Apple TV Project Is Said to Be Led By ITunes Creator Jeff Robbin

By Adam Satariano - Oct 25, 2011 11:01 AM GMT+0700

Apple Inc. (AAPL) is turning to the software engineer who built iTunes to help lead its development of a television set, according to three people with knowledge of the project.

Jeff Robbin, who helped create the iPod in addition to the iTunes media store, is now guiding Apple’s internal development of the new TV effort, said the people, who declined to be identified because his role isn’t public.

Robbin’s involvement is a sign of Apple’s commitment to extending its leadership in smartphones and tablets into the living room. Before his Oct. 5 death, Apple co-founder Steve Jobs told biographer Walter Isaacson that he had “finally cracked” how to build an integrated TV with a simple user interface that would wirelessly synchronize content with Apple’s other devices.

“It will have the simplest user interface you could imagine,” Jobs told Isaacson in the biography “Steve Jobs,” released yesterday by CBS Corp. (CBS)’s Simon & Schuster.

Trudy Muller, a spokeswoman for Cupertino, California-based Apple, declined to comment. Outside of Jobs’s remarks in the book, Apple hasn’t acknowledged that it’s developing a TV set. And according to one person, it’s not guaranteed that Apple will release a television.

Until now, the company’s TV efforts have been limited to Apple TV, a small $99 gadget that plugs in to a television and gives users access to content from iTunes, Netflix Inc. (NFLX)’s streaming service and YouTube. Jobs had called it Apple’s “hobby,” rather than something designed to be a serious moneymaker.

Prototype Model

That may be changing. Apple has a prototype TV in the works and may introduce a product for sale by late next year or 2013, according to Gene Munster, an analyst with Piper Jaffray Cos. He based that timing on meetings with contacts close to Apple’s suppliers in Asia, industry contacts and Apple’s patent portfolio. Munster said Apple also is investing in manufacturing facilities and securing supplies of LCD screens.

Apple’s introduction of the voice-command software Siri and Web-storage service iCloud also could be used for a future television, Munster said in a note to investors yesterday. Siri may help search for videos, while iCloud allows customers to store video, music, pictures and other content on the company’s servers instead of their own hard drives.

Searching for Shows

One of Apple’s goals for a new TV is to let users more seamlessly search for a show or movie, said one of the people. For example, instead of having to separately check to see if a movie or show is available through Netflix or a cable service, all the material could be integrated, this person said.

One challenge will be getting makers of movies and television shows to change how they make their content available. Apple has considered adopting new business models for delivering video, including a subscription TV service, media executives said last year. Those talks didn’t lead to a deal.

Building a full TV set would put Apple in closer competition with consumer-electronics companies such as Samsung Electronics Co. and Sony Corp. (SNE) Apple could sell 1.4 million TVs next year, out of about 220 million flat-panel sets for the total market, according to Munster. That could add $6 billion in revenue to the company’s top line by 2014, he said.

Google Inc. (GOOG), which competes with Apple in the smartphone market, also is attempting to attract customers to an operating system it has created for televisions. Unlike that approach, Apple would be building both the hardware and the software.

Apple rose 3.3 percent to $405.77 at the close in New York yesterday. The shares have climbed 26 percent this year.

SoundJam Player

Robbin, the software engineer helping lead the TV effort, was hired in 2000 to develop iTunes after Apple bought the SoundJam digital music player he developed. ITunes, introduced in January 2001, became Apple’s digital hub for synchronizing music, video and applications across Apple’s devices, including the iPod, iPhone and iPad.

According to the biography, Jobs considered Robbin such a valuable employee that he wouldn’t let a Time magazine reporter meet him without agreeing not to print his last name, for fear that he would be poached by a competitor.

Robbin was among the Apple executives who helped persuade Jobs to allow computers running Microsoft Corp. (MSFT)’s Windows software to use iTunes, according to the biography, a move that helped the company add millions of new customers. The iTunes digital store, with more than 225 million registered users, generated almost $1.5 billion last quarter.

Robbin also was closely involved with the development of the iPod, including participating in a crucial 2001 meeting when Apple decided on the spin-wheel design of the digital music player and charted its expansion beyond personal computers to mobile computing, according to the book.

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

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

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Euro Snaps Five-Day Advance, Most Stocks Fall

By Stephen Kirkland and Shiyin Chen - Oct 25, 2011 4:44 PM GMT+0700
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Asian stocks and U.S. equity-index futures slid and the euro snapped a five-day advance against the dollar before European leaders hold a summit tomorrow to discuss ways to contain the region’s debt crisis. Photographer: Chris Ratcliffe/Bloomberg

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Oct. 25 (Bloomberg) -- Markus Rosgen, Hong Kong-based chief Asian strategist at Citigroup Inc., talks about the outlook for Asian and U.S. equity markets. Rosgen also discusses the impact of Europe's debt crisis on global stocks. He speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)

Commodities rose for a third day while stocks and U.S. index futures fluctuated as energy companies reported earnings that beat estimates and investors awaited tomorrow’s European leaders’ meeting to resolve the region’s debt crisis.

Oil advanced 1 percent, leading the Standard & Poor’s GSCI index of 24 commodities 0.4 percent higher at 10:40 a.m. in London. The Stoxx Europe 600 Index increased 0.1 percent, after gain as much as 0.4 percent and losing 0.4 percent. S&P 500 Index (SPX) futures added less than 0.1 percent. German bonds declined, with the 10-year yield climbing three basis points to 2.15 percent.

European leaders will hold a second summit in four days tomorrow, seeking to bolster the region’s rescue fund, recapitalize banks and provide debt relief to Greece. Boosting the effectiveness of the European Financial Stability Facility will require further talks with investors as German lawmakers prepare to vote on its new powers, a European Union document showed. BP Plc said today profit dropped less than expected, while BG Group Plc’s third-quarter earnings rose 25 percent.

“The dominant factor is what’s happening in Europe,” said Angus Gluskie, who manages more than $350 million at White Funds Management in Sydney. There may be “superficial optimism that some sort of deal might be reached. Underneath the surface, though, I think investors still have a lot of questions in the back of their minds and they are alert to risks.”

Thailand Floods

Oil in New York jumped as much as 1.9 percent to $92.99 a barrel, the highest since Aug. 3, extending yesterday’s 4.4 percent advance. Rice climbed 1.6 percent on speculation floods in Thailand will boost demand for U.S. supplies. The S&P GSCI index gained 2.4 percent yesterday and 1 percent on Oct. 21.

The Stoxx 600 fluctuated near an 11-week high. BP, Europe’s second-biggest oil company, and BG, the U.K.’s third-largest natural-gas producer, rose more than 3.5 percent. Neste Oil Oyj, Finland’s only oil refiner, jumped 16 percent as the outlook for its renewable-fuels unit improved. STMicroelectronics NV (STM), Europe’s largest semiconductor maker, fell 7.1 percent after predicting fourth-quarter sales short of analysts’ estimates.

The S&P 500 index has gained for three days. Home prices in 20 U.S. cities probably fell at a slower pace and consumer confidence hovered near a two-year low, highlighting the obstacles facing the recovery in its third year, economists said before reports today.

Forty-three companies in the S&P 500 are due to release earnings today, according to data compiled by Bloomberg. About 73 percent of the 119 index members that have reported results since Oct. 11 have beaten analysts’ estimates, the data show.

Five-Day Gain

The euro snapped a five-day gain versus the dollar, weakening 0.1 percent to $1.3910. The Dollar Index, which tracks the U.S. currency against those of six of the country’s major trading partners, was little changed. The New Zealand dollar weakened versus all 16 of its major peers after the government said inflation slowed in the third quarter.

U.K. government bonds declined amid a sale of index-linked gilts managed by banks. The 10-year yield was five basis points higher at 2.61 percent. Spanish 10-year bonds were little changed as the nation sold 3.48 billion euros ($4.9 billion) of bills.

The MSCI Emerging Markets Index rose 1 percent to the highest in five weeks. The Shanghai Composite Index gained 1.7 percent as China Vanke Co.’s profit jump eased concern that the slowing economy and tighter monetary policies will spur a collapse in earnings. Thailand’s SET index climbed 2.9 percent as trading resumed after yesterday’s holiday.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Shiyin Chen in Singapore at schen37@bloomberg.net;

To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net

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Obama in Western Trip Promotes Mortgage Plan as He Presses Congress to Act

By Kate Andersen Brower - Oct 25, 2011 12:58 PM GMT+0700

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Oct. 24 (Bloomberg) -- Neil Barofsky, former special inspector general for the U.S. Treasury's Troubled Asset Relief Program and a Bloomberg Television contributing editor, talks about the expansion of the Home Affordable Refinance Program, or HARP, to aid underwater borrowers and impact of the expanded plan on the housing market. Barofsky speaks with Mark Crumpton on Bloomberg Television's "Bottom Line." (Source: Bloomberg)

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President Barack Obama holds a kitchen table meeting with homeowners Jose Bonilla, center, and Lissette Bonilla in Las Vegas on October 24, 2011. Photographer: Jewel Samad/AFP/Getty Images

President Barack Obama said he will take executive action to move ahead with his economic proposals while keeping up pressure on Congress to act on his broader package of tax cuts and spending.

In Nevada, the state with the highest foreclosure rate, Obama yesterday promoted an initiative by the Federal Housing Finance Agency to let qualified homeowners refinance mortgages regardless of how much their houses have dropped in value.

With the president on a three-day trip to Nevada, California and Colorado, the administration also plans to outline measures to help veterans find jobs and help students manage education loans.

“We can’t wait for an increasingly dysfunctional Congress to do its job,” Obama said in Las Vegas outside the home of Jose and Lissette Bonilla after talking with them about housing values. “I’ve told my administration to keep looking every single day for actions we can take without Congress.”

He criticized Republican presidential candidates for failing to recommend anything to improve the economy while favoring cutting back on environmental regulations and keeping tax cuts for the wealthiest Americans.

Campaign Mode

The president was in full campaign mode yesterday, holding babies and small children after talking to a family in a Las Vegas subdivision. He made an unannounced stop to shake the hands of unsuspecting customers at Roscoe’s House of Chicken and Waffles in Los Angeles -- and ordered chicken wings -- before attending two fundraisers.

Obama is heading into the 2012 election year with the nation’s unemployment rate stalled at 9.1 percent in September and the White House Office of Management and Budget forecasting it will average 9 percent. The sagging housing market is a drag on growth, which the administration projects will be 2.6 percent next year.

“Probably the single greatest cause of the financial crisis and this brutal recession has been the housing bubble that burst four years ago,” Obama said. “And as long as this goes on, our recovery can’t take off as quickly as it would after a normal recession.”

To help revive the housing market, the FHFA will enhance the Home Affordable Refinance Program, or HARP, by eliminating some fees, reducing others and waiving some risk for lenders. The agency is lifting the previous limit on aid to homeowners on mortgages no greater than 125 percent of the value of the property.

On-Time Payments

To qualify, borrowers must be making on-time payments on loans owned or guaranteed by Fannie Mae or Freddie Mac, the mortgage-finance firms placed under U.S. conservatorship in 2008.

About 11 million borrowers owe more on their mortgages than their homes are worth. HARP was started in 2009 with a goal of reaching 5 million borrowers. As of August, fewer than 895,000 borrowers have been helped. That number could double by the end of 2013 under the expanded program, according to an FHFA projection.

Mortgage lenders welcome the modification to the program, said David H. Stevens, president and chief executive officer of the Mortgage Bankers Association in Washington. “These changes alone should encourage lenders to more actively participate.”

Referendum on Obama

Republicans are seeking to make the presidential election a referendum on Obama’s handling of the economy. He is countering by accusing opponents in Congress of blocking measures that would help spur hiring and economic growth.

“Last week, for the second time this month, Republicans in the Senate blocked a jobs bill from moving forward,” Obama said in Las Vegas. “It was paid for, and it was supported by an overwhelming majority of the American people. But they still said no.”

Senate Minority Leader Mitch McConnell has said the president got most of what he wanted when Democrats controlled the House and Senate during the first two years of his administration and it didn’t work.

“Their policies are in place,” the Kentucky Republican said on CNN’s “State of the Union” program on Oct. 23. “And they are demonstrably not working.”

Opposing Jobs Plan

Alluding to McConnell yesterday, Obama said Republicans may be opposing his jobs plan “because I’m the one that’s sponsoring it.”

Obama won the three states he is visiting and all have a higher unemployment rate now than they did when he took office. While California has been reliably Democratic in the last five presidential elections, Colorado and Nevada are swing states that went Republican in 2000 and 2004. Nevada has the highest home foreclosure and unemployment rates, 13.4 percent, in the country.

“He’s going to those states where Democrats have been valued in the recent election; he’s hoping the appeal of 2008 can be rekindled,” said Julian Zelizer, a professor of history and public affairs at Princeton University in New Jersey. “It’s more hostile territory at this point. If he felt confident, he wouldn’t have to go back.”

Obama also is seeking to raise at least $5 million with six fundraisers during the trip. He also will make an appearance today on NBC’s “The Tonight Show with Jay Leno.”

Las Vegas Fundraiser

His first campaign stop yesterday was the Bellagio Hotel for an event where ticket prices started at $1,000. In addition to the Las Vegas fundraiser, Obama attended two more events last night in Los Angeles.

One was at the Hancock Park home of film producer James Lassiter where tickets went for $35,800, according to a Democratic Party official.

Obama told approximately 40 guests, including Earvin “Magic” Johnson, the former Los Angeles Lakers star turned entrepreneur, actor Will Smith and his wife actress Jada Pinkett Smith, and singer and actress Hillary Duff, that he’s gotten “about 60 percent” of what he’s wanted accomplished. “That’s not bad for three years because I need another five.”

Obama then went to the home of actress Melanie Griffith for another fundraiser with about 120 people. Tickets for the event started at $5,000, the party official said.

Once there, Obama talked about the Bonillas, who came to the U.S. as undocumented workers, got legal status through an amnesty program and raised three children in a one-bedroom apartment before buying a house. Efforts to overhaul immigration policy by granting residency to certain younger illegal immigrants stalled a year ago.

‘Have to Fight’

“We are going to have to fight to make sure that immigration reform is a reality,” Obama told an audience that included Los Angeles Mayor Antonio Villaraigosa and Labor Secretary Hilda Solis. “In order to get it done, we’ve got to have the same determination, the same focus, the same hard- headedness, the same passion that that family I saw in Las Vegas today has.”

Since taking office, Obama has visited California 10 times and almost every stop has included a fundraiser. On Sept. 25-26, he went to fundraisers at the home of Facebook Inc. Chief Operating Officer Sheryl Sandberg, Symantec Corp. (SYMC) Chairman John W. Thompson and two star-studded fundraisers in West Hollywood.

The campaign also has fundraisers scheduled in San Francisco and Denver.

To contact the reporter on this story: Kate Andersen Brower in Los Angeles at kandersen7@bloomberg.net

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

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Most Asia Stocks, U.S. Futures Fall; Metals Gain

By Shiyin Chen and Yoshiaki Nohara - Oct 25, 2011 1:07 PM GMT+0700

Asian stocks and U.S. equity-index futures slid and the euro snapped a five-day advance against the dollar before European leaders hold a summit tomorrow to discuss ways to contain the region’s debt crisis. Industrial metals jumped, leading a rally in commodities.

The MSCI Asia Pacific Index decreased 0.2 percent at 3:03 p.m. in Tokyo. Standard & Poor’s 500 Index futures retreated 0.3 percent and Euro Stoxx 50 Index contracts sank 0.7 percent. The euro traded 0.2 percent lower at $1.3895, while South Korea’s won strengthened to a five-week high. Copper gained 1 percent, extending the biggest two-day rally since 2009. Rice climbed to the highest level in more than a month. The cost of insuring Asian debt from default decreased.

European leaders, who will hold a second summit in four days tomorrow, are seeking an agreement on bolstering the region’s rescue fund, recapitalizing banks and providing debt relief to Greece to avoid contagion spreading to Italy and Spain. Boosting the effectiveness of European Financial Stability Facility will require further talks with investors as German lawmakers prepare to vote on its new powers, a European Union document showed.

“Clearly, the dominant factor is what’s happening in Europe,” said Angus Gluskie, who manages more than $350 million at White Funds Management in Sydney. There may be some “superficial optimism that some sort of deal might be reached. Underneath the surface, though, I think investors still have a lot of questions in the back of their minds and they are alert to risks.”

Stocks Slide

About three shares declined for every two that gained in MSCI’s Asia Pacific Index, which earlier rose as much as 0.3 percent and declined as much as 0.2 percent. Japan’s Nikkei 225 Stock Average lost 0.4 percent, Australia’s S&P/ASX 200 Index dropped 0.8 percent and Hong Kong’s Hang Seng Index climbed 0.5 percent.

S&P 500 futures signal the gauge may halt a three-day rally. Gains yesterday were helped by higher-than-estimated earnings at Caterpillar Inc. After the close of U.S. trading, Texas Instruments Inc. (TXN), the largest maker of analog semiconductors, forecast lower fourth-quarter sales than some analysts had estimated.

The euro fell 0.3 percent to 105.72 yen, also halting a five-day gain. The shared currency also weakened before reports that economists say will show deteriorating consumer confidence in Germany and France.

Europe Summit

German budget lawmakers are due to convene in Berlin today to begin scrutiny of two leveraging models for Europe’s bailout fund for indebted nations. The first would raise the European Financial Stability Facility’s capacity by insuring a fraction of countries’ funding requirements, a European Union document showed. The second combines capital from European and non- European public and private investors, according to the draft.

Tomorrow’s summit in Brussels follows an Oct. 23 meeting, where European leaders excluded a forced restructuring of Greece’s debt, keeping with the policy of encouraging bondholders to accept “voluntary” losses to help restore the country’s finances.

New Zealand’s dollar weakened 0.5 percent to 80.36 U.S. cents after Statistics New Zealand said consumer prices increased 0.4 percent in the third quarter from the previous three months, when they rose 1 percent. South Korea’s won climbed 0.5 percent to 1,129.16 per dollar.

The cost of insuring Asia-Pacific corporate and sovereign bonds against non-payment decreased, with the Markit iTraxx Australia index dropping five basis points to 177 basis points, Credit Agricole CIB prices show. That will be the lowest close since Sept. 16, according to data provider CMA.

Copper, Rice

Three-month copper climbed 1 percent to $7,714.25 a metric ton, following a two-day, 13 percent jump. Zinc gained 1.6 percent and aluminum climbed 0.6 percent, also extending two days of advances. An index of six primary metals traded in London surged 5.9 percent yesterday, extending the previous trading day’s 4.7 percent rally. The two-day gain was the steepest since October 2008.

Rice futures climbed as much as 2 percent to $17.56 per 100 pounds in Chicago, the highest level in more than a month, as flood damage to crops in Southeast Asia boosted prospects for U.S. exports. Oil for December delivery increased 0.3 percent to $91.55 a barrel on the New York Mercantile Exchange, near the highest close in almost 12 weeks.

To contact the reporters on this story: Shiyin Chen in Singapore at schen37@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net;

To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net

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Asian Stocks Swing Between Gains, Losses Ahead of European Crisis Summit

By Yoshiaki Nohara and Shani Raja - Oct 25, 2011 12:25 PM GMT+0700
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The Caterpillar Inc. logo is seen on a 321C hydraulic excavator during road work in Topeka, Indiana. Photographer: Matthew Staver/Bloomberg

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Oct. 25 (Bloomberg) -- Jeremy Siegel, a finance professor at the University of Pennsylvania’s Wharton School in Philadelphia, talks about Europe's sovereign debt crisis. Siegel speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

Asian stocks swung between gains and losses as investors await the results of a European summit tomorrow where leaders are expected to hammer out details on enhancing the region’s bailout fund.

Esprit Holdings Ltd. (330), a clothier that gets 79 percent of its revenue in Europe, lost 2.8 percent in Hong Kong. NGK Insulators Ltd. plunged 17 percent after a report the maker of industrial ceramics asked customers not to use some of its batteries following a fire. Komatsu Ltd. (6301), the world’s second- biggest construction machinery maker, rose 3.4 percent as rival Caterpillar Inc. (CAT)’s posted earnings that beat estimates. Cnooc Ltd. (883), China’s largest offshore energy explorer, rose 4.7 percent in Hong Kong after crude prices gained.

The MSCI Asia Pacific Index was little changed at 119.22 as of 2:14 p.m. in Tokyo after falling as much as 0.2 percent and rising as much as 0.3 percent. About the same number of stocks rose as fell on the index, with six of the 10 groups advancing. German Chancellor Angela Merkel and fellow European leaders will meet in Brussels tomorrow for a second summit in four days to find ways to enhance the firepower of a regional rescue fund.

“Clearly, the dominant factor is what’s happening in Europe,” said Angus Gluskie, who manages more than $350 million at White Funds Management in Sydney. “At this stage, I think there is some superficial optimism that some sort of deal might be reached. Underneath the surface, though, I think investors still have a lot of questions in the back of their minds and they are alert to risks. Most investors want to get their minds around details tomorrow.”

Negotiations Continue

European leaders are still negotiating with banks over the size of losses they take on Greek bonds while deliberating over whether the region’s rescue fund will guarantee losses for banks that lend to debt-stricken countries in the region.

Futures on the Standard & Poor’s 500 Index fell 0.3 percent today after the index rose 1.3 percent yesterday in New York. Caterpillar, the world’s largest construction and mining- equipment maker, rallied 5 percent after saying third-quarter profit jumped 44 percent to $1.14 billion, beating analysts’ estimates for $1.05 billion.

“One of the most positive signs of the rally is the fact that it was not solely built on Europe optimism,” said Stan Shamu, a strategist at IG Markets in Melbourne. “The fact that U.S. companies are continuing to report strong earnings and are flush with cash is a very bullish sign going forward. Investors are increasingly beginning to believe that European leaders will succeed in preventing a spread of the region’s debt crisis.”

Nikkei Drops

Japan’s Nikkei 225 Stock Average fell 0.7 percent today, while South Korea’s Kospi Index lost 0.3 percent. Australia’s S&P/ASX 200 slipped 0.6 percent. Hong Kong’s Hang Seng Index rose 0.5 percent.

Asian exporters to Europe fell. Esprit Holdings lost 2.8 percent to HK$10.46. Canon Inc. (7751), second only to Nippon Sheet Glass Co. on the benchmark Nikkei 225 Stock Average in percentage of revenue generated in Europe, slid 1.4 percent to 3,505 yen. Mazda Motor Corp., the Japanese carmaker that gets 18 percent of sales from Europe, declined 2.5 percent to 158 yen.

NGK Insulators plunged in Tokyo trading after the Nikkei newspaper reported the company asked customers not to use some of its batteries following a fire at a Mitsubishi Materials plant. The stock slid 17 percent to 926 yen after slumping as much as 27 percent, the biggest drop since at least 1974, according to Bloomberg data.

The MSCI Asia Pacific Index declined 13 percent this year through yesterday, compared with a 0.3 percent loss by the S&P 500 and a 12 percent drop by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 12.1 times estimated earnings on average, compared with 12.6 times for the S&P 500 and 10.4 times for the Stoxx 600.

Caterpillar Effect

Makers of building equipment rose today after Caterpillar topped earnings estimates. Komatsu rose 3.4 percent to 1,839 yen, while Hitachi Construction Machinery Co. gained 2.5 percent 1,430 yen. Kubota Corp. (6326) increased 1.8 percent to 636 yen.

Energy firms advanced after crude oil prices increased. Cnooc rose 4.7 percent to HK$14.32 in Hong Kong. Inpex Corp., Japan’s biggest energy explorer, climbed 2.3 percent to 530,000 yen in Tokyo.

Crude oil for December delivery rose $3.87 to $91.27 a barrel yesterday on the New York Mercantile Exchange, the highest settlement price since Aug. 3.

Olympus Corp. (7733) surged 7.9 percent to 1,186 yen in Tokyo, rebounding from an eight-day, 53 percent rout, after brokers were told by Japan Securities Finance Co., a provider of stock- lending services, that limits may be imposed on the number of shares available for trading through margin accounts. The maker of cameras and endoscopes is under fire from shareholders amid investigations into $687 million in payments to advisers on a 2008 acquisition.

The request could discourage investors using borrowed shares to sell Olympus through margin transactions, reducing downward pressure on the share price, according to Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co. Olympus lost more than $4.5 billion in market value since president Michael Woodford was ousted on Oct. 14 for challenging the payments.

To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.

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TI’s 4Q Forecast Misses Some Estimates

By Ian King - Oct 25, 2011 5:06 AM GMT+0700

Texas Instruments Inc. (TXN), the largest maker of analog semiconductors, forecast lower fourth-quarter sales than some analysts had estimated, indicating that demand for electronic components remains sluggish.

Revenue will be $3.26 billion to $3.54 billion in the period, the Dallas-based company said today in a statement. Doug Freedman, an analyst at RBC Capital Markets, had estimated $3.57 billion for the period. This is the first quarter that Texas Instruments is including its National Semiconductor Corp. acquisition in the forecasts. That transaction closed Sept. 23.

Texas Instruments gets most of its revenue from analog chips -- semiconductors that are key components in everything from missiles to washing machines. That makes its earnings an indicator of demand across the economy. Revenue improved throughout the third quarter and the rate at which orders declined slowed from July to September, indicating the slump may be approaching its lowest point, said Chief Financial Officer Kevin March in an interview.

“We think that a bottoming process has begun,” he said. “It’s hard to say that we can declare victory and we’ve achieved a bottom yet.”

Texas Instruments’ stock declined 30 cents to $31.39 in late trading. It had climbed 4 percent today at the close in New York, leaving the shares down 2.5 percent for the year.

‘Tough Quarter’

“I’d need to see further evidence before making a call on whether we’ve reached the bottom,” said Bill Kreher, a St. Louis-based analyst at Edward Jones. He recommends buying the stock and said he doesn’t own Texas Instruments shares. “I think Texas Instruments executed well throughout a tough quarter.”

Profit in the fourth quarter, including costs related to the acquisition of National Semiconductor, will be 28 cents to 36 cents a share, the company said.

“Economic uncertainty continues to weigh on demand in almost every major market segment in which we operate,” Chief Executive Officer Rich Templeton said in the statement.

Third-quarter profit fell to $601 million, or 51 cents a share, from $859 million, or 71 cents, a year earlier. Revenue declined 7.3 percent to $3.47 billion.

On Sept. 8, Texas Instruments said profit in the third quarter would be 56 cents to 60 cents a share on sales of $3.23 billion to $3.37 billion, citing a slump across its product lines.

Largest Customers

Three of Texas Instruments’ largest customers are Avnet Inc., Arrow Electronics Inc. and WPG Holdings Ltd. -- all distributors of electronic components -- which account for a combined 21 percent of the company’s sales, according to Bloomberg data.

Texas Instruments ranked second behind Santa Clara, California-based Intel Corp. among U.S. chipmakers in total sales last year. The company has pared back its mobile-phone radio-chip business to focus on analog semiconductors, which can convert real-world input such as sound and touch into electronic signals. Analog chips also regulate power within devices.

To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net

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

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Oracle Agrees to Buy RightNow for $1.5 Billion to Expand Cloud Computing

By Sarah Frier - Oct 25, 2011 3:25 AM GMT+0700

Oracle Corp. (ORCL), the world’s second- largest software maker, agreed to buy RightNow Technologies Inc. (RNOW) for $1.5 billion, gaining customer-service expertise to bolster a new Internet-based product.

RightNow investors will get $43 a share, Oracle said today in a statement. That’s 20 percent more than Bozeman, Montana- based RightNow’s closing price on Oct. 21.

The acquisition will add software that helps companies serve customers using call centers, Internet and social networks. Oracle is making its biggest purchase since Sun Microsystems Inc. last year after introducing the Oracle Public Cloud, which delivers software online via cloud computing, to spur demand for its programs.

“Oracle is getting serious about its own cloud,” said Richard Williams, an analyst at Cross Research in Livingston, New Jersey, who recommends buying the stock. “This is the first infrastructure buy, and it means they’re putting the plumbing for the cloud together.”

Oracle gained 2.3 percent to $32.87 at the close today. RightNow added 19 percent to $42.94. The stock had advanced 52 percent this year before today.

The acquisition values RightNow at 68 times earnings before interest, taxes, depreciation and amortization, the highest multiple of similar deals in the past five years, according to Bloomberg data. The median ratio of six enterprise software and service deals of more than $1 billion was 17 since 2006 in the U.S., according to the data.

High Multiples

Companies that offer software as a service, or SaaS, are sought after, Williams sad.

“Oracle is paying a premium to lock them up,” the analyst said. “It’s not unexpected that this would be an expensive acquisition because SaaS companies are trading at very high multiples.”

RightNow Chief Executive Officer and founder Greg Gianforte’s 20 percent stake is worth about $290 million in the deal. He last sold 100,000 shares, according to an Oct. 5 filing.

After gobbling up more than 70 companies in a $40 billion buying spree, Oracle said this month it is focusing on smaller deals and building on its own products to find growth. Oracle embarked on its run of acquisitions in 2005 when it bought the human-resources software maker PeopleSoft Inc.

RightNow’s acquisition is Oracle’s biggest since the purchase of Sun Microsystems, completed in January 2010, according to Bloomberg data. Oracle has relied on takeovers to boost sales to $35.6 billion in the fiscal year ended in May.

‘Pricey’ Cloud

“RightNow’s leading customer service cloud is a very important addition to Oracle’s Public Cloud,” Redwood City, California-based Oracle said in the statement.

Oracle, which has made nine acquisitions over the past 12 months, is paying seven times RightNow’s revenue, according to Bloomberg data.

“A lot of the acquisitions in the software-as-a-service space tend to be pricey because everybody sees that the market is moving towards the cloud, and everyone wants to make sure they have a well-placed strategy,” said Kirk Materne, an analyst at Evercore Partners Inc. (EVR) in New York, who has an “overweight” rating on Oracle. “A lot of these cloud-based deals tend to be in anywhere from five to 10 times revenue.”

To contact the reporter on this story: Sarah Frier in New York at sfrier1@bloomberg.net

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

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River Swells to Record as Floods Reach Bangkok

By Daniel Ten Kate and Supunnabul Suwannakij - Oct 25, 2011 8:26 AM GMT+0700

Thai authorities warned people living on the banks of the Chao Phraya river to prepare to evacuate as water levels reached a record and floodwaters began spilling into the nation’s capital.

About 4 billion cubic meters of water is approaching Bangkok, boosting levels in the Chao Phraya to 2.30 meters (7.5 feet) above sea level, exceeding the 2.27-meter peak reached in 1995, Bangkok Governor Sukhumbhand Paribatra wrote on his official Facebook page late yesterday. The city has an average elevation of less than 2 meters above sea level.

Efforts to bolster levees to protect Bangkok, which sits on a river basin the size of Florida that drains into the Gulf of Thailand, have slowed the dispersal of floodwaters that swamped farms and manufacturing hubs north of the city. The deluge has spurred tension between residents living outside flood barriers who want the water drained quickly to the gulf, and Bangkok inhabitants aiming to protect the capital.

“A massive amount of water is gradually flowing into Bangkok both through waterways and on roads,” Sukhumbhand said. “We have to warn people living along the banks of the Chao Phraya river both inside and outside the flood barrier line to consider moving to evacuation centers. Those who live inside the barrier still have time to prepare.”

Peninsula, Oriental

Water surged onto a major street on the city’s northern outskirts yesterday, inundating cars and a hospital, according to images broadcast on military-owned Channel 5 television station. The Chao Phraya, which empties into the Gulf of Thailand about 30 kilometers south of the capital, is lined with hotels including the Oriental, the Peninsula and the Shangri-La, as well as the Bank of Thailand.

Floods may “may pose a danger” to people in nine districts including Lak Si, Don Mueang, Sai Mai, Nong Chok, Minburi, Khan Na Yao, Lat Krabang, Bang Phlat and Thawi Watthana, government spokeswoman Anuttama Amornvivat said.

“There is a huge amount of water coming into Bangkok,” Prime Minister Yingluck Shinawatra told reporters yesterday. “From the models, there will be low-level areas that will be flooded. There is some difficulty in diverting the water into the sea.”

Yingluck has vowed to protect the city’s airports, power plants and major transport routes from floodwaters sitting north of Bangkok that she said may take six weeks to drain through the city’s 1,682 canals.

At least 366 people have been killed because of seasonal monsoon rains and flooding since July 25, the Department of Disaster Prevention and Mitigation said on its website today.

Water Shortages

The disaster has severed road and rail links, destroyed crops and shut down some production of food and drinking water, disrupting the ability of supermarkets in the capital to restock shelves. Conflicting warnings about the severity of the crisis have sparked panic buying.

“There are shortages of eggs, bottled water, pork and milk formula,” Vachari Vimooktayon, director general of the government’s Internal Trade Department, said yesterday after meeting with retailers. “Flooding has hampered logistics and many distribution centers are flooded. We plan to let retailers import products from Malaysia and Singapore.”

The government may cut import taxes on some affected goods, Vachari said. Soft-drink makers will be asked to shift production to drinking water to alleviate shortages, Deputy Prime Minister Kittiratt Na-Ranong told reporters yesterday.

Yingluck yesterday urged state agencies and companies to close offices to help alleviate traffic congestion and told residents in affected areas that “if you have a choice to move to other provinces, you should do it.”

Flooding ‘Inevitable’

Flooding was “inevitable” in districts including Don Mueang, Lak Si, Bang Khen, Chatujak, Bang Sue and Sai Mai, the Bangkok governor said on Oct. 22. Chatujak is home to the city’s biggest weekend market, one of two places where the elevated train line intersects with the subway.

The Mass Rapid Transit Authority of Thailand, operator of Bangkok’s subway, closed 70 of 140 entrances, the government’s Public Relations Department said, citing deputy director Ronnachit Yaensaard. Services continued as normal, it said.

Three nights ago, “a few men with weapons” from areas north of the city where floodwaters are as high as 3 meters confronted Bangkok officials building a sandbag levee at a low- lying junction, spokesman Jate Sopitpongstorn said by phone yesterday. The men destroyed the barrier, he said, allowing the water to flow from Pathum Thani province into Bangkok.

Mixed Messages

Outside the city’s center, more than 100,000 people are living in about 1,700 government evacuation centers, which can handle as many as 800,000 people.

Nirut Hongprasith, head of the Royal Thai Navy’s Hydrographic Department, told reporters on Oct. 22 that “Bangkok will definitely be safe.”

Hours earlier, Yingluck said floodwaters throughout the capital may reach more than 1 meter and expressed concern about water levels in Saen Saeb canal, which runs close to shopping districts such as Central World and Sukhumvit Road.

The government will consider providing a “soft loan” of about 25 billion baht ($812 million) to help rebuild infrastructure at seven industrial estates that have been damaged by flooding, Deputy Prime Minister Kittiratt Na-Ranong told reporters yesterday. Army chief Prayuth Chan-Ocha over the weekend ordered soldiers to strengthen levies around two industrial estates in Eastern Bangkok that are home to factories operated by Honda Motor Co., Unilever and Cadbury Plc.

Apple, Toyota

Companies including Apple Inc. (AAPL) and Toyota Motor Corp. (7203) are facing the worst supply disruptions since the March earthquake that struck Japan. Thailand makes about a quarter of the world’s hard-disk drives and serves as a production hub for Japanese carmakers and electronics firms.

“The rising flood waters have hurt all Japanese auto manufacturers and many electronics firms, either directly at flooded plants or via affected parts suppliers,” Moody’s Investors Service said in a report yesterday, adding that it’s “credit negative.” The floods will cost Thailand 2 percent of its gross domestic product this year, it said.

Thailand’s central bank, which left the benchmark interest rate unchanged last week at 3.50 percent, signaled Oct. 20 it may consider cutting rates as the disaster threatens to slow growth. The benchmark SET Index fell 4.1 percent last week. The exchange was closed yesterday for a holiday.

The damage caused by the floods cost as much as 120 billion baht, Bank of Thailand Governor Prasarn Trairatvorakul said Oct. 14. Barclays Capital cut its forecast for Thai economic growth this year to 2.9 percent from 3.7 percent because of flood- related losses, it said in a report. Official data last week showed exports rose 19.1 percent in September from a year earlier, the least since June.

To contact the reporters on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net; Supunnabul Suwannakij in Bangkok at ssuwannakij@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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Banks Clash With Lawmakers on Greek Rescue

By Nicholas Comfort and Aaron Kirchfeld - Oct 25, 2011 5:01 AM GMT+0700

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Oct. 25 (Bloomberg) -- Jeremy Siegel, a finance professor at the University of Pennsylvania’s Wharton School in Philadelphia, talks about Europe's sovereign debt crisis. Siegel speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

Banks are pushing back against European leaders on the size of losses they are ready to accept on Greek bonds as officials struggle to rescue the debt-laden country while avoiding a default.

There are limits “to what could be considered as voluntary to the investor base and to broader market participants,” Charles Dallara, managing director of the Institute of International Finance, an industry group that’s participating in the talks on Greek debt, said in an e-mailed statement yesterday. “Any approach that is not based on cooperative discussions and involves unilateral actions would be tantamount to default.”

The discussions are part of an attempt to solve the two- year-old sovereign-debt crisis that has pushed Greece toward default and roiled global markets. European Union leaders, who hold a second summit in four days tomorrow, are seeking an agreement on bolstering the region’s rescue fund, recapitalizing banks and providing debt relief to Greece to avoid contagion spreading to Italy and Spain.

Financial companies, represented by the Washington-based IIF, proposed a loss of 40 percent on Greek debt, said a person briefed on the matter who declined to be identified because the talks are confidential. Luxembourg’s Jean-Claude Juncker, who leads the group of euro-area finance ministers, said yesterday that talks on private-sector involvement in a second aid package for Greece are focusing on losses of 50 percent to 60 percent.

‘Defence Strategy’

“The IIF’s strategy is to say the burden is being unevenly shared and there’s a risk of a chain reaction,” said Klaus Fleischer, a professor for banking and finance at the University of Applied Sciences in Munich. “It’s an understandable positioning and defence strategy by the banks.”

Policy makers are seeking a voluntary agreement with Greek bondholders on reducing the country’s debt to avoid the unpredictable consequences of an outright default.

The IIF, whose members include 450 of the world’s biggest financial firms, said a default would risk keeping Greece locked out of international capital markets for years, further damaging the Greek economy, driving up costs for European taxpayers and triggering contagion. The group is in constant contact with the Greek authorities and banks and is working to find “constructive” solutions, Dallara said.

Larger Writedowns

EU policy makers are calling for larger writedowns amid a deteriorating Greek economic and financial situation, as highlighted in a draft report last week by the European Commission, the European Central Bank and the International Monetary Fund, collectively known as the troika.

Greek two-year notes currently trade at about 40 percent of face value. Under the terms of a July 21 accord with the IIF, the banks would take losses of 21 percent on the net present value of their holdings of the nation’s debt. That plan includes up to 35 billion euros ($49 billion) in high-quality collateral for the investors.

One option being considered involves a swap with no collateral of any kind in a so-called hard restructuring, people familiar with the matter said on Oct. 21. Other plans involve an exchange with a 50 percent reduction in net present value, or upfront bond exchanges into either European Financial Stability Facility bonds or new 30-year Greek government debt, the people said. Upfront exchanges could involve a 50 percent discount off face value.

To help European lenders shoulder sovereign losses, banks may be required to raise about 100 billion euros in capital by mid-2012, according to two people briefed on the matter. The European Banking Authority tested lenders to see how much money they’ll need after writing down bonds from countries such as Greece and marking up stronger debt including that of Germany, they said.

To contact the reporter on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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Rajaratnam’s Comments ‘Inaccurate’: U.S.

By Patricia Hurtado - Oct 25, 2011 6:42 AM GMT+0700
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Raj Rajaratnam, co-founder of Galleon Group LLC, right, exits federal court with his attorney Terence Lynam in New York, on Oct. 13, 2011. Photographer: Peter Foley/Bloomberg

Raj Rajaratnam, the Galleon Group LLC hedge fund manager sentenced to 11 years in prison for masterminding an insider-trading scheme, made inaccurate statements about the federal investigation in an interview published in Newsweek magazine, U.S. officials said.

“A number of his assertions are inaccurate,” said Ellen Davis, a spokeswoman for Manhattan U.S. Attorney Preet Bharara, whose office along with the FBI prosecuted a nationwide investigation of insider trading at hedge funds, technology companies, banks and consulting firms. More than 50 people have pleaded guilty or been convicted at trials following a multiyear probe by FBI agents across the country.

Jim Margolin, a spokesman for the Federal Bureau of Investigation in New York, said in an interview that comments Rajaratnam attributed to FBI agents “were never uttered.”

Rajaratnam was interviewed by Suketu Mehta, who on his website describes himself as a fiction writer and an associate professor of journalism at New York University. Rajaratnam said prosecutors pushed him to plead guilty to one criminal charge and become an informant against former Goldman Sachs Group Inc. director Rajat Gupta, according to the article.

Rajaratnam understood that he would be sentenced to as little as five years in prison, the article said.

Prosecutors urged him to turn on Gupta as late as two weeks before he was sentenced Oct. 13 by U.S. District Judge Richard Holwell, Rajaratnam reportedly said.

Plea Bargain

“They wanted me to plea-bargain,” Rajaratnam was quoted as saying. “They want to get Rajat. I am not going to do what people did to me. Rajat has four daughters.”

Prosecutors called Gupta and Rengan Rajaratnam, Raj’s brother, unindicted co-conspirators. Neither has been charged.

Mehta didn’t respond to an e-mail seeking comment on the statements by the FBI and Bharara’s office.

FBI agent B.J. Kang, the lead investigator on the case, told Rajaratnam, “Take a good look at your son. You’re not going to see him for a long time,” and added, “Your wife doesn’t seem so upset. Because she’s going to spend all your money,” according to the article.

Agents later “thumped tables, jumped up and down, told him, ‘Just say you did it to one count!’” Mehta wrote.

In the interview, Rajaratnam said prosecutors attempted to “get inside his head,” and added, “I’m a fighter, an underdog.”

Margolin said that statements attributed to Kang and other agents were never spoken.

Kumar, Tips

Rajaratnam claimed that he trusted Kumar not to pass any tips that were illegal, saying, “I did not think a senior partner of McKinsey would violate the confidentiality of McKinsey. I assumed he was kosher, that he would not cross the line,” according to the article.

The U.S. Securities and Exchange Commission filed a civil administrative action March 1 alleging that Gupta passed inside information to Rajaratnam about Goldman Sachs and Procter & Gamble Co., where Gupta was on the board. The SEC dropped the case in August.

The U.S. obtained the guilty pleas and cooperation of four people who admitted being part of Rajaratnam’s insider-trading schemes. They included Anil Kumar, a former partner at McKinsey & Co.; Rajiv Goel, a former managing director at Intel Corp; Roomy Khan, a former trader; and Adam Smith, a former Galleon portfolio manager. Kumar, Goel and Smith testified against Rajaratnam.

Mehta wrote that the government had two kinds of cooperators in the case.

White Defendants

“The white defendants all pleaded without cooperating,” Mehta wrote, citing Rajaratnam. “They did not wear a wire.”

Rajaratnam was quoted as saying, “The South Asians all did the plea bargain with fingering,” and, “The Americans stood their ground. Every bloody Indian cooperated -- Goel, Khan, Kumar.”

Smith testified that he recorded telephone calls with Ian Horowitz, a former Galleon trader. Evidence showed that Khan made consensually recorded calls with Rajaratnam for the FBI after she began cooperating with the government.

Rajaratnam was quoted as saying that so many Indians were named in the indictment “because Roomy Khan was Indian.” He doesn’t believe there was a conspiracy to target South Asians, he reportedly told the magazine.

Brother’s View

In the article, Mehta quotes Rajaratnam’s brother Rengan, whose own fund, Sedna Capital Management LLC, was the subject of an SEC probe, as believing there was some effort by the government to target South Asians.

“For years these guys were sitting around in sports clubs and exchanging information,” Mehta quotes Rengan Rajaratnam as saying. “That wasn’t a crime. And now we immigrants do the same thing and it is?”

Rajaratnam said visits to Goel’s home in California weren’t made to obtain inside information, attributing visits to Goel’s wife’s cooking, according to the article.

“His wife makes really good chaat,” an Indian snack, Rajaratnam said.

Rajaratnam said that while no one in his family attended his trial, Bharara’s wife was frequently in attendance. A person with knowledge said that Bharara’s wife never attended the insider-trading trial.

Previous Accusations

Today wasn’t the first time U.S. officials called Rajaratnam untruthful. Assistant U.S. attorneys Jonathan Streeter, Reed Brodsky and Andrew Michaelson, who prosecuted the case, argued in court papers before sentencing that he obstructed justice by lying to the SEC when asked if he had committed insider trading.

Terence Lynam, a lawyer for Rajaratnam, didn’t reply to a voice-mail message seeking comment.

The fund manager attributed his decision to fight the charges to the advice of a Sri Lankan astrologist, according to the magazine article.

The astrologist said that “eventually I would prevail,” Rajaratnam was quoted as saying.

The case is U.S. v. Rajaratnam, 1:09-cr-01184, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Patricia Hurtado in New York at pathurtado@bloomberg.net.

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

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Munger: EU Leaders ’Behind the Curve’on Crisis

By Christopher Palmeri and Andrew Frye - Oct 25, 2011 1:34 AM GMT+0700

European leaders, who have directed about $350 billion to aid Greece, Ireland and Portugal, need to do more to resolve the continent’s debt crisis, Berkshire Hathaway Inc. (BRK/A) Vice Chairman Charles Munger said.

“They are way behind the curve,” Munger, 87, told Bloomberg Television’s Shivaune Field in an interview today in Los Angeles. “They have to stop shooting at this elephant with a pea shooter.”

Berkshire has cut its holdings of European sovereign debt and Chairman Warren Buffett said last month that his firm wasn’t prepared to invest in the continent’s banks. Munger, who advises Buffett on Berkshire’s investments, praised policy makers in the U.S. for the 2008 bank bailouts. European lenders must turn to investors as they face losses on bond holdings, with nations including Greece struggling to repay debts, Buffett said.

“They need capital in their banks, in many of their banks,” Buffett, who is also Berkshire’s chief executive officer, said in a Sept. 30 interview. “We would not be a good prospect.”

Buffett agreed in August to buy $5 billion of preferred stock in Bank of America Corp. (BAC) to help the U.S. lender protect against mortgage-related losses and prepare for higher capital requirements. The Charlotte, North Carolina-based bank has lost about half its market value this year as it takes provisions against faulty home loans.

Spain, Italy

European leaders have grappled for months with Greece’s mounting debt, seeking to prevent the crisis from infecting Spain and Italy and tipping the world economy into recession. A plan in March was billed as a “comprehensive” strategy. A July accord on a second bailout for Greece and more powers for a rescue fund was hailed at the time as the “final package, of course,” by Luxembourg Prime Minister Jean-Claude Juncker.

Europe’s leaders are scheduled to meet again on Oct. 26 to try to complete a plan to resolve the debt crisis, after meeting in Brussels over the weekend.

Aid of 256 billion euros ($357 billion) for Greece, Ireland and Portugal has failed to stabilize markets or prevent the turmoil from spreading to France, co-anchor with Germany of the European economy. French bank shares have tumbled on concern they are vulnerable to losses around Europe’s periphery.

Moynihan’s ‘Right Attitude’

Bank of America reported a $6.2 billion third-quarter profit after a net loss of $8.8 billion in the three months ended June 30. CEO Brian T. Moynihan, who took the top job last year, has sold assets and dismantled portions of the company that his predecessor, Kenneth Lewis, built into the biggest U.S. bank. In the third quarter, Bank of America fell to No. 2 behind JPMorgan Chase & Co. among the top U.S. lenders by assets.

“He has the right attitude, back to basics,” Munger said of Moynihan.

Munger attended an event in Los Angeles to mark the opening of a headquarters for Chinese carmaker BYD Co. Berkshire bought stock in Shenzhen-based BYD in 2008 and owned a stake of about 9.9 percent as of Dec. 31. BYD, which is also a battery maker, is a “huge technical leader,” Munger said.

“They’ve just gone from strength to strength,” Munger told reporters.

To contact the reporters on this story: Christopher Palmeri in Los Angeles at cpalmeri1@bloomberg.net; Andrew Frye in New York at afrye@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net

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Jobs Admired Facebook’s Zuckerberg for ‘Not Selling Out’

By Sarah Frier - Oct 25, 2011 4:14 AM GMT+0700

Steve Jobs, who mentored Silicon Valley technology leaders in the months before he died, said he admired Facebook Inc. co-founder Mark Zuckerberg for “not selling out.”

“We talk about social networks in the plural, but I don’t see anybody other than Facebook out there,” Jobs told biographer Walter Isaacson in excerpts of an interview released online by “60 Minutes,” the CBS television show. “Just Facebook, they’re dominating this.”

“I admire Mark Zuckerberg,” Jobs said of Facebook’s chief executive officer on the recording. “I only know him a little bit, but I admire him for not selling out, for wanting to make a company. I admire that, a lot.”

Jobs, who co-founded Apple Inc. (AAPL) and died Oct. 5, told Isaacson his opinions of competitors such as Google Inc. (GOOG) and Microsoft Corp. (MSFT) and of his struggles with cancer. The biography, which goes on sale today, was based on more than 40 interviews with Jobs and was previewed on last night’s “60 Minutes.”

The book is on track to be the best-selling adult book of the year, said Mary Ellen Keating, a spokeswoman for retailer Barnes & Noble Inc. (BKS), in an e-mail. The book is No. 1 on Amazon.com Inc. (AMZN)’s best-seller list and has been in the top 100 for 45 days due to pre-orders.

‘Don’t Get It’

Google, which competes with Apple in making operating systems for smartphones, had a lot in common with Microsoft, Jobs said. When Larry Page took over leadership of Google, Jobs told him to simplify the company, according to the book, purchased by Bloomberg.

“Microsoft never had the humanities and the liberal arts in the DNA; it was pure technology company, and they just didn’t get it,” Jobs said. “Google’s the same way. They just don’t get it.”

Jobs spoke at length about Bill Gates, the Microsoft co- founder who was a competitor for decades and, at times, a partner. He admired Gates for his success and influence. Still, the two men had fundamentally different views of the industry they helped create, Jobs said.

“Bill ended up the wealthiest guy around, and if that was his goal then he achieved it,” Jobs said. “But it’s never been my goal, and I even wonder in the end if it was really his goal. I don’t know.”

Jobs had an unusual relationship with money, he said in interviews with Isaacson. He went from money not mattering because he was young and poor to money not mattering because he had more than he would ever need, shortly after the initial public offering of Apple.

‘Bizarro People’

Jobs kept a home on a normal street in Palo Alto, California, with a gate to the backyard often unlocked. He said he was determined to avoid the negative effects of money after seeing Apple employees get rich, buy Rolls Royces and get their wives plastic surgery, Isaacson said.

“I saw these people who were really nice, simple people turn into these bizarro people,” Jobs said in an audio recording. “And I made a promise to myself. I said: ‘I’m not going to let this money ruin my life.’”

Jobs, who died at age 56, told Isaacson he sometimes believed in God and sometimes felt life was more like an “on- off switch.”

“Click, and you’re gone,” Jobs said, according to Isaacson. “And that’s why I don’t like putting on-off switches on Apple devices.”

To contact the reporter on this story: Sarah Frier in New York at sfrier1@bloomberg.net

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

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EU Signals Fund Leverage Needs More Talks

By Brian Parkin and Rainer Buergin - Oct 25, 2011 5:00 AM GMT+0700

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Oct. 25 (Bloomberg) -- Jeremy Siegel, a finance professor at the University of Pennsylvania’s Wharton School in Philadelphia, talks about Europe's sovereign debt crisis. Siegel speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

Boosting the effectiveness of Europe’s bailout fund will require further talks with investors as German lawmakers prepare to vote on its new powers tomorrow, a European Union document showed.

While the European Financial Stability Facility can be bolstered under two models that may be combined and implemented “quickly,” the extent to which the fund is leveraged can only be ascertained after discussions with investors and rating companies, the document provided to German lawmakers said.

The draft underscores the gaps remaining in European Union efforts to address the debt crisis as Chancellor Angela Merkel and fellow leaders prepare to return to Brussels tomorrow for a second summit in four days. Leaders are still jousting with banks over the size of losses they take on Greek bonds while deliberating over leveraging the fund after ruling out tapping the European Central Bank’s balance sheet.

“A lot of people will wait to see the detail” of how the EFSF capacity is increased, Kit Juckes, head of foreign-exchange research at Societe Generale SA in London, said in an interview on Bloomberg Television’s “Surveillance Midday” with Tom Keene. “It’s hard to see that the ECB isn’t going to have to print some of this.”

German budget lawmakers are due to convene in Berlin today to begin scrutiny of the two leveraging models. The first would raise the EFSF’s capacity by insuring a fraction of countries’ funding requirements, and the second combines capital from European and non-European public and private investors, the draft said. The two are not “mutually exclusive,” Steffen Seibert, Merkel’s spokesman, told reporters yesterday.

‘Investor Appetite’

“The capacity of the extended EFSF can be enlarged without extending the guarantees underpinning” it, the draft said. Even so, “the leverage which can be achieved can only be determined after dialog with investors and rating agencies around the new instrument, and in the light of prevailing investor appetite over time for the sovereign bonds of particular member states.”

Merkel’s Free Democratic coalition partner indicated support for the revamped fund that should allow it to pass in tomorrow’s German parliamentary vote.

“Two conditions of the deliberations are vital for us: the upper limit of Germany’s 211 billion euros in guarantees can’t be increased and the EFSF mustn’t get a bank license,” Economy Minister Philipp Roesler, who heads the FDP, told reporters yesterday. “These conditions have been retained.”

German Fulcrum

Two years after the sovereign debt crisis came to light in Greece, Europe’s response to the market turmoil once more hangs on German willingness to remain the biggest contributor to euro- area bailouts.

While “little in terms of substantive outcomes” has so far emerged from the deliberations, markets have “continued hope that Wednesday’s summit might eventually cut the Gordian knot of Europe’s debt crisis,” said Tobias Blattner and Chris Scicluna of Daiwa International in London.

The euro advanced and European stocks climbed to their highest level in 11 weeks yesterday. The benchmark Stoxx Europe 600 Index rose 1.3 percent to 242.03 at the close in London, climbing for a second day to its highest level since Aug. 4.

Merkel is pushing for investors to accept losses on Greek debt of as much as 60 percent and for bank recapitalizations of about 100 billion euros, Greens party co-leader Juergen Trittin told reporters after talks with the chancellor. He said the EFSF might be leveraged to “more than 1 trillion” euros.

Greek Losses Compromise

Financial companies, represented by the Institute of International Finance, proposed a loss of 40 percent on Greek debt, said a person with knowledge of the discussions, who declined to be identified because talks are confidential. The EU is calling on investors to forfeit as much as 60 percent, making a compromise at 50 percent possible, the person said.

“There are limits, however, to what could be considered as voluntary to the investor base and to broader market participants,” Charles Dallara, the IIF’s managing director, said in an e-mailed statement. “Any approach that is not based on cooperative discussions and involves unilateral actions would be tantamount to default.”

Greece’s deteriorating finances have narrowed Europe’s room for maneuver in battling the contagion, which threatens to pitch the country into default, rattle the banking system, infect Spain and Italy and tip the world economy into recession.

“Nobody has anything to fear about Europe’s third-largest economy,” Prime Minister Silvio Berlusconi said in an e-mailed statement, defending his government’s commitment to fiscal rigor after the EU urged Italy to pass “comprehensive” measures to fight the debt crisis. The government is preparing to push through “important decisions” on structural changes, he said.

Two Options

According to the document, Option 1 calls for the EFSF to lend a distressed state the money to buy EFSF bonds with detachable “partial protection certificates’’ that can be traded separately from the EFSF bonds themselves, which would be used to collateralize the certificates in the event of a default.

What would constitute a default still has to be decided, the paper says. If a state failed to meet its obligations, the owners of the certificates would be paid off with the EFSF bonds held in a separate trust, the document states.

Using the option would risk triggering so-called negative pledge clauses in the documents governing some of the bonds, according to the draft. A negative pledge forbids an issuer selling new debt senior to existing bonds. The option would also risk increasing the beneficiary country’s tally of debt as reckoned by Eurostat, the EU’s statistical office in Luxembourg.

The paper says Option 2 involves setting up a special purpose investment vehicle, or SPIV, to buy the bonds of the country in question in both primary and secondary markets. The purchases would be funded by the SPIV issuing senior bonds, which would be rated and targeted at traditional fixed income investors. A more junior portion aimed at higher risk investors could also be issued, would rank ahead of the EFSF investment, and share any gains with the EFSF, the draft says.

To contact the reporters on this story: Brian Parkin in Berlin at bparkin@bloomberg.net; Rainer Buergin in Berlin at rbuergin1@bloomberg.net

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

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U.S. Stocks Advance Amid Takeovers as Caterpillar Earnings Beat Estimates

By Rita Nazareth - Oct 25, 2011 4:18 AM GMT+0700

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Oct. 24 (Bloomberg) -- Kevin Rendino, senior fund manager at BlackRock Inc., discusses the banking industry, the outlook for corporate earnings and the prospects of Google Inc. providing financing for an acquisition of Yahoo! Inc. by other bidders. Rendino, speaking with Betty Liu and Dominic Chu on Bloomberg Television's "In the Loop," also talks about the European sovereign debt crisis, investment strategy and hedge funds. (Source: Bloomberg)

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Oct. 24 (Bloomberg) -- Bloomberg's Deborah Kostroun reports on the performance of the U.S. equity market today. U.S. stocks rallied, almost wiping out this year’s decline in the Standard & Poor’s 500 Index, amid takeover deals, higher-than-estimated earnings at Caterpillar Inc. and progress in talks to tame Europe’s debt crisis. Bloomberg's Pimm Fox also speaks. (Source: Bloomberg)

U.S. stocks rallied, almost wiping out this year’s decline in the Standard & Poor’s 500 Index, amid takeover deals, higher-than-estimated earnings at Caterpillar Inc. (CAT) and progress in talks to tame Europe’s debt crisis.

Gauges of commodity, financial and technology shares had the biggest gains in the S&P 500 among 10 groups, rising at least 1.9 percent. Caterpillar, the largest construction and mining-equipment maker, climbed 5 percent. RightNow Technologies Inc. (RNOW) surged 19 percent, while Healthspring Inc. (HS) soared 34 percent, on acquisitions. Alcoa Inc. (AA) added 3.4 percent as metals advanced on signs of growth in China and Japan.

The S&P 500 increased 1.3 percent to 1,254.19 as of 4 p.m. New York time, paring its 2011 retreat to 0.3 percent. The Dow Jones Industrial Average climbed 104.83 points, or 0.9 percent, to 11,913.62 today. The Nasdaq Composite Index gained 2.4 percent, erasing its year-to-date decline. The Russell 2000 Index of small companies advanced 3.3 percent.

“The world isn’t ending,” Keith Wirtz, who oversees $16.7 billion as chief investment officer at Fifth Third Asset Management in Cincinnati, said in a telephone interview. “If there’s any sentiment change after five months of market declines, you’re going to get a rebound in stock prices. The market is just hungry to get the European crisis behind us and focus on domestic news. We’re not in a recession.”

The S&P 500 has risen 11 percent so far in October, poised for its best monthly gain since 1991, after falling for five straight months. It rose from the threshold of a bear market early in October on steps by European leaders to support banks and higher-than-estimated earnings. The rebound brought the index above a price range where it had traded since August.

Turning Points

Tom DeMark, the creator of indicators to show turning points in markets, said last week that the S&P 500 would climb to 1,254 before reversing and falling more than 5 percent. The index rose as high as 1,256.55 today. His prediction last month that a decline in the index that started Sept. 16 would end at 1,076 proved prescient when the gauge bottomed at 1,074.77. DeMark spoke in an interview with Bloomberg on Oct. 18.

“There’s not that much more upside in the market,” DeMark said in an interview today. “The market top is going to be when we’ve had four or five days of successively higher closes on the S&P 500 from today’s close,” he said. “If that happens then we go down very hard.”

Global stocks rallied today as European leaders in debt- crisis talks this weekend outlined plans to aid banks and ruled out tapping the European Central Bank’s balance sheet to boost the region’s rescue fund.

Complete Blueprint

Europe’s 13th crisis-management summit in 21 months also explored how to strengthen the International Monetary Fund’s role. The complete blueprint won’t come together until a summit in two days.

“Let’s hope this is decision time in Europe,” Richard Sichel, who oversees $1.6 billion as chief investment officer at Philadelphia Trust Co., said in a telephone interview. “We need to put this crisis behind us and get back to looking at U.S. corporate earnings.”

The Morgan Stanley Cyclical Index of companies most-tied to economic growth rallied 2.6 percent. The Dow Jones Transportation Average gained 1.8 percent. The KBW Bank Index added 2.9 percent. A gauge of homebuilders in S&P indexes rose 3.2 percent as the Federal Housing Finance Agency said it will eliminate fees and relieve banks of certain risks as part of a plan to help homeowners refinance their mortgages.

Earnings Season

This week, 191 companies in the S&P 500 are scheduled to report quarterly results. Profit for all companies in the index climbed 16 percent during the third quarter, and will increase 18 percent to a record $99.34 a share for all of 2011, according to analyst estimates compiled by Bloomberg. About three quarters of the S&P 500 companies that reported results since Oct. 11 beat analysts’ projections, the data showed.

Caterpillar rallied 5 percent, the most in the Dow, to $91.77. The company said full-year profit will be $6.75 a share and sales will be at the top end of a previously forecast range of $56 billion to $58 billion.

United Parcel Service Inc. (UPS), the largest provider of package deliveries and a proxy for the economy, and Amazon.com Inc. (AMZN), the world’s largest online retailer, are among companies scheduled to report results this week.

“We need to take the Armageddon scenario off the table,” Kevin Rendino, a money manager at New York-based BlackRock Inc., which oversees $3.3 trillion, said in an interview on Bloomberg Television’s “In the Loop” with Betty Liu. “Companies have done a really good job at managing expectations and then coming in OK because it is not as bad as we think it is.”

Takeover Deals

Some takeover deals helped lift equities today. RightNow Technologies surged 19 percent to $42.94. Oracle Corp. (ORCL) agreed to buy the company for $1.5 billion, gaining customer-service expertise to bolster a new Internet-based product. Healthspring jumped 34 percent to $53.71. Cigna Corp. (CI) agreed to buy the health maintenance organization for $3.8 billion in cash to expand the U.S. insurer’s Medicare business.

A gauge of raw material producers in the S&P 500 added 2.3 percent, the biggest gain within 10 industries, as the S&P GSCI Index of commodities rose 2.4 percent. Alcoa, the largest U.S. aluminum producer, gained 3.4 percent to $10.58.

China’s manufacturing may expand in October for the first time in four months, snapping the longest contraction since 2009, after a preliminary index of purchasing managers showed a rebound in new orders and output. The Chinese report, along with Japanese data today showing an increase in exports exceeding economists’ forecasts, signaled that Asia’s largest two economies are withstanding Europe’s sovereign debt crisis.

Economic Data

The U.S. economy probably grew in the third quarter at the fastest pace this year, economists said before a report this week. Nonetheless, Federal Reserve officials Janet Yellen and Daniel Tarullo last week said that more monetary stimulus may be needed. Fed Bank of New York President William C. Dudley today said the central bank has the option of starting a third round of asset purchases to stimulate growth.

“I’d argue that it’s not where we begin this week, but where we end this week,” Mike Ryan, the New York-based chief investment strategist at UBS Wealth Management Americas, said in a telephone interview. His firm oversees $774 billion. “We have a lot of earnings coming out, fairly important economic releases and we’ll see on Wednesday what if anything the EU is able to deliver. I’m still on the cautious side.”

Indexes of telephone, consumer staples and utility companies in the S&P 500, which are least-tied to the economy, retreated.

Kimberly-Clark Corp. (KMB) lost 4.6 percent, the most in the S&P 500, to $69.65. The maker of Scott toilet paper and Huggies diapers cut the high end of its annual profit forecast amid lower demand in North America and some developed markets.

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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Netflix Customer Loss Worse Than Forecast

By Cliff Edwards - Oct 25, 2011 6:33 AM GMT+0700

Netflix Inc. (NFLX), the video-rental service, posted third-quarter customer losses that were worse than its September forecast and predicted more cancellations over a price hike. The shares plunged 27 percent.

Domestic suscribers fell to 23.8 million as of Sept. 30 from 24.6 million three months earlier, a bigger decline than the company projected, according to a website statement today. This quarter, U.S. customers will fall short of the 24.9 million analysts were predicting.

The outlook suggests Netflix has been unable to contain a subscriber revolt over a price increase and aborted plan to force subscribers into separate streaming and DVD services. The company now forecasts losses in 2012 because of costs to offer content in the U.K. and Ireland, and will delay further expansion until profitability is restored.

“Pausing is a good thing from an investor standpoint,” Chief Executive Officer Reed Hasting said in an interview. “We are going to pause and restore our global profitability.”

Netflix plunged 27 percent to $87 in extended trading after results were announced, putting its market-value loss at more than $10 billion since the stock made an all-time closing high of $298.73 on July 13, according to Bloomberg data.

Hastings, responding to questions, said he has no plans to step down and declined to comment on discussions with Netflix directors.

Subscriber Fallout

Investors are trying to gauge the extent of the fallout from the price increase and aborted plan to put DVD customers on a new service called Qwikster.

“To show even modest U.S. subscriber growth in the fourth quarter will require significant ramp-up in Netflix’s marketing spending,” said Paul T. Sweeney, director of research for Bloomberg Industries.

Hastings downplayed the likelihood of a big increase in marketing efforts.

“Our streaming marketing has been very effective in the past two years,” Hastings said. “We are going to work on improving the user interface, expanding to more platforms and delivering more content. There’s no grand gestures, there’s just a lot of steady and intense efforts.”

Domestic streaming subscriptions are forecast to decline this month, level off in November and rebound in December to end at 20 million to 21.5 million, Netflix said. DVD subscriptions will fall “sharply” to 10.3 million to 11.3 million customers.

Fourth-Quarter Outlook

Fourth-quarter profit will be $19 million to $37 million, or 36 cents to 70 cents a share, on revenue of as much as $875 million, the company said. Analysts were projecting profit of $1.10 a share on sales of $919 million, according to Bloomberg data. The company earned $47.1 million, or 87 cents a share, on sales of $595.9 million, a year earlier.

Domestic subscriber growth is particularly important because Netflix has used its wide lead over U.S. rivals to finance growth in its streaming business and expand overseas.

Earlier today, Netflix announced it will begin selling subscriptions in the U.K. and Ireland in 2012, putting it in competition with Amazon.com Inc. (AMZN)’s LoveFilm.

Netflix had projected a loss of 600,000 users on Sept. 15 to end the third quarter at 24 million. The actual results were in line with the average loss of 780,000 customers seen by 10 analysts in a Bloomberg survey.

Domestic churn, a measure of subscriber turnover, jumped to 6.3 percent in the third quarter from 4.2 percent in the prior three months. The company’s total subscriber count, including service in Canada and Latin America, fell to 25.3 million from 25.6 million

For the third quarter, Netflix reported net income rose 65 percent to $62.5 million, or $1.16 a share. Analysts projected 95 cents, the average of 25 estimates. Sales rose 49 percent to $821.8 million, beating expectations of $812.8 million.

To contact the reporter on this story: Cliff Edwards in San Francisco at cedwards28@bloomberg.net

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

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