Economic Calendar

Monday, April 30, 2012

Oil Slips From Near Four-Week High; Hedge Funds Cut Bullish Bets

By Ben Sharples - Apr 30, 2012 8:47 AM GMT+0700

Oil slid from the highest close in almost four weeks, trimming a monthly gain, as investors speculated that recent price gains may be unsustainable.

Futures fell as much as 0.3 percent after climbing for a second week. Oil’s advance halted after it failed to surpass its 50-day moving average, a technical resistance level at which traders typically sell. Hedge funds cut bullish crude bets last week, the Commodity Futures Trading Commission said. Output by the Organization of Petroleum Exporting Countries climbed to the highest level in more than three years in April. A report this week may show U.S. employment rose this month.

“The market has decided to get ahead of itself and that’s effectively what we’re seeing,” said Jonathan Barratt, chief executive of Barratt’s Bulletin, a commodity-markets newsletter in Sydney. “There are areas or pockets which are holding the price of crude up when oil should be a lot lower. Employment will be the key this week.”

Crude for June delivery fell as much as 27 cents to $104.66 a barrel on the New York Mercantile Exchange and was at $104.69 at 11:11 a.m. Sydney time. The contract advanced 38 cents, or 0.4 percent, to $104.93 on April 27, the highest close since April 2. Prices are 1.6 percent higher this month and up 6 percent this year.

Brent oil for June settlement was at $119.58 a barrel, down 25 cents, on the London-based ICE Futures Europe exchange. Prices are down 2.7 percent this month, heading for the first monthly decline since December. The European benchmark contract’s front month premium to West Texas Intermediate was at $14.89, from $14.90 on April 27.

Technical Resistance

Oil in New York has technical resistance along its 50-day moving average, at $105.17 a barrel today, according to data compiled by Bloomberg. Futures have closed below this indicator every day since April 4.

Crude’s trading range in April is the tightest for any month in 17 years as concern eased that supplies would be disrupted and reports showed slower U.S. economic growth. This month’s price has ranged from $100.68 to $105.49 a barrel, a difference of 4.8 percent. That’s the smallest since February 1995, when the price ranged from $18.13 to $18.98.

New York futures rose to $110.55 a barrel on March 1 as Western nations prepared sanctions against Iran, then slipped as tension eased. U.S. gross domestic product growth slowed to a 2.2 percent rate in the first quarter, according to the Commerce Department.

Hedge Funds

Money managers, including hedge funds, cut bullish oil wagers by 2,878, or 1.4 percent, to 196,426 futures and options combined in the seven days ended April 24, according to the Commodity Futures Trading Commission’s Commitments of Traders report on April 27.

OPEC production increased 305,000 barrels, or 1 percent, to an average 31.405 million barrels a day in April from a revised 31.1 million in March, according to a Bloomberg News survey of oil companies, producers and analysts. Output increased to the highest level since October 2008. The March total was revised 10,000 barrels a day lower.

Payrolls climbed by 165,000 workers after a 120,000 gain in March, according to the median forecast of 64 economists surveyed by Bloomberg News before Labor Department data due May 4. Manufacturing and services grew at a slower pace, other reports may show.

To contact the reporter on this story: Ben Sharples in Melbourne at

To contact the editor responsible for this story: Alexander Kwiatkowski at


Apple Uses Office Locations to Minimize Tax Burden, NYT Reports

By Dan Hart - Apr 29, 2012 8:47 PM GMT+0700

Apple Inc. (AAPL) uses offices in states other than California, where it’s headquartered, and countries outside the U.S. to help minimize its overall tax burden, the New York Times reported.

The company has an office in Reno, Nevada, to collect and invest its profits and avoid paying California’s 8.84 percent corporate tax rate on some of its gains, the newspaper said. Nevada’s tax rate is zero, the Times said. The method, which is legal, is one of many that enables the iPad and iPhone maker to reduce its tax bill by billions of dollars each year, the newspaper said in a story published today.

Former Treasury Department economist Martin Sullivan estimates Apple paid cash taxes of $3.3 billion worldwide on posted profit of $34.2 billion last year, and would have paid $2.4 billion more in U.S. taxes without the arrangement it has, the newspaper said.

Technology companies, due to a tax code skewed to an industrial age and not a digital one, are among the least-taxed businesses in the U.S., the Times said, citing government and corporate data.

Bloomberg News reported in October 2010 that Google Inc. (GOOG) cut its taxes by $3.1 billion in the three years prior using strategies known as the “Double Irish” and “Dutch Sandwich,” reducing its tax rate internationally to 2.4 percent.

Apple told the Times it “pays an enormous amount of taxes, which help our local, state and federal governments.” The company said its U.S. operations generated about $5 billion in federal and state income taxes in the first half of fiscal 2012, the newspaper reported.

The company also has subsidiaries in Luxembourg, Ireland and the British Virgin Islands that allow it to pay lower taxes on royalties or processed transactions, the newspaper said, citing former Apple executives. Apple declined to comment on its operations in Nevada or the other countries.

To contact the reporter on this story: Dan Hart in Washington at

To contact the editor responsible for this story: Sylvia Wier at


Google Staff Said They Were Unaware of Data Gathering, FCC Says

By Brian Womack - Apr 29, 2012 1:36 PM GMT+0700

Google Inc. (GOOG) employees who worked on a mapping-service project told the U.S. Federal Communications Commission they didn’t initially know about software that would gather personal data, even though an engineer disclosed the program’s details, according to an agency report.

The unidentified engineer, who made the disclosure in an internal project document, also told at least two fellow workers about how the software program would access so-called payload data, which includes personal information such as e-mails, according to the FCC report, which was re-released yesterday by the company with fewer portions redacted.

Google Inc., based in Mountain View, California, has been facing rising scrutiny from federal regulators about how it handles private data. Photographer: Tony Avelar/Bloomberg

The FCC compiled the report as part of an investigation into whether Google’s collection of private data through its Street View map product was a violation of the Communications Act. The agency said in the April 13 document that it decided not to penalize Google for the data-gathering, though it assessed a $25,000 fine for not cooperating with the inquiry.

“Engineer Doe specifically told two engineers working on the project, including a senior manager, about collecting payload data,” the agency said in the report. “Nevertheless, managers of the Street View project and other Google employees who worked on Street View have uniformly asserted in declarations and interviews” that they didn’t know about the private-data gathering, which began in 2007, until April or May 2010.

Street View sends cars to photograph buildings and homes in neighborhoods. Google has said the data collection was a mistake, and last week said that it would pay the FCC’s penalty to conclude the inquiry.

Privacy Concerns

The Mountain View, California-based company has been facing rising scrutiny from federal regulators about how it handles private data. Last year, Google agreed to 20 years of independent privacy audits to settle claims with the Federal Trade Commission that it deceived users and violated its own privacy policies with the Buzz social network.

The report’s details were reported earlier by the Los Angeles Times. Google released the less-redacted version of the FCC report after saying earlier this week it had cooperated fully with the agency.

“We decided to voluntarily make the entire document available except for the names of individuals,” the company said in an e-mailed statement. “While we disagree with some of the statements made in the document, we agree with the FCC’s conclusion that we did not break the law. We hope that we can now put this matter behind us.”

‘Sensitive Information’

For three years starting in May 2007, Street View cars collected from wireless networks content that wasn’t needed for the project, according to the FCC’s April 13 findings. Google gathered e-mail and text messages, passwords, Internet-usage history and “other highly sensitive personal information,” the FCC said. Google “grounded” the cars after learning about the data gathering.

The agency didn’t penalize Google for the activities because communications and wiretap law were unclear and the engineer who said he told other workers, called “Engineer Doe” in the report, had declined to testify, the FCC said.

To contact the reporter on this story: Brian Womack in San Francisco at

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


‘Failing’ Syria Peace Plan Raises Question of What’s Next

By Nayla Razzouk and Nicole Gaouette - Apr 29, 2012 10:44 PM GMT+0700

At least seven people were killed in fighting throughout Syria as the U.S. said the United Nations-backed peace plan for the country was failing.

The casualties today included one soldier who defected from government forces and a child, according to the opposition Local Coordination Committees.

More than 500 people have been killed since the April 12 start of the cease-fire brokered by UN special envoy Kofi Annan, according to the website of the Local Coordination Committees. If violence continues, the U.S. and its allies anticipate putting further pressure on the regime by seeking a travel ban, additional financial sanctions and an arms embargo at the UN Security Council, U.S. State Department spokeswoman Victoria Nuland said last week in Washington.

Nuland blamed Syrian President Bashar al-Assad for the plan’s lack of success, citing attacks by government forces on civilians and the military’s failure to withdraw heavy weapons from population centers. She also said it is essential to deploy as many as 300 unarmed UN cease-fire observers in the effort to limit the violence.

Pentagon officials are drawing up plans in the event that President Barack Obama decides to pursue military options in Syria, Kathleen Hicks, an administration nominee to the Defense Department’s policy staff, told the Senate Committee on Armed Services April 26.

‘Significant Planning’

“We are doing a significant amount of planning for a wide range of scenarios, including our ability to assist allies and partners along the borders,” said Hicks, the nominee to be principal deputy undersecretary of defense for policy.

The U.S., Turkey and other allies have discussed creating a civilian aid corridor along the Turkish border with Syria as one option if the fighting continues.

The head of the UN monitoring force arrived in Damascus today, Al Arabiya reported without saying how it got the information. An advance team of 15 UN observers has reported heavy weapons in populated areas in violation of the UN agreement, Ban said.

Nuland estimated that it may take another three to four weeks to deploy the first 100 of the anticipated 300 monitors.

The head of the Arab League, Nabil el-Arabi, said Arab foreign ministers have asked him to convene a meeting of all the Syrian opposition factions on May 16, according to the Al Jazeera television channel.

To contact the reporters on this story: Nicole Gaouette in Washington at; Nayla Razzouk in Dubai at

To contact the editor responsible for this story: John Walcott at; Andrew J. Barden at


Obama Jokes About Romney, Second Term

By David Lerman - Apr 29, 2012 12:01 PM GMT+0700

President Barack Obama unveiled his “secret agenda” for a second term last night, vowing to “win the war on Christmas” and replace the former ban on gays serving openly in the military with a policy called “It’s Raining Men.”

Then the mock agenda was abruptly cut short.

U.S. President Barack Obama delivers remarks at the annual White House Correspondents' Association Dinner. Photographer: Kristoffer Tripplaar/Pool via Bloomberg

Late-night comic Jimmy Kimmel, the celebrity keynote speaker of the night, delivers remarks at the annual White House Correspondents' Association Dinner. Photographer: Kristoffer Tripplaar/Pool via Bloomberg

Actor George Clooney, left, and former U.S. Secretary of State Colin Powell attend the Bloomberg Vanity Fair White House Correspondents' Association Dinner afterparty in Washington, D.C. Photographer: Joshua Roberts/Bloomberg

Actress Lindsay Lohan arrives for the White House Correspondents' Association Dinner. Photographer: Joshua Roberts/Bloomberg

Actress Claire Danes, left, and Bob Schieffer of CBS News, arrive for the White House Correspondents' Association Dinner. Photographer: Joshua Roberts/Bloomberg

“I had a lot more material prepared, but I have to get the Secret Service home in time for their new curfew,” Obama deadpanned at the annual White House Correspondents’ Association Dinner.

The tuxedo-clad president, facing re-election this year, also went into campaign mode, taking aim at his likely Republican opponent in November, former Massachusetts Governor Mitt Romney.

Noting they both have degrees from Harvard University, Obama said, “I have one, he has two. What a snob.”

Turning toward former House Speaker Newt Gingrich, who has said he will announce his withdrawal from the Republican presidential primary race this week, Obama said, “Newt, there’s still time, man.”

Late-night comic Jimmy Kimmel, the celebrity keynote speaker of the night and host of ABC’s “Jimmy Kimmel Live,” returned some of the political fire on Obama.

“Remember when the country rallied around you in hopes of a better tomorrow?” Kimmel asked the president. “That was hilarious.”

Warning Obama that he might not approve of some of his jokes, Kimmel instructed: “Cover your ears, if that’s physically possible.”

Media Circus

The annual black-tie dinner is a Washington tradition dating to 1920. What was once a more modest, low-key affair for White House reporters and administration officials morphed decades ago into a televised media circus.

Hollywood celebrities now routinely flock to the event at the invitation of media organizations.

Among the big names who showed up last night were George Clooney, Steven Spielberg, Charlize Theron, Zooey Deschanel, Diane Keaton, Claire Danes, and Uggie, the dog from the Oscar- winning film “The Artist.”

Then there were the celebrities who are famous just for being famous -- and often go by a single name. There was Lindsay (Lohan). And there was Kim (Kardashian).

More than 2,000 of the elite from Washington and Hollywood crammed into a ballroom of the Washington Hilton Hotel to dine on Texas-rubbed petite filet with a Calvados sauce, along with red curry jumbo shrimp.

Dessert featured a chocolate truffle mousse layered with chocolate genoise and almond macaroon.


Washington A-listers included former Secretary of State Colin Powell, Defense Secretary Leon Panetta, House Majority Leader Eric Cantor and -- fresh off the presidential campaign trail-- former Pennsylvania Senator Rick Santorum.

“I guess it just wasn’t Rick’s year,” Kimmel said. “Rick’s year was 1954. It’s one thing to oppose gay marriage. It’s another thing to do it in a sweater vest.”

Obama was at times self-deprecating, at times a jokester, and at times a savvy campaigner.

“Some have said I blame too many problems on my predecessor,” Obama said. “But let’s not forget that’s a practice that was initiated by George W. Bush.”

Last year’s dinner occurred on the eve of what is arguably one of Obama’s biggest accomplishments: the killing of former al-Qaeda leader Osama bin Laden. Obama took note of the one-year anniversary, albeit with humor.

Delivered Justice

“Last year at this time, we finally delivered justice to one of the world’s most notorious individuals,” Obama said, as a photo of business tycoon Donald Trump appeared on a jumbo screen. Obama had mocked Trump at last year’s dinner.

In a friendly jab at former Alaska Governor Sarah Palin, the Republican vice-presidential nominee in 2008, Obama rewrote her now-famous joke from the 2008 Republican convention.

“What’s the difference between a hockey mom and a pit bull?” Obama asked the crowd. “A pit bull is delicious.”

The bipartisan gathering has long been a night of good humor and gentle ribbing among all of Washington’s power brokers, and Kimmel gave equal time in his monologue to mocking Republicans and Democrats.

He said Texas Representative Ron Paul, who is still a Republican presidential hopeful, looks like “the guy who gets unhooded at the end of every Scooby Doo episode.”

Welcoming Gingrich to the dinner, Kimmel said, “I guess the checks cleared,” in an apparent reference to the Georgia Republican’s mounting campaign debt.


Kimmel praised Uggie, the dog-star of “The Artist,” for being able to roll over on command. “He’s a Democrat,” Kimmel said.

Still, he saved much of his ammunition for Obama, who laughed and smiled through most of the routine.

“President Obama wants everyone to have health care, whether they want it or not,” Kimmel said. “I think I figured it out. You’re not from Kenya. It’s even worse: You’re from Canada.”

Proceeds from the dinner go toward scholarships for aspiring journalists and awards for prize-winning reporting.

The first president to attend the dinner was Calvin Coolidge, in 1924.

Until 1962, the dinner was open only to men. Women were not permitted until former White House reporter Helen Thomas protested the policy and former President John Kennedy refused to attend the dinner unless the ban on women was lifted, according to the White House Correspondents Association’s website.

Observing a ballroom filled with politicians, journalists and Hollywood celebrities, Kimmel told the crowd, “Everything that is wrong with America is here tonight.”

To contact the reporter on this story: David Lerman in Washington at

To contact the editor responsible for this story: John Walcott at


Muslim Brotherhood Says Saudi Protest Reflects Egypt’s Dignity

By Tarek El-Tablawy - Apr 29, 2012 3:05 PM GMT+0700

The Muslim Brotherhood’s political arm said the protests that prompted Saudi Arabia to temporarily close its Cairo embassy and consulates reflected Egyptians standing up for their rights.

The Freedom and Justice Party, which holds nearly half the seats in parliament’s lower house, said the demonstrators were “merely expressing the Egyptian people’s aspiration to preserve the dignity of their fellow citizens who visit, live or work in Arab countries,” according to a statement on the party website.

The protests that began on April 24 outside Saudi Arabia’s embassy in Cairo were in response to the detention of Ahmed el- Gizawy, a human rights activist and lawyer who was detained earlier this month in the kingdom after officials there said he tried to smuggle in anti-anxiety tablets. The detention fueled complaints by activists on social media about the treatment of Egyptians in Saudi Arabia. Egyptians have long complained that ousted President Hosni Mubarak remained silent about how Egyptians were treated in Gulf Arab states largely to not offend the oil-rich Arab states.

“The people are voicing their conviction that insulting the dignity of Egyptians abroad is no longer tolerated after the peaceful revolution which restored their will, their voice and their dignity,” the FJP said in the statement.

Egyptian officials have sought to smooth over the potential rift, with Field Marshal Mohamed Hussein Tantawi calling King Abdullah yesterday to reaffirm the strength of ties between the two nations, the state-run al-Ahram reported today.

‘Individual Actions’

Foreign Minister Mohamed Kamel Amr said the methods used by some of the protesters were “individual actions that do not represent” the views of Egyptians as a whole, the state-run Middle East News Agency said late yesterday.

The FJP said that Egyptian-Saudi relations are “far greater than any problems” and that “dialogue and transparency in these relations can solve any problems.” The party called on Egypt’s military rulers to “take concrete steps to solve the el-Gizawy issue in a manner which ensures Egyptians’ dignity, and at the same time preserves” the strong ties between both nations.

To contact the reporter on this story: Tarek El-Tablawy in Cairo at

To contact the editor responsible for this story: Andrew J. Barden at


Geithner, Clinton Don’t Plan to Cancel China Trip

By Bloomberg News - Apr 29, 2012 10:17 PM GMT+0700

U.S. Secretary of State Hillary Clinton and Treasury Secretary Timothy F. Geithner have no plans to cancel their trip to China, according to a State Department official who spoke on condition of anonymity, amid reports the U.S. is protecting a fugitive Chinese activist.

Last week, legal activist Chen Guangcheng escaped house arrest in Shandong province, where he had been held since his release from prison in September 2010, Midland, Texas-based ChinaAid, a U.S.-based human rights group, reported.

U.S. Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner attend the U.S delegation press conference following the China-U.S. Strategic and Economic Dialogue in Beijing on May 25, 2010. Photographer: Feng Li/Getty Images

Clinton and Geithner are due to arrive in Beijing for annual talks May 3-4. The trip will go forward, the State Department official said yesterday, speaking anonymously because of the sensitivity of the issue.

“This all looks to me like a brewing, perfect-storm test for relations,” said Chris Johnson, a senior adviser at the Center for Strategic and International Studies in Washington and former senior China analyst at the Central Intelligence Agency. The annual talks, which “substantively, probably would have been inconsequential, suddenly become the most important test for Sino-U.S. relations for the Obama administration thus far in its tenure.”

Chen, who is blind, is now under U.S. protection in Beijing, and talks are taking place between the U.S. and China about his status, ChinaAid’s founder Bob Fu said in an e-mail yesterday, citing people close to the situation.

‘No Information’

Chinese Vice Foreign Minister Cui Tiankai, speaking at a news conference in Beijing yesterday, said the talks would go ahead as scheduled and he had “no information” about Chen.

U.S. Assistant Secretary of State Kurt Campbell arrived in Beijing today, earlier than his scheduled arrival before the talks, the Associated Press reported. Richard Buangan, a spokesman for the U.S. embassy in the Chinese capital, declined to comment on the report when reached by Bloomberg News.

Asked about Chen on “Fox News Sunday,” Deputy National Security Adviser John Brennan said “we are working very closely with the individuals involved in this,” and declined further comment.

President Barack Obama has “faced similar situations” in which he’s had to balance human rights and diplomatic issues, and the U.S. government will “find the right way forward,” Brennan said.

Mitt Romney, the presumptive Republican presidential candidate to challenge Democrat Obama in the U.S. November elections, urged the U.S. to ensure the protection of Chen and his family. The U.S. “must play a strong role in urging reform in China and supporting those fighting for the freedoms we enjoy,” Romney said in a statement today.

Relations Tested

U.S.-Chinese relations have been tested this year by events including “the Chinese early support for the Assad regime in Syria, North Korea’s satellite launch and a presumed nuclear test, this guy running to the consulate -- it’s just one thing after another,” Johnson said.

Chinese political leaders were already trying to manage a scandal involving U.S. diplomats and a Chinese citizen, Johnson said. Chongqing party leader Bo Xilai lost his Politburo post earlier this month after his wife and an aide were put in custody for suspicion of murdering a British businessman.

The arrests came after Bo’s former police chief, Wang Lijun, had spent a night in February at the U.S. consulate in Chengdu, and then left, an event confirmed by both the U.S. and Chinese governments. China’s state-run news agency Xinhua reported that Wang disclosed the murder allegations.

Political Earthquake

“The political earthquake in Beijing this year has been the Bo Xilai affair,” said Ken Lieberthal, head of the Thornton Center for China at the Washington-based Brookings Institution. “There are some people in China who I’m sure feel that all of that was a set up by the U.S. government to embarrass the leaders.”

The U.S. government faces “no good solution,” Lieberthal said. “You want to do the right thing by the individual,” yet talking about Chinese abuses “will come across in China to most people as if you are interfering in domestic affairs, seeking to humiliate China, and therefore being folks that are not of goodwill and should not be listened to. So you end up being quite ineffective,” he said.

F-16s to Taiwan

Johnson, at the Center for Strategic and International Studies, went on to add the politics behind the consideration being given by the U.S. to selling Taiwan Lockheed Martin Corp. (LMT) F-16 fighter jets is another nuance to be navigated by the Obama administration.

“When you layer onto the cake as well that the White House sent a letter to Senator Cornyn of Texas noting that they would take a second look at possible new F-16 fighter aircraft sales to Taiwan in order to get Senator Cornyn to lift his hold on the appointment of Mark Lippert as the new assistant secretary of defense for East Asia,” the Geithner-Clinton trip becomes “a very tricky situation,” he said.

The sale of F-16s “warrants serious consideration, given the growing military threat to Taiwan,” Robert Nabors, the White House’s director of legislative affairs, said in a letter to Senator John Cornyn, a Texas Republican, on April 27.

China, which insists that Taiwan be reunited with the mainland, by force if necessary, has in the past cut military contacts with the U.S. over American arms sales to the island.

Johnson said the timing of Chen’s escape alone will encourage hardliners to see the event as a “conspiracy to stifle China’s rise” and to adopt the belief “that this was all planned by the U.S.” For the Chinese, that means “they have got to react probably a little more sternly,” he said.

‘Bilateral Mess’

“This could be the biggest bilateral mess that we’ve faced in a very long time,” Johnson said.

A Chinese dissident spent an extended period sheltered inside the U.S. embassy during the 1989 Tiananmen Square protests, when the Communist Party clashed with pro-democracy students. Fang Lizhi, a physics professor, was housed in the U.S. embassy for 13 months before he left the country for the U.S. He died earlier this month at the age of 76 in Tucson, Arizona.

‘Pivotal Moment’

“This is a pivotal moment for U.S. human rights diplomacy,” Fu said in the e-mail. “Because of Chen’s wide popularity, the Obama administration must stand firmly with him or risk losing credibility as a defender of freedom and the rule of law.”

The U.S. has taken up Chen’s case in the past. Clinton mentioned him in a speech in November, saying the U.S. was “alarmed” by his continued house arrest and calling on China to “embrace a different path.”

ChinaAid’s statement said Fu has been in touch with Chen’s friends and family and was told that Chen wanted to remain in China. He wants “a normal life as a Chinese citizen,” according to the statement.

Chen was jailed for more than four years after helping villagers resist forced abortions, rights groups including the New York-based Human Rights in China say. After his release in September 2010, he and his wife were confined to their home in the village of Dongshigu.

Chen is a self-taught lawyer who was blinded by a fever in infancy, the Associated Press reported. He Peirong, an activist who has led a campaign to free Chen, picked him up and drove him to a “relatively safe place,” the AP quoted her as saying.

Nephew, Brother Detained

Human Rights in China, citing a “knowledgeable source” that it didn’t identify, has said that Chen’s nephew, Chen Kegui, was taken from his home by more than 30 policemen April 27. Chen Guangfu, Chen Guangcheng’s older brother, was taken away a day earlier, the group said in an e-mailed statement.

“It’s a very political year in Beijing -- it is here too - - and they were very anxious to avoid things that would impact negatively on the relationship,” Brookings’ Lieberthal said. He recommended the U.S. “adopt a very low profile on this while trying quietly to negotiate” an exit to a safe haven for Chen and his family.

If the Chinese “can find a face-saving solution that works, that may be of interest to them because, just like the Bo Xilai scandal, they keep wanting to just move on and refocus on the succession,” Johnson said.

To contact Bloomberg News staff for this story: Michael Forsythe in Beijing at; Indira A.R. Lakshmanan in Washington at; Alexander Kowalski in New York at

To contact the editor responsible for this story: Steven Komarow at


Saturday, April 28, 2012

Economy in U.S. Grew Less Than Forecast in First Quarter

By Shobhana Chandra - Apr 28, 2012 11:00 AM GMT+0700

The U.S. economy expanded less than forecast in the first quarter as a smaller contribution from inventories overshadowed the biggest gain in consumer spending in more than a year.

Gross domestic product, the value of all goods and services produced in the U.S., rose at a 2.2 percent annual rate after a 3 percent pace, Commerce Department figures showed yesterday in Washington. The median projection of economists surveyed by Bloomberg News called for a 2.5 percent gain. Government spending fell for a sixth straight quarter.

Annie Ellicott, left, with a new Toyota at Toyota of Marin in San Rafael, California. Photographer: Justin Sullivan/Getty Images

April 27 (Bloomberg) -- David Semmens, a U.S. economist at Standard Chartered Bank, talks about the outlook for the U.S. economy. He speaks with Caroline Hyde on Bloomberg Television's "On the Move." (Source: Bloomberg)

April 27 (Bloomberg) -- Phillip Swagel, a professor at the University of Maryland School of Public Policy, talks about the first-quarter U.S. gross domestic product and economic outlook. GDP rose at a 2.2 percent annual rate, less than forecast, after a 3 percent pace, Commerce Department figures showed. Swagel speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)

April 25 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke offers his views on the outlook for central bank monetary policy and the U.S. economy. Fed policy makers say they expect growth to accelerate, while refraining from new actions to lower borrowing costs. Bernanke says the central bank stands ready to add to its stimulus if necessary. (Excerpts. Source: Bloomberg)

April 27 (Bloomberg) -- Joshua Shapiro, chief U.S. economist at MFR Inc., talks about U.S. consumer sentiment, the economy and Federal Reserve monetary policy. He speaks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)

April 27 (Bloomberg) -- U.S. Housing and Urban Development Secretary Shaun Donovan talks about the outlook for the U.S. housing market and housing finance reform. He speaks on Bloomberg Television's "InBusiness With Margaret Brennan. (Source: Bloomberg)

Goods are stacked in the tray warehouse at a Supervalu Inc. distribution center in Hopkins, Minnesota. Photographer: Ariana Lindquist/Bloomberg

Job creation and income gains propelled sales at car dealerships and retailers like Target Corp. (TGT), helping cushion the U.S. economy from weakness overseas. Further gains in consumer spending will depend on progress in reducing a jobless rate that has hovered above 8 percent since early 2009.

“This report came in less than expected but it was hardly a disaster,” said Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania. “Consumers hit the vehicle showrooms hard and consumption was strong.”

In addition to the 2.9 percent pickup in the rate of consumer purchases, the economy benefited from the biggest gain in homebuilding in two years and a jump in auto production. GDP was restrained by slower growth in business investment in equipment.

Stocks, Treasuries

Stocks rose for a fourth straight day on stronger corporate earnings. The Standard & Poor’s 500 Index climbed 0.2 percent to 1,403.36 at the close of trading in New York. Treasuries were little changed, with the 10-year note yield at 1.93 percent at 4:34 p.m. in New York.

Another report yesterday showed consumer confidence rose to the highest in a year in April. The Thomson Reuters/University of Michigan’s final index of sentiment increased to 76.4 from 76.2 last month. The gauge was projected to hold at the 75.7 level initially reported earlier this month, according to the median forecast in a Bloomberg News survey of economists.

Consumer spending, which accounts for about 70 percent of the economy, contributed 2 percentage points to first-quarter growth, the most since the final three months of 2010. Cars sold last quarter at the fastest pace in four years, according to industry data.

“Auto sales softened at the end of the first quarter, and this rapid growth rate is unlikely to be repeated in the second quarter,” Ryan Wang, an economist at HSBC Securities USA Inc. in New York, said in a research note.

Doing Better

The U.S. is doing better than some other major economies. The U.K. slipped into its first double-dip recession since the 1970s, figures showed this week. In Japan and Germany, gross domestic product dropped in the final three months of 2011, while China, the world’s second-largest economy, is also cooling.

“The U.S. is where the strength is,” Sandy Cutler, chairman and chief executive officer at Eaton Corp. (ETN), said on an April 23 conference call with analysts.

The Cleveland-based company predicted its U.S. markets, including electrical, hydraulics, aerospace, truck and automotive, will rise 9 percent this year, up from an earlier estimate of 6 percent. For its markets abroad, Eaton reduced its growth forecast to 2 percent from 4 percent, Cutler said.

The GDP data underscore the view of Federal Reserve officials who this week said they expect “moderate” growth as they repeated borrowing costs are likely to stay low at least through late 2014.

Central Theme

Jobs and the economy are a central theme in political sparring between President Barack Obama and Republican challenger Mitt Romney.

Obama’s job approval rating reached 50 percent in a Gallup Daily tracking poll for April 21-23. The telephone survey of 1,534 adults has a margin of error of plus or minus 3 percentage points. The 50 percent approval mark is notable because all incumbent presidents since Dwight Eisenhower at or above the level at the time of the election were re-elected, according to Gallup.

A stabilization in housing also aided first-quarter GDP growth. Residential construction increased at a 19.1 percent rate, the fastest in almost two years.

A job market that’s improved since the end of 2011 is underpinning demand. Employers increased payrolls by 635,000 from January through March, the biggest quarterly gain since the first three months of 2006, data from the Labor Department show. At the same time, the jobless rate has been above 8 percent for the past three years.

Labor Market

“People have been spending -- whether they continue to spend is a function of what happens with the labor market,” said Joseph Lavorgna, chief economist at Deutsche Bank Securities Inc. in New York.

Americans dipped into savings as they increased their purchases, yesterday’s data showed. Disposable income after inflation rose 0.4 percent in the first quarter following a 1.7 percent gain. The saving rate from January through March eased to 3.9 percent from 4.5 percent.

The drop “raises the question, ‘How long can we continue to consume by saving less?’” said Mohamed El-Erian, chief executive officer of Pacific Investment Management Co., the world’s biggest manager of bond funds.

Yesterday’s University of Michigan report also showed that Americans were more pessimistic about their finances than in March. Views on finances weakened across all income groups, with 28 percent saying they were improved, down from 34 percent who said so last month.

Retail Sales

Retail purchases advanced at an average rate of 0.8 percent in the first quarter, the fastest in a year, as stores offered discounts and shoppers stocked up early on spring gear. Same- store sales at Target, the second-largest U.S. discount chain, and Gap Inc. (GPS), the biggest U.S. apparel chain, beat the average estimate of analysts.

Connie Zheng, 26, was promoted in January at North of Nine, a technology public relations agency based in San Francisco. The promotion came with a raise, allowing her to celebrate with the purchase of $150 purse and a new Apple Inc. iPad.

The economy “feels much better than a year ago,” Zheng said. “I was looking for a job in 2009. That was really hard, looking for a job back then. Since, there’s been a lot more hiring going on and things generally feel better.”

Mild Weather

Unseasonably mild temperatures may have also spurred spending on everything from homes to restaurant meals. The January-to-March period was the warmest first quarter on records going back to 1895, according to the National Oceanic and Atmospheric Administration.

Small businesses such as Spreadshirt Inc. are also benefiting from the pickup in consumption. The print-on-demand t-shirt company had a 108 percent increase in sales in the first quarter from a year ago. The company, which is based in Leipzig, Germany, is opening a factory in Las Vegas and will add 90 employees to its current U.S. staff of 150, according to Vice President Mark Venezia.

Sales have been “remarkable,” Venezia said. “With this growth we’re looking at expansion into other countries. We’re investing in more equipment.”

Business investment cooled. Corporate spending on equipment and software climbed at a 1.7 percent pace, the weakest in almost three years, after advancing at a 7.5 percent rate in the previous quarter. It contributed 0.1 percentage point to growth.

Rising auto and industrial demand will keep factories busy even as manufacturing, a driver of the economic rebound, cools to a more sustainable pace, economists said. 3M Co., the maker of fuel system tune-up kits and Post-it Notes, reported a first- quarter profit that beat analysts’ estimates.

Topping Estimates

Texas Instruments (TXN) Inc. this week forecast second-quarter earnings that may top some analysts’ estimates, and Chief Executive Officer Rich Templeton in a statement referred to the “breadth of increased orders across geographical regions and markets.”

A smaller boost came from inventories, which contributed 0.6 percentage point to GDP growth after 1.8 percentage points at the end of 2011. Stockpiles were rebuilt at a $69.5 billion annual pace, after a fourth-quarter rate of $52.2 billion.

Other areas of the economy that struggled include spending by state and local governments, which decreased at a 1.2 percent annual rate, after a 2.2 percent drop. Outlays by federal agencies declined 5.6 percent. National defense spending slumped 8.1 percent, following a 12.1 percent decrease the prior quarter.

A measure of inflation that is tied to consumer spending and strips out food and energy costs, climbed at a 2.1 percent annual pace compared with 1.3 percent in the prior quarter. Fed officials have defined their inflation target as 2 percent a year.

To contact the reporter on this story: Shobhana Chandra in Washington at

To contact the editor responsible for this story: Christopher Wellisz in Washington at


S&P 500 Gains as Retailers Surge to Record on Earnings

By Rita Nazareth - Apr 28, 2012 3:42 AM GMT+0700

The Standard & Poor’s 500 Index (SPX) capped the best week in a month, as retailers (S5RETL) surged to a record, after improving corporate earnings and consumer confidence tempered lower-than-forecast economic growth.

Retailers in the S&P 500 climbed 3.5 percent for the biggest gain among 24 groups. Inc. (AMZN), the largest Internet retailer, and Expedia Inc., an online-travel company, surged at least 15 percent as earnings beat estimates. A gauge of homebuilders in S&P indexes rallied 3 percent to the highest level since October 2008. Starbucks Corp. (SBUX) tumbled 5.3 percent as same-store sales trailed analysts’ projections.

Traders on the floor of the New York Stock Exchange on April 25, 2012. Photographer: Scott Eells/Bloomberg

April 27 (Bloomberg) -- Bloomberg's Deborah Kostroun reports on the performance of the U.S. equity market today. The Standard & Poor’s 500 Index capped the best week in a month, as retailers surged to a record, after improving corporate earnings and consumer confidence tempered lower-than-forecast economic growth. (Source: Bloomberg)

April 27 (Bloomberg) -- Bloomberg’s Trish Regan, Adam Johnson and Matt Miller report on today’s ten most important stocks including Ford, Amazon and Starbucks. (Source: Bloomberg)

April 27 (Bloomberg) -- Michael Gayed, chief investment strategist at Pension Partners LLC, talks about the outlook for the U.S. stock market. He speaks with Pimm Fox on Bloomberg Television's "Taking Stock." (Source: Bloomberg)

April 27 (Bloomberg) -- Michael Crofton, chief executive officer of Philadelphia Trust Co., talks about the U.S. economy, stock market and investment strategy. He speaks with Trish Regan and Adam Johnson on Bloomberg Television's "Street Smart." (Source: Bloomberg)

The S&P 500 added 0.2 percent to 1,403.36 at 4 p.m. New York time. The benchmark gauge for U.S. equities rallied 1.8 percent since April 20 for a back-to-back weekly gain. The Dow Jones Industrial Average gained 23.69 points, or 0.2 percent, to 13,228.31. About 6.2 billion shares changed hands on U.S. exchanges, or 7 percent below the three-month average.

“It all tells me that the economy continues to grow at a slow, steady pace,” said Jeffrey Layman, chief investment officer of BKD Wealth Advisors in Springfield, Missouri. His firm has $1.9 billion under management. “Consumers are feeling more confident and it’s a good thing. We’re pleased with the overall improvement in earnings.”

About 75 percent of the companies in the S&P 500 that reported results since April 10 have topped analysts’ estimates, according to data compiled by Bloomberg. Per-share profits are forecast to have grown 5.3 percent in the first-quarter, Bloomberg data show. That’s up from the 0.8 percent growth projection before the earnings season started.

Economic Data

Equities rose even after data showed the U.S. economy expanded at a 2.2 percent annual rate in the first quarter, less than the 2.5 percent increase forecast by economists. Confidence among U.S. consumers climbed in April to the highest level in a year, according to a separate report.

Pacific Investment Management Co.’s Mohamed El-Erian said lower-than-forecast U.S. growth suggests additional monetary stimulus remains on option for the Federal Reserve even though there is no immediate need for action.

“If we continue this weakening trend, the Fed will come back in and try to sustain this market and this economy,” El- Erian, the chief executive officer of the world’s largest manager of bond funds, said during an interview on Bloomberg Television’s “In the Loop” with Betty Liu. “I don’t think there is an immediate need now.”

Today’s rally trimmed this month’s decline in the S&P 500 to 0.4 percent. If the index erases its April drop, it will cap the fifth straight month of gains, the longest winning streak since 2009. The gauge has gained 12 percent so far this year.

Biggest Gains

Six out of 10 groups in the S&P 500 rose today as companies that rely on consumer discretionary spending and industrial shares had the biggest gains. Ten of 11 stocks in a measure of homebuilders in S&P indexes advanced.

Amazon surged 16 percent, the biggest advance since October 2009, to $226.85. The company posted earnings-per-share that quadrupled the average analyst estimate. Chief Executive Officer Jeff Bezos is looking to add customers by pouring money into new versions of the Kindle and warehouses that are equipped to send out products faster.

Expedia (EXPE) soared 24 percent, the most in the S&P 500, to $40.31. “Gross bookings and revenue growth were again driven by strength in our hotel business with global room-nights growing 24 percent, a nice acceleration from the 19 percent we saw for the fourth quarter,” Dara Khosrowshahi, the company’s chief executive officer, said on a conference call yesterday.

Highest Since 1997

Vivus Inc. (VVUS) jumped 3 percent to $25.15, the highest since 1997. A Vivus pill that is supposed to provide erections within 15 minutes, about half the time or less than Pfizer Inc.’s Viagra, won U.S. regulatory approval.

Starbucks retreated 5.3 percent, the most since Aug. 18, to $57.43. Sales at stores open at least 13 months rose 7 percent globally in the quarter. Analysts projected a gain of 8.2 percent, the average of 17 estimates compiled by Consensus Metrix. Such sales fell 1 percent in Europe, the Middle East and Africa amid “slight decreases” in transactions and average check, Starbucks said.

Customers in Europe “are just cautious, as you would expect, not unlike what they were like in the U.S. three and four years ago,” Chief Financial Officer Troy Alstead said in an interview. Starbucks “is not immune from that,” he said.

Procter & Gamble Co. (PG) slumped 3.6 percent to $64.44 for the biggest loss in the Dow. The world’s largest consumer-products company reduced its full-year earnings forecast amid higher costs for raw materials.

Overseas Losses

Ford Motor Co. (F) dropped 2.3 percent to $11.60. The company seeking a second investment-grade credit rating said first- quarter profit fell 45 percent on a higher tax rate and as overseas losses ate into growing income from North America.

Allscripts Healthcare Solutions Inc. (MDRX) plunged 36 percent, the most in the Russell 1000 Index (RIY), to $10.30. The maker of clinical software slashed its earnings forecast for 2012. Chief Financial Officer Bill Davis will leave the company effective May 18, and three board directors resigned after disagreeing with a decision to terminate Chairman Phil Pead.

Utilities are poised to become the only one of the S&P 500’s 10 main industry groups whose investors receive dividends on every stock. AES (AES) Corp. and NRG Energy Inc. (NRG), two independent power producers, plan to introduce payouts during the second half. They are the only utilities in the S&P 500 that don’t already provide dividend income.

Dividend Ranking

The industry currently has the fourth-highest percentage of dividend-paying shares. Raw-material (S5MATR) producers, makers of food, beverages and other consumer staples, and industrial companies are the top three, in that order.

More than 80 percent of S&P 500 companies pay dividends, said Howard Silverblatt, a New York-based senior index analyst at S&P. The figure is the highest since January 2000. Nasdaq OMX Group Inc. sent the percentage above that threshold two days ago by declaring a quarterly payout of 13 cents a share.

AES plans to distribute $120 million a year, starting in the fourth quarter. That’s equivalent to an annual dividend of about 16 cents a share. The Arlington, Virginia-based company’s most recent payout was in 1994, four years before joining the S&P 500, according to data compiled by Bloomberg.

NRG, a component of the index since 2010, plans to begin paying dividends in the third quarter. Investors would receive 36 cents a share annually. The company, based in Princeton, New Jersey, made a similar proposal in 2007 that was scrapped after a bid to refinance debt failed.

To contact the reporter on this story: Rita Nazareth in New York at

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


Friday, April 27, 2012

Samsung Net Beats Estimates on Galaxy Phones, Demand for TVs

By Jun Yang - Apr 27, 2012 6:58 AM GMT+0700

Samsung Electronics Co. (005930), Asia’s largest consumer-electronics maker, posted first-quarter profit that beat analysts’ estimates as surging sales of Galaxy smartphones helped mask slumping earnings at the chip business.

Net income was 5.05 trillion won ($4.4 billion), the Suwon, South Korea-based company said in a statement today. The average of 29 analyst estimates compiled by Bloomberg was for profit of 4.24 trillion won.

A Samsung Electronics Co. Galaxy Note smartphone. Photographer: SeongJoon Cho/Bloomberg

Operating profit at the mobile-phone business gained in the quarter from a year earlier after Samsung unveiled new models such as the Galaxy Note to take on Apple Inc. (AAPL)’s iPhone and iPad. Samsung, which likely overtook Nokia Oyj as the world’s biggest handset maker in the first quarter, is counting on Galaxy products to capitalize on the $219 billion smartphone market and shield earnings as chip prices plunge.

“Earnings will only get better starting in the second quarter,” Ahn Seong Ho, a Seoul-based analyst at Hanwha Securities Co., said by phone before today’s announcement. “We don’t see anything particular that can slow down momentum on the phone side. The semiconductor side will improve after bottoming out in the first quarter, too.”

Samsung shares rose 2.7 percent to 1,340,000 won in Seoul trading yesterday. They have gained 27 percent this year, compared with a 50 percent jump in Apple.


Operating profit at the mobile business in the quarter almost tripled to 4.27 trillion won, the company said in the statement today. That beat the 4.01 trillion-won median estimate in a Bloomberg News survey of four analysts.

The company probably overtook Nokia (NOK1V) as the world’s biggest handset seller for the first time in the three months ended March 31, according to analyst estimates.

Samsung may have shipped about 92 million mobile phones, including basic types, during that period, according to the median of five estimates in a Bloomberg News survey. Nokia sold 83 million, including 12 million smartphones and 71 million low- end models, the Espoo, Finland-based company said this month.

Samsung probably sold 44 million smartphones in the first quarter, more than tripling from a year earlier, Matt Evans, a Seoul-based analyst at CLSA Asia-Pacific Markets, said in an April 2 report. That would make Samsung the top smartphone seller during the three-month period.

Samsung vs Apple

Apple sold 35.1 million iPhones during the quarter ended in March, helping the Cupertino, California-based company report a 94 percent surge in profit, the company said April 25. Apple sold 11.8 million iPads.

Samsung plans to double sales of smartphones and tablet computers this year, helped by new products, the company said in February. Including basic phones, Samsung expects to sell about 380 million handsets this year after shipping a record 300 million units last year.

Global sales of the Galaxy S II smartphone reached 20 million just 10 months after going on sale, about seven months faster than its predecessor, Samsung said in February. The Galaxy phones and tablets compete with Apple’s iPhone and iPad.

Samsung plans to unveil a successor in London next month.

The company sold more than 5 million units of the Galaxy Note, equipped with a 5.3-inch screen and a stylus, since its debut in October. Samsung expects to sell 10 million units of the model by year’s end and plans to introduce more pen-equipped products with different screen sizes.

Chip Prices

Samsung and Apple have been suing each other in the past year on four continents regarding patent-infringement claims related to mobile technology and design. Apple is Samsung’s biggest customer, buying chips and displays from the South Korean company and accounting for 7.6 percent of its revenue, according to data compiled by Bloomberg.

Operating profit at the chip business in the first quarter was 760 billion won, down 54 percent from a year earlier, the company said in the statement. That lagged behind the analysts’ estimate for 1.31 trillion won.

Samsung, the exclusive manufacturer of processors powering the iPhone and iPad, also will benefit from rising sales of chips used in mobile devices, Ahn said.

“Samsung is not just a DRAM company,” he said.

Elpida, Micron

The price of the benchmark DDR3 2-gigabit DRAM closed at $1.02 on April 26, compared with $1.95 a year earlier, according to data from Taipei-based DRAMeXchange, operator of Asia’s largest spot market for semiconductors.

Falling chip prices pushed smaller Japanese competitor Elpida Memory Inc. into bankruptcy earlier this year, while Micron Technology Inc. (MU) reported a third consecutive quarterly loss in March.

Demand for memory chips slowed in the first quarter as hard-disk drive output didn’t recover as fast as expected after floods in Thailand, a key production site, Choi Sung Jae, a Seoul-based analyst at SK Securities Co., said in a March 30 report. Elpida’s bankruptcy will likely prompt major chip buyers, including Apple, Dell Inc. and Hewlett-Packard Co. (HPQ), to seek alternative suppliers, helping boost prices in the second quarter, Choi wrote.

Samsung plans to invest $7 billion to build a factory in China, producing NAND flash, a different type of memory widely used in smartphones and tablet computers.

Display Profit

Profit at the display unit in the quarter was 280 billion won, compared with a loss of 230 billion won last year. Operating profit at the TV business was 530 billion won compared with a profit of 8 billion won a year earlier, Samsung said.

Samsung is the world’s biggest TV manufacturer.

While liquid-crystal-display prices were suppressed by slowing TV demand, panels used in mobile devices such as phones and tablets helped boost earnings, Choi at SK said. Samsung supplies Apple with screens used in the latest iPad, according to research company IHS Inc.’s iSuppli. Samsung spun off the LCD business April 1.

Last year, global TV shipments fell for the first time since 2004, according to DisplaySearch, part of NPD Group. Flat- screen TV shipments in the U.S. may fall for the first time this year, to 37.1 million units from 39.1 million in 2011, according to iSuppli.

Samsung had a record market share in the U.S. LCD TV market in the fourth quarter, accounting for about 25 percent of total shipments, helped by a wide range of models and features, iSuppli said this month.

To contact the reporter on this story: Jun Yang in Seoul at

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


Amazon First-Quarter Revenue Tops Estimates on Kindle Sales

By Danielle Kucera - Apr 27, 2012 6:22 AM GMT+0700 Inc. (AMZN), the world’s largest Internet retailer, beat analysts’ first-quarter revenue and earnings estimates, led by demand for Kindle devices and e- commerce services for outside vendors.

The shares surged 15 percent after the report. Net income was $130 million, or 28 cents a share, compared with $201 million, or 44 cents, a year earlier, the company said today in a statement. Sales rose 34 percent to $13.2 billion. Analysts on average estimated earnings of 7 cents on sales of $12.9 billion, according to data compiled by Bloomberg.

An Inc. Kindle Fire tablet computer sits on display at a Super Target store in Denver. Photographer: Matthew Staver/Bloomberg

April 26 (Bloomberg) -- Bloomberg's Emily Chang and Jon Erlichman report that Inc., the world’s largest Internet retailer, beat analysts’ first-quarter revenue and earnings estimates, led by demand for Kindle devices and a jump in sales for outside vendors through its website. They speak on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)

April 26 (Bloomberg) -- Mark Harding, an analyst at JMP Securities, talks about Inc.'s first-quarter performance and business strategy. The largest Internet retailer beat analysts’ first-quarter revenue and earnings estimates, led by demand for Kindle devices and a jump in sales for outside vendors through its website. Harding speaks with Emily Chang on Bloomberg Television's "Bloomberg West." (Source: Bloomberg) Marston Gate 'Fulfillment Center,' in Ridgmont. Photographer: Chris Ratcliffe/Bloomberg

Chief Executive Officer Jeff Bezos is looking to add customers by pouring money into new versions of the Kindle and warehouses that are equipped to send out products faster. In the quarter when it was introduced last November, the Kindle Fire tablet rocketed to No. 2 in the market behind Apple Inc.’s iPad, according to IDC, and it remains the best-selling item on Amazon’s website, the company said today.

“It was above expectations, both top and bottom line,” Kerry Rice, a San Francisco-based analyst at Needham & Co., said in an interview.

Income from operations was $192 million in the first quarter, Seattle-based Amazon said. Analysts on average had projected $99.4 million in operating profit. Third-party unit sales represented 39 percent of the total and grew 60 percent from a year earlier, Amazon said.

Shares Soar

The company’s shares soared as high as $225.80 following the report. They had climbed less than 1 percent to $195.99 at the close in New York, and have gained 13 percent so far this year.

Amazon trades at about 141 times trailing 12-month earnings, compared with an average of about 53 for similar companies, data compiled by Bloomberg show.

This is the first quarter in three that Amazon reported higher revenue than analysts were predicting, data compiled by Bloomberg shows.

“First solid top and bottom line beat in quite a while, when some investors were expecting a miss on one or both,” said Colin Sebastian, an analyst at Robert W. Baird & Co. in San Francisco, who has an “outperform” rating on the company’s shares. “If Amazon can ultimately drive higher margins this year on continued strong revenue growth, then we could see further upside in shares.”

Amazon’s operating margin, a measure of profitability, was 1.46 percent in the first quarter, according to data compiled by Bloomberg. Margin for all of 2011 was 1.79 percent, the lowest for any year since 2001.

Second Quarter

Second-quarter operating income will range from a loss of $260 million to a gain of $40 million, the company said. Analysts in a Bloomberg survey were projecting operating income of $184 million. Sales in the current period will be $11.9 billion to $13.3 billion, Amazon said, compared with an estimate of $12.8 billion.

Bezos spent about $4.6 billion on Amazon’s warehouses last year, part of a series of investments that sent operating expenses up 44 percent in 2011 and sliced margins by 2.3 percentage points. The company will build 13 more distribution centers in 2012, Chief Financial Officer Thomas Szkutak said on a conference call today.

To bolster profitability, the company has been adding more third-party sellers, which generate higher margins, to its website. Amazon collects a commission, usually about 10 percent, on any item sold by an outside vendor. All of that money goes to the bottom line. Amazon also collects fees if the partner elects to fulfill through its chain of warehouses, according to Mercent Corp., a consulting firm that helps retailers improve online sales.

Video Offerings

Amazon is focusing on building out the video offerings available on its website and the Kindle Fire, Szkutak said. Amazon announced the availability of the Amazon Instant Video app for Sony Corp.’s PlayStation 3 earlier this year, the first video-game console that offers the software.

Sales of digital media increased 19 percent to $4.7 billion, Amazon said.

“Underlying user growth trends remain strong,” Douglas Anmuth, an analyst at JPMorgan Chase & Co. (JPM) in New York, wrote in a research note this week. “We project margin to improve in the back half of the year.”

To contact the reporter on this story: Danielle Kucera in San Francisco at

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


Goldman Sachs Banker in California Said to Be Target

By Edvard Pettersson and Patricia Hurtado - Apr 27, 2012 4:55 AM GMT+0700

Goldman Sachs Group Inc. (GS) banker Matthew Korenberg in California is under investigation for insider-trading related to Galleon Group LLC co-founder Raj Rajaratnam, a person familiar with the matter said.

Federal prosecutors in Los Angeles are investigating Korenberg, a banker at Goldman Sachs’s San Francisco office, and Paul Yook, a former Galleon employee, for insider-trading involving transactions in the health-care industry, said the person, who didn’t want to be identified because the investigation isn’t public.

Raj Rajaratnam, co-founder of Galleon Group LLC, right, exits federal court followed by his attorney Terence Lynam in New York. Photographer: Peter Foley/Bloomberg

Goldman Sachs has been aware of the allegations for more than two years and conducted its own investigation, said Michael DuVally, a spokesman for the New York-based bank, in an e-mail. Korenberg “remains actively employed,” DuVally said.

“There was an investigation of insider trading but it had nothing to do with Raj Rajaratnam,” John Hueston, a lawyer for Korenberg, said in a phone interview. “That’s very significant. He is still at Goldman Sachs and he has done nothing wrong and Goldman Sachs has stood behind him and continues to stand behind him.”

Federal prosecutors in New York this month disclosed that a Goldman Sachs employee was under investigation for passing illegal tips to Rajaratnam. It was at least the third person at the bank to be tied to a probe related to Rajaratnam and former Goldman Sachs director Rajat Gupta. The existence of the California investigation was disclosed in court proceedings involving Gupta’s prosecution for allegedly passing tips to Rajaratnam.

Gupta Trial

Gupta has pleaded not guilty and faces trial next month in Manhattan federal court.

Korenberg didn’t work on any of the deals involved in the Gupta case and has never been investigated for passing alleged tips to Gupta or Rajaratnam, Hueston said.

“These are entirely false allegations,” Hueston said.

“The multiyear investigation that he has been involved with has resulted in nothing,” Hueston said. “He has never tipped any information, he was never alleged to have tipped any inside information. He has had a distinguished career at Goldman Sachs.”

Hueston declined to comment on the nature of the investigation involving Korenberg.

‘Found Nothing’

“I’m not going to elevate the insignificance of that investigation that’s gone on now for more than 2 1/2 years and has found nothing,” he said.

Korenberg’s identity was reported earlier by the New York Times.

Yook didn’t immediately return a call to a number listed under his name in New York. Laura Eimiller, a spokeswoman for the Federal Bureau of Investigation in Los Angeles, declined to comment on the investigation. Gary Naftalis, a lawyer for Gupta, declined to comment on Korenberg.

On April 20, the U.S. notified U.S. District Court Judge Jed Rakoff, who is presiding over Gupta’s case in Manhattan, that an unidentified Goldman Sachs employee was under investigation for leaking inside information to Rajaratnam.

Unidentified Tipper

The unidentified tipper “allegedly gave material, nonpublic information to Mr. Raj Rajaratnam,” Naftalis said at the hearing. “We obviously would request of the government to get us any and all information relating to this additional sources that Mr. Raj Rajaratnam had at Goldman Sachs of nonpublic information as soon as possible.”

Yook and Rajaratnam’s brother Rengan were partners at Sedna Capital Management LLC. They were investigated by the U.S. Securities and Exchange Commission for insider trading in 2006, according to testimony at a pretrial hearing in Raj Rajaratnam’s case in October 2010 by Lindi Beaudreault, a lawyer who represented Galleon and Sedna. Yook was also questioned under oath by regulators as part of an investigation by the SEC into Sedna and Galleon, Beaudreault testified.

“At any time during Mr. Yook’s deposition, did he admit to engaging in insider trading?” Assistant U.S. Attorney Jonathan Streeter asked Beaudreault.

“I am sure he didn’t,” Beaudreault said.

“At any time during his deposition did he describe any suspicion that he had of insider trading?” Streeter asked.

“I don’t really remember about his deposition,” she said.

Since 2009, insider-trading and securities fraud charges have been filed against at least 64 people in the U.S. investigation. At least 59 people have either pleaded guilty or been convicted at trial. They include Rajaratnam, who is serving an 11-year prison term.

Goldman Sachs named Korenberg on a list of 272 managing directors in November 2009.

A woman carrying a white dog at Korenberg’s brown, two- story home in the Pacific Heights neighborhood of San Francisco, said “Sorry” and closed the door when asked for comment about the investigation. Korenberg bought the 2,640-square-foot, four- bedroom home built in 1900, for $2.6 million in 2010, according to real-estate website

To contact the reporters on this story: Edvard Pettersson in Los Angeles at; Patricia Hurtado in New York federal court at

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


Son of Bo Xilai Says Father’s Ouster ‘Destroyed My Life’

By Bloomberg News - Apr 27, 2012 7:05 AM GMT+0700

Li Wangzhi, the eldest son of ousted Politburo member Bo Xilai, rejected suggestions he used his father’s position for personal gain and said the downfall of a man he hasn’t seen in five years had destroyed his life.

Li, 34, said in a telephone interview yesterday that the last time he saw his father was at the funeral of his grandfather, Bo Yibo, in early 2007, and he hasn’t had any contact with him since. The former Citigroup Inc. (C) banker, who later went into private equity, said he was in China and not under detention.

Li Wangzhi, elder son of Bo Xilai, former Chongqing communist party secretary, is identified as standing back row far right, in this Columbia University graduation photo provided by Tang Baiqiao, a former classmate, who stands back row far left, in New York on May 20, 2003. Source: Tang Baiqiao via Bloomberg

Li’s comments seek to dispel speculation he profited from the position of his father, who was suspended earlier this month from the ruling Politburo. The ouster of Bo and the arrest of his wife on suspicion of murder have heightened scrutiny of the family’s business interests and sparked China’s deepest political crisis since the 1989 Tiananmen uprising.

“This incident has destroyed my life,” said Li, who also goes by the name Brendan Li. “I have no way to control how others think, but I have no desire to bask in his glow,” he said, referring to his father.

Bo Xilai’s wife, Gu Kailai, was taken into custody for involvement in the murder of British businessman Neil Heywood, Xinhua News Agency reported April 10. The state-run agency said Gu and Heywood had “a conflict over economic interests.” Bo, 62, who was suspended as Communist Party chief of the municipality of Chongqing last month, has been accused of “serious violations of discipline,” the agency said.

Not a Spy

Heywood wasn’t a British spy and “was not an employee of the British government in any capacity,” U.K. Foreign Secretary William Hague wrote in a letter yesterday to the House of Commons Foreign Affairs Committee in London.

Li said he didn’t know Heywood or the relationship between Heywood and the Bo family, and said his mother, Li Danyu, has not had any contact with her ex-husband in three decades. Li Danyu and Bo divorced when Li Wangzhi was a child. Li said he left the Bo family “a long time ago.”

Since Bo’s ouster from his posts, details of his extended family’s wealth and business dealings have emerged that show businesses from China to the Caribbean, the U.S. and U.K.

“The spouses and children of some cadres have taken advantage of their power to seek personal gains, disregarding the law, thus stirring public outcry,” state-run Xinhua News Agency said in an April 14 commentary, four days after reporting that Bo had been suspended from the Politburo.

“It’s an obvious fact that my family name isn’t Bo,” Li said when contacted on his mobile phone number.

Guagua, Xiyong

Bo Xilai’s removal has altered the lives of his extended family, including that of Li’s half-brother and Harvard University student Bo Guagua, 24, and their uncle Bo Xiyong. The uncle on April 25 resigned from Hong Kong-listed alternative energy company China Everbright International Ltd. (257), where he served as vice chairman. Li said he hasn’t had any contact with other Bo family members since the funeral.

Bo Guagua denied reports in newspapers including the Wall Street Journal and Daily Telegraph that he led a lavish lifestyle, which included driving a red Ferrari and expensive schooling beyond the means of his father’s salary as a party official. He made the comments in a statement published April 24 in the Harvard Crimson, the student newspaper.

The grandfather of Bo Guagua and Li Wangzhi is a former vice premier of China who died in 2007. The family patriarch was one of the so-called eight immortals who helped steer China after the 1966-1976 Cultural Revolution.

Columbia, Citigroup

After graduating from Columbia University’s School of International and Public Affairs in New York in 2003 with a master’s degree, Li worked for Citigroup. He wouldn’t comment about his time at the New York-based bank, saying he had signed a confidentiality agreement.

After leaving Citigroup he began a career in private equity. He said investments he made in Dalian, where his father was mayor for much of the 1990s, were not very successful.

Li, who said he hasn’t worked since February, is linked to Chong’er Investment & Consultancy Co. by office and e-mail addresses. Chong’er was a Chinese prince in the seventh century B.C. who fled his home in the ancient state of Jin, modern-day Shanxi province and the ancestral home of the Bo, Li and Gu families, because his father made his half-brother the crown prince. Chong’er eventually fought back and took the crown.

Referring to Bo Xilai, he said: “I also want to know if he’s safe.

‘‘I look forward to seeing a fair conclusion to this case,’’ Li said. ‘‘My country’s government will make the correct judgment.’’

To contact Bloomberg News staff for this story: Michael Forsythe in Beijing at; Wenxin Fan in Shanghai at; Yidi Zhao in Beijing at; Dune Lawrence in New York at

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