Sukhoi SuperJet Disappears During Indonesia Demo Flight

By Yudith Ho and Andrea Rothman - May 10, 2012 6:01 AM GMT+0700

The search continued for a Russian Sukhoi SuperJet 100 that vanished from radar screens during a brief promotional flight in Indonesia yesterday with 50 people on board, as poor weather complicated the rescue effort.

Indonesia’s National Search & Rescue Agency deployed more than 100 people to track down the aircraft that disappeared in the afternoon in West Java. Helicopters were forced to abort an earlier mission and will resume their search today. Sukhoi representatives said they were heading for Jakarta to support the effort, along with Russia’s Ministry of Industry & Trade.

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Relatives of passengers on the ill-fated Russian Sukhoi Superjet 100 grieve at the arrival area of Halim airport in Jakarta on May 9, 2012. Photographer: Romeo Gacad/AFP/GettyImages

The twin-engine aircraft, which can carry about 100 people, lost contact after descending to 6,000 feet (1,828 meters) on its second flight of the day during a promotional tour of Asian countries. The SuperJet, developed with support and equipment of Western partners, is the spearhead in Russia’s attempt to revive the nation’s aerospace industry and modernise the fleet following the 1991 collapse of the Soviet Union.

“I cannot say that it has crashed,” Daryatmo, head of the Search and Rescue Agency, said at a press briefing at Halim Perdana Kusumah airport. “What we can say at the moment is that it has lost contact.” .

The terrain in the West Java province reaches 10,000 feet around the peak of the Ciremai volcano. The Sukhoi had taken off from the Halim Perdana airport as part of a tour of Asia that had included previous stints to Myanmar, Pakistan and Kazakhstan. Further appearances were planned in Laos and Vietnam, Olga Kayukova, a spokeswoman for Sukhoi owner United Aircraft Corp., said by telephone.

Proper Condition

The aircraft has an operating range of as much as 4,578 kilometers (2,845 miles) and is a challenger to similar-sized jets from Bombardier Inc. (BBD/B) and Brazil’s Embraer SA. (EMBR3) Sukhoi said the jet used in Jakarta had gone through the “full pre-flight check” and displayed the “proper technical condition.”

The second demonstration flight for the day followed a first tour that had gone “without any technical problems,” Sukhoi said in a statement on its website. Commanding the jet were a “very experienced crew” consisting of Chief Test Pilot Alexander Yablontsev and co-pilot Alexander Kochetkov, it said.

The Sukhoi SuperJet carried 42 passengers and eight crew, Sunaryo, an official from PT Trimarga Rekatama, said at a press conference yesterday in Jakarta. Trimarga Rekatama is Sukhoi’s agent in Indonesia.

Prone to Accidents

The SuperJet was developed in a venture with Finmeccanica SpA (FNC)’s Alenia Aeronautica SpA, which is helping market the plane. Russia’s aviation industry has sought to overcome the image of outdated aircraft prone to accidents. Last year, the country suffered 99 deaths after five jetliner accidents through late September, according to the most recent figures available from researcher Ascend Worldwide Ltd.

Following an accident last year when a plane carrying the Lokomotiv Yaroslavl hockey team failed to gain altitude, then- President Dimitry Medvedev said Russia might turn to foreign aircraft producers to ensure safety of air travel.

The age of Russia’s domestically manufactured single-aisle aircraft fleet is between 25 and 30 years, while the U.S. fleet averages around 13 years, according to figures published late last year by Ascend, a London-based aviation consultant company.

“It’s a setback, but we don’t know anything about the causes yet,” said Richard Aboulafia, vice president of the Teal Group, an aviation forecaster in Fairfax, Virginia. “Russia’s jetliner industry completely lost its competitiveness after the Cold War and shrank to almost nothing.”

Muted Interest

Customers for the SuperJet included Armenia’s Armavia and Russia’s flagship airline OAO Aeroflot, and the eight aircraft in service for two carriers have accumulated more than 3,500 flights. PT Sky Aviation, an Indonesian carrier, has ordered 12, and the Asian tour was an attempt to raise the aircraft’s profile with prospective customers.

While European carriers including Air France-KLM Group and Deutsche Lufthansa (LHA) AG initially said they were studying the plane, neither has so far placed orders. The SuperJet’s main competitors are the CRJ900 built by Bombardier and the E175 and E190 models by Embraer.

Seating five abreast, the plane is powered with engines built by PowerJet, a joint venture between French engine maker Snecma, a unit of Safran SA (SAF), and NPO Saturn. Safran’s Messier- Dowty unit also provides the integrated landing gear system, with B/E Aerospace providing the doors. Italy’s Avio provides the gearbox for the propulsion systems and Safran’s Aircelle unit provides the engine nacelles.

Development and capital costs were about $1 billion, according to Fairfax’s Teal, with another $1 billion for the engines and customer support. The list price is $28 million. The aircraft had 170 orders in total, according to Teal. Sukhoi itself has not disclosed order numbers.

To contact the reporters on this story: Yudith Ho in Singapore at yho35@bloomberg.net; Andrea Rothman in Paris at aerothman@bloomberg.net

To contact the editors responsible for this story: Benedikt Kammel at bkammel@bloomberg.net; Neil Denslow at ndenslow@bloomberg.net

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Greece Euro-Exit Debate Goes Public

By James G. Neuger - May 10, 2012 5:01 AM GMT+0700

From the monetary fortress of the European Central Bank to the pro-European duchy of Luxembourg, policy makers are beginning to air their doubts that Greece can stay in the euro.

Post-election tumult in Athens has put the once-taboo subject of an exit from the 17-country currency union on the agenda, lifting the veil on possible scenario planning afoot behind the scenes.

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The euro fell for the eighth day as it dawned on investors that Greek voters’ revolt against austerity, and not the victory of Socialist Francois Hollande in France, was the more significant of the two national elections in the EU on May 6. Photographer: Simon Dawson/Bloomberg

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May 10 (Bloomberg) -- Stephen Roach, a professor at Yale University and former non-executive chairman for Morgan Stanley in Asia, talks about the global economy and Europe's sovereign debt crisis. He speaks from Connecticut with Susan Li on Bloomberg television's "First Up." (Source: Bloomberg)

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May 10 (Bloomberg) -- Elena Panaritis, a former Greek member of parliament for the socialist Pasok party, talks about the outlook for the nation's debt crisis and possible exit from the euro zone. Post-election tumult in Athens has put the once-taboo subject of an exit from the 17-country currency union on the agenda, lifting the veil on possible scenario planning afoot behind the scenes. Panaritis speaks from Athens with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

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May 9 (Bloomberg) -- Riccardo Barbieri, chief European economist at Mizuho International Plc, talks about European Union fiscal cooperation and the prospects for another round of Greek elections in June. He speaks with Manus Cranny on Bloomberg Televisions's "Last Word." (Source: Bloomberg)

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May 9 (Bloomberg) -- Robert Jukes, global strategist at Collins Stewart Wealth Management, discusses global investment strategy and controls against portfolio risk. He speaks with Linzie Janis and Mark Barton on Bloomberg Televisions's "Countdown." (Source: Bloomberg)

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May 9 (Bloomberg) -- Bank of Italy Director General Fabrizio Saccomanni talks about Greece's bailout terms and the outlook for the Italian economy. He speaks with Bloomberg Television's David Tweed in Florence, Italy. (Source: Bloomberg)

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A German activist, member of the Frankfurter 'Occupy Public Space,' outside the German embassy in Athens protesting 'against the austerity and debt politics in the EU forced by the German government'. Photographer: Simela Pantzartzi/EPA/Landov

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Alexis Tsipras, center, leader of Greece's radical left coalition SYRIZA, leaves Greek President Karolos Papoulias' office in Athens on May 8, 2012. Photograph: Kyodo/Landov

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Wolfgang Schaeuble, Germany's finance minister. Photographer: Jock Fistick/Bloomberg

“If Greece decides not to stay in the euro zone, we cannot force Greece,” German Finance Minister Wolfgang Schaeuble said at a conference sponsored by German broadcaster WDR in Brussels yesterday. “They will decide whether to stay in the euro zone or not.”

After 386 billion euros ($499 billion) in aid pledges for Greece, Ireland and Portugal, 214 billion euros in ECB bond purchases and another trillion euros in low-interest loans for banks, plus 17 high-level crisis summits, Greece’s political chaos thrust Europe into a perilous new phase.

The world is witnessing an “important moment in European Union history, a moment of crisis,” EU President Herman Van Rompuy said in Brussels on the 62nd anniversary of the declaration by Robert Schuman, then France’s foreign minister, that launched postwar European integration.

Euro’s Drop

The euro fell for the eighth day as it dawned on investors that Greek voters’ revolt against austerity, and not the victory of Socialist Francois Hollande in France, was the more significant of the two national elections in the EU on May 6.

Bonds of at-risk countries have suffered since the balloting. Spain’s extra 10-year yield over German levels widened to 456 basis points from 415 at the end of last week. Italy’s widened to 408 basis points from 385 over the same timespan. The euro bought $1.2950 at 6:15 p.m. in Brussels, bringing its eight-day loss to 2.4 percent.

“Politically speaking, Greece is already out of the euro zone,” Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, said in an e-mailed note. “The only question is about the timing and disorderliness of its exit.

The Greek parties running on an austerity-for-rescue platform took one-third of the vote. Top vote getter Antonis Samaras failed to assemble a government, throwing in the towel after a few hours. Second-place finisher Alexis Tsipras of the Syriza party began coalition talks with an ultimatum to would-be partners to renounce support for the bailout.

‘Catastrophic Uncertainty’

The response outside Athens left little room for maneuver. Schaeuble said that fiddling with the bailout terms would unleash ‘‘catastrophic uncertainty’’ in financial markets, and the central bank’s verdict came from his former deputy, Joerg Asmussen.

‘‘Greece has to be aware that there is no alternative to the agreed consolidation program if it wants to remain a member of the euro zone,’’ Asmussen, who last year moved from the German Finance Ministry to the ECB board, told Handelsblatt in an interview published yesterday.

With polls showing roughly the same proportion of Greeks wanting to stay in monetary union while opposing austerity, the haggling over the future government and possible elections next month put the country before two incompatible options.

‘Very Painful’

‘‘If 80 percent of Greeks want to stay in the euro, then I think they have to support parties that are in favor of this policy of staying in the euro,’’ Luxembourg Foreign Minister Jean Asselborn said at the Brussels conference. Otherwise ‘‘comes the point where Greece unfortunately has squandered the opportunity and that will be very, very painful for the people.’’

European treaties label the euro ‘‘irrevocable’’ and provide no legal procedure for a country to leave or be thrown out. A December 2009 study by the ECB’s legal department deemed an ouster or departure ‘‘so challenging, conceptually, legally and practically, that its likelihood is close to zero.’’

Europe’s crisis managers put the odds at zero until last November, when German Chancellor Angela Merkel and French President Nicolas Sarkozy turned a planned Greek referendum on austerity into an in-or-out vote on Greece’s euro future.

The referendum was dropped and the Greek leader who mooted it, George Papandreou, was out within days. A nonpartisan government led by former ECB Vice President Lucas Papademos took over. Unlike Italy, which got a technocratic government at the same time, Greek politicians gambled on early elections.

Re-Vote

With the coalition talks in Athens at risk of stalemating, another vote may come as soon as next month.

Merkel’s first finance minister, Peer Steinbrueck, questioned whether a new election would yield a functioning government with the mandate to deliver the additional savings demanded by international donors.

Greece may be mired in ‘‘a fragile, virtually paralyzed situation for months,” Steinbrueck, a potential challenger to Merkel in Germany’s 2013 election, said at the Brussels conference.

The next Greek ballot “will be a referendum on continued euro membership,” said John Stopford, co-head of fixed income and currency in London at Investec Asset Management, which oversees about $90 billion. “As last week’s election shows, it’s going to be a close-run thing.”

To contact the reporter on this story: James G. Neuger in Brussels at jneuger@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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Dow Falls 6th Day in Longest Slump Since August on Greece

By Rita Nazareth - May 10, 2012 4:17 AM GMT+0700

The Dow Jones Industrial Average (INDU) declined for a sixth straight day, the longest losing streak since August, amid concern Greece’s debt crisis is worsening as the nation struggles to form a coalition government.

Equities trimmed losses as Europe’s bailout fund said it will pay the next installment of aid to Greece. General Electric Co. (GE) and JPMorgan Chase & Co. (JPM) slid more than 1.7 percent to pace declines among the largest companies. Macy’s Inc. (M), the owner of its namesake department stores, slumped 3.7 percent as its profit forecast for this year trailed projections. Walt Disney Co. (DIS) advanced 1.6 percent, to an all-time high, after the world’s largest entertainment company said earnings surged 21 percent.

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Stocks pared losses as the European Financial Stability Facility’s Board of Directors confirmed the release of 5.2 billion euros ($6.7 billion) from a first installment of 39.4 billion euros by the end of June. Photographer: Richard Drew/AP Photo

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May 9 (Bloomberg) -- Bloomberg's Deborah Kostroun reports on the performance of the U.S. equity market today. The Dow Jones Industrial Average declined for a sixth straight day, the longest losing streak since August, amid concern Greece’s debt crisis is worsening as the nation struggles to form a coalition government. (Source: Bloomberg)

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May 9 (Bloomberg) -- Bloomberg’s Betty Liu, Adam Johnson and Matt Miller report on today’s ten most important stocks including Macy's, Metro PCS and Cisco. (Source: Bloomberg)

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May 9 (Bloomberg) -- Bloomberg’s Adam Johnson reports on the seasonality charts of the S&P 500, oil and economic surprise index. (Source: Bloomberg)

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May 9 (Bloomberg) -- James Swanson, chief investment strategist at MFS Investment Management, and Frederick Lane, vice chairman for investment banking at Raymond James Financial, talk about their investment strategies. They speak with Betty Liu and Adam Johnson on Bloomberg Television's "Street Smart." (Source: Bloomberg)

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May 9 (Bloomberg) -- Dean Curnutt, chief executive officer of Macro Risk Advisors LLC, talks about Federal Reserve policy, market conditions and volatility. He speaks with Tom Keene on Bloomberg Television’s “Surveillance Midday.” (Source: Bloomberg)

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May 9 (Bloomberg) -- Abhay Deshpande, portfolio manager at First Eagle Investment Management, talks about strategy and stock picks. He speaks with Scarlet Fu on Bloomberg Television's "InBusiness." (Source: Bloomberg)

The Standard & Poor’s 500 Index fell 0.7 percent to 1,354.58 at 4 p.m. New York time, a two-month low. The Dow slid 97.03 points, or 0.8 percent, to 12,835.06. It had the longest slump since Aug. 2, three days before S&P stripped the U.S. of its AAA credit rating. About 7.8 billion shares changed hands on U.S. exchanges, or 18 percent above the three-month average.

“It’s a tense situation in Greece,” John Carey, who helps oversee about $220 billion at Pioneer Investments in Boston, said in a telephone interview. “The elections in Europe opened up the possibility of a new look at bailout packages. That’s tough to analyze and uncertainty as always troubles investors.”

Global stocks fell as Greece’s political turmoil looks set to enter a fourth day with coalition talks deadlocked. The standoff has reignited concerns over its ability to hold to the terms of its two bailouts negotiated since May 2010. With Parliament split and policy makers in Berlin and Brussels urging Greece to stay the course, the country at the epicenter of the debt crisis is again facing the risk of an exit from the euro.

5.2 Billion Euros

Equities pared declines as the European Financial Stability Facility’s Board of Directors confirmed the release of 5.2 billion euros ($6.7 billion) from a first installment of 39.4 billion euros by the end of June.

Some investors also said the market trimmed losses as the S&P 500 traded near 1,350 (SPX), a support level for traders. Peter Jankovskis, at Oakbrook Investments, said that equities could resume their rally with positive developments in Europe. The index has risen 7.7 percent in 2012 amid better-than-estimated corporate profits. About 70 percent of S&P 500 companies that reported results since the start of the earnings season have topped projections, according to data compiled by Bloomberg.

“Corporate earnings have continued to be good,” Jankovskis, who helps manage $2.9 billion, said in a telephone interview from Lisle, Illinois. “There’s reason to be encouraged about American stocks.”

Volatility Jumps

Concern about Europe’s debt crisis helped drive the S&P 500 down 3.1 percent in May. All 10 groups in the benchmark gauge retreated today. The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, surged 5.4 percent to 20.08, the highest level since April 10.

The Dow Jones Transportation Average, a proxy for the economy, lost 1.4 percent. FedEx Corp. (FDX), the operator of the world’s biggest cargo airline, slid 2.1 percent to $87.13. GE decreased 1.8 percent to $18.91. The KBW Bank Index (BKX) dropped 1.6 percent. JPMorgan sank 1.8 percent to $40.64.

Moody’s Investors Service will this month start cutting the credit ratings of more than 100 banks, a move that risks pushing up their funding costs and forcing them to curb lending in a threat to economic growth.

BNP Paribas SA, France’s biggest lender, Deutsche Bank AG, Germany’s largest, and New York-based Morgan Stanley are among firms that face having their short- and long-term debt downgraded to their lowest-ever levels by Moody’s, the ratings company said in February.

Macy’s Slumps

Macy’s declined 3.7 percent to $38.05. The company repeated its forecast that profit this year would be $3.25 to $3.30 a share. Analysts estimated $3.39, on average.

Carlyle Group LP (CG) sank 1.1 percent to $21.75, slumping below the $22 offering price in its fifth day of trading, following a discounted IPO with which the firm sought to prove that shares in private-equity managers can rise.

Disney rose 1.6 percent, the most in the Dow, to $45.02. The record weekend opening of “Marvel’s The Avengers,” while not a factor in the second quarter ended March 31, was a focus of yesterday’s conference call with analysts. Disney is working on a sequel, racing to get more “Avengers” merchandise in stores and plotting to get the characters in its parks.

A measure of homebuilders in S&P indexes rallied 2.6 percent. Prices for single-family homes climbed in half of U.S. cities in the first quarter as real estate markets stabilized.

Merger Talks

MetroPCS Communications Inc. (PCS) surged 14 percent, the biggest gain in the S&P 500, to $7.50. Deutsche Telekom AG is discussing a merger of its T-Mobile USA unit with MetroPCS as it reviews options for the customer-losing business, according to people familiar with the matter.

Avon Products Inc. (AVP) gained 9.3 percent to $21.60 after JAB Holdings B.V. announced plans to sell 36 million shares of Reckitt Benckiser Group Plc to fund investments, including its proposed acquisition of Avon.

Dean Foods Co. (DF) rose 11 percent to $14.15. The biggest U.S. dairy processor boosted its full-year forecast, saying it now expects to earn at least $1.10 a share. Analysts, on average, estimated 95 cents.

U.S. stocks are less than expensive regardless of the price-earnings ratio used to value them, said Richard Bernstein, chief executive officer of Richard Bernstein Advisors LLC.

Ratio Comparison

A comparison of the S&P 500’s multiple to earnings from the previous four quarters along with a ratio, compiled by Yale University Professor Robert J. Shiller, that’s based on 10 years of income, put the index’s value at respectively 13.8 times and 22.2 times profit.

“The market looks at worst reasonably valued, at best downright cheap,” Bernstein said in an interview with Robert Huebscher, founder and CEO of the Advisor Perspectives website, that was published yesterday.

Both price-earnings indicators look “better than normal” after taking interest rates into account, he said. The average yield on 10-year Treasury notes has fallen to 2.01 percent this year from 2.76 percent for all of last year, according to data compiled by Bloomberg.

P/E ratios are poised to rise, he said during the April 30 interview, as economic weakness in Europe and slower growth in emerging markets spur demand for U.S. assets.

“People are underestimating the risk outside the U.S. and overestimating the risk inside it,” said Bernstein, based in New York. “Over the next several years, there is going to be a reevaluation of those risks, and we should get higher multiples in the U.S.”

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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Jaguar F-Type Revisits Swinging ‘60s to Challenge Porsche: Cars

By Steve Rothwell - May 9, 2012 7:35 PM GMT+0700

Jaguar is invoking its iconic E-Type roadster to challenge Mercedes-Benz and Porsche with its first two-seat sports car in almost four decades.

The F-Type, due to be unveiled in September and go on sale as soon as next April, will be Jaguar’s smallest auto in more than a half-century as the marque seeks a return to its sporting tradition following decades spent focusing on luxury sedans.

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Jaguar says the F-Type, a production version of its C-X16 concept car, seen here, minus the hybrid engine, is more than just a marketing ploy, and that the model will make money. Photographer: Jason Alden/Bloomberg

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May 9 (Bloomberg) -- The Jaguar C-X16 concept sports car is seen in a promotional video from Jaguar Land Rover Plc. The company's F-Type production roadster, due to be unveiled in September, is based on the C-X16. (Video courtesy of Jaguar Land Rover Plc. Source: Bloomberg)

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May 9 (Bloomberg) -- Bloomberg's Betty Liu and Dominic Chu report that Jaguar is invoking its iconic E-Type roadster to challenge Mercedes-Benz and Porsche with its first two-seat sports car in almost four decades. They speak on Bloomberg Television's "In The Loop." (Source: Bloomberg)

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The E-Type, seen here, introduced at the 1961 Geneva Motor Show, was described by Ferrari founder Enzo Ferrari as “the most beautiful car ever built,” and became synonymous with the London of the “Swinging Sixties.” Source V&A via Bloomberg

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Beijing auto show attendees walk past a large poster for a Jaguar automobile. Photographer: Nelson Ching/Bloomberg

“If the product can do what the original E-Type did for Jaguar, it will be a huge boost,” said Peter Schmidt, managing director of Warwick, England-based Automotive Industry Data. “What they’re doing is laudable, it’s good for the brand and it’s good for the image. But nobody should expect miracles.”

The E-Type, introduced at the 1961 Geneva Motor Show, was described by Ferrari founder Enzo Ferrari as “the most beautiful car ever built,” and became synonymous with the London of the “Swinging Sixties.” Yet it has taken the $2.5 billion purchase of Jaguar by India’s Tata Motors Ltd. (TTMT) in 2008 for a pure-bred sports model to return to favor at the British manufacturer.

Tata, which acquired the Jaguar and Land Rover brands from Ford Motor Co. and combined them into a single unit, plans to invest $12 billion over five years to win a bigger slice of an upscale market dominated by German automakers.

Tata Motors fell 1.2 percent to 292.85 rupees in Mumbai trading today. The shares have still advanced 64 percent this year, exceeding gains of 30 percent for Bayerische Motoren Werke AG (BMW), 18 percent at Volkswagen AG (VOW), parent of luxury carmaker Audi, and 13 percent at Daimler AG (DAI), which owns Mercedes-Benz.

‘Twin Job’

Jaguar says the F-Type, a production version of its C-X16 concept car minus the hybrid engine, is more than just a marketing ploy, and that the model will make money.

“We’re too small a company for it not to be a viable business proposition,” spokesman Angus Fitton said. “It’s got to pay for itself and generate profit, but it has got to do a twin job in that it will be a brand-building job as well.”

Jaguar has yet to say how much the F-Type will cost, though the “speculated price” for the first variant, a convertible, is about 55,000 pounds ($89,000), putting it in a niche where there’s little overlap with competitors’ models and helping to reduce the average age of Jaguar’s customer base, Fitton said.

The third generation of Porsche AG’s Boxster roadster went on sale in Germany last month at 48,300 euros ($62,800), while the Carrera Cabriolet, the cheapest convertible version of the Stuttgart-based company’s 911 model, sells for 100,500 euros.

Three Models

The F-Type will also sit between the Mercedes SLK compact roadster, which costs 38,700 euros, and the Daimler brand’s new SL, available in Europe from March 31 and priced from 93,500 euros, as well as the 31,500-euro TT Roadster and 123,200-euro R8 Spyder from VW’s Ingolstadt-based Audi. BMW’s only two-seat convertible is the 36,400-euro Z4.

Jaguar’s current lineup is based on three models, two of them sedans, with the XJ positioned to compete with the BMW 7- Series and Mercedes S-Class and the mid-range XF an alternative to the 5-Series and E-Class from the two German companies.

The third model, the XK, is available as a four-seat convertible for 99,400 euros and was regarded as the closest thing to an E-Type successor when it was introduced in 1996 to replace the XJS, which itself ousted the 1960s icon in 1975.

The F-Type will be made at Jaguar’s Castle Bromwich plant near Birmingham, England. The company, which currently operates from three U.K. sites, said March 21 it had agreed to form a venture with Chery Automobile Co. Ltd. to build cars in China.

The new model will come with a 3-liter supercharged V6 engine tuned to either 335 or 375 horsepower and later with a 5- liter V8, according to Fitton. With a top speed of 155 miles per hour, it will only be produced in a two-seat layout.

Production Plans

While that may help restore Jaguar’s sporting credentials established with the 100-mph SS100 in 1938 and buoyed by seven victories in the Le Mans 24 Hour Race with models including the C-Type and D-Type, the F-Type won’t deliver the volumes needed for the part-sharing and economies of scale required to compete with larger manufacturers, said Garel Rhys, director of Cardiff University’s automotive industry research center.

BMW, the Munich-based luxury-car leader, boosted deliveries 13 percent last year to 1.38 million cars and sport-utility vehicles, while Audi ranked second with 1.3 million autos and Stuttgart-based Mercedes-Benz placed third with 1.26 million.

SUV-Led

Jaguar Land Rover, by contrast, sold 314,433 vehicles in the 12 months ended March 31. While that represented a 29 percent increase from a year earlier, deliveries of Land Rover SUV’s accounted for more than 80 percent of total output.

“You can’t go on like that,” Rhys said. “You need that volume, you really do. There has to be much more carry-over between Jaguars and Land Rovers under the skin of the cars.”

The relatively narrow model range also leaves Jaguar vulnerable to sudden shifts in consumer taste, especially as buyers begin to switch to smaller, more fuel-efficient models, according Andrew Jackson, an analyst at Datamonitor in London.

“Because they only have three vehicles, they’re somewhat exposed once they get to the end of their life cycle,” he said. “The competition could be providing something that might be a bit cheaper, that looks better or might be better fitted.”

Rhys said he reckons Jaguar Land Rover wants to lift deliveries to as many as 650,000 a year by 2016 and predicts it will announce a new model in the next six months aimed at competing with BMW’s best-selling 3-Series in the small- to mid- sized sedan market.

“They do need something like that,” he said. “Unless you have a vehicle with sales of 150,000 a year, you’re really going to be hard-pressed to justify the Jaguar brand long-term.”

To contact the reporter on this story: Steve Rothwell in London at srothwell@bloomberg.net

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

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Greek Leaders Given Bailout Ultimatum

By Maria Petrakis and Natalie Weeks - May 9, 2012 4:00 AM GMT+0700

Alexis Tsipras of Greece’s Syriza party squared off with political leaders before talks on forming a coalition, handing them an ultimatum to renounce support for the European Union-led rescue if they want to enter government.

Tsipras said he expected Antonis Samaras of New Democracy and Evangelos Venizelos, the former finance minister who leads the Pasok party, to send a letter to the EU revoking their written pledges to implement austerity measures by the time he meets them today to discuss a government alliance. Samaras and Venizelos rejected the request. Samaras said he was being asked “to put my signature to the destruction of Greece.”

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Leader of the Greek conservative party New Democracy Antonis Samaras in Athens. Photographer: Aris Messinis/AFP/Getty Images

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May 8 (Bloomberg) -- German Chancellor Angela Merkel, Barton Biggs, managing partner and co-founder of Traxis Partners LP, and Carl Weinberg, founder and chief economist at High Frequency Economics, offer their views on European elections, Greece's debt crisis and the outlook for the euro zone. John Taylor, founder and chief executive officer of FX Concepts LLC; Charles Dallara, head of the Institute of International Finance; Andrew Bosomworth, a managing director at Pacific Investment Management Co., and David Blanchflower, a professor at Dartmouth College and a Bloomberg Television contributing editor, also speak. (Source: Bloomberg)

“He interprets, with unbelievable arrogance, the election result as a mandate to drag the country into chaos,” Samaras said late yesterday in televised remarks. “I hope Mr Tsipras will have come to his senses by the time we meet.” Tsipras is due to meet with political leaders from about 5 p.m. in Athens.

The stand-off since the inconclusive May 6 election has reignited European concerns over Greece’s ability to hold to the terms of its two bailouts negotiated since May 2010. With Parliament split and policy makers in Berlin and Brussels urging Greece to stay the course, the country at the epicenter of the debt crisis is again facing the risk of an exit from the euro.

‘Huge’ Repercussions

The repercussions are “potentially huge,” said Gillian Edgeworth, a London-based economist at UniCredit. “The chances of Spain needing official aid would increase, with implications for spillover to others.”

The risk of Greece leaving the euro by the end of 2013 has risen to as high as 75 percent, Citigroup Inc. said May 7.

Greek stocks sank to their lowest level in about two decades yesterday amid the political instability. The benchmark ASE Stock index fell 3.6 percent to 620.54 at the close in Athens, its lowest since November 1992. The Stoxx Europe 600 Index slid 1.7 percent. The euro fell 0.3 percent to $1.3007.

New Democracy and Pasok, rivals until the country’s crisis made them pro-bailout partners in a national government last year, are two deputies short of the 151 seats needed for a majority in the 300-seat chamber. President Karolos Papoulias handed the mandate to build a coalition to Tsipras yesterday, one day after Samaras, who won the election, abandoned his bid to forge a government.

Tsipras said he aimed to link up with parties in a government that would nationalize banks, place a moratorium on debt payments and cancel the bailout and measures such as labor reforms and pension cuts.

‘Plunder’ Greece

“The bailout parties no longer have a majority in parliament to vote for measures that plunder the country,” Tsipras told reporters. “There will be no 11 billion euros ($14 billion) of additional austerity measures; 150,000 jobs will not be cut.”

Samaras said yesterday that his party is prepared to support a minority government as long as it ensured Greece’s membership in the euro and its national interests.

Venizelos said Pasok’s proposal for a national unity government with the participation of all parties with a pro- European orientation was the only solution. Greece must remain “safely” within the euro while pursuing changes to the bailout accord to boost growth, he said.

International creditors urged Greek leaders to hold to the agreed terms of their EU-International Monetary Fund bailouts.

‘No Alternative’

“Greece has to be aware that there is no alternative to the agreed consolidation program if it wants to remain a member of the euro zone,” European Central Bank Executive Board member Joerg Asmussen was quoted as saying in an interview with Germany’s Handelsblatt newspaper to be published today.

German Foreign Minister Guido Westerwelle called on “the authorities in Greece to quickly move toward stability so that a government of reason can be formed,” telling reporters in Berlin that the steps to be taken in return for aid “are not up for negotiation.”

New Democracy won the election with 19 percent of the vote, gaining 108 seats; Syriza came second with 17 percent, winning 52 seats; and Pasok placed third with 13 percent, or 41 seats.

Tsipras met yesterday with the leader of Democratic Left, which won 19 seats in Parliament and rejects austerity measures. As well as talks with Samaras and Venizelos, he’s due to see the head of Independent Greeks, Panos Kammenos, who has 33 seats.

If Tsipras fails to build a working majority, the onus on forming a government will pass to Pasok. Each mandate can last for three days. If the process still fails to yield a coalition, the president must try to broker a government of national unity, the constitution says. If that fails, new elections are held.

New Elections

“A Greek return to the polls in mid-June looks increasingly likely,” Malcolm Barr, an economist at JPMorgan Chase & Co in London, said in a note. “There is little doubt that the drop in support for New Democracy, Pasok has raised the probability of an eventual euro exit.”

Either New Democracy and Pasok will form a government with the Democratic Left or Greece will hold new elections within weeks, said Thanos Veremis, the vice president of the Hellenic Foundation for European and Foreign Policy. New elections are the more likely scenario, in which case New Democracy and Pasok would see a return of voter support, he said. Veremis was an unsuccessful candidate on May 6 for Drasi, a pro-bailout party that failed to reach the threshold for entering the parliament.

“The Greeks have to blow their top to let the world know they are unhappy,” Veremis said by phone on May 7. “Once they do that, they tend to go back to the real world.”

To contact the reporters on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net; Natalie Weeks in Athens at nweeks2@bloomberg.net.

To contact the editor responsible for this story: Tim Quinson at tquinson@bloomberg.net; Jerrold Colten at jcolten@bloomberg.net

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Ross Says Looming ‘Freak Show’ May Threaten U.S. Economy

By Jason Kelly - May 9, 2012 2:29 AM GMT+0700

The U.S. economy is at risk of slipping back into recession in 2013 because of likely impasses in Washington over taxes and mandatory spending cuts, said Wilbur Ross, the billionaire investor.

“That’s too big a hit for the economy to take,” Ross said today during a discussion at Bloomberg Markets’ Global Financial Elite lunch in New York. “We’re going to have another freak show at the end of the year.”

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Wilbur Ross, chairman and chief executive officer of WL Ross & Co. LLC. Photographer: Scott Eells/Bloomberg

Ross said he’s worried that President Barack Obama and Congress won’t be able to agree on extending tax cuts passed under former President George W. Bush that expire at the end of 2012, or on mandatory spending cuts tied to the extension of the country’s debt-ceiling agreement. He said he’s optimistic about the U.S. economy between now and then, and found a new way to describe the shape of the recovery beyond a “W.”

“It’s more like punctuation,” he said. “Dots, dashes, question marks and an occasional exclamation point.”

W.L. Ross & Co., his namesake firm known for buying distressed assets in industries from steel to financial services, is largely avoiding investments in what he called “the Club Med countries” of Europe, according to Ross.

“It’s way too unsettled, even for our tastes, to be in Spain or countries like that just yet,” he said, adding that he has made deals in countries including Ireland. “You have to be very selective within Europe.”

To contact the reporter on this story: Jason Kelly in New York at jkelly14@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

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Panasonic Rises After Report It May Swing to Profit

By Mariko Yasu and Shunichi Ozasa - May 9, 2012 8:15 AM GMT+0700

Panasonic Corp. (6752), Japan’s largest appliance maker, rose the most in two months in Tokyo trading after the Nikkei newspaper said it may post a 50 billion yen ($626 million) profit this fiscal year.

Panasonic advanced as much as 4.9 percent, the biggest intraday gain since March 9, to 605 yen and traded at 601 yen as of 9:58 a.m. Japan’s benchmark Nikkei 225 Stock Average lost 1.3 percent.

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Attendees watch a presentation wearing Panasonic 3D glasses. Photographer: David Paul Morris/Bloomberg

The Osaka-based manufacturer, which has said it may post a record 780 billion-yen loss for the year ended March 31, may return to profit this year because of restructuring, the Nikkei reported, without saying where it got the information. The 50 billion-yen projection compares with the 106 billion-yen average of 18 analyst estimates compiled by Bloomberg.

Operating profit may rise to about 250 billion yen this year from 30 billion yen in the previous 12 months, the Nikkei reported. The projection compares with the 241 billion-yen average of 19 estimates compiled by Bloomberg.

Yuko Hosaka, a spokeswoman for Panasonic, said the company wasn’t the source of the report and that it will disclose its earnings May 11.

Panasonic’s revenue may be unchanged this year at about 8 trillion yen while television sales will probably fall below last year’s approximately 18 million units, the Nikkei said. Solar-cell sales will be buoyed by a government subsidy program, the report said.

Panasonic said in February it may post a 780 billion-yen loss for the year ended March 31, the most since the company was founded in 1918, after natural disasters disrupted production while the surging yen eroded overseas earnings and the global economy slowed.

President Fumio Ohtsubo, set to step down as president next month, has said he’s eliminating jobs, shifting output overseas and closing display factories in an attempt to transform Panasonic into a leader in solar panels and rechargeable batteries.

To contact the reporters on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net; Shunichi Ozasa in Tokyo at sozasa@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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S&P 500 Declines to Lowest Level in One Month on Greece

By Rita Nazareth - May 9, 2012 3:40 AM GMT+0700

U.S. stocks retreated, sending the Standard & Poor’s 500 Index to the lowest level in almost a month, as political tension in Greece intensified concern about a euro exit and a deepening of the region’s debt crisis.

Equities trimmed earlier losses after the S&P 500 dropped below 1,350, a so-called support level being watched by traders. Hewlett-Packard (HPQ) Co. and Bank of America Corp. fell at least 2.1 percent to pace declines among the biggest companies. McDonald’s Corp., the world’s largest restaurant chain, slumped 2.1 percent as April sales trailed projections. Fossil Inc. (FOSL) plunged 38 percent, the most since 1995, after the owner of the namesake watch brand reduced its full-year earnings forecast.

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May 8 (Bloomberg) -- Bloomberg’s Trish Regan, Adam Johnson and Alix Steel report on today’s ten most important stocks including Fluor, LinkedIn and Berkshire Hathaway. (Source: Bloomberg)

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May 8 (Bloomberg) -- Michael Darda, chief economist and chief market strategist at MKM Partners LP, talks about the outlook for equity markets, investor sentiment and the prospects for a fiscal crisis. Darda speaks with Betty Liu, Joshua Lipton and Dominic Chu on Bloomberg Television's "In the Loop." (Source: Bloomberg)

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May 8 (Bloomberg) -- U.S. stock-index futures declined as Greek political leaders struggled to form a government, raising concern the Mediterranean nation may default on its debt as early as next month. (Source: Bloomberg)

The S&P 500 slid 0.4 percent to 1,363.72 at 4 p.m. New York time, trimming a loss of as much as 1.6 percent. The Dow Jones Industrial Average fell 76.44 points, or 0.6 percent, to 12,932.09 for a fifth day of losses. Greek stocks sank to a two- decade low. About 7.8 billion shares changed hands on U.S. exchanges, or 17 percent above the three-month average.

“It’s the unknown in Europe affecting the market,” said Hank Smith, chief investment officer at Haverford Trust Co. in Radnor, Pennsylvania. His firm manages about $6.5 billion. “If Greece does exit the euro, will there be contagion? It could have a negative reverberation throughout the globe.”

Equities fell as Greece’s leaders met for a second day to try to form a government after an election that raised questions about the nation’s membership of the euro. Alexis Tsipras, leader of the Syriza party who has vowed to rip up the terms of Greece’s bailout, was handed the mandate to form a government after Antonis Samaras of New Democracy failed to reach a deal.

Euro Exit

Concern about the European debt crisis helped drive the S&P 500 down 2.5 percent in May. The situation in Europe could get “worse” before it gets better, according to James McDonald, chief investment strategist at Northern Trust Corp., whose firm manages $715 billion. John Taylor of hedge fund FX Concepts LLC said Greece will probably leave the euro as soon as next month as the government runs out of cash and European institutions fail to lend more to the nation.

“This summer I think is very likely,” Taylor, founder and chief executive officer of FX Concepts in New York, said today in an interview on Bloomberg Television’s “Inside Track” with Erik Schatzker. “The Europeans aren’t going to give them the money, the International Monetary Fund’s not going to give them an OK. They will be out of money in June.”

Stocks pared losses after the S&P 500 dipped below 1,350 for only about 15 minutes this morning. The market found support at that level, according to Michael Shaoul, chairman of Marketfield Asset Management in New York.

‘Buy the Dip’

“Once that held, you’ve seen a willingness to buy the dip in the U.S. market in names that people have become comfortable with,” said Shaoul. His firm oversees more than $1.6 billion.

Eight out of 10 groups in the S&P 500 retreated today as consumer discretionary, financial and commodity companies had the biggest declines. Utilities and health-care shares, which are less-tied to economic growth, rose. Hewlett-Packard dropped 2.3 percent, the most in the Dow, to $23.32. Bank of America sank 2.1 percent to $7.79.

McDonald’s (MCD) lost 2.1 percent to $93.55. Sales at stores open at least 13 months rose 3.3 percent worldwide last month, trailing estimates, as sales growth slowed in the U.S. Analysts projected a gain of 4.3 percent, the average of 13 estimates compiled by Consensus Metrix. Sales in the U.S. advanced 3.3 percent. Analysts estimated an increase of 5.2 percent.

Electronic Arts (EA) dropped 4.3 percent to $14.48. The second- largest U.S. video-game publisher tumbled after its forecasts for the current quarter and fiscal year fell short of analysts’ estimates. The company plans to cut jobs.

Most in S&P 500

Fossil plunged 38 percent, the most in the S&P 500, to $78.52. Wholesale revenue in Europe in the first quarter rose 4.7 percent from a year earlier, the Richardson, Texas-based company said today in a statement. Chief Financial Officer Mike Kovar said in a February conference call that wholesale and retail activity in the U.S. and Europe would increase in a “low double-digit area” in the first quarter and for the year.

Discovery Communications Inc. (DISCA) retreated 6.1 percent to $50.80. The owner of cable networks such as Animal Planet and TLC reported a 28 percent decline in first-quarter profit after a one-time gain last year on Oprah Winfrey’s network, OWN.

Wynn Resorts Ltd. (WYNN) slid 4.8 percent to $119.23. The casino company founded by billionaire Steve Wynn reported first-quarter earnings fell 19 percent, missing analysts’ projections on lower winnings in Las Vegas.

‘Modest’

Dendreon Corp. (DNDN) tumbled 25 percent to $8.75. The maker of the prostate cancer drug Provenge said growth this year will be “modest” and its first-quarter loss fell short of estimates.

Investors should buy utilities because the group tends to do better from May through October, when the S&P 500 averages its worst six-month return of the year, according to Sanford C. Bernstein & Co.

A gauge of utilities has risen at an average annualized pace of 12 percent from May through October since 1970 (S5UTIL), compared with a gain of 4.5 percent for the S&P 500, according to data compiled by Bernstein. The group was the second-worst performing among 10 S&P 500 industries, falling 1.7 percent this year through yesterday, as investors snapped up financial and technology shares in anticipation of an economic rebound.

“With political risk rising in Europe and U.S. economic indicators showing tepid growth, we believe investors should consider holding high yielding, low beta regulated utilities during the traditionally low return, high volatility months of May through October,” Hugh Wynne, a New York-based analyst with Bernstein, wrote in a note yesterday.

Facebook IPO

Facebook Inc. (FB) officials are touting growth prospects for the largest social network in meetings this week in New York and Boston with hundreds of would-be investors before its record initial public offering. Chief Operating Officer Sheryl Sandberg and Chief Financial Officer David Ebersman led a presentation in Boston today. They were joined yesterday in New York by Chief Executive Officer Mark Zuckerberg.

Facebook plans to raise as much as $11.8 billion in its IPO, the biggest ever for an Internet company. Zuckerberg, 27, has had to pitch his business model during Facebook’s years as a private company and probably won’t have trouble communicating the mission to prospective public investors, said Herman Leung, an analyst at Susquehanna International Group.

“It’s important to hear directly from him for investors who are about to put millions and millions of dollars into a company,” said Leung, who is based in San Francisco. “Convincing others now they should buy shouldn’t be that hard for a company that has amassed a user base of over 900 million.”

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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Facebook’s Zuckerberg Meets Would-Be Investors in New York

By Brian Womack, Sarah Frier and Lee Spears - May 8, 2012 5:08 AM GMT+0700

Facebook Inc. (FB) Chief Executive Officer Mark Zuckerberg and other officials touted growth prospects for the largest social network in a meeting with hundreds of would- be investors ahead of its record initial public offering.

Investors watched a video featuring pitches by Zuckerberg, Chief Operating Officer Sheryl Sandberg and Chief Financial Officer David Ebersman, and then asked questions of the trio, said several people who attended today’s meeting at the Sheraton New York Hotel. The executives discussed their reasons for acquiring photo-sharing site Instagram and told investors they were optimistic about potential for future gains at Facebook.

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Mark Zuckerberg, chief executive officer and founder of Facebook Inc.. Photographer: David Paul Morris/Bloomberg

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May 7 (Bloomberg) -- Michael Pachter, a managing director at Wedbush Securities, talks about Facebook Inc.'s leadership and planned public stock offering. He speaks with Emily Chang on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)

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May 7 (Bloomberg) -- Arvind Bhatia, an analyst at Sterne Agee & Leach Inc., talks about the outlook for Facebook Inc.'s initial public offering, the company and its shares. Facebook Chief Executive Officer Mark Zuckerberg is meeting would-be investors today as the largest social-networking service begins marketing its IPO, says a person with knowledge of the matter. Bhatia speaks with Betty Liu and Adam Johnson on Bloomberg Television's "Street Smart." (Source: Bloomberg)

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May 4 (Bloomberg) -- Francis Gaskins, president of researcher IPOdesktop.com, talks about the outlook for Facebook Inc. He speaks with Emily Chang on Bloomberg Television's " Bloomberg West." (Source: Bloomberg)

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May 7 (Bloomberg) -- Facebook Inc. Chief Executive Officer Mark Zuckerberg and other officials touted growth prospects for the largest social network in a meeting with hundreds of would-be investors ahead of its record initial public offering. Bloomberg's Jon Erlichman reports on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)

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May 7 (Bloomberg) -- Barton Biggs, managing partner and co-founder of Traxis Partners LP, talks about the outlook for the euro region and his investment strategy. He speaks with Betty Liu and Dominic Chu on Bloomberg Television's "In the Loop." (Source: Bloomberg)

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May 4 (Bloomberg) -- Alexis Ohanian, co-founder of Reddit.com, talks about the outlook for Facebook Inc.'s initial public offering. Ohanian speaks with Scarlet Fu on Bloomberg Television's "InBusiness." (Source: Bloomberg)

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Mark Zuckerberg, founder and chief executive officer of Facebook Inc., leaves the Sheraton hotel in New York. Photographer: Scott Eells/Bloomberg

Facebook plans to raise as much as $11.8 billion in its IPO, the biggest ever for an Internet company. Zuckerberg, 27, has had to pitch his business model during Facebook’s years as a private company and probably won’t have trouble communicating the mission to prospective public investors, said Herman Leung, an analyst at Susquehanna International Group.

“It’s important to hear directly from him for investors who are about to put millions and millions of dollars into a company,” said Leung, who is based in San Francisco. “Convincing others now they should buy shouldn’t be that hard for a company that has amassed a user base of over 900 million.”

Investors’ Questions

Potential investors waited in a line that snaked through the hotel’s lobby and around the side of the building for a meeting that started about an hour late. CNBC televised footage of a hooded sweatshirt-clad Zuckerberg arriving at the hotel.

“The questions were all toward long-term elements of the business,” said Samuel Schwerin, managing partner at New York- based Millennium Technology Value Partners, which oversees $1 billion, including Facebook stock it bought in 2008. Schwerin attended the meeting today, and said he’ll add more shares in the IPO. “One of the things I was surprised by was the level of interest in the fundamental elements of how the company grows and how early it is in the value-creation story for Facebook.”

The video shown today had been posted online last week and many investors had already seen it. Facebook also has arranged meetings in Boston and Palo Alto, California, this week.

Executives addressed Facebook’s slowdown in revenue growth, saying the company is now facing a larger base of users and is working to be useful to them and advertisers, according to meeting attendees. Facebook is working on new ways to make money from mobile users, and on getting partners besides game maker Zynga Inc. to use its platform and currency, which is used to buy so-called virtual goods.

Instagram Deal

Zuckerberg told investors that the $1 billion Instagram acquisition, announced last month, was contemplated over a long period. He said he had watched the company grow for a while. He said opportunities like Instagram are unique, according to several meeting attendees.

The Menlo Park, California-based company is seeking a market value of as much as $96 billion. Facebook is offering 337.4 million shares at $28 to $35 each, and is scheduled to price the offering on May 17, data compiled by Bloomberg show. The shares will be listed on the Nasdaq Stock Market under the symbol FB. Morgan Stanley, JPMorgan Chase & Co. and Goldman Sachs Group Inc. (GS) are leading the sale.

Facebook is offering 180 million shares, while existing owners such as Accel Partners, Goldman Sachs and Digital Sky Technologies are offering 157.4 million shares. Zuckerberg is offering 30.2 million of his 533.8 million shares, and may control about 57 percent of the voting power of Facebook’s capital stock outstanding after the offering, the filing shows.

Attendance Required

“His attendance might demonstrate that the company processed the message that Mark’s absolute voting control makes his presence, at least at some of the larger meetings, much more important than would otherwise be the case,” Lise Buyer, principal at Class V Group in Portola Valley, California, said in an e-mailed statement. “The company’s job -- Mark, Sheryl, David together -- is to convince investors that Facebook’s brightest days are ahead and that therefore, there is significant room for an increase in the company’s value.”

Sandberg, who isn’t selling in the IPO, holds 1.9 million shares.

The initial share sale would eclipse the 2004 IPO of Google Inc. (GOOG), the world’s most valuable Internet company. Google’s offering, the same year Zuckerberg helped found Facebook, raised $1.9 billion and valued the company then at about $23 billion.

To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@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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Google’s Android Infringed Oracle’s Java, Jury Says

By Karen Gullo - May 8, 2012 5:03 AM GMT+0700

Oracle Corp. (ORCL) can’t seek $1 billion in damages from Google Inc. (GOOG) for infringing copyrights when it developed Android software running on more than 300 million mobile devices because a jury couldn’t agree on whether it was “fair use,” a federal judge said.

A jury in San Francisco today found that Google, the largest Web-search provider, infringed Oracle’s copyrights for programming tools and nine lines of code. U.S. District Judge William Alsup said at this point Oracle can only seek damages on the nine lines, which by law would be at most $150,000.

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The Android operating system trade stand at the Mobile World Congress in Barcelona. Photographer: Denis Doyle/Bloomberg

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May 7 (Bloomberg) -- Pat Walravens, managing director at JMP Securities LLC, talks about a jury's decision today in the first phase of a trial in Oracle Corp.'s intellectual-property lawsuit against Google Inc. The jury found that Google infringed Oracle's copyrights for programming tools in nine lines of codes. Walravens speaks with Emily Chang on Bloomberg Television's "Bloomberg West." Cory Johnson also speaks. (Source: Bloomberg)

“There has been zero finding of liability on copyright, the issue of fair use is still in play,” Alsup said about the 12-member jury’s decision on the programming tools. He ordered the patent phase of the case to begin; damages will be taken up by the jury in the last phase of the 8-week trial.

Anyone can use copyrighted work without consent of the owner if it advances the public interest by adding something new or functional. Google attorney Robert Van Nest asked Alsup to declare a mistrial, saying the issue of whether the company is liable for infringement is directly linked to the question of whether it was fair use. Alsup gave each side until May 10 to submit arguments on that issue and didn’t say when he would rule.

Mobile Devices

Oracle alleged that Google, based in Mountain View, California, stole copyrights and patents for the Java programming language when it developed the Android operating system for mobile devices, which were released in 2007. Oracle acquired Java when it bought Sun Microsystems Inc. in 2010.

Oracle, the largest maker of database software, is seeking damages as well as a court order preventing Google from distributing Android unless it pays for a license.

“Oracle, the nine million Java developers, and the entire Java community thank the jury for their verdict in this phase of the case,” Deborah Hellinger, an Oracle spokeswoman, said in an e-mail. “The overwhelming evidence demonstrated that Google knew it needed a license.

“Every major commercial enterprise -- except Google -- has a license for Java and maintains compatibility to run across all computing platforms,” she said.

Last Word

The jury’s findings may not be the last word on infringement. While the panel was asked to decide whether Google infringed parts of Java called application programming interfaces, or APIs, the ultimate decision on whether APIs are covered by copyrights will be made by Alsup later in the case. Alsup told the jury to assume APIs are copyrightable; he can decide later that they aren’t.

Alsup must also rule on Oracle’s request for a judgment in its favor that Google infringed Java copyrights and its copying wasn’t fair use. A ruling for Oracle could set aside the jury’s decision.

“We appreciate the jury’s efforts, and know that fair use and infringement are two sides of the same coin,” Google spokesman Jim Prosser said in an e-mail. “The core issue is whether the APIs here are copyrightable, and that’s for the court to decide. We expect to prevail on this issue and Oracle’s other claims.”

Seven Notes

The jury found today that Google didn’t infringe the documentation for the 37 APIs at issue. The panel also determined that Google infringed just 1 of 3 Java codes that were in dispute. In addition, jurors concluded that while Google proved that “Sun and/or Oracle” led the company to believe it didn’t need a license for the Java technology, Google didn’t show that it relied on that knowledge when it decided not to seek a license.

The verdict came on the fifth day of deliberations in the trial, which began April 16. The jury sent Alsup seven notes during its discussions with questions, including some about the meaning of “fair use.” A May 3 note said the panel couldn’t reach a unanimous decision. Alsup ordered jurors to continue deliberations, and after learning the panel was still at an impasse, ordered them to deliver a partial verdict.

Java is a free language. Oracle argued that the parts of Java that Google used are covered by copyrights and that the search engine company was required to pay for a license to use the technology.

Operating System

Google denied infringement, saying it developed Android from scratch and that the Java elements it used aren’t covered by copyrights. Any bits of copied Java in Android constituted fair use because Google gives Android away for free to programmers and it expanded the language’s usefulness by finding a way to build a smartphone operating system with Java, something Sun and Oracle were unable to do.

Oracle argued that the Java copying was for Google’s commercial benefit -- to increase use of Google’s search engine, which generates advertising revenue -- and added nothing new to Java.

The next phase of the case is about two Java patents Oracle alleges were infringed.

Google rose $10.58 to $607.55 in Nasdaq trading in New York. Oracle fell 49 cents to $27.92.

The case is Oracle v. Google, 10-3561, U.S. District Court, Northern District of California (San Francisco).

To contact the reporter on this story: Karen Gullo in San Francisco at kgullo@bloomberg.net.

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

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