HTC Said to Be Shut Out of Next Version of Windows

By Ian King, Tim Culpan and Dina Bass - Jun 7, 2012 8:23 AM GMT+0700

HTC Corp. (2498) is being shut out of the introduction of Microsoft Corp. (MSFT)’s next Windows software, people with knowledge of the matter said, cutting off another source of revenue after HTC reduced its second-quarter sales forecast by 13 percent. The shares fell to the lowest in two years.

Microsoft locked out HTC from the development of products using the newest version of its operating system on concern that HTC doesn’t sell enough devices or have ample experience making tablets, said the people, who asked not to be named because negotiations between HTC and other companies are private.

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The HTC J smartphone in Tokyo. Photographer: Tomohiro Ohsumi/Bloomberg

Microsoft’s decision will keep HTC, maker of the first Google Inc.-branded smartphone, from participating in the electronics industry’s latest attempt to erode Apple Inc. (AAPL)’s lead in tablets. The Taiwanese company, whose stock has dropped 68 percent in the past year, is also facing shortages from chipmaker Qualcomm Inc. (QCOM), highlighting the challenge of competing with Apple and Samsung Electronics Co. (005930) -- two companies whose dominance in manufacturing and software are increasingly marginalizing smaller rivals like HTC.

“Every consumer knows about Samsung’s Galaxy platform and the iPhone, and you are starting to see consumers coalesce around them,” said Matthew Thornton, an analyst at Avian Securities LLC, who yesterday cut his rating on HTC to negative. “Things just get worse from here. It’s a very bleak outlook.”

Windows RT

Microsoft plans to release its next Windows operating system, the first to run on chips with technology from ARM Holdings Plc (ARM), in time for the holiday shopping season. The ARM version of the new software, designed for tablets that compete with the iPad, is called Windows RT. Other tablets and computers will be made using chips based on Intel Corp. (INTC)’s technology. The software, also called Windows 8, will appear in devices from companies like Toshiba Corp. (6502) and Asustek Computer Inc. (2357) later this year.

HTC is a strong partner now and for the future, said Frank Shaw, a spokesman for Microsoft, in an e-mailed statement. He declined to discuss specifics. HTC intends to support future versions of Windows and isn’t commenting on the details of its product plans, said Sally Julien, a U.S.-based spokeswoman at HTC, in an e-mailed statement.

HTC has been unable to either develop its own software or hardware or sell enough devices to make it the first in line for its suppliers, said Ramon Llamas, an analyst at IDC.

“Controlling the supply chain or influencing the supply chain is one of the things that takes you to success,” said Llamas. “It can very quickly turn on you if you’re not controlling everything in-house.”

Product Delays

HTC said yesterday that second-quarter sales would be NT$91 billion ($3.05 billion), below a previous forecast of NT$105 billion because of product delays in the U.S. and lower-than- anticipated sales in Europe. Besides smartphones, HTC also makes tablets with Google (GOOG)’s Android operating system.

The company’s shares plunged 6.9 percent to NT$378, the lowest in two years, in Taipei trading today after the guidance.

Microsoft, which has tightly controlled the number of ARM- based devices it is supporting at first to ensure quality, opted not to work with HTC after initial discussions with the company, said the two people familiar with the matter. The world’s largest software maker decided to work with other vendors that had greater sales volume and more tablet experience for the first round of devices, the people said.

HTC engineers wanted to build a Windows device with a customized home screen that would be distinctive to its devices, as manufacturers are allowed to do with Android. Redmond, Washington-based Microsoft refused, said the people, and HTC was left off the list of companies the software maker provided with early versions of the software.

Sales Decline

HTC may release a Windows device later, in a second round of products to come next year, one of the people said.

After surging 90 percent in 2010 and 65 percent last year, HTC’s sales will decline 12 percent this year, according to the average of analysts’ estimates compiled by Bloomberg.

In the first quarter, HTC’s smartphone shipments dropped 23 percent as Samsung’s more than tripled and Apple’s increased 89 percent, according to IDC. Samsung and Apple account for 53 percent of the market. HTC has a 4.8 percent share, according to the market researcher, placing it fifth behind Nokia Oyj (NOK1V) and Research In Motion Ltd. (RIM)

Participating in the introduction of Windows RT tablets would be unlikely to solve all that ails HTC. The machines will be starting from a zero-market-share position, without the advantage of popular, older Windows applications that won’t run on ARM hardware.

Relationship Shift

The situation underlines the shift in the relationship between Microsoft and HTC, which once relied on each other to prop up early efforts in the mobile-phone market. The two companies started working together on Microsoft’s mobile phones early in the last decade and the first Windows-based phone was manufactured by HTC. At the time, Microsoft had virtually no experience in the area, and HTC was a maker of unbranded generic phones for other companies.

HTC recently has placed more emphasis on its better-selling Android phones, and Microsoft has forged a closer relationship with HTC competitor Nokia.

Still, HTC has seven Windows Phone models on sale globally. The operating system has about 2 percent share of the market, according to IDC.

To contact the reporters on this story: Ian King in San Francisco at ianking@bloomberg.net; Tim Culpan in Taipei at tculpan1@bloomberg.net; Dina Bass in Seattle at dbass2@bloomberg.net

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

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House Adopts Measure to Halt Light-Bulb Efficiency Law

By Jim Snyder - Jun 7, 2012 5:32 AM GMT+0700

Republicans in the U.S. House adopted a provision designed to save traditional incandescent light bulbs by blocking what one lawmaker called the “energy police” from enforcing an efficiency standard.

Even if the House language approved last night survives in the Democratic-led Senate, the impact for consumers probably will be limited because manufacturers such as Royal Philips Electronics NV (PHIA) and General Electric Co. (GE) have revamped manufacturing to comply with the law, making bulbs that use less electricity to generate the same amount of light.

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A General Electric Co. 26 watt compact flourescent bulb is displayed for a photograph on a case of 100 watt light bulbs at the Kennedy Webster Electric Co. warehouse in Downers Grove, Illinois, U.S.. Photographer: Daniel Acker/Bloomberg

The first phase of the federal efficiency standard, which was passed in 2007 during President George W. Bush’s administration, went into effect this year. It has become a symbol of government excess to Tea Party-aligned lawmakers, who say consumers should be able to buy the bulbs they want.

“People are sick of the government treading where it just doesn’t belong,” said Representative Michael Burgess, a Texas Republican who sponsored the light-bulb amendment, which was added to a broader energy-spending bill.

Burgess’ provision was adopted last night by voice vote. A similar provision was in the spending bill covering the fiscal year that ends Sept. 30, which was passed in the House in December.

“The law couldn’t be enforced,” Burgess said of his amendment in an interview. “‘We don’t need no stinkin’ badges. We’re the energy police.’”

Measure Passes

The House today passed, 255-165, the energy-spending bill that includes the light-bulb provision.

Democrats, environmental groups and lighting manufacturers such as Fairfield, Connecticut-based GE support the efficiency law.

Blocking the Energy Department from enforcement might let unscrupulous foreign manufacturers push non-compliant products, including to bulk buyers such as builders. Those sales are difficult to track.

“Some in Congress are willing to put U.S. jobs at risk for political positioning,” said Joseph Higbee, a spokesman for the National Electrical Manufacturers Association, a Rosslyn, Virginia-based group. “This is an example of a few politicizing light bulbs at the risk of American workers and the economy.”

Plants Retooled

Companies have retooled plants to make compact fluorescent lights, light-emitting diodes and a halogen version of the pear- shaped incandescent product that meets the efficiency standard. Some of the more efficient bulbs are made in the U.S.

Burgess said consumers should be able to choose for themselves which bulbs they want to buy.

“I’m smart enough to make my own decisions about the purchase of energy, and the government should not feel the need to do that for me,” he said.

The underlying bill would spend $32.1 billion on energy and water-development programs, about $965 million less than what President Barack Obama requested, according to the House Appropriations Committee. It would put more money into fossil- fuel programs than Obama’s budget.

The president’s advisers said May 31 they would recommend the president veto the bill because of cuts to efficiency and clean-energy programs, including to the Advanced Research Projects Agency - Energy that funds innovative technologies, and language intended to keep Yucca Mountain in Nevada viable as a repository for the nation’s nuclear waste.

The House spending bill is H.R. 5325.

To contact the reporter on this story: Jim Snyder in Washington at jsnyder24@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net

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Obama Re-Election Map Shaken After Walker’s Wisconsin Win

By John McCormick - Jun 7, 2012 3:16 AM GMT+0700

Wisconsin Governor Scott Walker said today his victory in yesterday’s recall election sets the stage for Mitt Romney to be competitive in his state in November’s election, while the presumptive Republican presidential nominee saw broader national implications to the result.

“I think he’d acknowledge he’s an underdog, particularly here in Wisconsin,” Walker said of Romney on MSNBC. “But I think anyone looking at the results last night would also acknowledge that it’s now competitive in Wisconsin.”

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Republican Gov. Scott Walker greets supporters at an election night rally on June 5, 2012 in Waukesha, Wisconsin. Photographer: Brian Kersey/UPI/Landov

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June 6 (Bloomberg) -- Alberta Darling, a Republican state senator who survived a recall attempt last year, talks with Bloomberg's Mark Niquette about the outlook for the state after Republican Governor Scott Walker survived a recall election last night. They speak at Walker's victory party in Waukesha. (Source: Bloomberg)

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June 6 (Bloomberg) -- Bloomberg's Al Hunt discusses Wisconsin Republican Governor Scott Walker surviving a recall election, the boost it gives to Republicans across the country and what impact it may have on the presidential election in November. He speaks on Bloomberg Television's "InBusiness." (Source: Bloomberg)

Romney, speaking at a fundraiser today in San Antonio, Texas, said the Wisconsin vote will “echo” throughout U.S.

“Yesterday was won by the people of Wisconsin doing the right thing and voting for conservative principles,” he said. “I think people recognize we just can’t keep going down the same path that we’re on. It ends up in calamity.”

Walker’s win prompted Democratic and Republican strategists to reassess Wisconsin’s political landscape and the role the state will play in the presidential race. Until earlier this week, target states listed by President Barack Obama’s campaign didn’t include the state, which has voted Democratic in the past six presidential elections, albeit narrowly at times.

In a campaign video released June 4 -- the day before the recall -- Obama campaign manager Jim Messina listed Wisconsin as “undecided,” along with Colorado, Florida, Iowa, Ohio, North Carolina, New Hampshire and Virginia.

Downplaying Results

White House press secretary Jay Carney told reporters aboard Air Force One today that he hadn’t yet spoken extensively with Obama about the Wisconsin outcome.

“I certainly wouldn’t read much into yesterday’s results,” he said, adding that Obama’s message about growing the economy and jobs “will resonate in Wisconsin.”

It remains an open question whether Romney can capitalize on Walker’s momentum. So far, his campaign has yet to announce any travel plans to Wisconsin.

“It tends to be a blue state in presidential elections, we don’t win a lot in Wisconsin,” Romney said today.

“The key for Governor Romney to be competitive enough to win is I think he’s got to lay out a clear platform -- something similar to what our friend Paul Ryan has done,” Walker said, pointing to the U.S. House Budget Committee chairman whose proposed overhaul of Medicaid and Medicare and suggested government spending cuts is being used by Democrats to rally support.

Make Compelling Case

Walker said that if Romney “makes a compelling case to the people of Wisconsin that he’s willing to take those kinds of risks to get America back on track for our kids and our grandkids’ kids, he can win.”

Romney said today the Wisconsin results show voters support leaders who seek to curb the government’s size and challenge organized labor, and that those attitudes would surface in November’s vote.

Voters in Wisconsin “said we’ve seen a conservative governor; he cut back on the scale of government and has held down taxes and stood up to the public sector unions and we want more of that, not less of it,” Romney said during a telephone town hall meeting with members of the National Federation of Independent Business. “And I think you’re going to find that in the decisions being made in November.”

Big Names

Three of the biggest names in Republican politics today call Wisconsin home: Walker, Ryan and Republican National Committee Chairman Reince Priebus.

Even before the recall results were in, Democrats and Republicans were working to spin the significance of the outcome for the matchup between Obama and Romney, a former Massachusetts governor.

The organization and mobilization of Wisconsin Republicans to protect Walker could provide Romney a boost, should he decide to compete aggressively in the state.

If Romney were able to make Wisconsin a competitive state, it could make a major difference in this year’s campaign. Winning a Midwest industrial state such as Wisconsin or Michigan, which both backed Obama in 2008, would provide him an easier path to the 270 electoral votes needed to win the White House.

Wisconsin’s History

A victory wouldn’t be an easy task for Romney, 65. The state, which has 10 electoral votes, hasn’t voted for a Republican presidential candidate since President Ronald Reagan carried it in his 1984 re-election against Democrat Walter Mondale, who won just one state, his native Minnesota.

Obama, 50, in the 2008 election beat Republican John McCain in Wisconsin, 56 percent to 42 percent. An exit poll of recall election voters conducted yesterday showed Obama beating Romney, 51 percent to 44 percent.

Still, if this presidential election plays out similar to those held in 2000 and 2004, Romney could have a fighting chance. Former President George W. Bush came within several thousand votes of winning the state in both of those election cycles.

Also boosting Republican confidence in the state are their 2010 victories, when the party won the governor’s office, as well as a U.S. Senate seat held by Democrat Russ Feingold. They also picked up two House seats in the state’s eight-member delegation and gained control of both chambers of the state legislature.

Tea Partiers

Tea Party activists were an important constituency behind Republican Ron Johnson’s 2010 Senate win and the movement, which promotes a smaller role for the federal government, remains a force in the state.

Spending on the recall through May 21 amounted to at least $66 million, according to the Wisconsin Democracy Campaign, a nonpartisan group in Madison that follows election financing. That’s almost double the $37 million spent on the 2010 governor’s race. Walker alone raised more than $30 million, with about two-thirds coming from out of state.

The financial imbalance contributed to Walker’s victory, recall supporters said. Still, as important as money was in the race, its significance may be overplayed by Democrats. The exit polling showed that nearly nine in ten voters made their decision on the recall prior to May, more than a month before the actual vote and an explosion of television advertising.

State In Play

Ed Gillespie, a senior Romney adviser, said today that Wisconsin is in play, though he cautioned not to overestimate the effects of the recall vote.

“I do think it will be competitive in November,” he said of Wisconsin at a Bloomberg Breakfast in Washington today. “But winning in a recall election does not mean you should put it in your ‘leans-Republican’ column today.”

Gillespie, a former chairman of the Republican National Committee, said the vote affirms policies proposed by governors in other states and by Romney that would limit unions as a way of closing budget gaps.

“The election results indicate that there is a receptive message out in the heartland, the country at large, for that center-right approach,” he said.

“The playing field has broadened for Republicans,” Gillespie said. “The fact that Wisconsin is in play is revealing.”

Walker Victory

Walker beat Democratic Milwaukee Mayor Tom Barrett, 53 percent to 46 percent with all of the vote recorded, according to unofficial returns from the Associated Press.

Obama’s Wisconsin win four years ago was boosted by a surge in support among younger voters, a demographic that remains more supportive of him than Romney and yet which polls show is less energetic about his campaign than it was four years ago.

The president declined to get involved in the recall race, with the exception of an Internet post supportive of Barrett on the evening before the vote. He literally flew over the state -- twice -- on June 1 en route to his own campaign events in Minnesota and Illinois.

Besides the potential of an embarrassing loss, Obama traveling to Wisconsin also would have brought with it the risk of turning off some of the independent voters who backed Walker that the president needs to win in November.

Romney, who also didn’t visit the state in the run-up to the recall election, made supportive statements about Walker as he campaigned ahead of Wisconsin’s April 3 primary, a victory that accelerated his path to clinching his party’s presidential nomination.

-- With assistance from Lisa Lerer and Roger Runningen in Washington and Julie Hirschfeld Davis in San Antonio, Texas. Editors: Jeanne Cummings, Don Frederick

To contact the reporter on this story: John McCormick in Chicago at jmccormick16@bloomberg.net

To contact the editor responsible for this story: Jeanne Cummings at jcummings21@bloomberg.net

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U.S. Stocks Cap Biggest Rally in 2012 on Stimulus Bets

By Rita Nazareth - Jun 7, 2012 3:52 AM GMT+0700

U.S. stocks rallied, giving benchmark indexes their biggest gains in 2012, on speculation global policy makers will take steps to stimulate economic growth.

Bank of America Corp. surged 7.6 percent to pace gains among financial shares. Caterpillar Inc. (CAT) and Exxon Mobil Corp. (XOM) increased at least 3.3 percent. Home Depot Inc. (HD), the largest U.S. home-improvement retailer, climbed 3.4 percent after raising its stock repurchase plan by $500 million for fiscal 2012. Facebook Inc. (FB) added 3.6 percent, following a 32 percent decline since the biggest social-networking company went public.

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All 10 groups in the S&P 500 rose today as commodity, financial and technology shares had the biggest gains. Photograph: Landov

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June 6 (Bloomberg) -- Bloomberg's Deborah Kostroun reports on the performance of the U.S. equity market today. U.S. stocks rallied, giving benchmark indexes their biggest gains in 2012, on speculation global policy makers will take steps to stimulate economic growth. (Source: Bloomberg)

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June 6 (Bloomberg) -- Bloomberg’s Trish Regan, Matt Miller and Alix Steel report on today’s ten most important stocks including Home Depot, Halliburton and Bank of America. (Source: Bloomberg)

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June 6 (Bloomberg) -- Michael Woolfolk, managing director at Bank of New York Mellon Corp., talks about the the impact of the European sovereign-debt crisis on U.S. stocks and bonds, and the outlook for equities. He speaks with Trish Regan and Matt Miller on Bloomberg Television's "Street Smart." Sandy Villere, portfolio manager at Villere & Co., also speaks. (Source: Bloomberg)

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June 6 (Bloomberg) -- Michael Purves, chief global strategist and head of equity derivatives research at Weeden & Co., talks about the U.S. stock market and economy, gold prices and Europe's sovereign debt crisis. He speaks with Pimm Fox and Alix Steel on Bloomberg Television's "Taking Stock." (Source: Bloomberg)

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June 6 (Bloomberg) -- Thomas Lee, chief U.S. equity strategist at JPMorgan Chase & Co., talks about the outlook for U.S. stocks and likely fiscal and monetary response to a potential withdrawal by Greece from the euro zone. He speaks with Scarlet Fu on Bloomberg Television's "InBusiness." (Source: Bloomberg)

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Traders work on the floor of the New York Stock Exchange. Photographer: Richard Drew/AP Photo

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The Standard & Poor’s 500 Index advanced 2.3 percent to 1,315.13 at 4 p.m. New York time. The Dow Jones Industrial Average increased 286.84 points, or 2.4 percent, to 12,414.79. About 7.3 billion shares changed hands on U.S. exchanges today, or 8.3 percent above the three-month average.

“People are viewing central banks as very aware of the weakness of the global economy and looking for ways to deal with that,” said Michael Holland, chairman of New York-based Holland & Co. His firm oversees more than $4 billion. “In addition to that, we’ve had a major selloff, valuations are low and that certainly helps to lift the market on a day like today.”

The S&P 500 rose 2.9 percent in three days, wiping out the loss driven by a disappointing jobs report on June 1. Earlier this week, the index traded at 12.9 times its companies’ reported earnings, according to data compiled by Bloomberg. That was the cheapest valuation in six months, the data showed. Concern about Europe’s debt crisis and a global slowdown took the S&P 500 down as much as 9.9 percent from this year’s peak.

Stimulus Bets

Equities rallied today as European Central Bank President Mario Draghi said officials stand ready to act as the euro region’s outlook worsens. Federal Reserve Bank of Atlanta PresidentDennis Lockhart said extending Operation Twist, the program to lengthen maturities of debt on the U.S. central bank’s balance sheet, is an “option on the table.”

The U.S. economy maintained a moderate pace of growth, according to the Fed’s Beige Book survey of business conditions. The policy-setting Federal Open Market Committee meets June 19-20 to consider whether more stimulus is needed.

“I would be surprised if the Federal Reserve isn’t already having a contingency plan if everything unravels in Europe,” said Ron Florance, managing director of investment strategy for Wells Fargo Private Bank. His firm manages $169 billion.

Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc. (BRK/A), said he expects the U.S. economy to avoid another recession as long as Europe can contain its debt crisis. There won’t be a recession “unless events in Europe develop in some way that spills over here big-time,” Buffett said yesterday at the Economic Club of Washington, D.C.

Biggest Gains

All 10 groups in the S&P 500 rose today as energy, financial and industrial shares had the biggest gains. The Dow Jones Transportation Average climbed 3 percent. Bank of America increased 7.6 percent, the most in the Dow, to $7.64. Caterpillar, the largest maker of construction equipment, added 3.6 percent to $86.66. Exxon Mobil jumped 3.3 percent to $80.18.

Home Depot rose 3.4 percent to $50.60. The timing of its share repurchases will not have a material impact on the diluted earnings per share in that period, the retailer said.

Monsanto Co. (MON) added 3 percent to $79.20. The largest seed company will repurchase as much as $1 billion of shares as rising profit boosts the company’s cash hoard to a record.

Facebook rallied 3.6 percent to $26.81. No large U.S. company is attracting more attention from short sellers than Facebook amid bets it will keep falling after losing $29 billion since its initial public offering.

Short Interest

Short interest on the Menlo Park, California-based company reached 5.9 percent of shares outstanding, according to data compiled by Bloomberg and Data Explorers Ltd., a New York-based research firm. None of the S&P 500 companies with at least $50 billion in market capitalization has short interest higher than 3 percent, the data show. Facebook, which has a market value of about $61.6 billion, isn’t in the S&P 500.

“Facebook is one of those companies whose future potential is unknown and unknowable,” said Robert Stimpson, a money manager at Akron, Ohio-based Oak Associates Ltd., which oversees about $900 million and doesn’t own Facebook. “The stock is expensive. The short interest might also reflect a bet that there is more bad news to come and Facebook will be punished.”

Nasdaq OMX Group Inc. (NDAQ)’s board approved a plan to pay brokers whose orders were mishandled in Facebook Inc.’s initial public offering, earmarking about $40 million to cover losses.

Chesapeake Energy Corp. (CHK) jumped 7.1 percent, the most since Aug. 11, to $18.21. The company is in advanced talks to sell pipelines to Global Infrastructure Partners for more than $4 billion, said two people with knowledge of the matter.

Unexpected Profit

A measure of homebuilders in S&P indexes gained 3.7 percent. Hovnanian Enterprises Inc. (HOV) surged 18 percent, the most since Aug. 15, to $2.01. The largest homebuilder in New Jersey reported an unexpected profit for its fiscal second quarter as orders jumped 52 percent amid rising U.S. demand for new houses.

Iron Mountain Inc. (IRM) surged 14 percent, the biggest gain in the S&P 500, to $32.32. The document-storage company approved a plan to convert to a real-estate investment trust and increased its quarterly dividend by 8 percent.

Lee Enterprises Inc. soared 16 percent, the biggest gain since Jan. 24, to $1.33. Buffett’s Berkshire Hathaway disclosed owning a stake in the owner of newspapers in the U.S. Midwest and West Coast.

Ancestry.com Inc. (ACOM) gained 11 percent to $25.06. The family- history research website is weighing a sale and working with Frank Quattrone’s Qatalyst Partners LLC to find buyers, according to a person with knowledge of the situation.

Material Costs

Halliburton Co. (HAL) slumped 3.5 percent to $28.10. The world’s largest provider of hydraulic-fracturing services said North American margins will be 500 to 550 basis points lower this quarter than last because of higher material costs.

Tempur-Pedic International Inc. (TPX) plunged 49 percent, the most ever, to $22.39. The luxury mattress maker cut its full- year profit and revenue forecasts amid lower-than-expected second-quarter sales in North America.

The selloff that erased $1.78 trillion from U.S. equity values has pushed the cost of options to the highest levels of 2012, prompting hedge funds to add to short sales at the fastest rate since October. The Chicago Board Options Exchange Volatility Index surpassed 26 last week, a level not seen since December.

The gain left the gauge near its price just before the S&P 500 slumped 12 percent in August and September 2011, data compiled by Bloomberg show. As the VIX (VIX) has risen, an International Strategy & Investment Group measure of hedge fund bullishness has retreated by 7.4 percent.

Short Selling

While the cost of hedges and the amount of short selling are increasing, they may have further to go before bearishness is exhausted amid Europe’s credit crisis, according to Wayne Lin of Legg Mason Inc. The VIX would have to gain 45 percent to reach its average price in August and September. The ISI gauge bottomed at 42 last year compared with its level of 45.3 now.

“The concerns about Europe combined with questions about the robustness of global growth are filtering into markets,” Lin, who helps oversee $639 billion as a money manager at Baltimore-based Legg Mason, said yesterday in a phone interview. “These risks make people back out of equities, cause the hedge funds to go short and push the VIX up.”

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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French Open Date Demands Spur Network Congestion Fix

By Marie Mawad - Jun 6, 2012 5:01 AM GMT+0700

While tennis fans watch the action on the courts at the French Open this week, Jean-Luc Vuillemin is more focused on what’s happening in the stands. Across the Roland Garros complex in Paris, fans use mobile devices to keep an eye on matches other than the one they’re attending -- potentially overloading parts of the France Telecom SA (FTE) wireless network that Vuillemin oversees.

“More and more spots just like this one are going to pop up,” Vuillemin said. “Our networks overall have enough capacity, but we face challenges where large crowds connect in one place and generate loads of traffic.”

From stadiums to airports, train stations to business centers, wireless networks worldwide get bogged down when thousands of users packed into tight spaces reach for their handsets to video chat, watch movies and play games online.

Ericsson AB, Alcatel-Lucent SA and Huawei Technologies Co. say they have a solution: downsized antennas, smaller and cheaper, made to hang on lamp posts, traffic lights or on the side of buildings where networks need the boost and full-blown gear can’t fit.

While no widespread installation of these new “small cells” has been announced, manufacturers have high hopes for the technology. The market may triple to $10.1 billion by 2015 from 2012, according to ABI Research. In contrast, capital spending by phone companies worldwide this year could expand 3 percent to $314 billion, researcher Ovum predicts, after half a decade of average annual growth of 6.5 percent.

Alcatel’s Cube

“Vendors are betting they can sell ten times the volume if they turn to small cells,” said Dimitris Mavrakis, an analyst at Informa Telecoms & Media in Athens. “In comparison, developed markets are already saturated with macro cells.”

Alcatel-Lucent last year released an early version of its lightRadio miniature antenna, a 5-centimeter-tall cube. The Paris company has been working to improve it with seven customers including Verizon Communications Inc. (VZ), France Telecom, Telefonica SA (TEF) and China Mobile Ltd. (941)

Ericsson’s smallest product is about the size of a four- slice toaster. The world’s biggest maker of wireless-network equipment bought Canadian company BelAir Networks in April to broaden its reach into offloading data.

Small-cell equipment is eight to 12 times cheaper than larger gear, according to Nick Marshall, an analyst with ABI Research in Austin, Texas. Marshall said prices are set to fall about 18 percent in the next three years as the number of antennas sold globally more than triples to 1.6 million.

How Profitable?

“I doubt that there will be more profit,” Marshall said. “Second and third-tier vendors will also enter this market and prices will go down.”

The new technology isn’t the only option carriers are trying as they seek to keep up with surging mobile traffic. In the U.S., Verizon Wireless and AT&T Inc. (T) have capped data speeds for users of unlimited wireless packages, and some carriers are trying to offload traffic to Wi-Fi. AT&T has teamed up with the likes of Starbucks Corp. (SBUX) to build connection spots in coffee shops and similar locales.

European carriers have some of the most ambitious experiments with small-cell technology. Nokia (NOK1V) Siemens Networks plans to team up with a French mobile-phone company to roll out dozens of mini-antennas starting next year to beef up capacity in Paris’s La Defense, an area notorious for poor wireless signals.

Mounir Bougrine, a 41-year-old technical engineer at Societe Generale SA, says that whenever he wants to surf the Web on his mobile phone he has to step out of the investment bank’s skyscraper, walk some 200 meters and hope for the best.

‘Hundred Times’

“I’m out here a hundred times a day looking for a spot with a proper working signal,” said Bougrine, one of 160,000 people who work in the west-side district that is home to some of France’s biggest banks and companies.

The need to place them accurately because of narrow range coverage may hinder a quick deployment of small cells, said Emin Gurdenli of consulting firm Azenby. In a test in Milan, Vodafone Group Plc (VOD) says its small cells suffered from interference and dropped connections.

“It was crashing everything,” Chief Technology Officer Steve Pusey said during an analyst presentation last month.

French carrier SFR, a unit of Vivendi SA (VIV) and competitor to France Telecom, has set up 4 million Wi-Fi hot spots for its subscribers by beaming wireless signals from set-top boxes. To offload pressure on its network, SFR this month plans to start offering technology that can shift smartphone signals to Wi-Fi and back.

Vuillemin, the France Telecom network chief, says the carrier sees the French Open as an ideal testing ground for new technologies. The company offers a special iPhone and Android app for the tournament that features scores, player stats and live broadcasts of matches, creating just the kind of network congestion that keeps Vuillemin up at night.

And since it was downloaded 800,000 times last year, it gives him plenty of incentive to find new solutions. ’’Small cells,’’ he said, ’’could be part of the fix.’’

To contact the reporter on this story: Marie Mawad in Paris at mmawad1@bloomberg.net

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

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U.S. Stocks Gain as ISM Services Index Unexpectedly Rises

By Rita Nazareth - Jun 6, 2012 3:28 AM GMT+0700

The Standard & Poor’s 500 Index (SPX) rose, amid the cheapest valuation in six months, after an unexpected increase in a measure of service industries and as a report said Europe’s bailout fund was preparing a credit line for Spain.

Financial, commodity and technology shares had the biggest gains in the S&P 500 among 10 groups. JPMorgan Chase & Co. (JPM) and Hewlett-Packard Co. (HPQ) climbed at least 2.9 percent. A gauge of homebuilders in S&P indexes rallied 4 percent as Lennar (LEN) Corp. and PulteGroup Inc. (PHM) surged more than 5.9 percent. Facebook Inc. (FB) retreated 3.8 percent, extending its decline since the company’s initial public offering last month to 32 percent.

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A trader works at the New York Stock Exchange (NYSE) in New York.. Photographer: Scott Eells/Bloomberg

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June 5 (Bloomberg) -- Bloomberg's Deborah Kostroun reports on the performance of the U.S. equity market today. The Standard & Poor’s 500 Index rose, amid the cheapest valuation in six months, after an unexpected increase in a measure of service industries and as a report said Europe’s bailout fund was preparing a credit line for Spain. (Source: Bloomberg)

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June 5 (Bloomberg) -- Bloomberg’s Trish Regan, Matt Miller and Alix Steel report on today’s ten most important stocks including JPMorgan, Akamai and Fastenal. (Source: Bloomberg)

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June 5 (Bloomberg) -- Hank Smith, chief investment officer of Haverford Trust Co., talks about the outlook for U.S. stocks, monetary and fiscal policies, and the impact of regulation and debt on the economy. He talks with Matt Miller and Trish Regan on Bloomberg Television's "Street Smart." (Source: Bloomberg)

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June 5 (Bloomberg) -- John Manley, chief equity strategist for Wells Fargo Advantage Funds, talks about financial markets, money flows, investment strategy and the U.S. economy. Manley speaks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)

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June 6 (Bloomberg) -- William Smead, chief investment officer at Smead Capital Management in Seattle, talks about the outlook for the U.S. economy, and stocks, and his investment strategy. Smead also discusses China's economy and Europe's sovereign debt crisis. He speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

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June 5 (Bloomberg) -- Gary Shilling, president of A. Gary Shilling & Co., and a Bloomberg View columnist, talks about the outlook for the U.S. economy, housing prices and Federal Reserve monetary policy. Shilling, speaking with Erik Schatzker, Sara Eisen, Scarlet Fu and Stephanie Ruhle on Bloomberg Television's "InsideTrack," also discusses investment strategy for Treasuries and the European financial crisis. (Shilling is a Bloomberg View columnist. The opinions expressed are his own. Source: Bloomberg)

The S&P 500 rose 0.6 percent to 1,285.50 at 4 p.m. New York time. The Dow Jones Industrial Average added 26.49 points, or 0.2 percent, to 12,127.95. It snapped a four-day drop. The Russell 2000 Index of small companies gained 1.2 percent to 746.09. About 6.1 billion shares changed hands on U.S. exchanges today, or 9.3 percent below the three-month average.

“I’d be a buyer of stocks,” John Manley, chief equity strategist for Wells Fargo Advantage Funds in New York, said in a telephone interview. His firm oversees $205 billion. “The U.S. economy is doing OK. Obviously, there are lots of things that could go wrong. We’re going to have to see more agreements in Europe. Yet valuation is attractive, the market is cheap.”

The S&P 500 started the day trading at 12.9 times its companies’ reported earnings, the lowest valuation since November, according to data compiled by Bloomberg. Yesterday, the index briefly extended a drop from its April peak to more than 10 percent amid disappointing economic data.

Economic Data

Equities reversed early losses today as the Institute for Supply Management’s index of non-manufacturing businesses, which covers about 90 percent of the economy, unexpectedly rose to 53.7 last month from April’s 53.5. The median forecast of 75 economists surveyed by Bloomberg News projected 53.4. Finance ministers and central bank governors from the world’s leading economies agreed to coordinate their response to Europe’s crisis on a conference call that dealt with Spain and Greece.

Spain called for outside support for the first time to battle the financial (S5FINL) crisis as Budget Minister Cristobal Montoro said European institutions should help shore up the nation’s lenders. The country may receive a precautionary credit line from the European Financial Stability Facility, Germany’s Die Welt newspaper reported in a preview of a story that will run tomorrow, citing unidentified people familiar with talks about the possible option.

‘Bipolar’ Market

“We’re going to continue to see a bipolar financial market until the European situation gets sorted out,” said Chad Morganlander, a Florham Park, New Jersey-based money manager at Stifel Nicolaus & Co., which oversees $127 billion of assets. “The U.S. economy is growing at a glacial pace. This growth rate could sustain market valuations.”

Eight out of 10 groups in the S&P 500 gained. The KBW Bank Index (BKX) added 1.5 percent. JPMorgan climbed 3.2 percent to $31.99. Hewlett-Packard, the world’s largest personal-computer maker, rose 2.9 percent to $21.68. Homebuilder Lennar jumped 6.7 percent to $25.27, after slumping 13 percent in two days. PulteGroup increased 6 percent to $8.16.

Prudential Financial Inc. (PRU) led a rally of life insurers as investors bet the company’s agreement to handle pension obligations for General Motors Co. may signal more opportunities for the industry. Prudential, the second-largest U.S. life insurer, advanced 2.8 percent to $45.99. No. 1 MetLife Inc. (MET) climbed 2.1 percent to $28.39.

SanDisk Corp. (SNDK) surged 5.5 percent to $33.41. The company, which makes memory chips used in mobile devices, was rated outperform in new coverage at Pacific Crest Securities.

Facebook Slumps

Facebook slid 3.8 percent to $25.87, the lowest since it went public last month at $38. A Reuters/Ipsos poll showed sagging interest in the site and a minority of users being influenced by ads and comments when making purchasing decisions.

Starbucks Corp. (SBUX) dropped 2.8 percent to $52.41. The world’s largest coffee-shop operator agreed to buy Bay Bread LLC for $100 million in cash, making its largest acquisition to further expand its offering of food with pastries and sandwiches.

Dollar General Corp. (DG) declined 3.6 percent to $46.76. The discount-retail chain said Buck Holdings LP, along with Chief Executive Officer Richard Dreiling and other executives, plans to sell a total of 25 million shares.

W.W. Grainger Inc. dropped 5.1 percent to $177.95. The supplier of industrial goods from tools to paper fell after an MKM Partners analyst said the growth phase of the manufacturing cycle is over.

‘Selling Climax’

The S&P 500 may extend its decline from its April peak to 15 percent in a “selling climax” that would deplete bears, according to StockCharts.com Inc. The index dropped 9.9 percent to 1,278.18 through yesterday from its 2012 high on April 2 as concern grew that global economic growth is slowing and Europe’s debt crisis is worsening.

While the gauge will likely be supported at 1,250, further selling may push it as low as 1,200, a level where the S&P 500 would retrace 61.8 percent its advance since October, said Arthur Hill, a technical analyst at Redmond, Washington-based StockCharts.com.

“Economic reports have been largely below expectations the last two months and the stock market is pricing in this information,” Hill wrote in a note yesterday. While the S&P 500 will probably find support at 1,250, “we could even see an overshoot because some sort of selling climax is possible before all selling is exhausted,” he said.

The S&P 500 slumped 6.3 percent in May, the most since September, amid concern Greece would exit the euro area and as data on U.S. jobs and manufacturing missed forecasts. The index on June 1 dropped below its 200-day average for the first time since December after a Labor Department report showed the economy added the fewest jobs in a year.

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

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

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Paulson Buys Saudi Prince’s Ranch in $49M Deal

By Oshrat Carmiel and Kelly Bit - Jun 6, 2012 12:35 AM GMT+0700

Billionaire John Paulson bought Hala Ranch, a 90-acre (36-hectare) property in Aspen, Colorado, that belonged to Saudi Prince Bandar bin Sultan, and a separate site in the town for $49 million.

The ranch, built by the prince about 20 years ago, is Aspen’s largest residential property and includes a 55,000- square-foot (5,000-square-meter) main house, according to Tim Estin, a broker with Coldwell Banker Mason Morse Real Estate in Aspen. It was initially marketed for $135 million, making it the most expensive U.S. home listing, the Aspen Times said in 2006.

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John A. Paulson, president of Paulson & Co., arrives at the Spanish ambassador's residence for a meeting with Spanish Prime Minister Jose Luis Rodriguez Zapatero in New York in September 2010. Photographer: Andrew Harrer/Bloomberg

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The backyard of Hala Ranch, a 95-acre estate in Aspen, Colo., built in 1991 for the family of Saudi Prince Bandar bin Sultan, in 2007. Photographer: Michael Brands/The New York Times/Redux

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“Hala Ranch is one of the most beautiful properties in Aspen,” Paulson & Co., the hedge-fund manager’s investment firm, said in a statement. “The purchase price represents a substantial discount to the asking price.”

Paulson also bought Bear Cabin, located on a separate 38- acre parcel that was never previously offered for sale, according to the statement.

The statement didn’t disclose the exact price for the transactions, which were reported yesterday by CNBC. Land records in Pitkin County reflect two sales totaling $49 million to an entity called Starwood Mountain Ranch LLC.

Aspen Sales

The dollar volume of Aspen home sales declined 27 percent this year through May from the same period in 2011, to $277 million, according to Estin, publisher of the Estin Report, a monthly analysis of the Aspen home market. He wasn’t involved in the Paulson transactions.

The dollar volume fell as fewer homes priced above $10 million changed hands, Estin said. The tally doesn’t include Paulson’s purchase, which was completed in June, according to property records. The deals for Hala Ranch and another $30 million home that went into contract last week will bring sales volume in line with a year ago, he said.

After the prince built the ranch, Pitkin County limited home sizes to 15,000 square feet, according to Estin.

Paulson, directly or through his funds, owns real estate across the U.S. including properties in Colorado, Arizona, California, Nevada, Florida and Hawaii, according to the statement.

To contact the reporter on this story: Oshrat Carmiel in New York at ocarmiel1@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net

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Japan’s Debt Sustains a Deflationary Depression

Illustration by Kiji McCafferty

By A. Gary Shilling Jun 5, 2012 6:01 AM GMT+0700

Markets have reacted dramatically to the Bank of Japan’s recent efforts to stimulate the economy with loans to high-growth sectors; an expansion of its asset-purchase program; and a new 1 percent inflation target to combat chronic deflation.

Japanese stocks, especially of major exporters, soared and the yen tanked, starting in early February. Yet the spurring effects of monetary easing on Japanese stocks and the depressing influence on the yen didn’t last long. Since mid-March, the currency has resumed its role as a haven from euro-area turmoil. The “risk off” trade is back in favor. Still, I continue to believe that fundamental changes are occurring in Japan that will weaken the yen considerably in future years.

About Gary Shilling

A. Gary Shilling, a Bloomberg View columnist, is president of A. Gary Shilling & Co., a consultancy in Springfield, New Jersey. He is the author of “The Age of Deleveraging: Investment Strategies for a Decade of Slow Growth and Deflation.”

More about Gary Shilling

Last year, Japan’s gross government debt was 220 percent of gross domestic product, according to the International Monetary Fund, by far the largest ratio of any Group of Seven country. All governments lend back and forth among official entities so that their gross debt is bigger than the net debt held by non-government investors, and Japan does this more than other developed countries. Still, on a net basis, Japan’s government-debt-to-GDP ratio is rivaled only by Italy’s and leaped to 113 percent in 2011 from 11.5 percent in 1991.

Ratings Downgrade

Standard & Poor’s has cut the Japanese government-debt rating to AA minus and Moody’s Investors Service cut its rating to Aa3. On May 22, Fitch Ratings reduced Japan’s sovereign grading to A+ and said the government is taking a “leisurely” approach to dealing with the nation’s debt. Meanwhile, loans from Japanese banks have dropped precipitously since the early 1990s. That was partly due to the write-offs of bad real-estate loans. Even so, the revival of borrowing in recent years has been minimal.

Japan’s traditionally low unemployment rate jumped from 2 percent in the early 1990s to 4.6 percent in April of this year. The male labor-force participation rate ceased its post- World War II decline in the bubble 1980s, though the downward trend has accelerated again since the early 1990s. The female participation rate rose from the late 1970s until the early 1990s as many women decided that working and remaining single were preferable to being confined to the home and rearing children in a male-dominated culture.

Despite aggressive monetary policy since the early 1990s, Japan has suffered bouts of deflation. The two decades of economic stagnation were compounded by the huge earthquake and devastating tsunami last year. The economic disruptions and loss of nuclear-power generation remain considerable. Rebuilding will create jobs and economic activity, but it will simply take things back to where they were, and at tremendous cost to the government, insurers and those who lost property, income and jobs, to say nothing of the thousands of lost lives.

Japan seemed poised to take over the world in the late 1980s at the height of its real-estate and stock-market booms, but it has undergone a huge reversal. Back then, many Americans believed they would soon be working for Japanese companies or would be run out of business by them. Japan’s exports of vehicles, consumer electronics and other goods achieved global dominance from standing starts after World War II, and the Japanese used their export earnings to buy Midwest farmland, Pebble Beach and Rockefeller Center. Japan remains the world’s biggest creditor country with net foreign assets of $3.19 trillion.

Wealthy Country

Does all this mean that Japan is finished as a major economy? Hardly. Despite little growth in GDP per capita since 1995, it is a wealthy country. In 2010, GDP per capita was still more than that of France, Germany, the U.K. and Italy. And China’s economy is now larger than Japan’s because of its huge population, 1.3 billion compared with 128 million, though China’s $5,414 GDP per capita is only 12 percent of Japan’s $45,920.

The Japanese are tough and will rebuild their economy in the aftermath of the earthquake and tsunami. The destruction, excluding the nuclear ramifications, was initially estimated at only 4 percent of GDP.

The nation is well-educated and dedicated. The group decision-making process, called “ringi-sho,” is slow and laborious, but once the group makes up its collective mind, it turns to the task at hand with resolution. This dedication in the face of adversity is summed up by the phrase, “fukutsu no seishin,” or “never give up.”

That attitude revived a largely destroyed economy after 1945, and made it the envy of the world in the 1980s. The World War II defeat was a psychological disaster for the Japanese who previously viewed unconditional surrender and foreign occupation of their country as unthinkable. In the late 1900s, this mentality was responsible for the rapid conversion from a primitive, feudal nation to a modern industrial economy.

This perseverance has driven efforts by the government and central bank to resurrect the economy for two decades, but with little success. Instead, these attempts have set up Japan for a slow-motion train wreck, characterized by leaping interest rates on government debt and a collapsing yen.

The Bank of Japan helped pop the 1980s housing and stock bubbles by raising interest rates starting May 31, 1989. After the bubbles burst, the central bank slashed its reference overnight rate to zero and has kept it close to that level ever since. That pumped money into the economy, to no avail. In any case, even if nominal rates are zero, borrowers are discouraged by positive real rates in periods of deflation. And zero is usually as low as central banks can go, though the U.S. Treasury is considering issuing bills at premiums with the resulting negative returns. Japan’s financial system remains in the classic liquidity trap where no interest rate is low enough to encourage scared borrowers to borrow or reluctant lenders to lend.

Quantitative Easing

Substantial quantitative easing by the BOJ through purchases of government bonds didn’t help much, either. Nor did the 3 percent annual increase in M2 money supply over the last two decades. And so far, the central bank’s attempts to promote borrowing haven’t worked: The trend since the mid-1990s has been to repay loans that weren’t written off. Nevertheless, competitive quantitative easing by central banks is now the order of the day, and the BOJ is being outrun. Last year, it expanded its balance sheet by 11 percent, while the Federal Reserve’s increased 19 percent, the European Central Bank’s rose 36 percent and the Swiss National Bank’s grew 33 percent.

Government deficits are supposed to stimulate the economy, yet the composition of Japanese public spending isn’t particularly helpful. Debt service and social-security payments -- generally non-stimulative -- are expected to consume 53.5 percent of total outlays for 2012, compared with 54.4 percent for 2011. In addition, the gap between public spending and revenue was 9.3 percent of GDP for 2010, the latest data available, so debt service now accounts for 43 percent of government revenue, up from about 4 percent in the early 1970s. More than half of public spending is financed by new debt issues. As a result, the government borrows heavily just to service debt.

Japan wants to double the 5 percent sales tax in two stages by 2015 to help pay for increasing welfare costs as the population ages. The country’s leaders also want to demonstrate some control over the deficit and curtail further rating downgrades. They also want to prevent a sell-off of government bonds: In late March, foreigners sold more than 2 trillion yen ($25 billion) in Japanese obligations, one of the biggest outflows since the collapse of Lehman Brothers Holdings Inc. in September 2008.

But when the government last raised the sales tax to 5 percent in 1997, a recession followed. Furthermore, the military rise of China in Asia, North Korea’s nuclear ambitions and the planned reduction of U.S. defense expenditures have increased pressure on Japan to boost military spending. At $59 billion in 2011, the defense budget was already 5.2 percent of total government outlays, making it the sixth-largest in the world.

(A. Gary Shilling is president of A. Gary Shilling & Co. and author of “The Age of Deleveraging: Investment Strategies for a Decade of Slow Growth and Deflation.” The opinions expressed are his own. This is the second in a five-part series. Read Part 1.)

Read more opinion online from Bloomberg View. Subscribe to receive a daily e-mail highlighting new View columns, editorials and op-ed articles.

Today’s highlights: the View editors on pressuring Russia to pressure Syria; Margaret Carlson on the Wisconsin recall election; Jeffrey Goldberg on winning the Six-Day War; Ramesh Ponnuru on the wayward Obama campaign; William Pesek on India’s faltering market reforms.

To contact the writer of this article: A. Gary Shilling at insight@agaryshilling.com

To contact the editor responsible for this article: Max Berley at mberley@bloomberg.net

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Apple Denied Ban on Samsung Tablet Computer Sales in U.S.

By Edvard Pettersson and Joel Rosenblatt - Jun 5, 2012 11:01 AM GMT+0700

Apple Inc. (AAPL) was denied its renewed request for a ban on U.S. sales of Samsung Electronics Co.’s Galaxy Tab 10.1 tablet computer while the case is still before a federal court of appeals.

U.S. District Judge Lucy Koh in San Jose, California, said yesterday that she doesn’t have jurisdiction to issue a preliminary injunction because the U.S. Court of Appeals for the Federal Circuit in Washington hasn’t issued a mandate yet. The judge said Apple can renew its request once the court in Washington issues its ruling.

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The appeals court said May 14 that Apple can pursue its efforts to halt sales of the Samsung tablet while the infringement case is awaiting trial. Photographer: SeongJoon Cho/Bloomberg

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May 30 (Bloomberg) -- Lee Simpson, an analyst at Jefferies International, talks about Samsung Electronics Co.'s Galaxy S III smartphone and the company's patent disputes with Apple Inc. He speaks with Linzie Janis and Mark Barton on Bloomberg Television's "Countdown." (Source: Bloomberg)

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May 30 (Bloomberg) -- Sandy Shen, an analyst at Gartner Inc. in Shanghai, talks about Samsung Electronics Co.'s new Galaxy S III smartphone and how it compares to Apple Inc.'s iPhone 4S. Shen speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

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May 2 (Bloomberg) -- Ron Laurie, managing director of Inflexion Point Strategy LLC, talks about the patent dispute between Apple Inc. and Samsung Electronics Co. He speaks from San Francisco with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

Koh in December rejected Apple’s initial request, which is part of a broader patent dispute over smartphones and tablets. Apple’s renewed request was based on the Federal Circuit’s finding that it will probably win its patent infringement claim relating to the Tab 10.1 tablet.

The appeals court said May 14 that Apple can pursue its efforts to halt sales of the Samsung tablet while the infringement case is awaiting trial. The appeals court disagreed with Koh’s finding that Apple failed to show it was likely to win its case on the merits, according to court filings.

Samsung, based in Suwon, South Korea, said last month that Apple’s renewed request for the injunction is “premature” because Samsung would request a rehearing of the appeals court decision.

Representatives of Cupertino, California-based Apple didn’t immediately respond to an e-mail after regular business hours seeking comment on yesterday’s ruling.

The case is Apple Inc. v. Samsung Electronics Co. (005930), 11-01846, U.S. District Court, Northern District of California (San Jose).

To contact the reporters on this story: Edvard Pettersson in Los Angeles at epettersson@bloomberg.net; Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net

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

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