RIM Cutting Carrier Fee Shows ‘Spiral’ Concern

By Ari Altstedter and Hugo Miller - Jul 5, 2012 3:30 AM GMT+0700

Research In Motion Ltd. (RIM), the BlackBerry maker whose stock has dropped 95 percent since 2008, is under pressure from mobile phone companies to reduce carrier fees that generate $4.09 billion in annual revenue.

RIM said it faces demands to cut the fees paid by customers such as AT&T Inc. after posting its first loss in a decade last week. The fees account for more than a third of revenue at RIM, which is racing to introduce BlackBerry 10 phones and engineer a turnaround.

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RIM plunged 19 percent on June 29 after posting its first loss in a decade. Photographer: Nelson Ching/Bloomberg

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RIM Chief Executive Officer Thorsten Heins said yesterday, “This company is not ignoring the world out there, nor is it in a death spiral.” Photographer: Peter Foley/Bloomberg

“There’s definitely negotiations going on right now to reduce” the fees if the company has acknowledged its concern, said Sameet Kanade, a technology analyst at Northern Securities.

Kanade, who rates RIM a sell, estimates revenue from the monthly fee could drop 17 percent to $3.4 billion this year and another 18 percent to $2.8 billion in fiscal 2014 as carriers such as AT&T (T) and Verizon Wireless seek lower fees amid the company’s diminishing clout. RIM is the only handset maker to charge such a fee.

RIM levies the fees to carriers for subscriber access to its BlackBerry server infrastructure. As wireless operators face customers’ requests for reduced monthly charges, it becomes harder for those carriers to pass on the subscriber fee, said Kanade at Northern Securities in Toronto.

Spokespeople for AT&T and Verizon Wireless, BCE Inc. (BCE) and Rogers Communications Inc. (RCI/B), the two largest carriers in the U.S. and Canada respectively, declined to comment on the nature of any discussions they hold with RIM.

“RIM intends to continue generating a revenue stream from the services we offer,” said Nick Manning, a spokesman for Waterloo, Ontario-based RIM. He declined to elaborate on any requests for fee reductions cited by the company in last week’s earnings release.

Still Growing

Lower service fees in emerging markets, where RIM is increasingly reliant for growth as U.S. sales tumble, also pose a threat to business margins, said Kanade.

For now, it’s still a growing part of the business as RIM’s subscriber numbers rise, helped by increasing sales in markets such as Indonesia and South Africa. Revenue from those fees and other services climbed 4.1 percent last quarter from a year earlier as device sales plunged 57 percent. That lifted services’ share of total revenue to 36 percent last quarter from 20 percent the year before.

The fee revenue is expected to drop to $2.7 billion in fiscal 2014 and $2.3 billion in fiscal 2015, according to another estimate from Sanford C. Bernstein Ltd. analyst Pierre Ferragu.

While that may still give RIM enough cash to last two years, that doesn’t mean the company can afford to burn through its reserves, Kanade said.

Burning Cash

“Devices are definitely burning cash at a rapid rate,” said Neeraj Monga, an analyst at Veritas Research in Toronto. “They need to have the services business continue to give them cash so they can maintain their flexibility.”

Monga, who rates RIM a sell, said RIM may run out of cash by May if the new phone hasn’t launched by then, as hardware losses overwhelm shrinking service revenue.

“April, May of next year could be a time of reckoning for RIM,” he said. “It’s a race between what comes first: BB10, zero cash balance or an acquisition.”

RIM Chief Executive Officer Thorsten Heins said the BlackBerry maker isn’t in a “death spiral” as it works to deliver the new phone in 2013.

“The way I would describe it, we’re in the middle of a transition,” Heins said yesterday in a Canadian Broadcasting Corp. radio interview. “This company is not ignoring the world out there, nor is it in a death spiral.”

Delayed Release

RIM plunged 19 percent on June 29 after posting its first loss in a decade, delaying the release of a new phone it’s counting on to revive slumping sales and cutting 5,000 jobs. While the company said it had $2.2 billion in cash at the end of last quarter, Chief Financial Officer Brian Bidulka warned that number could drop if the company has to further restructure.

RIM has dropped 95 percent from its mid-2008 peak, cutting its market value to less than $4 billion. That makes the company’s cash reserves worth more than half its current market value. The stock closed unchanged at C$7.44 in Toronto. ‘As some pundits write RIM’s obituary, the company’s global subscriber base continues to grow to more than 78 million people in 175 countries,’’ Heins wrote in an editorial posted yesterday on the Globe and Mail’s website. He pointed out that RIM has no debt and more than $2 billion in cash.

“The facts about RIM’s business provide reason to believe that we can succeed, even as we take painful but necessary steps to focus our resources and build a lean, nimble organization focused intently on bringing BlackBerry 10 to market.”

Hires Bankers

The BlackBerry maker in May hired JPMorgan Chase & Co. (JPM) and RBC Capital Markets to help evaluate options and has not ruled out a sale of the company. In the CBC interview, Heins said the company is “looking into all options. At the end of the day it’s about creating long-term shareholder value.”

RIM’s introduction of BB10 has been delayed by what Heins has said is the volume of software code that needs to be created for the platform that will run future BlackBerrys and its PlayBook tablet. RIM last week postponed the release of the first BB10 phone to the first quarter of 2013, a delay of a year from when the device was first planned to come into the market.

RIM may also need its cash for the BB10 release, which analysts increasingly see as a long-shot to get RIM to compete with Apple Inc. (AAPL)’s iPhone and devices built on Google Inc. (GOOG)’s Android platform. All of that means they can’t afford a sizable drop in services revenue, said Anil Doradla, an analyst at William Blair Co. in New York.

The drop over the next two quarters of services revenue “will not be so severe that they just have to stop their phone business,” said Doradla, who rates RIM the equivalent of a hold. “But it’s not going to be pretty.”

To contact the reporters on this story: Ari Altstedter in Toronto at aaltstedter@bloomberg.net; Hugo Miller in Toronto at hugomiller@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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Apple Said to Plan Smaller IPad to Vie With Google Nexus

By Peter Burrows and Adam Satariano - Jul 5, 2012 11:01 AM GMT+0700

Apple Inc. (AAPL) plans to debut a smaller, cheaper iPad by year-end, two people with knowledge of the plans said, to help maintain dominance of the tablet market as Google Inc. (GOOG) and Microsoft Corp. (MSFT) prepare competing handheld devices.

The new model will have a screen that’s 7 inches to 8 inches diagonally, less than the current 9.7-inch version, said the people, who asked not to be identified because Apple hasn’t made its plans public. The product, which Apple may announce by October, won’t have the high-definition screen featured on the iPad that was released in March, one of the people said.

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Hugo Barra, director of product management at Google Inc., with the Nexus 7 tablet during the Google I/O conference in San Francisco on June 27, 2012. Photographer: David Paul Morris/Bloomberg

A smaller, less expensive iPad could undercut the ambitions of Google, Microsoft and Amazon.com Inc. (AMZN) to gain traction in the advancing tablet market, said Shaw Wu, an analyst at Sterne Agee & Leach Inc. The new device will probably have a price closer to Google’s Nexus 7 tablet and Amazon’s Kindle Fire, both of which have 7-inch screens and cost $199.

“It would be the competitors’ worst nightmare,” Wu said in an interview. “The ball is in Apple’s court.”

Trudy Muller, a spokeswoman for Cupertino, California-based Apple, declined to comment yesterday.

Since the iPad went on sale in April 2010, Apple has dominated the tablet market, which is predicted by DisplaySearch to reach $66.4 billion this year. Apple has 61 percent of the market, according to Gartner Inc.

Apple’s rivals are eager to gain a toehold. Google said on June 27 that it will sell a tablet-style device called the Nexus 7. Earlier in the month, Microsoft announced a tablet called Surface that will have a similar screen size as the current iPad. Amazon’s Kindle Fire was released last year.

Google Strategy

The entrants’ best chance of success has been to focus on markets where Apple had no toehold, said Jan Dawson, an analyst at Ovum Ltd. The Surface comes in two models that are most likely to appeal to buyers who want to continue using Microsoft’s Windows software, Dawson said. While Microsoft has not disclosed pricing or timing for either, the higher-end version will probably be pricier than the iPad and targeted more at an emerging class of laptop PCs called Ultrabooks, he said. The latest iPad ranges in price from $499 to $829.

Google’s Nexus 7 could stack up well against Amazon’s Kindle Fire, which went on sale in November. The Nexus 7, manufactured by Asustek Computer Inc. (2357), has a faster processor and better battery life than the Kindle Fire, as well as a front-facing camera.

Still, competing with a lower-priced iPad will be more challenging, Wu said. Apple benefits from having more than 225,000 apps that have been tailored specifically for the current iPad.

Apple Retail

The company also boasts more than 360 retail stores where the device can be purchased and tested by consumers. Google said the Nexus 7 will be available only from its online store, while Microsoft will sell its tablets online and at its smaller chain of 20 stores.

Apple has considered introducing a smaller tablet since the original iPad was released, one person said. That approach has worked for Apple’s iPod, which is the world’s top music player and comes in various sizes and colors.

Yet Apple co-founder Steve Jobs spoke skeptically of smaller tablets before his death in October. He said in 2010 that the iPad’s current size was the minimum required to ensure a good user-experience and enable attractive software applications.

The screen of the small model will have the same number of pixels as those in the iPad before it was upgraded to the so- called Retina Display earlier this year, one person said.

Fatter Margins

Apple also may be at an advantage profit-wise. The gross margin on the latest iPad is about 37 percent, according to Wu. Apple could earn a similar profit on a smaller iPad because it will probably use the cheaper screen, Wu said. Apple can also charge more for the device without sacrificing sales, he said.

“This isn’t like the old days, when it cost thousands of dollars more to buy an Apple product,” Wu said. “Fifty or a hundred bucks wouldn’t be enough to make someone switch.”

Amazon, by contrast, loses money on every Kindle Fire it sells, with the aim of profiting from sales of books and other digital media. At the $199 price of the Nexus 7, Google’s plan should be to break even on the hardware, in exchange for the opportunity to win advertising and related revenue, said Michael Gartenberg, an analyst at Gartner Inc.

Apple’s plans to release a smaller sized iPad were reported previously in blogs, including DigiTimes.

Microsoft’s Stakes

The stakes are high for Microsoft and Google to succeed at hardware sales. Both companies have risked alienating long-time hardware partners, such as Samsung Electronics Co., by selling their own tablets, Gartenberg said.

“How does Samsung make money in tablets, when Google is partnering with Asus to make a product that makes no money?” he asked.

A failure to gain traction with the Nexus 7 and Surface, respectively, might also undermine the credibility of Google’s Android strategy and of Microsoft’s introduction of the next version of the Windows operating system, Wu said. If Google and Microsoft can’t make a must-have product around their own software, consumers may be harder to convince that hardware manufacturers could do it, he said.

“They’re really sticking their necks out this time, putting their own brands on this front and center,” Wu said.

To contact the reporters on this story: Peter Burrows in San Francisco at pburrows@bloomberg.net; Adam Satariano in San Francisco at asatariano1@bloomberg.net

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

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VW to Pay $5.6 Billion for Rest of Porsche After Seven-Year Saga

By Chad Thomas and Dorothee Tschampa - Jul 5, 2012 5:53 AM GMT+0700

Volkswagen AG (VOW) agreed to buy the 50.1 percent stake in Porsche SE (PAH3)’s automotive business that it doesn’t already own for 4.46 billion euros ($5.6 billion), ending a seven-year takeover saga that divided two of Germany’s most powerful families.

VW was able to proceed with the transaction after reaching an agreement with German tax authorities, it said in an emailed statement late yesterday. The cash deal is based on an equity value of 3.88 billion euros and also includes what the Porsche holding company would have received in dividend payments and half of the forecast synergies from the combination.

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A customer browses Porsche 911 automobiles on display outside a dealership in Stuttgart, Germany. Photographer: Guenter Schiffmann/Bloomberg

The agreement means Wolfsburg, Germany-based Volkswagen can now fully fold the Porsche automaking business into its stable of brands, which range from Audi sedans to Ducati motorbikes. The two companies agreed to combine in 2009 after Stuttgart- based Porsche racked up more than 10 billion euros of debt in an unsuccessful attempt to take over Europe’s largest carmaker.

“We can now cooperate even more closely and jointly leverage new growth opportunities in the high-margin premium segment,” VW Chief Executive Officer Martin Winterkorn said in an e-mailed statement. “Combining their operating business will make Volkswagen and Porsche even stronger -- both financially and strategically -- going forward.”

VW said it expects Porsche’s automaking business to be fully consolidated in its accounts from Aug. 1. Porsche’s earnings contribution for this year will be mainly offset by the purchase price, VW said. By revaluing its existing shares in Porsche, VW expects to book a non-cash gain of more than 9 billion euros and predicts a liquidity drain on its own automaking division of about 7 billion euros.

U.S. Lawsuits

The two companies scrapped the plan for a full merger last year with the Porsche holding company, which is controlled by the Piech-Porsche family and still owns 50.7 percent of VW’s common stock, because of lawsuits against Porsche in the U.S. and Germany over the failed VW takeover.

The deal announced yesterday allows VW to purchase Porsche’s automotive business without having to pay the taxes associated with exercising a put-call option it had to buy the stake. The agreement will result in 320 million euros in additional synergies due to the earlier completion.

Botched Takeover

“I am not surprised by the deal as such, only by the timing,” said Albrecht Denninghoff, a Frankfurt-based analyst at Silvia Quandt Research. “Both parties have wanted the integration for a long time.”

Volkswagen shares have climbed 11 percent this year, valuing the carmaker at 57.2 billion euros. Shares in the Porsche SE holding company are up 1.5 percent in 2012, giving the company a market value of 12.8 billion euros.

Porsche’s attempt starting in 2005 to take over Volkswagen, which makes more cars in a week than the sports-car maker does in a year, split the controlling family. Ferdinand Piech, VW’s chairman, crossed his cousin Wolfgang Porsche to thwart the plan, which ultimately fell apart after Porsche’s debt rose in the midst of the financial crisis.

Piech, 75, the former VW CEO who was elected to a third term as chairman in April, has since solidified control of Volkswagen. His wife, Ursula, took a seat on the company’s supervisory board earlier this year. In April, VW agreed to acquire Italian motorcycle maker Ducati, fulfilling Piech’s vision of a company with a range spanning two-wheelers to 50-ton trucks. VW also controls truck makers MAN SE and Scania AB.

“To have the Porsche clan as owners and the anchor shareholder is good for Volkswagen and for Germany,” said Christoph Stuermer, an IHS Automotive in Frankfurt. “This has changed the cultural heart of the company. Volkswagen has become substantially stronger and long-term oriented.”

To contact the reporters on this story: Chad Thomas in Berlin cthomas16@bloomberg.net Dorothee Tschampa in Frankfurt at dtschampa@bloomberg.net.

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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Stocks in Europe Drop With Euro; Asian Shares Advance

By Stephen Kirkland - Jul 5, 2012 4:00 AM GMT+0700

The euro declined on speculation the European Central Bank will cut interest rates to a record low tomorrow after a report showed Germany’s services industries unexpectedly shrank last month. Metals fell and European stocks pared their drop.

The euro depreciated 0.7 percent to $1.2524 at 4:54 p.m. in New York. Copper decreased 1.3 percent and Brent crude dropped 0.9 percent. The Stoxx Europe 600 (SXXP) Index was little changed after falling 0.5 percent. Standard & Poor’s 500 Index futures were little changed on the U.S. Independence Day holiday. Italy’s 10-year bond snapped four days of gains.

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A financial trader monitors data on computer screens at the Frankfurt Stock Exchange in Frankfurt. Photographer: Simon Dawson/Bloomberg

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July 4 (Bloomberg) -- Kathleen Brooks, research director at Forex.com, Christian Schulz, senior economist at Berenberg Bank, and Derek Halpenny, European head of global currency-markets research at Bank of Tokyo-Mitsubishi UFJ Ltd., discuss the outlook for European Central Bank monetary policy. This report also includes comments from ECB President Mario Draghi, who will hold his monthly press conference tomorrow. (Source: Bloomberg)

A gauge of German services fell to 49.9 in June, less than the earlier reading of 50.3, according to London-based Markit Economics, with a figure below 50 indicating contraction. Other reports showed euro-area services and manufacturing output declined for a fifth month and China’s services expanded at the slowest pace in 10 months. ECB President Mario Draghi will probably cut the benchmark rate by a quarter-percentage point to 0.75 percent, according to the median forecast of economists in a Bloomberg survey.

“Slow growth dynamics and uncertainty are pressuring the euro,” said Gavin Friend, a London-based markets strategist at National Australia Bank Ltd. “The ECB will probably cut tomorrow. Draghi has hinted that an easing of policy is on the way. The euro will probably lag behind, with other currencies rallying more.”

IMF Outlook

The International Monetary Fund cut its U.S. growth estimate yesterday and said the Federal Reserve may need to further ease monetary policy.

The Stoxx 600 was little changed after rallying 5.2 percent over the previous three days. The gauge is still on course for a fifth straight week of gains, the longest stretch since January, as European leaders agreed to address flaws in their bailout programs to ease the sovereign-debt crisis and speculation grew that central banks will take steps to boost the economy.

Futures on the S&P 500 (SPX) fluctuated after the index completed its biggest three-day rally of the year. U.S. equity and bond markets were closed today.

A report on July 6 is forecast to show that U.S. employers added 90,000 to payrolls in June after a gain of 69,000 in May, according to a Bloomberg survey of economists. Alcoa Inc., America’s biggest aluminum producer, is due to kick off the U.S. earnings-reporting season July 9.

The euro fell 0.6 percent against the yen, dropping versus 13 of its 16 major peers. Sweden’s krona climbed to its strongest level against the euro since December 2000 after Sweden’s central bank left its main interest rate unchanged.

Bunds Gain

The yield on Italy’s 10-year bond rose 14 basis points to 5.77 percent, widening the spread with German bunds by 21 basis points to 430 basis points. Italy’s budget deficit increased in the first quarter to 8 percent of gross domestic product, the highest in three years. The yield on five-year German debt fell seven basis points to 0.48 percent, the lowest closing level since June 18.

Brazil’s Bovespa rose 0.5 percent as Usinas Siderurgicas de Minas Gerais SA (USIM5), a steelmaker, increased 3.3 percent. It rallied 8.3 percent yesterday as Reuters, citing two people familiar with the matter whom it didn’t identify, reported that the company is raising prices. Usiminas declined to comment when contacted by Bloomberg. The MSCI Latin America index retreated 0.4 percent.

The Standard & Poor’s/TSX Composite Index of Canadian stocks climbed 0.6 percent as financial companies rallied after the Competition Bureau approved a proposed bid for the Toronto Stock Exchange by a group of Canadian banks.

The Kospi Index gained 0.4 percent in South Korea as Hyundai Motor Co. (005380) advanced 1.7 percent after it sold more cars in the U.S. The Hang Seng China Enterprises Index of mainland companies slipped 0.3 percent. The MSCI Emerging Markets Index (MXEF) fell less than 0.1 percent.

To contact the reporter on this story: Stephen Kirkland in London at skirkland@bloomberg.net

To contact the editor responsible for this story: Stuart Wallace at Swallace6@bloomberg.net

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Diamond Says Rivals Lowballed Libor, Blames Regulators

By Jesse Westbrook, Liam Vaughan and Howard Mustoe - Jul 5, 2012 6:01 AM GMT+0700

Robert Diamond, who quit this week as chief executive officer of Barclays Plc (BARC), sought to blame other banks for misleading markets about their ability to borrow, and regulators for turning a blind eye.

Ordered to testify to British lawmakers after Barclays agreed to pay a record 290-million pound ($455 million) fine for rigging the London interbank offered rate, Diamond said yesterday he was “disappointed” regulators failed to act on repeated warnings from Barclays that competitors had lowballed their submissions. Legislators challenged him on why he took so long to uncover his own firm’s attempts to manipulate the rate.

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Former Barclays Chief Executive Officer Robert Diamond is seen in this screen grab as he gives evidence to Parliament's Treasury Select Committee at Portcullis House in London. Source: U.K. Parliament via Bloomberg

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Former Barclays Chief Executive Officer Robert Diamond is seen in this screen grab as he gives evidence to Parliament's Treasury Select Committee at Portcullis House in London. Source: U.K. Parliament via Bloomberg

“This isn’t just Barclays,” Diamond, 60, told lawmakers at a three-hour hearing of Parliament’s Treasury Select Committee. “Throughout 2007 and 2008, no institution of the 16 banks reporting three-month dollar Libor was at the higher end more consistently than Barclays. Barclays was getting questions about why it was always high and we were saying, ‘We are high because we were reporting at where we were borrowing money.’”

Diamond’s comments underscore concern that Libor, the benchmark for more than $360 trillion of global securities, has stopped being an accurate reflection of banks’ borrowing costs. Last week, regulators found Barclays had tried to manipulate the benchmark for profit and to mask its difficulty borrowing money during the credit crisis.

Huge Unhappiness

The scandal has already cost the jobs of Barclays C Marcus Agius, 65, and Chief Operating Officer Jerry Del Missier, 50. At least 12 more banks, ranging from Citigroup Inc. (C) to UBS AG (UBSN), are still being probed by regulators.

“I’m asking why people at Barclays noticed other people doing this, but were unable for whatever reason to recognize what was going on internally,” Scottish National Party lawmaker Stewart Hosie said. There is “a huge amount of unhappiness both in Parliament and in the general public.”

Libor is calculated by a survey of banks’ daily estimates of how much it would cost them to borrow from one another for different time frames and in different currencies. Because submissions aren’t based on real trades, the potential exists for the benchmark to be manipulated by traders seeking to profit from where the rate is set.

Diamond apologized for the rigging, blaming a group of 14 traders out of 2,000, and said the bank had failed in taking so long to uncover their actions. He said he didn’t know about their activities until a week before regulators published their findings, including e-mails between Barclays traders.

‘Physically Ill’

“When I read the e-mails from those traders, I got physically ill,” he told lawmakers.

Andrea Leadsom, a Conservative member of the committee and a former Barclays banker herself, questioned why compliance officers hadn’t been aware of these exchanges, which took place over a period of years.

“I want to focus on the criminality,” she said. “Not the issues of the financial crisis but the actual criminal behavior. Clearly there was a significant amount of collusion going on.”

Trading-desk supervisors had failed to alert their bosses, Diamond said. “In cases where that happened, they were not doing their job and that will be dealt with,” he said. Some will be subject to follow-up criminal probes, he said. “Clearly there was behavior that was reprehensible.”

The fact that “some of these things only became clear to Bob” recently “struck me as odd,” said Michael Trippitt, an analysts at Oriel Securities Ltd. in London.

Shares Slip

Barclays shares slipped 0.6 percent to 166 pence in London trading yesterday. They plunged 16 percent on June 28, the day after the bank’s settlement with regulators was announced. The stock is down 5.7 percent this year, making Barclays the worst performer in the six-member FTSE 350 banks index.

Barclays spoke to the Bank of England, the U.K. Financial Services Authority, the Federal Reserve Bank of New York and the British Bankers’ Association 33 times in 2007 and 2008, the lender said in an earlier statement to lawmakers.

In those conversations it “consistently” raised concerns that its competitors were low-balling the rate, the bank said. Barclays’s three-month dollar Libor submissions were in the top quartile 89 percent of times from Sept. 1, 2007 to Dec. 31, 2008, the bank said in the statement.

“A number of the firms who were posting had emergency loans, were nationalized or were having trouble funding and yet we were posting the highest level,” Diamond said yesterday. “We would question whether some of those other institutions could actually get funds at the levels they’re posting.”

Nationalization Threat

Barclays also released notes the bank said were written by Diamond following an Oct. 29, 2008 phone conversation he had with Paul Tucker, now deputy governor of the Bank of England.

Tucker called Diamond to inform the banker that “senior” Whitehall officials had asked why Barclays’ Libor submissions were always at the “top end.” Tucker told Diamond that Barclays’s submissions didn’t always need to be as high as they had been recently, according to Diamond’s note.

Diamond said yesterday he asked Tucker to tell the officials that not all banks were providing quotes that represented the true level at which they could borrow money. He said he was also concerned the lender could have been nationalized if it showed signs of difficulties in obtaining funding.

“If Whitehall then was told Barclays was at the highest in Libor, they might say to themselves, ‘my goodness, they can’t fund; we need to nationalize them,’ as they had nationalized other British banks,” he said. Whitehall is the London street where most British government departments are based.

The conversation between Diamond and Tucker was passed on to Del Missier, who misinterpreted it as government permission to submit lower quotes, according to Barclays.

Diamond said he didn’t believe government officials wanted Barclays to “fiddle” with its Libor submissions. Barclays had no difficulty funding, he said.

Tucker yesterday made a request to appear before Parliament “as soon as possible” to give evidence on Libor, according to a statement released by the Bank of England.

To contact the reporters on this story: Jesse Westbrook in London at jwestbrook1@bloomberg.net; Liam Vaughan in London at lvaughan6@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

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Particle Discovery Brings Scientists Close to Understanding Mass

By Thomas Mulier and Jason Gale - Jul 5, 2012 5:01 AM GMT+0700

Scientists seeking to explain the origins of matter discovered a particle that may support a decades-old theory of physics, bringing people closer to understanding unseen parts of the universe.

The observed particle is the heaviest boson ever found, said Joe Incandela, spokesman for one of the experiments at CERN, the European Organization for Nuclear Research, at a seminar yesterday at its Geneva headquarters. Scientists stopped short of claiming they have found the elusive Higgs boson, a theoretical particle that could explain where mass comes from.

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A graphic showing a collision of particles at the Compact Muon Solenoid experience, at CERN, in Geneva, on December 13, 2011. Photographer: Fabrice Coffrini/AFP/Getty Images

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Spokesman for one of the experiments at CERN Joe Incandela, right, gestures next to CERN Director Rolf-Dieter Heuer at a press conference in Meyrin near Geneva. Photographer: Fabrice Coffrini/AFP/Getty Images

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U.K. Physicist Peter Higgs said, "For me, it’s really an incredible thing that it’s happened in my lifetime.” Photographer: Fabrice Coffrini/AFP/Getty Images

“As a layman, I think I would say ‘we have it,’” said Rolf-Dieter Heuer, director of CERN, at a press conference in Geneva. It will take at least three to four years of research to fully understand the properties of the observed particle, Heuer said.

The announcement brings humankind closer to answering a millennia-old question that the ancient Greeks wrestled with: what is matter made of? The particle is a key to the Standard Model, a theory explaining how the universe is built, and its existence would help scientists gain a better understanding of how galaxies hold together. It also could open a door to exploring other parts of physics such as superparticles or dark matter that telescopes can’t detect.

‘Sings and Dances’

The new boson “sings and dances like” the theoretical particle, said Pauline Gagnon, a researcher on the Atlas set of experiments in Geneva, in an interview in Melbourne, where she was attending the bi-annual International Conference on High Energy Physics. “There is no doubt it comes from a different signal, different channels, with different experiments. We just need in the next few months with more data to ascertain exactly what are the properties of this particle to see if it is exactly the Standard Model Higgs boson or some variation of it."”

Particle physics is the study of the elemental building blocks that make up matter. These particles, with names such as quark, fermion, lepton and boson, can’t be subdivided. They exist and interact within several unseen ‘‘fields’’ that permeate the universe.

The field that generates mass for objects is named for U.K. physicist Peter Higgs, who in the 1960s was one of the first scientists to outline a working theory on how elemental particles achieve mass. Higgs was one of four of the theorists attending yesterday’s meeting in Geneva. He wiped a tear from his eye as the findings were presented.

Champagne for Higgs

‘‘For me, it’s really an incredible thing that it’s happened in my lifetime,” Higgs said in Geneva. In a statement, he said he would be “asking my family to put some champagne in the fridge.”

Higgs wrote that some particles -- such as photons, the basic unit of light -- don’t interact with the Higgs field, and thus don’t achieve mass. Most others do.

To put it another way, if the Higgs field were a Hollywood party, a photon would be the unknown actor who hurries through without gaining a bit of interest from others in the room. Other particles would be more like Angelina Jolie, drawing crowds of hangers-on as they move through the party.

It gets increasingly harder to stop such a cluster from moving forward and more difficult to get it moving again once it’s stopped, meeting one definition of mass.

Scientists are trying to prove the existence of the Higgs field by displaying a physical effect for the Higgs boson, a particle that lives for less than a trillionth of a second and is an excitation, or force, within the Higgs field.

Digging Deeper

Providing indirect evidence that the Higgs field exists will allow scientists to dig even deeper into the secrets of our existence, said Mark Wise, a professor of physics at California Institute of Technology.

“In some sense, this is the beginning,” Wise said of finding the boson. “Because we want to know all its properties.”

The data presented yesterday are the latest from the $10.5 billion Large Hadron Collider, a 27-kilometer (17-mile) circumference particle accelerator buried on the border of France and Switzerland. CERN has 10,000 scientists working on the project, in which billions of subatomic particles are hurled at each other at velocities approaching the speed of light.

The collider will provide more data later this year, giving scientists a more complete picture of the observed new particle. Researchers will try to determine whether it is a Higgs boson, the particle predicted by the Standard Model.

Like Columbus

“Very few physicists would privately argue that this is not a Higgs particle,” said Themis Bowcock, head of particle physics at the University of Liverpool, in a statement. “For physicists, this is the equivalent of Columbus discovering America.”

A more exotic version of the Higgs particle could help scientists understand the 96 percent of the universe that remains obscure, since observable matter only represents 4 percent of the total, CERN said.

To declare the boson is discovered, physicists use the statistical standard of “five sigma,” meaning that there should only be a 1 in 3.4 million chance that a sighting would be due to chance. The observations of the new particle have a five-sigma level of significance, Incandela said.

“The implications are very significant and it is precisely for this reason that we must be extremely diligent in all of our studies and cross-checks,” he said.

To contact the reporters on this story: Thomas Mulier in Geneva at tmulier@bloomberg.net; Jason Gale in Singapore at j.gale@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net

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