Economic Calendar

Wednesday, January 25, 2012

Corning Quarterly Profit Falls 53% as Glass Prices Decline; Shares Retreat

By Alexander Yablon - Jan 25, 2012 8:47 PM GMT+0700

Corning Inc. (GLW), the world’s largest maker of glass for flat-panel televisions, reported fourth- quarter profit fell 53 percent as glass prices for LCD displays sank.

Net income declined to $491 million, or 31 cents a share, from $1.04 billion, or 66 cents, a year earlier, according to a statement today. While profit excluding some items matched the 33-cent average estimate of 21 analysts surveyed by Bloomberg, the company also said first-quarter earnings will fall amid “significant” price declines. Corning shares retreated 8.8 percent to $13.34 in pre-market trading.

“The real concern for investors is what happens in the glass industry and how they deal with excess capacity,” said Alkesh Shah, an analyst with Evercore Partners Inc. in New York. “Management is making the right decision to reduce capacity. The question is will they reduce enough, and what will competitors do.” He has an “equal weight” rating on Corning.

Corning said first-quarter earnings excluding some items may fall by 5 percent to 20 percent, without saying whether the comparison was with a year earlier or the previous quarter.

The company, based in Corning, New York, had cut its fourth-quarter forecast on Nov. 29, after price declines for liquid crystal display glass and the loss of a contract in Korea. Corning said then that earnings might drop 30 percent, not 5 percent as predicted in October.

A Corning spokesman, Daniel Collins, said the company will disclose more details about its expectations for 2012 at an investor meeting on Feb. 3.

“Considering that most of their products go straight to consumers, I think it’s still going to a tough year,” said Darice Liu, an analyst with Brigantine Advisors, citing uncertainty about the economy, in comments made before the earnings report.

Fourth-quarter sales for Corning advanced 6.9 percent to $1.89 billion, from $1.77 billion a year earlier. The average estimate of analysts was $1.85 billion, according to data compiled by Bloomberg.

The company makes glass and ceramic products, including glass panels for liquid crystal displays, Gorilla Glass found on smartphone touch screens, fiber-optic cables, industrial air filters, and life science equipment.

To contact the reporter on this story: Alexander Yablon in New York at

To contact the editor responsible for this story: Ville Heiskanen at


Apple ‘Didn’t Bet High Enough’ on Chinese Demand for IPhone 4S, Cook Says

By Bloomberg News - Jan 25, 2012 1:36 PM GMT+0700

Apple Inc. (AAPL) underestimated the “staggering” demand for the iPhone 4S when it started sales in China this month, Chief Executive Officer Tim Cook said.

“We thought we were betting bold,” Cook said about sales of the device in China on a conference call yesterday. “We didn’t bet high enough.”

Crowds pelted Apple’s oldest store in China with eggs on Jan. 13 when the shop in Beijing’s Sanlitun district failed to open on the first day of sales for the iPhone 4S. After Beijing police sealed off the area to remove more than 500 people, Apple announced that it would suspend sales of iPhones at all stores in Beijing and Shanghai “for the time being” to ensure safety.

With sales halted at its China retail outlets, Apple is now offering the iPhone in the world’s largest mobile phone market through its online store, carrier partner China Unicom (Hong Kong) Ltd., and authorized resellers. The company’s online store in China is currently sold out of the iPhone 4S.

Chinese demand for the handset is “off the charts,” Cook said on the call.

Apple, based in Cupertino, California, this month moved closer to expanding its distribution in China through a second carrier partner when regulators approved specifications for a device that would run on the network of China Telecom Corp. (728), the nation’s third-largest wireless carrier.

Cook declined to answer questions about when a second carrier would be added in China.

‘Key Partner’

“China Unicom continues to be a very key partner,” he said on the call. “I’ve got nothing to announce today on an expansion there, but as I’ve consistently said, China is an extremely important market for us and we continue to look at how to grow it further.”

Apple announced yesterday that quarterly profit more than doubled to $13.1 billion in the period that ended Dec. 31 on surging demand for the iPhone and iPad.

The company sold 5.6 million iPhones in China during the first nine months of last year, making it the No. 4 smartphone vendor in the country in the third quarter, according to Stamford, Connecticut-based research company Gartner Inc.

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

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


ECB Said to Oppose Haircut on Its Own Greek Debt

By Jeff Black and Gabi Thesing - Jan 25, 2012 7:28 PM GMT+0700

The European Central Bank remains firmly opposed to any restructuring of its Greek bond holdings as the debt was acquired for monetary policy purposes, according to two people familiar with the Governing Council’s stance.

While the ECB faces pressure to join private-sector investors in taking losses on Greek debt, the central bank sees this as potentially damaging to confidence in the institution if it were to take part, said the people, who declined to be identified because the matter is confidential.

International Monetary Fund Managing Director Christine Lagarde said today that European governments and other public holders of Greek debt may have to increase support if private creditors don’t go far enough. Investors and European finance ministers remain at odds over how much private investors should shoulder in the Greek bailout.

“Once again, policy makers leave the room and hope the ECB will fill in,” said Thomas Costerg, an economist at Standard Chartered Bank in London. “The risk is that by putting the ECB on board, as the IMF asks, this could result in debt swap negotiations restarting from scratch, which could mean additional delay to an already over-stretched timetable.”

German Chancellor Angela Merkel’s government will oppose any attempt to make the ECB accept a writedown on its Greek bonds, senior coalition lawmaker Michael Meister said in an interview today.

Greek Talks

ECB President Mario Draghi said on Jan. 19 that the ECB is “not party” to ongoing discussions between the Greek government and the private sector. The ECB is in talks regarding a potential swap of its Greek bonds that would ease the country’s debt load and avoid losses at the central bank, the New York Times reported today, citing unnamed officials.

An ECB spokesman declined to comment.

Greek bondholders meet today in Paris to discuss their response to European officials’ demands that they take deeper losses on their holdings of Greek debt to help bring the nation’s borrowings to a sustainable level.

Institute of International Finance Managing Director Charles Dallara, who’s negotiating on behalf of the bondholders, said yesterday that all parties, public and private, should contribute to cutting Greece’s debt. Dallara stressed that private investors hold only about 60 percent of Greece’s 350 billion euros ($454 billion) of debt. The IIF is a Washington- based industry group with more than 450 members.

Dallara’s View

“It is important for all parties to recognize how much we all have at stake here and work together and co-operatively to find a solution,” Dallara told reporters in Zurich. “Some might minimize the risk of an involuntary debt exchange and point to other cases such as Argentina. I would caution against that attitude.”

European officials and Greece’s private bondholders agreed in October to implement a 50 percent cut in the face value of more than 200 billion euros of debt by voluntarily exchanging outstanding bonds for new securities, with a goal of reducing Greece’s borrowings to 120 percent of gross domestic product by 2020. The accord is tied to a second financing package for the cash-strapped country, which faces a 14.5 billion-euro bond payment on March 20.

Latest Offer

The latest offer from the IIF would lead to a loss of about 69 percent on the net-present value of Greek bonds, two people with knowledge of the talks said. The new 30-year bonds would carry an average coupon of about 4.25 percent, said the people, who declined to be identified because the talks are private.

“If the level of Greece’s privately held debt is not sufficiently renegotiated, then public creditors, holders of Greek debt, will also have to participate in the financial effort,” Lagarde told journalists in Paris.

European finance ministers meeting in Brussels signaled they would push Greece’s private investors to accept bigger losses, with coupons below 3.5 percent for debt to be serviced until 2020 and below 4 percent over the 30 years of the next Greek package.

The ECB has opposed any “involuntary” restructuring of Greek debt that would trigger the payment of credit default swaps, and extracted a 35 billion-euro guarantee for bonds held as collateral on its books from European governments last year.

‘Costly’ Move

Asking private investors to take a loss on Greek holdings has proved “costly for the euro zone” as it sends a message that “euro zone sovereign debt should no longer be considered a safe asset with the implicit promise that it would be repaid in full,” ECB Governing Council member Athanasios Orphanides wrote in the Financial Times on Jan. 5, calling for the plan to be jettisoned.

The ECB began buying Greek government debt in May 2010 as the sovereign debt crisis flared, saying the move was needed to maintain the transmission of monetary policy as bond yields soared. It now holds about 36 billion euros of the nation’s bonds, Barclays Capital estimated in a Jan. 6 report.

Greece’s creditors won’t help the country get a handle on its debt by taking losses on sovereign bonds, according to the Kiel Institute for the World Economy. Greece’s debt load will be “unbearably high” even if public creditors join investors in taking 50 percent writedowns on the debt, the institute at the University of Kiel in northern Germany said in a study published on its website.

To contact the reporters on this story: Jeff Black in Frankfurt at; Gabi Thesing in London at

To contact the editor responsible for this story: Craig Stirling at


Capitalism Seen in Crisis by Investors: Poll

By Rich Miller - Jan 25, 2012 4:20 PM GMT+0700

Jan. 25 (Bloomberg) -- Michael Spence, a professor of economics at New York University and nobel laureate, discusses the findings of Bloomberg's Global Poll, the U.K. economy and the outlook for euro-area economies. He speaks with Maryam Nemazee on Bloomberg Television's "The Pulse" on the sidelines of the World Economic Forum's annual meeting in Davos, Switzerland. (Source: Bloomberg)

International investors say capitalism is in crisis, with almost one in three backing radical changes to the system, according to a Bloomberg survey.

As the global financial and business elite gather in Davos for their annual forum, a majority in the Bloomberg Global Poll agree that income inequality hurts the economy and that governments need to do something to address it -- ideas at the heart of “Occupy” protests worldwide. Those surveyed also voice reservations about the financial industry’s role in society, with seven in 10 seeing at least some truth in the argument that banks have too much power over governments.

“Capitalism is in crisis because there is a huge and growing disparity in income/wealth distribution in Western economies, and an equally divisive generational disparity,” poll participant Michael Derks, chief strategist for FXPro Financial Services broker in London, said in an e-mail.

“It requires government intervention on an enormous scale, because an economy cannot survive if it does not invest in the younger generation,” Derks said.

More than 70 percent of those polled believe the system is in trouble, with 32 percent saying it needs a “radical reworking of the rules and regulations.” The other 39 percent think the turbulence will ebb on its own, according to the quarterly poll conducted Jan. 23-24 of 1,209 investors, analysts and traders who are Bloomberg subscribers. Fewer than one in four say free enterprise is working as it should.

Seventy percent of those surveyed say Europe’s economic troubles will cause social instability in 2012, including riots or other unrest.

Role for Government

The 459 U.S. investors who answered the survey view capitalism more favorably than their counterparts elsewhere, with roughly one in five saying the system needs an overhaul, according to the poll.

U.S. participants are also more wary of government action to tackle income disparities. Half say such official intervention would be inappropriate. More than three of four European investors and more than four in five Asians see a role for government in dealing with the issue.

The future of free enterprise was discussed today at the start of the World Economic Forum’s annual meeting. The opening panel featured Carlyle Group LP (CG) co-founder David Rubenstein, Bank of America Corp. Chief Executive Officer Brian Moynihan and Sharan Burrow, general secretary of the International Trade Union Confederation.

Rubenstein said the Chinese-style “state capitalism” model “will prevail” if the U.S. and Western European economies don’t fix their debt problems.

Message Resonating

As 2,600 delegates meet in the ski resort’s conference center, young Swiss Socialists are erecting igloos under the banner of “OccupyWEF,” which draws its inspiration from last year’s “Occupy Wall Street” protests against the financial industry and the concentration of wealth in the top one percent of the society.

Their message is resonating with global investors, according to the results of the poll. More than half of respondents say that income inequality hampers economic growth. Some two-thirds think it is appropriate for governments to pursue policies to tackle the issue, although a plurality -- 48 percent -- says it can be addressed over time. Fewer than one in five back urgent action to deal with the gap.

“There is a large and growing wealth disparity and I think it is unhealthy,” Steve Morton, a director at Natixis Securities in New York who took part in the survey, said in an e-mail. “The lower levels of the pyramid don’t have enough money to buy things and keep the economy going.”

Criticizing Banks

The financial industry also comes in for criticism in the quarterly poll. About two-thirds see at least some truth in the argument that bankers’ actions are driven by greed and harm the economy. More than four in five voice some sympathy for the contention that top bankers get large bonuses even when their firms don’t do well. And only 14 percent completely disagree with the statement that banks need to be regulated so that they’re not too big to fail.

“There’s too much power, it’s time to reset,” Burrow said at the Davos panel. “If you’ve got a group that is too big to fail, what it means is that you are the biggest bullies on the planet. The financial sector has lost its moral compass.”

Growing Gap

“The banking culture has evolved radically, to the point where the perception amongst most members of society is that their actions are driven by the relentless pursuit of earnings with no regard to their potential negative impact on communities,” said Anson Rosewall, a poll participant and sales trader at BBY Ltd., a financial services firm in Sydney, Australia.

“The fact that banks have taken government cash, while the average person has lost his job and house without help, will probably forever tarnish the reputation of these major institutions,” he said in an e-mail.

The gap between rich and poor is widening across most developed economies as executives, bankers and skilled workers reap more rewards, the Organization for Economic Cooperation and Development said last month.

The average income of the richest tenth of the population is now about nine times that of the poorest tenth, the Paris- based OECD said. The gap has increased about 10 percent since the mid-1980s with Mexico, the U.S., Israel and the U.K. among the countries with the biggest divide between rich and poor.

Tax Debate

President Barack Obama has signaled that he intends to highlight the issue in his re-election campaign by repeatedly calling for legislation to ensure that people with incomes of more than $1 million a year pay at least the same percentage in taxes as middle-class households.

Republican presidential candidate Mitt Romney earned $21.6 million in 2010 and paid 13.9 percent of that amount in income taxes, using the preferential rate on investment income and charitable contributions to pay a smaller share of his earnings than top wage earners typically do, according to tax returns released by the former Massachusetts governor yesterday.

U.S. investors are not convinced that income inequality is a threat to the economy: a majority of those surveyed say it does not hinder growth. More than 50 percent of Europeans and 60 percent of Asians think otherwise.

Skeptical of Regulation

Poll respondents from America are also less enthusiastic about bank regulation. Only about one in three U.S. investors are completely convinced that banks are in need of regulation to prevent them from being too big to fail. Majorities of investors in Europe and Asia are sold on that idea.

The poll’s overall results aren’t completely negative for the financial industry. Only about a quarter of investors completely disagree with the argument that banks do a good job routing capital to businesses that have the best chance of creating jobs.

More than three in four also voice at least some support for the statement that strong bank profits are good for the economy because financial institutions will have more money to lend to consumers and companies.

Structural changes, in particular new capital requirements and regulation, are holding banking profits down, according to roughly three-quarters of those surveyed. Only about a quarter blame the lower profits on a temporary slowdown in the economy and financial markets.

The Bloomberg Global Poll was conducted by Selzer & Co., a Des Moines, Iowa-based firm. It has a margin of error of plus or minus 2.8 percentage points.

To contact the reporter on this story: Rich Miller in Washington at

To contact the editor responsible for this story: Lawrence Roberts at


Gold Retreats for a Second Day as Asian Holidays Erode Physical Demand

By Nicholas Larkin and Glenys Sim - Jan 25, 2012 6:44 PM GMT+0700

Gold dropped for a second day in London as physical demand slumped due to holidays in Asia and as investors await the outcome of a Federal Reserve meeting.

Economists expect the U.S. central bank will maintain a pledge to keep its benchmark interest rate near zero at its meeting today. European equities declined and commodities were little changed. Financial markets in China, Hong Kong and Taiwan are closed today for the Lunar New Year.

“In the absence of sustained physical interest, gold is prone to a little more downside this week as bullion continues trading with global risk sentiment,” Andrey Kryuchenkov, an analyst at VTB Capital in London, wrote today in a report. Still, the Fed is “set to remain accommodative for now which is, as ever, gold-beneficial in the long run.”

Bullion for immediate delivery fell 0.6 percent to $1,656.20 an ounce by 11:24 a.m. in London. Prices dropped 0.7 percent yesterday, the most since Dec. 28. Gold for February delivery was down 0.5 percent at $1,655.80 on the Comex in New York.

Gold at the morning “fixing,” used by some mining companies to sell output, declined to $1,659 an ounce in London from $1,665.50 at yesterday’s afternoon fixing.

The metal climbed 10 percent in 2011, an 11th consecutive annual gain, as investors sought to diversify from equities and some currencies. While gold slid 14 percent since touching a record $1,921.15 in September, holdings in bullion-backed exchange-traded products are within 1.9 percent of last month’s all-time high. Assets were 2,349.2 metric tons yesterday, data compiled by Bloomberg show.

Fed Forecasts

The Fed said last week it will provide two charts with the forecasts for the benchmark rate after the meeting of policy makers. It left the target for overnight loans between banks in a range of zero to 0.25 percent last month and reiterated that economic conditions may warrant “exceptionally low” rates “at least” through mid-2013. They will keep the key rate unchanged today, according to a Bloomberg survey.

“It’s all about the dollar,” said Nick Trevethan, an analyst at Australia & New Zealand Banking Group Ltd. “This is the first time the Federal Open Market Committee is giving its forecast, and I think people are keen to see what it looks like.”

Silver for immediate delivery dropped 0.6 percent to $31.865 an ounce. It’s the best-performing precious metal this year with a gain of 14 percent.

Palladium fell 0.8 percent at $674.50 an ounce after rising to a four-month high of $689.50 yesterday. Platinum was down 0.4 percent at $1,544.75 an ounce. It yesterday climbed to $1,568.50, the highest price since Dec. 2.

To contact the reporters for this story: Nicholas Larkin in London at; Glenys Sim at

To contact the editor responsible for this story: Claudia Carpenter at


Stocks Drop in Europe as Ericsson Profit Disappoints; Nasdaq Futures Rise

By Stephen Kirkland and Shiyin Chen - Jan 25, 2012 8:05 PM GMT+0700

Jan. 25 (Bloomberg) -- Rajiv Jain, a money manager at Vontobel Asset Management Inc. in New York, talks about U.S. stocks, Europe's debt crisis and the technology industry. He speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

Jan. 25 (Bloomberg) -- Thomas Murphy, managing partner at Family Office Research & Management Ltd. in Sydney, a private wealth-management firm, talks about global stocks and his investment strategy. Murphy also discusses President Barack Obama's State of the Union address. He speaks with Susan Li on Bloomberg Television's "Asia Edge." (Source: Bloomberg)

European stocks dropped for a second day as Ericsson AB’s earnings missed estimates, Novartis AG said sales may stagnate and a report showed the U.K. economy contracted more than estimated. Nasdaq-100 Index futures rose after Apple (AAPL) Inc.’s profit more than doubled.

The Stoxx Europe 600 Index slipped 0.7 percent at 8 a.m. in New York and Standard & Poor’s 500 Index futures fell 0.3 percent. Nasdaq-100 futures jumped 0.6 percent as Apple shares climbed 7.4 percent in pre-market trading. The yen weakened 0.5 percent against the dollar after the country posted its first annual trade deficit in 31 years. The German 30-year bond yield lost three basis points as bids at an auction exceeded the government’s sales target. Oil declined 0.9 percent.

Ericsson, the world’s largest maker of wireless networks, reported profit fell amid slower spending from North American customers, and Novartis said sales probably won’t grow this year and profitability may decline. The U.K. economy shrank 0.2 percent in the fourth quarter, according to the Office for National Statistics. The Federal Reserve is set to release rate forecasts for the first time a day after President Barack Obama delivered his third State of the Union address.

“Earnings estimates still look extremely optimistic,” said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels. “We would be cautious on risky assets at the moment. Let’s not forget the overall economy is weak.”

Ericsson tumbled 14 percent and Novartis, Europe’s biggest drugmaker by sales, sank 3.4 percent. ARM Holdings Plc, the U.K. owner of chip technology used in Apple’s iPhone and iPad, rose 4.4 percent.

Apple Earnings

Apple said first-quarter profit surged to $13.1 billion, or $13.87 a share. Analysts surveyed by Bloomberg on average estimated profit of $10.14 a share. Apple is among the 54 of 86 S&P 500 companies that have beaten analyst estimates for quarterly profit since earnings season began on Jan. 9.

Advanced Micro Devices Inc., the second-largest maker of processors for personal computers, fell 6.3 percent after projecting lower sales than some analysts estimated. Nvidia Corp. sank 5.5 percent after the maker of graphics processors cut its fourth-quarter revenue outlook.

Boeing Co. slipped 1.1 percent after forecasting earnings per share that were less than analysts predicted. Xerox Corp. reported fourth-quarter profit more than doubled. The shares were little changed.

Illumina Inc. surged 43 percent in pre-market New York trading after Roche Holding AG offered about $5.7 billion in cash for the provider of genetic-analysis tools, the third time the Swiss drugmaker has made a hostile bid for a U.S. company since 2007.

Home Sales

A report today may show the number of Americans signing contracts to buy previously owned homes fell 1 percent in December after a 7.3 percent gain the previous month, according to the median estimate in a Bloomberg News survey of economists.

Australia’s dollar strengthened against most of its 16 counterparts on speculation the nation’s central bank may have less scope to cut borrowing costs after core inflation accelerated.

The pound lost 0.5 percent to $1.5556. The euro slipped 0.7 percent to $1.2949 as the European Central Bank was said to oppose restructuring its Greek bond holdings.

Billionaire George Soros said “the euro must survive because the alternative, a breakup, would cause a meltdown that Europe, the world, can’t afford,” Newsweek Magazine reported, citing an interview in New York before his participation at the World Economic Forum in Davos.

German Auction

The Portuguese five-year note yield climbed to a record 18.78 percent, while the yield on the Italian 10-year bond jumped 10 basis points.

The German 10-year bund yield slipped four basis points, falling for the first time in five days. Germany got bids for 5.042 billion euros ($6.6 billion) of 30-year bonds, more than the maximum sales target of 3 billion euros, the Bundesbank said in a statement today. The debt agency accepted bids for 2.458 billion euros at average yield of 2.62 percent.

The yield on the U.S. five-year Treasury note fell two basis points to 0.88 percent before the government sells $35 billion of similar-maturity securities.

Obama called on Congress to require the highest U.S. earners to pay at least 30 percent of their income in taxes, building on his election-year push for what he terms economic fairness. He also vowed to get tough on unfair trade practices by nations such as China, and said the U.S. should provide aid to help domestic companies compete.

Oil in New York dropped for a second day to $98.07 a barrel and copper declined from a four-month high. The S&P GSCI index of 24 commodities slipped 0.3 percent. Natural gas climbed 2.9 percent, the fourth consecutive gain.

To contact the reporters on this story: Stephen Kirkland in London at; Shiyin Chen in Singapore at;

To contact the editor responsible for this story: Stuart Wallace at


European Stocks Decline on Ericsson, Novartis

By Adam Haigh - Jan 25, 2012 7:29 PM GMT+0700

European stocks fell for a second day after Ericsson AB and Novartis AG (NOVN) posted earnings that missed analysts’ estimates. U.S. index futures retreated, while Asian shares climbed.

Ericsson, the world’s largest maker of wireless networks, plunged 14 percent after reporting fourth-quarter net income that missed analysts’ estimates. Novartis, Europe’s biggest drugmaker by sales, declined 3.4 percent. ARM Holdings Plc (ARM) climbed 4.1 percent after Apple Inc. posted quarterly profit that more than doubled.

The benchmark Stoxx Europe 600 Index slipped 0.8 percent to 254.04 at 12:27 p.m. in London. Futures contracts on the Standard & Poor’s 500 Index expiring in March lost 0.4 percent, while the MSCI Asia Pacific Index rallied 0.7 percent.

“Earnings estimates still look extremely optimistic,” Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets, said in a phone interview from Brussels. “We would be cautious on risky assets at the moment. Let’s not forget the overall economy is weak.”

Earnings per share for companies in the Stoxx 600 probably rose by 12 percent on average in 2011, according to more than 12,000 analyst estimates compiled by Bloomberg. They may increase by 7 percent this year, the forecasts show.

U.K. Economy Contracts

The U.K. economy shrank in the fourth quarter more than economists had forecast as manufacturers cut output and services stagnated, leaving Britain on the brink of another recession. Bank of England policy makers voted unanimously this month to keep their target for bond purchases unchanged, with some officials saying more stimulus is “likely” to be needed after the current program is complete.

Ericsson plunged 14 percent to 58.95 kronor, its largest drop since 2008, after reporting fourth-quarter net income of 1.15 billion kronor ($169 million), missing analysts’ estimates for profit of 4.24 billion kronor.

These results are “spectacularly dreadful, even with low expectations,” said Neil Campling, an analyst at Aviate Global LLP in London. “A further problem for the investment community going forward is Ericsson’s continued insistence on giving no guidance. We’d expect a plethora of downgrades to follow.”

Novartis fell 3.4 percent to 50.25 Swiss francs for the largest contribution to the Stoxx 600’s slide. The drugmaker said sales probably won’t grow this year and profitability will be hurt as the drugmaker’s biggest-selling medicine loses U.S. patent protection. Fourth-quarter net income excluding some costs rose to $3 billion, or $1.23 a share, from $2.8 billion, or $1.14, a year earlier. Analysts had predicted $1.24 a share, the average of 14 estimates compiled by Bloomberg.

Roche, Lonza Slide

Roche Holding AG (ROG) lost 2.3 percent to 160.90 francs after offering about $5.7 billion in cash for Illumina Inc. to bolster its cancer-drug sales. Roche proposed paying $44.50 a share for Illumina, 18 percent more than yesterday’s closing price. Roche will put the offer directly to shareholders after the San Diego- based company was “unwilling to participate in substantive discussions,” Roche said in a statement.

Lonza Group AG (LONN) tumbled 11 percent to 54.40 francs, its largest slide in more than two years, after saying it is seeking a successor to Chief Executive Officer Stefan Borgas and reporting a 46 percent decline in profit last year.

Banks retreated in Britain as the economy shrank more than forecast. Royal Bank of Scotland Group Plc fell 3 percent to 26.25 pence and Lloyds Banking Group Plc slid 2.8 percent to 30.8 pence. Barclays Plc slipped 1.7 percent to 214.8 pence and HSBC Holdings Plc declined 1.6 percent to 531.7 pence.

Petroplus Holdings AG retreated 8.3 percent to 22 centimes, extending the 84 percent slide yesterday when the largest independent European refiner said it planned to file for insolvency.

Apple’s Earnings

Declines in European shares came as Apple Inc. (AAPL) reported quarterly profit that more than doubled.

Apple reported per-share profit for its fiscal first quarter of $13.87, more than it earned in any full year before 2010. The company forecast revenue of about $32.5 billion and profit of $8.50 a share for its fiscal second quarter. That compares with analysts’ predictions for sales of $31.9 billion and profit of $7.96 a share. The stock trades at a price- earnings ratio of 10.9 times, based on estimated profits, according to data compiled by Bloomberg.

“It’s the largest company I’ve ever seen, with the fastest growth earnings, selling for the cheapest multiple, ever,” said Kenneth Schapiro, president of Condor Capital Management, which oversees $500 million in Martinsville, New Jersey. He spoke in a Bloomberg Television interview with Susan Li.

ARM Shares Gain

ARM’s shares rose 4.1 percent to 604 pence. ARM is the U.K. owner of chip technology used in Apple’s iPhone and iPad. Apple shares rallied 7.7 percent to $452.59 in early New York trading.

The Federal Reserve will release rate forecasts for the first time today. Business and political leaders gathered in Davos, Switzerland, for the start of the World Economic Forum’s annual meeting.

The Stoxx 600 has risen 3.9 percent so far this year amid signs that the U.S. economy is recovering and as investors speculated that the euro area will contain its debt crisis and China will reduce curbs on lending.

To contact the reporter on this story: Adam Haigh in London at

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


Billionaires at Davos Bemoan Inequalities

By Matthew G. Miller - Jan 25, 2012 2:18 PM GMT+0700

Jan. 25 (Bloomberg) -- Rahul Bajaj, chairman of Bajaj Group, talks about capitalism, the free market and the World Economic Forum's annual meeting in Davos, Switzerland. He spoke Jan. 23 with Bloomberg's Poppy Trowbridge in Davos. (Source: Bloomberg)

Ukrainian billionaire Victor Pinchuk wants to talk about income inequality. So does Irish billionaire Denis O’Brien and Indian billionaire Vikas Oberoi.

The three are among a contingent of at least 70 billionaires who are joining more than 2,500 business and political leaders at the World Economic Forum’s annual meeting in Davos, Switzerland, this week, according to a list of attendees and promotional materials obtained by Bloomberg News. A half-dozen of the richest participants, interviewed in advance of the conference, say economic disparity needs to be addressed.

“Many who will be in Davos are the people being blamed for economic inequalities,” Oberoi, 42, chairman of Oberoi Realty Ltd. (OBER), India’s second-biggest real estate developer by market value, said in an interview earlier this month by mobile phone from his car in Mumbai. “I hope it’s not just about glamour and people having a big party.”

Oberoi, who’s attending Davos for the first time, and like- minded billionaires may have trouble finding the subject of income inequality on the agenda. While the forum’s Global Risks 2012 report, published this month, describes “severe income disparity” as the world’s top risk over the next 10 years, tied with fiscal imbalances and ahead of greenhouse-gas emissions, the word “inequality” appears only once in the event’s 130- page program, and that’s in the title of a panel about art.

Remodeling Capitalism

Some sessions in a series labeled “Ensuring Inclusive Growth and Development” will touch on income inequality, said Kevin Steinberg, chief operating officer of the forum in the U.S. A panel titled “Remodeling Capitalism” is scheduled for Jan. 27 at the Swiss Alpine High School auditorium, six shuttle- bus stops away from the conference’s main location.

Last year, wealth disparities helped fuel protests from Cairo to New York, and the Occupy Wall Street movement made the richest 1 percent targets. That hasn’t gone unnoticed by some Davos participants, including Azim Premji, 66, chairman of Bangalore-based Wipro Ltd. (WIPR), India’s third-largest software exporter, who in December 2010 transferred stock then worth $2 billion to a foundation that supports education for the poor.

“We have seen in 2011 what ignoring this aspect can result in,” Premji wrote in an e-mail. “If we don’t take cognizance of it and try to solve this problem, it can create a chaotic upheaval globally.”

‘Distribution of Wealth’

That view was shared by Pinchuk, 51, founder of Interpipe, a Ukrainian maker of steel pipes for the oil and gas industries, who is attending Davos for the eighth time.

“The global social-economic order will change, if we want it or not,” Pinchuk wrote in an e-mail. In a second e-mail, he said businesses should concentrate on both maximizing profits and assuring “a more just distribution of wealth.”

Pinchuk, who will host an event in Davos about philanthropy moderated by Chelsea Clinton, daughter of former President Bill Clinton, celebrated his 50th birthday in the French ski resort of Courchevel in December 2010 with several hundred friends. The party featured performances by Christina Aguilera and a troupe of Cirque du Soleil acrobats, according to an account in the Los Angeles Times. Dennis Kazvan, a spokesman for the Victor Pinchuk Foundation, which is sponsoring the Davos event, declined to comment about the party.

The best way to address tensions over income inequality, Pinchuk said, is for conference-goers and complainers to chat.

“The Davos men are ready for such a dialog, even more than the occupiers,” he said.

Camp Igloo

Some of those occupiers moved into what they call “Camp Igloo” in Davos, where 155 centimeters (61 inches) of snow was on the ground yesterday, the second-highest level recorded for a Jan. 24 since the Institute of Snow and Avalanche Research, based in the ski resort, started keeping records 66 years ago.

“This year, we will not let them exclude us, the 99%,” the group, OccupyWEF, says on its website.

O’Brien, the Irish-born chairman and owner of Digicel Group Ltd., a Kingston, Jamaica-based mobile-communications provider, said the Occupy movement deserves encouragement.

“They believe the financial community has behaved abominably, and some of them have,” O’Brien, 53, said in a phone interview from London this month. “They are serious people who have taken a stand, and they should be engaged.”

‘Last Continent’

O’Brien, whose company is worth about $4 billion, according to data compiled by Bloomberg, plans to spend much of his time in Davos encouraging European and Asian firms to build factories in Haiti, where 80 percent of the population lives in poverty, according to the Central Intelligence Agency’s World Factbook. Digicel, which has rebuilt more than 50 schools in the country since a magnitude 7.0 earthquake in 2010, is the island’s biggest employer.

“Corporations need to engage in giving a chunk of their profits to social issues,” O’Brien said.

Some billionaires aren’t interested in talking about income inequality or the Occupy movement at Davos.

“It’s all for the television cameras,” Henry Ross Perot Jr., 53, chairman of Hillwood Development Corp., his family’s real estate development firm, said in a phone interview from his office in Dallas. “They usually tell the organizers when and where they will protest in advance.”

Perot said he plans to attend lectures and investigate new investment opportunities, especially in Africa, where he owns a stake in safari operator Robin Hurt Ltd.

“That’s the last continent to have a boom,” said Perot, whose father, Ross Perot, twice ran for U.S. President as an independent candidate. “They certainly have the human capital and natural resources. The question is do they have the enlightened leaders to lead them there?”

Soros, Deripaska

Perot is one of at least 20 U.S. billionaires who will be at Davos this year, the largest national contingent, according to data compiled by Bloomberg. He’ll be joined by hedge-fund managers Steven Cohen of SAC Capital Advisors LP, Ray Dalio of Bridgewater Associates LP and George Soros of Soros Fund Management LLC.

Soros, 81, who has donated more than $8 billion to charity and has been going to Davos for 20 years, has said he’s in favor of increasing taxes on the rich. He “recognizes that income inequality is a problem,” according to his spokesman, Michael Vachon, who said Soros declined to comment further.

Bloomberg Poll

More than half of international investors say income inequality hampers economic growth, according to a Bloomberg survey published today. The Jan. 23-24 poll of 1,209 investors, analysts and traders who are Bloomberg subscribers also found that 31 percent don’t think it’s appropriate for government policy to address the issue. Overall, almost one in three surveyed back radical changes to the capitalist system.

The country with the second-highest number of billionaires registered for the conference is India, with at least 16. Russia will send at least 12, including Oleg Deripaska, chief executive officer of United Co. Rusal (RUALR), the world’s largest aluminum producer, and Viktor Vekselberg, the company’s chairman, who owns about 16 percent along with partners.

Vekselberg, 54, called on Davos’s “unprecedented collective of the world’s influencers” to cooperate amid what he described as a “very somber economic context.”

“In some cases, more impact can happen over a cup of coffee than in days or weeks of formal discussions if the right people connect,” he wrote in an e-mail.

‘New Ways Out’

Deripaska, 44, said if Davos participants can find “new ways out of the global political and economy instability” at this year’s meeting, “criticism will go down.”

One Russian 10-figure tycoon, Roustam Tariko, who controls Russian Standard Corp., which has interests in banking and vodka, wrote in an e-mail that economic equality will be one of the most important issues at the conference and is “key not only to domestic stability but also to the relationship between the post-industrial world and developing countries.”

Tariko, 49, echoed Perot’s views about Occupy protesters.

“The current movement has no strategy and purpose and hence doesn’t look serious to me,” he wrote.

Tariko said he’d rather talk about how political instability is undermining the global economy. That would suit Adi Godrej, chairman of Godrej Group, a Mumbai-based conglomerate with interests ranging from chemicals to real estate. He said delegates should focus on policy discussions aimed at fixing the economy, especially in Asia.

China, India

“China and India must realize that a lot of global recovery will be based on how well they implement reforms,” said Godrej, 69, who called Davos “a good working holiday” that saves him weeks of travel each year because of the number of people he can see in a short period of time.

Still, many of the billionaires interviewed in advance of the meeting said the widening gulf between rich and poor was a great concern.

“These growing inequalities are not acceptable,” said Rahul Bajaj, chairman of Bajaj Group, who valued his holdings in the Mumbai-based conglomerate at $1 billion. “The rich have done much better than the poor, and that creates problems.”

Bajaj, 73, who has been to Davos every year since 1979, said economic development should be encouraged through a mix of state and private-sector incentives. Governments could then invest additional tax revenue in infrastructure, education, food and water to benefit those below the poverty line, he said.

For Nicolas Berggruen, 50, who parlayed a trust fund worth about $250,000 into a fortune of at least $2.5 billion, according to data compiled by Bloomberg, policy discussions at Davos have value. Berggruen, who has been called the “homeless billionaire” because he roams the world in his Gulfstream IV jet living out of five-star hotels, said he will mostly be a listener in the conversation.

“There is a serious crisis of governance in the West, and the U.S. has many misconceptions about China,” he said from a hotel room in Singapore. “These issues lead to the symptoms that cause movements like Occupy Wall Street. We must talk about those symptoms. That makes Davos more relevant than ever.”

To contact the reporter on this story: Matthew G. Miller in New York at

To contact the editor responsible for this story: Robert Friedman in New York at


Obama Calls for Higher Taxes on Wealthy

By Catherine Dodge and Kate Andersen Brower - Jan 25, 2012 1:07 PM GMT+0700

Jan. 25 (Bloomberg) -- U.S. Senator Rob Portman, a Republican from Ohio, David Stockman, former director of the Office of Management and Budget in the Reagan administration, John Podesta, a former Democratic White House chief of staff, former Republican Senator John Sununu of New Hampshire, now a Bloomberg contributing editor, and Al Hunt, executive editor at Bloomberg News, talk about President Obama's State of the Union address. Speaking with Bloomberg's Margaret Brennan they also discuss the Republican Party's response from Indiana Governor Mitch Daniels. (Hunt is a Bloomberg View columnist. The opinions expressed are his own. Source: Bloomberg)

President Barack Obama, offering an election-year prescription to spur the economy, said the wealthiest Americans should pay more taxes in the name of fairness, to bring down the deficit and ensure those trying to make ends meet don’t have to “make up the difference.”

In his State of the Union address last night, Obama called on Congress to embrace a tax plan named for billionaire Warren Buffett that would require those making $1 million or more pay at least 30 percent in taxes. With congressional gridlock heightened by the 2012 election, there is little chance the proposal will pass.

“You can call this class warfare all you want,” Obama said in a nationally televised speech before a joint session of Congress. “But asking a billionaire to pay at least as much as his secretary in taxes? Most Americans would call that common sense.”

The president’s 65-minute address was directed at both voters and Congress. The populist themes -- tax fairness, help for homeowners, cracking down on U.S. financial crimes and unfair trade practices in China and investigating the lending practices that preceded the housing crisis -- are those he will be repeating as he campaigns for a second term.

He invoked the teamwork and selflessness of the U.S. armed forces to urge lawmakers toward agreement on changing the tax code for individuals and corporations, promoting energy development and improving job training and education. Still, he is unlikely to get any major legislation through Congress before the November election, which will also decide control of the House and Senate.

Spending Constraints

He is also constrained on spending for proposals such as infrastructure projects by efforts to contain the national debt. Last year’s deficit of $1.3 trillion was third-highest as a share of the economy since 1945.

In the Republican response, Indiana Governor Mitch Daniels, who last year decided against a presidential run, said Democratic “extremism” has stifled domestic energy development and job growth.

“No feature of the Obama presidency has been sadder than its constant efforts to divide us, to curry favor with some Americans by castigating others,” Daniels said.

Former U.S. House Speaker Newt Gingrich, who is vying with former Massachusetts Governor Mitt Romney for the lead in the Republican race, said in an e-mailed statement that Obama “described his conviction that his big government is built to last and should be paid for with higher taxes.”

Battleground States

Obama takes his case to voters today, beginning a three-day trip to election battleground states where he will talk about his initiatives on manufacturing, energy and education. With the presidential campaign under way, Obama is drawing contrasts with the Republican presidential candidates. He is also highlighting a willingness to confront congressional Republicans who have stalled his agenda and seek to overturn tougher regulation of Wall Street.

While saying he “will work with anyone in this chamber” to accelerate the economic recovery, “I intend to fight obstruction with action, and I will oppose any effort to return to the very same policies that brought on this economic crisis in the first place.”

Some Republicans said they found things to like in Obama’s address. Representative Jeff Flake of Arizona said he supports Obama’s call for additional power to consolidate federal agencies.

“We ought to see what we can give him and if he’s willing to use it to streamline government, to make it more efficient, to downsize, then I’m all for it,” Flake said.

Common Ground

Senator Rob Portman, an Ohio Republican, said there are “four or five things” to like in the speech, including calling for an overhaul of the corporate tax code and tougher enforcement of international trade rules.

Obama’s call for a minimum tax for million-dollar earners drew opposition. Portman said that, while he agrees the tax code should be fair, “It’s not about taxing wealthy people.”

Representative Jeb Hensarling, a Texas Republican, rejected the proposal. “We’re going to increase taxes on people in this economy?” he asked.

Obama argued that making sure that millionaires pay at least the same percentage in taxes as middle-income Americans is part of making sure “everyone gets a fair shot, and everyone does their fair share.”

“Because of loopholes and shelters in the tax code, a quarter of all millionaires pay lower tax rates than millions of middle-class households,” Obama said. “Right now, Warren Buffett pays a lower tax rate than his secretary.”

Buffett Rule

The so-called Buffett rule was inspired by a New York Times op-ed essay in August in which Buffett said that in 2010 he paid a lower tax rate -- 17.4 percent -- than “any of the other 20 people in our office.”

Buffett’s secretary, Debbie Bosanek, looked on from first lady Michelle Obama’s box in the House gallery where she was an invited guest for the address.

“This is all gamesmanship, but it was very well played,” said Charlie Cook, publisher of the nonpartisan Cook Political Report in Washington. “Having Warren Buffett’s secretary sitting there, it did force you to think about it for a second. This is a big and complicated debate, and it won’t be settled any time soon.”

Tax fairness has become an election-year issue and Obama is seeking a contrast to his challengers. Romney yesterday released his tax returns and they showed he earned $21.6 million in 2010 and paid 13.9 percent in taxes.

The former private-equity executive earned more than half of his income from capital gains and dividends, which are taxed at a top rate of 15 percent, rather than the 35 percent top rate for ordinary income.

Bipartisan Seating

Even with the partisan division in Congress, some lawmakers in the House chamber continued their recently adopted practice of bipartisan seating to listen to the president’s speech.

In an effort to keep manufacturing jobs in the U.S., Obama proposed ending tax breaks for companies that move their operations overseas. He said a tax credit should be created for companies that close operations abroad and bring jobs back home.

“Every multinational company should have to pay a basic minimum tax,” Obama said. “And every penny should go towards lowering taxes for companies that choose to stay here and hire here in America.”

Obama revisited an idea he presented in September to improve the nation’s infrastructure, except this time he would use half of the savings from winding down the wars in Iraq and Afghanistan to pay for it. The other half, he said, would be used to pay down the deficit.

Job Training

Obama also talked about education and job training to make Americans more competitive and help reduce unemployment. Among his proposals is a partnership between community colleges and businesses to train and place 2 million workers.

To promote U.S. energy independence, Obama directed the government to promote development of natural gas, which he said will support more than 600,000 jobs by the end of the decade. He said the administration will create new rules for safe shale gas development and drilling practices.

The president bookended his remarks by referring to the May raid that killed al-Qaeda leader Osama bin Laden, a victory that has helped Obama mute attacks from his opponents on national security.

“For the first time in two decades, Osama bin Laden is not a threat to this country,” he said within the first two minutes of the address, prompting a standing ovation.

Obama closed the address by referring to the day when his administration’s top officials, including former Secretary of Defense Robert Gates, who served in former Republican President George W. Bush’s administration, and Secretary of State Hillary Clinton, who ran against Obama for the 2008 nomination, huddled in the White House Situation Room as the Navy SEAL team conducted the raid that killed bin Laden.

“All that mattered that day was the mission,” Obama said. “No one thought about politics.”

To contact the reporters on this story: Catherine Dodge in Washington at; Kate Andersen Brower in Washington at

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


Apple Profit More Than Doubles on IPhone

By Adam Satariano - Jan 25, 2012 6:02 PM GMT+0700

Jan. 25 (Bloomberg) -- Kenneth Schapiro, president of Condor Capital Management, talks about the outlook for Apple Inc. Apple reported quarterly profit that more than doubled as holiday purchases of the iPhone catapulted sales to a record and helped the company steer clear of the consumer-spending slump that has hurt rival companies. Schapiro speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

Jan. 24 (Bloomberg) -- Brian Marshall, analyst at ISI Group, talks about Apple Inc.'s fiscal first-quarter profit and outlook. Marshall speaks with Adam Johnson and Lisa Murphy on Bloomberg Television's "Street Smart." Eric Jackson, president and founder of Ironfire Capital LLC and Bloomberg's Cory Johnson and Stephanie Ruhle also speak. (Source: Bloomberg)

Apple Inc. (AAPL)’s quarterly profit more than doubled as surging demand for the iPhone and iPad cemented its role as the most valuable technology company and ramped up pressure on rivals Google Inc. and Samsung Electronics Co.

Net income of $13.1 billion in the period that ended Dec. 31 ranked among the highest quarterly profits on record, putting Apple in the same league as energy companies such as Exxon Mobil Corp. (XOM) and Russia’s Gazprom OAO (OGZPY), data compiled by Bloomberg show. Per-share profit of $13.87 for the period was more than Apple earned in any full year before 2010.

Apple sold 37 million iPhones in the period, with customers snapping up the new 4S model that went on sale in October, a week after the death of co-founder Steve Jobs. Record revenue vaulted Apple ahead of Hewlett-Packard (HPQ) Co. as the world’s biggest computer maker by sales and quelled concern that the company’s allure may dim as it embarks on a new era with Chief Executive Officer Tim Cook at the helm.

“The momentum that Steve Jobs created, Tim Cook is maintaining,” Gene Munster, an analyst at Piper Jaffray Cos., said in a televised interview on “Bloomberg West.” “We kind of run out of adjectives to describe this quarter.”

Apple today rose as much as 7.6 percent in German trading to the equivalent of $454.69. In the U.S., the stock soared as much as 12 percent to $468.95 in extended trading, surpassing its record closing price of $429.11 on Jan. 18.


If the gain holds in today’s U.S. trading, Apple’s market value would grow to $437.1 billion, higher than Exxon’s $417.9 billion market capitalization at yesterday’s close. The two companies have been trading places atop the Standard & Poor’s 500 Index since August.

“Look at the Apple numbers, they were stunning,” Alcatel- Lucent CEO Ben Verwaayen said in an interview with Maryam Nemazee on Bloomberg Television’s “Countdown” show at the World Economic Forum’s annual meeting in Davos, Switzerland. “It shows that even in a time of difficult circumstances, if you have the right product and the right focus, you can make a difference.”

Sales rose 73 percent to $46.3 billion in the fiscal first quarter, Cupertino, California-based Apple said yesterday in a statement. Analysts surveyed by Bloomberg on average estimated net income of $10.14 a share on sales of $39 billion.

‘Unimaginable’ Numbers

In looking ahead to the second quarter, Apple forecast revenue of about $32.5 billion and profit of $8.50 a share. That compares with average analysts’ predictions for sales of $31.9 billion and profit of $7.96 a share.

Except for the period that ended in September 2011, when customers put off iPhone purchases in anticipation of the 4S, Apple’s profit has exceeded analysts’ projections in every quarter for at least six years, according to data compiled by Bloomberg.

The quarterly results mark the first time Apple’s revenue topped Hewlett-Packard’s, underscoring how the company’s focus on sleek, touch-screen mobile devices has rearranged the technology industry’s pecking order.

Apple’s net income exceeded total revenue at Google (GOOG), Apple’s largest rival in mobile operating systems, for the period.


“Those numbers are just unimaginable,” said Michael Obuchowski, chief investment officer at First Empire Asset Management, which has $4 billion under management, including Apple shares. “It’s still an extremely well-managed company and they are showing that the product pipeline is sufficient even now to generate growth rates that are unrivaled.”

Apple wasn’t harmed by Inc.’s introduction of the Kindle Fire, a tablet designed to compete against the iPad at less than half the price. Apple sold 15.4 million iPads, topping the 13.5 million projected by analysts.

“Everybody expected the Kindle Fire to affect their sales,” said Carl Howe, an analyst at the Yankee Group in Boston. “All evidence shows it had none.”

Apple has accumulated $97.6 billion in cash and investments, money it’s “actively” discussing how to use, Chief Financial Officer Peter Oppenheimer said on a conference call yesterday. That could include supply-chain investments, acquisitions or other expenditures, he said.

Lasting Momentum

The recent period was the first full quarter since Cook took over in August, when Jobs stepped down, six weeks before his death.

“This shows that the business model has lasting momentum without Steve Jobs,” said Keith Goddard, CEO of Capital Advisors Inc. in Tulsa, Oklahoma, whose firm manages more than $13 million in Apple shares.

Apple’s report contrasted with those of companies such as Microsoft Corp. (MSFT) and Intel Corp. (INTC), which are grappling with slower personal-computer sales in part because customers are choosing to buy smartphones and tablets like the iPad instead. While Microsoft and Intel are benefiting from business demand for servers and software, they’re playing catch-up in the consumer arena by rolling out new mobile products, including Microsoft’s Windows 8 operating system, designed to integrate more smoothly with smartphones and tablets.

Smartphone Rivals

Rival smartphone makers also have struggled to keep pace with Apple. HTC Corp. (2498) and Motorola Mobility Holdings Corp. (MMI), two of the biggest companies whose devices run Google’s Android operating system, disappointed investors with results for their most recent quarters. Research In Motion Ltd., which has lost 90 percent of its market value since June 2008, replaced its co- CEOs this week.

Holiday iPhone demand helped Apple gain market share on manufacturers including Samsung and HTC. In December, about 45 percent of U.S. shoppers who bought a smartphone in the previous three months said they purchased an iPhone, up from 25 percent in a study done two months earlier, according to Nielsen Co. Android phones were selected by 47 percent of buyers, down from 62 percent.

Cook said Apple couldn’t manufacture iPhones fast enough and that the record number announced yesterday could have been bigger.

Competitors also haven’t been able to match the success of the iPad, with Apple controlling 62 percent of the tablet market in the third quarter, according to researcher IDC.

Mac Sales

The popularity of the iPad and iPhone has also buoyed sales of Apple’s lineup of Mac computers. The company sold a record 5.2 million Macs in the first quarter, up from 4.9 million in the previous period.

Hewlett-Packard had revenue of $32.1 billion in its most recent quarter, which ended in October. The Palo Alto, California-based computer maker will report fiscal first-quarter results next month.

On the call yesterday, Cook was asked to assess his early months at the helm.

“You can see our results,” Cook said. “The team is doing a fantastic job. We feel very good about where we are.”

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

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


Merkel Becomes Master of Markets With Euro Austerity Mollifying Investors

By Tony Czuczka - Jan 25, 2012 6:06 PM GMT+0700

Jan. 25 (Bloomberg) -- Gerard Lyons, chief economist at Standard Chartered Plc, talks about the outlook for the euro zone and challenges facing the region's policy makers. Lyons speaks with Maryam Nemazee on Bloomberg Television's "The Pulse" from the World Economic Forum's annual meeting in Davos, Switzerland. (Source: Bloomberg)

Angela Merkel, Germany's chancellor, speaks during an event to mark 10 years of the Euro currency at the Konrad Adenauer foundation in Berlin. Photographer: Michele Tantussi/Bloomberg

German Chancellor Angela Merkel has declared a truce in her campaign to master financial markets.

Merkel, who began the euro crisis seeing politicians and investors locked in a battle for supremacy, is now using markets’ judgments to support her calls for austerity to rescue the single currency. At the same time, she backed off from her demand that bondholders contribute to bailouts.

The shift underscores Merkel’s journey from scientist to dominant crisis manager amid unprecedented economic and financial turmoil that has thrust her to the fore of Europe’s policy response. Delivering the opening speech today at the World Economic Forum’s annual meeting in Davos, Switzerland, she’ll be addressing critics who say her conversion may be too late to stop woes from splintering the 17-nation euro.

“She’s starting a little bit to employ and massage markets, as a politician should do,” Holger Schmieding, chief economist at Joh. Berenberg Gossler & Co in London, said in an interview. “You cannot control markets, but you can work with the markets and harness the power of markets your way if you do it well.”

Merkel is scheduled to make her speech at 5:25 p.m. local time.

Euro Rally

Merkel’s convergence with the European Central Bank and her attempt to bury the hatchet with financial markets came as concerns of an imminent euro break-up ease. The euro had its biggest rally since October against the dollar last week. Spain and France sold bonds at lower yields on Jan. 19, the latest debt auctions this year to signal an easing of the crisis, at least for now.

German business confidence jumped more than economists forecast in January to a five-month high, according to the Munich-based Ifo institute’s business climate index published today. Germany’s DAX index (DAX) of 30 stocks has gained 8.6 percent this year compared with a 4.3 percent increase for the Stoxx Europe 600.

Domestically, 91 percent of Germans back Merkel’s push to impose tougher enforcement of debt and deficit limits, according to an FG Wahlen poll for ZDF television last month. The poll also showed Merkel recapturing the spot as Germany’s most popular politician for the first time since April 2010, before Greece received the euro area’s first bailout. Merkel’s Christian Democratic Union remains the top rated party 18 months before elections that are likely to be a referendum on her handling of the debt crisis.

‘Sunny Heights’

“The chancellor is back at sunny heights,” Gerd Langguth, a Bonn University political scientist and Merkel biographer, said Jan. 13 on Deutschlandfunk radio. “She’s refusing to get excited, which seems the right thing to do,” he said in a subsequent telephone interview.

A physicist who grew up in communist East Germany, Merkel, 57, has said she’s no economic expert. Some analysts say that handicap in Europe’s leading politician has set back efforts to combat the crisis.

Investors have repeatedly expected Merkel and fellow leaders “to act comprehensively and with speed and they’ve done neither,” Gerard Lyons, chief economist at Standard Chartered and a Davos delegate, said in an interview. “Fundamentally the euro can’t survive in its current format.”

Greek Contagion

Contagion from Greece has buffeted Spain, Italy and France, the euro region’s three biggest economies after Germany. Greece’s debt woes required a second bailout that can’t proceed until there’s agreement with bondholders on a 50 percent debt writedown.

Merkel has learned along the way. She and French President Nicolas Sarkozy last month reversed a year of policy and dropped the idea of requiring private-investor losses under the European Union’s permanent rescue fund, which investors, economists and European officials blamed for worsening the market turmoil in 2011.

Requiring bondholder losses “had a very negative effect on debt markets,” EU President Herman Van Rompuy said Dec. 9 after the last summit. Merkel also signaled that her push to make investors accept losses on Greek sovereign bonds won’t be repeated in other euro countries.

The previous month, as Italian yields topped the 7 percent level that triggered bailouts for Greece, Ireland and Portugal, Prime Minister Silvio Berlusconi quit and was replaced by Mario Monti, a former economics professor. On Nov. 24, after meeting with Monti and Sarkozy in Strasbourg, France, Merkel reminded them that ignoring spreads would be a mistake because they indicate “where work needs to be done and where you have to keep pressing ahead.”

Merkel’s ‘Battle’

That contrasts with the antagonism she expressed 12 months earlier. “It is true that there is a kind of battle over what power the financial markets have and how much room for policy making the politicians have,” she said in a Nov. 18, 2010, speech. At stake is “what we call the primacy of politics.”

As Merkel’s approach has shifted, the faces surrounding her at EU summits and in the glass-and-concrete chancellery in Berlin have changed too. Lars-Hendrik Roeller, who studied economics at the University of Pennsylvania, worked at the EU in Brussels and ran a business school in Berlin, joined as chief economic adviser in July.

Roeller replaced Jens Weidmann, whom Merkel sent to head Germany’s Bundesbank. Joerg Asmussen, a former deputy German finance minister who advised Merkel during EU summits, joined Weidmann on the European Central Bank’s executive board this month.

German Reach

Thrust into the role of Europe’s indispensable leader by the debt crisis, Merkel is increasingly extending the reach of German policies across the continent as other euro nations fall behind.

Sarkozy, who met Merkel so often last year that the leaders of Europe’s No. 1 and No. 2 economies were dubbed “Merkozy” by the media, praised German efforts to cut labor costs, saying Jan. 9 in Berlin that German industrial policy “is unquestionably an example.” Sarkozy has suggested a sales-tax hike emulating Germany even as he lags in polls before France’s presidential election in April.

Monti meanwhile said his ideal is “an Italy that resembles Germany as much as possible,” according to a Jan. 11 interview with the Die Welt newspaper.

S&P Downgrades

As political leaders in France and Austria bemoaned the Standard & Poor’s decision to strip them of their top credit rating among nine euro states downgraded on Jan. 13, Merkel said the decision “confirms my conviction” that austerity is needed. Germany is now the only euro country with a stable AAA credit rating at S&P.

Enlisting markets to help make her case for EU-wide budget discipline is a change for Merkel, who said as recently as Aug. 21 that politicians have to be “unassailable” and can’t let investors force their hand.

She’s also giving markets a human face, saying in a radio interview broadcast Jan. 15 that they “ultimately consist of investors, some of whom manage the life-insurance policies of totally normal people.” Those investors “wonder, ‘Is putting my money in Europe a good investment?’”

Merkel says it’s not about Germany trying to dominate Europe. Rather, she says, the EU can only thrive in the global competition with emerging powers such as China and Brazil if governments cut debt and strive to become as competitive as Germany, the world’s No. 2 exporter after China.

Stiglitz View

Facing down calls by economists including Nobel laureate Joseph Stiglitz and politicians such as Irish Finance Minister Michael Noonan to support joint euro-area bonds and let the ECB aid debt-strapped governments plays well for Merkel at home. It didn’t stop her being ranked the world’s most powerful woman by Forbes magazine in 2011, reclaiming the top spot after a one- year hiatus.

Underscoring Germany’s dominance, leaders from Monti and Sarkozy to Bulgarian Prime Minister Boiko Borissov traveled to Berlin this month to endorse a European agreement on tougher rules for debt reduction, a policy adopted at a summit last month. Including Spanish Prime Minister Mariano Rajoy, who is due in Berlin tomorrow, six of the euro-area’s 17 leaders will have traveled to the court of Merkel in the past two weeks. International Monetary Fund head Christine Lagarde, Van Rompuy and EU Commission President Jose Barroso also paid visits.

IMF Resources

Lagarde, who is seeking $500 billion in additional IMF lending resources as she deploys the fund to help fight Europe’s sovereign debt crisis, prodded Merkel to contribute more to a “firewall” and to support joint euro-area bonds.

“What we must all understand is that this is a defining moment,” Lagarde, a former French finance minister, said in a Jan. 23 speech in Berlin. “It is not about saving any one country or region. It is about saving the world from a downward economic spiral.”

For all its popularity at home, Merkel’s rejection of what she calls “Anglo-Saxon” solutions to the debt crisis carries global risks. Monti has warned that the economic squeeze of austerity may lead to street protests in Italy. EU leaders are seeking to address the threat of unrest by making growth and jobs the official topic of their next summit on Jan. 30.

Spending cuts won’t solve the euro’s problems “and Germany is making it all a lot worse,” Charles Grant, director of the London-based Centre for European Reform, said in an interview. “If Germany doesn’t change its mind, the currency won’t survive. Merkel has lacked the courage to be a leader, someone who changes the way people think and takes risks.”

Sarkozy Prodding

At their Nov. 24 meeting in Strasbourg, Merkel won over Sarkozy to stop prodding the ECB to expand its support of debt- strapped governments, easing political pressure on the central bank.

Within a month, the ECB offered the region’s banks a record 489 billion euros ($637 billion) in three-year loans so they can keep lending. With Europe hamstrung by Germany’s historic fear of inflation, the loans are quantitative easing “through the backdoor,” Simon Derrick, chief currency strategist at Bank of New York Mellon Corp., said on Dec. 21.

Merkel has meanwhile persuaded EU governments to return to her agenda by tightening draft rules on budget deficits after the ECB warned against backsliding as the fiscal pact risked being watered down. That allows bank president, Mario Draghi, to keep on providing banks with “enormous amounts of liquidity,” said Carsten Brzeski, an economist at ING Group in Brussels.

‘Incarnation of Pragmatism’

“Merkel is finally getting what she wants in Europe,” Brzeski said by phone. As a result, “the euro bonds story is not off the table” and Merkel may end her opposition to joint debt “at the very end of the trip” to fiscal discipline in the region. “We know her: She’s the incarnation of pragmatism.”

As she battles the crisis that she has said poses one of the greatest risks to European unity since World War II, Merkel continues to signal that European partners shouldn’t look to Germany to share more of its prosperity, which would amount to the European “transfer union” that her coalition opposes.

“I’m still looking for what more we should do,” she told reporters on Jan. 18 “When I have figured that out, I will tell you what it is.”

To contact the reporter on this story: Tony Czuczka in Berlin at

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


Facebook Trades to Be Halted for Three Days

By Ari Levy, Douglas MacMillan and Lee Spears - Jan 25, 2012 7:28 AM GMT+0700

Shareholders of Facebook Inc., the Internet site preparing an initial public offering, are facing a three-day suspension of trading on secondary markets this week, people with knowledge of the matter said.

While buy and sell orders can be made, transactions won’t be processed by Facebook’s attorneys at Fenwick & West LLC from Jan. 25 to Jan. 27, said the people, who declined to be named because details on secondary transactions are kept private. The halt pertains to trading of Facebook shares only, one of the people said.

Facebook, the largest social-networking site, is considering raising about $10 billion in an IPO that would value the company at more than $100 billion, a person with knowledge of the situation said in November. Companies suspend trading ahead of a filing to make sure that investors can’t buy or sell until all of the information is public, said Sam Hamadeh, chief executive officer of New York-based PrivCo.

“Facebook and companies who do this don’t want to expose themselves to lawsuits related to the fact that some people had it before others and were able to trade on it,” said Hamadeh, whose firm provides research on more than 30,000 private companies. “The best way to protect yourself is to have no one able to trade.”

This week’s halt doesn’t necessarily mean the filing is imminent, the people said.

Private shares can still be traded on secondary markets between the time of the filing and the IPO, though companies are more likely to restrict the transactions closer to the public offering, Hamadeh said.

Rising Valuation

Employees and early stakeholders have been able to sell shares privately using exchanges including SharesPost Inc. and SecondMarket Inc. Buyers are typically institutional investors.

Jonathan Thaw, a spokesman for Menlo Park, California-based Facebook, declined to comment, as did Merredith Branscombe, a spokeswoman for Fenwick & West. Representatives of New York- based SecondMarket, and SharesPost, based in San Bruno, California, declined to comment.

Facebook is valued at $73.4 billion on SharesPost’s website, an estimate that takes into account transaction prices, research estimates and financing round valuations. The last contract listed on SharesPost was completed today at $34.50 a share, or an implied valuation of $82 billion.

To contact the reporters on this story: Douglas Macmillan in New York at; Ari Levy in San Francisco at; Lee Spears in New York at

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


Obama Vows Fight to Restore Broad-Based Prosperity

by Kate Andersen Brower and Catherine Dodge - Jan 25, 2012 7:51 AM GMT+0700

President Barack Obama vowed to restore the promise of broad-based U.S. prosperity and “fight obstruction with action” in dealing with Congress, as he runs for re-election with the economy still struggling to recover from the recession.

Obama’s State of the Union address tonight sets out both his policy priorities and his campaign themes. In excerpts released by the White House, he combines a call to rebuild the U.S. economy on a stronger foundation with a promise to confront critics who stand in the way.

“We can either settle for a country where a shrinking number of people do really well, while a growing number of Americans barely get by,” Obama will say, according to the excerpts. “Or we can restore an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules.”

In the speech, scheduled to begin at 9 p.m. Washington time before a joint session of Congress, the president will lay out what he calls a “blueprint” for revitalizing the economy, emphasizing a rebirth for U.S. manufacturing, bolstering domestic energy production and training workers. He also will call for the wealthiest Americans to pay more taxes.

“What’s at stake are not Democratic values or Republican values, but American values,” Obama will say.

Election Effect

Obama is unlikely to get major legislative initiatives enacted before the November election, which will also decide control of the House and the Senate. He also is constrained by efforts to reduce the nation’s long-term debt. Last year’s deficit of $1.3 trillion was third-highest as a share of the economy since 1945.

Obama said over the weekend that tonight’s address will serve as a “bookend” to one he delivered Dec. 6 in Osawatomie, Kansas, that invoked the populism of President Theodore Roosevelt. Economic inequality has left millions of Americans feeling that “the basic bargain that made this country great has eroded,” he said.

As he did then, Obama tonight says renewing the promise of the U.S. as a place where hard work is rewarded is “the defining issue of our time.”

Buffett Rule

Obama will “lay out some specifics” on the so-called Buffett rule -- named for billionaire investor Warren Buffett -- which would require people with incomes of more than $1 million a year to pay at least the same percentage rate in taxes as middle-class households, White House senior adviser David Plouffe said on NBC’s “Today” program. In a New York Times op- ed essay in August, Buffett said that in 2010 he paid a lower tax rate -- 17.4 percent -- than “any of the other 20 people in our office.”

When Obama announced the proposal in September, he said that “Warren Buffett’s secretary shouldn’t pay a higher tax rate than Warren Buffett.” The secretary, Debbie Bosanek, will be a guest at the speech tonight.

House Speaker John Boehner, an Ohio Republican, told reporters today that he expects the speech will be a “rerun of what we’ve heard over the last three years: more spending, higher taxes and more regulation.”

Romney’s Returns

The administration today used the release of tax returns by Republican presidential candidate Mitt Romney to underscore the points Obama will make on taxes and fairness.

Romney’s returns showed he earned $21.6 million in 2010 and paid 13.9 percent of that in income taxes, using the preferential rate on investment income and charitable deductions to pay a smaller share of his earnings than top wage earners typically do.

Plouffe said that the preferential rate on investment income, which is not available to typical wage-earners, was “a good example of the tax reform we need.”

Obama and his wife, Michelle, reported $1.7 million in adjusted gross income in 2010 and paid the top marginal tax rate of 35 percent on most of their earnings, according to tax returns released by the White House last year.

Romney delivered what his campaign called a “pre-buttal” to Obama’s speech while campaigning today in Florida.

Florida Campaigning

With a large sign behind him saying “Obama Isn’t Working,” Romney kept his focus on the incumbent president as he spoke in Tampa at what he said was a gypsum-manufacturing plant that was closed in 2008 because of the economic downturn.

“Do we want a president who will try to explain again why his policies haven’t worked?” Romney asked. “Do we want a president who will keep promising that this time he will get it right? Do we want a president who will keep telling us why he’s right and why we’re all wrong? Or do we want the sense of excitement that comes with a new leader?”

The Republican response to the State of the Union is being delivered by Indiana Governor Mitch Daniels, who will say that Democratic “extremism” has stifled domestic energy development and private sector job growth. He also said the U.S. needs a “dramatically simpler tax system” and fewer regulations.

“It’s not fair and it’s not true for the president to attack Republicans in Congress as obstacles on these questions,” Daniels says in excerpts released by Republican congressional leaders.

To spur manufacturing jobs, Obama has promised to seek new tax proposals that reward companies for bringing jobs home and investing in America. He also pledged to end tax breaks for companies that move jobs overseas. Details are likely to come in the budget he’ll submit to Congress on Feb. 13.

Energy Production

Obama also will devote a section of his speech to U.S. energy production. In a video to supporters over the weekend, he said economic growth can be “fueled by homegrown and alternative energy sources.”

Early in his administration Obama announced a target of reducing oil imports by a third by 2025. Since he took office, U.S. natural gas production averaged 1.89 trillion cubic feet a month through October. That’s 13 percent higher than the average during President George W. Bush’s two terms, according to Energy Department data. Crude oil production is 2 percent higher, the department said.

Last March, he called for new incentives to boost production of oil, natural gas and biofuels, tougher fuel- efficiency standards for vehicles and greater reliance on cleaner sources of energy, including nuclear power.

Signs of Rebound

In talking about the economy, Obama may point to signs of a rebound.

The unemployment rate in December dropped to 8.5 percent, a three-year low, and employers expanded payrolls by 200,000, an indication that the job market is gaining momentum. Employers added 853,000 jobs in the second half of 2011, compared with 782,000 in the first six months. Manufacturing output climbed 0.9 percent, the biggest gain since December 2010, according to Federal Reserve data.

Gross domestic product, the value of all goods and services produced, rose at a 3 percent annual rate in the final three months of 2011 after advancing 1.8 percent in the previous quarter, according to the median forecast of 64 economists surveyed by Bloomberg News before the Commerce Department’s Jan. 27 release.

Obama will leave tomorrow morning for a three-day trip to Iowa, Arizona (BEESAZ), Nevada (STPINV), Colorado and Michigan (MBASMI), all battlegrounds in the election. He’ll use the stops to highlight the main points of his address on manufacturing, energy and education.

Obama’s Guests

The administration has invited more than 20 guests to sit with first lady Michelle Obama at the Capitol. The list includes people representing topics Obama may touch on in his speech, including a teacher, college student, a General Motors Co. plant manager, and a veteran of the war in Iraq.

Also among the guests is Admiral William McRaven, the commander of U.S. special operations, which includes the Navy SEALs who conducted the raid last May that killed Osama bin Laden.

To counter the president, Boehner invited representatives of businesses affected by Obama’s denial of a permit for TransCanada Corp. (TRP)’s Keystone XL pipeline.

Obama’s campaign plans to use social media to spread the messages in his speech. The president plans an online video chat Jan. 30 on the White House page on Google (GOOG) Plus and the website.

To contact the reporters on this story: Kate Andersen Brower in Washington at; Catherine Dodge in Washington at

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