Economic Calendar

Sunday, May 6, 2012

Buffett Shuns $22 Billion Deal to Protect Stock Holdings

By Noah Buhayar, Margaret Collins and Andrew Frye - May 6, 2012 12:33 AM GMT+0700

Warren Buffett, who built Berkshire Hathaway Inc. (BRK/A) with stock picks before focusing on takeovers, said he recently opted against a $22 billion acquisition because he didn’t want to sell investments in marketable securities.

“We considered one here just a month or two ago, which we would have liked to do,” Buffett, Berkshire’s chairman and chief executive officer, said today at the company’s annual meeting in Omaha, Nebraska. “I would have had to sell some securities I didn’t want to sell.”

Warren Buffett, chairman of Berkshire Hathaway Inc., talks with his daughter Susie Buffett at the Berkshire Hathaway annual shareholders meeting in Omaha. Photographer: Daniel Acker/Bloomberg

Buffett, 81, divested portions of Berkshire’s stock portfolio to help fund his $26.5 billion acquisition of railroad Burlington Northern Santa Fe in 2010. Since then, he has spent more than $15 billion on stocks, while assuring Berkshire shareholders that he was seeking further takeovers.

“We wish we could have made it,” Buffett said of the deal he opted against, without naming the target company.

Berkshire’s equity portfolio, which includes the largest shareholdings of Coca-Cola Co. (KO) and Wells Fargo & Co. (WFC), surged 41 percent to $89.1 billion in the 12 months ended March 31. In that period, the Standard & Poor’s 500 Index rose 6.2 percent and Buffett built what has become a $13.1 billion stake in International Business Machines Corp. (IBM)

To contact the reporters on this story: Noah Buhayar in New York at; Margaret Collins in Omaha at; Andrew Frye in New York at

To contact the editor responsible for this story: Dan Kraut at


Apple Wins Ruling, Sanctions in Samsung Infringement Suit

By Joel Rosenblatt - May 6, 2012 6:23 AM GMT+0700

Apple Inc. (AAPL) won sanctions against Samsung Electronics Co. for its failure to produce source code in a patent-infringement case in federal court in San Jose, California.

U.S. Magistrate Judge Paul S. Grewal wrote in his ruling yesterday that Samsung “plainly violated” a court order requiring it to turn over code to Apple, and ruled that Samsung won’t be able to offer evidence in the case about its efforts to “design around” three patents at issue in the case.

In its lawsuit, Apple claims that Samsung’s 4G smartphone and Galaxy Tab 10.1 tablet computer infringe its patents. In December, U.S. District Judge Lucy Koh in San Jose ruled against Apple’s request to block Suwon, South Korea-based Samsung from selling that phone and tablet in the U.S. That order followed an Australian court ruling lifting an injunction on the tablet there.

Samsung, which was the world’s largest seller of smartphones last year, and Cupertino, California-based Apple have filed at least 30 lawsuits against each other on four continents since April 2011.

In his ruling, Grewal said producing source code in patent litigation is “disruptive, expensive, and fraught with monumental opportunities to screw up.” Still, under federal law there is no exception to the requirement, especially when a defendant in a patent suit challenges the opposition’s failure to analyze the accused product’s source code, the judge said.


Grewal said he focused on Samsung’s so-called design-around source code developed for products with the “specific intent” of avoiding Apple’s patent claims. The ruling targets that code because “by their very nature design-arounds impact key questions of liability, damages and injunctive relief,” Grewal wrote.

“They are inevitably designed with substantial input from counsel for the specific purpose of distinguishing other products at issue,” Grewal wrote. “In short, they matter. A lot.”

Adam Yates, a Samsung spokesman, didn’t immediately return an e-mail after business hours seeking comment on the ruling.

“It’s no coincidence that Samsung’s latest products look a lot like the iPhone and iPad, from the shape of the hardware to the user interface and even the packaging,” Apple said today in an e-mailed statement. “This kind of blatant copying is wrong, and we need to protect Apple’s intellectual property when companies steal our ideas.”

The case is Apple Inc. v. Samsung Electronics Co. (005930), 11-01846, U.S. District Court, Northern District of California (San Jose).

To contact the reporter on this story: Joel Rosenblatt in San Francisco at

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


Yahoo Investor Steps Up Pressure to Have CEO Fired

By Nick Turner and Dina Bass - May 5, 2012 11:01 AM GMT+0700

Yahoo! Inc. (YHOO) is under pressure from Third Point LLC, one of its largest investors, to dismiss Chief Executive Officer Scott Thompson for failing to correct false academic information on his biography.

Third Point, which is fighting for representation on Yahoo’s board because it says the company is poorly managed, said Yahoo should “terminate Mr. Thompson for cause immediately,” after his resume erroneously said he had a degree in computer science. Yahoo is reviewing the matter.

A section of a Yahoo! billboard moved in San Francisco. Photographer: Justin Sullivan/Getty Images

The investor highlighted the discrepancies in Thompson’s record on May 3, and yesterday complained that Yahoo isn’t responding adequately. The dispute adds to challenges facing Yahoo, which is struggling to revive growth and stem customer losses. The company hired Thompson from EBay Inc. in January after ousting his predecessor, Carol Bartz, who failed to gird Yahoo against threats from Google Inc. and Facebook Inc.

“It is so clear-cut whether one has a degree or not that it is a deliberate lie and the only reason to do it is to misrepresent yourself,” said Janice Bellace, professor of legal studies and business ethics at the Wharton School at the University of Pennsylvania. “The board should certainly be looking at his capacity to lead the company and the example he sets for others in the company.”

Yahoo declined 1.6 percent to $15.15 yesterday in New York. That left it down 6.1 percent since the beginning of the year.

‘Inadvertent Error’

While Thompson lists a bachelor’s degree in computer science from Stonehill College, the school didn’t begin offering such a degree until four years after he graduated, Third Point CEO Daniel Loeb said this week in a letter to the board. Thompson has an accounting degree from the school.

Yahoo’s board plans to review the matter, and will later “make an appropriate disclosure to shareholders,” the company said in response late on May 3. Yahoo, in its first public statement on the issue, had earlier called the discrepancy an “inadvertent error” and said it “in no way alters that fact that Mr. Thompson is a highly qualified executive with a successful track record leading large consumer technology companies.”

Third Point, the owner of about 5.8 percent of Yahoo, announced plans in March to seek shareholder votes for its slate of four directors. Yahoo has been struggling to keep pace with rivals Google and Facebook, which have lured away users and ad dollars. Third Point has demanded changes at Yahoo, calling it one of technology’s “most mismanaged companies.”

Thompson Biography

In his May 3 letter, Loeb said that Stonehill only had one computer-science course when Thompson attended the Boston-area school. “Presumably, Mr. Thompson took that course,” he said.

Martin McGovern, a spokesman for Stonehill in Easton, Massachusetts, said that Thompson received a bachelor’s of science in business administration, with a major in accounting on May 20, 1979. He declined to comment further.

Thompson’s biography from his time at EBay’s PayPal unit, as submitted to events such as the 2009 Web 2.0 Summit, also stated that he had a degree in computer science. Anuj Nayar, a spokesman for PayPal, said that in recent EBay filings, Thompson’s degree was listed correctly.

“Under Mr. Thompson’s leadership, Yahoo is moving forward to grow the company and drive shareholder value,” Sunnyvale, California-based Yahoo said on May 3.

Questioning Hart’s Background

Loeb said that Patti Hart, a Yahoo board member who chairs the search committee, inflated her degree too. Hart, who also serves as CEO of International Game Technology (IGT), is listed in filings as holding a “bachelor’s degree in marketing and economics” from Illinois State University, Loeb said. “However, we understand that Ms. Hart’s degree is in business administration. She received a degree in neither marketing nor economics.”

Yahoo said in its response that “Patti Hart holds a bachelor of science degree in business administration with specialties in marketing and economics from Illinois State University.”

Jay Groves, a spokesman for Illinois State, corroborated the business administration degree, saying Hart graduated in 1978 with a concentration in economics and marketing.

‘Ethical Lapse’

Embellishing resumes has led to executive firings and resignations. In 2009, Intrepid Potash Inc. President Patrick Avery stepped down after confirming he hadn’t received degrees from two universities listed on a company prospectus. RadioShack Corp. CEO David Edmondson resigned in 2006 after acknowledging he hadn’t earned the degrees in theology and psychology that he listed on his resume.

Kenneth Lonchar, chief financial officer at Veritas Software Corp., quit in 2002 after admitting he had lied about having a master’s degree in business administration from Stanford University.

“It’s an incredibly serious ethical lapse to falsify information on a resume,” said Wharton’s Bellace. “The holes we dig for ourselves, once you start a lie, sometimes it’s very difficult to step back.”

Others who misrepresented their education kept their jobs. Microsemi Corp. CEO James Peterson was censured and fined after a 2009 review found fabricated degrees from Brigham Young University, but the company retained him as CEO. In 2002, Ronald Zarrella, CEO of Bausch & Lomb Inc., was found to have listed an MBA from New York University on his resume, when he had only taken classes at its business school. He kept his job.

‘Overhaul’ Needed

Third Point faulted Thompson last month for embarking on a round of job cuts before he articulated a more complete strategy. Thompson is the former president of eBay’s PayPal (EBAY) payment business.

Yahoo named three new independent directors in March, part of its own effort to shake up the board and appease investors. The company had negotiated with Third Point’s Loeb about adding one of his nominees and another that both sides could agree on. The discussions broke down when Loeb insisted that he himself be added, Yahoo said at the time.

“If misrepresentations were made, they would confirm yet again that Yahoo is in dire need of a complete corporate governance overhaul,” Loeb said on May 3. “As we have asserted repeatedly and forcefully, as Yahoo’s largest outside shareholder and a voice for our fellow investors, we believe the Yahoo board requires fresh, outside perspectives from individuals who have no connection to a failed regime and have the expertise to address the serious challenges facing the company.”

To contact the reporters on this story: Nick Turner in San Francisco at; Dina Bass in Seattle at

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


Buffett Says U.S. Banks a Class Apart From Europeans

By Noah Buhayar, Andrew Frye and Hugh Son - May 5, 2012 11:48 PM GMT+0700

Warren Buffett, whose Berkshire Hathaway Inc. (BRK/A) has more than $19 billion invested in U.S. banks, said the lenders have ample liquidity and are a class apart from European rivals.

“I would put European banks and American banks in two very different categories,” Buffett, Berkshire’s chairman and chief executive officer, said today at the firm’s annual meeting in Omaha, Nebraska. “The American banking system is in fine shape. The European system was gasping for air a few months back” before getting assistance from the European Central Bank.

Warren Buffett, chairman of Berkshire Hathaway. Photographer: Jeff Bundy/The Omaha World-Herald/AP Photo

Wells Fargo & Co. (WFC) and JPMorgan Chase & Co. posted record profits last year and their CEOs are contesting efforts by U.S. policy makers to strengthen banking regulations. European banks have struggled amid the continent’s sovereign debt crisis and turned to the ECB, starting in December, for extraordinary three-year loans at interest rates of 1 percent.

“I’d like to have a lot of money for three years at 1 percent, but I’m not in trouble,” said Buffett, 81. U.S. banks have “liquidity coming out their ears.”

Berkshire, which Buffett has led for 42 years, is the biggest shareholder of San Francisco-based Wells Fargo, with a more than $12 billion stake. Buffett injected $5 billion into Bank of America Corp. (BAC) last year in exchange for preferred stock and warrants. Berkshire’s shareholding of U.S. Bancorp (USB) was valued at $2.2 billion as of yesterday.

To contact the reporters on this story: Noah Buhayar in New York at; Andrew Frye in New York at; Hugh Son in New York at

To contact the editor responsible for this story: Dan Kraut at