Glencore to Buy Xstrata for $41B in Shares

By Firat Kayakiran and Jesse Riseborough - Feb 7, 2012 6:22 PM GMT+0700

Glencore International Plc, the world’s largest publicly traded commodities supplier, agreed to buy Xstrata Plc (XTA) for about 26 billion pounds ($41 billion) in shares in the biggest mining takeover.

Glencore offered 2.8 new shares for each one in the Zug, Switzerland-based coal exporter, the companies said in a joint statement today. That represents a premium of 17 percent based on Xstrata’s average share price over the past 20 days. Xstrata Chief Executive Officer Mick Davis, 53, will be CEO of the combined group while Glencore CEO Ivan Glasenberg, 55, will be deputy CEO and president.

The plan would create a business with $209 billion in sales, the companies said, combining Glencore’s global trading network for energy, metals and farming products with Xstrata’s coal, copper and zinc mines. The deal has prompted speculation of further mining takeovers as Glasenberg and Davis set up a company to challenge BHP Billiton Ltd. and Rio Tinto Group.

“This looks like it’s going to be a comprehensive new business model,” said Ian Kramer, director of energy and natural resources at KPMG. “I would not be surprised at all if you see this new giant coming in and sweeping up” other companies, Kramer said in an interview at the Mining Indaba in Cape Town.

The offer by Glencore, which already owns 34 percent of Xstrata, values the target at 39.1 billion pounds, the companies said. The premium compares with the 23 percent average paid in 2011 mining deals, according to data compiled by Bloomberg.

Xstrata ‘Undervalued’

Xstrata fell 2.1 percent to 1,234.5 pence at 10:16 a.m. in London. Glencore gained 0.6 percent to 463.7 pence. The merger values each Xstrata share at 1,290.10 pence.

At least two shareholders said they oppose the deal.

“The proposed exchange ratio clearly undervalues Xstrata’s assets and future earnings contribution,” David Cumming, Standard Life Investment’s head of equities, said in e-mailed comments. “It is our intention to vote against the deal unless the merger terms for Xstrata are materially improved.”

Schroders Plc said its head of U.K. equities Richard Buxton intends to vote against the deal, according to e-mailed comments from spokeswoman Estelle Bibby.

Glencore, which held a $10 billion initial public offering in London in May, and Xstrata have been talking about a merger for five years, Glasenberg said in a telephone interview today. “Since the IPO, we’ve been talking every few weeks,” he said. Davis said the companies have discussed the transaction “for many years.”

‘Merger of Equals’

The combination is “a merger of equals,” the companies said in their statement. It is expected to close in the third quarter of this year, Davis said on a conference call, after approvals from shareholders and antitrust regulators in countries including South Africa and China.

Synergies from the transaction will deliver annual gains of $500 million to $600 million, he said.

“This would mainly come from putting Xstrata production into Glencore’s marketing and trading system,” Davis said. “This would create such a different animal in the space with huge flexibility and optionality to get value from exploration to delivery of product,” he said in an interview. “No company has that capability.”

Xstrata shareholders other than Baar, Switzerland-based Glencore will hold 45 percent in the combined entity, to be known as Glencore Xstrata International Plc and listed in London and Hong Kong, the companies said. Its headquarters will be in Switzerland. Glencore has agreed to pay Xstrata a so-called break fee of 298 million pounds should it withdraw its offer.

John Bond

Xstrata Chief Financial Officer Trevor Reid will fill the role for the new company, with Glencore CFO Steven Kalmin as his deputy. Xstrata non-executive Chairman John Bond will be nominated for the same post in the combined company. The board will include Davis, Glasenberg and a further four non-executive directors from each company.

The combination forms a $90 billion natural resources group, fully integrated from mining, processing, storage, freight and logistics to marketing and sales, the companies said. The combined group will have operations and projects in 33 countries with 101 mines and more than 50 metallurgical facilities. It will have about 130,000 workers.

Marc Rich

Glencore was founded in 1974 as Marc Rich & Co. by the former fugitive U.S. financier. The company, which changed its name in 1994 after management bought out Rich, ended more than three decades of operating as a closely held partnership with its May IPO.

The copper-to-cotton trader owns mines, plants, ports and warehouses and employs 2,800 people at marketing units in 40 nations and about 54,800 at industrial units in more than 30 countries. Its oil shipping fleet comprises 203 vessels, according to a 2010 sustainability report that describes Glencore as among the world’s leading suppliers of sugar.

Glencore today said net income before exceptional items rose 7 percent to $4.1 billion in 2011. It expects to declare a final dividend of 10 cents a share, the company said in a statement on its website.

“2012 has started well across all areas of our business,” Glasenberg said. “Much of the market weakness experienced towards the end of the year has reversed and market volumes remain healthy.”

Swiss Roots

The takeover will create the world’s fourth-largest mining company, Glencore said. The trader’s market value has grown to about $50 billion at yesterday’s close from $1.2 billion at the time of its management buyout in 1994, it said.

Xstrata was founded as Sudelektra AG in 1926. The Swiss infrastructure investment company was renamed Xstrata in 1999, and Davis became CEO in 2001.

Since then, Davis has overseen its growth from a company with 2,500 staff and a market value of $500 million to one with 70,000 employees in 20 countries and a value of $58 billion. It is the fourth-biggest copper producer and mines more zinc ore than any other. Xstrata said today 2011 net income before exceptional items rose 12 percent to $5.79 billion after coal and metal prices gained.

Rising commodity demand from developing nations and the deteriorating quality of mineral reserves is spurring producers to combine and boost efficiency. Global mining deals swelled to $98 billion last year, the highest level since 2007, from $76 billion in 2010, according to data compiled by Bloomberg.

Mining Deals

Mining companies may spend $134 billion developing assets this year, up 23 percent from 2010, according to a report last month by Citigroup Inc.

The combination would reunite two groups that separated a decade ago when Xstrata bought Glencore’s Australian and South African coal mines for $2.5 billion and went public in London. It would also unite their two South African CEOs in Davis and Glasenberg, Glencore’s largest shareholder with a 15.7 percent stake.

Glencore is working with Citigroup and Morgan Stanley as financial advisers, while Xstrata has hired Goldman Sachs Group Inc., JPMorgan Chase & Co., Deutsche Bank AG and Nomura Bank International Plc.

The mining industry’s biggest takeover to date is Rio Tinto’s 2007 acquisition of Alcan Inc. for $38 billion. BHP, the largest mining company, withdrew from what would have been the world’s biggest mining deal, a $66 billion offer for Rio, in 2008. BHP has a market value of about 130 billion pounds. while Rio is valued at 77.6 billion pounds.

To contact the reporter on this story: Jesse Riseborough in London at jriseborough@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

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European Stocks Slide for Second Day; Swatch, UBS Decline After Earnings

By Corinne Gretler - Feb 7, 2012 9:11 PM GMT+0700

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Feb. 7 (Bloomberg) -- Scilla Huang Sun, head of equities at Swiss & Global Asset Management, talks about the outlook for luxury-brand stocks and recommendation of LVMH Moet Hennessy Louis Vuitton SA, Swatch Group AG and Cie. Financiere Richemont SA. She speaks with Linzie Janis on Bloomberg Television's "Countdown." (Source: Bloomberg)

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Feb. 7 (Bloomberg) -- Adrian van Tiggelen, senior equity strategist at ING Investment Management, talks about the outlook for European stocks, investment strategy and corporate earnings. He speaks from The Hague with Maryam Nemazee on Bloomberg Television's "The Pulse." (Source: Bloomberg)

European stocks declined for a second straight day as Greek talks on measures needed to get a second bailout continued and China said industrial-output growth is likely to slow.

Bayerische Motoren Werke AG (BMW) and Rio Tinto Group led carmakers and mining companies lower. LVMH Moet Hennessy Louis Vuitton SA (MC) lost 3.5 percent after three Bulgari directors sold a 558 million-euro ($733 million) stake. Swatch Group AG (UHR), the world’s biggest watchmaker, sank 4.9 percent as profit trailed projections. ArcelorMittal and Yara International ASA (YAR) rose more than 1.5 percent after reporting earnings.

The Stoxx Europe 600 Index declined 0.6 percent to 262.57 at 2:09 p.m. in London. The gauge has still advanced 7.4 percent this year amid optimism that the euro area will contain its sovereign-debt crisis and that the economic recovery in the U.S. remains intact.

“The Greek tragedy dominates the headlines,” Viola Stork, an analyst at Helaba Landesbank Hessen-Thueringen in Frankfurt, wrote in a report today. “Unsuccessful consultations between the local government and the parties on the necessary austerity measures cause increasing fear of a default.”

Greek Talks

Greek Prime Minister Lucas Papademos is convening the nation’s political leaders to seek consensus on the cuts required for another European Union-led bailout. Officials are working on the final draft of the document listing the budget and structural measures required to receive international funding, a government official said.

They have already agreed to make further cuts this year equal to 1.5 percent of gross domestic product, but have yet to decide how to recapitalize banks, ensure the viability of pension funds and reduce wages to increase the economy’s competitiveness.

China’s industrial output growth will probably slow this quarter as the world economy cools and the euro area’s crisis worsens, the Ministry of Industry and Information Technology said today.

“The global economy is slowing down, Europe’s sovereign- debt crisis is deepening and the downside risks to the world economy are rising with international demand still slack and global commodities and financial markets continuing to be volatile,” the ministry said.

German industrial output unexpectedly dropped the most in three years in December as Europe’s debt crisis weighed on confidence and the global economic slowdown damped demand. Production fell 2.9 percent from November, when it stagnated, the Economy Ministry in Berlin said today. Economists had expected output to remain unchanged, according to the median of 41 forecasts in a Bloomberg News survey.

Automakers Fall

BMW, the world’s biggest maker of luxury cars, slid 2.3 percent to 69.13 euros, snapping a five-day advance, and Renault SA (RNO) retreated 2.7 percent to 36.09 euros. Automakers were the among worst performing groups of 19 industries in the Stoxx 600 today.

Rio Tinto, the world’s third-largest mining company, fell 1.9 percent to 3,869.5 pence and Eurasian Natural Resources Corp. dropped 3.1 percent to 699.5 pence.

LVMH retreated 3.5 percent to 124.15 euros after Paolo Bulgari, Nicola Bulgari and Francesco Trapani sold 4.48 million shares in the world’s largest maker of luxury goods at 124.50 euros apiece.

Swatch declined 4.9 percent to 394.40 Swiss francs after reporting 2011 operating profit of 1.61 billion francs ($1.75 billion), missing the average projection in a Bloomberg survey of 1.67 billion francs. Cie. Financiere Richemont SA, the owner of the Cartier brand, fell 2.9 percent to 53.70 francs.

Burberry, Dior

Luxury shares fell. Burberry Group Plc (BRBY) lost 2.6 percent to 1,408 pence and Christian Dior SA (CDI) slid 3.9 percent to 110 euros. Hermes International (RMS) SCA, the French maker of Birkin bags and silk scarves, dropped 3.2 percent to 267.90 euros.

Xstrata Plc (XTA), the largest exporter of power-station coal, retreated 3.4 percent to 1,219 pence. Glencore International Plc slipped 2.6 percent to 448.9 pence after it agreed to buy the company for 39.1 billion pounds ($62 billion) in the biggest mining takeover.

Standard Life Investments Ltd. said it plans to vote against the proposed merger, as it “clearly undervalues Xstrata’s assets and future earnings contribution,” according to David Cumming, head of equities at Standard Life.

Xstrata reported 2011 earnings before interest, taxes, depreciation and amortization of $11.6 billion, up from $10.4 billion a year earlier. That trailed the $11.5 billion median estimate of analysts surveyed by Bloomberg.

Lagardere Falls

Lagardere SCA (MMB) sank 5.6 percent to 21.86 euros, the largest decline in three months. The publisher said it will record losses of about 900 million euros to reflect the lower value of its sports-marketing and pay-television units.

ArcelorMittal (MT), the world’s biggest steelmaker, gained 2.6 percent to 16.58 euros after reporting fourth-quarter Earnings before interest, taxes, depreciation and amortization of $1.71 billion, beating the average analyst estimate of $1.68 billion. The company also forecast that first-half earnings will exceed the previous six months.

Yara International rose 1.8 percent to 262.10 kroner. The largest maker of nitrogen fertilizers posted fourth-quarter net income of 3.39 billion kroner ($584 million), topping the average analyst estimate of 2.98 billion kroner.

Novo Nordisk A/S, the world’s biggest insulin maker, increased 2.3 percent to 753 kroner, its highest price since at least 1991, and Shire Plc (SHP) jumped 3.6 percent to 2,206 pence. Keyur Parekh, an analyst at Goldman Sachs Group Inc., said the two companies are among the best positioned stocks in pharmaceuticals.

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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U.S. Stocks Decline as Greece Confers

By Rita Nazareth - Feb 7, 2012 9:31 PM GMT+0700

U.S. stocks fell, sending the Standard & Poor’s 500 Index lower for a second straight day, as Greece held talks to secure rescue funds.

The S&P 500 lost 0.2 percent to 1,342.16 at 9:30 a.m. New York time.

“The rest of Europe is running out of patience with the Greeks,” said Morten Kongshaug, the chief strategist at Danske Bank in Copenhagen. “A Greek default will cause a correction of 5 to 10 percent in equities in Europe and perhaps less than half of that in the U.S., but it won’t be more.”

Greek Prime Minister Lucas Papademos plans to convene the nation’s political leaders to seek consensus on the cuts required for a bailout. Greek officials are working on the final draft of the document listing the budget and structural measures required to receive international funding, a government official said. China’s industrial output growth is likely to slow this quarter, the government said. Federal Reserve Chairman Ben S. Bernanke speaks on the state of the U.S. economy.

Equities fell yesterday, following a five-week advance for the S&P 500, amid concern about Europe’s debt crisis as Greek leaders wrestled with spending cuts to get aid and avert a default. Trading volume on U.S. exchanges yesterday accounted for about 5.9 billion shares, the lowest this year.

Set the Stage

A retreat in U.S. stocks will set the stage for the S&P 500 to approach 1,370, the level where the current bull market ran out of steam last year, according to analysts who study charts to predict market moves.

The benchmark index for U.S. equities slipped less than 0.1 percent to 1,344.33 yesterday on concern over Europe’s debt crisis as German Chancellor Angela Merkel said time was running out for Greece to accept conditions for a bailout. The S&P 500 had gained for five weeks, the longest streak in a year, sending its 14-day relative strength index, which measures the degree that gains and losses outpace each other, to the highest level since February 2011, according to data compiled by Bloomberg.

“We need to pause, rest, consolidate in order to stay healthy,” Carter Worth, New York-based chief market technician at Oppenheimer & Co., wrote in a note yesterday. “Any such consolidation would cure the market from a tad unhealthy right back to very healthy, and would be the perfect ‘setup’ for a breakout-type move to new 52-week highs.”

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

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

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UBS Profit Drops 76% on Investment Bank Loss

By Elena Logutenkova - Feb 7, 2012 9:44 PM GMT+0700
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A pedestrian looks at stock tickers in a window at the UBS AG headquarters on Paradeplatz in Zurich, Switzerland. Photographer: Adrian Moser/Bloomberg

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Feb. 7 (Bloomberg) -- Ralph Silva, a strategist at Silva Research Network, talks about UBS AG's fourth-quarter profit reported today and the prospect of further cost cuts. Silva also discusses banking industry bonuses with Linzie Janis on Bloomberg Television's "Countdown." (Source: Bloomberg)

UBS AG (UBSN), Switzerland’s biggest bank, said fourth-quarter profit dropped 76 percent after its investment bank reported a second consecutive quarterly loss.

Net income fell to 393 million Swiss francs ($427 million) from 1.66 billion francs in the year-earlier period, the Zurich- based bank said in a statement today. Earnings missed the 721 million-franc average estimate of eight analysts surveyed by Bloomberg over the past four weeks.

Chief Executive Officer Sergio Ermotti, who took over from Oswald Gruebel following the discovery of a $2.3 billion loss from unauthorized trading in September, is shrinking the investment bank as stricter capital requirements and the European sovereign debt crisis erode profitability. The bank said concerns about the crisis and the global economic outlook are “likely” to weigh on revenues this quarter as well.

“They basically gave a profit warning for the first quarter,” said Dirk Becker, a Frankfurt-based analyst at Kepler Capital Markets, who has a “reduce” rating on UBS. “I don’t see how the bank can come out of the strategic dilemma of not having enough revenues to sustain staff at the investment bank.”

Cash Dividend

UBS fell as much as 2.7 percent, and was 18 centimes, or 1.4 percent, lower at 13.03 francs by 2:51 p.m. in Zurich, trimming its gain this year to 17 percent. That compares with an 18 percent increase in the 43-company Bloomberg Europe Banks and Financial Services Index in 2012 and a 13 percent gain at Credit Suisse Group AG.

UBS reiterated plans for a dividend of 10 centimes a share for 2011, its first cash payout since 2006.

Pretax profit at the wealth management unit rose 2 percent to 471 million francs from a year earlier, while wealth management Americas swung to a profit of 114 million francs from a loss of 32 million francs. The two units reported net new money of 5 billion francs for the quarter. Earnings at the retail and corporate unit gained 6.5 percent to 412 million francs, while asset management posted a 20 percent decline in profit to 118 million francs. The investment bank had a pretax loss of 256 million francs.

“Traditional improvements in first quarter activity levels and trading volumes may fail to materialize fully, which would weigh on overall results for the coming quarter, most notably in the investment bank,” Ermotti and Chairman Kaspar Villiger said in a letter to shareholders today.

Deutsche Bank

Revenue at the investment bank slumped 36 percent to 1.8 billion francs from the year-earlier period, while operating expenses declined 4.4 percent to 1.99 billion francs.

Deutsche Bank AG, Germany’s biggest bank, last week said fourth-quarter profit dropped 76 percent as its investment bank posted a 422 million-euro ($554 million) pretax loss. Credit Suisse, which reports earnings on Feb. 9, may say profit fell 53 percent to 396 million francs in the quarter, according to the mean estimate of nine analysts surveyed by Bloomberg, who also forecast a loss at the securities unit.

UBS intends to reduce risk-weighted assets at the investment bank, run by 44-year-old Carsten Kengeter, by 145 billion francs from 300 billion francs by 2016, under Basel III rules. The company reduced risk-weighted assets by about 20 billion francs in the fourth quarter, while the investment bank cut assets by about 26 billion francs, it said.

Management Change

The bank lowered its profitability target in November to a return on equity of between 12 percent and 17 percent starting in 2013, compared with a previous goal of 15 percent to 20 percent. UBS’s return on equity in 2011 was 8.6 percent.

The shift in strategy coincides with another round of management upheaval at UBS, which was ravaged by more than $57 billion of credit-related losses during the financial crisis of 2008. Ermotti, 51, who joined UBS in April, became CEO after the departure of Gruebel, 68. Villiger, 71, is leaving in 2012, a year earlier than planned, to make way for former Bundesbank President Axel Weber, 54, in the chairman role.

Since Ermotti took over, the co-heads of the equities unit, Francois Gouws and Yassine Bouhara, left, as did Chief Risk Officer Maureen Miskovic, who was at UBS for less than a year.

Kweku Adoboli, the former employee accused of causing the trading loss, pleaded not guilty to fraud and false accounting last week and was denied bail while he awaits a trial in early September. The U.K. and Swiss finance regulators also said last week that they have begun formal enforcement actions against UBS over the risk-management processes at its investment bank.

Bonuses Slashed

UBS cut the 2011 bonus pool, including pay deferred into future years, by 40 percent to 2.57 billion francs from 4.25 billion francs for 2010, the bank said. About 707 million francs of the pool is earmarked to be deferred.

Variable compensation at the investment bank is being reduced 60 percent, Chief Financial Officer Tom Naratil said. Investment-banking chief Kengeter volunteered to waive any variable pay entitlement, according to Ermotti.

UBS announced plans last year to cut about 3,500 jobs to help reduce annual costs by 2 billion francs by the end of 2013. That program is “on track,” Ermotti said today. UBS would trim costs further if market conditions don’t improve, he said.

“We must focus on strategic changes which go to the heart of our organizational design and structure,” Ermotti said at a press conference in Zurich. “Consistently improving efficiency has to become part of our corporate DNA. And we are working on the next phase, which will reshape our cost base in the years to come.”

UBS’s outlook is “realistic” rather than “negative,” Ermotti said, and the bank is prepared to take advantage of the situation should markets improve.

To contact the reporter on this story: Elena Logutenkova in Zurich at elogutenkova@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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Papademos Seeks Greek Consensus on Cuts

By Maria Petrakis, Marcus Bensasson and Natalie Weeks - Feb 7, 2012 6:31 PM GMT+0700

Greek Prime Minister Lucas Papademos plans to convene the nation’s political leaders to seek consensus on the cuts required for a bailout as unions called a strike to protest and European leaders pressed for answers.

While Papademos and the party chiefs have agreed to make further cuts this year equal to 1.5 percent of gross domestic product, they have yet to close gaps over measures demanded by creditors for a 130 billion-euro ($171 billion) rescue. German Chancellor Angela Merkel said “time is running out,” while unions derided the conditions as “blackmail.”

“It is clear we are going into another drama for Greece with many questions unanswered,” Patrick Legland, head of research at Societe Generale SA, told Bloomberg Television today. “It’s kind of a catch-22 where they have to reduce their deficit but there is no growth. It’s very tricky.”

At stake is whether Greece wins the bailout, secures a debt writeoff with private creditors and remains in the euro region. Finance Minister Evangelos Venizelos told reporters late yesterday that “failure of these talks, failure of the plan, the country’s bankruptcy, means even greater sacrifice.”

The euro fell 0.1 percent to $1.3123 as of 1:05 p.m. in Athens as investors await the outcome of the Greek talks. The Stoxx Europe 600 Index slipped 0.5 percent and the Euro Stoxx 50 also dropped 0.5 percent.

Bill Auction

The country raised 812.5 million euros in a sale of 26-week Treasury bills today, a sale held a week earlier than usually scheduled to allow for the rollover of 26-week bills due on the Feb. 10. The yield fell to 4.86 percent from 4.9 percent in the last sale of such bills on Jan. 10

Short-term debt sales are the only source of market financing available for the nation. Bonds repayable in 2022 are worth about a third of their face value.

Greek political leaders have yet to resolve issues from recapitalizing banks, ensuring the viability of pension funds and reducing wages and non-wage costs to boost competitiveness. Greece still needs to agree on 600 million euros of fiscal measures for 2012, a government official told reporters in Athens yesterday. Meantime, unions called their first general strike of the year.

Papademos met overnight with representatives from the European Commission, the European Central Bank and the International Monetary Fund to continue talks on possible spending cuts.

‘Great Sacrifices’

“The salvation of the country, remaining in the euro, means great sacrifices,” Venizelos told reporters in Athens late yesterday after his meeting with the so-called troika of representatives. He described the talks in Athens as a “Hydra’s head,” a reference to the monster in Greek mythology that grew back more heads than the one cut off.

Venizelos met again today with the officials ahead of the meeting of political leaders. Papademos hasn’t yet set a time for the meeting with leaders.

With the country set to pay a 14.5 billion-euro bond due on March 20, Merkel said in Paris that “I can’t quite understand why we need a few more days.” French President Nicolas Sarkozy said there could be no funds without reforms. Allowing Greece to go bankrupt “isn’t an option,” he said.

Greece’s efforts to win a second bailout from the troika have hung in the balance over the past four days as negotiations in Athens failed to clinch an agreement on measures demanded by lenders, which could include a cut in the minimum wage, lower pensions and immediate layoffs for state employees.

Bailout Package

Citigroup Inc. raised the probability that Greece will be forced to leave the euro area in the next 18 months to 50 percent from 25 percent to 30 percent previously.

“To remain in the euro area, the Greek government needs to exhibit a minimum degree of compliance with the fiscal and structural conditions of the bail-out program,” the firm’s chief economist, Willem Buiter, said in an e-mailed note. “The hurdles for Greece set by euro area negotiators to receive the second bail-out are high.”

Adding to pressure on Papademos and political leaders, the biggest public-sector and private-sector union groups, ADEDY and GSEE, held a 24-hour general strike today, shutting down government services, courts, schools and ferry services. Dockworkers and bank employees also walked off the job while a walkout by culture ministry workers forced the closure of museums and other tourist attractions.

‘Cynical Blackmail’

“What is taking place isn’t a negotiation,” GSEE president Yannis Panagopoulos said in an e-mailed statement. “It’s raw, cynical blackmail against a whole people.”

Police estimated the number of protesters who marched through rain to Parliament House in the center of the city at about 10,000. No violence was reported.

Administration Minister Dimitris Reppas said the troika asked for 15,000 state jobs to be cut this year, part of plans by Greece to gradually phase out 150,000 employees by the end of 2015. He told Athens-based Mega TV he was opposed to “blind firings.”

The troika argues that lower wage costs is among reforms necessary to boost competitiveness in the country. Those opposed say the cuts would deepen the country’s recession, now in its fifth year.

Antonis Samaras, the head of the second-biggest party, New Democracy, has indicated he will oppose measures that will deepen the country’s downturn.

Guarantees Sought

Guarantees from Greek political leaders such as Samaras, who leads in opinion polls, are key to securing the funds from the EU and IMF. International lenders want assurances that whoever wins the next election will stick to pledges made now to receive financing.

The rescue blueprint includes a loss of more than 70 percent for bondholders in a voluntary debt exchange that will slice 100 billion euros off 200 billion euros of privately-held Greek debt and loans that will probably exceed the 130 billion euros now on the table. A formal offer for the debt swap must be made by Feb. 13 to allow all procedures to be completed before the March 20 bond comes due.

Creditors are prepared to accept an average coupon of as low as 3.6 percent on new 30-year bonds in the exchange, said a person familiar with the talks, who declined to be identified because a final deal hasn’t been struck yet.

Greece has lagged behind budget targets set when it won an initial, taxpayer-funded rescue of 110 billion euros in May 2010, prompting euro-area threats to cut off aid. The country’s economy shrank 6 percent last year, according to the most recent IMF estimates, the budget deficit is still close to 10 percent of GDP and unemployment is about 18 percent.

To contact the reporters on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net; Marcus Bensasson in Athens at mbensasson@bloomberg.net; Natalie Weeks in Athens at nweeks2@bloomberg.net

To contact the editors responsible for this story: James Hertling at jhertling@bloomberg.net; Stephen Foxwell at sfoxwell@bloomberg.net

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Farmers Plan Biggest Crops Since 1984

By Jeff Wilson and Whitney McFerron - Feb 7, 2012 5:09 PM GMT+0700

U.S. farmers will plant the most acres in a generation this year, led by the biggest corn crop since World War II, taking advantage of the highest agricultural prices in at least four decades.

They will sow corn, soybeans and wheat on 226.9 million acres, the most since 1984, a Bloomberg survey of 36 farmers, bankers and analysts showed. The 2.5 percent gain means an expansion the size of New Jersey, as growers target fields left fallow last year and land freed up from conservation programs.

Crop prices, some of which reached the highest averages ever in 2011, bolstered the economies of Midwest growing states, sent net farm income up 28 percent to $100.9 billion and pushed the value of farmland to a record $2,350 an acre, the U.S. Department of Agriculture estimates. Global food costs are down 11 percent from a peak a year ago as grain output rises from China to Canada, United Nations data show.

“There is unlikely to be any ground that won’t be planted this year,” said Todd Wachtel, a 40 year-old who farms about 5,700 acres in Altamont, Illinois, and plans to expand his corn fields by 21 percent when seeding begins in early April. “Farmers know that they have to plant more when prices are high because they may not last.”

Production Forecast

A bigger harvest in the U.S., the world’s largest exporter of all three crops, will help compensate for shortages in the current crop year. Drought damage in Brazil and Argentina will probably spur the USDA to cut its global and U.S. grain-supply forecasts for the current season on Feb. 9, a separate Bloomberg survey of as many as 25 analysts showed. The USDA’s first forecast for the year 2012-2013 crop year will be Feb. 23.

Farmers will sow corn, used to feed livestock and make ethanol, on 94.329 million acres this year, up 2.6 percent from last year and the most since 1944, according to the Bloomberg survey. Soybean fields may expand 0.4 percent to 75.309 million acres, the fifth-most ever. Both crops are harvested after the current season ends on Aug. 31. Wheat in the season that begins June 1 will reach a three-year high of 57.233 million acres, up 5.2 percent, the survey showed.

Corn may rise 7.1 percent to $6.90 a bushel in six months because of the damage in South America, before dropping to $5.25 in a year as U.S. farmers increase supply, Goldman Sachs Group Inc. said in a Feb. 2 report. Corn for delivery in December, after the harvest, fell 0.1 percent to $5.8075 today, 9.9 percent below the March contract on the Chicago Board of Trade.

Foresight Commodities

Wheat may tumble 18 percent to $5.50 by July and soybeans may drop 17 percent to $10.20 a bushel, analysts at commodity broker Allendale Inc. in McHenry, Illinois, said Jan. 21.

“The area is available to have huge crops this year,” said Paul Meyers, a vice president at Foresight Commodities Services Inc. in Long Valley, New Jersey, and the former head of grain-market analysis at the USDA from 1974 to 1983. “We are headed for a surplus-supply situation.”

Corn, soybean and wheat futures are down at least 15 percent since the end of August, helping to send the Standard & Poor’s GSCI Agriculture Index to a 16 percent decline. The MSCI All-Country World Index of equities gained 4.7 percent during the period, touching a six-month high Feb. 3, while Treasuries returned 2.5 percent, a Bank of America Corp. index shows.

World food prices fell to a 14-month low in December, led by declines in grains, sugar and oilseeds, the UN’s Food and Agriculture Organization said Jan. 12.

Monetary Fund

The USDA affirmed its forecast for moderating food costs last month. Prices will increase 2.5 percent to 3.5 percent in 2012, below last year’s 3.7 percent gain, the agency said Jan. 25. The same day, the International Monetary Fund forecast a 14 percent drop in non-oil commodities this year, citing more supply.

Farmers in the Midwest, the main growing region, are less than two months away from planting seeds, and dry soils in some areas could limit output. The most widely-held option on December corn futures gives the holder the right to buy the grain at $7.

“It’s been an abnormally warm winter,” said Alan Tiemann, who is preparing to expand corn planting on his 2,000-acre farm in Seward, Nebraska, by 15 percent. “That may not relate to what’s going to happen this summer, but it keeps you on the edge of your seat a little bit, wondering when the next moisture event is going to happen.”

Corn averaged $6.79 in Chicago last year, the highest ever and twice the level of the previous decade, exchange data show. Soybeans averaged a record $13.21, 72 percent above the 10 previous years, while wheat’s average of $7.235 was the second- highest ever and 57 percent more than the past decade.

Trading Commission

Money managers have been betting on lower wheat prices since September, U.S. Commodity Futures Trading Commission data show. They cut their bullish wagers on soybean and corn in two of the past three weeks.

Floods, drought and freezes last year prevented planting of the three crops on about 8.577 million acres, 28 percent more than in 2010, USDA data show. An additional 1.84 million acres that were planted failed to produce, more than double the amount a year earlier.

Crop insurers paid out a record $9.1 billion last year to cover the damage, and the bill may top $10 billion when all claims are settled, Overland Park, Kansas-based National Crop Insurance Services said Jan. 24.

A return to normal weather in 2012 would mean more production from last year’s lost acres. The government also has reduced the amount of land it pays farmers to leave fallow by 4.7 percent, adding 1.47 million acres that weren’t available in 2011, USDA data show.

Rising incomes allowed farmers to buy more land and the extra seed, crop chemicals and equipment needed.

Profitable Industries

“Grain farming has been one of few profitable industries for the past three years, and there will be a tendency for farmers around the world to maximize acreage,” said Don Roose, the president of U.S. Commodities Inc. in West Des Moines, Iowa, who has been advising farmers and grain elevators since 1979. “We have the potential to grow record world crops this year that can swamp demand.”

Deere & Co., the world’s largest farm-equipment maker, will report record net income of $3.14 billion this year, up from $2.8 billion a year earlier, the mean of eight analyst estimates compiled by Bloomberg shows. Shares of the Moline, Illinois- based company rose 14 percent this year. Monsanto Co., the biggest seed company, will earn $1.9 billion, up from $1.61 billion, the mean of seven estimates shows. The St. Louis-based company rose 14 percent in New York trading this year.

Farming Accounts

Land prices in Iowa, the biggest corn- and soybean-growing state, averaged $5,600 an acre last year, three times the amount a decade ago, USDA data show.

While farming accounts for 0.9 percent of the U.S. economy, it has been among the fastest-growing contributors. The amount of value added by agriculture in the four years through 2010 rose 42 percent to $132.6 billion, compared with 8.6 percent growth for the entire economy, government data show.

U.S. exports surged as global economic growth boosted demand for crops, meat and dairy products, while weather damage disrupted supplies of everything from Russian wheat to Chinese pork.

Shipments reached a record $137.4 billion in the year that ended Sept. 30, with China the largest farm-goods buyer, USDA data show. While the government expects a drop to $132 billion in the current fiscal year, that still would be the second- largest ever and 21 percent higher than when President Barack Obama set a goal in 2010 to double all U.S. exports by 2015.

U.S. Unemployment

Unemployment in Midwest states was 7.9 percent in December, tied with the Northeast as the healthiest job region. North Dakota, Nebraska and South Dakota were the only states with unemployment under 5 percent. The national rate fell to 8.3 percent in January from 8.5 percent in December.

Corn will lead the planting surge because it is the most profitable row crop. U.S. mandates for alternative fuels have led to an increased use of the grain to make ethanol, and rising worldwide incomes are boosting meat consumption, increasing requirements for livestock feed. Global production of beef, veal, pork, chicken and turkey will reach almost a quarter of a billion metric tons this year, 62 percent more than two decades ago, the USDA estimates.

An acre of corn will earn as much $150 more than soybeans at current prices and normal weather, said Mike Wagler, 30, who farms about 7,000 acres with his father in Montgomery, Indiana.

“Farmers have the capital to plant a big corn crop this year,” said Wagler, who plans to sow 85 percent of his family’s land with the grain compared with 70 percent last year. “We can make more money raising corn than soybeans.”

North Dakota

In North Dakota, the largest producer of spring wheat, farmers probably will plant record corn and soybean acres this year as they use most of the 5.6 million acres that couldn’t be planted in 2011, said Frayne Olson, an agriculture economist at North Dakota State University in Fargo. Spring-wheat acreage will remain steady, he said.

David Kopseng, a fourth-generation grower on 4,700 acres in Harvey, North Dakota, said he will boost corn planting by 17 percent to 1,400 acres from a year earlier. in 2006, he didn’t sow any of the grain. Improved seeds have boosted yield by about 40 percent in the past decade, making corn at least $50 more profitable than wheat or soybeans, he said.

“We’re going to plant the most corn acres ever,” said the 47-year-old Kopseng. “I’ve been buying some more land and renting more because of corn’s profitability. It’s a great time to be a farmer in North Dakota.”

To contact the reporters on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net; Whitney McFerron in Chicago at wmcferron1@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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HTC Drops on Weak Guidance, Stiff Competition

By Tim Culpan - Feb 7, 2012 11:06 AM GMT+0700

HTC Corp., Asia’s second-largest smartphone maker, fell the most in two months in Taipei trading after forecasting first-quarter revenue that missed analyst estimates as it faces tougher competition in the U.S.

HTC dropped as much as its 6.9 percent daily limit, the most on an intraday basis since Dec. 5, and traded 6.5 percent lower at NT$515 as of 11:31 a.m. in Taipei. Trading volume was double the three-month daily average. Sales this quarter will be NT$65 billion ($2.2 billion) to NT$70 billion, the Taoyuan-based company said yesterday. That’s the lowest since the second quarter of 2010 and below the NT$84.9 billion average of 14 analyst estimates.

Competition from Apple Inc. (AAPL)’s iPhone and Samsung Electronics Co.’s Galaxy models damped demand for HTC devices in the U.S., while sales of faster LTE fourth-generation models didn’t meet expectations, Chief Financial Officer Winston Yung said yesterday. New models will be released next quarter, prompting the weak guidance this period as the company awaits “product transition,” Yung said.

“HTC is likely to lose further economies of scale in manufacturing in 2012 and 2013, as we forecast its shipments for 2012 to decline further to one-third of those of Samsung and Apple, down from half for 2011,” Alex Chang, an analyst at Daiwa Capital Markets in Taipei, wrote in a report today. Daiwa downgraded the stock to “sell” from “hold” and lowered the six-month target price to NT$333.

IPhone 4S

HTC became the largest smartphone maker in the U.S. during the third quarter as consumers awaited the next iPhone model, according to data from researcher Canalys. HTC cut its fourth-quarter sales outlook on Nov. 23 by more than 20 percent, citing competition from the iPhone 4S, which went on sale in October.

Thirteen of 35 analysts tracked by Bloomberg now recommend investors sell the stock, with eight saying “buy” and 14 advising to “hold.”

HTC will release new models at the Mobile World Congress to be held in Barcelona, Spain, from Feb. 27 while Samsung won’t announce its newest Galaxy S3 at the show, Yolanda Wang, a Taipei-based analyst at HSBC Holdings Plc, wrote in a report. She maintained her “underweight” rating on the stock and cut her price estimate 6 percent to NT$386.

“We expect the new model announcements at the MWC will drive HTC’s share price in the near term,” Wang wrote. “However, we expect the rebound will be short-lived given the competition from both high-end and lowend.”

The shares, which have risen 4 percent this year, dropped 42 percent in 2011 and are down more than 58 percent from their April peak.

To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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Asian Stocks Swing Between Gains, Losses as Greece Debt Weighs on Outlook

By Sarah Jones - Feb 7, 2012 12:05 PM GMT+0700

Asian stocks swung between gains and losses, with the regional benchmark index trading near a five month high, as investors await the outcome of Greek bailout talks amid warnings Europe’s crisis threatens global demand.

Chinese stocks dropped the most in eight weeks as the Ministry of Industry and Information Technology said the world’s second-largest economy faces more uncertainty at home and abroad. National Australia Bank Ltd. fell after reporting earnings. Japan Tobacco Inc. paced advancing shares after the company raised its earnings forecast.

The MSCI Asia Pacific Index slid 0.1 percent to 124.76 at 2 p.m. in Tokyo after falling as much as 0.2 percent and rising as much as 0.3 percent earlier. Hong Kong’s Hang Seng Index lost 0.2 percent and Japan’s Nikkei 225 Stock Average fell 0.5 percent. The broader Topix Index was little changed.

“Things aren’t great but it’s getting better,” said Angus Gluskie, who oversees about $350 million as managing director at White Funds Management in Sydney. “Investors have been very pessimistic about Europe and we are starting to see some small incremental positives. Greece is reasonably critical for the market, at this stage we all think they will come up with some sort of agreement.”

In Australia, the S&P/ASX 200 Index fell 0.4 percent after the nation’s central bank unexpectedly kept its benchmark interest rate unchanged. South Korea’s Kospi Index climbed 0.1 percent today.

Greek Prime Minister Lucas Papademos began a second round of negotiations with international creditors in Athens to stave off default as political leaders waver on budget measures. The country still needs to detail 600 million euros ($787 million) of fiscal measures for 2012, a government official said in Athens yesterday.

China Growth Threat

In China, SAIC Motor Corp. fell 1.4 percent to 15.03 yuan after the nation’s largest carmaker said sales declined last month by 8.5 percent.

Shanghai’s Composite Index fell 1.9 percent, the most since Dec. 15, as Zhu Hongren, spokesman for the Ministry of Industry and Information Technology, told a press briefing in Beijing that China’s industrial output growth is likely to slow.

“The global economy is slowing down, Europe’s sovereign debt crisis is deepening and the downside risks to the world economy are rising with international demand still slack and global commodities and financial markets continuing to be volatile,” the ministry said in a statement issued before today’s briefing.

The comments come a day after the International Monetary Fund estimated China’s economic expansion could slow by 4 percentage points from the fund’s current projection of 8.2 percent this year should Europe’s crisis worsen.

Copper, Banks

Jiangxi Copper Co. declined 2.2 percent to HK$20.25, leading commodity producers lower as copper retreated on the London Metal Exchange.

Elsewhere, National Australia Bank Ltd. lost 3.7 percent to A$23.28 after Chief Executive Officer Cameron Clyne said earnings were hurt by lower lending margins and a jump in bad debts in the U.K. The bank today reported cash profit for the three months ended Dec. 31 of A$1.4 billion ($1.5 billion). That’s up 7.7 percent from a year earlier.

Japan Tobacco gained 5.2 percent to 405,500 yen in Tokyo after the company raised its annual profit forecast as sales recovered faster than expected after the March earthquake. Full- year revenue is expected to rise 4.4 percent.

Japanese shipping companies also advanced after the Baltic Dry Index, a gauge of cargo rates, climbed for the first time since Dec. 12. Kawasaki Kisen Kaisha Ltd. advanced 1.3 percent to 157 yen, Nippon Yusen K.K. increased 0.9 percent to 215 yen and Mitsui O.S.K. Lines Ltd. gained 2.2 percent to 329 yen.

Cochlear Ltd. jumped 7.5 percent to A$62.49 in Sydney after the maker of the world’s top-selling ear implant reported a first-half loss of A$20.4 million, smaller than analyst estimates.

To contact the reporter on this story: Sarah Jones in Sydney at sjones35@bloomberg.net

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

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California Pension Fund to Engage With Facebook on Governance

By Douglas MacMillan - Feb 7, 2012 12:01 PM GMT+0700

Facebook Inc., the social-networking company planning an initial public offering, faces corporate- governance scrutiny from one of its investors, the California State Teachers’ Retirement System.

“We are in fact in the beginning stages of engagement with Facebook” over governance issues, Ricardo Duran, a spokesman for the pension fund, said in an interview. “We are planning to send them a letter.”

Facebook Chief Executive Officer Mark Zuckerberg controls 56.9 percent of voting power at the social network, which filed last week to raise $5 billion in an IPO. Corporate-governance experts have said that the CEO’s majority control puts too much power in the hands of one person.

Calstrs, the second-largest U.S. pension, has a history of pushing for changes at companies. It lobbied last year to get corporations to disclose their political donations. In 2009, the pension sent a letter to 300 of its largest portfolio companies asking them to let shareholders have an advisory vote on executive compensation.

Calstrs is an investor in Facebook through two of its private-equity managers, Duran said.

Zuckerberg owns 28.4 percent of Facebook, the largest single stake in the company, and he extended his voting power by implementing a dual-class stock structure in 2009. Some of his shares have 10 times more voting power than common stock, according to Facebook’s IPO filing. The CEO also gained voting power through agreements with individual stockholders. He owns an “irrevocable proxy” over those shares, Facebook said.

Jonathan Thaw, a spokesman for Menlo Park, California-based Facebook, declined to comment.

Reuters reported earlier that Calstrs has approached Facebook about governance.

To contact the reporter on this story: Douglas MacMillan in San Francisco at dmacmillan3@bloomberg.net

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

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Oracle Wants New Trial Against SAP After Judge Threw Out Verdict

By Karen Gullo - Feb 7, 2012 12:01 PM GMT+0700

Oracle Corp. decided it would rather have a new trial against SAP AG for copyright infringement than accept a judge’s $1 billion reduction in a jury verdict it won against its competitor.

U.S. District Judge Phyllis Hamilton in Oakland, California, threw out a $1.3 billion verdict against SAP in September, calling it “grossly excessive” and not supported by the evidence. SAP, the biggest maker of business-management software, should get a new trial if Oracle rejects her decision to reduce the amount to $272 million, Hamilton said in her ruling.

“Oracle’s objective is to obtain clarification of the law and, if it is right about what the law is and what the evidence supports in this case, to vindicate the verdict of the jury and Oracle’s intellectual property rights as a copyright owner,” Oracle attorney Geoffrey Howard said in a filing yesterday in federal court in Oakland.

In the 2010 trial, Oracle accused SAP’s TomorrowNow software-maintenance unit of making hundreds of thousands of illegal downloads and several thousand copies of Oracle’s software. Oracle said SAP’s aim was to avoid paying licensing fees and to steal customers.

SAP and Redwood City, California-based Oracle, the second- biggest maker of business software, are competitors in the market for programs that businesses use to automate payroll, human resources, accounting and other tasks.

Hypothetical License

SAP, based in Walldorf, Germany, didn’t contest that it was liable for the infringement by TomorrowNow, which it closed in 2008. Jurors based their award on the value of a hypothetical license that SAP would have needed to use Oracle’s software.

Hamilton said there was no evidence that Oracle had ever granted a license that would permit a competitor to use its software to compete for Oracle customers. Oracle can’t recover lost license fees because, without such evidence, any award would be subjective and speculative and not based on objective evidence, she said.

“We are disappointed that Oracle has passed up yet another opportunity to resolve this case,” Jim Dever, an SAP spokesman, said in an e-mail. “We will continue to work to bring this case to a fair and reasonable end.”

The case is Oracle v. SAP, 07-1658, U.S. District Court, Northern District of California (Oakland).

To contact the reporter on this story: Karen Gullo in San Francisco at kgullo@bloomberg.net

To contact the editor responsible for this story: Andrew Dunn at adunn8@bloomberg.net

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DIY Mobile Apps Win Honeywell to Disney

By Rachael King - Feb 7, 2012 12:01 PM GMT+0700

Dongyan Wang, an executive at data- storage provider NetApp Inc. (NTAP), did what peers at some other businesses deem unthinkable: He let the company’s 10,000 employees start making their own mobile applications for work.

Do-it-yourself mobile software can be unreliable or leave a company vulnerable to malware. Wang bet that employee-generated applications would result in a productivity boost and cost reduction that outweighed those risks.

One year later, the effort has resulted in 20 apps, including an employee directory and another that helps provide customer service, Bloomberg Businessweek.com reported today. The apps cost an average of $35,000 to $50,000 to build, compared with hundreds of thousands of dollars or more for programs made with help from conventional business-software makers such as SAP AG and Oracle Corp., Wang said.

“We call it, ‘You cook and we host for you,’” said Wang, senior director of enterprise solutions and the person responsible for mobile apps at Sunnyvale, California-based NetApp. “Both our own team and our users are amazed at how we can get value so quickly.”

A growing number of workers, even those without technical expertise, are building mobile apps for use on the job, a democratization of technology creation spurred by the boom in portable devices, such as Apple Inc. iPads and the smartphones featuring Google Inc.’s Android. That can create tension with information technology managers concerned about network security.

‘Not the Boss of Me’

Even so, rank-and-file employees will build at least a quarter of new business applications by 2014, up from less than 5 percent in 2007, Stamford, Connecticut-based Gartner Inc. predicts.

“The business units are telling IT, ‘You’re not the boss of me anymore,’” said Jeffrey Hammond, principal analyst at Cambridge, Massachusetts-based Forrester Research Inc.

The DIY app trend is fueling demand for services provided by such companies as Taptera, Mobile Roadie and Socialize Inc.’s AppMakr, which can make it easier and cheaper to build mobile apps. They’re part of a market for mobile-application development that generated $20.5 billion in revenue in 2011, and the figure may rise to $100 billion in 2015, according to a report from research firm Research2guidance.

Avoiding IT Department

“Within a large organization, it’s typically a small department that wants an app but doesn’t want to go to IT,” said Raju Vegesna, whose title is evangelist at software maker Zoho Corp.

There’s a reason IT departments are reluctant to cede control of app creation. Employees who build their own apps might create bugs or security holes in a corporate network.

That’s why NetApp insists on vetting each app much like Apple reviews each program made available on its App Store.

“We can’t allow everyone to publish their own app and put it into the app store,” Wang said. About 90 percent of the apps that have been built by employees require some revision, he said.

Still, the app review process at NetApp is fairly nimble and a way for the company to get new software into circulation relatively quickly and cheaply when compared to the old way of creating enterprise software.

“We’re almost the other extreme of traditional IT where you had to go through a steering committee,” Wang said. “If the business groups say we have money and this idea, we can build it within six to eight weeks.”

Open to Customers

The company’s employees make apps for internal use, as well as use by clients, including one for customer support and another that compares NetApp products with a competitor’s. There’s also a business-intelligence app that helps executives analyze corporate data and make decisions.

Employees at Accenture Plc, the world’s second-largest technology-consulting company, used AppMakr to build an app to communicate with clients in its consumer goods and services division. The app also gives customers access to case studies, podcasts and news, and it’s available free to other businesses through Apple’s App Store.

Other app-building services such as Zoho Creator and Intuit Inc.’s QuickBase can help employees create their own Web apps -- applications that are accessed through a mobile Web browser. Hiring a Web developer to make a custom mobile app can easily run $50,000 to $75,000. In contrast, some of these services are free or can cost less than $10,000.

Honeywell, Ikea

Zoho’s Web app building service has been used by employees at Honeywell International Inc., Ikea AB, Hewlett-Packard Co., Sony Corp. and Walt Disney Co.’s Pixar.

Even traditional software makers including SAP see mobile- app development as a less expensive way to connect customers with their larger-scale software systems.

Chris O’Connor and Dan McCall realized how expensive and time-consuming it was to develop mobile apps when they were working at Genentech Inc., the cancer-drug maker acquired in 2009 by Roche Holding AG.

O’Connor and McCall built about 60 custom apps to do things like create a company directory or to reserve conference rooms for employees. The pair co-founded startup Taptera because they realized that other companies would also want to buy these types of apps.

Intuit has given its own employees permission to create QuickBase apps, which are online database apps designed to collect and distribute information. So far, 3,500 of the company’s 8,000 employees have built their own QuickBase apps.

“We still see business teams at the workgroup or division level having some need that isn’t getting served and choosing to self-solve,” said Allison Mnookin, vice president and general manager at Intuit.

One Intuit lawyer built a Web app to manage the process for submitting patents. The app made it easier for employees to submit ideas, distribute them internally for review and get alerts about a reward for those whose ideas get patented.

“He did all of that without needing to know a line of code,” said Mnookin. “The pace of business is moving faster, and folks are looking for a way to solve their problems.”

To contact the reporter on this story: Rachael King in San Francisco at rking25@bloomberg.net

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

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Clint Eastwood Heralds Comeback in Detroit With Chrysler’s Super Bowl Ad

By Craig Trudell and Keith Naughton - Feb 7, 2012 8:40 AM GMT+0700

Clint Eastwood, whose “Gran Torino” film focused on the heroics of a retired Detroit auto worker, returned to that theme in a two-minute Super Bowl commercial for Chrysler Group LLC last night, heralding the city’s recovery.

“It’s halftime in America, too,” Eastwood, 81, said in a two-minute spot just before the New England Patriots and New York Giants emerged from their locker rooms to start the second half of last night’s game, the year’s most-watched U.S. television event. “People are out of work and they’re hurting. And they’re all wondering what they’re going to do to make a comeback.”

Answers can come from the people of Detroit, Eastwood said. Wracked by the 2007-2009 recession and collapse of U.S. auto sales that sent the former Chrysler LLC and General Motors Corp. into bankruptcy, the region’s jobless rate reached as high as 16.6 percent in July 2009. Now it’s 9.7 percent.

“The people of Detroit know a little something about this,” said Eastwood, who was mayor of Carmel-by-the-Sea, California, from 1986 to 1988. “They almost lost everything. But we all pulled together, now Motor City is fighting again.”

The views Eastwood expressed were his own and the undisclosed fee he received for making them is being donated to charity, Chrysler Chief Executive Officer Sergio Marchionne said today.

The graveled voice that uttered some of Hollywood’s most memorable lines, including “Make my day,” in more than five decades as an actor, director and producer paid tribute to the U.S. industry’s comeback.

Michigan Rebound

General Motors Co. (GM) has regained its spot as the world’s largest automaker, car companies are hiring and Michigan had the second-best performance on the Bloomberg Economic Evaluation of States in the third quarter. Only oil-producing North Dakota had a bigger gain. The U.S. government has exited a stake it acquired in Auburn Hills, Michigan-based Chrysler during the bankruptcy process, and Italy’s Fiat SpA (F) today shares ownership with a United Auto Workers health-care trust.

“He felt really deeply everything he said,” Marchionne, who is also Fiat’s CEO, said today an interview on WJR-AM, a Detroit radio station. “I’ve spoken with him. There was not a single doubt in my mind that when he spoke on the commercial he was expressing his views.”

Bailout Opposition

In November, Eastwood told the Los Angeles Times’s 24 Frames blog that he opposed rescuing the auto companies. “We shouldn’t be bailing out the banks and car companies,” he said. “If a CEO can’t figure out how to make his company profitable, then he shouldn’t be the CEO.”

Eastwood said in an interview with Fox News today that he is not affiliated with Obama.

“It was meant to be a message about job growth and the spirit of America,” he is quoted as saying. “I think all politicians will agree with it.”

The spot may have special resonance in an election year where the economy and job growth are key themes of Republican criticisms of President Barack Obama.

“If it wasn’t for the bailout packages, Chrysler and GM would probably not be around,” Jesse Toprak, a Santa Monica, California-based analyst at TrueCar.com, said in an interview. “Now they’re adding capacity to plants, adding more production, and the best-case scenario has come to fruition. This was a commercial to remind people what has happened.”

Politically Neutral

Marchionne said the ad “has zero political content.”

“It was not intended to be any type of a political overture on our part,” Marchionne said. “Nobody inside Chrysler was attempting to influence decisions. The message is sufficiently universal and neutral that it should be appealing to everybody in this country and I sincerely hope that it doesn’t get utilized as political fodder in a debate.”

While the president’s lieutenants praised the ad on Twitter, Jay Carney, a spokesman for the president, said today that neither Obama nor his administration had any involvement in the spot’s creation.

“Saving the America Auto Industry: Something Eminem and Clint Eastwood can agree on,” Dan Pfeiffer, the White House communications director, said in a post on Twitter, referring to Chrysler’s ad with the rap-music star in last year’s Super Bowl. “Powerful spot,” David Axelrod, Obama’s chief political strategist, said on Twitter.

Rove ‘Offended’

Karl Rove, a Republican political strategist, said he was “offended” by Chrysler’s commercial.

“It’s a sign of what happens when you have Chicago-style politics,” Rove said today on Fox News Channel, for which he has served as a political analyst. “The president of the United States and his political minions are, in essence, using our tax dollars to buy corporate advertising and the best wishes of the management which is benefited by getting a bunch of money that they’ll never pay back.”

Dianna Gutierrez, a Chrysler spokeswoman, declined a request to respond to Rove’s comments.

By exercising options at a cost of $1.97 billion and meeting certain performance milestones, Fiat boosted its ownership stake in Chrysler to 58.5 percent in January. The U.S. government has said it recovered $11.1 billion of $12.4 billion given to Chrysler under the bailout.

Chrysler Loans

Chrysler continues to seek low-interest loans from the U.S. Energy Department to develop and produce fuel-efficient cars. The company sought $3.5 billion in such loans last year, and that amount has been reduced, Marchionne said.

“I’m not ready to give up,” Marchionne told reporters Feb. 4 at the National Automobile Dealers Association convention in Las Vegas. “The department has not indicated an unwillingness to lend.”

Ener1 Inc., the maker of batteries for electric cars whose subsidiary received a $118 million Energy Department grant to make electric-car batteries, last month filed for bankruptcy protection after defaulting on bond debt amid Asian competition. Ener1’s bankruptcy follows the failure of at least two U.S. government-backed renewable energy companies, solar panel maker Solyndra LLC and energy storage company Beacon Power Corp.

Chrysler’s Super Bowl ad ran for 2 minutes of the most expensive television advertising time of the year, during the National Football League championship game that the Giants won 21-17. The average cost of a 30-second spot was $3.5 million.

Top Score

Chrysler’s commercial edged out Honda Motor Co.’s spot that used actor Matthew Broderick to promote the CR-V crossover as the top-scoring automotive ad as measured by Ace Metrix, a Mountain View, California-based company that rates video advertising.

“It really struck a chord,” Peter Daboll, chief executive officer of Mountain View, California-based Ace Metrix, said in a phone interview. Chrysler’s ad scored 633 out of 950 on Ace Metrix’s scale, which is based on likeability, brand identification, preference, relevance and persuasion, he said.

Chrysler convinced Eastwood, who filmed the 2008 release “Gran Torino” in Detroit, to make a rare advertising appearance because he believed in the message, Marchionne said, adding that Eastwood never uttered the word “Chrysler” in the spot.

“Clint was sufficiently, was so generous in his approach to this that any money that we’re paying him is going to go to charity,” Marchionne said. “This was not done for financial reasons.”

Chrysler Shots

The ad’s only references to Chrysler came from a few images of cars and trucks, shots of SUVs being built at a Detroit factory and the company’s brand logos in the closing shot. The automaker ran a similar ad during last year’s Super Bowl, using music and an appearance from hometown rapper Eminem that focused more squarely on the city of Detroit itself and the Chrysler 200 sedan.

This year’s TV spot is being augmented by a 4-page ad that wrapped around the outside of Gannett Co.’s USA Today that summarizes the spot, said Gutierrez, the Chrysler spokeswoman.

“It’s Monday morning,” reads the newspaper ad, which contains still images from the TV spot. “Today, Americans will get up and go to work. And so we’ll go to work. The people of this nation will think about what they can do today to make themselves better. And that will be our aim as well.”

The ad ran only in USA Today, Gutierrez said.

‘Emotional Theme’

“They were trying to tap into an emotional theme” of surviving hardship, Jeremy Anwyl, vice chairman of auto researcher Edmunds.com in Santa Monica, California, said in an interview after the game. “This one sounded like an Obama re- election campaign.”

The closest Eastwood came to addressing the political environment was in describing “the fog of division, discord and blame.” America will have to find its way through the tough times, he said.

“Detroit’s showing us it can be done,” he said. “This country can’t be knocked out with one punch. We get right back up again and when we do, the world is going to hear the roar of our engines.”

“Yeah, it’s halftime, America,” Eastwood said. “And our second half is about to begin.”

To contact the reporters on this story: Craig Trudell in Southfield, Michigan, at ctrudell1@bloomberg.net; Keith Naughton in Southfield, Michigan, at knaughton3@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net

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MF Trustee Traced $105B in Cash Movement

By Tiffany Kary and Linda Sandler - Feb 7, 2012 12:01 PM GMT+0700

A trustee’s investigation found that the $1.2 billion in missing MF Global Inc. customer funds began to flow out of the brokerage on Oct. 26, five days before its collapse, as computers and employees fell behind margin calls and demands for collateral.

James Giddens, the trustee overseeing the brokerage’s liquidation, said in a statement yesterday that MF Global regularly used money from the segregated accounts of commodities customers to finance daily activities. A rush to meet collateral requirements led to billions of dollars in securities sales, credit draws and inter-company loans to foreign affiliates, he said.

“For three months our investigative team has worked to understand what happened during the final days of MF Global when cash and related securities movementsthe week before its parent, MF Global Holdings Ltd., filed for bankruptcy and made $100 billion in securities trades, according to the statement. The trades included liquidating customer securities and the firm’s own positions. After tracing 840 transactions worth $327 billion, Giddens is still analyzing where some of the money “ended up,” he said.

‘Larger Amounts’

MF Global Inc., the brokerage, often moved money between its own accounts and those of customers in amounts of less than $50 million a day, replacing the cash by day’s end, according to the report.

As cash demands on the firm surged in the last week of October, “much larger amounts were used, apparently with the assumption that funds would be restored by the end of the day,” according to the report. Starting on Oct. 26, “funds did not return as anticipated,” the trustee said.

Such mingling of firm money and customer cash isn’t a safe way to run a futures brokerage, said Darrell Duffie, a finance professor at Stanford University.

“The very practice of reaching into the same account doesn’t sound prudent to me,” Duffie said. Customer cash should be operationally distinct from any money belonging to a futures broker such as MF Global, he said.

Regulations allowed MF Global to use funds in the segregated accounts only for certain investments, with CME Group Inc., the world’s largest futures exchange, performing audits to check that the invested funds met segregation requirements.

CFTC Rules

One U.S. Commodity Futures Trading Commission rule requires that all customer funds be separately accounted for and segregated as belonging to commodity or option customers.

Another CFTC rule lists acceptable investments, which include foreign sovereign debt.

MF Global Holdings Ltd., once run by former New Jersey governor Jon Corzine, filed for bankruptcy on Oct. 31 citing credit rating downgrades tied to $6.3 billion in investments in European sovereign debt.

CME, based in Chicago, reviewed MF Global’s accounts the week of Oct. 24, and found them in compliance. MF Global didn’t report any transfers until early Oct. 31, suggesting the firm “made subsequent transfers of customer segregated funds in a manner that may have been designed to avoid detection,” according to a CME statement on Nov. 2.

Potential Lawsuits

The trustee said he has now traced how most of the more than $327 billion in transactions played out during the brokerage’s last days. The banks, clearing houses and customers that received the funds may be subject to lawsuits that seek to recover them on behalf of all customers that are missing funds from their accounts, Giddens said.

Giddens has already returned about $3.8 billion that was frozen in customer accounts, or about 72 percent of what customers are owed. He said he estimates that $1.2 billion or more is missing. Corzine has said he doesn’t know where the missing money is and didn’t authorize any misuse of customer money that may have occurred.

The brokerage is liquidating under Giddens through the Securities Investor Protection Corp. The parent’s Chapter 11 bankruptcy is being handled by a separate trustee, former Federal Bureau of Investigation Director Louis Freeh.

Class Actions

Corzine and other executives face two potential class actions over the collapse. Futures customers of MF Global Inc. are competing to lead a lawsuit over the alleged theft of $1.2 billion of their assets. An investor suit led by the Virginia Retirement System alleges that Corzine made misleading statements that inflated the prices of MF Global securities.

MF Global Holdings’ insurance unit issued $190 million of liability policies for Corzine, other professionals and the company through May to cover costs of defending against allegations of wrongdoing, Freeh said in a Feb. 3 court filing in Manhattan. The policies don’t belong to the bankrupt estate and the coverage should be continued, he said.

“Directors’ and officers’ insurance policies tend to be proportional to the size of the risks that the company might face if it does something wrong,” Nancy Rapoport, a bankruptcy law professor at the University of Nevada, Las Vegas, said in an e-mail.

Lehman Brothers

Lehman Brothers Holdings Inc., which filed the biggest U.S. bankruptcy in 2008, had $250 million of insurance for civil, criminal and regulatory claims through last year. The defunct investment bank said in August that former executives including ex-Chairman Richard Fuld would settle an investor lawsuit over losses on Lehman stock and options using a $90 million payment from insurers.

The MF Global policies, which have a deductible of $25,000 per single claim, cover the insured “for all loss arising out of a wrongful act which gives rise to a claim,” according to Freeh’s filing. The policies cover defense lawyers’ bills, as well as certain damages awards and settlements.

Andrew Levander, a lawyer for Corzine, didn’t respond to e- mails seeking comment on the lawsuits.

Separately, the MF Global parent and affiliates have a $15 million insurance policy from New Hampshire Insurance Co. for costs of defending against lawsuits, according to a December court filing. The insurer disclosed the policy in a request to a judge to let it pay MF Global and a defendant for costs incurred before and after the Oct. 31 bankruptcy.

Combining Cases

U.S. District Judge Victor Marrero has been combining the investor cases, saying they make similar claims that Corzine and other company officials made misleading statements about MF Global’s financial condition before its Chapter 11 filing.

The Virginia Retirement System, chosen by Marrero to lead the investor suit together with Canada’s Province of Alberta, said in a filing the two together lost more than $19 million on MF Global stock and debt.

The brokerage case is Securities Investor Protection Corp. v. MF Global Inc., 11-02790, U.S. District Court, Southern District of New York (Manhattan). The parent’s bankruptcy case is MF Global Holdings Ltd., 11-bk-15059, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The main investor case is DeAngelis v. Corzine, 11-cv-7866, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Tiffany Kary in New York at tkary@bloomberg.net; Linda Sandler in New York at lsandler@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net

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Papademos Meets Creditors as ‘Sacrifice’ Looms

By Maria Petrakis, Marcus Bensasson and Natalie Weeks - Feb 7, 2012 8:40 AM GMT+0700

Greek Prime Minister Lucas Papademos plans today to discuss with the nation’s political leaders the implementation of additional fiscal measures needed to secure a second European Union-led bailout.

While Papademos and the party chiefs already agreed to make further cuts this year equal to 1.5 percent of gross domestic product, they have yet to close gaps over measures demanded by creditors. European leaders raised pressure on meeting the conditions of the 130 billion-euro ($171 billion) rescue, with German Chancellor Angela Merkel saying “time is running out.”

“There are fears that the Greek government will note the country has reached the limits on austerity,” UBS AG currency analysts including Chris Walker in London wrote in a note to clients yesterday. “The week ahead will be extremely significant for event risk and headlines could become a dominant driver for the euro.”

At stake is whether Greece can win the bailout, secure a deal with private creditors and remain in the euro region. Finance Minister Evangelos Venizelos told reporters late yesterday that “failure of these talks, failure of the plan, the country’s bankruptcy, means even greater sacrifice.”

The euro was little changed at $1.3118 as of 10:06 a.m. in Tokyo as investors await the outcome of the Greek talks. Asian equities were also little changed, after U.S. and European stocks fell overnight, driving the Dow Jones Industrial Average down from an almost four-year high.

Unions to Strike

Greek political leaders have yet to resolve issues from recapitalizing banks, ensuring the viability of pension funds and reducing wages and non-wage costs to boost competitiveness. Greece still needs to agree on 600 million euros of fiscal measures for 2012, a government official told reporters in Athens yesterday. Meantime, unions called their first general strike of the year.

Papademos met early this morning with representatives from the European Commission, the European Central Bank and the International Monetary Fund to continue talks on possible spending cuts.

“The salvation of the country, remaining in the euro, means great sacrifices,” Venizelos told reporters in Athens late yesterday after his meeting with the so-called troika of representatives.

Merkel Perplexed

With the country set to pay a 14.5 billion-euro bond due on March 20, Merkel said in Paris that “I can’t quite understand why we need a few more days.” French President Nicolas Sarkozy said there could be no funds without reforms. Allowing Greece to go bankrupt “isn’t an option,” he said.

Greece’s efforts to win a second bailout from the troika have hung in the balance over the past four days as negotiations in Athens failed to clinch an agreement on measures demanded by lenders, which could include a cut in the minimum wage, lower pensions and immediate layoffs for state employees.

The country will sell 625 million euros of 26-week Treasury bills today, a week earlier than usually scheduled to allow for the rollover of 26-week bills due on the Feb. 10. Short-term debt sales like those are the only source of market financing available for the nation. Bonds repayable in 2022 are worth about a third of their face value.

Bailout Package

Euro-area finance chiefs told Venizelos on Feb. 4 that an increase in the bailout package wasn’t forthcoming, underscoring their frustration at a lack of progress on fixing the economy. Keeping Greece from tumbling into default presents what Deutsche Bank AG Chief Executive Officer Josef Ackermann calls a “make or break” moment.

Venizelos described the talks in Athens as a “Hydra’s head”, a reference to the monster in Greek mythology that grew back more heads than the one cut off.

Citigroup Inc. raised the probability that Greece will be forced to leave the euro area in the next 18 months to 50 percent from 25 percent to 30 percent previously.

“To remain in the euro area, the Greek government needs to exhibit a minimum degree of compliance with the fiscal and structural conditions of the bail-out program,” Chief Economist Willem Buiter said in an e-mailed note. “The hurdles for Greece set by euro area negotiators to receive the second bail-out are high.”

Off the Job

Adding to pressure on Papademos and political leaders, the biggest public-sector and private-sector union groups, ADEDY and GSEE, hold a 24-hour general strike today, shutting down government services, courts, schools and ferry services. Dockworkers and bank employees will also walk off the job while a walkout by culture ministry workers will force the closure of museums and other tourist attractions.

Public transport in Athens will operate during the day to bring protestors to the city center. Workers from the state-run Hellenic Railways Organization, one of the biggest loss-making state-owned companies, will shut down rail service across the country.

“What is taking place isn’t a negotiation,” GSEE president Yannis Panagopoulos said in an e-mailed statement. “It’s raw, cynical blackmail against a whole people.”

Administration Minister Dimitris Reppas said the troika asked for 15,000 state jobs to be cut this year, part of plans by Greece to gradually phase out 150,000 employees by the end of 2015. He told Athens-based Mega TV he was opposed to “blind firings.”

Additional Reductions

The troika argues that lower wage costs is among reforms necessary to boost competitiveness in the country. Those opposed say the cuts would deepen the country’s recession, now in its fifth year.

Antonis Samaras, the head of the second-biggest party, New Democracy, has indicated he will oppose measures that will deepen the country’s downturn.

Guarantees from Greek political leaders such as Samaras, who leads in opinion polls, are key to securing the funds from the EU and IMF. International lenders want assurances that whoever wins the next election will stick to pledges made now to receive financing.

George Papandreou, the former prime minister who leads the Pasok socialist party, the biggest in the Greek parliament, proposed that Papademos’s mandate be extended to boost confidence among lenders the pledges will be implemented.

Election Call

That is an option likely to be opposed by Samaras, who has called for elections as soon as the new financing is agreed.

Open questions involve how much more aid Greece needs, how much more austerity is required, and how to involve the ECB in the private-sector creditor debt swap.

The rescue blueprint includes a loss of more than 70 percent for bondholders in a voluntary debt exchange that will slice 100 billion euros off 200 billion euros of privately-held Greek debt and loans that will probably exceed the 130 billion euros now on the table. A formal offer for the debt swap must be made by Feb. 13 to allow all procedures to be completed before the March 20 bond comes due.

Creditors are prepared to accept an average coupon of as low as 3.6 percent on new 30-year bonds in the exchange, said a person familiar with the talks, who declined to be identified because a final deal hasn’t been struck yet.

Greece has lagged behind budget targets set when it won an initial, taxpayer-funded rescue of 110 billion euros in May 2010, prompting euro-area threats to cut off aid. The country’s economy shrank 6 percent last year, according to the most recent IMF estimates, the budget deficit is still close to 10 percent of GDP and unemployment is about 18 percent.

Debt Burden

Even after a second bailout, Greece may be saddled with too much debt, too little growth and too large a budget hole to do without even more money, which euro nations led by Germany are increasingly reluctant to offer.

The only way out for Greece is “a reduction in debt, progress on wages, on labor costs and the commitment by the Europeans to extend funds for as long as it’s needed,” International Monetary Fund chief economist Olivier Blanchard said in Washington yesterday. “Under these three conditions it’s still a terribly ugly and unpleasant path but it is at least one which can be tried.”

To contact the reporters on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net; Natalie Weeks in Athens at nweeks2@bloomberg.net; Marcus Bensasson in Athens at mbensasson@bloomberg.net

To contact the editors responsible for this story: James Hertling at jhertling@bloomberg.net; Stephen Foxwell at sfoxwell@bloomberg.net

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