Rovio Executive Says ‘Angry Birds Space’ Skips Windows Phone

By Jon Erlichman and Diana ben-Aaron - Mar 24, 2012 2:59 AM GMT+0700

An executive of the maker of “Angry Birds” said the latest edition of the world’s most popular mobile-phone game won’t appear on Microsoft Corp. (MSFT)’s Windows Phone platform, a possible blow to handset maker Nokia Oyj. (NOK1V)

“We’re the No. 1 app in the Windows Phone app store, but it’s a big undertaking to support it, and you have to completely rewrite the application,” Peter Vesterbacka, chief marketing officer of the game’s maker, Rovio Entertainment Oy, said in an interview on Bloomberg Television. He said Rovio, which yesterday started selling the new “Angry Birds Space” game for Apple Inc. (APPL)’s iPhone and handsets running Google Inc. (GOOG)’s Android platform, has no plans to release the title on Windows Phone.

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Angry Bird toys are seen on display at the headquarters of the game's developer Rovio Mobile Oy in Espoo, Finland, on Friday, Dec. 3, 2010. Photographer: Henrik Kettunen/Bloomberg

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March 23 (Bloomberg) -- Peter Vesterbacka, chief marketing officer of "Angry Birds" maker Rovio Entertainment Oy, says demand for the world's most popular mobile-phone game may reach 2 billion by the end of the year, boosted by the introduction of "Space." Jon Erlichman reports on Bloomberg Television's "Countdown." (Source: Bloomberg)

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March 22 (Bloomberg) -- Bloomberg's Jon Erlichman talks about the release of Rovio Entertainment Oy's "Angry Birds Space" mobile game today, and the company's bird and slingshot display on the Space Needle in Seattle. He speaks with Emily Chang on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)

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March 22 (Bloomberg) -- Bloomberg's Jon Erlichman talks about the release of Rovio Entertainment Oy's "Angry Birds Space" mobile game today, and the company's bird and slingshot display on the Space Needle in Seattle. (Source: Bloomberg)

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Peter Vesterbacka, chief marketing officer and co-founder of Rovio Entertainment Oy, speaks during the TechCrunch Disrupt Beijing conference in Beijing, China. Photographer: Keith Bedford/Bloomberg

Rovio Chief Executive Officer Mikael Hed later told Reuters the company was “working towards” getting “Angry Birds Space” on the Windows Phone 7 operating system. Hed didn’t return calls by Bloomberg News. Ville Heijari, a spokesman for Rovio, said in e- mailed statement that the company is working toward offering its games on “all relevant platforms” and that it will announce “further platforms as soon as more information is available.”

Nokia is betting on the Windows Phone operating system to revive its struggling smartphone business. The lack of “Angry Birds” may make it more difficult for the company, based in the same Espoo, Finland-based office park as Rovio, to attract gaming-oriented users and persuade developers that its platform is growing.

China Push

“This is a worrying development for Windows Phone because it suggests that Rovio does not have much confidence in its future,” Nomura analyst Richard Windsor said today in a report. “As the standard version is already number one on the Windows Phone app store, it gives a strong indication that no one else will expect to be making money writing for this platform either.”

Nokia Chief Executive Officer Stephen Elop has introduced several Windows Phones since October and plans to bring the handsets next to China, where “Angry Birds” took off last year.

“China has been our second-largest market, but it’s actually been the fastest-growing for quite a while, and it could well be that China becomes the biggest market this year,” Vesterbacka said.

Nokia spokesman James Etheridge had no immediate comment when contacted today. The company’s shares rose 0.9 percent to 3.98 euros at the close in Helsinki. The stock has declined 33 percent in the past 12 months.

Elop, who took over at the world’s largest mobile-phone maker in 2010, shifted to Windows Phone last year after determining Nokia’s Symbian and MeeGo systems couldn’t keep up with Android, the fastest-growing smartphone platform, and the iPhone.

Chicken and Egg

Microsoft plans to bring its Windows Phone software to 23 more countries for a total of 63 and put the operating system on less expensive smartphones, it said last month. The company aims to move quickly in developing economies, where Google and Apple are less dominant, before cheaper Android phones can strengthen Google’s position.

“There is a chicken and egg situation here, where no apps means no users and no users means no apps,” Windsor said. “Nokia has tried in the past to get past this by paying developers directly to write applications but it has largely failed to bring any life back to the platform.”

For the time being, it’s too expensive for Rovio to adapt new games to Windows Phones, Vesterbacka said.

“If you look at activations, Apple’s iOS and Android are clearly bigger than any other platform,” he said. “We want to be on all screens, but we have to consider the cost of supplying the smaller platforms. With Windows Phone it’s a lot of work to technically support it.”

Flinging Birds

“Angry Birds” may reach a billion cumulative downloads in the next few months, boosted by the introduction of “Space,” and 2 billion by the end of the year, he said. That compares to just 50 million in late 2010, a year after the unveiling of the original game. Rovio predicts to introduce four more Angry Birds games by the end of the year, Vesterbacka said.

Basic “Angry Birds” game play consists of using a virtual slingshot to fling birds at structures populated by green pigs. The game zoomed to the top of the chart in Apple’s online app store in 2010 before being rolled out for Android phones, desktop computers and e-readers. The Facebook version is approaching 20 million active users, Vesterbacka said.

Rovio, which has more than 300 employees, also sold about 25 million plush toys last year and has started a book division with a cookbook and comics.

Closely held Rovio published 51 games for Nokia phones and other handsets before releasing “Angry Birds.” The game is on Nokia’s current smartphones and some lower-end models.

The new version of “Angry Birds,” which takes place in space with planetary gravity interfering with the birds’ flight paths, is available for Windows personal computers as well as Apple Mac computers.

To contact the reporter on this story: Jon Erlichman in New York at jerlichman1@bloomberg.net; Diana ben-Aaron in Helsinki at dbenaaron1@bloomberg.net

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

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MF Global’s Corzine Ordered Funds Transferred, Memo Says

By Phil Mattingly and Silla Brush - Mar 25, 2012 3:33 AM GMT+0700

Jon S. Corzine, MF Global Holding Ltd. (MFGLQ)’s chief executive officer, gave “direct instructions” to transfer $200 million from a customer fund account to meet an overdraft in a brokerage account with JPMorgan Chase & Co. (JPM), according to a memo written by congressional investigators.

Edith O’Brien, a treasurer for the firm, said in an e-mail quoted in the memo that the transfer was “Per JC’s direct instructions,” according to a copy of the memo obtained by Bloomberg News yesterday. The e-mail, dated Oct. 28, was sent three days before the company collapsed, the memo says. The memo does not indicate whether that phrase was the full text of the e-mail or an excerpt.

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Jon S. Corzine, former chairman and chief executive officer of MF Global Holdings Ltd. Photographer: Andrew Harrer/Bloomberg

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March 23 (Bloomberg) -- Jon S. Corzine , MF Global Holding Ltd.’s chief executive officer, gave “direct instructions” to transfer $200 million from a customer fund account to meet an overdraft in one of the brokerage’s JPMorgan Chase & Co. accounts in London, according to an e-mail sent by a firm executive. Bloomberg's Julie Hyman reports on Bloomberg Television's "Street Smart." (Source: Bloomberg)

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March 23 (Bloomberg) -- Bloomberg News reporter Phil Mattingly, Jay Pelosky, consultant at J2Z Advisory, Bloomberg View columnist William Cohan, Robert Brusca, president of Fact & Opinion Economics, and Bloomberg Television markets correspondent Joshua Lipton talk about a Bloomberg News report that Jon S. Corzine, MF Global Holding Ltd.’s chief executive officer, gave “direct instructions” to transfer $200 million from a customer fund account to meet an overdraft in one of the brokerage’s JPMorgan Chase & Co. accounts in London, according to an e-mail sent by a firm executive. They speak with Pimm Fox on Bloomberg Television's "Taking Stock." (Cohan is a Bloomberg View columnist. The opinions expressed are his own. Source: Bloomberg)

The account could have contained both client and company funds, the memo notes. Whether the transferred funds were those of the company, its clients or both is not known.

“If client funds were transferred at his direction, it raises new questions,” Seth Berenzweig, managing partner at Berenzweig Leonard LLP, a law firm in McLean, Virginia, said in an interview with Bloomberg Television. “This is a new storm cloud that is now headed for Jon Corzine and it raises a lot of issues.”

O’Brien’s internal e-mail was sent as the New York-based broker found intraday credit lines limited by JPMorgan, the firm’s clearing bank as well as one of its custodian banks for segregated customer funds, according to the memo, which was prepared for a March 28 House Financial Services subcommittee hearing on the firm’s collapse. O’Brien is scheduled to testify at the hearing after being subpoenaed.

‘Funds Were Safe’

“Over the course of that week, MF Global (MFGLQ)’s financial position deteriorated, but the firm represented to its regulators and self-regulatory organizations that its customers’ segregated funds were safe,” said the memo, written by Financial Services Committee staff and sent to lawmakers.

Steven Goldberg, a spokesman for Corzine, said in a statement that Corzine “never gave any instruction to misuse customer funds and never intended anyone at MF Global to misuse customer funds.”

Vinay Mahajan, global treasurer of MF Global Holdings, wrote an e-mail on Oct. 28 that JPMorgan was “holding up vital business in the U.S. as a result” of the overdrawn account in London, which had to be “fully funded ASAP,” according to the memo.

$200 Million Transfer

“On the afternoon of Friday, October 28, MF Global transferred $200 million from a segregated customer account at JPMC to cover a $175 million overdraft in one of MF Global’s JPMC accounts in London,” the memo says. “Ms. O’Brien wrote in an e-mail that the transfer was ‘Per JC’s [Jon Corzine’s] direct instructions’.”

Barry Zubrow, JPMorgan’s chief risk officer, called Corzine to seek assurances that the funds belonged to MF Global and not customers. JPMorgan drafted a letter to be signed by O’Brien to ensure that MF Global was complying with rules requiring customers’ collateral to be segregated. The letter was not returned to JPMorgan, the memo said.

Corzine, 65, in testimony in front of the House panel in December, said he did not order any improper transfer of customer funds. Corzine also testified that he never intended a misuse of customer funds at MF Global, and that he doesn’t know where client funds went.

‘Never Intended’

“I never gave any instruction to misuse customer funds, I never intended anyone at MF Global to misuse customer funds and I don’t believe that anything I said could reasonably have been interpreted as an instruction to misuse customer funds,” Corzine told lawmakers in December.

In his statement, Goldberg said Corzine did not specify which funds should be used to replenish the JPMorgan account.

“He never directed Ms. O’Brien or anyone else regarding which account should be used to cure the overdrafts, and he never directed that customer funds should be used for that purpose,” Goldberg said. “Nor was he informed that customer funds had been used for that purpose.”

The bankruptcy trustee overseeing the liquidation of the company’s brokerage subsidiary has estimated a $1.6 billion shortfall between customer claims and assets available.

Lawmakers and investigators from the Commodity Futures Trading Commission, Securities and Exchange Commission and Department of Justice have been reviewing events leading up to MF Global’s bankruptcy filing. Executives including Corzine, a Democrat who served in the Senate from 2001 to 2006 and as governor of New Jersey from 2006 to 2010, gave testimony on the collapse at three congressional hearings last year. Corzine was co-chairman of Goldman Sachs Group Inc. (GS) before entering politics.

Congressional Report

Representative Randy Neugebauer, a Texas Republican and chairman of the Financial Services oversight and investigations subcommittee, is preparing a final report on his investigation into the firm’s failure.

“One of the goals of our investigation is not only to find out where the money went but to identify what went wrong in order to prevent this from happening again,” Neugebauer said in a statement.

O’Brien is scheduled to appear before lawmakers with Christine Serwinski and Laurie Ferber, two other MF Global executives named by Corzine as being involved in the transaction, according to the memo. Henri Steenkamp , the firm’s chief financial officer, is also scheduled to testify, as is a representative from JPMorgan who has not yet been identified.

European Bet

MF Global and its brokerage sought Chapter 11 bankruptcy after a $6.3 billion bet on the bonds of some of Europe’s most indebted nations prompted regulator concerns and a credit rating downgrade. Corzine quit MF Global Nov. 4.

During his testimony, Corzine identified O’Brien as someone with knowledge of a transfer of funds from customer accounts before the firm sought bankruptcy protection Oct. 31.

Reid H. Weingarten, O’Brien’s lawyer, did not respond to a phone call and e-mail seeking comment.

The memo’s account of the e-mail exchanges aligns with what Terrence Duffy, the executive chairman at CME Group Inc. (CME), told lawmakers during a December congressional hearing. Auditors at CME, which had authority to oversee MF Global, learned from an employee of the brokerage that Corzine knew about the loans involving a European affiliate, Duffy told committee members.

To contact the reporters on this story: Phil Mattingly in Washington at pmattingly@bloomberg.net; Silla Brush in Washington at sbrush@bloomberg.net

To contact the editor responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net

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U.S. Tax Breaks Valued at More Than $1 Trillion, WSJ Reports

By Dan Hart - Mar 24, 2012 7:54 PM GMT+0700

The value of U.S. tax breaks exceeds $1 trillion, which may give both parties potential areas to cut costs and alleviate the cost of changing the tax code, the Wall Street Journal reported, citing a study.

The Congressional Research Service report found the biggest tax break is likely to be valued at $164 billion annually in 2014 and is on employer-provided health insurance, while employer-provided pensions are the second-biggest exclusion at about $163 billion, the newspaper said.

The study said the most that might be gained in additional tax revenue from eliminating tax breaks was $150 billion, because of political opposition and technical hurdles, the newspaper said.

Lawmakers might only be able to reduce tax rates by one or two percentage points for the top individual rate, the Journal said, citing the report.

To contact the reporter on this story: Dan Hart in Washington at dahart@bloomberg.net

To contact the editor responsible for this story: Sylvia Wier at swier@bloomberg.net

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LinkedIn Chairman Hoffman Sells Facebook Stock Before IPO

By Zijing Wu and Douglas MacMillan - Mar 23, 2012 4:26 AM GMT+0700

Reid Hoffman, co-founder and chairman of LinkedIn Corp. and an early investor in Facebook Inc. (FB), plans to sell some of his shares in the world’s largest social network prior to its initial public offering this year.

“I am selling a minority of my position as part of a general diversification strategy, but holding onto the majority of my stock,” Hoffman said in a telephone interview.

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LinkedIn Executive Chairman and co-founder Reid Hoffman at the Web 2.0 Expo on March 30, 2011 in San Francisco. Photographer: Justin Sullivan/Getty Images

Hoffman participated in Facebook’s seed funding round in 2004, along with Peter Thiel and Mark Pincus. He later invested in social-gaming leader Zynga Inc. and became a partner at Menlo Park, California-based venture capital firm Greylock Partners.

Facebook, which filed in February to raise as much as $5 billion in an IPO, may be valued at as much as $100 billion in the offering, people with knowledge of the matter said earlier this year.

While Hoffman’s stake in Facebook isn’t disclosed in the company’s prospectus, the website Who Owns Facebook estimates he owns 0.5 percent, or about $500 million, based on a valuation of $100 billion.

The trading of private-company shares has accelerated in recent years, spurring the U.S. Securities and Exchange Commission to examine whether the trades expose investors to fraud because the companies aren’t required to disclose financial data. Last week, the U.S. regulator settled with SharesPost Inc. to resolve claims that the online marketplace acted as an unregistered broker of shares.

Hoffman is the biggest shareholder of LinkedIn (LNKD), with stock valued at about $1.9 billion following its IPO last year.

Jonathan Thaw, a spokesman for Menlo Park-based Facebook, declined to comment on the stock sale.

To contact the reporters on this story: Zijing Wu in London at zwu17@bloomberg.net; Douglas MacMillan in San Francisco at dmacmillan3@bloomberg.net

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

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Credit Suisse VIX Note Tumbles to Record-Low Price

By Nikolaj Gammeltoft - Mar 23, 2012 3:36 AM GMT+0700

A Credit Suisse Group AG (CSGN) security tracking the benchmark measure of U.S. options prices plunged to an all-time low, reversing ground after trading at a record premium to its underlying assets the last four days.

The VelocityShares Daily 2x VIX Short-Term ETN (TVIX), or TVIX, retreated 29 percent to $10.20 at 4 p.m. New York time, on volume that was 2.6 times the three-month average. Credit Suisse’s exchange-traded note closed at $14.43 yesterday, or 89 percent above its so-called indicative value, after falling 86 percent from its Oct. 3 peak as the Standard & Poor’s 500 Index rose 28 percent to the highest level since May 2008.

The gap between the security’s price and the value of the index it tracks has widened since Credit Suisse suspended issuance of new shares, causing a supply shortage amid record demand for volatility products that provide a hedge against U.S. equity losses. Short sellers may be accelerating bets against TVIX today on speculation Credit Suisse will permit issuance of more shares, said WallachBeth Capital’s Chris Hempstead.

“People are waiting for Credit Suisse or VelocityShares to come out and say what’s going to happen,” Hempstead, director of exchange-traded-fund execution services at WallachBeth in New York, said in a phone interview. “The trading community believes that they will be able to create these shares again in the near future, and if that’s the case then that’s why they are shorting it.”

Market Cap Surges

Katherine Herring, a spokeswoman for Credit Suisse in New York, declined to comment. Her company suspended issuance of TVIX shares after its market value more than quadrupled this year to almost $700 million, data compiled by Bloomberg show. Its market capitalization has since plunged to $415.4 million.

The VelocityShares ETN aims to produce twice the daily return of the S&P 500 VIX Futures Index, which tracks a trading strategy involving futures on the Chicago Board Options Exchange Volatility Index. The VIX (VIX), as the CBOE gauge is known, is used as a benchmark measure of U.S. equities derivatives and measures the cost of protection from losses in U.S. stocks. It rose 2.9 percent today.

ETNs are unsecured bank debt backed by their issuer’s credit, unlike exchange-traded funds that hold assets. Banks create and redeem shares of ETNs based on the level of demand for the securities. That demand usually doesn’t affect the price since the ETNs track the performance of an index.

Credit Suisse’s decision to halt new issuance of TVIX shares coincided with a period in which the ETN began moving independently of its underlying assets. The S&P 500 VIX Futures Index lost 32 percent between Feb. 21, the day of the suspension, and yesterday. That was more than twice the decline in the ETN.

Bigger Premium

The faster decrease in the underlying index contributed to a widening in the premium of the TVIX to its underlying asset. The gap reached a record 36 percent on March 16 and then expanded to 62 percent, 78 percent and 89 percent in the next three days, according to data compiled by Bloomberg.

“People are likely shorting the TVIX and creating the underlying portfolio by buying the VIX futures to hedge,” Michael McCarty, managing partner at Differential Research LLC in Austin, Texas, said today in a phone interview. “That will cause the premium to contract.”

Demand to protect against losses in equities pushed up the number of shares available for trading to records this week in four of the five largest exchange-traded products that rise when U.S. stock volatility increases, data compiled by Bloomberg show. For the iPath S&P 500 VIX Short-Term Futures ETN (VXX), the biggest, outstanding stock reached 113.8 million yesterday, up 80 percent since March 12 and more than fivefold since Dec. 30.

TVIX trading volume surged to 29.7 million shares today, the most since Feb. 17 and more than twice the three-month average, according to data compiled by Bloomberg.

To contact the reporter on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net

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

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BlackBerry Loses Top Spot to Apple at Home: Corporate Canada

By Hugo Miller - Mar 23, 2012 3:21 AM GMT+0700

Canada’s love affair with the BlackBerry is waning.

Research In Motion Ltd. (RIM) has been ousted from the top spot for smartphone shipments in its home market for the first time, trailing Apple (AAPL) Inc.’s iPhone.

RIM, based in Waterloo, Ontario, shipped 2.08 million BlackBerrys last year in Canada, compared with 2.85 million units for Apple, data compiled by IDC and Bloomberg show. In 2010, the BlackBerry topped the iPhone by half a million, and in 2008, the year after the iPhone’s debut, RIM outsold Apple by almost five to one.

BlackBerry, one of the biggest consumer brands to emerge from Canada, had enjoyed more loyalty among locals who embraced its made-in-Canada roots. BlackBerry’s loss of domestic preeminence shows the iPhone’s user-friendly features and wealth of apps trump other considerations, said Paul Taylor, a fund manager at BMO Harris Private Banking in Toronto.

“For RIM, in its home market, to lose that No. 1 position to iPhone is strategically important,” said Taylor, who manages about $15 billion in assets, including RIM and Apple shares. “It does identify, even with a home-country bias, how consumers are responding to the greater functionality of the iPhone.”

To halt a sales slump that’s spreading north from the U.S., Thorsten Heins, RIM’s new chief executive officer, has vowed to do something “dramatically different.” The BlackBerry 7 phones introduced last year have better Web browsers and touch-screen navigation than older models and the BlackBerry 10 devices due out this year will represent further improvement, Heins said.

Losing the Way

Sales in Canada, which account for about 7 percent of RIM’s revenue, fell 23 percent in the fiscal third quarter from a year earlier as U.S. sales tumbled 45 percent. That dragged worldwide revenue down 5.9 percent, offsetting rising emerging-market sales.

While RIM was once a hotbed of innovation, it didn’t invest enough in promoting its devices once the iPhone arrived, said Alfred DuPuy of Interbrand, a research firm.

“They got so good at innovation they just expected the product to sell itself,” said DuPuy, head of the firm’s Toronto office. “From a brand perspective, they just lost their way.”

BlackBerry slipped two spots to 54th in Interbrand’s October 2011 ranking of the world’s top 100 brands as Apple climbed nine spots to eighth.

“The challenge for Mr. Heins is to take that iconic brand and products that are reasonably competitive and ensure that they do get appropriate attention from the average consumer,” BMO Harris’s Taylor said. “That’s the challenge: to reverse the negative sentiment that has developed.”

Betting on Decline

Market-share losses, a series of marketing missteps and product delays sent the stock down 75 percent last year and RIM today closed down 91 percent from its mid-2008 record. That hasn’t stopped investors from betting on further declines. Short interest (RIMM) in RIM reached an eight-year high this month.

RIM will probably say fourth-quarter profit fell by more than half to 82 cents a share when it reports results March 29, according to a Bloomberg survey of analysts. Sales probably dropped 18 percent to $4.53 billion, analysts predict. RIM said in December sales would be $4.6 billion to $4.9 billion.

By contrast, Apple’s fourth-quarter profit more than doubled to $13.1 billion -- almost triple RIM’s sales -- as revenue surged 73 percent to $46.3 billion.

RIM declined 1.9 percent to $13.78 at 4 p.m. in New York and Apple fell 0.5 percent to $599.34. Apple has gained 48 percent this year and soared almost six-fold since 2009.

Heidi Davidson, a spokeswoman for RIM, declined to comment, citing a quiet period ahead of earnings.

Loyal Customers

Still, many of Canada’s banks and the federal government remain loyal to RIM devices. Royal Bank of Canada, the country’s largest bank, only issues BlackBerrys, said Katherine Gay, a spokeswoman for the Toronto-based bank. Bank of Nova Scotia and Bank of Montreal do the same. Toronto-Dominion Bank (TD), which issues BlackBerrys to its staff, is assessing the policy and allows employees to use personal Apple and Android devices for corporate e-mail, said Dave Codack, head of employee technology.

BlackBerry still has an edge over the iPhone in some emerging markets. In the Middle East and Africa, RIM shipped 8.3 million handsets to Apple’s 2.5 million iPhones last year. In Saudi Arabia, teenagers have embraced RIM because they can flirt using its free BlackBerry Messenger instant messaging, avoiding local religious police who restrict interaction between unmarried men and women.

In Latin America, RIM outsells Apple by an even larger margin, with 10.6 million BlackBerrys shipped versus 2.1 million iPhones in 2011, according to IDC. Venezuelan President Hugo Chavez has dubbed his BlackBerry and Twitter account his “secret weapon.”

More Affordable

For Venezuelans, a no-frills BlackBerry Curve is more affordable than the iPhone because Latin American carriers don’t typically subsidize the cost of devices in exchange for multiyear contracts the way North American operators do. That price advantage has helped RIM expand its base of 75 million subscribers worldwide.

Local concerns about Canada’s technology sector grew after Nortel Networks Corp. (NRTLQ), once North America’s largest phone- equipment maker, filed for bankruptcy in 2009. Nortel, which helped incubate dozens of startups in its heyday, was broken up and its businesses and patents sold to rivals including Ericsson AB and Apple.

That collapse put more pressure on RIM, which had already overtaken Nortel to become Canada’s biggest technology company, to lead the industry’s expansion in the country.

Pitched to Carriers

RIM’s early growth was due in part to the way former co-CEO Jim Balsillie persuasively pitched the BlackBerry to wireless carriers, said Shaw Wu, an analyst with Sterne Agee & Leach Inc. As consumers increasingly choose smartphones for their range of apps, and more companies allow employees to bring their own devices to work and fewer issue BlackBerrys, RIM risks being left behind by the iPhone, Wu said.

“RIM in the past did really well as carriers pushed the product and that’s what sold,” said Wu, who is based in San Francisco and rates RIM the equivalent of a hold. “Now you get the opposite, it’s not what the carriers push but what customers want and customers are choosing iPhones -- even in Canada.”

To contact the reporter on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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Facebook Is Said to Buy 750 IBM Patents to Boost Defenses

By Brian Womack - Mar 23, 2012 5:48 AM GMT+0700

Facebook Inc. (FB) acquired 750 patents from International Business Machines Corp. (IBM), adding intellectual property that may help it counter allegations of patent infringement, a person with knowledge of the transaction said.

The patents cover various technologies such as software and networking, said the person, who asked not to be identified because the deal hasn’t been made public. The acquisition would swell the size of Facebook’s portfolio, which includes at least 56 issued patents and 503 filed U.S. patent applications.

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Facebook. Photogrpher: Frank May/DPA/Landov

Facebook, the world’s biggest social-networking service, is bolstering its legal defenses amid a standoff with rivals that have broader intellectual property portfolios. Yahoo! Inc. (YHOO) sued Facebook this month, accusing it of infringing patents covering critical website functions. Facebook may have shelled out hundreds of millions of dollars for the IBM patents, said Erin- Michael Gill, a managing director at MDB Capital Group LLC.

“This is a very big deal,” said Gill, who is chief intellectual property officer at MDB, an investment bank focused on intellectual property. While it’s not clear how strong the patents are, “Facebook is now where it’s supposed to be.”

The Yahoo suit involves patents covering Internet privacy, advertising and information sharing. Sunnyvale, California-based Yahoo asked for an order barring Facebook from infringing the 10 patents. It’s seeking triple damages.

Jonathan Thaw, a spokesman for Menlo Park, California-based Facebook, declined to comment, as did Ed Barbini, a spokesman for IBM.

Earlier Deals

Facebook already has been acquiring patents from other holders, including early social-networking site Friendster and computing company Hewlett-Packard Co. (HPQ), according to the U.S. Patent & Trademark Office. Yahoo, Google Inc. and Microsoft Corp. all have at least 1,000 patents, according to MDB, based in Santa Monica, California.

Facebook’s IBM deal could help assuage concerns that the company lacks the intellectual property it needs, Gill said. The social network filed for an initial public offering last month, increasing investor scrutiny of the business.

Facebook, which had almost $4 billion in revenue last year, announced earlier this month that it set up a new credit line of $5 billion, replacing a $2.5 billion revolving line, that will be used for working capital and other general corporate purposes. The funds also will help Facebook cover the potential legal costs of patent litigation with Yahoo, according to a person familiar with the matter.

Record IPO

Facebook also had 33 corresponding patents and 149 filed applications in foreign countries as of the end of last year, according to the IPO filing. The company is seeking to raise $5 billion in the offering, making it the largest Internet IPO on record.

Facebook expects more patent lawsuits in the future, according to the filing.

“We expect the number of patent and other intellectual property claims against us to grow,” the company said in the Feb. 1 document, prior to Yahoo’s actions. “We may introduce new products, including in areas where we currently do not compete, which could increase our exposure to patent and other intellectual property claims.”

Already, Facebook ranked No. 28 on the list of companies most frequently targeted in patent cases last year, with 22 suits, according to LegalMetric.com. That’s more than companies such as Cisco Systems Inc. and Yahoo.

‘Weapons in Arsenal’

“They need to have some weapons in their own arsenal,” Thomas Scott, a lawyer at Goodwin Procter LLP in Washington, said in an interview last week.

Acquired patents made up $51 million of Facebook’s goodwill and intangible assets in 2011, up from $33 million in 2010, according to Facebook.

IBM, meanwhile, has been offering portions of its patent hoard to Internet companies. The Armonk, New York-based computer-services giant has made a series of intellectual- property deals with Google (GOOG) over the past year.

IBM continues to add to its patent trove, receiving 6,180 new patents last year. The company has topped the list of U.S. patent recipients for 19 straight years.

To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net

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

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Etch A Sketch Maker Capitalizes After Being Drawn Into Race

By Chris Christoff and Matt Townsend - Mar 23, 2012 5:22 AM GMT+0700

Mitt Romney didn’t make Etch A Sketch a playtime fixture. Generations of nimble-fingered budding artists did that.

His campaign did manage to make the toy that Ohio Art Co. (OART) released in 1960 a central political metaphor when a spokesman compared the Republican presidential candidate’s views to the erasable drawing pad.

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Rick Santorum, right, hands an Etch A Sketch to a staff member on March 22, 2012, in San Antonio. Photographer: Eric Gay/AP Photo

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March 22 (Bloomberg) -- Carol Dean, manager of Creative Minds, talks with Bloomberg's Chris Christoff about Etch A Sketch sales. Creative Minds is located in Bryan, Ohio, home of Ohio Art Co. which makes Etch A Sketch. (Source: Bloomberg)

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An Etch A Sketch toy made by Ohio Art Co. Source: Ohio Art Co. via Bloomberg

The mention during a CNN interview -- and ensuing storm of rivals’ mockery and social-media reiteration -- prompted a flood of attention. In its 52 years, nothing spread the name Etch A Sketch so fast and wide, said Martin Killgallon, senior vice president for marketing and product development.

“If you went out and tried to buy this kind of media coverage, it would be impossible,” Killgallon, 36, said in a telephone interview. “I don’t know how to measure it.”

Nicole Gresh, spokeswoman for the Bryan, Ohio-based toymaker founded in 1908, said she hadn’t had so many calls since June. That’s when Lyons, Colorado, held a Sketch-A-Palooza to set a Guinness Book of Records mark for simultaneous sketching.

The red, plastic tablet, a mainstay of U.S. playrooms and Ohio Art’s best-selling product through last year, allows children to use knobs to control a line’s horizontal and vertical progress. Shake the gizmo and the picture disappears, leaving a clean slate for a new creation.

Franco-American Fun

The toy was invented by Andre Cassagnes in the late 1950s. The French electrician’s original version, called the Telecran, used a joystick, glass and aluminum powder. Ohio Art then bought the rights. It sells the toy for $17.99.

Etch A Sketch’s star turn began yesterday, when Romney aide Eric Fehrnstrom was asked on CNN whether he was concerned that the candidate was being forced by Republican opponents to take extreme positions during the primary that might alienate moderates in a race against President Barack Obama.

“You hit a reset button for the fall campaign,” Fehrnstrom said. “Everything changes. It’s almost like an Etch A Sketch. You can kind of shake it up, and we start all over again.”

The statement resounded in the political world -- and beyond. Tim George, a Columbus, Ohio, artist whose medium is the Etch A Sketch, said he has drawn all 44 U.S. presidents.

Get Scribbling

“I haven’t drawn any of the Republican candidates yet because I was kind of waiting until they narrow it down to one,” George, 60, said in a telephone interview. “It looks like I’ll be drawing Romney, though, at some point. In fact, I wish I had it done now.”

At the FAO Schwarz toy store in midtown Manhattan -- which displays a prototype Etch A Sketch dating from 1959 -- shopper and father Cal Elcan said the plaything is “timeless.”

“We’ve all played with an Etch A Sketch before -- every one of us,” said the tourist from Nashville, Tennessee.

Alexis Elcan, 9, said she finds twiddling the knobs more challenging than a newfangled computer drawing game.

“They’re weird,” she said. “You have to be really good at them.”

Ohio Art, which manufactures the plaything in China, employs about 100 people at its Toy Street facility in Bryan (12939MF), including sales and design staffs, Killgallon said. The town of about 11,500, dominated by the county courthouse’s clock tower, is a capital of childhood delights: It is also home of Spangler Candy Co., maker of Dum Dums lollipops.

Divine Plug

Ohio Art competes in a field dominated by Mattel Inc. (MAT) and Hasbro Inc. (HAS), the world’s largest toymakers, with combined sales of more than $10 billion. They spend millions on advertising and marketing, and Hasbro even owns part of a cable television station to help market its toys.

“It’s virtually impossible to get attention,” said Michael Greenberg, chief executive of Chester, New Jersey-based PlayWow International, a small manufacturer that tries to garner publicity by donating its inflatable toys. “Something like this is a gift from God.”

Fehrnstrom’s free publicity might be worth tens of millions to Ohio Art, according to Jordan Zimmerman, founder of an eponymous advertising firm whose clients include Papa John’s International Inc. (PZZA) and Office Depot Inc. (ODP)

“It will help resurrect the brand and drive sales,” said Zimmerman, who’s based in Fort Lauderdale, Florida. “If they are smart, they will parlay this.”

Surprise Gift

This gift of free advertising comes after sales in the arts-and-crafts category, which includes Etch a Sketch, declined 1 percent to $2.7 billion last year, according to NPD Group. Total revenue in the U.S. toy industry fell 2 percent to $21.2 billion, the researcher said.

Shares of Ohio Arts, which is thinly traded, more than doubled to $9.65 after three transactions totaling 800 shares at the close in New York’s over-the-counter market.

It’s too early tell whether sales will increase, Ohio Art said.

“It’s a pop culture icon and it’s nice to be part of the discussion,” Killgallon said. “One thing we’d like to do with all this publicity is to try to find a way to turn it into a positive and look at some sort of get-out-the-vote campaign.”

Killgallon said he’s been asked whether Etch A Sketch leans toward Democrats or Republicans.

“Etch A Sketch has right- and left-hand knobs,” he said. “We speak to both parties. And together we can draw circles.”

To contact the reporters on this story: Chris Christoff in Bryan at cchristoff@bloomberg.net; Matt Townsend in New York at mtownsend9@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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Google Said to Rethink Wallet Strategy Amid Slow Adoption

By Olga Kharif - Mar 22, 2012 12:53 AM GMT+0700

Google Inc. (GOOG) is weighing changes aimed at improving its Google Wallet mobile-payment system following slow adoption and the departure of two key managers, according to people with knowledge of the project.

The company is considering sharing revenue with carriers such as Verizon Wireless and AT&T Inc. (T) to get them to embrace the technology, which lets users pay for items at checkout by tapping phones on a reader device, said the people, who asked not to be named because the discussions are private.

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The Google Inc. Mobile Wallet application for cardless payment is displayed on a smartphone screen at the Mobile World Congress in Barcelona, Spain, on Feb. 29, 2012. Photographer: Chris Ratcliffe/Bloomberg

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Nov. 3 (Bloomberg) -- Bloomberg's Rich Jaroslovsky reviews Google Inc.'s Google Wallet mobile-payment application. It is one of the first systems in a push by companies like Visa Inc., Mastercard Inc. and the wireless carriers to encourage the use of smartphones to replace cash and credit cards in retail transactions. (Source: Bloomberg)

Google aims to spur demand for its Wallet app, which is designed to boost its share of the multibillion-dollar market for mobile advertising by letting it target shoppers with coupons and promotions. The challenge: Few phones have the right technology installed, and rivals are readying their own systems, including one called ISIS that’s backed by carriers.

“They are in a bit of a re-evaluation pattern right now,” said Rick Oglesby, an analyst at Boston-based research firm Aite Group. “It’s going much slower than anticipated.”

One of the two original creators of the Google Wallet software, Jonathan Wall, left Google this month to start his own company focused on mobile shopping, Tappmo Inc. Marc Freed- Finnegan, lead product manager for Google Wallet, also departed to join Tappmo.

Making Progress

Google said it’s enthusiastic about Google Wallet’s progress so far. The company is enlisting retailers such as the Pinkberry frozen-yogurt chain, which announced this week that it is using the system. Google Wallet relies on a system called near field communications, a wireless standard that works from within a few inches.

“We continue to work hard to develop Google Wallet and build the partner ecosystem to make it possible for everyone to pay with their phones and get great deals while shopping,” Nate Tyler, a spokesman for Mountain View, California-based Google, said in an e-mailed statement.

The mobile-payment market has drawn scads of competitors, including startups and more established companies such as Visa Inc. (V), all aiming to capitalize on the growth of smartphones. The idea is to free shoppers from having to carry credit cards or cash -- they just need their handsets. Mobile-payment transactions will top $170 billion by 2015, up from about $60 billion last year, according to Juniper Research.

ISIS System

As the owner of both the world’s most popular search engine and smartphone operating system, Google has an inside track with consumers. Still, it lacks the support of the two biggest U.S. carriers, Verizon and AT&T, which are backing the ISIS system. For now, Google Wallet’s NFC functions only work on two phones from Sprint Nextel Corp. (S), the third-largest U.S. carrier. While 50,000 to 100,000 people have downloaded the software, only a small percentage use it, Oglesby estimates.

“The reception has been lukewarm,” said Chetan Sharma, an independent consultant focused on the wireless industry.

Gaining a bigger foothold in the wireless-payment market would help solidify Google’s role as the leading seller of ads on phones and other mobile devices. That industry is projected to reach almost $11 billion in 2016, up from $2.61 billion this year, according to research firm EMarketer Inc.

The proposal to share revenue with carriers would involve the coupons and special offers that run on the Google Wallet app, the people familiar with the matter said. Carriers might get a cut of the proceeds when consumers accept the deals.

‘No Incentive’

“Today, the operators have no incentive to adopt Google Wallet, given that they have their own ambitions in this space,” said Sharma, who is based in Issaquah, Washington.

Verizon, AT&T and T-Mobile USA have joined forces to create ISIS, which is slated to roll out in the next few months. At the same time, carriers aren’t making it easy for their customers to use Google Wallet. In December, Verizon blocked the app from its new Galaxy Nexus smartphone, citing security concerns.

“We are continuing our commercial discussions with Google on this issue,” Brenda Raney, a Verizon spokeswoman, said in an e-mail. Mark Siegel, an AT&T spokesman, declined to comment on whether the carrier might offer the app in the future.

Another option Google is exploring: sidestepping the carriers altogether and relying more heavily on in-store terminals to complete mobile-payment transactions, the people said. This approach could involve additional hardware or software for the terminals, coupled with software that runs on Google’s servers, they said.

Work Around

So instead of requiring phones to authenticate payments -- something that needs assistance from carriers -- the system might send transactions to Google’s servers for approval and then clear it with the retailer.

Google currently works with VeriFone Systems Inc. (PAY), Ingenico (ING) and ViVOtech Inc., which make hardware and software for cash registers and other payment systems. Other Google Wallet partners include retailers such as Macy’s Inc. (M), Subway Restaurants and American Eagle Outfitters Inc. (AEO)

Google is adding more employees to the effort, seeking to fill eight Google Wallet positions. Last November, the company folded its Checkout service, which lets customers make online purchases, into Google Wallet.

Sprint will introduce as many as 12 new phones able to run the Wallet app this year. Even so, Google’s retail partners aren’t seeing much traffic for now.

“We knew from the get-go we won’t see a lot of volume,” said Robert Notte, chief technology officer at Jamba Juice (JMBA), which accepts Google Wallet NFC payments at 276 stores. “We are in very early stages of this.”

To contact the reporter on this story: Olga Kharif in Portland, Oregon, at okharif@bloomberg.net

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

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U.S. Stocks Fall as Energy Shares Drop on Profit Concern

By Rita Nazareth - Mar 22, 2012 3:38 AM GMT+0700

U.S. stocks fell, sending the Standard & Poor’s 500 Index down a second day, on concern the best first-quarter since 1998 has outpaced economic prospects and as Baker Hughes Inc. drove a selloff in energy shares.

Baker Hughes, the world’s third-largest oilfield-services provider, tumbled 5.8 percent after saying that a shift away from gas rigs will hurt earnings. Morgan Stanley (MS) and Fifth Third Bancorp dropped at least 1.7 percent to pace losses in financial companies. Hewlett-Packard Co. (HPQ) slumped 2.2 percent for the biggest decline in the Dow Jones Industrial Average.

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Traders work on the floor of the New York Stock Exchange (NYSE) in New York. Photographer: Scott Eells/Bloomberg

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March 21 (Bloomberg) -- Bloomberg's Pimm Fox and Deborah Kostroun report on the performance of the U.S. equity market today. U.S. stocks fell, sending the Standard & Poor’s 500 Index down a second day, on concern the best first-quarter since 1998 has outpaced economic prospects and as Baker Hughes Inc. drove a selloff in energy shares. (Source: Bloomberg)

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March 21 (Bloomberg) -- Adam Parker, head of U.S. equity strategy at Morgan Stanley, talks about investment strategy and some of his industry picks. He speaks with Adam Johnson and Trish Regan on Bloomberg Television's "Street Smart." (Source: Bloomberg)

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March 21 (Bloomberg) -- Kate Moore, senior global equity strategist at Bank of America Merrill Lynch, talks about the outlook for stocks, investor sentiment and investment strategy. She speaks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)

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Sales of previously owned homes probably rose in February to the highest in almost two years, a report at 10 a.m. in Washington may show. Photographer: Jim R. Bounds/Bloomberg

The S&P 500 slipped 0.2 percent to 1,402.89 at 4 p.m. New York time. The Dow retreated 45.57 points, or 0.4 percent, to 13,124.62. About 6.1 billion shares changed hands on U.S. exchanges, or 7.9 percent below the three-month average.

“People won’t play real hard at these levels,” said Jeffrey Saut, chief investment strategist at Raymond James & Associates in St. Petersburg, Florida, which oversees more than $300 billion. “I don’t think you should get bearish. Yet the market’s energy seems to be used up after the strong rally.”

The S&P 500 has rallied 12 percent this year amid better- than-estimated economic and corporate data. More than $3.6 trillion was restored to U.S. equity values since last year’s low for the benchmark gauge in October. The rally drove the index to about 14.6 times reported earnings this week, the highest valuation level since July.

Data today showed purchases of previously owned U.S. houses dropped 0.9 percent to a 4.59 million annual rate from a revised 4.63 million pace in January that was faster than previously estimated. The median forecast in a Bloomberg News survey called for a rise to 4.61 million.

‘One-Way Ride’

“The housing situation is not a quick turnaround,” Hank Smith, chief investment officer at Haverford Trust Co. in Radnor, Pennsylvania, said in a telephone interview. His firm manages about $6.5 billion. “In addition, the stock market had an almost one-way ride. It’s due for a pause.”

Energy shares in the S&P 500 slumped 1 percent for the biggest decline among 10 groups.

Baker Hughes (BHI) tumbled 5.8 percent to $45.04. North American first-quarter profit margin will drop to as low as 13.2 percent from 18.7 percent because of lower prices, higher costs and supply shortages as U.S. operators shift rig locations, the company said. Companies are drilling for oil because it’s worth about eight times more on an energy-equivalent basis than gas on U.S. markets, according to data compiled by Bloomberg.

Financials Fall

A measure of financial shares in the S&P 500 lost 0.4 percent for the second-biggest decline among 10 industries. Morgan Stanley fell 1.7 percent to $20.06. Fifth Third retreated 1.8 percent to $14.24.

Hewlett-Packard slid 2.2 percent to $23.46. The company will combine its personal-computer unit with the division that sells printers into a group led by Todd Bradley, who ran the PC business, to help cut expenses amid declining sales and profit.

“Deeper issues will likely take more than management changes,” Maynard Um, an analyst with UBS AG in New York, said in a note to investors.

Hartford Financial Services Group Inc. (HIG) rose 1.4 percent to $22.02. Chief Executive Officer Liam McGee responded to billionaire John Paulson’s call for a breakup with plans to shut or sell parts of the 201-year-old insurer. Hartford will stop selling individual annuities and seek buyers for its individual life, Woodbury Financial Services and retirement-plan operations.

LinkedIn Corp. (LNKD) surged 6.5 percent to $97.78. The biggest professional-networking website was raised to buy from neutral at Goldman Sachs Group Inc.

Netflix Jumps

Netflix Inc. (NFLX) gained 4.4 percent to $120.10. The online and mail-order video-rental service said the mystery series “Hemlock Grove” will be available exclusively to its members for instant viewing early in 2013.

Stocks will probably begin a “steady upward trajectory” over the next few years because any declines in economic growth are already reflected in share prices, Goldman Sachs Group Inc. said. The MSCI World Index (MXWO) is trading at 13.2 times estimated earnings after falling 7.6 percent last year, data compiled by Bloomberg show.

“Given current valuations, we think it’s time to say a ‘long goodbye’ to bonds, and embrace the ‘long good buy’ for equities as we expect them to embark on an upward trend over the next few years,” Peter Oppenheimer, chief global equity strategist at Goldman Sachs in London, wrote in a report today.

The prospects for returns in equities versus bonds “are as good as they have been in a generation,” he wrote.

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

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

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Zynga Said to Pay $200 Million for ‘Draw Something’ Creator

By Douglas MacMillan - Mar 22, 2012 3:37 AM GMT+0700

Zynga Inc. (ZNGA) agreed to acquire OMGPOP Inc., adding the popular application “Draw Something” to its portfolio of games played on Facebook Inc. (FB) and Apple Inc. iPhones.

Zynga will pay about $200 million for the startup, said a person familiar with deal, who asked not to be identified because the terms weren’t made public. OMGPOP will remain headquartered in New York, the companies said in a statement, which didn’t disclose the purchase’s financial terms.

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Zynga Inc. employees through the "time tunnel" at the company's new headquarters in San Francisco on March 15, 2012. Photographer: David Paul Morris/Bloomberg

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Zynga Inc. headquarters in San Francisco on March 15, 2012. Photographer: David Paul Morris/Bloomberg

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Zynga Inc. signage and logo are displayed on the facade of the company's new headquarters in San Francisco. Photographer: David Paul Morris/Bloomberg

The biggest maker of social games is stepping up spending on acquisitions after paying a combined $147.2 million for 22 companies in 2010 and 2011. Zynga, which raised $1 billion in a December initial public offering, aims to lessen its reliance on Facebook, accounting for more than 90 percent of its sales.

“They have done a lot of acquisitions of small game companies along the way,” said Brian Blau, research director at Gartner Inc. “Most of those acquisitions were for talent rather than titles. This is a case where they are buying a title” already popular with users, he said.

OMGPOP’s “Draw Something,” a game where users take turns guessing what their friends draw, has 22.4 million monthly users on Facebook, according to the website AppData. A mobile version for iPhones and iPads released in February is currently the most popular program in Apple’s App Store.

Adam Isserlis, a spokesman for San Francisco-based Zynga, declined to comment on the price of the acquisition.

Facebook takes a 30 percent cut of virtual goods sold in Zynga’s games. Earlier this month, Zynga took the wraps off of Zynga.com, a game-playing hub separate from the social network.

In 2010, Zynga acquired Newtoy Inc., the developer of the mobile application “Words With Friends,” for $53.3 million, according to a company filing.

Zynga shares rose 2.5 percent to $13.72 at the close in New York. The stock has climbed 46 percent this year.

Technology blog TechCrunch reported earlier this week that Zynga could pay between $150 million and $250 million to acquire OMGPOP.

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

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

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JPMorgan Joins BofA in Cutting Senior Mortgage Traders

By Hugh Son and Dawn Kopecki - Mar 22, 2012 4:48 AM GMT+0700

JPMorgan Chase & Co. (JPM) and Bank of America Corp., the two biggest U.S. banks, are cutting senior mortgage traders and salesmen amid a decline in the asset-backed securities market, people with knowledge of the moves said.

Raphael Gonzalez, JPMorgan’s co-head of trading in subprime mortgages, and John Angelica, a securitized-products salesman, resigned from the New York-based bank within the past four weeks in exchange for severance packages that included all their deferred stock awards, said the people, who declined to be identified because the terms are private. Roy Kim, who traded adjustable-rate mortgages, left on his own accord with a similar exit deal, the people said.

JPMorgan and Bank of America, based in Charlotte, North Carolina, are re-evaluating staffing on mortgage-trading desks amid pressure to cut expenses and stricter capital requirements tied to the assets. Some employees were offered severance packages allowing them to keep millions of dollars of deferred stock that otherwise may have been forfeited, the people said.

“When you start doing something like this, you’re making a forward statement about the mortgage-backed security market -- they are saying it isn’t going to be as active,” said Brad Hintz, an analyst covering banks at Sanford C. Bernstein & Co. in New York. “Firms are right-sizing for the fixed-income market of the future. We’ll probably be seeing this in a lot of other Wall Street businesses as the regulations become clear.”

Trading Decline

Trading revenue from securitized products at the 10 biggest global investment banks dropped to roughly $10 billion last year from about $17.5 billion in 2010, according to data from consultant Coalition Ltd.

The three JPMorgan executives left amid involuntary reductions in the past four weeks in the bank’s securitized- products division, which trades and sells mortgage bonds, derivatives and other asset-backed securities, according to two of the people with knowledge of the matter. Jennifer Zuccarelli, a JPMorgan spokeswoman, said she couldn’t comment on the departures, as did Gonzalez and Angelica. Contact information for Kim couldn’t immediately be located.

The bank also dismissed about 5 percent of its equities traders and salesmen yesterday and cut about 100 employees in its treasury and securities services unit in January, according to three people with knowledge of those moves. Andy Taylor, the bank’s head of commercial mortgage bond trading, was shifted to run the loan-trading book. Justin Perras, a company spokesman, confirmed Taylor’s move.

Bank of America eliminated at least half a dozen mortgage traders and salesmen this week. That included John McNiff, a managing director who served as co-head of commercial mortgage securities trading, said people with knowledge of the moves.

Jackier, Eck

Managing directors Seth Jackier in mortgage sales and John Eck in asset-backed trading also opted to leave Bank of America, said the people. Michael Case, a director in commercial mortgage security banking, and salesmen John Livingstone and Michael L. Miller also departed, one of the people said.

Some Bank of America employees volunteered to resign in exchange for a so-called garden leave, a period of 90 days in which they receive full salary and benefits while staying at home, and severance packages including stock, the people said.

“This isn’t necessarily bad news” for people who are weighing moves to other firms, said Jeanne Branthover, managing director at Boyden Global Executive Search Ltd. in New York. “Areas like this that didn’t come back as expected are the ones that companies are now evaluating.”

European Crisis

Banks pulled back from making new loans to package into bonds last year as Europe’s debt crisis roiled credit markets and sent relative yields soaring. Credit Suisse Group AG is shutting its unit responsible for making loans, while the retreat has left other firms short on mortgages to pool for sale.

Bank of America is also cutting outside the U.S., dismissing almost a dozen workers at its Canadian capital- markets business as part of a global staff reduction, one person said. The move leaves the bank with almost 500 people at offices in Toronto, Montreal, Vancouver and Calgary, the person said.

Wall Street firms are firing staff and reducing pay as revenue wanes from trading and underwriting. More cuts are coming at Bank of America as part of Chief Executive Officer Brian T. Moynihan’s efficiency plan, which may target as much as $8 billion in total annual savings. Moynihan, 52, already announced as many as 30,000 job cuts in retail banking and technology.

Bank of America lost market share last year to rivals including New York-based Morgan Stanley (MS) in the trading of equities, bonds, currencies and commodities, Matthew O’Connor, an analyst at Deutsche Bank AG, said in a Jan. 19 research note.

To contact the reporters on this story: Hugh Son in New York at hson1@bloomberg.net; Dawn Kopecki in New York at dkopecki@bloomberg.net.

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

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Kraft’s Name Change to Mondelez Leaves Experts Guessing

By David Welch - Mar 22, 2012 3:19 AM GMT+0700

Is it pronounced mon-dah-lay? Mon- dah-lezz? Oh, it’s mohn-dah-LEEZ.

That, according to corporate naming expert Nina Beckhardt, is the first problem with Mondelez, the name Kraft Foods Inc. (KFT) plans to give its global snacks business after spinning off its U.S. grocery unit this year.

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Photographer: Brent Murray

The second problem: What does it mean? The name is a combination of the word “monde,” derived from the Latin for “world,” and “delez,” an expression for delicious. The name might suit a company commanding $32 billion in revenue from Beijing to Berlin if the connection was apparent. It’s not, Beckhardt said.

“The public gets sick of compressed words if they aren’t intuitive,” said Beckhardt, founder and president of The Naming Group, a New York-based firm that has named shoes for Puma SE (PUM) and high-end stereos for Sony Corp. (6758) “When the pronunciation isn’t accessible, it looks bad. It’s not intuitive.”

Mondelez isn’t the first corporate name to generate confusion. When Andersen Consulting switched to Accenture in 2001, pundits wondered why they would leave behind such name recognition. The move paid off later when Arthur Andersen accounting -- once under the same corporate umbrella as the consulting firm -- became embroiled in the Enron Corp. (ENRNQ) accounting scandal.

Philip Morris changed its name to Altria Group Inc. (MO), claiming that the Latin word “altus,” suggested high performance. The name also disassociated the company from the baggage of tobacco litigation and health concerns.

Corporate Versus Brand

Corporate name changes tend to have less of an impact, either good or bad, than brand name changes, Beckhardt said. That could be good news for Northfield, Illinois-based Kraft, which plans to use Mondelez strictly on the back of packages of such snack foods as Oreo cookies and Newtons snacks. After the split, the snacks business will market those brands directly to consumers and Mondelez will remain in the background.

Establishing the corporate name will take time, said Sharon Shedroff, founder of San Diego consulting firm Strategic Vision Inc. The Mondelez name may be understood in European countries where Latin-based languages are spoken. People speaking other languages will have a tougher time figuring it out.

“Until the brand is established, it will be difficult for people to give it meaning in the U.S. and probably in Asia,” Shedroff said in a phone interview. “Brands under it, like Oreo, could lend credibility to Mondelez.”

Kraft Groceries

Kraft’s grocery business will retain the Kraft name as it continues selling cheese and other items that have borne founder J.L. Kraft’s moniker since he started as a wholesaler in 1903.

Nissan Motor Co. (7201)’s decision to put its corporate name on Datsun cars sold in the U.S. in 1981 was a disaster, said Jim Hall, principal of 2953 Analytics in Birmingham, Michigan.

Americans liked the Datsun 510 sedan and 240Z sports car, and Datsun was the second-best selling Japanese brand in the U.S. behind Toyota Motor Corp. (7203) at the time. The change to Nissan caused confusion, Hall said. Today, Nissan trails Toyota and Honda Motor Co. (7267)

Kraft asked employees to suggest names, and more than 1,000 participated, submitting more than 1,700 potential names, the company said. The inspiration for Mondelez came from two employees, one in Europe and another in North America.

Kraft realizes that the pronunciation of Mondelez isn’t easily picked up by everyone, said Michael Mitchell, a company spokesman. People will figure it out before too long, he said.

“It will take a while to get used to,” Mitchell said in a phone interview. “People will learn how to pronounce it, and it will be good.”

To contact the reporter on this story: David Welch in Detroit at dwelch12@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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Madonna Vows to Oppose Gay Law in Putin’s Hometown

By Anastasia Ustinova - Mar 22, 2012 4:22 AM GMT+0700

Madonna’s first tour in Russia drew the ire of orthodox Christian activists. Now she vows to defy a new law against promoting homosexuality when she performs in President-elect Vladimir Putin’s hometown in August.

“I will come to St. Petersburg to speak up for the gay community and to give strength and inspiration to anyone who is or feels oppressed,” the pop star said by e-mail late yesterday. “I’m a freedom fighter.”

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Madonna performs during the Bridgestone Super Bowl XLVI Halftime Show at Lucas Oil Stadium on Feb. 5, 2012 in Indianapolis, Indiana. Photographer: Christopher Polk/Getty Images

The law, signed on March 7 by St. Petersburg Governor Georgy Poltavchenko, a Putin ally and former KGB officer, bans lesbian, gay, bisexual and transgendered “propaganda” that could give minors “the false perception that traditional and nontraditional relationships are socially equal.”

Homosexuality was outlawed in the Soviet era and wasn’t decriminalized in Russia until 1993. Seventy-six of the 193 members of the United Nations deem homosexuality illegal, according to Human Rights Watch. At least five countries, including Iran, impose the death penalty for consensual same-sex relations, the New York-based advocacy group says.

Madonna, ranked the 8th highest-earning celebrity in Forbes magazine’s 2010 list with estimated earnings of $58 million, plans to return to Russia for the third time with a concert in Moscow on Aug. 7, followed two days later by St. Petersburg. Tickets for both performances range from 1,500 rubles ($51) to 50,000 rubles apiece, according to PMI Corp. and Euro Entertainment, the organizers of the events.

‘Ridiculous Atrocity’

“I don’t run away from adversity,” Madonna, who has used her fame to support gay rights, said in the e-mail. “I will speak during my show about this ridiculous atrocity.”

Madonna’s first show in Russia six years ago was marred by protests of Russian Orthodox activists who objected to her performance of the song “Live to Tell,” which she sang while wearing a crown of thorns and dangling from a cross.

During the singer’s second visit in 2009 on the Sticky and Sweet tour, a Communist group urged her to sing a revolutionary anthem like the Marseillaise as she performed near the Winter Palace in St. Petersburg, which was stormed by the Bolsheviks in 1917. The palace now houses the Hermitage Museum.

The American pop star’s financial interests in Russia extend beyond show business. She opened a Hard Candy upscale fitness center in Moscow last year, a 35,000 square-foot (3,250 square-meter) facility less than 650 yards (600 meters) from the Kremlin. This was the second Madonna-themed gym in the world, after Mexico City. She plans to open a third in St. Petersburg, Europe’s fourth-largest city.

‘Lots of Criticism’

The Russian Orthodox Church, the dominant religious body in a country of 143 million people, considers homosexuality a sin. About 69 percent of Russians identify themselves as Orthodox, according to a poll last August by the Moscow-based Levada Center.

“There’s lots of criticism from the media community about this law, but somehow most of the media forget about this crucial word -- minors,” said Vladimir Vigilyansky, a spokesman for the Moscow Patriarchy, by phone. “It’s about propaganda among minors, not about banning homosexuality itself.”

Russia, which is preparing to host the Winter Olympics in 2014 and the soccer World Cup in 2018, was chastised for the legislation by Canada, which issued a warning to its citizens who plan to travel to St. Petersburg to avoid “displaying affection in public, as homosexuals can be targets of violence.”

The former imperial capital, founded by Peter the Great in 1703, is the country’s top tourist destination and a host city for the World Cup. About 2.3 million foreigners visited the city in 2010, the last year for which government data is available.

To contact the reporter on this story: Anastasia Ustinova in в Чикаго at austinova@bloomberg.net

To contact the editor responsible for this story: Brad Cook at bcook7@bloomberg.net



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