Woodford Seeks Olympus Shareholder Backing

By Chris Cooper and David Glovin - Dec 1, 2011 11:13 AM GMT+0700

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Dec. 1 (Bloomberg) -- Michael Woodford, former chief executive officer of Olympus Corp., talks about the accounting scandal at the Japanese camera maker. Woodford resigned as a director of Olympus in the first step of a campaign to take control of the company from the board that fired him as CEO in a dispute over falsified accounts. He spoke last night with Bloomberg Television's Lisa Murphy. (Source: Bloomberg)

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Michael C. Woodford, former president and chief executive officer of Olympus Corp. Photographer: Jin Lee/Bloomberg

Michael C. Woodford resigned as a director of Olympus Corp. in the first step of a campaign to take control of the camera maker from the board that fired him as chief executive officer in a dispute over falsified accounts.

“I will come together with a new slate of directors,” Woodford said in an interview in New York yesterday. Resigning “allows me to talk to all parties at Olympus.”

Shareholders should be given a chance to vote for new management after Olympus admitted former Chairman Tsuyoshi Kikukawa and senior aides colluded to cover up losses dating back to the 1990s, Woodford said. Southeastern Asset Management Inc., Olympus’s largest overseas stockholder, has called for Woodford’s reinstatement and pressed for more executives to quit, including Akihiro Nambu, the current head of investor relations.

“It’s completely inappropriate for the current management team, who are tainted by its past mistakes, to make choices about the identity of new board members,” Woodford said in an e-mailed statement today. “I intend to liaise with all interested stakeholders with a view to formulating a proposal for the constitution of a new board.”

The former CEO was fired after questioning $1.4 billion in takeover costs now at the center of criminal investigations. Olympus confirmed it accepted his resignation as a director, according to a statement to the Tokyo Stock Exchange.

“I remain completely committed to Olympus and, if the shareholders decide, very much want to return,” Woodford said in the e-mail. “I would like nothing more than to return to Olympus and lead it towards” regaining its reputation as “a world-class organization which is the envy of its competitors,” he said in the statement.

FBI, SEC

Woodford met with the Federal Bureau of Investigation, the Department of Justice and the Securities and Exchange Commission in the U.S. this week, following meetings with Japanese police and regulators last week, to discuss payments made in the purchase of Gyrus Group Plc and stake writedowns in three other takeovers.

The stock of the 92-year-old camera and endoscope maker has slumped more than 50 percent since Woodford was fired, on concerns about the scale of the losses, the threat of delisting and continuing criminal investigations. Olympus rose as much as 9.3 percent to 1,120 yen, and traded at 1,082 yen as of 11:13 a.m. in Tokyo.

Woodford met with President Shuichi Takayama and other directors at a board meeting in Tokyo last week and pledged to work to avoid delisting. The company must report earnings by a Dec. 14 deadline set by regulators to avoid being removed from public trading.

An independent panel investigating acquisitions and accounting that the company set up on Nov. 1 may report its findings as early as this week, according to a person with direct knowledge of the matter.

Committee Findings

The committee, headed by former Supreme Court Judge Tatsuo Kainaka, has interviewed previous executives including Woodford, Kikukawa and Hisashi Mori, the executive vice president dismissed over his part in the schemes to cover up losses.

The company is also forming two teams to improve corporate governance and business structure that will be led by President Takayama, the company said two days ago.

“The promise for reform or reconstruction by Mr. Takayama and the current board carries little or no credibility and is continuing to harm Olympus and its long-term future,” Woodford said in the statement.

To contact the reporter on this story: Chris Cooper in Tokyo at ccooper1@bloomberg.net; David Glovin in New York at dglovin@bloomberg.net

To contact the editor responsible for this story: Ben Richardson at brichardson8@bloomberg.net; Michael Hytha at mhytha@bloomberg.net

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Central Banks Cut Cost of Borrowing Dollars

By Scott Lanman and Jeff Black - Dec 1, 2011 4:25 AM GMT+0700

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Nov. 30 (Bloomberg) -- Michael Holland, chairman of Holland & Co., talks about the outlook for the U.S. economy following the decision by the Federal Reserve and five other central banks to cut the cost of emergency dollar funding for European banks. Holland speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)

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Nov. 30 (Bloomberg) -- Cliff Noreen, president of Babson Capital Management LLC, talks about his investment strategy for fixed-income. Noreen also discusses Europe's sovereign debt crisis and six central banks' move to make it cheaper for banks to borrow dollars in an effort to ease the crisis. He speaks with Adam Johnson on Bloomberg Television's "Street Smart." (Source: Bloomberg)

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Nov. 30 (Bloomberg) -- Brian Belski, chief investment strategist at Oppenheimer & Co., discusses the decision by the Federal Reserve and five other central banks to cut the cost of emergency dollar funding for European banks in response to the region's sovereign-debt crisis. Belski, speaking with Betty Liu and Dominic Chu on Bloomberg Television's "In the Loop," also discusses investment strategy and the outlook for financial markets. (Source: Bloomberg)

Six central banks led by the Federal Reserve made it cheaper for banks to borrow dollars in emergencies in a global effort to ease Europe’s sovereign-debt crisis.

Stocks rallied, driving the Dow Jones Industrial Average up the most since March 2009, commodities surged and yields on most European debt fell on the show of force from central banks aimed at easing strains in financial markets. The cost for European banks to borrow dollars dropped from the highest in three years, tempering concerns about the euro’s worsening crisis after leaders said they’d failed to boost the region’s bailout fund as much as planned.

“It’s supportive but not necessarily a game changer,” said Michelle Girard, senior U.S. economist at RBS Securities Inc. in Stamford, Connecticut. “The impact is more psychological than anything else” as investors take heart from policy makers’ coordination, Girard said.

The premium banks pay to borrow dollars overnight from central banks will fall by half a percentage point to 50 basis points, the Fed said today in a statement in Washington. The so- called dollar swap lines will be extended by six months to Feb. 1, 2013. The Fed coordinated the move with the European Central Bank and the central banks of Canada, Switzerland, Japan and the U.K.

The six central banks also agreed to create temporary bilateral swap programs so funding can be provided in any of the currencies “should market conditions so warrant.” Those swap lines were also authorized through Feb. 1, 2013.

Starting December

The swap lines were previously set to expire Aug. 1, 2012. The new pricing will be applied to operations starting on Dec. 5. Seven-day loans would carry an interest rate of about 0.58 percent, down from 1.08 percent, based on the current one-week overnight index swap rate of 0.08 percent. OIS is a measure of expectations for the benchmark federal funds rate.

“This was in response to increased tension in global financial markets,” Bank of Japan Governor Masaaki Shirakawa said at a press conference in Tokyo today. “Coordinated action will give markets a sense of security.”

The action wasn’t aimed at supporting any specific financial institution, Canadian Finance Minister Jim Flaherty said in a Bloomberg Television interview in New York.

The Dow jumped 490.05 points, or 4.2 percent, to 12,045.68 at 4 p.m. in New York, and the Stoxx Europe 600 Index earlier surged 3.6 percent. The euro strengthened to $1.3444 from $1.3317 late yesterday. The yield on the 10-year Treasury note climbed to 2.08 percent from 1.99 percent.

Game Changer?

“When there’s concerted action by central banks, it’s definitely good,” said Jens Sondergaard, senior European economist at Nomura International Plc in London. “But are liquidity injections a game changer when the heart of the problem is in European sovereign debt markets?”

European banks gained, with Barclays Plc (BARC) climbing as much as 9.4 percent in London trading. Deutsche Bank rose as much as 7.3 percent in Frankfurt, while BNP Paribas SA and Credit Agricole SA gained in Paris.

Today’s move echoes coordinated actions from the financial panic starting in 2007 to create and expand the currency-swap lines, whose use peaked at about $583 billion in December 2008. The central banks also jointly lowered their benchmark interest rates in October 2008.

Fed policy makers voted 9-1 for the swap action in a Nov. 28 videoconference, with Richmond Fed President Jeffrey Lacker dissenting, Michelle Smith, a Fed spokeswoman, said in an e- mail. Lacker voted in place of Philadelphia Fed President Charles Plosser, who was unavailable for the meeting, Smith said. Laura Fortunato, a spokeswoman for Lacker at the Richmond Fed, didn’t immediately respond to a request for comment.

No Current Difficulties

The Fed said U.S. financial companies “currently do not face difficulty obtaining liquidity in short-term funding markets.”

“However, were conditions to deteriorate, the Federal Reserve has a range of tools available to provide an effective liquidity backstop for such institutions and is prepared to use these tools as needed to support financial stability and to promote the extension of credit to U.S. households and businesses,” the central bank said in the statement.

U.S. House Financial Services Committee Chairman Spencer Bachus, an Alabama Republican, said in a statement that the move “is a recognition of the interconnected nature of the global economy” and that it’s in America’s interest to see Europe recover. At the same time, the action “should not and cannot absolve European policymakers from the need to resolve their own problems,” Bachus said.

China Move

Two hours before the Fed announcement, China cut the amount of cash that the nation’s banks must set aside as reserves for the first time since 2008. The level for the biggest lenders falls to 21 percent from a record 21.5 percent, based on past statements.

While today’s move by the six central banks is likely to ease tensions in money markets, it falls short of some calls for the ECB to step up and act as lender of last resort for the governments of the 17-member euro area and buy unlimited amounts of government bonds. Germany, Europe’s largest economy, has resisted the idea, arguing it isn’t the ECB’s job to do so and would only be a temporary fix.

The ECB unexpectedly cut its benchmark interest rate Nov. 3 by 25 basis points to 1.25 percent as the turmoil threatened to drag the euro area into recession. ECB policy makers next meet Dec. 8, while Fed officials gather Dec. 13.

Seven-Day Refinancing

Yesterday, the ECB allotted the most to banks in its regular seven-day refinancing operation in more than two years, lending 265.5 billion euros ($357.5 billion). The ECB offers unlimited funding to euro-area banks against eligible collateral.

“The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity,” the Fed statement said.

Under the dollar liquidity-swap program, the Fed lends dollars to the ECB and other central banks in exchange for currencies including euros. The central banks lend dollars to commercial banks in their jurisdictions through an auction process.

The swap arrangements were revived in May 2010 when the debt crisis in Europe worsened. The Fed three months earlier had closed all swap lines opened during the financial crisis triggered by the subprime-mortgage meltdown in 2007.

Dollar Tender

European lenders asked for a total of $395 million in the ECB’s 84-day dollar tender conducted in coordination with the Fed on Nov. 9. In the first offering on Oct. 12, the ECB lent six banks $1.35 billion for three months. The next three-month loan will be offered on Dec. 7.

The coordinated action “lowers the cost of emergency funding and increases the scope,” Mohamed El-Erian, chief executive officer, of Pacific Investment Management Co. said in a radio interview today on “Bloomberg Surveillance” with Ken Prewitt and Tom Keene.

Central banks “are seeing something in the functioning of the banking system that worries them,” El-Erian said.

To contact the reporters on this story: Scott Lanman in Washington at slanman@bloomberg.net; Jeff Black in Frankfurt at jblack25@bloomberg.net

To contact the editors responsible for this story: Chris Wellisz at cwellisz@bloomberg.net; Craig Stirling at cstirling1@bloomberg.net

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Alibaba-Led Group Said to Prepare Yahoo Bid

By Cristina Alesci, Jeffrey McCracken and Serena Saitto - Dec 1, 2011 9:38 AM GMT+0700

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Nov. 30 (Bloomberg) -- Bloomberg's Jon Erlichman reports on the outlook for Yahoo! Inc. and potential bids for the company. Alibaba Group Holding Ltd. and Softbank Corp. are in advanced talks with Blackstone Group LP and Bain Capital LLC about making a bid for all of Yahoo said three people with knowledge of the matter. Emily Chang also speaks on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)

Alibaba Group Holding Ltd. and Softbank Corp. (9984) are in advanced talks with Blackstone Group LP (BX) and Bain Capital LLC about making a bid for all of Yahoo! Inc., said three people with knowledge of the matter.

A bid may value Yahoo at more than $20 a share because of tax savings tied to the Internet company’s stakes in Alibaba and Yahoo Japan, said two of the people, who declined to be identified because the discussions are private. Yahoo shares advanced 6.9 percent to $16.79 in extended trading.

Yahoo’s board is meeting to discuss offers it received for a minority stake in the Sunnyvale, California-based company from bidders including TPG Capital and a group led by Silver Lake, people familiar with the matter said this week. Silver Lake’s bid valued Yahoo at about $16.60 a share, these people said. TPG Capital’s offer was higher, they said.

Some Yahoo investors say they would prefer the company be sold in its entirety, at a higher price. “It definitely has to be much higher than $16.60,” said Di Zhou, a Santa Fe, New Mexico-based analyst at Thornburg Investment Management, which oversees about $80 billion in assets, including Yahoo shares.

While the Alibaba group has prepared financing for a possible offer, it hasn’t decided on a final price or whether to proceed, the people said. The group would prefer to be invited to bid rather than going hostile, one person said. Alibaba hasn’t informed Yahoo of its possible bid, this person said.

No Decision Yet?

“Alibaba Group has not made a decision to be part of a whole-company bid for Yahoo,” John Spelich, a spokesman for Hangzhou, China-based Alibaba, said in an e-mailed statement.

At $20 a share, Yahoo would be valued at 24.1 times earnings in the past 12 months, data compiled by Bloomberg show. That would compare with 20.4 times for Google Inc. (GOOG) and a ratio of 9.5 for Microsoft Corp.

Yahoo shares rose 1 cent to $15.71 yesterday at the close in New York. The stock has fallen 5.5 percent this year.

The $20 price tag would undervalue the company because its Asian assets have so much growth potential, said Thornburg’s Zhou, who puts the value at about $25 a share. Yahoo, the largest U.S. Internet portal, owns about 40 percent of Alibaba, the top e-commerce site in China, and 35 percent of Yahoo Japan.

Zhou wants to see Yahoo hold on to the Alibaba stake until the Chinese company can hold an initial public offering, providing a windfall to investors.

“Chinese Internet penetration and e-commerce is going well,” she said. “It should be more valuable by the day.”

Chinese Growth

Total Internet users in China may grow 27 percent this year, with the number of online shoppers climbing 28 percent, according to Thornburg.

Alibaba is seeking to buy back the stake in its company that Yahoo owns. Softbank, meanwhile, wants to acquire the stake in Yahoo Japan, one of the people familiar with the matter said. In the proposed deal, Blackstone and Bain would take control of the U.S. operations, the person said.

Spokeswomen for Blackstone, Softbank and Yahoo declined to comment.

Alibaba Chief Executive Officer Jack Ma said in October that his company is interested in purchasing Yahoo. Earlier attempts by the Chinese e-commerce leader to buy out Yahoo’s stake faltered amid disagreements with former CEO Carol Bartz. Yahoo acquired the Alibaba stake for about $1 billion in 2005.

While Alibaba is in advanced talks with Blackstone and Bain, the company is also in discussions with other private- equity firms, including Providence Equity Partners Inc., about an offer, one person said.

Ken Sena, an analyst at Evercore Partners Inc. in New York, puts Yahoo’s total value at about $18 a share, with $5 coming from the U.S. Internet business. The so-called off-balance-sheet assets -- including the Asian investments -- are worth $11 a share, plus $2 in cash, he said. By buying the whole company, Alibaba would avoid having to negotiate over how much Yahoo’s main business is worth, Sena said.

“Almost two-thirds of the enterprise value is really these off-balance-sheet assets,” he said.

To contact the reporters on this story: Cristina Alesci in New York at calesci2@bloomberg.net; Jeffrey McCracken in New York at jmccracken3@bloomberg.net; Serena Saitto in New York at ssaitto@bloomberg.net

To contact the editor responsible for this story: Jennifer Sondag at jsondag@bloomberg.net

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Dow Average Jumps Most Since 2009 as Central Banks Take Action on Crisis

By Michael P. Regan and Rita Nazareth - Dec 1, 2011 4:30 AM GMT+0700

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Nov. 30 (Bloomberg) -- Anthony Crescenzi, executive vice president at Pacific Investment Management Co., talks about the global economy and financial markets. Crescenzi also discusses the U.S. and China's banking industries and real estate markets. He speaks from Newport Beach, California, with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

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Nov. 30 (Bloomberg) -- Ritesh Maheshwari, an analyst at Standard & Poor's in Singapore, talks about Asian banks' credit ratings. S&P upgraded ratings of Bank of China Ltd. and China Construction Bank Corp. to A from A- and maintained the A rating on Industrial & Commercial Bank of China Ltd., giving all three lenders higher grades than most big U.S. banks. Maheshwari speaks with John Dawson on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)

Stocks surged, giving the Dow Jones Industrial Average its biggest rally since March 2009, and the euro strengthened as six central banks made additional funds available to ease strains from Europe’s debt crisis. Treasuries fell while commodities jumped.

The MSCI All-Country World Index climbed 3.7 percent at 4 p.m. New York time and is up 7.6 percent in three sessions. The Dow gained 4.2 percent to 12,045.68, while the Stoxx Europe 600 Index capped its best four-day gain in three years. The dollar weakened against all 16 major peers, with the euro up 0.9 percent to $1.3441. The cost for European banks to fund in dollars retreated from the highest since 2008. Oil jumped to almost $101 a barrel and copper rose 5.5 percent.

The central banks of the U.S., the euro region, Canada, the U.K., Japan and Switzerland agreed to cut the cost of providing dollar funding via swap arrangements, the Federal Reserve said, and agreed to make other currencies available as needed. China said earlier today it will cut the reserve requirement ratio for banks by 0.5 percentage points, while data on U.S. business activity and the employment and housing markets topped economists’ estimates.

“I’m in a better mood today than I’ve been in a while,” Burt White, who helps oversee about $315 billion as chief investment officer at LPL Financial Corp. in Boston, said in a telephone interview. “This coordinated effort is a huge one. It is not a European problem, it’s a global problem. If we don’t get Europe solved, it’s going to send pretty big ripples across the globe. We really could see some upside for the market, if this momentum continues.”

Rescue Fund

Euro-area finance ministers said they would seek a greater role for the International Monetary Fund and the European Central Bank in fighting the sovereign debt crisis after conceding an effort to expand their bailout fund missed its target. The ministers yesterday agreed to guarantee as much as 30 percent of new bond sales from troubled governments, and to improve its ability to cap yields by buying bonds. European heads of government will meet in Brussels on Dec. 9 to discuss the crisis.

The new interest rate central banks are offering for dollar funding is the dollar overnight index swap rate plus 50 basis points, a half percentage-point cut, and the program was extended by six months to Feb. 1, 2013, the Fed said today. The six central banks also agreed to create temporary bilateral swap programs so funding can be provided in any of the currencies if needed.

Borrowing Costs

The actions helped ease a surge in borrowing rates fueled by concern about a possible breakup of the euro area.

The three-month cross-currency basis swap, the rate banks pay to convert euro payments into dollars, was 131 basis points below the euro interbank offered rate after earlier reaching a three-year high of 163. The U.S. two-year interest-rate swap spread fell the most in nine months. Predictions in the forward markets of how reluctant banks will be to lend in the first quarter dropped from an 18-month high.

“You really needed the central banks to come in and force, if you want to call it, the liquidity into the system,” Tobias Levkovich, Citigroup Inc.’s chief U.S. equity strategist, told Bloomberg Television. “And they recognize the pressure that was building.”

The moves by the central banks fueled speculation that the Fed will cut the discount rate it charges U.S. banks, which has been at 0.75 percent since February 2010, as the changes result in lower borrowing costs for foreign firms.

‘Level the Playing Field’

“Be on the lookout for headlines on this front,"Dan Greenhaus, chief global strategist at BTIG LLC in New York, wrote in a note to clients. Michael Cloherty, head of U.S. rates strategy at RBC Capital Markets in New York, said in a note that a discount-rate cut would ‘‘level the playing field,’’ while Jefferies Group Inc. Chief Financial Economist Ward McCarthy was skeptical the Fed will cut the rate since there is no dollar- funding problem in the U.S.

The Standard & Poor’s 500 Index jumped 4.3 percent, the most since Aug. 11. Today’s rally trimmed the sixth monthly decline in seven for the index, leaving it down 0.5 percent in November. U.S. equities also advanced after companies added 206,000 workers in November, according to data from ADP Employer Services that bolstered optimism in the labor market before a government jobs report in two days. The median forecast of economists surveyed by Bloomberg News called for an increase of 130,000.

Economic Data

Other data showed business activity in the U.S. expanded in November at the fastest pace in seven months, according to the Institute for Supply Management-Chicago Inc. The index of pending home sales increased 10.4 percent in October, the National Association of Realtors said, the biggest gain since November 2010 and five times the median forecast of economists.

The Fed said the economy expanded at a ‘‘moderate” pace in 11 of 12 districts, led by gains in manufacturing and consumer spending. The Fed’s Beige Book survey reinforced the central bank’s view that the economy, while strong enough to skirt a recession, remains too weak to bring down an unemployment rate stuck near 9 percent or higher for more than two years.

Indexes of commodity producers, industrial companies and financial firms jumped at least 5.1 percent to lead gains in all 10 of the main industry groups in the S&P 500. Trading volume of stocks in the index was 45 percent greater than the average over the past 10 sessions, according to data compiled by Bloomberg.

Caterpillar Inc., JPMorgan Chase & Co. and General Electric Co. surged at least 6.6 percent as all 30 stocks in the Dow climbed, sending the gauge up as much as 490 points.

Dollar, Commodities

The dollar weakened against all 16 major peers, with the Australian, South African and New Zealand currencies surging at least 2.5 percent.

The S&P GSCI Index of commodities climbed 0.7 percent and is up 3.4 percent in three days. Zinc, copper and aluminum rose more than 5.2 percent to lead gains today. Among 24 commodities tracked by the index, only seven declined.

Commodities are set for a “difficult environment” in 2012, UBS AG said, citing Europe’s debt crisis and a “hard landing” in China, the biggest raw-materials consumer. The People’s Bank of China cut the amount of cash that lenders must set aside as reserves for the first time since 2008 as Europe’s debt crisis dims the outlook for exports and growth.

European Stocks

More than 27 stocks advanced for every one that declined in the Stoxx 600, sending the benchmark gauge up 3.6 percent and extending its four-day rally to 9.1 percent. Barclays Plc surged and Deutsche Bank AG rallied more than 6 percent. BP Plc, Europe’s second-biggest oil producer, climbed 5 percent and BHP Billiton Plc, the world’s largest mining company, jumped 6.2 percent.

European stocks fell earlier after S&P cut debt ratings on lenders from Bank of America Corp. to Goldman Sachs Group Inc. to UBS AG. More than $3 trillion has been erased from the value of global equities this month as rising borrowing costs in Italy and Spain signaled Europe’s debt crisis was worsening.

The yield on the 10-year Treasury note rose nine basis points to 2.08 percent. Germany’s one-year yield dropped nine basis points to minus 0.01 percent, sinking below zero for the first time ever. Italy’s 10-year bond yield slid 22 basis points to 7.02 percent.

Default Swaps Drop

The cost of insuring against default on European corporate debt fell, according to traders of credit-default swaps. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings dropped 33 basis points to 758.5, according to JPMorgan Chase & Co. at 3 p.m. in London. A decline signals improved perceptions of credit quality.

The MSCI Emerging Markets Index (MXEF) added 2 percent, trimming this month’s drop to 6.7 percent. Benchmark gauges in Brazil, Russia, South Africa and Turkey gained at least 2.8 percent. Poland’s WIG20 Index jumped 4.8 percent after a report showed the economy grew more than economists forecast in the third quarter. The Shanghai Composite Index (SHCOMP) earlier fell 3.3 percent after central bank adviser Xia Bin said China’s policy “fine- tuning” doesn’t mean credit controls will be loosened.

To contact the reporters on this story: Michael P. Regan in New York at mregan12@bloomberg.net; Rita Nazareth in Sao Paulo at rnazareth@bloomberg.net

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

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Netflix Viewing Seen Swelling U.S. Cable Bills

By Alex Sherman - Nov 30, 2011 12:00 PM GMT+0700

Time Warner Cable Inc. (TWC) and U.S. pay- TV companies, weighing how to profit from surging Internet demand spurred by Netflix Inc. (NFLX) and Hulu, are on the verge of instituting new fees on Web-access customers who use the most.

At least one major cable operator will institute so-called usage-based billing next year, predicts Craig Moffett, an analyst with Sanford C. Bernstein & Co. in New York. He said Cox Communications Inc., Charter Communications Inc. (CHTR) or Time Warner Cable may be first to charge Web-access customers for the amount of data they consume, not just transmission speed.

“As more video shifts to the Web, the cable operators will inevitably align their pricing models,” Moffett said in an interview. “With the right usage-based pricing plan, they can embrace the transition instead of resisting it.”

U.S. providers like Time Warner Cable have weighed usage- based plans for years as a way to squeeze more profit from Web access, and to counter slowing growth and rising program costs in the TV business. While customer complaints hampered earlier attempts, pay-TV companies are testing usage caps and price structures that point to the advent of permanent fees.

“We’re basically a broadband provider,” Peter Stern, chief strategy officer for New York-based Time Warner Cable, said Nov. 17 at the Future of Television conference in New York. “As a convenience for our customers, we package and distribute television and provide service around that.”

Google (GOOG) Deterrent

Rogers Communications Inc., the largest Canadian cable company, has been billing broadband customers based on consumption since 2008. U.S. providers AT&T Inc. (T) and St. Louis- based Suddenlink Communications LLC are experimenting with usage-based plans.

Cable companies see usage-based billing as a way to limit the appeal of online services like Netflix and Hulu LLC, and reduce the threat from new entrants like Amazon.com Inc. (AMZN) and Google Inc.

“It’s the reason why Apple or Google would inevitably be reticent about committing a significant amount of capital to an online video model,” Moffett said. “You can’t simply assume just because you can buy the content more cheaply, you can offer a product that’s cheaper to the end user.”

Netflix and Hulu’s subscription services have driven up Web usage at peak hours once reserved for watching TV. Google, Amazon, Apple (AAPL) Inc. and premium channels HBO and Showtime have also put shows online and followed viewers onto mobile devices like iPads and Android tablets.

Web Demand

While demand for Web service grows, cable operators are battling to preserve profit in the mature pay-TV business and withstand competition from satellite carrier DirecTV (DTV), Verizon Communications Inc. (VZ)’s FiOS and AT&T’s U-Verse. Programmers like Walt Disney Co. (DIS)’s ESPN are also demanding higher fees.

Time Warner Cable, the second-largest U.S. cable operator behind Comcast Corp. (CMCSA), lost 126,000 pay-TV accounts in the third quarter.

The incentives to focus on Web access are compelling. Cable’s broadband gross margins are about 95 percent, versus 60 percent for video, according to Moffett. As programming costs increase nearly 10 percent a year, video margins are crimped, he said.

Time Warner Cable is testing meters to measure broadband consumption for the purpose of tiered pricing, Chief Executive Officer Glenn Britt said in June. In April, he said usage-based billing is “inevitable.” A previous attempt in 2009 was abandoned amid customer complaints.

Low-Impact Users

“Some form of usage-based billing might have some utility for customers who use the Internet very little, or only use low- bandwidth applications like e-mail,” said Alex Dudley, a Time Warner Cable spokesman.

AT&T, based in Dallas, charges digital subscriber line, or DSL, customers who exceed a monthly limit of 150 gigabytes in three consecutive months $10 extra for every additional 50 gigabytes of data they use.

Suddenlink, with about 1.4 million customers in states including Missouri, Arizona, Texas and North Carolina, began instituting usage caps in some markets in October. Users pay $10 for each 50 gigabytes they use over their monthly allowance.

Data usage is surging by almost 50 percent a year, Chief Executive Officer Jerry Kent said in an interview. Suddenlink’s broadband revenue rose 12 percent in the third quarter, versus a 1.6 percent gain from pay-TV.

“Our video business is challenged,” Kent said. “My broadband margins are double my video margins.”

Movie Quotas

Cox, the third-largest U.S. cable company, segments Web- access customers based on data speed, allowing those who purchase faster service to use more data overall.

While those who exceed the caps aren’t charged, they are told to reduce usage or choose a different plan, said Todd Smith, a spokesman for Atlanta-based Cox. He wouldn’t say whether Cox will start charging based on total data used.

Comcast, based in Philadelphia, and St. Louis-based Charter, No. 4 in the U.S., have instituted caps large enough that most customers aren’t affected. Neither charges overage fees, nor do they have near-term plans to charge subscribers based on consumption, according to Comcast spokeswoman Jennifer Khoury and Charter’s Anita Lamont.

The standard cap for Comcast, Charter, Cox and Suddenlink is 250 gigabytes per month. That’s enough for a household to send or receive 12,000 one-page e-mails and watch 60 standard- definition movies with excess capacity for other tasks, according to Suddenlink.

Netflix Protests

Netflix steers customers with enough bandwidth toward high- definition movies, which soak up about double the data. If the average U.S. household, which watches more than five hours of television a day, were to transfer all that viewing to an online, high-definition source, their usage would total almost 10 gigabytes a day and break through the current caps.

Charging by Web usage, cable companies may discourage customers from dropping traditional pay-TV service and slow the growth of Netflix, Hulu and an expanding list of online alternatives, Moffett said.

The possibility of usage-based pricing has brought protests from Los Gatos, California-based Netflix and warnings from Charlie Ergen, chairman of rival Dish Network Corp. (DISH), which operates the Blockbuster movie-rental business.

$20 Surcharge?

“That Netflix subscription of $7.99 could go to an extra $20 a month for bit streaming,” Ergen said during Dish’s conference call on Nov. 7, making a total monthly subscription “the equivalent of $27.99.”

Consumption-based pricing is anti-competitive if the goal of broadband providers is to boost revenue by diminishing the value of rivals, wrote Netflix General Counsel David Hyman in a July Wall Street Journal editorial.

The practice “is not in the consumer’s best interest as consumers deserve unfettered access to a robust Internet at reasonable rates,” said Steve Swasey, a Netflix spokesman.

Federal Communications Commission Chairman Julius Genachowski publicly supported usage-based pricing in December, a victory for cable companies concerned that usage-based billing would run afoul of net neutrality rules prohibiting Internet services from favoring one form of content for another.

While lower caps may slow the online shift, cable companies won’t be able to stop it. According to media researcher SNL Kagan, about 12.1 million U.S. households will receive TV shows and movies from Internet services rather than a traditional pay TV provider by 2015, up from 2.5 million homes at the end of 2010, SNL Kagan estimates.

Cable’s best option is to find ways to profit from the online shift, said Moffett. If the companies were to lose all of their video customers, the revenue decline would be more than offset by a lower programming fees and set-top box spending, he said.

“In the end, it will be the best thing that ever happened to the cable industry,” Moffett said.

To contact the reporter on this story: Alex Sherman in New York at asherman6@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net; Peter Elstrom at pelstrom@bloomberg.net

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Silver Lake Group Said to Bid $16.60 a Share for Yahoo Stake

By Brian Womack, Jeffrey McCracken and Serena Saitto - Dec 1, 2011 5:19 AM GMT+0700

A group of investors led by private- equity firm Silver Lake offered to buy a minority stake in Yahoo! Inc. for about $16.60 a share, according to people with knowledge of the matter.

Silver Lake, working with Microsoft Corp. (MSFT), venture-capital firm Andreessen Horowitz and Canada Pension Plan Investment Board, offered to buy convertible preferred securities equal to a 10 percent to 15 percent stake for as much as $3 billion, said one of the people, who asked not to be identified because the bids made this week are private. The price was lower than an offer made by private-equity firm TPG Capital, two people said.

Silver Lake’s bid values Sunnyvale, California-based Yahoo at $20.6 billion, about 6 percent higher than its market value at yesterday’s close. Under Silver Lake’s proposal, Yahoo would be able to distribute at least $5 billion to shareholders in the form of a special dividend or a share buyback, said the person. Yahoo, exploring strategic options after ousting Chief Executive Officer Carol Bartz, aims to wrap up the deal by the end of the year, people said.

“The offer is disappointing,” said Hamilton Faber, an analyst at Atlantic Equities LLP in London with a “neutral” rating on Yahoo shares. “Investors who’ve been buying Yahoo recently were hoping for a significant premium and a takeout of the full company, and this falls short on both counts.”

Spokeswomen for Yahoo, Silver Lake and Canada Pension Plan declined to comment.

Board Meeting

Yahoo directors are likely to discuss offers at a board meeting scheduled for today, one person said. Alibaba Group Holding Ltd., aiming to buy back the stake in itself owned by Yahoo, is monitoring the situation and may still enter the bidding, one person said.

Yahoo gained 1 cent to $15.71 at the close in New York. The shares have declined 5.5 percent this year.

While Microsoft failed in 2008 to acquire all of Yahoo, it aims to use a minority holding to safeguard its 10-year Web search agreement with the company.

Microsoft, based in Redmond, Washington, forged the partnership under Bartz to provide search technology to Yahoo sites. The deal was aimed at helping both companies vie with Google, the leader in U.S. search-related advertising.

Alibaba’s Role

KKR (KKR) & Co. and Blackstone Group LP (BX) are among the private- equity firms considering possible bids for Yahoo, people with knowledge of the matter said last month.

Private-equity firm Thomas H. Lee Partners is also considering a bid for Yahoo, people knowledgeable said.

Alibaba Group has said it’s interested in acquiring Yahoo, in part to buy back a stake the company owns. With a holding of about 40 percent, Yahoo is Alibaba’s biggest investor. Alibaba is waiting to see whether Yahoo’s board will deem the partial- stake bids inadequate and invite it into negotiations to acquire the whole company, a person with knowledge of the matter said. Alibaba is open to acquiring its stake back or making a larger push for all of Yahoo, this person said.

Alibaba already submitted an offer to buy back the stake in itself held by Yahoo, said the people. That proposal was made together with Japan’s Softbank Corp., which wants to buy the rest of Yahoo Japan, and may be reviewed by Yahoo’s board today, the people said.

Alibaba and Softbank are less likely to make an offer for all of Yahoo because of difficulty financing a bid, one person said. The companies have discussed this possibility, people said earlier this month.

The Wall Street Journal reported yesterday that Yahoo aims to strike a deal by year’s end.

Bloomberg LP, the parent company of Bloomberg News, is an investor in Andreessen Horowitz.

To contact the reporters on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net; Jeffrey McCracken in New York at jmccracken3@bloomberg.net; Serena Saitto in New York at ssaitto@bloomberg.net

To contact the editors responsible for this story: Tom Giles at tgiles5@bloomberg.net; Jennifer Sondag at jsondag@bloomberg.net

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Olympus Ex-CEO Woodford Resigns as Director

By Chris Cooper - Dec 1, 2011 8:00 AM GMT+0700

Michael C. Woodford, the former president and chief executive officer of Olympus Corp., resigned from the company’s board and urged a shareholder meeting to allow stock owners to choose new management.

Woodford, who was fired after questioning $1.4 billion in takeover costs now at the center of criminal investigations, said in an e-mailed statement it was “inappropriate” for current management to decide on new board members. Olympus declined to comment on his resignation, spokesman Tsuyoshi Kitada said by phone.

The 51-year-old British citizen met with the Federal Bureau of Investigation, the Department of Justice and the Securities and Exchange Commission in the U.S. this week, following meetings with Japanese officials last week, to discuss payments made in the purchase of Gyrus Group Plc and writedowns of stakes in three other takeovers. The camera maker has admitted former Chairman Tsuyoshi Kikukawa and senior aides colluded to cover up losses.

“It’s completely inappropriate for the current management team, who are tainted by its past mistakes, to make choices about the identity of new board members,” Woodford said in the statement. “I intend to liaise with all interested stakeholders with a view to formulating a proposal for the constitution of a new board.”

The stock of the 92-year-old camera and endoscope maker has slumped more than 50 percent since Woodford was fired, on concerns about the scale of the losses, the threat of delisting and continuing criminal investigations.

To contact the reporter on this story: Chris Cooper in Tokyo at ccooper1@bloomberg.net

To contact the editor responsible for this story: Ben Richardson at brichardson8@bloomberg.net

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HP Rating Cut by S&P After Autonomy Acquisition Boosts Debt

By Nick Turner and Aaron Ricadela - Dec 1, 2011 4:59 AM GMT+0700

Hewlett-Packard Co. (HPQ) had its corporate credit and senior unsecured ratings cut to BBB+ from A by Standard & Poor’s Ratings Services, which cited the increased debt load caused by the acquisition of Autonomy Corp.

The company’s “inconsistent” strategies and management turnover may also have raised risks, S&P said today in a statement. The outlook on the ratings is stable.

Hewlett-Packard is trying to rebound from sluggish sales and the ouster of two chief executive officers over the past two years. The $10 billion Autonomy acquisition, announced under ex- CEO Leo Apotheker, drew the ire of investors and contributed to his replacement by Meg Whitman in September. He also shook up the board during his tenure.

“We have concerns that HP’s inconsistent growth strategies and high levels of board of director and senior management turnover have elevated the level of operational and execution risk in the near term,” Martha Toll-Reed, an analyst at New York-based S&P, said in the report.

Mylene Mangalindan, a spokeswoman for Palo Alto, California-based Hewlett-Packard, declined to comment.

Hewlett-Packard’s first-quarter profit forecast and full- year earnings outlook both missed analysts’ estimates this month. Whitman’s plan for fixing Hewlett-Packard’s ailing businesses, such as PCs and information-technology services, includes boosting research spending and limiting the size of acquisitions.

Saving Cash

The idea is to conserve cash and spur homegrown innovation, something the company neglected over the past decade. She has said she will unveil more plans in the first half of next year.

On Nov. 17, the company appointed activist shareholder Ralph Whitworth to its board. Whitworth, whose investment firm oversees $6.5 billion, told management his appointment would burnish credibility and that he’d press for share buybacks, higher dividends or more investment in research, a person with knowledge of the situation said.

Hewlett-Packard also lost its title as the world’s biggest maker of server computers to International Business Machines Corp. (IBM) in the third quarter, Gartner Inc. said this week.

Hewlett-Packard fell 14 cents to $27.81 in extended trading after S&P posted its report. The shares, down 34 percent this year, had climbed 3.9 percent to $27.95 at the close in New York.

To contact the reporters on this story: Nick Turner in San Francisco at nturner7@bloomberg.net; Aaron Ricadela in San Francisco at aricadela@bloomberg.net

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

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Obama Makes Pitch to Blue-Collar Voters on Payroll Tax Cut

By Kate Andersen Brower - Dec 1, 2011 7:03 AM GMT+0700

President Barack Obama said the U.S. economy would suffer a “massive blow” if Congress lets a temporary payroll tax cut expire at the end of the year.

Speaking at a high school in Scranton, Pennsylvania, Obama said Republican lawmakers face a choice: “Are you going to cut taxes for the middle class and those who are trying to get into the middle class, or are you going to protect massive tax breaks for millionaires and billionaires?”

Lawmakers will debate in coming weeks how to extend the payroll tax cut for employees, with Republicans and Democrats differing over whether to offset the revenue loss by raising taxes on the wealthiest Americans or cutting spending more deeply.

In the working class, former manufacturing hub in northeastern Pennsylvania, Obama said “there’s a sense of deep frustration among people who’ve done the right thing but don’t see that hard work and that responsibility pay off.”

“We’re fighting to make things right again,” he said.

The Scranton visit took Obama before a key constituency of blue-collar voters in a longtime Democratic congressional district that flipped to a Republican in the 2010 election.

Electoral Indicator

“People have looked to Scranton to see what middle-class, blue-collar America is thinking,” said Jean Harris, head of the political science department at the University of Scranton. “And if he can get here early and get people talking about him in a positive way, they’re probably hoping it’s going to snowball.”

From Scranton, Obama flew to New York for a trio of fundraisers, the first at the home of American Jewish Congress chairman and member of the executive committee of the American Israel Public Affairs Committee, Jack Rosen. About 30 people were invited, with ticket prices starting at $10,000 each, according to a Democratic Party official who wasn’t authorized to publicly discuss the matter.

Rosen, who also is the chairman of the American Council for World Jewry, a Jewish advocacy group, said in introducing Obama that the president was “amongst friends.”

The Republican candidates seeking their party’s presidential nomination have been critical of Obama over U.S. relations with Israel. Former Massachusetts Governor Mitt Romney said in September that the president had thrown Israel “under the bus and undermined its negotiating position.”

Israel as Ally

Obama told the group, “We don’t compromise when it comes to Israel’s security” and that “no ally is more important” to the U.S. than Israel.

The president will end the day at a dinner with approximately 45 people who paid $35,800 per person and a holiday-themed party at the Sheraton Hotel with approximately 500 people who paid $1,000 each.

The campaign aimed to raise at least $2.4 million at the three events, the party official said. Obama reported raising $88 million through Sept. 30, exceeding his record fundraising pace of four years ago. By comparison, Romney, the top fundraiser among the Republicans seeking their party’s nomination, reported taking in $33.6 million.

Since officially kicking off his re-election campaign in April, Obama has focused on states that he won in 2008 and needs to hold to get re-elected. Among them is Pennsylvania, which Obama has visited 16 times since he took office, including six over the last seven months. Vice President Joe Biden, who grew up in Scranton, also has visited the area.

Democratic Advantages

Pennsylvania should be friendly territory for Obama. There are about four registered Democrats for every three Republicans there, and Democrats outnumber Republicans 2-1 in Lackawanna County, of which Scranton is the hub, according to the Pennsylvania Department of State.

In the last five elections, Pennsylvania voters have supported the Democratic nominee for president, including giving Obama 54.5 percent of the vote in 2008.

Still, Republicans took Pennsylvania’s governorship, a U.S. Senate seat and five U.S. House seats from Democrats in the 2010 elections.

One of those House seats went to Republican Representative Lou Barletta, who defeated 13-term incumbent Democrat Paul Kanjorski in 2010 and now represents Scranton. Barletta said he doesn’t think Obama can take the area for granted.

Vote Margins

“In 2008, the president won here in northeastern Pennsylvania by 15 points; however, I won by 10 points in 2010, so you can draw your own conclusion as to how the president’s doing here in northeastern Pennsylvania,” he said in an interview.

Rick Schraeder, president of the local electrical workers union, said he voted for Obama in 2008 and will again in 2012. Still, he said “any one of” the Republican candidates seeking their party’s nomination could pose a challenge to Obama.

“We can’t take anything for granted, we’re going to have to work hard to get the people in there that are going to support the middle class,” he said.

Pennsylvania’s unemployment rate was 8.1 percent in October, below the national average of 9 percent that month. The metropolitan area that includes Scranton had an 8.8 percent unemployment rate in September, according to Labor Department data compiled by Bloomberg.

Pennsylvania’s economic health improved 1.9 percent during the year ended June 30, 15th-best among 50 states and Washington, D.C., according to the Bloomberg Economic Evaluation of States Index, which uses data on real estate, jobs, taxes and stock prices to gauge growth.

Schraeder is urging his union’s approximately 500 members to “wake up” and vote for the president in 2012.

“A lot of our workers realize now that we’re down to it; it’s not a special interest item anymore, it’s not a gun, it’s not an abortion, it’s not a gay thing,” said Schraeder, 61. “We need to put food on our tables, we need a livable wage.”

To contact the reporter on this story: Kate Andersen Brower in Scranton, Pennsylvania, at

kandersen7@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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Disney Increases Dividend by 50%

By Rob Golum and Andy Fixmer - Dec 1, 2011 7:21 AM GMT+0700

Walt Disney Co. (DIS), owner of the namesake theme parks and ESPN sports network, increased its annual dividend by 50 percent, the most in at least 20 years, following record sales and profit.

The new 60-cent dividend, up from 40 cents, will be paid on Jan. 18 to shareholders of record as of Dec. 16, the Burbank, California-based company said today in a statement.

Disney, also owner of the ABC TV network, is returning cash to investors through stock repurchases as well. The company bought back $5 billion of shares in the year ended Oct. 1, according to a Nov. 10 statement. Disney last increased its dividend one year ago, boosting the payment to the current 40 cents from 35 cents previously. Bloomberg historical data going back to 1990 don’t show an increase this large.

“The hike showed an unexpectedly higher order of magnitude, more so for a somewhat conservatively managed Disney,” Tuna Amobi, a Standard & Poor’s analyst, said in an e- mail. The “move also seems consistent with large media’s refocus on increased return of capital to shareholders,” said the analyst, who recommends the stock.

The Steven P. Jobs Trust, Disney’s largest shareholder, will reap $82.8 million, an increase of $27.6 million based on the 138 million shares held by the estate of Apple Inc.’s late co-founder.

Disney rose 5.4 percent to $35.85 at the close in New York, a day when the Dow Jones Industrial Average advanced 4.2 percent and every company in the 30-stock index gained. Disney has declined 4.4 percent this year.

2011 Results

“The Walt Disney Company had a great creative, strategic and financial year,” Robert A. Iger, president and chief executive officer, said in the statement. “We are pleased to be able to raise our shareholder dividend by 50 percent while continuing to invest for future growth.”

The company on Nov. 10 reported a 21 percent increase in fiscal 2011 profit to $4.81 billion, or $2.52 a share, on revenue that gained 7.4 percent to $40.9 billion.

Disney was expected to raise its dividend by 5 cents to 45 cents, according to data compiled by Bloomberg. An increase to 65 cents is forecast for next year, according to the data.

At the new dividend rate, Disney has an indicated yield of 1.67 percent, compared with 2.12 percent for the S&P 500 stock index, according to Bloomberg data.

To contact the reporters on this story: Rob Golum in Los Angeles at rgolum@bloomberg.net; Andy Fixmer in Los Angeles at afixmer@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net

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Berkshire Hathaway to Buy Omaha World-Herald Newspaper

By Andrew Frye - Dec 1, 2011 6:01 AM GMT+0700

Warren Buffett’s Berkshire Hathaway Inc. will expand its media holdings by acquiring the Omaha World-Herald Co., publisher of the billionaire’s hometown newspaper.

The World-Herald reported the price as $150 million plus assumption of debt. The deal would give Berkshire control of the World-Herald, six other daily newspapers and several weekly newspapers across Nebraska and southwest Iowa, according to a company statement today. Sellers include employee shareholders and the Peter Kiewit Foundation.

Buffett is putting aside his doubts about the industry after telling shareholders in 2009 that papers have “potential for unending losses” and that he wouldn’t buy most of them “at any price.” Publishers have lost revenue as readers shift to other media including the Internet.

Buffett told employees today that newspapers “have a decent future,” according to the World-Herald’s account. “It won’t be like the past. But there are still a lot of things newspapers can do better than any other media.” As for the cost, Buffett said, “it’s not a crazy price. It certainly is not a bargain.”

In addition to the $150 million cash purchase, Berkshire will take on $50 million of World-Herald debt, the newspaper reported. Buffett didn’t respond to an interview request e- mailed to Berkshire’s Omaha headquarters.

“That’s a pretty generous price,” said John Morton, a veteran newspaper analyst and president of media consulting firm Morton Research Inc. who writes a column for the American Journalism Review. “That’s a price that you would have paid for it five years ago.”

Home Team

“He’s rooting for the home team,” said Jeff Matthews, a Berkshire shareholder and author of “Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett.” “But he says it’s profitable and well-run.”

The World-Herald is 80 percent owned by its employees and 20 percent held by Peter Kiewit Foundation, the paper said today in its news story. It’s the No. 49 newspaper in the U.S. with circulation of 135,282 daily and 170,381 on Sunday, according to the company. CEO Terry Kroeger will stay with the business after the acquisition, Berkshire said.

Buffett, in his fifth decade as CEO of Berkshire, won a Pulitzer Prize -- the industry’s highest honor -- for investigative reporting in 1973 as owner of the Omaha Sun. The paper was cited for an analysis of funding at Boy’s Town, a local charity, according to Alice Schroeder’s biography, “The Snowball, Warren Buffett and the Business of Life.”

Media Holdings

Berkshire’s holdings include Business Wire, which distributes press releases to the media. Buffett’s firm is also the biggest shareholder of the Washington Post Co. (WPO) and owner of the Buffalo News of New York.

“It’s a business which has been overly maligned for having lost its relevance,” said Thomas Russo, a partner at Berkshire investor Gardner Russo & Gardner. “I suspect the price is such that he can pencil out a return.”

Buffett has been among the industry’s critics and derided the newspaper model at Berkshire’s 2008 annual meeting, according Matthews’s book.

“Imagine that someone came along saying, ‘I have a great idea: Let’s chop trees down, buy expensive printing presses, and buy a fleet of delivery trucks, all to get pieces of paper to people to read about what happened yesterday,’ ” Buffett said, according to Matthews.

The World-Herald is the largest employee-owned newspaper in the U.S., with a news staff of about 200 who produce morning and evening editions, according to its website.

Brand Names

The purchase won’t have much impact on the overall performance of Berkshire Hathaway, which generated $136 billion in revenue last year and $13 billion in profit on activities that include insurance, running utilities and railroads, real estate, manufacturing and retailing.

Brands include Geico insurance, Fruit of the Loom underwear and Dairy Queen ice cream. Berkshire is among the biggest stakeholders at banks including U.S. Bancorp and Wells Fargo & Co., and Buffett has come to the aid of financial firms such as Goldman Sachs Group Inc. and Bank of America Corp. with capital injections.

Berkshire’s Class A stock rose 4.9 percent to $118,500 as of 4:01 p.m. in New York.

As for the World-Herald, “it’s very difficult to see this as a financial investment,” said Meyer Shields, an analyst with Stifel Nicolaus & Co. who has a “hold” recommendation on Berkshire’s stock. Buffett has “a desire to cultivate his legacy, and if he can control the first draft of history, that makes it a little bit easier.”

To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net

To contact the editor responsible for this story: Rick Green at rgreen18@bloomberg.net

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News Corp Wins Dismissal of Shine Group Acquisition Lawsuit

By Jef Feeley - Dec 1, 2011 7:32 AM GMT+0700

Rupert Murdoch and his News Corp. (NWSA) won dismissal of an investor lawsuit seeking information about the $675 million purchase of a U.K.-based television production company owned by Murdoch’s daughter.

Delaware Chancery Court Judge John Noble concluded that a suit filed by an Illinois-based pension fund seeking to inspect News Corp. documents about the purchase of Elisabeth Murdoch’s Shine Group Ltd. was moot since it and other shareholders had also sued the company’s directors over the deal.

Lawyers for Central Laborers Pension Fund can no longer “tender a proper purpose for pursuing efforts to inspect the books and records of News Corp.” on the acquisition, Noble ruled today.

The ruling comes as New York-based News Corp. continues to be investigated and sued over claims that thousands of people’s phones were hacked by its News of the World tabloid, which was shuttered in July.

Teri Everett, a News Corp. spokeswoman, didn’t immediately return a call for comment on Noble’s decision to throw out the investor suit.

News Corp. officials announced in February the media company would acquire Shine Group, which supplies television content to U.K. TV companies including the British Broadcasting Corp., in an all-stock deal worth about $675 million.

Dual Suits

Amalgamated Bank, another News Corp. shareholder, and the fund sued News Corp directors in Delaware over the acquisition, claiming it was motivated by “nepotism” and designed solely to reward Murdoch’s daughter. The Laborers also filed a separate suit seeking access to records about the deal.

News Corp. asked Noble to dismiss the fund’s suit as duplicative and unnecessary. The judge agreed to the company’s request.

“The simultaneous filing of the derivative action refutes any claims of a proper purposes for” a need to inspect files over the buyout, the company argued in court papers.

Michael Barry, one of the fund’s lawyers, declined to comment today on Noble’s ruling.

The case is Central Laborers Pension Fund v. News Corp, CA 6287, Delaware Chancery Court (Wilmington).

To contact the reporter on this story: Jef Feeley in Wilmington, Delaware, at jfeeley@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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Yen Weakens on Prospects Stock Gains Will Curb Demand for Haven Currencies

By Kristine Aquino and Masaki Kondo - Dec 1, 2011 7:14 AM GMT+0700

The yen was 0.4 percent from a two- week low against the euro as Asian stocks extended a global equity rally, curbing demand for haven assets.

Japan’s currency weakened after six central banks led by the Federal Reserve acted to lower the cost of borrowing dollars for banks, adding to signs policy makers worldwide are acting to ease Europe’s sovereign-debt crisis. The dollar maintained its biggest slide in three weeks versus the 17-nation euro. The Australian and New Zealand dollars traded near two-week highs against the greenback.

“Safe-haven currencies should perform badly while this optimism persists,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp., Australia’s second-largest lender. “We have more opportunity for policy makers to announce positive measures.”

The yen traded at 104.31 per euro as of 9:05 a.m. in Tokyo from 104.37 in New York yesterday, when it declined to as low as 104.73, the least since Nov. 15. It was at 77.59 per dollar from 77.62. The U.S. currency was little changed $1.3448 per euro from $1.3446 yesterday, when it dropped 1 percent. That was the biggest one-day slide since Nov. 11.

Australia’s dollar fetched $1.0263 from $1.0283 yesterday, when the currency rose to $1.0328, the highest since Nov. 14. New Zealand’s dollar traded at 77.89 U.S. cents from 78.05 yesterday, when it reached 78.23, also the most since Nov. 14.

The MSCI Asia Pacific Index (MXAP) gained 2 percent. The Standard & Poor’s 500 Index rallied 4.3 percent yesterday, the biggest advance (SPX) since Aug. 11.

Lower Premium

The premium banks pay to borrow dollars overnight from central banks will fall by half a percentage point to 50 basis points, the Fed said yesterday in a statement in Washington. The so-called dollar swap lines will be extended by six months to Feb. 1, 2013. The Fed coordinated the move with the European Central Bank and the central banks of Canada, Switzerland, Japan and the U.K.

“This was in response to increased tension in global financial markets,” Bank of Japan Governor Masaaki Shirakawa said at a press conference in Tokyo yesterday. “Coordinated action will give markets a sense of security.”

The six central banks also agreed to create temporary bilateral swap programs so funding can be provided in any of the currencies “should market conditions so warrant.” Those swap lines were also authorized through Feb. 1, 2013.

The ECB holds its next policy meeting on Dec. 8. European heads of government will meet the following day in Brussels.

To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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400 Dow Points Aren’t What They Used to Be

By Whitney Kisling and Inyoung Hwang - Dec 1, 2011 5:14 AM GMT+0700

Play Video

Nov. 30 (Bloomberg) -- Charles Peabody, an analyst at Portales Partners LLC, talks about the outlook for U.S. bank shares and his investment strategy. Peabody also discusses Standard & Poor's cut in the credit ratings of major U.S. lenders and six central banks' move to make it cheaper for banks to borrow dollars in an effort to ease Europe's sovereign-debt crisis. He speaks with Lisa Murphy on Bloomberg Television's "Street Smart." (Source: Bloomberg)

What does today’s stock rally equal in past markets? About half as much.

The Dow Jones Industrial Average (INDU) reached 12,045.68, up 490.05 points from yesterday’s close. Adjusting for the market’s volatility in 2011, the gain is equal to about 240 points in the first nine years of the last decade, Bloomberg data show.

Europe’s sovereign debt crisis has fueled some of the biggest stock swings ever during the last four months. The Standard & Poor’s 500 Index has moved 1.7 percent on average each day, compared with 0.8 percent before September 2008, when Lehman Brothers Holdings Inc. collapsed, according to data compiled by Bloomberg.

“It feels like a good day, but whether or not it’s sustainable is another thing,” Hayes Miller, who helps oversee about $43 billion as the Boston-based head of asset allocation in North America at Baring Asset Management Inc., said in a telephone interview. “We’re not buying it. This rally isn’t going to shake us from being more cautious on risk assets for the first half of 2012.”

The Dow surged 4.2 percent, the most since March 2009, after central banks acted to make additional funds available to lenders. JPMorgan Chase & Co. (JPM) and Bank of America Corp. advanced at least 7.3 percent today as the Federal Reserve and five central banks lowered interest rates on dollar swaps and China cut banks’ reserve requirements.

Central Banks

The S&P 500 gained 4.3 percent to 1,246.96 today as only 10 stocks fell. The index has risen 7.6 percent in three days, the most since March 2009. More than 10 billion shares changed hands on U.S. exchanges today, compared with the three-month daily average of 8.77 billion.

The S&P 500 has climbed 3 percent or more in a day 36 times in the three years since Lehman’s collapse, or about once a month. That compares with 27 times for the nine years before, or about 0.3 times a month, data compiled by Bloomberg show. The Dow’s intraday move has exceeded 100 points every day in November except one, Nov. 18.

Equity markets worldwide have been tumbling since July 22 as the U.S. had its credit rating slashed by S&P and investors speculated the European debt crisis is spreading. The VIX (VIX), as the Chicago Board Options Exchange Volatility Index is known, has averaged 33.5 since then. While it fell 9.3 percent to 27.80 today, dropping below 30 for the first time since Nov. 11, it’s still 35 percent above its average since 1990.

‘Human Behavior’

“In terms of natural human behavior, markets become more volatile when there’s higher level of uncertainty as to the economic outlook worldwide,” Richard Skaggs, the Boston-based senior equity strategist at Loomis Sayles & Co., which manages about $160 billion, said in a telephone interview today. “In 2011, we faced a number of questions -- is China slowing and by how much? In Europe, we have moved from a slow-growth forecast to a consensus that it’s due for at least a mild recession. In the U.S., there’s potential for a double-dip recession.”

Speculation about Europe’s debt crisis has been spurring near-lockstep movement in equity prices. The correlation of S&P 500 (SPX) companies to gains or losses in the full index increased to a record 0.86 last month, according to data compiled by Birinyi Associates Inc. in Westport, Connecticut. A level of 1 would mean all 500 stocks moved together. Correlation was 0.79 yesterday, 74 percent higher than its average since 1980.

The Dow alternated between gains and losses of more than 400 points on four days in August, the longest streak ever.

Hedge Funds

The swings have taken a toll on professional investors. Less than 24 percent of 542 categories of funds tracked by Morningstar Inc. have topped their benchmark indexes this year, the fewest since at least 1999. A Hedge Fund Research Inc. index of industrywide performance has fallen 3.3 percent this year. It’s only the third annual loss since 1990 and the biggest decline since 2008, when it plunged 19 percent, according to data from the Chicago-based firm.

“We had the worst Thanksgiving week since the ‘30s and then you turn around, you have a 8 percent rally in three days,’’ William Nichols, senior managing director in equity trading at Cantor Fitzgerald LP in New York, said in a phone interview today. ‘‘Everything is great in terms of this nice move, but you look year-to-date, the Dow is up 3 percent, the S&P is still down and the U.S. is outperforming other markets.’’

Investors who ignore the swings and focus on record corporate earnings may be better off, David Kelly, who helps oversee $394 billion as chief market strategist for JPMorgan Funds in New York, said in a phone interview.

Bear Market

The S&P 500 gained or lost 2 percent or more almost three times a month during the bear market that began in 2000, data compiled by Bloomberg show. That’s about three times the average between 2002 and September 2008. Stocks ended up recovering and the S&P 500 went on to reach a record high of 1,565.15 in October 2007.

‘‘If I’m a long-term investor, I’d try to ignore the volatility,” Kelly said. “To me the most remarkable thing in all these screens today, the S&P 500 is within 10 points of where we are at the start of the year,” he said. “It’s very important for long-term investors to recognize that most of the zigs were offset with zags.”

After Lehman’s bankruptcy spurred the biggest financial crisis since the Great Depression, the S&P 500’s daily moves averaged 2.8 percent through March 2009, according to data compiled by Bloomberg. While the index has surged 84 percent since March 9, 2009, it has fallen 8.6 percent since April 29 and dropped 0.9 percent in 2011.

Strategist Forecasts

Strategists expect the S&P 500 to end the year at 1,274, according to the average of 12 projections in a Bloomberg survey. Their forecasts range from 1,130 to 1,425.

The benchmark measure of U.S. equities has averaged a 2.1 percent move between its intraday lows and highs during the past month, compared with the 1.3 percent average since 1982, according to data compiled by Bloomberg. The 30-day average reached 6.9 percent in October 2008, the highest in record.

“Uncertainty is high,” said Brian Belski, Oppenheimer & Co.’s New York-based chief investment strategist, in an interview today on Bloomberg Television’s “In the Loop” with Betty Liu. “Investors aren’t investing, they’re just trading and reacting to these sound bites.”

To contact the reporters on this story: Whitney Kisling in New York at wkisling@bloomberg.net; Inyoung Hwang in New York at ihwang7@bloomberg.net

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

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Dow Jumps Most Since ’09 as Central Banks Act

By Rita Nazareth - Dec 1, 2011 5:27 AM GMT+0700

U.S. stocks advanced, driving the Dow Jones Industrial Average up the most since March 2009, after six central banks took action on Europe’s debt crisis by making it cheaper for lenders to borrow in dollars.

Financial shares rallied 6.6 percent, the biggest gain in the Standard & Poor’s 500 Index among 10 groups. JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC) surged at least 7.3 percent. Caterpillar Inc. (CAT) increased 8.1 percent and U.S. Steel Corp. climbed 15 percent after China lowered banks’ reserve requirements, bolstering optimism about economic growth. The Dow Jones Transportation Average jumped 4.8 percent.

The S&P 500 rose 4.3 percent to 1,246.96 at 4 p.m. New York time. The benchmark gauge rallied 7.6 percent in three days, the most since March 2009. The Dow added 490.05 points, or 4.2 percent, to 12,045.68. About 10 billion shares changed hands on U.S. exchanges, or 25 percent above the three-month average.

“They have put some more lubricant in the engine,” James McDonald, chief investment strategist at Northern Trust Corp. in Chicago, said in a telephone interview, referring to the global central bank action. His firm manages about $644 billion. “Stocks have been under considerable pressure over the fears that policy makers were not going to act. While this specific action isn’t a final solution, it does indicate their willingness to prevent significant financial dislocation.”

Today’s rally trimmed the monthly drop in the S&P 500 to 0.5 percent. Financial shares had the biggest decline (SPXL1) within 10 groups in November amid concern that Europe’s debt crisis would hamper global growth. The benchmark measure jumped 11 percent in October, the most since 1991, snapping five months of losses.

First Since 2008

American stocks joined a global rally. The central banks of the U.S., the euro region, Canada, the U.K., Japan and Switzerland agreed to cut the cost of providing dollar funding via swap arrangements, the Federal Reserve said, and agreed to make other currencies available as needed. China cut the amount of cash that banks must set aside as reserves for the first time since 2008.

In the U.S., companies boosted payrolls in November by the most this year and U.S. businesses expanded at the fastest pace in seven months. Another report showed the biggest gain in home- purchase contract signings in a year. The Fed said the economy expanded at a “moderate” pace in 11 of its 12 districts, led by gains in manufacturing and consumer spending, according to its Beige Book survey released today covering October and the first half of November.

‘Avoid a Recession’

“The economic backdrop continues to improve,” Burt White, who helps oversee about $315 billion as chief investment officer at LPL Financial Corp. in Boston, said in a telephone interview. “Then, you mix in the policy action across the globe to ease liquidity concerns. I don’t think there’s any doubt that the U.S. economy is going to avoid a recession.”

All 10 groups in the S&P 500 rose as gauges of financial, commodity and industrial shares added at least 5.1 percent. The Morgan Stanley Cyclical Index rallied 5.9 percent as concern eased about global economic growth. A measure of homebuilders (S5FINL) in S&P indexes increased 6.5 percent.

The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, tumbled 9.3 percent to 27.80, extending its three-day decline to 19 percent.

“You want to buy when things don’t look that great,” John Manley, chief equity strategist for Wells Fargo Advantage Funds in New York, said in a telephone interview. His firm oversees $209.1 billion. “I’m not predicting that the volatility is over, but I think they are making progress.”

Banks Rally

The KBW Bank Index (BKX), which had slumped 32 percent this year through yesterday, gained 7.2 percent. Financial shares tumbled after the close of regular trading yesterday as S&P cut credit ratings for lenders including Bank of America and Citigroup Inc. (C) Today, JPMorgan added 8.4 percent, the most in the Dow, to $30.97. Bank of America gained 7.3 percent to $5.44. Citigroup rose 8.9 percent to $27.48.

Caterpillar, the world’s largest construction and mining- equipment maker, rose 8.1 percent to $97.88. U.S. Steel surged 15 percent to $27.30. PulteGroup Inc. (PHM) jumped 8 percent to $6.11, pacing gains in homebuilders.

American Airlines parent AMR Corp. (AMR) increased 23 percent to 32 cents. The shares tumbled 84 percent yesterday after the company announced a bankruptcy filing.

Cisco Systems Inc. (CSCO) gained 5.4 percent to $18.64. Deutsche Bank AG recommended buying the world’s biggest maker of networking equipment, saying checks suggest datacenter information technology rollouts remain “robust.”

‘At All Costs’

Netflix Inc. (NFLX) slumped 4.5 percent to $64.53. The video- streaming and DVD subscription service was cut to “underperform” from “neutral” at Wedbush Securities Inc., citing rising content costs, continued customer losses and concern about the company’s “growth at all costs business model.” Wedbush gave a 12-month price estimate of $45 a share.

Investors should buy U.S. stocks as an indicator of momentum and breadth on the S&P 500 has reached “oversold” levels, according to the technical analysis team at UBS AG.

An indicator called McClellan Oscillator, which measures the moving average of net advancing shares in a market, has moved into a low phase from where a “lasting bounce” may start and continue for several days.

“We have increasing evidence that another important short- term cycle low is in place, which simply means the market is back in tactical bull mode,” Marc Muller and Michael Riesner wrote in a report yesterday.

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

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

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