 8.4 times estimated profit from 13 times at the start of the year, valuations are still higher than they were a decade ago. The MSCI India Index trades for 15 times profit, up from 13 times in 2001, according to data compiled by MSCI Inc.

India’s price-earnings ratios have climbed to an 8 percent premium over U.S. stocks from a 63 percent discount 10 years ago, data compiled by MSCI show. The discount on Chinese shares narrowed to 35 percent from 59 percent, while it shrank to 29 percent from 76 percent in Brazil and dropped to 60 percent from 87 percent in Russia, based on MSCI indexes.

Relative Valuations

Compared to the U.S., valuations for BRIC markets don’t look cheap enough, said Ok Hye Eun, a Seoul-based fund manager at Woori Asset Management Co., which oversees the equivalent of $15 billion.

“BRIC markets won’t be an attractive destination for a while because there are still ongoing risks,” said Ok, citing the prospects of a potential collapse in China’s real estate market and the outlook for economic reforms in India. “I see more opportunities in the U.S.”

ICICI Bank Ltd. (ICICIBC), India’s biggest private lender, trades for 14 times profits, a 42 percent premium over San Francisco-based Wells Fargo & Co., even as analysts predict slower earnings growth at the Mumbai-based bank, according to data compiled by Bloomberg. ICICI Bank profits will increase 10 percent in the current fiscal year, compared with 28 percent at Wells Fargo, the biggest U.S. bank by market value, the estimates show.

Want Want, Redecard

Want Want China Holdings Ltd. (151), a Shanghai-based maker of food and beverages, is valued at 36 times profits and analysts project earnings will increase 7.7 percent this year. The Hong Kong-listed shares are twice as expensive as Northfield, Illinois-based Kraft Foods Inc., which trades for 17 times earnings and may boost profits 13 percent, analyst estimates compiled by Bloomberg show.

Redecard SA (RDCD3), Brazil’s second-biggest card-payment processor, trades for 15 times profits, versus 12 times for New York-based American Express Co. Sao Paulo-based Redecard’s earnings will probably slip 3.8 percent this year while American Express posts a 19 percent gain, analyst projections compiled by Bloomberg show.

Outflows from emerging-market funds may continue next year as economic growth and company results disappoint investors, according to John-Paul Smith, the London-based emerging-market strategist at Deutsche Bank AG. Money managers surveyed by Bank of America Corp. from Dec. 2 to Dec. 8 said their emerging- market holdings are still 23 percent higher than benchmark weightings even after they cut positions from last month.

‘Structural Weaknesses’

“There will be a lot of volatility, but as people realize the underlying structural weaknesses of the BRIC economies, you’ll see money coming out,” Deutsche Bank’s Smith said in a telephone interview on Dec. 19.

China’s economic data have trailed estimates for the past two months, based on Citigroup Inc.’s Economic Surprise Index, a gauge of how much reports are missing economist projections in Bloomberg News surveys. Chinese manufacturing contracted by the most since 2009 in November, while new home prices declined in 49 of 70 cities tracked by the government the same month.

By contrast, U.S. data is beating analyst expectations by the most in nine months, according to the country’s Citigroup surprise index. Manufacturing in America expanded at the fastest pace in five months in November, the Institute for Supply Management said. Initial jobless claims fell to the lowest level since 2008 in the week ended Dec. 10, while U.S. housing starts in November climbed the most in 19 months, government data show.

Per-share earnings in the MSCI BRIC index trailed analysts’ estimates by 13 percent last quarter, according to data compiled by Bloomberg. S&P 500 profits beat projections by 4.4 percent, the data show.

Labor Supply

While Goldman Sachs still expects the BRICs to join the U.S. and Japan as the world’s biggest economies by 2050, the bank predicted this month that the four nations’ contribution to the global expansion will diminish during the next few decades. Economic growth in the BRICs may fall to about 4 percent by 2050 as working-age populations dwindle, Goldman Sachs said.

The number of people aged 15 to 64 in Russia has already started to drop, while Chinese workers may peak at around 1 billion and begin falling by 2020, according to estimates by the United Nations. Brazil’s peak may come by 2040, with India’s topping out by 2060, the New York-based United Nations said. The U.S. will keep adding workers through 2100, the forecasts show.

“In the last decade, simply recognizing that the BRICs were the story was largely enough to propel outsized investment returns,” Goldman’s Wilson wrote in this month’s outlook report. “It is much harder to accept that simply believing in their long-term growth dynamics can be a sufficient investment thesis now, if it ever was.”

To contact the reporters on this story: Michael Patterson in London at; Shiyin Chen in Singapore at

To contact the editor responsible for this story: Laura Zelenko at


China Launches Alternative to GPS Navigation

By Bloomberg News - Dec 28, 2011 8:52 AM GMT+0700

A Chinese satellite navigation system began providing services yesterday as the nation seeks to end its “dependence” on the U.S.’s Global Positioning System, or GPS, the official Xinhua News Agency reported.

China’s Beidou Navigation Satellite System began providing initial positioning, navigation and timing operational services for the nation and surrounding areas, Xinhua reported yesterday, citing Ran Chengqi, director of the management office of the China Satellite Navigation System. Work began on the Beidou system in 2000 with a goal of creating a global position service by 2020, according to Xinhua.

The U.S.-owned GPS system is the world’s primary source of satellite navigation data that provides directions for drivers, tracking systems for emergency rescue teams and also positioning services for U.S. military vehicles and munitions. The U.S. Air Force operates the more than 30 satellites on which the system is based.

China has already launched 10 satellites for the Beidou system, the most recent of which entered orbit earlier this month, Xinhua reported. Six more satellites will be launched in 2012 to further improve the system and expand its coverage to most of the Asia-Pacific region, Xinhua quoted Ran as saying. The system is compatible with the world’s other major global navigation satellite systems, according to the report.

Civilian Service

Civilian service provided by the U.S.’s GPS system is freely available to all users on a continuous, worldwide basis, according to the service’s website. The service is made up of space, control and user segments, of which the U.S. Air Force develops, maintains, and operates the space and control segments.

GPS is also “critical to U.S. national security,” according to its website. Its applications are integrated into almost every facet of U.S. military operations and almost all new military equipment, it said.

The Air Force manages the constellation to ensure the availability of at least 24 GPS satellites 95 percent of the time, according to the website. The Air Force flies 31 operational GPS satellites, plus three or four decommissioned satellites that can be reactivated if needed.

To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at

To contact the editor responsible for this story: Michael Tighe at


Samsung, LCD Makers Agree to Pay $538.6 Million to Settle Antitrust Claims

By Don Jeffrey and Phil Milford - Dec 28, 2011 6:58 AM GMT+0700

Sharp Corp., Samsung Electronics Co. (005930) and five other makers of liquid crystal display panels used in computers and televisions agreed to pay $538.6 million to settle antitrust claims by indirect purchasers.

Earlier this month, the panel makers agreed to pay $388 million to settle price-fixing claims by direct buyers of the products as part of a series of cases consolidated in federal court in San Francisco. Under the new agreement, about $501 million will be available for partial refunds to consumers and about $37 million to compensate governments and other public entities for damages, according to a court filing dated Dec. 23.

The companies allegedly fixed prices of thin-film liquid crystal display panels, driving up prices for purchasers of televisions, notebook computers and monitors from 1999 to 2006, according to a class action, or group, lawsuit filed in 2007.

“We think that the amount of the settlement, along with the injunction the defendants had to agree to, will prevent price-fixing by these powerful companies in the consumer electronics industry,” Joseph Alioto, a lawyer for the class- action plaintiffs, said in a telephone interview. “The only way they pay attention to the law is to have to pay money.”

The attorneys general of eight states, including Florida, California and New York, were part of the settlement agreements with the manufacturers.


“Price-fixing is detrimental to Florida’s consumers, governmental agencies, and the economy,” Pam Bondi, Florida’s attorney general, said in a statement. “I am pleased that we will be able to return funds to those who were harmed by this illegal and deceptive behavior.”

New York taxpayers may receive as much as $11 million from the settlement, according to a release from the state’s attorney general, Eric Schneiderman.

Besides the $538.6 million settlement of the antitrust claims, five of the companies also agreed to pay more than $14 million in civil fines and penalties to New York, according to the statement from Schneiderman.

“This price-fixing scheme manipulated the playing field for businesses that abide by the rules, and left consumers to pay artificially higher costs for televisions, computers and other electronics,” Schneiderman said in the statement.

Lawyers representing Samsung and Sharp didn’t return messages seeking comment on the settlement.

Criminal Fines

Samsung agreed to pay $240 million in the settlement, the highest figure. The second-biggest amount, $115.5 million, will be paid by Sharp. The other companies in this agreement are Chimei, Chunghwa, Epson, Hannstar and Hitachi.

Alioto said he believed the $539 million settlement was the largest ever for consumers in a class-action price-fixing case.

A U.S. Justice Department investigation that led to guilty pleas by LG Display Co., Chunghwa Picture Tubes and Sharp preceded the litigation. The companies agreed in 2008 and 2009 to pay $585 million in criminal fines, the U.S. said.

Litigation will continue against companies that didn’t agree to the class-action settlement, including LG, Toshiba and AU Optronics, according to the statement from Bondi. Bondi’s suit against those defendants is scheduled to go to trial in November 2012.

The class-action suit in California is set for trial in April 2012, according to a court filing.

Jury Trial

Alioto said the class-action defendants are seeking more than $2 billion in damages in that jury trial in San Francisco. U.S. District Judge Susan Illston will preside.

This settlement followed the exchange of “more than 7.8 million documents totaling more than 40 million pages” and more than 100 depositions, lawyers said in the Dec. 23 filing requesting preliminary approval of the accord.

The other states involved in the settlement are Arkansas, Michigan, Missouri, West Virginia and Wisconsin.

The case is In Re TFT-LCD (Flat Panel) Antitrust Litigation, 07-01827, U.S. District Court for the Northern District of California (San Francisco).

To contact the reporters on this story: Don Jeffrey in New York at Phil Milford in Wilmington, Delaware at

To contact the editor responsible for this story: Michael Hytha at


2012 Set to Be Biggest Internet IPO Year Since ’99

By Lee Spears - Dec 28, 2011 12:00 PM GMT+0700
Enlarge image Facebook IPO

Mark Zuckerberg, chief executive officer and founder of Facebook Inc., speaks at Facebook's F8 developers conference in San Francisco on Sept. 22, 2011. Photographer: David Paul Morris/Bloomberg

A wall that has been written on by employees stands in the entry way at Facebook Inc.'s office in New York. Photographer: Scott Eells/Bloomberg

The Yelp Inc. app is displayed for a photograph on a mobile device in New York. Photographer: Scott Eells/Bloomberg

Facebook Inc. and Yelp Inc. are set to lead the biggest year for U.S. initial public offerings by Internet companies since 1999, testing demand for IPOs after investors lost money on Zynga Inc. and Pandora Media Inc.

With Facebook considering the largest Internet IPO on record and regulatory filings showing that at least 14 other Web-related companies are planning sales, the industry may raise $11 billion next year, according to data compiled by Bloomberg. That would be the most since $18.5 billion of IPOs in 1999, just before the dot-com bubble burst.

While surging sales growth may lure investors to Facebook, the biggest social-networking site, heightened stock volatility (VIX) and Europe’s sovereign-debt crisis could temper the pace of global IPOs after a 38 percent decline in 2011. Even Internet companies may cut valuations for their offerings after Zynga, the largest developer of games for Facebook, and online-radio company Pandora slumped following share sales this year, according to researcher Morningstar Inc.

“Technology is still a place where you can get outperformance in terms of growth against a tepid market backdrop,” said David Erickson, New York-based global co-head of equity capital markets at Barclays Plc. “You might see more IPOs emerge if we get resolution in Europe or stability that makes investors more comfortable with the overall market.”

Global Performance

IPOs raised $155.8 billion in 2011, compared with $252 billion a year earlier, and U.S. initial offerings generated $38.8 billion, about 10 percent less than in 2010, Bloomberg data show. In Asia, IPOs this year have raised $79.2 billion, less than half the $176.5 billion last year, Bloomberg data show.

While funds raised in Europe rose for the year, they sank more than 95 percent since August from a year earlier after the worsening debt crisis and a cut to the U.S. credit rating sapped confidence in global markets.

Morgan Stanley (MS) took the biggest share of both U.S. and global IPOs for the second year in a row after working on initial share sales by Glencore International Plc, HCA Holdings Inc. and Michael Kors Holdings Ltd. Pen Pendleton, a spokesman for New York-based Morgan Stanley, declined to comment.

The bank also was the lead underwriter on Zynga and Pandora’s IPOs. The stocks’ declines following those public debuts may prompt greater scrutiny of valuations in 2012, said James Krapfel, an analyst at Morningstar in Chicago.

“Investors will take a harder look at the numbers going forward and need to see strong revenue and profit growth,” Krapfel said. Bookings, an indication of deferred revenue, at Zynga have increased more slowly this year, suggesting the company’s IPO price was too high, according to a Dec. 9 Morningstar report.

Zynga, Groupon

Zynga, which raised $1 billion in its IPO this month, has since fallen 2.5 percent after going public at a valuation three times that of rival Electronic Arts Inc., Oakland, California- based Pandora has plunged 36 percent since its June 14 IPO.

Facebook, based in Menlo Park, California, is examining a $10 billion offering that would value it at more than $100 billion, a person with knowledge of the matter said last month. Total sales at Facebook in 2012 may surge 52 percent to 62 percent from this year’s projected $4.27 billion through increased ad revenue, according to Debra Aho Williamson, an analyst at EMarketer. Industrywide, the display ad market may surge 24 percent to $12.3 billion this year.

Yelp, ExactTarget

“Tech offerings generally offer real growth, and investors get very excited when they can’t find growth in the broader market,” JD Moriarty, New York-based co-head of equity capital markets for technology in the Americas at Bank of America Corp., said at a briefing this month.

Yelp, the consumer-review website operator, and e-mail marketer ExactTarget Inc. both filed for IPOs in November. This year, 19 Internet companies generated $6.6 billion in U.S. initial share sales.

Glam Media Inc., a Web-advertising company that targets women, plans to make its first IPO filing by the end of the second quarter, people familiar with the matter said on Dec. 14. AppNexus Inc., the online-ad company backed by Microsoft Corp., may go public in late 2012, Chief Executive Officer Brian O’Kelley said in September. Companies like MobiTV Inc. and Eloqua Ltd., which rely on the Internet to distribute cloud- based software products to clients, may seek an additional $650 million, regulatory filings show.

Europe’s Woes

In Europe, the IPO market has “essentially come to a halt” as the sovereign-debt crisis spread from Greece to Portugal and Italy, said Mary Ann Deignan, New York-based head of equity capital markets for the Americas at Bank of America. In September, Siemens AG suspended an IPO of its Osram lighting unit and Spain pulled the initial public offering of its lottery operator as global stocks headed for a one-year low.

“There are companies that would like to go public, but are waiting for the right market environment to do so,” said Deignan, speaking at a briefing this month. “As long as policymakers and politicians control the headlines, Europe remains a challenge.”

RIB Software AG (RSTA) raised 145 million euros ($189 million) in February, this year’s biggest technology IPO in Western Europe. Yandex NV, owner of Russia’s most popular Internet search engine, raised $1.4 billion in a U.S. IPO in May, while VKontakte, the largest Russian social networking website, also may sell shares in New York next year, people with knowledge of the matter said in June.

Months Behind

“The IPO market in Europe is probably six months behind where we are in Asia and the U.S.,” Brad Miller, New York-based global co-head of equity syndicate at Deutsche Bank AG, said at a briefing this month. The first pickup of stock-sale activity in Europe may come as governments sell state-owned assets to the public through spinoffs, Miller said.

Still, even in Hong Kong, where growth from mainland China will spur demand, a busier calendar may not come until the second half, said John Lydon, co-head of Asia equity capital markets at Deutsche Bank.

Chow Tai Fook Jewellery Group Ltd. and New China Life Insurance Co. both fell on their first day of trading in Hong Kong this month after selling shares at or near the bottom of proposed price ranges. Others such as Perfect Shape (PRC) Holdings Ltd. pulled offerings.

Private-Equity IPOs

IPOs by private-equity firms have also dried up this year, with owners instead pursuing secondary offerings. Last month, firms including Bain Capital LLC, Carlyle Group and Thomas H. Lee Partners LP raised $613 million from selling shares in Dunkin’ Brands Group Inc., the doughnut chain they took public in July. This year, KKR & Co. (KKR) and other investors generated $2.1 billion from secondary offerings of stock in Dollar General Corp., whose IPO occurred in 2009.

Private-equity firms seeking to unravel investments made during the record buyout boom from 2005 to 2007 may follow through with IPOs if markets stabilize, said Robert H. McCooey Jr., senior vice president of new listings and capital markets at Nasdaq OMX Group Inc. in New York.

“Given the right market conditions, there will certainly be some of those companies that will be looking to exit into the public markets,” McCooey said. Toys “R” Us Inc., backed by buyout firms including KKR, filed for an IPO in May 2010 and has yet to complete a sale.

Some technology companies have also held off. Travel- website operator Kayak Software Corp. filed plans for a $50 million IPO in November 2010., which considered a $1 billion IPO earlier this year, instead chose to raise $400 million from private investors, people familiar with the matter said this month.

Hot Names

Many Web-focused companies that completed IPOs in 1999, such as EToys Inc. and Inc., fell victim to the subsequent technology-stock collapse as shareholders abandoned the unprofitable ventures. The performance of new Internet stocks (RGUSTL) next year will show whether investors are ready to dive back into the Web, said Laurent Morel of Societe Generale SA.

“Technology IPOs are definitely the theme there, with lots of hot names like Zynga coming to the market,” said Morel, the Paris-based global head of equity capital markets. “But if you look at their performance, most of them are struggling. Next year will be the real test.”

To contact the reporter on this story: Lee Spears in New York at

To contact the editors responsible for this story: Jennifer Sondag at; Jacqueline Simmons at


Asia Stocks Fall on Europe, Growth Concerns

By Shiyin Chen and Wes Goodman - Dec 28, 2011 12:30 PM GMT+0700

Dec. 28 (Bloomberg) -- Steve Bernstein, an advisor with Primus Capital, talks about the outlook for Asian markets in 2012, the European debt crisis and his investment strategy. Bernstein spoke with Rishaad Salamat, John Dawson, Mia Saini and David Ingles in Hong Kong on Dec. 23 on Bloomberg Television's "Asia Edge." (Source: Bloomberg)

Asia stocks (MXAP) fell, extending the MSCI Asia Pacific Index’s annual loss, while copper snapped a four- day rally amid concern economic growth in the region is slowing and before Italy sells debt today and tomorrow.

The MSCI Asia Pacific Index declined 0.7 percent at 2:22 p.m. in Tokyo. Standard & Poor’s 500 Index futures retreated 0.3 percent. Copper lost 1.5 percent in London, soybeans slid for the first time in nine days and gold sank to a one-week low. The euro weakened against 12 of its 16 major peers. Treasury 30-year yields slipped one basis point to 3.01 percent.

Economic reports today showed Japan’s industrial production dropped and confidence among South Korean manufacturers sank to a 30-month low. U.S. home prices fell more than projected in October even as consumer confidence gained in December to an eight-month high, data showed yesterday. Italy is scheduled to sell 9 billion euros ($12 billion) of 179-day bills and as much as 2.5 billion euros of zero-coupon 2013 bonds today.

“We haven’t seen any resolution from the European area, and the situation is going to be the same next year,” said Chungkeun Oh, a debt trader in Seoul at Industrial Bank of Korea, South Korea’s largest lender to small- and medium-sized companies.

About three shares slid for every one that rose on the MSCI Asia Pacific Index. The measure has fallen 18 percent this year, compared with a 12 percent drop on the Stoxx Europe 600 Index and a 0.6 percent gain in the Standard & Poor’s 500 Index.

Australia’s S&P/ASX 200 Index declined 1.3 percent and Hong Kong’s Hang Seng Index retreated 0.7 percent as the markets open after a two-day holiday. South Korea’s Kospi Index slipped 0.9 percent. SK Telecom Co. (017670) led losses among companies that trade without the right to the year’s final dividend payments.

U.S. Economy

The S&P 500 was little changed yesterday following last week’s 3.7 percent rally. The Conference Board’s index of consumer confidence rose to 64.5, exceeding all estimates in a Bloomberg News survey, and the highest reading since April, figures from the New York-based private research group showed.

The S&P/Case-Shiller index of home values in cities dropped 3.4 percent from October 2010 after decreasing 3.5 percent in the year ended September, the New York-based group said yesterday. The median forecast of 27 economists in a Bloomberg survey projected a 3.2 percent decline.

“The U.S. housing market has yet to get on a firm recovery path because we don’t know if prices will actually come back,” said Naoteru Teraoka, general manager at Tokyo-based Chuo Mitsui Asset Management Co., which oversees about $29.6 billion. “Market participants are in vacation mode and aren’t doing much.”

Italian Sales

Treasury 10-year yields fell one basis point to 2 percent today. Treasuries of all maturities have returned 9 percent this year, according to Bank of America Merrill Lynch indexes.

The euro was little changed at $1.3066 and weakened 0.2 percent to 101.62 yen. In addition to today’s sales, Italy is scheduled to sell bonds maturing in 2014, 2018, 2021 and 2022 tomorrow. The nation’s 10-year bond yields climbed two basis points yesterday to 7 percent, the level that spurred Greece, Ireland and Portugal to seek bailouts.

A report tomorrow may show Italian business confidence dipped to the lowest in almost two years.

The won traded at 1,156.95 per dollar, near a one-week low, after the Bank of Korea said an index of manufacturers’ expectations for January was 79, the least since July 2009. Thailand’s baht weakened after government data showed today the nation’s industrial output sank the most in more than a decade in November.

Copper, Gold

Three-month copper fell to $7,525 a metric ton in London after gaining 4 percent last week. The metal is down 22 percent this year, set for the first annual fall since 2008. Soybean futures dropped 1 percent to $11.97 a bushel, halting an eight- day, 9 percent jump. Corn declined 0.2 percent to $6.32 a bushel after prices rose 9.4 percent in the past seven days.

Gold for immediate delivery slid as much as 0.5 percent to $1,586.13 an ounce, the lowest prices since Dec. 19, on concern that an escalation of Europe’s debt crisis may weigh on global growth amid slowing demand in India and China. Futures were on course for the longest losing streak since 2009.

Oil traded near the highest level in six weeks after Iran threatened to block crude transportation through the Strait of Hormuz, increasing concern that global supplies will be curbed amid shrinking U.S. stockpiles. Crude for February delivery retreated 0.1 percent to $101.24 a barrel in New York. Futures have climbed 11 percent this year increasing 15 percent in 2010.

The cost of insuring corporate bonds against non-payment fell in Australia and Japan. The Markit iTraxx Australia index decreased two basis points to 179 basis points, Westpac Banking Corp. prices show. The index is headed for its lowest close since Nov. 8 and at those levels would have risen 75.5 basis points this year, according to data provider CMA.

The Markit iTraxx Japan index declined 1 basis point to 186, Deutsche Bank AG prices show. The gauge is set for its lowest close since Dec. 27, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

To contact the reporters on this story: Shiyin Chen in Singapore at; Wes Goodman in Singapore at

To contact the editor responsible for this story: Shiyin Chen in Singapore at