SAP’s Facebook for Companies Trails IBM in Soaring Market

By Cornelius Rahn - May 15, 2012 5:01 AM GMT+0700

Martina Girkens is determined to change the way Continental AG (CON)’s 160,000 employees work together in what amounts to a micro version of how Facebook Inc. (FB) and Twitter Inc. have linked more than 1 billion people.

In the past two months, Girkens has helped more than half of the German auto supplier’s workers set up online profiles that let colleagues find each other and team up when specific skills are called for. International Business Machines Corp. (IBM) provided the internal social networking system, even though SAP AG (SAP) runs most of its back-office programs, including personnel management software. That’s a headache for the company’s technology staff.

It’s a typical conundrum for many customers of SAP, which has lagged behind efforts to provide social networking software for corporate customers such as Wal-Mart Stores Inc. and Apple Inc. (AAPL) Now, Walldorf, Germany-based SAP wants to catch up, challenging IBM and Salesforce.com Inc. (CRM) in a market that’s growing 60 percent a year and will reach $6.4 billion by 2016, according to Forrester Research.

“We’d like to see a better integration of tools in the workplace, so you don’t always need to switch back and forth between programs,” says Girkens, Continental’s head of technology for corporate functions.

SuccessFactors Takeover

SAP has boosted its presence in the market with the acquisition last December of SuccessFactors Inc., whose software includes Jam, a program featuring a Facebook-style layout, video integration and tools to help new hires get up to speed. SAP also offers StreamWork, a collaborative decision-making tool and a rival to Microsoft Corp. (MSFT)’s SharePoint.

The increasing demand for employee productivity has also fueled the growth of independent makers of social enterprise software, including Jive Software Inc. (JIVE), which shares have jumped 50 percent since its initial public offering in December. Salesforce.com, which offers Chatter as an internal business- collaboration platform, has surged 35 percent this year, beating SAP’s 19 percent increase.

For companies that make such software, the main advantage is connecting directly with customers’ employees, strengthening their hold on a client, says Ray Wang, chief executive officer of Constellation Research Group in San Francisco.

Next Category

“The world of enterprise and consumers are blending,” Wang said. “That’s why social is critical for a company that’s trying to defend a billion users from someone else’s sales activities.”

After focusing on routine enterprise tasks like payroll and supply-chain management for the first 35 years of its existence, SAP, beginning in 2007, ventured into business analytics, software for mobile devices, cloud computing and databases. The company wants to add a new field of business every 12 to 18 months, Co-CEO Jim Hagemann Snabe said last year, singling out collaborative software as the next category.

Office workers at Hanover-based Continental can use the IBM program, called Connections, to navigate internal forums, write company-wide blogs, and find peers across the world. The initiative also involves Microsoft’s SharePoint to collaborate on documents and IBM’s SameTime for chatting.

Girkens plans to add editable Wiki documents and a search function which helps weed through unstructured content.

About the same time Continental started its social network, SAP hired consultant and blogger Sameer Patel to lead its entry into the market.

Hiring Blogger

Patel, who has advised clients like Intel Corp. (INTC) and Oracle Corp. (ORCL) on collaboration, says solutions have to tie into business processes, like customer-relationship management or material sourcing, where employees actually encounter ad-hoc problems, rather than being a blanket forum.

“You need to have the level of depth around these core processes that SAP has offered for 40 years, where social becomes more focused and works as an enabler,” said Patel, who is scheduled to discuss SAP social networking software today at the Sapphire conference in Orlando, Florida.

Since many companies have already signed up with competitors, SAP can’t afford to simply offer what’s already on the market, said Ramon Baez, chief information officer at Kimberly-Clark Corp. (KMB), the maker of Huggies diapers.

A Kimberly-Clark engineer in Wisconsin was recently trying to set up a business-to-business website where clients can validate multiple products by running a test on one single sample. He wrote about his problem in an internal messaging group and got the solution from a U.K.-based employee who had written a book on the matter.

Video Messaging

Baez, whose company started using Chatter last year, said any new solution needs to be accessible from anywhere, via the so-called cloud, and the social network should support video messaging. Currently, Chatter and SharePoint don’t work together, he said.

“If you looked at the tablet market last year with the iPad, the Samsung Galaxy, the Playbook, only a couple survived,” Baez said. “There may well be room for competition, but if SAP wants to come up with a solution, they have to show how it’s going to differentiate.”

Other independent makers of social enterprise software include Yammer Inc., Box Inc. and Lithium Technologies Inc. SAP’s venture arm has invested in the latter two. Taking over a smaller company makes sense for SAP to help plug gaps and boost adoption, Constellation’s Wang said.

As SAP and others push forward on corporate social networking, they may find many companies willing to take a look at their offerings.

“We definitely don’t want to be too dependent on one supplier,” Continental’s Girkens said. “The aim should be to obtain as many synergies as possible, but not to be locked in with proprietary formats and interfaces.”

To contact the reporter on this story: Cornelius Rahn in Orlando, Florida, via crahn2@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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Groupon Profit Tops Estimates as Overseas Business Grows

By Douglas MacMillan - May 15, 2012 4:43 AM GMT+0700

Groupon Inc., the largest daily-deal website, reported first-quarter profit that topped analysts’ estimates as marketing costs dropped and international sales expanded in its second period as a publicly traded company.

Profit excluding certain costs was $16.3 million, or 2 cents a share, the Chicago-based company said in a statement today. Revenue jumped 89 percent to $559.3 million from $295.5 million a year earlier. Analysts had projected, on average, profit of 1 cent on sales of $530.6 million, according to data compiled by Bloomberg. The shares surged as much as 18 percent.

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Groupon's Chicago office. Photographer: Charles Rex Arbogast/AP Photo

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May 14 (Bloomberg) -- Aaron Kessler, an analyst at Raymond James & Associates, talks about Groupon Inc.'s first-quarter earnings and outlook. The largest daily-deal website reported profit that topped analysts' estimates. Kessler speaks with Cory Johnson on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)

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May 14 (Bloomberg) -- Cory Johnson reports on Groupon's earnings. He speaks on Bloomberg Television's "Street Smart." (Source: Bloomberg)

The coupon site is attempting to rebuild investor confidence after shares dropped more than 40 percent since its November initial public offering, one of the worst public market debuts for a Web company since the dot-com crash. International sales more than doubled to $320.7 million, suggesting Groupon hasn’t been hindered by economic turmoil in markets outside the U.S., said Clayton Moran, an analyst at Benchmark Co.

“Groupon is not showing any signs of impact from the European recession,” said Moran, who is based in Delray Beach, Florida, and recommends buying the stock. “All in all, it appears like the business continues to have solid growth.”

Groupon shares soared as high as $13.80 in extended trading following the report. Earlier, they had climbed 19 percent to $11.74 at the close in New York.

Second-quarter revenue will be $550 million to $590 million, Groupon said in the statement. Analysts on average had estimated $558.7 million in sales.

Marketing Expenses

The company generates sales by selling discounts -- known as Groupons -- from businesses such as restaurants and nail salons. It then splits the revenue with the businesses.

Marketing costs dropped to 21 percent of total revenue in the first quarter, from 32 percent in the preceding period and 78 percent a year earlier, Groupon said in a slide presentation accompanying the results. The company is getting better at adding subscribers to its e-mail list for less money, Chief Financial Officer Jason Child said.

“We got a lot of leverage from reduction in marketing expenses,” Child said in a telephone interview today. “We’re getting much more efficient with our paid marketing, and our organic customer growth continues to stay strong.”

Groupon had an operating profit of $39.6 million in the first quarter, compared with an operating loss of $117.1 million a year earlier.

The stock lost 48 percent of its value in its first six months on the public market, a period that ended on May 3. Since 2001, only four companies have performed worse among newly public U.S. Internet stocks.

International, Mobile

Groupon generated 57 percent of its revenue outside the U.S. in the first quarter. Almost 30 percent of Groupon’s transactions in North America were completed on mobile phones in April, up from 25 percent four months ago, Chief Executive Officer Andrew Mason said in a letter to shareholders last week.

In February, Groupon reported fourth-quarter operating income of $15 million, yet later reversed that into an operating loss of the same amount after restating results because of higher refunds to merchants. At the time of the restatement in March, Groupon said it discovered a “material weakness” in its financial controls.

The company has worked to address the weakness in its financial controls and will be prepared for auditors to test them again at the end of the year, Child said today.

“Over the next quarter or two we will have implemented all the steps necessary in terms of hiring people, upgrading our systems and improving our processes,” Child said.

The company’s first-quarter net loss narrowed to $11.7 million, or 2 cents a share, from $146.5 million, or 48 cents, a year earlier.

Last month, Groupon said Starbucks Corp. CEO Howard Schultz exited its board, and the company added Daniel Henry, the finance chief of American Express Co., and Robert Bass, a vice chairman of Deloitte LLP, as directors.

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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Stocks, Commodities Drop as Euro Weakens on Greek Crisis

By Stephen Kirkland and Rita Nazareth - May 15, 2012 3:21 AM GMT+0700

Stocks fell, commodities slid to the cheapest level this year and the euro weakened to a three-month low amid growing concern Greece will exit the European currency.

The MSCI All-Country World Index (MXWD) slid 1.6 percent at 4 p.m. in New York and the Standard & Poor’s 500 Index sank 1.1 percent to 1,338.35, with both slipping to the lowest levels in more than three months. The euro slid to less than $1.29 for the first time since January. Yields on U.S. seven-year debt and 10- year U.K. and German bonds fell to records, while costs to insure against a Spanish default jumped to an all-time high. The S&P GSCI gauge of commodities dropped 1.1 percent.

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Traders work at the New York Stock Exchange. Photographer: Scott Eells/Bloomberg

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May 14 (Bloomberg) -- Bloomberg's Deborah Kostroun reports on the performance of the U.S. equity market today. U.S. stocks declined, sending the Dow Jones Industrial Average to the lowest level since January, as Greece struggled to form a new government amid growing speculation the nation may leave the European currency. (Source: Bloomberg)

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May 14 (Bloomberg) -- Bloomberg’s Alix Steel, Adam Johnson and Trish Regan report on today’s ten most important stocks including Ancestry.com, Zynga and Groupon. (Source: Bloomberg)

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May 14 (Bloomberg) -- Michael Obuchowski, chief investment officer at First Empire Asset Management, talks about the performance of U.S. stocks, the influence of the European debt crisis on U.S. markets and his equity investment strategy. He speaks with Pimm Fox and Alix Steel on Bloomberg Television's "Taking Stock." (Source: Bloomberg)

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May 14 (Bloomberg) -- James Paulsen, chief investment strategist at Wells Capital Management, and Lincoln Ellis, managing director at Linn Group, talk about the outlook for U.S. stocks and their investment strategies. They speak with Trish Regan and Adam Johnson on Bloomberg Television's "Taking Stock." Paul Parker, co-head of global merger and acquisitions at Barclays Capital, also speaks. (Source: Bloomberg)

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May 14 (Bloomberg) -- Lena Komileva, chief economist at G+ Economics Ltd., talks about the outlook for European Central Bank policy, the region's debt crisis and its impact on global financial markets, and the likely consequences of a potential Greek exit from the euro. Komileva speaks with Tom Keene on Bloomberg Television's "Surveillance Midday.” (Source: Bloomberg)

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May 14 (Bloomberg) -- Kit Juckes, head of foreign-exchange research at Societe Generale SA, discusses the outlook for the euro, pound and Australian dollar and his recommendation of the Canadian dollar. He speaks with Caroline Hyde and Mark Barton on Bloomberg Television's "Countdown." (Source: Bloomberg)

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May 14 (Bloomberg) -- Michael O'Sullivan, head of portfolio strategy at Credit Suisse Private Banking, discusses his investment strategy for Europe, emerging markets and banks. He speaks with Mark Barton on Bloomberg Television's "Countdown." (Source: Bloomberg)

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May 14 (Bloomberg) -- Alistair Scarff, an analyst at Bank of America Merrill Lynch in Hong Kong, talks about JPMorgan Chase & Co.'s $2 billion trading loss and its implications for banking regulation and Asian banks. Scarff also discusses China's banking industry and the reserve ratio cut announced by the People's Bank of China on May 12. He speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

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May 14 (Bloomberg) -- Erwin Sanft, chief strategist for pan-Asia equities at BNP Paribas SA, talks about the outlook for Asian stocks and his investment strategy. Sanft also discusses the economies of China, the U.S. and Japan. He speaks with John Dawson on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)

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May 14 (Bloomberg) -- Barry Knapp, head of equity strategy at Barclays Capital, talks about the outlook for U.S. markets and economy. He speaks with Scarlet Fu on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

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An employee works on a 2 euro coin mint at the Bank of Greece's Printing Works Department and Mint in Athens. The euro depreciated 0.6 percent to $1.2845, and slipped 0.7 percent versus the yen. Photographer: Simon Dawson/Bloomberg

European finance ministers grappled with the costs of keeping Greece in the euro area or letting it go, as a post- election political feud prevents the nation from forming a new government following the May 6 election. President Karolos Papoulias told Greek political leaders that banks face the threat of collapse if deposits continue to dwindle amid the instability. In the U.S., JPMorgan Chase & Co. (JPM) fell for a second day after reporting a $2 billion trading loss.

“The markets are going to play hard ball and the European governments are going to play hard ball too,” John Manley, chief equity strategist for Wells Fargo Advantage Funds in New York, said in a telephone interview. His firm oversees $207 billion. “The odds of Greece leaving the euro are higher. It’s an enormous game of chicken that they are playing with each other. To the degree it does represent the democratic process in Greece, it makes it more likely they default and the Europeans have to do something.”

JPMorgan’s Loss

The S&P 500 fell for a second day as financial companies and energy producers led losses among all 10 of its main industry groups. All but three of 30 stocks in the Dow Jones Industrial Average retreated, sending the gauge down 125.25 points to 12,695.53, its lowest close since Jan. 31.

JPMorgan fell 3.2 percent and lost 12 percent since disclosing the trading loss on May 10, marking its biggest two- day slide in three years. Matt Zames, newly appointed to lead the firm’s chief investment office after it suffered a $2 billion loss on credit derivatives, shook up the unit’s leadership and announced a “renewed focus” on hedging risks. Chief Investment Officer Ina Drew will retire. Fitch Ratings on May 11 cut the bank’s credit rating by one level to A+ from AA-, saying the loss raises questions about its risk management.

Shares of Citigroup Inc. tumbled 4.1 percent and Bank of New York Mellon Corp. lost 3.1 percent to help lead declines in all 24 stocks in the KBW Bank Index (BKX), which slid to the lowest level since March 7. The S&P 500 trimmed its year-to-date gain to 6.4 percent, down from a rally of as much as 13 percent. The index has tumbled 5.7 percent from an almost four-year high on April 2.

Bearish Stock Bets Pared

As individuals bail out of U.S. stocks at the fastest rate in three decades, professional speculators have cut bearish bets by the most since 2008.

Money managers are net short 19,375 contracts on the S&P 500, down 82 percent from a four-year high in September even after the figure jumped from 3,584 last week, data compiled by Bloomberg and the Commodity Futures Trading Commission show. U.S. equity mutual funds recorded $18 billion of outflows in April, the most since at least 1984, according to preliminary data from the Investment Company Institute.

Hedge funds and other institutions are speculating the index will extend its 23 percent rally since October after 69 percent of S&P 500 companies beat first-quarter earnings estimates and economists projected accelerating U.S. growth this year. Bears say last week’s addition to bets on declines show short sellers have completed almost all of the buying they are likely to do, depleting demand for equities.

Bets Versus JPMorgan

Signs are emerging that traders are attempting to squeeze JPMorgan’s positions in credit derivatives. The 10-year Markit CDX North America Investment Grade Index Series 9 jumped the most in almost eight months on May 11. The index is an older, less-active benchmark for credit-default swaps created in 2007 in which JPMorgan trader Bruno Iksil in London was said to have amassed as much as a $100 billion position. Another index contract that takes more concentrated risks on the same companies recorded the biggest two-week surge in two years.

Bonds considered the safest investments rallied, sending yields on some debt to record lows. The rate on seven-year U.S. notes declined as much as six basis points to 1.17 percent, while 10-year German bund yields decreased to as low as 1.43 percent and the U.K. gilt yield touched 1.86 percent.

The Stoxx Europe 600 Index (SXXP) sank 1.8 percent to a four-month low as all 19 industry groups retreated. Opap SA, Europe’s biggest listed gambling company, helped lead Greek stocks lower, tumbling 12 percent for the biggest drop since October. Greece’s benchmark ASE Index traded at the lowest level since November 1992 for a second day, tumbling 4.6 percent. Spain’s IBEX 35 Index lost 2.7 percent, extending this year’s retreat to more than 20 percent.

‘Dangerous Template’

The Greek political deadlock looked set to continue for a second week as President Karolos Papoulias failed to secure agreement on a unity government. Greece faces a 436 million-euro ($561 million) note coming due for repayment tomorrow. A Greek exit from the euro “is not necessarily fatal, but it is not attractive,” European Central Bank Governing Council member Patrick Honohan said May 12.

German Finance Minister Wolfgang Schaeuble said Europe has done the “utmost” to prop up the financially stricken country, limiting any further room for leniency after about 240 billion euros ($308 billion) of aid pledges. German Chancellor Angela Merkel’s party was defeated in North Rhine-Westphalia two days before data that will show whether the nation slipped into recession.

The exit of Greece from the euro “would remain a dangerous template if other economies continued to weaken,” Jim Reid, a strategist at Deutsche Bank AG in London, wrote in a report. “Investors would surely fear that a similar outcome was possible and would either shy away from investments or demand an unsustainable risk premium for holding exposure.”

Euro Weakens

The euro depreciated 0.6 percent to $1.2846, and slipped 0.7 percent versus the yen. The Dollar Index, which tracks the U.S. currency against those of six trading partners, advanced 0.4 percent to extend its longest rally since August 2008. The Australian dollar fell below parity with the greenback for the first time this year, with the Swedish krona weakening to 7 per dollar for the first time since Jan. 16.

The yield on the Spanish 10-year bond rose 22 basis points to 6.23 percent. The nation sold 2.9 billion euros of bills maturing in 364 and 518 days, compared with a maximum target of 3 billion euros. Italy’s 10-year yield increased 19 basis points to 5.70 percent as the government auctioned 5.25 billion euros of securities due in 2015, 2020, 2022 and 2025. Germany sold 3.3 billion euros of six-month bills, with Finland and France also auctioning debt today.

Credit-default swaps on Spain climbed 15 basis points to an all-time high of 534.

Commodities Slip

The S&P GSCI fell to the lowest since December. Copper futures slid 2.6 percent in New York and gold declined 1.5 percent to $1,561 an ounce, erasing its gain for the year. New York oil futures dropped 1.4 percent to $94.78 a barrel, the lowest front-month settlement since Dec. 19.

Brent crude futures declined 0.8 percent to $111.40 a barrel. Saudi Arabian Oil Minister Ali al-Naimi said yesterday in Adelaide, Australia, that Brent crude, the benchmark price for more than half the world’s oil, should trade at about $100 as crude supply outweighs demand.

Speculators cut bets on a rally in commodities by the most since November. Money managers reduced net-long positions across 18 U.S. futures and options by 19 percent to 723,239 contracts in the week ended May 8, the biggest decline since Nov. 22, Commodity Futures Trading Commission data show. The S&P GSCI Spot Index of 24 raw materials dropped 6.5 percent in eight sessions through May 11, the longest slide since December 2008.

The MSCI Emerging Markets Index (MXEF) dropped 2.1 percent to its lowest level on a closing basis since Jan. 11. The Hang Seng China Enterprises Index (HSCEI) of Chinese stocks listed in Hong Kong fell 1.5 percent, its eighth consecutive decline. The People’s Bank of China said on May 12 it’s cutting the amount of cash that banks must set aside as reserves for a third time since November. Russia’s Micex plunged 3.5 percent and benchmark gauges in Brazil and Poland fell at least 2 percent. India’s Sensex dropped 0.5 percent after inflation unexpectedly quickened in April.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; 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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JPMorgan’s New Investment Head Zames Shakes Up Office

By Dawn Kopecki, Michael J. Moore and Bradley Keoun - May 15, 2012 4:18 AM GMT+0700

JPMorgan (JPM) Chase & Co.’s Matt Zames, newly appointed to lead the bank’s chief investment office after the unit suffered a $2 billion loss, shook up leadership and announced a “renewed focus” on hedging risks.

Zames named new finance and risk chiefs and wrote in a staff memo that top London-based trading executive Achilles Macris would hand off duties. JPMorgan named Zames head of the office earlier today to succeed Ina Drew, whose retirement after the surprise loss marked the downfall of one of the highest- ranking women on Wall Street.

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The JPMorgan Chase building in New York. Photographer: Mark Lennihan/AP Photo

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May 14 (Bloomberg) -- Bloomberg Government economic analysts Nela Richardson and Chris Payne discuss JPMorgan Chase & Co.'s $2 billion trading loss and the regulatory system. (Source: Bloomberg)

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May 14 (Bloomberg) -- Simon Johnson, a professor at the Massachusetts Institute of Technology and a former economist at the International Monetary Fund, talks about the outlook for JPMorgan Chase & Co. following the disclosure the company suffered a $2 billion trading loss. Johnson, speaking with Deirdre Bolton on Bloomberg Television's "In the Loop," also discusses the prospects Greece will exit the euro. (Source: Bloomberg)

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May 14 (Bloomberg) -- Jason Rosiak, head of portfolio management at Pacific Asset Management, talks about the implications of JPMorgan Chase & Co.'s $2 billion trading loss on credit markets. Rosiak, talking with Erik Schatzker and Stephanie Ruhle on Bloomberg Television's "InBusiness," also discusses investment strategy. (Source: Bloomberg)

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JPMorgan Chase & Co. Chief Investment Officer Ina Drew. Source: JPMorgan Chase & Co. via Bloomberg

“We will have a sharp, renewed focus on our hedging strategies, risk management and execution,” Zames, 41, wrote in the memo. “JPMorgan Chase will come out of this experience as a stronger firm.”

Chief Executive Officer Jamie Dimon, 56, announced the loss May 10, assailing his firm’s handling of trading in synthetic credit positions as “flawed, complex, poorly reviewed, poorly executed and poorly monitored.” New York-based JPMorgan is examining whether anyone in the unit, which employs a few dozen people in London, sought to hide risks, though there isn’t yet evidence that’s the case, the person said.

New London Chief

“It’s good to see there’s accountability as well as responsibility here,” said David Hendler, an analyst at CreditSights Inc., a New York-based research firm. “This person was in charge of this strategy and it appears was not aware, or giving the right signals to top management, of the risks that were building.”

Zames named Rob O’Rahilly to lead the office in Europe, the Middle East and Africa, as Christopher Chan continues overseeing Asia, according to the memo. Marie Nourie will become the global group’s finance chief, and Chetan Bhargiri will join the unit as chief risk officer, the memo shows.

Drew, 55, was one of two women on the operating committee at JPMorgan, the biggest and most profitable U.S. bank. Her office oversees about $360 billion, the difference between money from deposits and what the bank lends. Drew was named chief investment officer in 2005, reporting directly to Dimon.

Taking Risks

Dimon encouraged her unit to boost earnings by buying higher-yielding assets, including structured credit, equities and derivatives, in an expansion of risk-taking led by Macris, ex-employees said in April. That shifted the office from a role mitigating lending risks to becoming a profit center, former executives said.

Dimon said on May 10 that the unit made “egregious mistakes” by taking flawed positions on synthetic credit holdings and that JPMorgan could lose an additional $1 billion or more as it winds down the position. The U.S. Securities and Exchange Commission, the Federal Reserve and the Commodity Futures Trading Commission are investigating, according to people familiar with the probes.

Drew’s departure leaves Mary Erdoes as the only woman on the bank’s operating committee with one dozen men. The bank said in July that Heidi Miller, president of its international business, would retire this year. Sallie L. Krawcheck, one of the few women in a senior Wall Street position, was dismissed in September as Bank of America Corp.’s wealth-management division head. Former Morgan Stanley co-president Zoe Cruz, ousted in 2007, is returning money to investors after losing 8 percent last year at her $200 million hedge fund, Voras Capital Management LP.

‘Not Be Overshadowed’

Until recently, Drew did well with her investments, with the corporate division under which she reports earning a peak of $3.7 billion in 2009. The bank doesn’t break out results for the chief investment office. JPMorgan rewarded her with a $15 million pay package for 2010 and $14 million for her performance last year, according to regulatory filings.

“Ina Drew has been a great partner over her many years with our firm,” Dimon said in the statement. “Despite our recent losses in the CIO, Ina’s vast contributions to our company should not be overshadowed by these events.”

Drew was credited with guiding the company through the Russian debt crisis and collapse of hedge fund Long-Term Capital Management in 1998; market dislocation after the World Trade Center attacks and Enron Corp. bankruptcy in 2001; and the more recent financial crisis in 2008.

Avoids Limelight

Drew had a “tremendous ability through many crises to steer the firm through what would have otherwise been very painful liquidity periods,” said Lesley Daniels Webster, who was the bank’s head of market and fiduciary risk and worked with Drew for more than a decade. “JPMorgan Chase became a safe haven during the financial crisis” due to her management.

Drew, who declined to be interviewed for this article, is a private person who avoids the limelight, according to more than a dozen people who have worked with or know her personally. She graduated in 1978 from Johns Hopkins University in Baltimore and later got a master’s degree from the School of International Affairs at Columbia University. She began her career as a foreign-exchange and fixed-income trader at the Bank of Tokyo in 1979 and was hired in 1982 by Chemical Bank, which eventually became JPMorgan through a series of mergers.

Health Leave

She rose through the ranks at Chemical and was given oversight of U.S. interest-rate risk for the broader bank as well as a some discretionary trading positions in 1991 when it merged with Manufacturers Hanover Corp., according to a press release at the time. She was eventually given oversight of interest-rate and foreign-exchange risk globally, said incoming Freddie Mac CEO Don Layton, who was Drew’s boss from 1992, when Chemical Bank and Manufacturer’s Hanover merged, until 2002 at JPMorgan.

“She had a smart group of people who managed the investment portfolio well, developed good advanced techniques for measuring and managing the risk, sought the liquidity needs of the bank so we were well positioned at all times,” Layton said in an interview.

Drew went on leave for health reasons in 2010, said two people familiar with the matter, who asked not to be identified because the information is private. While she was out, Macris and Althea Duersten, who ran North America at the time and has since left the bank, assumed her duties for about six months, reporting directly to Dimon, a senior JPMorgan executive said.

Credit Trader

Macris, 50, and another trader on his team, Javier Martin- Artajo, are leaving the New York-based firm, the Wall Street Journal reported yesterday, citing the unidentified people. Martin-Artajo was not mentioned in Zames’s memo, and he didn’t respond to messages seeking comment. Kristin Lemkau, a JPMorgan spokeswoman, didn’t have an immediate response.

JPMorgan hired Zames from Credit Suisse First Boston in 2004 to run trading in Treasuries, agencies and interest-rate swaps and options. His responsibilities increased to include currencies, securitized products and municipal bonds. In 2009, Zames and Daniel Pinto were picked to run fixed income after Jes Staley took over the firm’s investment bank from William Winters and Steven Black. Pinto will become sole head of the business, according to the statement.

Under Zames and Pinto, JPMorgan has become the top bank globally in fixed-income trading. The firm’s 17 percent market share in 2011 was a record for Wall Street, Staley told shareholders earlier this year.

Bear Stearns

Zames previously worked at Long-Term Capital Management, which collapsed in 1998. Zames, then a 27-year-old trader, was one of two people at LTCM that Bill Krasker, described as the partner who had constructed many of the firm’s models, sought out in late August 1998 when he saw that U.S. swap spreads were trading in a wider range than the fund’s models had predicted, according to “When Genius Failed,” Roger Lowenstein’s book about the collapse of Long-Term Capital Management.

A decade later, in March 2008, Zames led a JPMorgan credit team dispatched to the offices of Bear Stearns Cos. to determine the investment bank’s financial position, according to “Last Man Standing,” Duff McDonald’s book on Dimon. JPMorgan ultimately provided Bear Stearns a secured loan facility with the Federal Reserve Bank of New York before agreeing to buy the firm two days later.

Zames, as chairman of the Treasury Borrowing Advisory Committee, wrote a letter to Treasury Secretary Timothy Geithner last year that said a failure to raise the nation’s $14.3 trillion debt limit could be “catastrophic.”

Madoff Scheme

He told JPMorgan Chief Risk Officer John Hogan in June 2007 that there was speculation that Bernard L. Madoff’s investment returns were part of a Ponzi scheme, according to a complaint filed against the bank by Irving Picard, the trustee liquidating Madoff’s firm. That was a year and a half before Madoff was arrested. Madoff, 74, is serving a 150-year sentence in a North Carolina federal prison after admitting he directed the biggest Ponzi scheme in history.

Picard sued the bank for $19 billion, saying the lender turned a blind eye to the fraud and should have alerted regulators. JPMorgan, which was Madoff’s primary banker, denied the allegations and U.S. District Judge Colleen McMahon in November dismissed the lawsuit.

To contact the reporters on this story: Michael J. Moore in New York at mmoore55@bloomberg.net; Bradley Keoun in New York at bkeoun@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net

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Dow Falls to Lowest Level Since January on Greece Concern

By Rita Nazareth - May 15, 2012 4:09 AM GMT+0700

U.S. stocks declined, sending the Dow Jones Industrial Average to the lowest level since January, as Greece struggled to form a new government amid growing speculation the nation may leave the European currency.

Financial and energy shares fell the most among 10 groups in the Standard & Poor’s 500 Index. JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC) sank at least 2.6 percent as European lenders slumped. Alcoa Inc. (AA) and Schlumberger Ltd. (SLB) slid more than 1.5 percent to pace declines in commodity producers. Symantec Corp. (SYMC), the biggest seller of security software, retreated 1.4 percent after Goldman Sachs Group Inc. cut its recommendation.

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Specialist Peter Giacchi, center, calls out prices on the floor of the New York Stock Exchange on May 11, 2012. Photographer: Richard Drew/AP Photo

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May 14 (Bloomberg) -- Bloomberg's Deborah Kostroun reports on the performance of the U.S. equity market today. U.S. stocks declined, sending the Dow Jones Industrial Average to the lowest level since January, as Greece struggled to form a new government amid growing speculation the nation may leave the European currency. (Source: Bloomberg)

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May 14 (Bloomberg) -- Bloomberg’s Alix Steel, Adam Johnson and Trish Regan report on today’s ten most important stocks including Ancestry.com, Zynga and Groupon. (Source: Bloomberg)

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May 14 (Bloomberg) -- Michael Obuchowski, chief investment officer at First Empire Asset Management, talks about the performance of U.S. stocks, the influence of the European debt crisis on U.S. markets and his equity investment strategy. He speaks with Pimm Fox and Alix Steel on Bloomberg Television's "Taking Stock." (Source: Bloomberg)

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May 14 (Bloomberg) -- James Paulsen, chief investment strategist at Wells Capital Management, and Lincoln Ellis, managing director at Linn Group, talk about the outlook for U.S. stocks and their investment strategies. They speak with Trish Regan and Adam Johnson on Bloomberg Television's "Taking Stock." Paul Parker, co-head of global merger and acquisitions at Barclays Capital, also speaks. (Source: Bloomberg)

The S&P 500 slid 1.1 percent to 1,338.35 at 4 p.m. New York time, the lowest since Feb. 2. The Dow fell 125.25 points, or 1 percent, to 12,695.35. The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against S&P 500 losses, rose 10 percent to an almost four-month high of 21.87. About 6.6 billion shares changed hands on U.S. exchanges, in line with the three-month average.

“The fear factor is definitely higher,” said Madelynn Matlock, who helps oversee about $14.7 billion at Huntington Asset Advisors in Cincinnati. “The whole European (SX7P) political situation is really the focus at this point. Nobody really knows what’s going to happen next and the market hates uncertainty.”

Global stocks fell as Greece’s political deadlock went into a second week after President Karolos Papoulias failed to secure agreement on a unity government. Alexis Tsipras, leader of Greece’s Syriza party, said Europe must reexamine its policy of austerity and that his party wants Greece to stay in the euro.

Record High

Concern about Europe’s crisis grew as the cost of insuring against a Spanish default jumped to an all-time high. Chancellor Angela Merkel’s party was defeated in Germany’s most populous state in an election that helped the Social Democrats tighten their grip on the country’s regional governments. The result may embolden the Social Democrats as they align with French President-elect Francois Hollande in an anti-austerity front.

“We certainly have a lot to worry about,” said John Manley, chief equity strategist for Wells Fargo Advantage Funds in New York. His firm oversees $207 billion. “The odds of Greece leaving the euro are higher. It’s an enormous game of chicken that they are playing with each other. To the degree it does represent the democratic process in Greece, it makes it more likely they default and the Europeans have to do something.”

American banks slumped as a measure of European lenders tumbled 2.8 percent. JPMorgan, which plunged 9.3 percent on May 11, lost 3.2 percent to $35.79. Bank of America fell 2.7 percent to $7.35. Citigroup Inc. (C) retreated 4.1 percent to $28.14.

‘Renewed Focus’

JPMorgan’s Matt Zames, newly appointed to lead the firm’s chief investment office after it suffered a $2 billion loss, shook up the unit’s leadership and announced a “renewed focus” on hedging risks. Achilles Macris, who was hired in 2006 to oversee trading in London where the losses occurred, will “transition” his CIO responsibilities, Zames said today in an employee memo obtained by Bloomberg News.

Energy and raw material producers sank as the S&P GSCI gauge of 24 commodities dropped 1.1 percent. Schlumberger lost 2.3 percent to 67.25. Alcoa fell 1.6 percent to $8.92.

Symantec slid 1.4 percent to $15.24. Goldman Sachs cut its rating to sell from neutral, citing worsening margins and cash flows. The share-price estimate was lowered to $14 from $16.

Best Buy Co. (BBY) rose 1.5 percent to $19.56. Founder Richard Schulze will step down as chairman after a probe found he failed to tell the board about allegations that then-Chief Executive Officer Brian Dunn was having an inappropriate relationship with a female employee.

Loan Agreement

Chesapeake Energy Corp. (CHK) surged 4.8 percent to $15.52. The company reached a $3 billion loan agreement with a unit of Goldman Sachs Group Inc. and affiliates of Jefferies Group Inc. to help ease a cash shortfall that threatens to curtail its development of oil and natural-gas wells.

Avon Products Inc. (AVP) rallied 3.8 percent to $20.96 as the company said it will respond within a week to Coty Inc., the perfume-maker that last week boosted its takeover offer for Avon to $10.7 billion.

Yahoo! Inc. (YHOO) rose 2 percent to $15.50. Chief Executive Officer Scott Thompson is stepping down after failing to correct errors in his credentials and the company is revamping its board, handing a victory to activist investor Daniel Loeb, who had pushed for the overhaul.

Ross Levinsohn, Yahoo’s head of global media, was named interim CEO, and director Fred Amoroso will become chairman.

Facebook’s IPO

Facebook Inc. (FB) plans to stop taking orders for its initial public offering tomorrow, two days ahead of schedule, according to a person with knowledge of the transaction.

Facebook will likely finish taking orders for the IPO after U.S. markets close May 15, said the person, who declined to be identified as the plans are private. The offer of 337.4 million shares at $28 to $35 each has been oversubscribed, people with knowledge of the matter said. Jonathan Thaw, a spokesman for Facebook, declined to comment.

“They’re swamped with the orders that are in,” said Jon Merriman, chief executive officer at investment firm Merriman Holdings Inc. in San Francisco. “They just need time to determine the price. They can send the message -- the books are closing, send in your orders now.”

As individuals bail out of U.S. stocks at the fastest rate in three decades, professional speculators have cut bearish bets by the most since 2008.

Money managers are net short 19,375 contracts on the S&P 500, down 82 percent from a four-year high in September even after the figure jumped from 3,584 last week, data compiled by Bloomberg and the Commodity Futures Trading Commission show.

Most Since 1984

U.S. equity mutual funds recorded $18 billion of outflows in April, the most since at least 1984, according to preliminary data from the Investment Company Institute.

Hedge funds and other institutions are speculating the index will extend its 23 percent rally since October after 69 percent of S&P 500 companies beat first-quarter earnings estimates and economists projected accelerating U.S. growth this year. Bears say last week’s addition to bets on declines show short sellers have completed almost all of the buying they are likely to do, depleting demand for equities.

“For the professional side, stocks look pretty compelling,” David Goerz, chief investment officer at Highmark Capital Management Inc., said in a telephone interview from San Francisco on May 9. His firm oversees about $17 billion. “Underlying economic strength is much more resilient than anybody expected it to be this year.”

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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