My Kampf

Lloyds Banking Group sells control of finance unit

2010-07-05T05:16:00.000-07:00

Lloyds Banking Group has agreed to sell a controlling stake in its Bank of Scotland Integrated Finance business.

Lloyds said monday that Coller Capital, a private equity company, is paying 332 million pounds ($504 million) for a 70 percent stake in the unit. Lloyds will remain as a minority partner with a 30 percent stake.

Lloyds, which was bailed out by the British government during the financial crisis, says it has now disposed of 750 million pounds in assets.

Samsung H2 could play spoilsport to strong recovery

2010-07-05T05:11:00.000-07:00

By Miyoung Kim Reuters

Samsung Electronics' (005930.KS) second-half performance might be hit by weak European markets, and the launch of its new smartphones is key as the world's No. 1 memory chipmaker is set to report a record quarterly profit.

The mainstay memory chip unit of Samsung is benefitting from a robust recovery in the global consumer electronics market, but Apple Inc's (AAPL.O) fastest ever global rollout of its latest iPhone is posing as a strong headwind to Samsung's nascent smartphone business.

Last month, BlackBerry maker Research in Motion (RIM.TO) reported disappointing quarterly shipments, rekindling worries it is losing market share to Apple and other rivals. Nokia also issued a second profit warning as it struggles to compete against iPhone.

Samsung, the first major global technology firm to unveil second quarter estimates, could be hit by its exposure to Europe.

"The biggest risk factor for Samsung at the moment is whether European demand will normalize back in the third quarter," said Benjamin Ban, an analyst at Daishin Securities.

"A further slowdown in European demand for electronics goods such as TVs and handsets will eventually depress buoyant component market, which has been the main source of record profit this year."

Europe is estimated to make up 30-40 percent of Samsung's TV and handset sales.

South Korea's exports to Europe rose around 16 percent so far this year, far underperforming a 30 and 50 percent growth to the United States and China and underscoring fiscal crisis in Europe has weakened demand from the region, customs data showed.

"Chips and LCD flat screens are doing well and will lead Samsung to continue to report record-breaking results until July-September," said Song Myung-sub, an analyst at Hi Investment & Securities.

"But things have turned somewhat downbeat from the very upbeat picture we had earlier this year, as we now expect prices of chips and LCDs would start falling from the fourth quarter and demand could weaken, initially starting from unstable Europe."

Samsung, which unveils April-June earnings guidance on Wednesday, is likely to estimate quarterly operating profit at a record 4.8 trillion won ($4.0 billion) on 38.4 trillion won sales, according to Thomson Reuters I/B/E/S.

It would beat the previous record of 4.4 trillion won seen in the first quarter and almost double from the previous year's 2.67 trillion won, mainly helped by record chip sales, which would make up around half of Samsung's total operating profit.

Sales of LCD flat screen panels were also seen strong thanks to robust orders from TV producers betting healthy demand growth during this summer's World Cup soccer event.

But handset business, one of Samsung's weakest performing units, suffered another setback due to delays in smartphone launches and weak feature phone sales, analysts said.

EUROPEAN WOES

Analysts expect weak demand from Europe and almost a 10 percent tumble in the euro might lead Samsung to report telecoms margin and profit nearly halved in the second quarter from the preceding quarter.

Shares in Samsung, Asia's most valuable technology firm worth $92 billion fell 11 percent over the past three months from a record high of 875,000 won, lagging the market's 3 percent drop.

After peaking at a new record of 5.0 trillion won in Q3, earnings are set to shrink 20 percent to 4.0 trillion won in the fourth quarter, as gains in its mainstay memory chip prices falter amid rising supply growth.

CLSA expects Samsung's average selling prices of DRAM, mostly used in computers and servers, are likely to fall 10 percent in Q3 and 20 percent in Q4, although a strong pick-up in demand for NAND chips, used in smartphones, will make up for the slowdown.

To boost its smartphone sales, Samsung is launching Galaxy S, its answer to Apple's iPhone, globally with 100 carriers including the top five U.S. carriers.

While Apple has so far limited iPhone distributions to a single partner in each major market, Samsung is targeting multiple carriers to sell Google's (GOOG.O) Android-based phone, as the smartphone laggard aims to treble shipments this year.

Mortgage rates scream buy, but who is listening?

2010-07-05T05:03:00.000-07:00

By ALAN ZIBEL and ALEX VEIGA, Associated Press

An odd scene has been playing out lately in the offices of mortgage brokers and bankers around the country.

Mortgage rates have sunk to levels not seen in more than a half-century — a seductive 4.58 percent for an average 30-year fixed loan. Yet brokers and lenders report not a flood but a trickle of customers.

So what's going on?

Call it a tale of the haves and have-nots.

The haves are those who stand to save money from refinancing and have the financial standing to do so. Since mortgage rates have been low for so long, most of them already have refinanced in the past 18 months. Doing so again wouldn't be worth the cost for most.

The have-nots? Those are the millions of Americans pummeled by the housing collapse. They have little or no home equity or no money for down payments. Or they lack the credit or steady income to get or refinance a mortgage.

The result is that brokers like Ginny Ferguson are filling their days doing something other than handling a stampede of customers buying homes or refinancing.

Ferguson, CEO of Heritage Valley Mortgage in Pleasanton Calif., has managed to stay busy: She's archiving files, reviewing marketing plans and calling previous clients and agents to try to drum up business.

"Am I sitting around playing Solitaire on my computer? No," she says.

The 4.58 percent average for a 30-year fixed-rate loan last week was the lowest on records that mortgage company Freddie Mac has kept since 1971. The last time rates were lower was the 1950s, when most long-term home loans lasted just 20 or 25 years.

Under normal circumstances, 4.58 percent would be irresistible. A decade ago, if you'd told David Christensen, owner of Mountain Lake Mortgage in Lakeside, Mont., that rates would drop this low, he wouldn't have believed you. And if rates did somehow fall this far, he never thought he would lack for customers, as he does now.

Yet both have come true.

Christensen argues that mortgage lending standards have tightened so much since the financial crisis that many people with decent but not-stellar credit can't qualify. Lenders are demanding stronger credit scores and higher down payments or home equity.

"The pendulum has swung too far the other way," Christensen said. "It needs to come back to the middle."

Overall lending has ticked up in recent weeks, driven by borrowers looking to refinance. But it remains only about half the level of early 2009.

Stricter lending rules aren't the only factors behind the restrained demand. A tax credit for home buyers that helped lift home sales expired April 30. The result is that fewer people are taking out loans to buy homes.

And some borrowers who do have good credit and solid jobs are still being rejected for refinanced loans. It's because their homes are worth less than they owe on their mortgage. They're "under water," in real estate parlance. About a quarter of American households with a mortgage are in this predicament.

Blame the housing bust. It shrank home values and depleted home equity.

Most people in the lending industry acknowledge that lending standards were far too lax during the boom. Yet these days, some brokers recall the boom times with a tinge of nostalgia. Buyers and refinancers were everywhere. And yet rates were higher than they are now.

In the summer of 2005, lending activity was about 30 percent more than it is today. And homebuyers and refinancers had to pay about a full percentage point more for a mortgage than today's 4.58 percent.

"If the money was as easy as it was three or four years ago, I'd be the richest guy in town," says Joe Bell, a mortgage broker and real estate agent in St. Petersburg, Fla.

Now?

"The phone rings a lot, but a lot of people can't qualify."

Part of the problem is that people have been able to receive mortgage rates under 5 percent at several points over the past 15 months. For them, spending thousands on fees to take out a new loan wouldn't make sense.

For many of the homeowners who refinanced over the past two years, rates would need to drop to around 4 percent for refinancing to be financially worthwhile, said Patrick Cunningham of Home Savings and Trust Mortgage in Fairfax, Va.

"We're turning down a number of people for every one person that we can get through," Cunningham says. "That part is frustrating for us, certainly. I would say it's even more frustrating for the consumer."

The drop in rates this spring and summer has been a surprise. Mortgage rates had been expected to rise after the Federal Reserve ended its program to lower rates by buying up mortgage-backed securities.

At the start of April, rates started to rise. Good economic news had caused long-term U.S. Treasury bonds, a safe haven during the recession, to lose some appeal. As demand for Treasurys fell, their yields rose. And so did mortgage rates, which track the yields on long-term Treasurys.

But then several European countries fell into crisis over their debt burdens. Investors rushed back into the safety of Treasury bonds. That drove down Treasury yields — and mortgage rates.

The costs of refinancing are generally considered worthwhile for homeowners who can shave at least three-quarters of a percentage point off their rate and plan to stay in their homes for several years.

For mortgage lenders and brokers, refinancing clients are generally people with excellent credit, stable jobs and plenty of equity in their homes.

People like Chris O'Donnell, 43, of Centreville, Va.

He and his wife are on track to close their refinanced loan this month. They are pulling money out to buy a new heating and air conditioning system for a home they bought last year.

But they're able to do so only because they had put down 50 percent of the purchase price when they bought the home. Few can afford to do that.

O'Donnell is shaving his mortgage rate by about half a percentage point to just over 4.6 percent. He'll save about $100 a month on payments. But he notes the main reason he can do that is the economy's feeble state.

"It's good for us," he said. "But it scares the heck out of me for the economy."

Build Buzz With a Business Blog 9 strategies for generating word-of-mouth publicity and marketing success

2010-06-29T01:26:00.000-07:00

The most powerful aspect of business blogging is the potential to generate word-of-mouth marketing from the content you publish. If you can engage your audience members and get them talking about your business, products and services outside of your website, you've hit marketing gold. Blogs are a perfect tool to achieve that goal because they're conversational in nature. They're also filled with personality (at least the good ones are) that encourages readers to participate and build relationships with the bloggers and businesses behind them. Relationships drive customer loyalty and create vocal brand advocates who want to talk about the brands they love and are willing to defend those brands from criticism. When that conversation moves from your business blog and turns into online buzz, you've achieved a goal that marketing managers dream of.

The power of the social web comes from the conversations and buzz that occur on it. With a business blog, you have a chance to start those conversations, nurture them and let them grow. As a marketer by profession, I think we live in the most incredible time because the power of the social web and blogging provides more opportunities for businesses to connect with consumers and drive word-of-mouth marketing wider and louder than ever.

Home > Marketing > Marketing Communications Columnist Susan Gunelius > Build Buzz With a Business Blog
Susan Gunelius: Marketing Communications
Build Buzz With a Business Blog
9 strategies for generating word-of-mouth publicity and marketing success
By Susan Gunelius | June 24, 2010
Print Email Share Get the Mag Weekly Updates [-] Text Size [+]
Recent Articles
By Susan Gunelius

* Build Buzz With a Business Blog
* Are You Engaging or Interrupting?
* 5 Tips for Quick Social Media Success
* 3 Ways to Move Customers to Action
* 10 Common--and Effective--Emotional Triggers
* See all articles »

The following is an edited excerpt from Blogging All-in-One for Dummies by Susan Gunelius (Wiley, 2010).

The most powerful aspect of business blogging is the potential to generate word-of-mouth marketing from the content you publish. If you can engage your audience members and get them talking about your business, products and services outside of your website, you've hit marketing gold. Blogs are a perfect tool to achieve that goal because they're conversational in nature. They're also filled with personality (at least the good ones are) that encourages readers to participate and build relationships with the bloggers and businesses behind them. Relationships drive customer loyalty and create vocal brand advocates who want to talk about the brands they love and are willing to defend those brands from criticism. When that conversation moves from your business blog and turns into online buzz, you've achieved a goal that marketing managers dream of.

The power of the social web comes from the conversations and buzz that occur on it. With a business blog, you have a chance to start those conversations, nurture them and let them grow. As a marketer by profession, I think we live in the most incredible time because the power of the social web and blogging provides more opportunities for businesses to connect with consumers and drive word-of-mouth marketing wider and louder than ever.

Content Continues Below

Click here to find out more!

Start thinking about the types of promotions and public relations posts that you can publish on your own business blog that would actually help your readers and put smiles on their faces. You don't want to bore them with promotional information. Instead, you want to make them feel like they're special because they take the time to read your business blog. For instance, you can thank them for their loyalty by publishing exclusive discounts for blog readers only--further connecting your business and blog to them.

Following are some suggestions for how you can use your business blog as a marketing tool:

1. Share sale information.
Your blog is a great place to share sale and discount information with consumers. Over time, they'll learn to expect to find this type of information on your business blog and they'll come looking for it.
2. Link to your online catalog or store.
If you mention your products in your blog posts and have an online catalog or store, be sure to link to it!
3. Offer tips and advice.
It's possible that consumers might have questions about how to use your products, so it's always helpful to publish blog posts that not only offer tips but also provide suggestions for new ways to use your products.
4. Publish referral program details.
You can get the conversation going by offering an incentive for referrals.
5. Hold a contest.
People love to win prizes. You can take advantage of that by holding contests on your blog. For example, hold a contest on your blog and offer a gift card for a future purchase from your business as the prize, or offer products as prizes. When you send the product to the winner, ask whether she'd like to write a review of the product for your blog or whether you can interview her about her experience using it.
6. Answer questions.
Engage your blog readers by asking them to send questions and answer them on your business blog. If a person has a question, chances are good that they're not the only one.
7. Solicit customer stories.
People love to see their names and photos in lights, so to speak. Ask your customers to send in stories about their use of your products and publish them on your blog. It's likely each person you talk about on your blog will want to share the post with their friends.
8. Include a "Share This" links on your posts.
Be sure to include a link or button that allows readers to share posts they enjoy through social networking sites, social bookmarking sites, Twitter and e-mail. It's an easy way to foster buzz.
9. Respond to all comments.
Make sure your readers feel valued. Respond to every comment left on your blog and keep the conversation going.

The possibilities are practically endless. While outright promotions are generally frowned upon, don't be afraid to think outside the box and be creative about using your business blog as a marketing tool.

Japan's economic recovery falters in May

2010-06-29T00:38:00.000-07:00

By TOMOKO A. HOSAKA, Associated Press

Japan's economic recovery faltered in May as moderating export demand dented factory output, household spending fell and the jobless rate unexpectedly rose for a third straight month.

Industrial production dropped 0.1 percent from the previous month — the first decline in three months, the government said Tuesday. Shipments overseas fell 1.7 percent.

Lower output from automakers such as Toyota Motor Corp. and Honda Motor Co. dragged the index south, reflecting softening overseas demand. Factories also made less machinery used for semiconductors and flat-panel displays, according to the Ministry of Economy, Trade and Industry.

"Production momentum is slowing, and with the index coming in below expectation for a fourth month in a row, it seems to be doing so sooner than expected," said Goldman Sachs economist Chiwoong Lee in a note to clients.

The government predicts output to rebound 0.4 percent in June and 1 percent in July — notably smaller gains than in March and April.

The results point toward weaker growth in the world's second biggest economy, which has relied on a rebound in exports to underpin recovery. Brisk overseas demand, particularly from Asia, drove annualized economic growth of 5 percent in the January-March quarter.

But that momentum is starting to cool as governments roll back stimulus measures and focus instead on controlling spending and debt. Data last week showed that while export growth is still robust, it has slowed every month since February.

World leaders who gathered for the Group of 20 meeting in Toronto pledged Sunday to slash government deficits in most industrialized nations in half by 2013, despite warnings from U.S. President Barack Obama and others that overly aggressive austerity measures could derail the global recovery.

Japan's new Prime Minister Naoto Kan, who has made debt reduction a priority, has a more immediate concern. With upper house elections looming on July 11, he must convince voters that his party can also figure out a way to fuel growth and fight deflation.

Separate data Tuesday showed that the country's seasonally adjusted jobless rate climbed to 5.2 percent, up from 5.1 percent in April and the highest level since December.

The number of jobless stood at 3.47 million, which is unchanged from the previous year, according to the Ministry of Internal Affairs and Communications. Those with jobs fell 0.7 percent to 62.95 million.

The export boom has been slow to translate into sustained improvements for workers and families, which has persistently dampened domestic demand and pushed prices down. Government incentives for cars and energy-efficient household appliance gave consumption a much-needed boost earlier, but the effects now appear to be fading.

Household spending in May fell a real 0.7 percent from a year earlier as incomes retreated, the government said in another report. Average monthly household income fell a real 2.4 percent from a year earlier to 421,413 yen ($4,714).

A picture of the mood in corporate Japan will emerge Thursday when the central bank releases its closely watched "tankan" survey of business sentiment.

Bank overhaul bill has plenty of rules and critics

2010-06-29T00:27:00.000-07:00

By BERNARD CONDON and DANIEL WAGNER, AP Business

To keep taxpayers from having to bail out giant banks again, lawmakers faced two choices: design rules to try to prevent them from failing, or shrink them so that if they do fail, they won't threaten the financial system.

Our political leaders chose the rules.

At more than 2,000 pages, the new financial regulatory bill takes aim at everything from megabanks straddling the globe to street-corner payday lenders. And with a bit of luck, the overhaul — the most sweeping since the Great Depression — will help make big bank failures less likely and less damaging if one does occur.

The House and Senate hope to pass the bill this week in time for President Barack Obama to sign it before July 4. Its backers say it is needed to avoid the kind of cascading fear that brought the financial world to a near standstill after Lehman Brothers collapsed in September 2008.

Whether it succeeds rides on how dozens of regulators, including the Securities and Exchange Commission and the Federal Reserve, fill in the details, because a lot was left up to them. The bill calls for banks to hold more money as a cushion against risks, but it doesn't say how much. It also was mum on the amount of cash that firms dealing in complex derivatives need to set aside in case those bets sour. Lobbying by industry and advocacy groups is expected to be fierce in the months ahead and take place mostly behind closed doors. It will take years for many of the rules to take effect.

But one thing is clear: For the nation's biggest banks, it could have been a lot worse.

In the Senate's version of the bill, banks such as Goldman Sachs Group Inc., Citigroup Inc. and JPMorgan Chase & Co. would have been barred from trading derivatives. In the final one, banks lose only a sliver of that business.

Another near-miss for Wall Street involved a ban on banks investing in hedge funds and private equity firms. The bill limits those investments, but not enough to hurt most big banks, says Dean Baker, co-director of the left-leaning Center for Economic and Policy Research.

"Those guys walked away pretty happy," he says.

Shares of big financial companies rose Friday after the bill was approved in the wee hours of the morning by a House and Senate conference committee.

Perhaps the biggest victory for giant banks: They get to stay big. A proposed amendment to cut them down to size was killed after receiving scant support.

"There's no magic bullet, so they need to be small enough to fail," says former International Monetary Fund chief economist Simon Johnson. Dallas Federal Reserve chief Richard Fisher agrees, stating in a recent speech that the "only" way to end bank bailouts is to "shrink 'em." Henry Kaufman, an elder statesmen among economists, puts it succinctly: "Break them up."

The stakes are high because banks are bigger than ever.

Thanks in part to acquisitions of Countrywide Financial Corp. and Merrill Lynch & Co., the assets of Bank of America Corp. have jumped 36 percent from before the financial crisis to $2.34 trillion. JPMorgan bought Bear Stearns Cos. and Washington Mutual Inc. and has assets of $2.14 trillion, up 37 percent.

The top four banks now have 40 percent of the nation's deposits.

The legislation increases government oversight of these and other big, interconnected financial firms. The goal is to identify problems early and address them — not allow them to grow until a giant bank is in trouble and a threat to the financial system. If the problems do mushroom and a big bank is failing, the new rules include a plan to seize and liquidate the bank. The enormous cost of doing that would be paid by other giant banks, not taxpayers. At least, that's the theory.

When Lehman got in trouble two years ago, the government lacked the authority to take it over. Lehman filed for bankruptcy, and other banks feared that firms with money tied up at Lehman might fail, too. Trust evaporated. Credit markets froze, and the stock market crashed. Under the new plan, the thinking goes, everyone linked to a failing bank would know that money was on its way and so they would be less likely to panic. Think of the orderly closings of smaller banks by the Federal Deposit Insurance Corp. every week — writ large.

To keep financial firms from collapsing in the first place, the bill calls for a new Financial Stability Oversight Council headed by the Treasury secretary to crack down on risk that threatens the financial system.

But a big question remains: Will these top cops even be able to spot problems early? The record isn't encouraging.

As late as May 2007, Fed Chairman Ben Bernanke predicted damage from reckless lending to homeowners with bad credit would "likely be limited." Treasury Secretary Henry Paulson also failed to finger these risky loans as a systemic risk. "I don't see (it) imposing a serious problem," he said in April of the same year.

Before the crisis, there was a patchwork of regulators overseeing the financial industry. But each was too focused on firms under its watch to see dangerous practices across the industry. For instance, few regulators among the many overseeing mortgages questioned lenders who stopped requiring borrowers to prove they could pay back their loans. Defaults mounted. When regulators woke up to the danger, it was too late.

The bill's key change aimed at fixing that problem eliminates the Office of Thrift Supervision. The OTS oversaw many of the riskiest players during the housing boom: Washington Mutual, IndyMac Bank and Countrywide. All were either sold in a fire sale, bailed out by taxpayers or seized by the government before they collapsed.

But critics are skeptical about whether the new council will be able to coordinate the various regulatory agencies and fulfill its mission.

"People are worried about the next bubble, and whether regulators will miss it and refuse to act upon it," says Robert Litan, an economist at the Ewing Marion Kauffman Foundation, which supports entrepreneurship programs.

The legislation gives regulators power to break up the biggest financial firms if they threaten the entire system. But some proposed crackdowns were cut from the bill. And the fate of many of those that remain are in the hands of regulators who must write the rules and then implement them in the years ahead. The record of regulators — like the OTS — is spotty.

The big banks could also claim a victory, of sorts, when it comes to the regulation of derivatives.

Derivatives are bets between two parties on how the value of an asset will change. They are often used by companies to hedge risks. A bank that fears its borrowers will default on their loans might use a derivative that pays off if that happens, thus minimizing its losses.

But derivatives can be used to speculate, too. A bank might use derivatives to bet that the value of an asset it doesn't own will go up or down. Derivatives were used just this way to bet on the housing market. Often, banks borrowed huge sums of money to make these bets. That magnified losses when home prices crashed. It was as if the market was several times bigger than its actual size, and that made the meltdown worse.

Thanks to such gambles, American International Group Inc. nearly collapsed and required a $182 billion bailout by the government. Regulators were scarcely aware of the massive bets made by AIG and other financial firms because they were struck in private deals.

The new bill requires federal oversight of lucrative derivatives for the first time. It requires many types of derivatives to trade on exchanges so regulators can better watch them. Banks using them must put aside money in case they lead to losses, something AIG was not required to do.

An original version proposed by Sen. Blanche Lincoln, D-Ark., would have forced federally insured banks to spin off their derivatives trading businesses. Under the bill approved early Friday and now heading to the full House and Senate for votes, banks would only have to spin off their riskiest derivatives trades. They would be able to keep trading derivatives related to things such as interest rates, foreign currencies, gold and silver. They could even arrange credit default swaps, the notorious instruments involving mortgages that were blamed for the meltdown, as long as they were traded through the exchanges.

Hedge fund manager Michael Lewitt, who lashes out at derivatives in his book "The Death of Capital," says that AIG-like bets with derivatives should have been banned, not just moved to exchanges so they will be visible.

"We can have an AIG again because everyone is interconnected and for what? So people can speculate?" Lewitt says. The bill "will prove completely inadequate to prevent future crises."

Under a provision known as the Volcker rule, named for former Fed Chairman Paul Volcker, banks also won't be allowed to buy and sell securities for their own profit, as opposed to doing that for clients. But the distinction is sometimes vague. For instance, banks often buy shares of companies for "inventory" in their role as middlemen helping clients in their own share purchases. If the bank buys more than needed to help others, it can generate profits. Analysts who have studied the bill say it isn't clear that this would violate the rules.

Likewise, the legislation will impose a cap of 3 percent on the amount of its capital that a bank can invest in risky hedge funds, private equity funds and real estate funds. Typically, though, such investments already fall below the 3 percent threshold. And banks will still be able to manage such funds and collect fees and a percentage of trading profits.

Richard Bove, an analyst at Rochdale Securities, thinks gray areas like that will leave banks such as Goldman Sachs relatively unscathed from the new rules. "I don't see how (the bill) is going to hurt Goldman much at all," he says.

His prediction: Goldman shares rising nearly a third to $182 in a year.

New iPhone in short supply at Japan launch

2010-06-24T02:31:00.000-07:00

By JAY ALABASTER, Associated Press

– Apple's newest iPhone was in short supply just hours after its global launch began in Tokyo on Thursday morning as hundreds queued outside stores across the city to become among the first in the world to own the device.

At the Apple store in the swanky Ginza shopping district, several hundred lined the street in the early afternoon heat, as staff handed out bottled water and loaned black umbrellas with the company logo. A man dressed as a giant iPhone danced and waived his arms as he made it to the front of the line.

"I like the design. It's sleek — I think it's cool!" said Yoko Kosugi, 41, a graphic designer, who took her new phone out of her bag to show it off, plastic wrapping still on the screen.

Long lines formed from early morning across the city at Apple stores and retail outlets across the city.

Thursday's global launch of the iPhone 4 was being carried out at 7 a.m. local time in each region, so Japanese were among the first in the world to get their hands on the device. The U.S., France, U.K. and Germany are also part of the global launch.

In the trendy shopping district of Harajuku, over 300 people were lined up at the flagship store of Softbank, Japan's exclusive carrier, when its doors opened in the morning. That store ran out of phones by early afternoon, said company spokesman Naoki Nakayama.

"We've been selling out at each launch, it's the same conditions," he said, declining to release any numbers.

When the initial version of the iPhone was released in Japan two years ago, some questioned whether it could succeed without many of the advanced hardware features common on Japanese models. But the phone's addictive touch screen and broad selection of downloadable applications have made it a runaway hit in the country.

The newest model is thinner with a better-resolution screen and longer battery life. It features a new operating system that can also be installed on some older models.

Even among Apple's most faithful, some said the phone has become a victim of its own success in Japan.

"As Softbank has cut prices and more and more people signed up, it has made the network much slower," said Motoki Sato, a university student who lined up outside of Softbank's store in urban Shibuya.

But he still waited through the night before the launch along with dozens of others at the Shibuya store, to get "a birthday present for myself" when he turned 24 on Thursday. He occasionally glanced at his black iPad as he spoke, and said he tried not use his older iPhone too much to conserve battery life through the long wait.

A swarm of pre-orders earlier in the week also led to long lines around Tokyo and overwhelmed computer servers struggling to keep up with demand.

Toyota president apologizes to shareholders

2010-06-24T02:06:00.000-07:00

By YURI KAGEYAMA AP Business

Toyota Motor Corp. President Akio Toyoda bowed deeply and apologized to shareholders Thursday for the troubles caused by massive global recalls of the company's vehicles.

Toyoda was facing shareholders for the first time since the Japanese automaker's reputation for quality was damaged by the recall crisis that started last October.

Again bowing deeply after the remark, Toyoda also said the company was doing its utmost to improve quality control and thanked shareholders for their support.

"I apologize deeply for the concerns we have caused," he said. "We believe our most important task is to regain customers' trust."

The shareholders' meeting was closed to the media, but the proceedings could be seen in a TV monitor in another room at Toyota headquarters in the city named after the automaker. Atonement for Japanese company heads typically comes as a deep bow held for several seconds to show heartfelt remorse for wrongdoing.

Toyota, the world's biggest automaker, has been working to patch up its reputation after more than 8 million vehicles were recalled worldwide over reports of unintended acceleration and other defects.

U.S. authorities slapped Toyota with a record $16.4 million fine for acting too slowly on the recalls. Toyota dealers have repaired millions of vehicles, but the automaker still faces more than 200 lawsuits tied to accidents, the lower resale value of Toyota vehicles and the drop in the company's stock.

Although the recall debacle hung over the shareholders' meeting, the statements from Toyoda and other officials were met with polite applause. A handful of shareholders shouted their anger.

The region where the automaker is headquartered is packed with Toyota plants, suppliers and other businesses like hotels and restaurants that are heavily reliant on Toyota and fiercely loyal.

"The company stumbled badly over the recalls, and it became a big problem," said one shareholder, who identified himself only by his surname Nishikawa.

He also expressed hopes Toyoda as the "face of the company" will handle the recall problem bravely, without breaking into tears, referring to a widely reported meeting that a tearful Toyoda had with dealers in the U.S. where the recalls were concentrated.

Others asked about Toyota's strategy for green vehicles and how it planned to expand in emerging markets, including dealing with labor strife that has temporarily shut down production n China.

Toyota Executive Vice President Satoshi Ozawa said recall-related costs for the fiscal year ended March totaled 380 billion yen ($4 billion).

Executive Vice President Shinichi Sasaki acknowledged that Toyota had failed to fully understand the feelings of customers about safety.

But he said the company was working harder to beef up quality controls, including appointing outsiders to assess the company's transparency, and finding out more how drivers were using Toyota vehicles.

"We want to make Toyota No. 1 in quality from the customers' viewpoint," he told shareolders.

Toyoda said directors on the board will forego their bonus payments for the second year in a row. Directors didn't get bonsues the previous year after Toyota reported the worst losses in its history as the financial crisis sent auto sales plunging.

That won the approval of at least one shareholder, who pointed out the contrast with Japanese rival Nissan Motor Co., which disclosed at its shareholders' meeting Wednesday that Chief Executive Carlos Ghosn had received $9.5 million in compensation.

Analyst opinion has been mixed about Toyota's prospects, which remain shaky and depend on a global auto recovery.

"I'm not that pessimistic. I am hopeful the world's economy is going to grow happier," Nomura Securities Co. auto analyst Shotaro Noguchi said in a telephone interview.

"The image that Toyota cars were dangerous got serious three months ago so that even kids knew about it. But people forget and that has changed," he said.

Toyoda pointed to his striking a deal last month with Tesla Motors Inc., a U.S. electric car manufacturer, to open an electric car plant at the site of Toyota's former venture with General Motors Co. as an example of how Toyota will start anew.

In April, Toyota closed the California plant, called New United Motor Manufacturing Inc., or NUMMI.

He promised Toyota will continue to grow, but without pursuing size for size's sake.

"Our company is about doing the right thing in the right way," he told the meeting. "And I like to think we are the kind of company that cares about people's feelings."

Spanish EU presidency marred by economic crisis

2010-06-24T01:49:00.000-07:00

by Pierre Ausseill

Spain's ambitious presidency of the EU was eclipsed by the European debt crisis which thrust the country's fragile economy into the global spotlight and weakened the Spanish government, analysts said.

Socialist Prime Minister Jose Luis Rodriguez Zapatero had planned to use the six-month presidency of the 27-nation bloc, which wraps up on July 1 when Belgium takes over, to bolster his international stature.

But nothing went as planned as the eruption of the Greek debt crisis, and the subsequent fears that it could spread to other southern European nations like Spain and Portugal, caused stock markets and the euro single currency to plunge.

Under pressure by EU heavyweight Germany, the Spanish government adopted unpopular austerity measures, including public sector spending cuts, aimed at slashing a public deficit that hit 11.2 percent of gross domestic product in 2009, the third-highest after Greece and Ireland.

The government also adopted an overhaul of its rigid labour market as recommended by the International Monetary Fund to fight an unemployment rate of 20 percent.

The reforms, which make it easier and less expensive to fire workers, put an end to Zapatero's honeymoon with the nation's unions, which have called a general strike for September 29, and caused his popularity to drop.

Spain was ending its stint as EU president as a "protectorate" of the bloc with its "economy managed from abroad", the leader of the main opposition Popular Party, Mariano Rajoy, charged Wednesday during a debate with Zapatero in parliament.

"The circumstances of the Greek crisis and the widespread problem of fiscal deficits overtook Spain as they would have overtaken any rotating presidency," said Ignacio Molina, a Europe analyst with the Elcano Institute think tank in Madrid.

"But Spain also emerged as one of the weakest countries in this scenario. It found itself without a margin for manoeuvre, being in the position of judge and litigant at the same time. It was difficult for other countries to consider it a neutral president," he added.

Hierlemann Dominik, a specialist in European affairs at German's Bertelsmann Foundation, said all other priorities "such as relations with the Maghreb, the rights of women, were swept away by the crisis in the euro, they were marginalized."

On the diplomatic front Spain's presidency of the EU was marked by the cancellation of two key summits, one with the United States in May and the other with the Mediterranean Union in June.

The EU-US summit was called off after US President Barack Obama cancelled the trip citing his busy schedule while the Mediterranean Union summit was postponed to give time for progress in indirect talks between Israel and the Palestinians.

The death of Cuban dissident Orlando Zapata in February torpedoed Spain's bid to get the EU to soften its common position regarding the communist island.

Spain did achieve its goals for the EU-Latin America summit held last month with the announcement of a free trade agreement between the bloc and Central America and the relaunch of free trade talks with South American trading bloc Mercosur, which is made up of Argentina, Brazil, Uruguay and Paraguay.

Zapatero defended Spain's performance during the EU presidency, saying Wednesday it had been "satisfactory" and "useful".

He pointed to the approval at an EU summit last week of Madrid's proposal to make bank stress tests public -- which he said would be "fundamental" to restore calm in the markets -- as an example of the success of the Spanish presidency.

"We had to deal with difficult circumstances for the European Union and also for our country," he added.

Santander makes bid for RBS branches

2010-06-18T23:23:00.000-07:00

Spanish bank Santander has submitted an offer to buy Royal Bank of Scotland's (RBS) Williams & Glyn's subsidiary.

RBS is selling the unit and its 318 branches after the European Commission ruled last year that it must dispose of the business as a condition of the bank being bailed out by the UK government.

Virgin Money, who had earlier dropped out of the bidding, told the BBC it was still interested in the RBS branches.

Santander said it was not sure when the tender process would end.

Santander is understood to have offered considerably less than £2bn.

"There is a pretty high probability that the board of RBS will conclude that Santander is not offering enough and will therefore withdraw the branches from sale, in the hope that market conditions for the auction of such assets improve in a year or two's time," BBC business editor Robert Peston said.

Under the agreement RBS reached with the European Commission on the disposal of certain of its businesses, RBS has another three and half years to complete the sale of the branches.

'Sale still open'

RBS said it was "seriously reviewing" Santander's offer, but added that the tender process remained open to other interested parties.

"This remains a competitive process and we will continue to do what is right for our shareholders in disposing of these assets," it said in a statement.

A number of other banks have been named as potential bidders, including National Australia Bank and US private equity group Blackrock, but reports have said they have dropped out of the running.

Santander already has a substantial presence on the UK High Street having bought Abbey National, Alliance & Leicester and Bradford & Bingley in recent years.

Obama warns G20 leaders on budget cuts

2010-06-18T23:11:00.000-07:00

Barack Obama has warned against cutting national debts too quickly as it would put economic recovery at risk.

In a letter to G20 leaders, the US president said that while it was important to put in place "credible plans" to cut deficits, withdrawing economic stimulus early was dangerous.

"[In the past] stimulus was too quickly withdrawn and resulted in renewed hardships and recession," he warned.

But Mr Obama said the US would still aim to halve is own deficit by 2013.

The US budget deficit would be cut to 3% of GDP by 2015, the president said.

The leaders of the world's 20 leading economies are due to meet in Toronto on 26 June.

Mr Obama said the priority of the meeting should be "to safeguard and strengthen the recovery".

The BBC World Service's economics correspondent Andrew Walker said the letter appeared to express the US administrations reservations over recent changes in economic policy in Europe.

"There has been a marked change in emphasis in the G20 in the last few weeks," he said.

"For many of the group's member countries, especially in Europe, the case for stimulating economic recovery using the public finances has been overtaken by concerns about stabilising government debt."

The governments of several large European countries, Germany and the United Kingdom among them, have recently outlined plans for spending cuts.

In comments apparently directed at China, Mr Obama also stressed the need for flexible exchange rates to ensure a balanced global economy.

China has been criticised by the US for failing to allow its currency to trade freely.

The G20, which includes both developed and developing economies such as Russia, China and Argentina, has taken the lead in efforts to tackle the global financial crisis.

Chevron vows to pay for Salt Lake City oil spill

2010-06-18T22:56:00.000-07:00

By PAUL FOY, Associated Press

Salt Lake City attorneys expect Chevron Corp. will quickly agree to a financial settlement related to last weekend's pipeline spill that dumped 33,000 gallons of crude oil into city waterways, a spokeswoman for Mayor Ralph Becker said Friday.

Becker has vowed to make Chevron pay for the cleanup, and the company has repeatedly pledged to cover the city's expenses, as well as damage or reimbursement claims from others.

A deal could be announced next week, said Lisa Harrison Smith, the mayor's spokeswoman.

"We won't be satisfied until it's done," she said.

San Ramon, Calif.-based Chevron believes an improbable series of events led to last Saturday's spill, which sent crude oil into pristine Red Butte Creek.

A short in an overhead 46,000-volt power line traveled to a fence post that acted like an electric arc welder, melting a quarter-size hole in the pipeline, the company said.

The bottom of the fence post was anchored just inches above the buried pipeline — an obvious danger that went unnoticed for 30 years, Chevron said.

"It would be highly unusual, but it's a plausible theory," Rocky Mountain Power spokesman Dave Eskelsen said.

Some of the spilled oil traveled in the creek through Salt Lake City to the Jordan River, which drains into the Great Salt Lake.

Chevron said it has cleaned up 21,000 of the 33,000 gallons of spilled oil. Much of that has been mopped and vacuumed from city waterways. Absorbent booms on the Jordan River have been capturing traces of oil, and workers were seen digging up oil-soaked soil Wednesday and sucking up residual oil from Red Butte Creek near the spill site.

Chevron said it plans to flush the Red Butte Creek with water Saturday to capture residual oil with absorbent booms. It warned residents the flushing could stir up oil fumes for three or four hours.

But the latest samples from 13 locations along Red Butte Creek and the Jordan River show no danger to human health or aquatic life, Utah Division of Water Quality officials said.

The U.S. Department of Transportation has jurisdiction over oil pipelines and is investigating what caused the spill, said Patricia Klinger, a spokeswoman for the department's pipeline-safety group. A metallurgist is examining the pipe, she said.

The department's Pipeline and Hazardous Materials Safety Administration can fine Chevron, but has no authority over Rocky Mountain Power, which owns the nearby fenced compound and power lines near the pipeline, Klinger said.

Chevron officials said earlier this week that more than 30 claims had been filed with the oil company. The company is taking full responsibility and expects to get hit with a large amount of bills for damages and expenses, Chevron spokesman Dan Johnson said Friday.

"We think that's appropriate," he said. "People who pay their bills are trusted."

The Utah Rivers Council on Friday called for Chevron to deposit $15 million into an escrow account to pay for damages and cleanup expenses. But the expected settlement agreement would make an escrow account unnecessary, Smith said.

Stocks post biggest two-week gain since November

2010-06-18T22:51:00.000-07:00

By TIM PARADIS and SETH SUTEL, AP Business

Here's something for investors beaten down by the market's sharp declines this spring: The Dow Jones industrial average just had its best two weeks since November.

The Dow's gain of 16 points on Friday was relatively modest, but it capped a surge of 5.2 percent over the past two weeks that puts the average nearly halfway back to the high for the year that it reached on April 26.

Stocks had a longer winning streak earlier this year, an eight-week stretch that ended in late April, but those gains were more gradual. Then a sharp drop in May and early June brought the Dow down as much as 12.4 percent below its 2010 high, a decline that market analysts call a "correction."

The debate now is focusing on whether that correction phase is over. A correction is generally considered a drop of 10-20 percent from a recent peak. The Dow has risen back 6.5 percent from its lowest close of the year on June 7, but it's still down 6.7 percent from its 2010 high.

"I don't know that we're totally through the correction," said Stu Schweitzer, global markets strategist at JPMorgan's Private Bank in New York. "I do expect markets to remain quite volatile all through the rest of this year, but I still expect that we're going to end the year higher."

Minerals companies led other shares higher after gold settled at another record high. Barrick Gold Corp. jumped 3.5 percent, while Newmont Mining Corp. rose 2.6 percent.

Corporate news also brought out buyers. CVS Caremark Corp. rose 1.9 percent and Walgreen Co. rose 2.8 percent after the two companies settled a dispute over pharmacy prescriptions that had threatened to hurt profits. Dow component Caterpillar Inc. gained 1.4 percent after reporting sharply higher sales.

The Dow rose 16.47, or 0.2 percent, to close at 10,450.64. The broader Standard & Poor's 500 index rose 1.47, or 0.1 percent, to 1,117.51. The Nasdaq composite index edged up 2.64, or 0.1 percent, to 2,309.80.

All three indicators posted solid gains for the week. The Dow is up 2.3 percent, the S&P 500 2.4 percent and the Nasdaq 3 percent.

The Dow posted its second consecutive weekly gain of more than 2 percent. Before that, the Dow had been down for three weeks. The last time the Dow had a two-week stretch of gains that strong was in November 2009.

Advancing stocks narrowly outpaced those that fell on the New York Stock Exchange, where consolidated volume came to 4.9 billion shares, versus 4.6 billion the day before. Volume was heavier because of the simultaneous expiration of four kinds of futures and options contracts, which occurs once every quarter.

Trading was relatively quiet considering the options and futures expirations, which can often bring volatility as traders adjust their portfolios. The week that follows the June expiration is often a losing one for investors. The Dow has posted a loss during that week for the past 11 years, according to the Stock Trader's Almanac.

Bond prices slipped, pushing interest rates higher. The yield on the benchmark 10-year Treasury note rose to 3.23 percent from 3.20 percent late Thursday.

The dollar edged lower against the British pound and Japanese yen, while the euro edged down versus the dollar. The euro has regained strength over the past week amid encouraging signs in Europe's efforts to control its debt crisis. Spain had successful bond sales this week, and European leaders pledged to disclose the results of stress tests on banks.

Crude oil rose 39 cents to settle at $77.18 per barrel on the New York Mercantile Exchange.

Randy Frederick, director of trading and derivatives at Charles Schwab, said the market's bounce from its recent lows has come too quickly. He said professional traders are building up positions in investments that would cushion their losses if the market fell again.

"Not that we're going into this big ugly bear market but to go back down to the lows that we were at just a few weeks ago, I think, seems very possible based on what I see," Frederick said. "I see a reason to be a little cautious right now."

The coming week brings readings on home sales and consumer sentiment. The Federal Reserve also will meet on interest rates.

Gold settled up $1,258.30 an ounce, a gain of $9.60. Barrick Gold rose $1.56, or 3.5 percent, to $46.38, and Newmont Mining climbed $1.57, or 2.6 percent, to $61.25.

CVS rose 59 cents to $32.43, while Walgreen gained 82 cents to $30.09. Caterpillar gained 90 cents to close at $65.85.

The Russell 2000 index of smaller companies rose 1.07, or 0.2 percent, to 666.92.

On the Call: Kroger CEO David Dillon

2010-06-17T23:29:00.000-07:00

By The Associated Press

Companies always keep a close eye on competitors, but when your rival is the biggest retailer on earth the pressure is even tougher. Supermarket retailer Kroger Co. reported its first-quarter results Thursday — net income fell but the results beat expectations and sales grew. However, the grocer is facing tough competition from Wal-Mart Stores Inc., which recently rolled out some of its fiercest reductions in food prices to help boost its slumping sales. Wal-Mart gets about half of its revenue from groceries.

Kroger CEO discussed the issue during a conference call with analysts:

QUESTION: Wal-Mart started the roll-back campaign on April 1st and started to do the deep discounts on May 1st. Wondering in markets where you overlap with a Wal-Mart super center, have you seen any discernible trends since they began that roll-back activity?

RESPONSE: Let me talk generally about Wal-Mart and how we see our markets for a moment.

We don't often talk about individual competitors, but many of you have asked about them, so it is probably worth commenting.

Wal-Mart affects any of the marketplaces in which they operate like any other competitor affects those marketplaces. Wal-Mart has become publicly more aggressive in what they're saying that they're doing, and if you look at what's happening in the stores and in the markets — just like we said the last two quarters — the marketing behavior, merchandising behavior Wal-Mart is (doing is) a lot more consistent with a traditional grocery supermarket operation than it is consistent with what Wal-Mart used to do.

It is a lot more feature items, sometimes features are on a little longer than a week, but it is feature items. And when you operate that way, there are items that come down in price which get lots of publicity, but there are also items that go up in price that don't get much publicity.

So we see the behavior as there is a lot of marketing noise around it, but we see the behavior as pretty much what happens in a lot of grocery. ... As a result, the most important thing I think for you to think about is that our behavior in those markets and in every market is based upon our plan and what we believe to be consistent with our customer-first strategy and what we think our customers want.

We can't do that with a blind eye to what competition does, but we also can't let competition dictate what we're going to do in those markets and we have chosen not (to do).

We're approaching this from purely from the point of view of 'What do we think our customers want from us in this kind of environment?' and using our data and insight in order to drive that.

Feds announce arrests in mortgage fraud crackdown

2010-06-17T23:25:00.000-07:00

By KEN RITTER, Associated Pres

Some 500 people have been arrested in a nationwide crackdown on mortgage fraud, and federal officials pointed to Las Vegas as one of the centers of the scams that pumped up home prices until the housing market bubble finally burst.

"I heard this many times," said Scott Hunter, a Las Vegas FBI agent who has interviewed hundreds of so-called "straw buyers" lured into buying homes by unscrupulous real estate agents, brokers and loan officers. "They said, 'Don't let your good credit go to waste. You can purchase these properties. This is how you acquire wealth.'"

"What happened here was, when the party stopped and they were not able to keep inflating the prices on these houses, the whole thing collapsed."

Nevada's U.S. attorney, Daniel Bogden, counted 123 defendants charged, convicted or sentenced in the Silver State since March 1 as part of a national crackdown dubbed Operation Stolen Dreams. Bogden put losses in Nevada alone at almost $250 million.

In Washington, the Justice Department linked nearly 500 arrests nationwide to the crackdown. U.S. Attorney General Eric Holder called the push the largest collective enforcement effort aimed at confronting mortgage fraud.

Holder said 1,215 criminal defendants had been netted in cases that uncovered more than $2.3 billion in losses, and said the Justice Department also engaged in civil enforcement actions to recover more than $147 million in the operation.

FBI Director Robert Mueller called mortgage fraud "a risk to our economic stability" as a nation.

More than lending institutions were victimized, said Michael Gibson, a Los Angeles-based federal Housing and Urban Development inspector who has been investigating cases in Las Vegas.

Homeowners, taxpayers, reputable real estate industry officials and the Federal Housing Administration were also hurt, Gibson said. "They're all victims in this. Every time you have a bad loan that's FHA-insured, the federal government pays that claim amount."

Real estate analyst Rick Sharga, of Irvine, Calif.-based RealtyTrac Inc., said places with the most foreclosures today were the most fertile places for mortgage scams during the housing boom.

"The states that had the highest fallout in foreclosure and price depreciation certainly didn't have markets built on sound business practices," Sharga said. "The running gag was, you'd put a home on the market at breakfast and have three offers for twice the asking price by lunch. We're seeing the consequences of that now."

"As soon as prices stopped going up, the whole house of cards came down," he said.

Prosecutors and investigators said schemes typically involved straw buyers with good credit buying homes at an inflated price or obtaining loans greater than the cost of the home. The resulting cash was skimmed by the person controlling the scheme.

Homes were "flipped," or quickly sold at inflated prices, driving up prices of comparable or neighboring homes, said Hunter, supervisor of the Las Vegas FBI white collar crime unit.

"If you didn't lie on your loan application, and you later go into foreclosure, there's no fraud there," he said. "But if you lie about everything about the application, and you mislead a lender into believing that all the information on that document is accurate, that's what we're going after."

Foreclosures have decreased in Nevada during the last year, according Realty Trac. But the state continued to lead the nation in May, followed by Arizona, Florida, California and Michigan. One of every 66 homes in the Las Vegas area received a foreclosure filing last month.

The Justice Department said the probe announced Thursday resulted in significant criminal cases in places like Duluth, Minn.; New Jersey and Atlanta.

Officials said that in Chico, Calif., a home builder sold houses built before the market cooled in 2006 to straw buyers at inflated prices, then rebated tens of thousands of dollars to shell companies controlled by the buyers' agents. The lenders were unaware of the rebates. The Justice Department said that to date, 38 of the homes are in foreclosure.

In New Jersey, a servicing manager at U.S. Mortgage pleaded guilty in the fraudulent sale of more than $136 million in mortgage loans to Fannie Mae and other investors.

In Oregon, the U.S. attorney said the FBI had received almost 5,000 reports of fraud since the height of the housing market in 2006.

In Detroit, investigators broke up a "ghost loan" mortgage scheme in which conspirators recruited more than 108 straw buyers and obtained some 500 mortgages totaling more than $100 million.

In Minnesota, convicted mortgage fraud defendant Michael Fiorito was sentenced in April to more than 22 years in prison for conspiracy and mail fraud. Prosecutors said he led homeowners who were in or near foreclosure to refinance or sell their homes, then stole their money.

An indictment in Miami accused two defendants of targeting Haitian-Americans, with one defendant also offering help with immigration issues.

In Las Vegas, Hunter said industry insiders controlling scams didn't spend their own money, but reaped cash from homes "like ATMs."

"They took as much money out of them as they could, and when they were done, they left southern Nevada in the wreckage," the FBI agent said. "Now it's our job to hold these people accountable."

Smart Modular Technologies returns to 3Q profit

2010-06-17T23:23:00.000-07:00

Smart Modular Technologies Inc., which makes computer memory products, on Thursday reported a profit for its fiscal third quarter, as renewed spending by businesses on technology helped it recover from a loss posted in the same period last year.

For the three months ended May 28, Smart Modular Technologies' net income was $14.9 million, or 23 cents per share. In the same period last year, the company reported a net loss of $2.4 million, or 4 cents per share.

Excluding stock options expenses and the divestiture of a business, the company earned 26 cents per share in the latest quarter.

Analysts surveyed by Thomson Reuters had forecast net income of 18 cents per share. Analyst estimates typically exclude one-time items.

Revenue more than doubled to $201.2 million from $91.6 million in the year-ago quarter. Analysts predicted revenue of $180.7 million.

Shares jumped 25 cents, or 3.9 percent, to $6.75 in after-hours trading. During the regular session, the stock added 3 cents to close at $6.50.

Bank of Japan unveils $33bn loan scheme

2010-06-17T23:18:00.000-07:00

BBC News

apan's central bank has announced plans to provide up to 3 trillion yen (£22bn; $33bn) in low interest loans in an effort to spur economic growth.

The bank plans to make the money available to commercial banks to encourage them to lend more to private businesses.

Firms in growth sectors including energy, the environment and tourism will be targeted by the scheme.

The Bank of Japan also confirmed it would hold interest rates near zero.

Rates have remained at 0.1% since the end of 2008, with Japan contining to fight deflation and recover slowly from recession.

The bank gave no indication that interest rates would rise in the near future, saying it planned to keep montary policy "extremly accomodative".
Impact questioned

Meanwhile it said its lending programme should help boost productivity and raise the economy's growth rate.

The plans allow approved banks to borrow up to 150bn yen each for up to four years at an interest rate of 0.1%.

The scheme is due to begin at the end of August.

But economists questioned what impact, if any, the plan would have on economic growth.

"We see little impact at this stage due to a lack of demand for funds," said Chiwoong Lee, economist at Goldman Sachs.

The Bank of Japan is also likely to come under further pressure from Japan's new prime minister, Naoto Kan, who has cited the country's massive debt levels as a chief concern.

Deflation is also a worry, with prices currently falling at an annual rate of 1.5%.

Russia becomes leading oil producer, BP says

2010-06-17T23:14:00.000-07:00

Russia overtook Saudi Arabia to become the world's leading oil producer in 2009, while global oil consumption fell the most since 1982, BP has said.

According to the oil giant's latest Statistical Review of World Energy, Russia increased oil production by 1.5% in 2009, claiming a 12.9% market share.

Production in Saudi Arabia fell 10.6%, giving the country a 12% market share.

Global oil consumption fell by 1.2m barrels a day, or 1.7%, while natural gas use dropped 2.1%.

The world's oil production dropped by 2m barrels a day, or 2.6%, also the largest decline since 1982.
'Unconventional supplies'

BP also said that "global gas production declined for the first time on record", falling 2.1%.

"Production fell sharply in Russia (-12.1%) and Turkmenistan (-44.8%), driven by declining consumption - in Russia and much of the rest of Europe - and the availability in Europe of competitively priced liquefied natural gas," the report states.

The US became the world's largest gas producer, surpassing Russia, thanks to "continued expansion of unconventional supplies".

Global proven oil reserves increased by 700m barrels to 1.33 trillion barrels last year.

At the same time, the world's gas reserves grew by 2.21 trillion cubic meters to 187.49 trillion cubic meters.

Fannie Mae and Freddie Mac delisted from stock exchange

2010-06-17T23:05:00.000-07:00

US home loan giants Fannie Mae and Freddie Mac are to cease trading on the New York Stock Exchange (NYSE).

The state-sponsored lenders were ordered to leave the exchange by the Federal Housing Finance Agency (FHFA).

They have both continued to suffer heavy losses in the aftermath of the financial crisis.

Their share prices have slumped to the NYSE's minimum level of $1 a share - requiring them to try to boost their stock, or delist.

The FHFA said the decision to exit the exchange did not "constitute any reflection on [Fannie Mae and Freddie Mac's] current performance or future direction".

FHFA's acting director Edward DeMarco added that delisting the shares "makes sense and fits with the goal... to preserve and conserve assets".

The two lenders, which provide mortgage finance to other lenders, were placed under government control in September 2008 after being severely hurt by the collapse in the mortgage market.

Both have continued to make heavy losses, however, so far costing US taxpayers $145bn in bail-out costs.

Murdoch's News Corporation in BSkyB takeover bid

2010-06-17T22:48:00.000-07:00

By Robert Peston BBC Business

Rupert Murdoch's News Corporation is seeking to take full control of satellite broadcaster BSkyB, by acquiring the 60.9% of the shares it does not already own.

News Corporation's initial offer of 700 pence a share, which values BSkyB at around £12bn, was rejected.

Talks are now expected to continue until a deal is reached. BSkyB said it wants "in excess of 800p" per share.

News of the bid pushed shares in BSkyB up 16.6%.

News Corporation also owns the Sun, Times and News of the World newspapers.

Industry giant

Agreement between News Corporation and BSkyB would go some way to clear the way for Mr Murdoch's ambitions, though any deal would also need regulatory approval.

"Both parties have agreed to work together to proceed with the regulatory process in order to facilitate a proposed transaction," said News Corporation.

BBC business editor Robert Peston said that if the deal did go ahead, it would "erase any scintilla of doubt that Mr Murdoch's News Corporation would be the most powerful of all the traditional media groups in the UK".

"The combination of Sky with his newspapers, such as the Sun and the Sunday Times, would generate annual revenues of around £8bn, compared with the £4.6bn income of the next largest player, the BBC."

Our editor added that any agreed deal between News Corporation and BSkyB may cause problems for the UK's coalition government.

He said this was because while the Conservatives had benefited from the support of News Corporation's newspapers during the general election, the Liberal Democrats were far more hostile to Mr Murdoch's media empire.

Whether to grant regulatory approval for any agreed takeover would be decided by the European Commission - unless it was called in by either Business Secretary Vince Cable or the Office of Fair Trading (OFT).

Mr Cable would have to say he had public interest concerns, while the OFT would have to stress competition fears.

British Sky Broadcasting was formed in 1990 by the merger of News Corporation's Sky Television and rival British Satellite Broadcasting.

Bebo sold by AOL after just two years

2010-06-17T22:43:00.000-07:00

Internet company AOL has sold Bebo, the social networking site it bought two years ago for $850m (then £417m).

Criterion Capital Partners, a small private investment firm, announced that it had bought the business, but did not disclose the amount paid.

However, analysts suspect it to be just a fraction of the price paid by AOL in 2008.

Since then, Bebo has struggled to compete effectively against social networking rivals such as Facebook.

Earlier this year, AOL announced plans to sell or shut down Bebo because it was unable to provide the "significant investment" needed to prevent its decline as a business.

The BBC's technology correspondent Rory Cellan-Jones called AOL's decision to buy Bebo "one of the worst deals ever made in the dotcom era".

"The extraordinary thing is the deal was made years after the dotcom crash which was supposed to have taught the industry lessons," he said.

"The interesting thing is that the founder, Michael Birch, walked away with $300m - it's the art of timing."
'Active user base'

Criterion Capital's plans for Bebo are unclear, and the company was not immediately available to give further details.

But the new owners are believed to see significant potential in the business.

Bebo's headquarters is set to remain in San Francisco, at least in the near term, but job losses have not been ruled out.

In a statement, Adam Levin, Criterion Capital's managing partner, said there was plenty to be positive about.

"The young, highly active user base, revenue history, presence in countries throughout the world and solid technical infrastructure make it an attractive media platform," he said.

The Other U.S. Energy Crisis: Lack of R&D R&D Neglect is holding back innovative energy technologies

2010-06-17T03:03:00.000-07:00

By Peter Coy Businessweek

BP (BP) says it's throwing its best people at stopping the Gulf of Mexico oil spill. Nevertheless, it took an outsider—Energy Secretary Steven Chu, who has a Nobel Prize in physics—to come up with the idea of peering inside the malfunctioning blowout preventer with high-energy gamma rays. BP tried Chu's idea—after a few snickers and Incredible Hulk jokes, according to the Washington Post—and lo and behold, it worked. The probe was "crucial in helping us understand what is happening inside the BOP [blowout preventer] and informing the approach moving ahead," said Jane Lubchenco, head of the National Oceanic & Atmospheric Administration.

The gamma ray incident is symptomatic of a problem that's bigger than London-based BP: Energy companies worldwide are far less science-oriented than one might expect from an industry that is heavily dependent on technology for safety and profit. In the U.S., energy companies' spending on research, development, and deployment amounts to just 0.3 percent of sales. That's barely more than a tenth what the auto industry spends as a share of sales and is dwarfed by the pharmaceutical industry, which spends nearly 19 percent of sales. (American Petroleum Institute chief economist John Felmy says R&D measures understate his industry's "overall investment for the future.")

Many economists argue that government needs to step in when the private sector isn't providing the socially optimal amount of something like research. But government R&D spending on energy has been scarce, too. It was less than 0.03 percent of U.S. gross domestic product as of 2007, about one-third the share in Japan. The dearth of investment in energy R&D helps explain why the world is still getting its energy by punching holes in the sea floor rather than from safer, renewable sources such as the sun and the wind.

In his Oval Office speech on the Gulf spill on June 15, President Barack Obama cited a rapid boost in energy R&D as one of several ideas that "have merit and deserve a fair hearing in the months ahead." That was a paler endorsement than some boosters hoped for. On June 11, the American Energy Innovation Council called for a gradual increase to $16 billion in annual federal R&D energy spending, from around $5 billion now. The seven-member council includes Microsoft (MSFT) Chairman Bill Gates, General Electric (GE) Chief Executive Officer Jeffrey Immelt, and Silicon Valley venture capitalist John Doerr.

The drive for more energy R&D is up against formidable obstacles, starting with the budget deficit. Representative Ralph Hall, the ranking Republican on the House Science & Technology Committee, tried in May to cut about $40 billion from the $86 billion sought by House Democrats for the America COMPETES Act, which funds federal research and math and science education. "We must be mindful of our spending if America is to continue to compete globally," Hall said then. The House eventually voted to reauthorize the act without Hall's cuts, while the Senate hasn't yet acted. Even if Congress agrees to authorize the full $86 billion, funding could still be cut in the appropriations process.

Money isn't the only problem. On the right, many Republicans say the federal government should be involved only in basic science, not steps toward commercialization. On the left, many Democrats hope to kick-start research and investment in green energy via measures such as carbon caps that would make coal and oil more expensive.

Hanging in the balance are initiatives such as ARPA-E, a 20-employee Energy Dept. program that funds what Director Arun Majumdar calls "really high-risk, high-reward, disruptive technologies." ARPA-E is modeled on DARPA, the Pentagon's Defense Advanced Research Projects Agency, which helped launch the Internet and the global positioning satellite system. Like DARPA, the Energy program is free from civil service hiring rules, so it can bring in top scientists and engineers for short stints. It began operations last year with a two-year allocation of $400 million in stimulus funds. The Obama Administration is seeking $300 million for ARPA-E for the fiscal year beginning Oct. 1.

Defying bureaucratic convention, ARPA-E is funding an unorthodox technique for producing fuel from plant matter even though it competes with another project of the Energy Dept., the Joint BioEnergy Institute. "That's the kind of environment we want," Majumdar said in a June 14 interview. "I'd rather have the competition inside the U.S. than outside the U.S."

What looks like fruitful competition to Majumdar can look like wasteful redundancy to a Congress that's worried about deficits. He says that's a problem. "Frankly we haven't done a good enough job of explaining what we're about. It's a new model."

The American Energy Innovation Council argues that ARPA-E merits $1 billion a year. Majumdar says he'd be happy just getting the requested $300 million given the big budget deficit. On the other hand, Energy's Chu testified last year that China is spending $9 billion a month on clean energy investments. Says Energy Under Secretary Kristina Johnson: "We're competing with some very fierce competitors that are throwing everything they have behind being successful in this clean energy economy."

The bottom line Lack of R&D is limiting development of new energy technologies, and prospects for a big increase remain cloudy.

Toyota is latest car maker hit by strike in China

2010-06-17T02:58:00.000-07:00

By ELAINE KURTENBACH,AP Business

Toyota Motor Corp., the latest automaker to be hit by a strike at a China parts supplier, said Thursday its car assembly operations were not affected by the short-lived dispute.

The strike comes amid mounting concern over signs of increasing unrest among the migrant workers who are the backbone of the country's industrial sector.

Niu Yu, spokesman for Toyota China in Beijing, said the strike at affiliate Toyoda Gosei Co. Ltd.'s plant in the northeastern city of Tianjin, had ended.

"So far, operations of our car assembly plant have not been affected," Niu said.

Toyoda Gosei spokesman Tomotaka Ito said the strike at the plant, Tianjin Star Light Rubber and Plastic Co., began Tuesday and ended Wednesday after the company agreed to review the pay structure for its 800 workers.

Production resumed Wednesday afternoon, despite a national holiday, to make up for lost time, said Ito, who would give no further details.

The strike was the first reported for Toyota following strikes at several China suppliers of Honda Motor Co. that forced that Japanese automaker to suspend car assembly intermittently in the past month due to a lack of parts.

So far, most of the auto-related labor disputes have been reported in southern China, near Guangzhou, where both Honda and Toyota have manufacturing bases along with their local partner Guangzhou Auto Group. Toyota has a separate joint venture in Tianjin with FAW Group.

Although Beijing has so far said little about specific labor disputes, earlier this week Premier Wen Jiabao signaled the leadership's concern, urging better treatment for the country's legions of young migrant workers.

"Migrant workers should be cared for, protected and respected, especially the younger generation," the official Communist Party paper, People's Daily, cited Wen as telling a group of migrant workers in Beijing.

In a commentary Thursday, the newspaper said China's economic model is facing a "turning point."

"Raising workers' income levels and adjusting the gap between rich and poor is not just an emergency response to protect stability," said the author Tang Jun, a researcher at the Chinese Academy of Social Sciences, a government think tank.

A labor law that went into effect in 2008 has accelerated an upsurge in workers' awareness of their rights. Meanwhile, there has been a generation shift between older migrant workers, who grew up in poverty and usually were the first in their families to seek non-farm work, and their children, who have higher expectations and less tolerance for low wages and harsh conditions.

_

Swiss parliament clears way for US tax deal

2010-06-17T02:51:00.000-07:00

By ELIANE ENGELER, Associated Press

Swiss lawmakers on Thursday gave final approval to a treaty with the United States that will hand Washington thousands of files on suspected tax cheats, agreeing to drop plans to allow a referendum on the issue.

Parliament's upper and lower house agreed that there will be no possibility of referendum on the deal that will see the country's biggest bank, UBS AG, divulge the names of 4,450 American clients suspected of tax evasion to U.S. authorities.

The agreement between both houses secured final approval of the treaty, which the government hopes will eventually end UBS's three-year battle with U.S. tax authorities that culminated in revelations the bank had for years helped American clients hide millions of dollars in offshore accounts.

UBS chief executive Oswald Gruebel welcomed the decision.

"I and the whole bank thank the Federal Council and those parliamentarians who worked to find a solution to this issue," he said in a statement.

The lower house voted 81-63 to drop its earlier demand that Swiss voters should be allowed to approve the deal in a referendum before it comes law. Forty-seven lawmakers abstained.

A popular ballot would have made Switzerland miss a late August deadline to hand over all 4,450 names because the vote would have been held in November at the earliest.

"Nothing now stands in the way of UBS client details being disclosed in cases where the decision handed down has taken legal effect," said the Swiss Justice Ministry in a statement.

The deal is crucial to UBS, which has faced intense pressure from U.S. authorities since 2007. Last year the bank agreed to turn over hundreds of client files and pay a $780 million penalty in return for a deferred prosecution agreement. But Washington has signaled that unless UBS reveals the further 4,450 American names demanded in the U.S.-Swiss agreement, it may face a crippling civil investigation just at a time when the bank is recovering from the subprime crisis and seeking to rebuild its U.S. business.

Swiss authorities have already transmitted the names of about 400 UBS clients who signed waivers as part of the Internal Revenue Service's voluntary disclosure program, according the Swiss Federal Tax Administration. A further 100 UBS clients gave their consent directly to Swiss authorities.

Shares in UBS were up 1.10 percent at 15.68 Swiss francs ($13.95) on the Zurich exchange.

Bloomberg BusinessWeek Business Exchange

2010-06-16T23:19:00.000-07:00

by: Arik Hesseldahl Bloomberg

Apple announced a new version of the Mac Mini today, bringing its design more in line with its siblings, the iMac and the MacBook Pro.

It’s nice to see Apple remaining committed to the Mac Mini. The line has been the subject of recurring rumors that Apple was close to killing it over the last few years, only to have its fans lobby Apple to keep it going. It once went an entire 19 months between updates. While It’s popular not only among consumers for being easy to connect to a TV. It’s also turned out to be a popular small and light server for small businesses. Apple sells a version specifically aimed at use as a server, which sells for a starting price of $999.

The new machine sports a unibody aluminum design similar to that used for the MacBook Pro, and is about 20 percent smaller than the previous Mac Mini. It’s less than an inch-and-a-half thick.

However don’t take its smaller size as any suggestion that it lacks power. Inside is an Intel Core 2 Duo processor clocked at 2.4 GHz and 2.66 GHz, an Nvidia GeForce 320M graphics processor, giving it twice the graphics power of its predecessor. The standard model comes with a 320 gigabyte hard drive and two gigabytes of RAM. Its starting price is $699.

Other big news is on the back. Like the iMac and MacBook Pro before it, the Mini now sports an SD memory card slot, and for those who use it like a digital media center, an HDMI display port for connecting to TV sets. There are also four USB ports.

Apple has also dubbed this new Mac Mini as the world’s most energy-efficient desktop. It bases that claim on how this machine compares to other desktop computers in the Energy Star 5.0 database as of this month. It also meets EPEAT Gold certification status.

A few other interesting notes about the new design. There’s a removable panel underneath the body that gives aces to the memory slots, allowing for easy RAM upgrades. It supports as much as 8 GB of RAM.

Heavy digital media users will find a lot to like. While the Mac Mini is a natural for watching movies from within iTunes and the Front Row, the Mini sports a DVD player, and can just as readily be connected to a nice set of stereo speakers, whether the music is coming from an iTunes playlist or a CD, or is streaming from the Web. Install software like Boxee or the Hulu desktop application for the Mac, and you’ve got a pretty good all-in-one digital media machine

Bloomberg BusinessWeek Business Exchange

2010-06-16T23:10:00.000-07:00

Posted by: Arik Hesseldahl Businessweek

How bad was the AT&T data breach on Apple’s iPad? According to AT&T, and the information about affected subscribers was limited to their email address, and a serial number known as an ICCID.

AT&T sent an email apologizing to affected customers, blaming “malicious hackers,” for the incident in reference to Goatse Security, a security consulting firm that publicized the vulnerability last week.

Now a wireless security consultant says that an ICCID number, once disclosed, can lead to further vulnerabilities that have been known for more than two years. An ICCID is a 19- or 20-digit serial number printed on a SIM card, the thumbnail-sized chip that gives the iPad and most wireless phones access to the cellular networks on which they operate.

Chris Paget, president and CTO of H4RDW4RE, a Sunnyvale, California-based firm that specializes in wireless security wrote in a blog post that on the AT&T network, the ICCID number directly correlates to another more sensitive and important number known as an IMSI, or International Mobile Subscriber Identity. An IMSI is a unique 15-digit number stored inside a SIM card, and it’s the number that a phone to identify itself on the wireless network.

Anyone who understand the correlation between the ICCID and IMSI numbers could use that information to carry out other kinds of attacks against wireless subscribers, Paget writes.

It turns out, that the correlation between the two numbers has already been documented. In a 2008 paper, security researcher Lee Reiber, owner of Boise, Idaho-based Mobile Forensics, Inc., a firm that trains law enforcement in collecting evidence from wireless phones, documented exactly how to extract an IMSI number from an AT&T ICCID number.

With the IMSI number in hand, the potential for trouble-making by an attacker grows much more serious, Paget says. In one scenario, the IMSI can be used to retrieve the subscriber’s full name, phone number, and approximate location relative to the nearest cell tower. Additionally, an attacker might be able to listen to their voice mail messages, something that obviously doesn’t apply to iPad owners.

In a second, more extreme scenario, a determined attacker could program a notebook PC to mimic a cell tower, and then drive within a few miles of their location, and intercept traffic from their phone or iPad. He describes the scenarios in more detail here and cites more original research in making his case.

AT&T spokesman Mark Siegel declined to comment on Paget’s observations in an email.
The list of people whose addresses were exposed include New York Times CEO Janet Robinson and New York Mayor Michael Bloomberg, the founder and majority owner of Bloomberg News parent Bloomberg Businessweek.

SEC proposes new disclosures for target-date funds

2010-06-16T23:03:00.000-07:00

By MARCY GORDON,

Federal regulators on Wednesday proposed new disclosure rules for target-date retirement funds that would require sponsors to spell out how they are investing the money and to warn about risks.

The Securities and Exchange Commission voted 5-0 to propose that marketing materials for target-date funds include how investments are being allocated among stocks, bonds, cash and such.

The proposed rules could be formally adopted sometime after a 60-day public comment period, possibly with changes.

Target-date funds, also called lifecycle funds, are pegged to a person's expected retirement year. They are an increasingly popular way to invest in 401(k) accounts and are appealing because of their "set-it-and-forget-it" approach. Usually named for the year the investor expects to retire, the funds now command a total of about $270 billion in assets.

The funds allocate investments among various types of assets, shifting to a more conservative mix as the target date for retirement approaches. The shift is called the fund's "glide path."

The funds drew criticism in the market meltdown of 2008 for wide variations in their returns, and excessive risks and high fees for some funds.

More than 40 companies offer target-date funds. The funds' complexities are so great that comparison tools from financial analysis companies are geared toward advisers and retirement plan administrators, not individual investors. It's difficult to make comparisons because of the wide variation in asset mixes.

Under the SEC proposal, target-date funds' marketing materials, whether electronic or in print, would have to include a prominent table, chart or graph showing the allocations among the various assets over the life of the fund. A statement would have to explain that the asset allocation changes over time.

The marketing materials also would have to include a statement telling prospective investors that they should consider their financial situation and tolerance for risk before going into a fund, and that it is possible to lose money investing in the fund, including at and after the target date.

"It's clear that investors need more information than just the date in a fund's name," SEC Chairman Mary Schapiro said before the vote.

The government has designated the funds as a qualified "default" investment option. That means employers are protected from liability when they invest a worker's contributions in a target-date fund if the worker hasn't chosen otherwise.

"It's not true that this is a good default investment," said Richard Michaud, president and chief investment officer of Boston's New Frontier Advisors and a critic of target-date funds.

Michaud said the SEC's proposed disclosure rules are helpful. However, the agency also should make clear "that these funds are a pretty risky bet on a long-term market," he said in a telephone interview.

Michaud calls "a dangerous myth" the idea that an investor's level of risk should be based on age, since stocks are shown to outperform bonds around three-quarters of the time over the long run. Factors more relevant than age are the investor's financial and personal situations and tolerance for risk, he says.

Target-date funds came under criticism during the market meltdown of 2008 and in its aftermath. Among 31 funds with a 2010 target date, the average loss in 2008 was nearly 25 percent. Returns for those funds varied widely: from minus 3.6 percent to minus 41 percent. Some had half or more of the assets allocated to stocks, only two years from the retirement target.

The funds have mostly recovered their losses since then. However, returns have continued to range widely, according to the SEC, from 7 percent to 31 percent last year for 2010 target funds — with an average return of around 22 percent.

A Senate investigation raised the question of whether some funds charged unreasonable fees and carried excessive risk. Several major fund companies have made changes in response to the criticism, cutting fees for their target date funds and making asset mixes more conservative sooner.

Among the largest providers of target-date funds are Fidelity Investments, Vanguard Group and Principal Financial Group.

FedEx says global trade recovery is underestimated

2010-06-16T22:56:00.000-07:00

By SAMANTHA BOMKAMP

FedEx said people are too pessimistic about a recovery in global trade, after it reported Wednesday that strong exports from Asia and other international shipments drove its improved fourth-quarter results.

While concerns about European economies and their looming debt problems remain, FedEx said international shipments overall grew by 23 percent. Countries like India, China and Brazil in particular are driving the increase.

FedEx said the U.S. economy is steadily growing as well. Still, it has a conservative outlook for the next year, expecting rising costs as shipments pick up.

The company's forecast for earnings of $4.40 to $5 per share for the fiscal year that started June 1 falls short of analysts' predictions of $5.05 per share. It's the first time FedEx has issued a full-year forecast since before the recession, indicating the company's growing confidence in the long-term recovery.

FedEx, based in Memphis, Tenn., expects to earn 85 cents to $1.05 per share for the quarter ending in August. Analysts forecast $1.03 per share.

In the quarter ended in May, FedEx earned $419 million, or $1.33 per share. It lost $876 million, or $2.82 per share a year earlier. Excluding a writedown on the value of assets and aircraft, earnings were 64 cents per share a year ago.

Revenue climbed 20 percent to $9.43 billion. FedEx took delivery of 18 planes in the fourth quarter. Six of those were Boeing 777Fs, which can fly from the company's hub in Memphis to China without refueling.

FedEx said international priority shipments jumped 24 percent in the period. Most of those shipments are high-tech, high-value goods like electronics and pharmaceuticals, which people want fast. FedEx will ship Apple's new iPhone 4s when the popular gadget launches next week.

Average daily shipments in the company's Ground unit rose 7 percent. The Ground segment grew steadily during the recession as people switched to slower shipping methods to save money, and FedEx gained business as DHL retreated from the U.S. market.

The company's weak point remains its freight segment, which posted back-to-back losses. FedEx said the market still has too many trucks competing for a relatively small amount of freight, which is preventing it from raising prices. FedEx Freight CEO William Logue said the unit is aggressively reviewing the business. He didn't provide a timeline for when it would become profitable. This segment ships things like refrigerators and other large appliances...

FedEx's fourth-quarter earnings were also affected by the reinstatement of merit raises and some 401(k) contributions it cut off during the recession.

For the full fiscal year that ended in May, FedEx posted net income of $1.18 billion, or $3.76 per share, compared with $98 million, or 31 cents per share, in the previous fiscal year.

Revenue fell 2 percent to $34.73 billion.fell $4.94, or 6 percent, to close at $78.07 Wednesday

Solar Panels – Are They a Threat to Biodiversity?

2010-06-15T23:15:00.000-07:00

Solar panels are gaining more recognition as key ingredients to produce eco-friendly and renewable source of energy. With growing need for more energy, there will be in future, a plethora of solar panels all over the world. Now this has become a source of eco-conservative concern, according to Mr. Bruce Robertson, Research Associate, from Kellogg Biological Station, Michigan State University.

Threat to biodiversity:
Mr. Robertson sounded a warning about a possible threat to biodiversity. He noted that the shining dark surfaces of the solar cells, which reflect light, resemble water surfaces resulting aquatic insects like mayflies depositing their eggs on the solar panels. The solar panels are posing a false habitat hazard to more than 300 species of insect. This leads to a reproductive failure which may have far-reaching cascading adverse effects to the food chain. The insects fall a prey to predators. This data was discovered from a research held at Hungary.

Mistaken surface:
After their research at Hungary, Mr. Robertson and his colleagues published an online article in ‘Conservation Biology.’ Reflected sunlight from expanses of dark surfaces that are shiny like glass-clad buildings, even vehicles, solar panels of all sizes, becomes a worrisome new source for polarized light pollution. This is what causes the caddis flies and other aquatic insects to mistake shining surface to be water surface to lay their eggs.

Warning off:
Mr Robertson estimated that white marking the solar cells may reduce this threat to a great extent. He calculated that the efficiency of solar cells is not too greatly affected by the white grids. While humans may recognize reflected sunlight as glare, the group discovered that the aquatic insects can be warned off by fixing white-color grids and other methods to break up the polarized reflection. Non-polarizing white-grid use is a new approach for habitat fragmentation, used beneficially here.

Research group:
Supported by Great Lakes Bio-energy Research Centre, U.S. Department of Energy and the Hungarian Science Foundation, Robertson and his team conducted his research at Hungary. The team consisted of scientists from Eotvos University in Budapest and Szent Istvan University in Godollo, Hungary.

The Rise of a Chinese Worker's Movement

2010-06-15T23:10:00.000-07:00

By Dexter Roberts Businessweek

A nondescript Beijing suburb was recently the venue for an evening of radical politics. The New Labor Art Troupe, a performance group with a cast of laborers, ran a graphic photo of a Foxconn worker who had just killed himself. Poems were read commemorating the hard lives of migrant workers in electronics factories and on construction sites. A guitar and harmonica were hauled out and songs were sung with titles like Marginalized Life, Industrial Zone, Working Is Our Glory and Our Hell, Get Back Our Wages, and Fighting in Solidarity. Some of the hundred or so assembled migrant workers, many of them employed in small furniture factories around the capital, started crying. The evening ended with the crowd standing up for a Chinese rendition of the The Internationale, the old battle hymn of the worldwide socialist movement. "The atmosphere was militant, but there was no overt criticism of the government," says University of Hawaii political scientist Eric Harwit, who attended the two hour-plus evening performance on May 28. "They seemed really sincere that they were upset about migrant labor working conditions."

The recent Beijing performance is just one example of the rising labor activism now evident in China, activism that asserted itself in recent weeks at the factories of Foxconn and Honda Motor (NYSE:HMC - News). It includes groups like New Labor, yet it also encompasses legal aid and other support networks at scores of universities, law firms focused on promoting worker rights, and countless migrant worker aid associations. "Civil society organizations are growing more powerful. They will push China to change," says Li Fan, director of the Beijing-based nongovernmental organization World & China Institute. Li has worked closely with labor groups as well as those pushing grassroots democracy.

The question is whether these groups can spawn a workers' movement that has the organization and mass to challenge factory owners across the country. Until a few years ago the Chinese authorities broke up sporadic workers' protests with relative ease: Local officials arrested a few ringleaders, then quickly offered concessions to the rest of the strikers to stop the unrest. Above all else, the Chinese security apparatus made sure that the leaders of labor protests in Shenzhen, Harbin, and elsewhere didn't connect with each other to form a national movement.

Today's young workers may be harder to corral. China now has 787 million mobile-phone users and 348 million Internet users -- and migrant workers in their twenties are far more aware of world developments than their parents. The younger generation can follow labor actions as they unfold, whether in China's northeastern Rust Belt or southern Pearl River Delta. "They have access to information. They use their mobile phones for messaging, to send pictures and video, and to go online," says Chinese Academy of Social Sciences journalism professor Bu Wei, who is researching the use of media by migrant workers.

The more assertive workers have also benefited from a huge push by China's state-run media to popularize knowledge about the tough labor contract law promulgated in 2008. As a result, young workers know what's owed them, whether it be guarantees of double pay for overtime or safer working conditions. "Every worker is a labor lawyer by himself. They know their rights better than my HR officer," says Frank Jaeger, a German factory owner who produces cable connectors in Dongguan in Guangdong Province. Adds Harley Seyedin, president of the American Chamber of Commerce of South China: "There are Internet cafes everywhere, so the workers can get information. They are starting to ask for more. The days of cheap labor are gone."

The workers' ranks are now filled with self-starters like Xu Haitao. A 28-year-old technician in a small metal components factory in Shenzhen, Xu takes a class on labor law and worker rights every Sunday at a local migrant workers support center. "Of course, more and more workers understand their rights these days," says Xu, who surfs labor law sites regularly. "Last year I started using my own computer. Computers are not expensive anymore. I bought the pieces and constructed my own." Xu wants more workers to educate themselves. "Many capitalists and factory managers still abuse our rights," he says. "If all the workers knew the labor law -- all 600 million of us -- then many factory owners would go bankrupt."

These self-educated workers now have new allies in China's universities. A decade-long effort by Beijing to expand the number of students in China's universities has brought more and more of the rural population -- and those with relatives and friends who still work in the factories -- onto Chinese campuses. That has driven a wave of support at colleges for migrant workers, points out CASS professor Bu. Students studying law, political science, and social science are forming support groups and even provide legal aid for workers, to a degree not seen before. One of Bu's graduate students, for example, has a brother working for the Foxconn facility near Shanghai.

Many faculty members support their students' activism. "From the Foxconn tragedy, we hear screams coming from the lives of a new generation of migrant workers, warning the entire society to rethink this development model leveraged upon the sacrifice of people's basic dignity," warned an open letter dated May 19 and signed by nine sociologists from prominent schools, including Peking and Tsinghua Universities. "We call for national and local governments to implement practical measures that allow migrant workers to integrate and establish roots in the city...sharing the fruits of economic development they themselves created."

It may be a long summer for Chinese officials trying to contain this unrest. On June 3 more than 20 women workers were detained when police tried to shut down a two-week strike at a formerly state-owned cotton mill in Pingdingshan, Henan. Thousands of workers had stopped operating the looms to express their anger at their factory's privatization and to demand higher wages, reports the Hong Kong-based China Labour Bulletin. Although workers are back on the line at the Honda transmission plant that strikers had shut down, their language is anything but conciliatory. "We call all workers to maintain a high degree of unity and not to allow the capitalists to divide us," the Honda workers declared in a statement released on June 3. "We are not simply struggling for the rights of 1,800 workers, but for the rights of workers across the whole country." On June 7, another Honda plant in China went on strike.

The bottom line: A new, savvier, and more militant generation of workers may start to form a genuine labor movement in China.

Lawmakers blast oil firms' drilling plans

2010-06-15T22:56:00.000-07:00

By Tom Doggett and Matt Daily Reuters

U.S. lawmakers blasted major oil companies on Tuesday for "virtually worthless" and "cookie cutter" plans to handle a deepwater oil disaster, with one top executive conceding the industry was ill prepared to handle big offshore spills.

Summoned to Capitol Hill to testify along with the U.S. chief of BP, top executives from four major oil companies distanced themselves from BP and its massive Gulf of Mexico oil spill by defending their practices and explaining how they could have prevented the catastrophe.

Facing a hostile room, the oil company executives were hoping to head off potentially costly new regulations by detailing their drilling policies and criticizing BP for not following industry norms.

Democrat Edward Markey blasted the companies for mentioning walruses -- which have not been found in the Gulf of Mexico for millions of years -- in their plans and for including the name and phone number of a specialist who died in 2005.

The outcome of the charged hearing could affect BP, U.S. offshore drilling and legislative efforts to introduce a new climate bill, as lawmakers consider options to address the worst oil spill in U.S. history.

The hearing came ahead of a televised address to the nation on Tuesday evening by President Barack Obama, who could outline new efforts to contain the spill and make a new call for climate legislation. Polls show many Americans doubt his administration has done enough to clean up the mess.

'NOT WELL EQUIPPED'

Soon after the deadly BP well explosion that killed 11 people, the Obama administration imposed a six-month moratorium on drilling in waters more than 500 feet deep.

The executives from Exxon Mobil, Chevron, ConocoPhillips and Royal Dutch Shell, are trying to reassure lawmakers that drilling is safe, saying they would have done things differently with such a spill.

But when pressed on how to handle a worst-case scenario with hundreds of thousands of barrels of oil spilling into the ocean, Exxon's chief Rex Tillerson said, "When these things happen we are not well equipped to deal with them."

"We've never represented anything different than that. That's why emphasis is always on preventing these things from occurring, because when they happen we are not very well equipped to deal with them," Tillerson said.

Lawmakers seemed unconvinced that the four major oil companies had better contingency plans than BP, which is still struggling to contain the oil that has been gushing into the ocean from a ruptured well for nearly two months.

The hearing could lead to new legislation that would have wide impact in the U.S. Gulf, America's best hope for increasing its domestic oil supply. It's also one of the most promising exploration frontiers for companies including BP, Shell and Chevron.

One by one the lawmakers took turns heaping criticism on the oil executives who sat expressionless as they stared facing rows of their inquisitors.

"Lawmakers won, no question. As soon as the companies were asked why they were better, it ended up making them all look worse in the eyes of the lawmakers," said Kevin Book, analyst at ClearView Energy Partners in Washington.

Though all five men were seated at the same large table, it was clearly four against one with BP America's chief Lamar McKay looking solitary at the end of the table as he faced most of the verbal attacks.

While McKay silently listened to Republican Representative Cliff Stearns of Florida demand his resignation, the other executives had only to defend their policies and insist that they would have done it differently.

McKay, who appeared drawn but showed little emotion, did not offer much new ahead of Thursday's testimony by BP's chief executive, Tony Hayward, on Capitol Hill.

Though Wall Street investors shrugged off the hearing as political theater, it is a tradition in Washington and a conduit of public anger, especially ahead of November elections.

Representative Bart Stupak, a Democrat and one of the lawmakers heading a probe of the disaster, slammed the companies' response plans for offshore accidents. He singled out Exxon Mobil for having a 40-page media response strategy, including pre-written talking points.

"Exxon Mobil's plan appears more concerned about public perception than wildlife protection given the fact that their media plan is fives times longer than its plan for protecting wildlife," said Stupak, adding that all of the companies' plans were "virtually worthless when an actual spill occurs."

'COOKIE CUTTER'

Representative Henry Waxman, a Democrat, said the companies had submitted nearly identical "cookie cutter" strategies to deal with a major spill which all included techniques that had failed to stem the flow of oil from BP's well.

"We found that none of the five companies has an adequate plan," he said.

BP's McKay was emotionless when repeatedly asked by Markey to apologize for under-estimating how much oil was gushing into the ocean after the well ruptured.

"We are sorry for everything the Gulf Coast is going through, we are sorry for that and the spill," he said, adding that the company did not have the technology to measure the amount of spilled oil.

But though the four non-BP executives appeared to stick together, chatting apart from McKay when the hearing ended, they still had to face public anger.

As the hearing came to a close, a protester holding a soda bottle filled with a black liquid approached the executives shouting, "You all are just as corrupt as BP. You should all be ashamed of yourself."

Police presence was beefed up, with the building and hearing room entrances both inside and outside lined with police officers.

EU demands 'extra' 2011 deficit measures of Spain

2010-06-15T22:50:00.000-07:00

Europe on Tuesday told Spain it must introduce "extra" measures in its 2011 budget if it is to restore its public deficit to the EU limit of three percent of GDP by a 2013 target.

"For 2011, Spain will need to specify concrete measures of about 1.75 percent of GDP to reach the deficit target of six percent in 2011," the EU's economic and monetary affairs commissioner Olli Rehn said in Strasbourg, France, at the European parliament.

So far Spain's deficit busting measures for next year only amount to 1.00 percent of output, according to Rehn's spokesman.

"Extra measures" need to be "specified in the 2011 budget," he stressed.

Spain was one of 12 countries, including Portugal, whose existing deficit reduction plans were considered, and broadly approved, by the EU Commission.

But while officials had already said they expected Spain to require additional measures in 2012 and 2013, Brussels now wants fresh action in Madrid when its budget is announced in mid-September.

Last month, the Spanish parliament, by a single vote, approved plans to slash 15 billion euros of spending (18.5 billion dollars) in an extended austerity plan covering this year and next.

That came on top of 50 billion euros of radical cuts already announced in January, plus pension and job market reforms, the latter due to be approved by the Spanish government on Wednesday.

The commission's stance, however, will likely increase intense scrutiny on capital markets after Spain's public deficit soared to 11.2 percent of GDP in 2009, the third-highest level in the eurozone after Greece and Ireland.

Investors are demanding ever higher interest payments in return for providing fresh cash, and banks' funding is also drying up according to experts.

Group of Seven finance ministers fear that problems with Spain's economy in particular -- Europe's fifth largest, with its banks heavily involved in Latin America -- could undermine global recovery.

"We are all concerned ... with the need for certain vulnerable European economies to act quickly to fiscally consolidate," Canadian Finance Minister Jim Flaherty said on Monday.

A string of leading EU figures have had to deny persistent reports that Spain is preparing to tap an EU emergency fund of 500 billion euros of loans and guarantees.

Spain "is working to ensure that these rumours remain unfounded, as is currently the case," Spanish Economy and Budget Minister Carlos Ocana said.

German Chancellor Angela Merkel said in Berlin late on Monday that "Spain, or any country, knows that it can make use of this mechanism at any time, if necessary," subject to conditions being thrashed out as was the case with Greece in a separate bailout.

Ten countries were given the all-clear under existing austerity drives including France, Germany and Italy, which have all recently announced new cuts of their own, as well as Austria, Belgium, the Czech Republic, Ireland, the Netherlands, Slovakia and Slovenia.

Portugal, for its part, has pledged to cut its public deficit this year to 7.3 percent, rather than 8.3 percent as initially planned. However the commission said that "further corrective measures should be included," next year.

Britain should have been the 13th EU member state to come up for inspection but with the new government having slated an emergency budget for June 22, its review was put back.

Two days from a summit of EU leaders dominated by their response to Europe's debt crisis, the commission meanwhile recommended opening excessive deficit procedures on three additional countries -- Cyprus, Denmark and Finland -- in moves to be agreed formally by EU finance ministers on July 13. Bulgaria is likely to follow.

Tesla Motors to raise $185M in IPO, Toyota deal

2010-06-15T22:45:00.000-07:00

By DAN STRUMPF Associated Press

Electric car maker Tesla Motors Inc. expects to raise $185 million from its highly anticipated initial public offering of stock and an investment from Toyota Motors Corp.

The company, which makes the $109,000 all-electric Roadster sports car, plans to begin selling stock the week of June 28, according to IPO research firm Renaissance Capital.

The Palo Alto, Calif. company currently sells just the Roadster, a high-end car powered by lithium-ion batteries with a design based on the Lotus Elise two-seater sports car. It has sold just 1,063 Roadsters since 2008 and has lost $290.2 million since the company was founded in 2003. Revenue has totaled $147.6 million.

However, the company plans to start selling a mass-market luxury sedan starting in 2012 that is expected to cost $49,900 after a $7,500 federal tax credit. The company has said it expects continuing quarterly losses until the sedan, the Model S, hits the market. Tesla said it has already taken 2,200 reservations for the five-passenger sedan.

After the release of the Model S, Tesla plans to continue expanding its lineup of electric cars with increasingly cheaper models.

Tesla said in a Tuesday filing with the Securities and Exchange Commission that the company and its stockholders plan to sell 11.1 million shares when it goes public. Shares will be priced between $14 and $16.

Toyota Motor Corp. will buy an additional $50 million in Tesla stock immediately after the close of Tesla's public offering.

As part of the partnership with Toyota, Tesla will pay the Japanese automaker $42 million for a shuttered auto plant in Fremont, Calif. The plant, called New United Motor Manufacturing Inc., is a former joint venture between Toyota and General Motors Co., but GM withdrew from the joint venture when it filed for bankruptcy protection last year, leaving Toyota saddled with the idled facility.

Tesla said it plans to use the sprawling, 207-acre facility — most recently used to build the Pontiac Vibe and the Toyota Corolla and Tacoma — to build the Model S. In addition, the two companies have loose plans to work together later on another electric car.

Tesla also has another source of funding: the U.S. government. In January, the company received approval for a $465 million loan from the Energy Department under a program established by Congress to foster development of electric vehicles. Ford Motor Co. and Nissan Motor Co., among other automakers, have also received funding from the program.

Tesla said it has drawn down $45.4 million of its government loan as of Monday. The company has also received $31 million in tax incentives from the state of California.

Shareholder Activists Set to Drill Oil Companies

2010-06-14T23:34:00.000-07:00

By David Bogoslaw Business

BP's Gulf disaster pressures energy companies to disclose more about environmental and safety compliance. How to account for catastrophic risk?

(This story has been updated in the fifteenth paragraph to include comment from BP.)

It may seem unthinkable that a company with so formidable a public image and financial track record as BP (BP) is fighting to save its reputation—and potentially, its very existence—less than two years after the oil industry logged its biggest-ever growth in profits. Reversals of fortune of this magnitude aren't as rare as we sometimes think. Recall how the tobacco giants wound up ceding enormous, profit-generating power to the U.S. government and how asbestos lawsuits forced such major industrial outfits as Johns-Manville into bankruptcy.

The common denominator linking BP with these companies is growing clear: They all failed to anticipate risks that could threaten their business foundations.

Now the tide has shifted with respect to how much thought mainstream investors are giving to environmental, social, and corporate governance (ESG) issues. Michael Passoff, senior program director for the Corporate Social Responsibility Program at As You Sow, a shareholder advocacy organization in San Francisco, has reviewed as far back as 1999 resolutions focused on corporate environmental issues that were being filed for the first time. "Nothing comes close to the support we're getting now," says Passoff.

A June 3 proxy vote that called on Layne Christensen (LAYN), a mining and production company, to produce a sustainability report drew support from over 60 percent of shareholders. Earlier resolutions regarding disclosures about coal ash at power producers CMS Energy (CMS) and MDU Resources Group (MDU) were supported by over 40 percent of each company's shareholders. Resolutions demanding greater disclosure by natural gas producers about their hydraulic fracturing practices have drawn supportive votes ranging from 26 percent to 41 percent of shareholders, five to six times what they've received in prior years, says Passoff.

He believes environmental sustainability issues had already begun to attract broader support before the Apr. 20 explosion of BP's Deepwater Horizon rig sent an estimated millions of barrels of oil gushing into the Gulf of Mexico. Passoff credits the change in consciousness to growing awareness of climate change issues. "Investors are seeing that environmental practices affect their bottom line. It's starting to become more commonly accepted," he says.

Environmental resolutions are drawing affirmative votes from pension funds such as the California Public Employees Retirement System (CalPERS) and from RiskMetrics, a proxy service that historically has tended to support management on ESG resolutions, says Passoff.
Other oil companies face same risks

On June 11, MSCI, a provider of stock indices and portfolio risk analytics, announced plans to include nonfinancial factors such as ESG in its investment products. MSCI acquired RiskMetrics Group on June 1.

There's undeniable risk that BP could declare bankruptcy as a result of the Gulf oil disaster, says Nell Minow, editor and co-founder of the Corporate Library, an independent research group. That BP is on the spot doesn't mean other oil companies are doing any better at planning for environmental debacles, she adds.

"If large fiduciary institutional investors who are going to own a piece of every company for a long time don't understand that they need to do a better job of monitoring risk and getting boards of directors to monitor risk," investors are better off "putting [all their money] in T-bills," says Minow.

he Securities & Exchange Commission's greater receptivity toward requiring disclosures on various matters concerning climate change points to a push for more disclosure, not less, says Robert Graham, founder and head of the environmental law practice at Chicago-based Jenner & Block. He thinks this should motivate shareholders to require companies to disclose more thorough information in their public filings.

In the past, demands for risk disclosure tended to be viewed as hypothetical. In light of the Gulf disaster, Graham predicts that requests for such information will become more mainstream. "These issues are real and this disaster dramatically demonstrates how they impact a company's balance sheet," he says.
$20 billion liability for marshlands?

Skeptics need look no further than the toll taken on BP's shares since Apr. 20, he says. (The stock has declined 44 percent.) It's also clear—from the thousands of lawsuits BP is facing as a result of the spill's health and safety effects, plus damages claims by many businesses operating in the Gulf—that the company is likely to be held accountable, Graham adds.

The plunge in BP's stock price over the past six weeks amounts to roughly $83 billion in market capitalization erased, no small loss for shareholders. If BP bows to pressure from U.S. politicians to suspend its $3.36 per ADR annual dividend, the pain will be compounded for BP investors. While the company has reportedly said it won't seek to limit payouts on legal claims to the $75 million cap set by the Oil Pollution Act of 1990, the liability cap is likely to be thrown out if plaintiffs' attorneys can prove that the company's reckless behavior and lack of proper safety measures contributed to the disaster.

BP could be on the hook for as much as $20 billion if a major public works project needs to be undertaken to save marshland around the Gulf, Douglas Brinkley, fellow in history at the Baker Institute at Rice University in Houston, told CNN (TWX) last week.

As of June 10, the company had received roughly 42,000 claims and paid over 20,000 claims totaling $53 million, a spokesman in BP's Houston office told Bloomberg Businessweek.

It is inevitable, Graham says, that companies will be pressed by shareholders to disclose more information about safety practices, the kinds of fail-safe mechanisms they have in place for high-risk operations, and their plans and prospects. Companies will have to reconsider the insurance they've arranged to better gauge how much and what kinds of coverage they need to cover potential risks. They'll also need to figure out how much cash to set aside in reserve to cover unforeseen incidents that may cause environmental damage, he says. Shareholders will also start to insist on viewing companies' safety records, including any sanctions received from federal or state agencies regarding their operations.
Do short-term investors care?

There will also likely be a bigger push for disclosure on what companies are doing to develop alternative energy sources and how much money they're investing in that area, relative to investments in fossil fuels, says Graham, which he notes would fit in well with disclosures on climate-related risks that the SEC began to require in February. In the long run, it may well encourage energy producers to put further research and money into developing less risky, climate-friendlier alternative energy sources such as solar and wind, he adds.

From one perspective, growing awareness among shareholders of environmental, social, and governance-related risks could be seen as a corrective to the general trend toward a relatively short-sighted view as investors' time horizons have shrunk. "If you're renting the stock, you don't care what happens next year," says Lloyd Kurtz, manager of the Wells Fargo Advantage Social Sustainability Fund (WSRAX). "You don't care if the company has a litigation problem in two years because you'll be gone by then."

The prevailing short-sighted view of risk creates an opportunity for investors with longer time horizons, who are more inclined to look for problems that may crop up, he says.

Kurtz would prefer that the damages companies are required to pay for litigation and environmental destruction continue to come out of shareholder equity rather than out of cash reserves earmarked to cover such events. That's the only way to get investors to make it common practice to weigh environmental risks, along with other risk factors, when deciding whether or not to invest in a company, he says. He suspects that any attempt to assign a monetary value to such risks before they manifest would only enable companies to manage the reserves to help bolster or reduce their profits.

Minow at the Corporate Library agrees that investors need to consider such risks when researching companies to invest in. She would also like to see these risks accounted for on companies' balance sheets. Apart from what she says is BP's environmental negligence, the company embarked on a project "without any idea of how to handle it if things went wrong," something Minow calls "utterly indefensible." The fact that BP didn't have a backup plan in place speaks to sustainability issues, she adds.

She sees a clear parallel with the fate of Texaco, which—while still an independent company—was forced to file for bankruptcy in 1987 so it could continue operating while it figured out how to recover from a huge civil verdict stemming from its attempted acquisition of Getty Oil.
shareholders might write in directors

The financial industry reform legislation that's now in conference committee between the U.S. Senate and the House of Representatives includes provisions for shareholders to propose their own board candidates on companies' proxy cards, which will put unprecedented pressure on individual directors, says Minow. She believes this—more than resolutions, which aren't binding—will be the focus of shareholder activism.

"[Primary attention] is going to be on replacing boards of directors and if the board of directors at BP didn't do a good-enough job of responding to problems, they'll be out," she predicts. If BP lacks directors with environmental credentials, some will have to be found and added, she says.

Coming as it did toward the end of proxy season, the timing of the Gulf disaster may seem unfortunate for activists, but Minow believes time will confer an advantage. By the time the 2011 proxy season comes around, she predicts that the financial reform legislation will have passed, opening fresh opportunities for activists to exert pressure on companies.

"There's a reason shareholders' resolutions have to be in by fall for meetings in the spring. It gives corporations a really good opportunity to get their acts together before shareholders start proposing resolutions," she says. "Partly for that reason, I suspect [BP chief executive officer Tony] Hayward will be out by the end of the summer."

ATHENS, Greece – Moody's Investors Service slashed Greece's credit rating to junk status on Monday in a new blow to the debt-ridden country that is un

2010-06-14T23:20:00.000-07:00

Battery maker Valence Technology Inc. said Monday that its fiscal fourth-quarter loss widened on lower sales of large battery systems as well as higher expenses.

The company reported a loss of $5.1 million, or 4 cents per share, in the quarter ending March 31. Valence recorded a loss of $4.4 million, or 4 cents per share, in the year-ago quarter, when the company had fewer shares outstanding.

Revenue dropped to $3.9 million from $4.7 million.

Analysts surveyed by Thomson Reuters expected a loss of 4 cents per share on revenue of $4.3 million.

Operating expenses increased to $4.6 million from $3.7 million.

For the full fiscal year, Valence lost $23.2 million, or 18 cents per share, compared with a loss of $21.4 million, or 18 cents per share, in the 2009 fiscal year.

Shares of Valence finished regular trading unchanged at about 91 cents.

Moody's downgrades Greece's debt to junk status

2010-06-14T23:14:00.000-07:00

By NICHOLAS PAPHITIS, Associated Press Writer

ATHENS, Greece – Moody's Investors Service slashed Greece's credit rating to junk status on Monday in a new blow to the debt-ridden country that is under intense international scrutiny after narrowly avoiding default last month.

A Moody's statement said it was cutting Greece's government bond ratings by four notches to Ba1 from A3, with a stable outlook for the next 12-18 months. It was the second of the three major agencies to accord Greek bonds junk status. Standard & Poor's did the same in late April.

The downgrades reflect concern that the country could fail to meet its obligations to cut its deficit and pay down its debt — which the Greek government says is out of the question.

Finance Ministry officials in Athens had no immediate reaction to the rating cut, which came as a delegation from the International Monetary Fund and the European Union started an interim review of the country's efforts to pull itself out of a major debt crisis.

After amassing a vast public debt and overspending that sent its budget deficit spiraling to 13.6 percent of gross domestic product in 2009, Greece was saved from defaulting on its loans in May by the first installment of a joint EU and IMF euro110 billion bailout. It is to receive the second in September, pending implementation of a major austerity program that has sparked strong union reaction and a series of damaging strikes.

"The Ba1 rating reflects our analysis of the balance of the strengths and risks associated with the Eurozone/IMF support package," said Moody's lead analyst for Greece Sarah Carlson.

"The package effectively eliminates any near-term risk of a liquidity-driven default and encourages the implementation of a credible, feasible, and incentive-compatible set of structural reforms, which have a high likelihood of stabilizing debt service requirements at manageable levels."

"Nevertheless, the macroeconomic and implementation risks associated with the program are substantial and more consistent with a Ba1 rating."

Despite the downgrade, the gap, technically known as a spread, between Greek 10-year bond yields and their benchmark German equivalents dipped only slightly late Monday. The difference was at 5.91 percent, down from 6.12 percent earlier in the day.

That means that Greece would have to pay a rate of around 9 percent were it to raise cash through bond issues. However, bolstered by the rescue loans, Athens says it has no plans to try selling its bonds to the markets soon — except for short-term treasury bill issues in July.

In return for the bailout, Prime Minister George Papandreou's center-left government announced painful austerity measures, slashing pensions and salaries while increasing indirect taxes, seeking to gradually bring the deficit down to 2.6 percent in 2014. The continued flow of EU and IMF funds is conditional on Greece meeting its targets, which will remain under constant scrutiny.

Athens says it has exceeded deficit-cutting targets in the first five months of 2010, as a lower-than-expected increase in revenues was offset by higher spending cuts.

The finance ministry says the January-May deficit stood at euro8.97 billion ($10.77 billion), compared to euro14.65 billion in the first five months of 2009. The drop translates into a 38.8 percent reduction, more than the planned 35.1 percent cut.

Papandreou said late last week that Greece was back on track to "a normal financial and fiscal situation, having left the major dangers behind."

Monday's Moody's statement said the austerity package was "very ambitious."

"There is considerable uncertainty surrounding the timing and impact of these measures on the country's economic growth, particularly in a less supportive global economic environment," Carlson said.

The EU/IMF delegation, which will stay in Athens for the week, was holding meetings at the finance ministry and was expected to also meet with officials at the labor ministry in coming days to review reforms to the social security system.

World Bank Says ‘Double-Dip’ Possible in Some Europe Economies

2010-06-10T01:03:00.000-07:00

Some European nations may experience a second economic slowdown if the region fails to manage its debt crisis, threatening countries from Central Asia to Latin America, the World Bank said today.

“We’re expecting that growth in the second quarter is also likely to be disappointing, quite possibly seeing negative growth in several European countries and a double dip in some of these economies,” Andrew Burns, the World Bank’s manager of global macroeconomics, said at a press briefing telecast from Washington today.

Stocks have tumbled in the past two months on concern that the global recovery will be derailed by the European debt turmoil. Risks to the world’s economic outlook have “risen significantly” and policy makers have limited room to provide support to growth, International Monetary Fund Deputy Managing Director Naoyuki Shinohara said yesterday.

Government finances in high-income countries in Europe, France, the U.S. and the U.K. are currently on an “unsustainable path,” Burns said. Failure to manage a fiscal consolidation could lead to a loss of confidence among investors in sovereign debt, increasing the risk premium and shrinking capital available for developing countries, he said.

“Even in a less probable but more serious scenario, you could see a crisis occur similar in some senses to the East Asian crisis in some of these more highly indebted countries,” he said. “That could have substantial knock-on effects in Europe and elsewhere.”

Most at Risk

Economies most at risk from such a crisis are those in Eastern Europe, Central Asia, Latin America and the Caribbean, Burns said.

“There would actually be a double-dip in the high-income economies,” Burns said, without naming the economies that would be affected by the less likely scenario. “We estimate that growth there could fall by 0.6 percent in 2011. That’s going to have important knock-on effects in East Asia, particularly because it is a very heavy trading region.”

Asia’s export growth may ease to “more sustainable rates” as China‘s import demand cools and growth in Europe “continues to disappoint,” the World Bank said in its Global Economic Prospects report released in Washington late yesterday. Failure to resolve the debt crisis in Europe could hurt global growth and have “serious” effects on East Asia, where exports and investment are large shares of economies, it said.

The escalation of Europe’s debt crisis has forced the European Union and the International Monetary Fund to offer as much as 750 billion euros ($904 billion) to countries in danger of financial instability.

Germany this week announced a four-year, 80 billion-euro package of budget cuts and revenue-raising measures. Greece, Spain, Italy and Portugal are among euro countries with austerity programs in the works. France plans a three-year spending freeze.

“If markets lost confidence in the credibility of efforts to put policy on a sustainable path, global growth could be significantly impaired and a double-dip recession could not be excluded,” the World Bank said in its report.

Goldman sued by hedge fund over notorious CDO deal

2010-06-10T00:13:00.000-07:00

By Steve Eder and Matthew Goldstein Reuters

An Australian hedge fund is suing Goldman Sachs Group Inc (GS.N) over an investment in a subprime mortgage-linked security that contributed to the fund's demise in 2007.

The lawsuit filed on Wednesday accuses Goldman of misrepresenting the value of the notorious Timberwolf collateralized debt obligation, which garnered a lot of attention during a recent congressional hearing.

Basis Yield Alpha Fund sued Goldman to recoup the $56 million it lost on the CDO, said Eric Lewis, a Washington-based lawyer for the fund. The suit also seeks $1 billion in punitive damages.

The litigation is the latest in a string of legal and public relations headaches for Goldman. In April, U.S. securities regulators charged the powerful Wall Street bank with civil fraud in connection with the structuring and sale of another CDO called Abacus 2007.

The Financial Times reported on Wednesday that the U.S. Securities and Exchange Commission was examining another Goldman CDO -- Hudson Mezzanine Funding -- that was not part of the April civil fraud lawsuit. The FT, citing people familiar with the matter, said the inquiry into the $2 billion CDO was part of a wider probe into the CDOs of Wall Street banks.

The Australian hedge fund decided to file suit after months of settlement talks with Goldman broke down. Reuters on Tuesday first reported on the likelihood of a lawsuit. The suit was filed in U.S. District Court for the Southern District of New York.

The 36-page complaint opens with a rhetorical flourish that repeats a Goldman executive's description of the Timberwolf CDO as "one shitty deal."

See http://www.scribd.com/doc/32779463/Complaint for a copy of the complaint.

The suit alleges that Goldman pitched the Timberwolf deal to Basis even as the bank's sales force and mortgage traders knew the market for CDOs could soon crumble. In June 2007, Basis paid $78 million for two pieces of the CDO with a face value of $100 million.

Basis, which financed the transaction with a loan from Goldman, said it lost more than $50 million when the bank began making margin calls on the product just weeks after selling the deal. Basis said the margin calls quickly forced it into insolvency.

"You can't say you are basically selling a strong performing high-yielding security that you know is going to tank," said Lewis, a partner with the law firm Baach Robinson & Lewis.

"MISGUIDED ATTEMPT"

Goldman called the suit "a misguided attempt by Basis ... to shift its investment losses to Goldman Sachs."

Michael DuVally, a Goldman spokesman, said, "Basis is now trying to recoup its losses based on false allegations that it was misled about aspects of the transaction and market conditions."

The $1 billion Timberwolf CDO and the aggressive tactics Goldman employed to sell the deal were a focal point of an April hearing by the Senate Permanent Subcommittee on Investigations. One of the documents unearthed by the panel was an email in which former Goldman mortgage executive Thomas Montag called Timberwolf "one shitty deal," just days after the firm completed the sale to Basis.

The hedge fund's lawsuit, which draws on other documents introduced by the Senate panel, alleges that Goldman misrepresented the value of the Timberwolf securities and failed to disclose that Goldman's trading desk had a role in working with Greywolf Capital Management in picking Timberwolf's underlying securities.

GOLDMAN COORDINATION

During the Senate subcommittee hearing in April, Goldman Chief Executive Lloyd Blankfein said the bank's employees are often unaware of what strategies are being employed elsewhere at the firm.

"We have 35,000 people and thousands of traders making markets throughout our firm," Blankfein said in response to a question from Senator Carl Levin. "They might have an idea. But they might not have an idea."

But the Basis lawsuit raises new questions about the coordination between Goldman's trading desks and its sales staff.

David Lehman, who joined Goldman in 2004 and worked as a managing director in Goldman's mortgage trading operation, met with representatives of Basis to convince them that the prices Goldman was selling the Timberwolf deal at were fair and legitimate.

The lawsuit alleges that Goldman's sales and trading desks worked together to sell the deal, while Goldman itself was betting against the performance of the CDO.

"This is not a bad case for dealing with the whole issue of how Goldman was conducting its business," said Lewis. "They were selling bonds like they were used cars, in that you say what you need to get it done."

MORE LAWSUITS?

Other investors in Goldman's CDO products are likely to keep a close eye on the Basis case.

"If they can prove there is some smoke there, many investors could feel they have a right to say they were also harmed in some way," said Matt McCormick, a portfolio manager and banking analyst at Bahl & Gaynor Investment Counsel in Cincinnati.

Still, lawsuits against firms over the marketing of toxic CDOs have been rare.

Scott Berman, a partner with Friedman Kaplan Seiler & Adelman who frequently represents institutional investors, said it's a bit of mystery that the financial crisis hasn't spawned more private litigation over CDOs and other exotic investments.

"Some of it may be being dealt with in private arbitration rather than litigation," said Berman. "It's also possible that many institutions are simply wary of suing each other."

The case is Basis Yield Alpha Fund (Master) v. Goldman Sachs Group Inc, U.S. District Court, Southern District of New York, No. 10-04537.

Higher expenses hurt Brown-Forman in 4th quarter

2010-06-10T00:04:00.000-07:00

By BRUCE SCHREINER,

Liquor company Brown-Forman Corp. said Wednesday that higher expenses and continued sluggish sales to bars and restaurants watered down gains by its flagship Jack Daniel's Tennessee Whiskey and contributed to its fourth-quarter net income falling 9 percent.

Brown-Forman's profit has been hurt in recent quarters by the struggling economy as consumers have chosen less expensive brands — and by the company's increased spending on advertising to focus more on people who drink at home. Like other liquor companies, Brown-Forman hopes to take better advantage of the recession-born trend away from drinking in bars and restaurants.

But Don Berg, Brown-Forman's chief financial officer, said out-on-the-town drinking — which the industry calls "on premise" consumption — has shown early signs of renewal.

"While it appears that consumers are returning to restaurants and bars, their spending seems to be greatly reduced," Berg said in a conference call with industry analysts. "Over time, we believe the on-premise channel will rebound as unemployment decreases and the global economy improves."

Berg said those sales account for about one-fourth of the company's total distilled-spirits volumes.

The company previewed new packaging Wednesday, along with plans for line extensions, executives said they hope to expand the Jack Daniel's brands overseas.

The company's Class B shares rose 93 cents, or 1.6 percent, to close Wednesday at $58.11.

The Louisville-based company reported strong sales of ready-to-drink products — mostly cocktails like its Lynchburg Lemonade — popular with consumers who don't patronize bars and restaurants.

In the three months that ended April 30, Brown-Forman's net income fell 9 percent to $72.7 million, or 49 cents per share. A year earlier, it was $79.6 million, or 53 cents per share. Revenue rose 7 percent to $733 million from $683 million.

The company's results were hurt by higher compensation expenses and one-time costs related to the health care overhaul.

Analysts polled by Thomson Reuters, who typically exclude one-time items, on average predicted earnings of 53 cents per share on revenue of $694.1 million.

For the year, net income rose 3 percent to $449.2 million, or $3.02 per share, from $434.4 million, or $2.87 per share last year.

Revenue rose 1 percent to $3.23 billion from $3.19 billion last year.

The company expects a "moderately better" global economy in fiscal 2011 and said its net income will be $2.98 to $3.38 per share. Analysts expect a profit of $3.30 per share.

Berg said the past year was difficult as consumers traded down to cheaper brands and competitors discounted their prices. He said he hoped industry discounting will be "less pervasive" in the next year.

Looking ahead, the company said it sees opportunities to increase market share for Jack Daniel's both in developed markets such as France — where the flagship Jack Daniel's Tennessee Whiskey brand has just a 2 percent share of the whiskey category — and in emerging markets such as Russia, Poland and Mexico.

The company said it plans to expand several lines in the U.S., including the premixed Southern Comfort Lime and Southern Comfort Lemonade.

The company also said Wednesday that its board has approved a plan to buy back up to $250 million of its outstanding shares by December.

Bonds: Avoid the next great bubble

2010-06-09T00:41:00.000-07:00

By Paul J. Lim CNN Money

As manias go, this one is different. Your neighbors aren't coming up to you at cocktail parties bragging about making a killing in bonds. No one is flipping fixed income for quick profit. And no talk-radio guru is shouting that bonds will be the only investment left standing after the next financial Armageddon.

Don't let the lack of fanfare fool you. A projected $380 billion will pour into bond funds this year, more than went into domestic stock funds in the past decade. That's on top of a record $376 billion last year.

"The bond market is a bubble," says Robert Froehlich, senior managing director of the Hartford Financial Services Group. "And it's getting ready to burst." One major reason: Despite the recent rally in treasury bond prices and slide in yields -- due to fears over the European debt crisis -- the long-term direction for interest rates is headed higher.

What's inflating the bubble

Like all financial manias, this one is being fueled by a combination of fear and greed.

James Stack, a market historian and president of InvesTech Research, notes that many baby boomers who have stampeded into bond funds did so in reaction to their stock losses since the financial crisis began in 2008.

"It's post-traumatic shock," he says. Even with the rebound in equities since March 2009, "investors fear putting money into the stock market because they have a newfound respect for the risk equities pose."

Over the past decade, holding bonds was considerably safer than holding stocks. After the tech bubble burst in 2000 and equities lost almost half their value over the next three years, corporate bonds surged nearly 50%. And when the global financial crisis erupted two years ago, U.S. Treasury bonds were just about the only investment to retain value. The flight to safety in recent weeks, driven by concerns over Europe's mounting budget problems, has moved investors back into treasuries for the time being yet again.

On top of that, few investors know what it's like to live through a true bear market in bonds. Fueled by falling interest rates (long-term rates were as high as 15% in the early '80s), the current bull market has lasted for 30 years.

The resulting sense of safety -- the belief that bonds don't go bad -- is contributing to this feeding frenzy in fixed-income funds and ETFs. And all that money flowing in has made bonds very expensive.

You can see how frothy Treasuries are by calculating a P/E of sorts for bonds; just divide the bond's price by its current yield, not by earnings. At a price of around $100 and a yield of 3.3% -- up from 2% in december 2008 -- 10-year Treasurys have a P/E of 30. That's around twice their historical level.

It's true that bonds are less volatile than stocks. But in fact they lose money just as often as equities do. "I don't think the public understands they can lose money in bond funds," says James Swanson, chief investment strategist at MFS, an asset-management firm in Boston.

So that's the fear part. The greed part comes from an entirely different group of people: safety-loving folks who normally park their money in cash, such as bank savings accounts, CDs, or money-market funds. Fed up with the meager interest rates those accounts are paying these days -- the average taxable money-market fund yields 0.03% -- they're venturing into short-term bond funds to eke out a bit more yield.

Why the bubble could burst
One part of the bubble is already leaking air: long-term government bond funds. Because they invest in supersafe U.S. Treasuries and other forms of government-backed debt, they were a popular place to hide during the mortgage meltdown.

But when the economy began improving and rates on 10-year Treasurys began rising (from about 2% at the end of 2008 to as high as 4% in April before slipping to 3.3% today), these funds started suffering. In fact, the Vanguard long-term Treasury bond fund fell 12% in 2009 and, despite the recent run up in Treasury securities, is still down 5% since the end of 2008.

Experts say that's just the beginning. Here are the major factors that could harm bonds further.

Rising interest rates. "Rising rates are the biggest concern out there for bonds," says Mario De Rose, fixed-income strategist for the brokerage Edward Jones in St. Louis. That's because they make older, lower-yielding bonds that you or your funds own look less attractive compared with newer securities.

Let's say you bought a 10-year Treasury at the current rate of 3.3%. If rates rose to, say, 4.3%, the price of the bond would fall by nearly 8%, according to T. Rowe Price. So even though you'd be earning interest income, your actual total return would be 4%.

Alas, even if rates continue to tick down for a bit, the long-term trend is up. Economists at Standard & Poor's think the yield on 10-year Treasuries will jump to 5.3% by 2012; Froehlich of Hartford predicts it could hit 6.5% much sooner than that.

In a rising-rate environment, individual bonds have an edge over bond funds. You can simply hold individual bonds to maturity, at which point the issuer promises to give you back your original investment in full. That's impossible with funds, which hold lots of issues and are constantly buying and selling. Fixed-income funds can still make sense for a lot of reasons. But "they are the worst investment when it comes to rising rates," says InvesTech's Stack.

The return of inflation. Even individual bonds are no match for the power of an overheated consumer price index. Bonds tend to do well in periods of falling, not rising, inflation. From 1980 to the end of 2009 -- when the annual growth in the consumer price index fell from nearly 14% to virtually nil -- bonds delivered higher-than-average returns of nearly 10% a year, according to Ibbotson Associates.

With the federal deficit now projected to exceed $1 trillion this year and next, the Federal Reserve has little choice but to effectively crank up the amount of money in circulation. So there's a real chance that inflation -- nonexistent now -- could start running as hot as 5% in the next few years. If that happens, the real return on any bond yielding below 5% would be wiped out entirely.

Lingering doubts about the economic recovery. Most experts believe that the global economy is on the mend. But ongoing struggles in the housing market, a rise in mortgage defaults among owners of commercial properties, or a spread of the debt crisis in Europe are still possible, says Jeremy Grantham, chief investment officer of GMO, an asset-management firm in Boston. Any of those could damage the financial health of the countries or companies that issue bonds.

If investors become concerned that certain bond issuers are less creditworthy, their debt will become less desirable, weighing down bond prices. For example, thanks to growing worries about the debt crisis in Greece, Spain, and Portugal, many funds that specialize in European bonds are down so far this year. American Century International Bond, with around two-thirds of its assets in debt issued from European countries, has fallen more than 7%.

Panic selling. In today's low-rate environment, some bond fund managers -- even those who run short-term funds -- are taking extra risks "to reach for extra yield," says Russel Kinnel, director of fund research for Morningstar.

For instance, they might invest in bonds issued by entities of questionable financial health. The results aren't always pretty. In 2008 several short and ultrashort funds posted staggering losses (35% in the case of Schwab YieldPlus) as the credit crisis crushed bonds that they held.

Remember all those Johnny-come-latelies who recently moved from money-market funds to bond funds? At the first sign of trouble, many of them are likely to flee back to cash, warns Marilyn Cohen, president of Envision Capital Management, an advisory firm in Los Angeles that manages bonds for individual investors.

If the selling is severe enough, fund managers could be forced to dump bonds to meet redemptions, making other bond investors' losses worse. That risk is especially high with bonds that trade infrequently. Holders might accept fire-sale prices to get out in a hurry -- that rush to sell exacerbated losses suffered in the credit crisis.

How to protect yourself
Does this mean you should junk your bond holdings? No. If used properly, bonds will help you diversify your portfolio and generate much-needed income. Instead, try these strategies to protect yourself from the worst effects of a bond meltdown.

Shorten your durations. "Duration" measures how sensitive an investment is to interest rate changes. If a bond or bond fund has a duration of five years, for example, its price is likely to rise around 5% if interest rates fall by one percentage point. Conversely, if rates rise by one point, the price will fall by around 5%. The longer the duration, the higher the risk of losses. In this rising-rate environment, MFS's Swanson advises investors to stick with durations of around four years or less.

If you own a long-term government bond fund, consider replacing it with a shorter-term one with a duration in Swanson's target zone. Also check out the duration of the intermediate- and short-term funds you already own. You can do so by going to Morningstar.com, typing in your fund ticker, and clicking the Portfolio tab.

There can be significant variation within categories. While the average duration of a typical intermediate-term government bond fund, for example, is about four years, that of Managers Intermediate Duration Government (MGIDX) is only 2.9 years.

Buy TIPS rather than regular Treasuries. Treasury Inflation-Protected Securities yield significantly less than regular Treasury bonds right now (around 1.3% for 10-year TIPS vs. 3.3% for regular Treasuries of similar maturities). But TIPS have one big advantage: The interest they pay is adjusted to reflect changes in the consumer price index.

Jason Brady, a managing director at Thornburg Investment Management in Santa Fe, points out another plus. When interest rates rise (which is typical during periods of higher inflation), demand for TIPS is likely to be stronger than for plain-vanilla Treasuries. That means TIPS' prices are unlikely to fall as far.

These days it makes sense to buy individual TIPS rather than mutual funds that hold them. For one thing, it's easy to buy the bonds directly from Uncle Sam at Treasurydirect.gov. You'll pay no commissions or other fees. And the minimum investment is just a hundred bucks. As for maturity, choose one of no more than 10 years. And make sure you won't need the principal back before the end date.

Shift some short-term money to floating-rate bank funds. These funds invest in short-term, adjustable-rate bank loans made to corporations. Because such loans often reset every one to six months, "you get more income as rates rise," says Brady. The average bank loan fund has returned around 3% so far this year, compared with 2% for the average short-term bond fund.

But banks make many of these floating-rate loans to companies with less-than-pristine balance sheets. Stick with funds that focus on more creditworthy companies, such as those whose debt is rated BB -- just a couple of notches below "high quality" -- or above. One example: Pioneer Floating Rate (FLARX). Check a fund's credit quality at Morningstar.com.

Raise the credit quality of your munis. Battered municipal budgets will improve eventually, assuming the economy continues to heal. But historically, states and cities are among the last financial entities to emerge from a downturn. "I am not worried about credit risk among corporations, but I am worried about it in the muni space," says Envision Capital's Cohen.

To lower that risk, go with funds that invest mostly in municipal bonds rated AA or higher, like Fidelity Intermediate Municipal Income (FLTMX).

Lower the credit quality of your corporates. Move some of your corporate bond stash to high yielders. That's right: junk bonds.

This strategy isn't as crazy as it sounds. Junk bonds aren't as sensitive to rising rates as investment-grade bonds are, in part because their higher payouts provide a cushion if bond prices start to fall. In the past three periods when rates rose -- 2005, 1999, and 1994 -- high-yield bonds outperformed Treasuries by an average of 10 percentage points, according to an analysis by T. Rowe Price.

Moreover, if rates are rising because the economy is improving, demand for these bonds will climb. "A small positive change in the economy could have big changes in the fundamentals of these types of companies and their ability to pay back their debt," says Carl Kaufman, manager of the Osterweis Strategic Income fund.

That said, if investors fear the economy is headed into another storm -- as was the case in recent weeks -- high-yield funds could sink along with the broad stock market. In fact, the average high-yield fund has fallen nearly 4% over the past month (though it's still up more than 25% over the past year).

Given that the global economy hasn't fully recovered, stick with relatively conservative high-yield funds that avoid companies with the ugliest balance sheets. One such fund is Vanguard High-Yield Corporate (VWEHX). The typical bonds in this fund are issued by companies with ratings of BB or higher.

Don't give up on foreign bonds. The recent Greek tragedy may have you wondering if it's time to repatriate your entire fixed-income portfolio. Resist the urge.

As we've mentioned, Greece's debt problems have hurt the price of government bonds from Portugal and Spain. (Long-term Greek bonds now yield more than 8%, a reflection of how risky they are.) But those from many other European countries, including Germany and Britain -- whose government bonds yield almost exactly what U.S. Treasuries do -- have held up decently.

You should be looking beyond just Europe anyway. It's smart to diversify your fixed-income stake around the world because interest rates in different regions are expected to climb at different rates.

Another plus: If rates rise because of hotter inflation as expected, bonds from commodity-driven countries such as Australia, Brazil, and Canada will do well, says Thornburg's Brady. At the very least, they're highly unlikely to spoil your portfolio.

Honda hit by second strike in China

2010-06-09T00:36:00.000-07:00

Honda has had to halt production at two of its four car assembly factories in China after another strike by workers at one of its Chinese parts facilities.

The Japanese firm said work had stopped on Wednesday because of industrial action at exhaust-maker Foshan Fengfu Autoparts, which it part-owns.

It is the second time in two weeks that its Chinese production has been hit by a walkout over pay at a local supplier.

The earlier strike at a gearbox plant closed all four of its China factories.

Growing pay disputes

Honda said the walkout at the Foshan Fengfu facility, which is 70%-owned by its Chinese subsidiary Yutaka Giken, started on Monday.

Negotiations to resolve the dispute are now continuing.

The two strikes to hit Honda come as labour disputes over pay are growing in number in China.

Honda runs three of its four car assembly factories in China as joint ventures with Chinese carmakers to supply the domestic market.

It has two factories in association with Guangzhou Automobile and one with Dongfeng Motor Corporation.

Honda's fourth Chinese factory makes its Jazz small car model solely for export.

The Japanese firm currently makes 650,000 cars a year in China, and intends to increase this to 830,000, as the Chinese car market continues to grow strongly.

Russia Fights for World Dominance—in Wheat

2010-06-09T00:26:00.000-07:00

By Maria Kolesnikova and Tony C. Dreibus Bloomberg

On May 28, Egypt, the world's biggest importer of wheat, bought 180,000 metric tons from Russia for $178.50 per ton, about $13 less than the U.S. price. The deal is one of many signs that Russia is challenging America's supremacy in the global wheat market. In the past 11 months Russia has won 58 percent of Egypt's regular purchases of wheat, compared with 40 percent the year before. The U.S. share of Egypt sales fell to 8 percent from 13 percent over the same period, says Egypt's General Authority for Supply Commodities.

For Russia, it's an extraordinary turnaround. As recently as the 1990s, it had to buy wheat from U.S. farmers to feed its people, so inefficient were its farms after decades of ruinous Soviet practices. Then Russian investors slowly started buying land and introducing modern farming in the country's fertile "black earth" region near Ukraine and the Black Sea. In 2002 the country emerged as a major exporter for the first time in decades by selling 15.6million tons abroad. "Exports suddenly became profitable," says Arkady Zlochevsky, president of Russia's Grain Union, a lobby group.

By 2008 global grain prices were reaching record levels, and Swedish, British, Chinese, and Korean investors were piling into Russian farmland. Today Russia exports 14 percent of the world's wheat, up from 0.5 percent in 2000. The U.S. share of wheat exports has slipped from 26 percent to 19 percent.

Moscow is now making dominance of the wheat market a goal, and it has a shot: The U.S. Agriculture Dept. predicts that Russia will become the top wheat exporter by 2019. President Dmitry Medvedev last year ordered the creation of a state company, United Grain, to modernize the storage and shipment of wheat in a $3.3 billion overhaul. United Grain will also pursue export deals in Southeast Asia and Latin America, says CEO Sergei Levin. Those regions are traditional strongholds for Australian and U.S. grain exporters.

U.S. farmers are worried. "The Black Sea region is becoming a bigger competitor for us," says Dean Stoskopf, 54, a wheat grower near Hoisington, Kan. Up to now, he says, U.S. farmers have commanded premium prices for higher quality—U.S. wheat generally has higher protein content than Russian grain and suffers less from insect infestations. That may change, Stoskopf fears, as the Russians improve their growing practices and storage facilities.

Some members of Congress want Washington to do more. "I would not rest on the attitude that we have a great product," says Senator Mike Johanns (R-Neb.), who was Secretary of Agriculture from 2005 to 2007. "Price is a factor. We should be working on free-trade agreements or very quickly we'll find ourselves behind." Free-trade agreements in certain parts of Latin America and Asia would open up new markets for U.S. wheat. Russia is part of a bigger problem, says Jason Britt, president of Central States Commodities in Kansas City, Mo. Wheat futures on the Chicago Board of Trade have fallen 32% in the past year as stockpiles have grown.

Kirill Podolsky, 39, is CEO of Valars Group, Russia's No. 3 wheat exporter. "We are completely opportunistic. We ship anywhere there is demand," he says at his headquarters in Taganrog by the Sea of Azov, which connects to the Black Sea. Valars will supply a third of the shipment in the Egypt deal. Podolsky founded Valars in 2006 and has spent $250million on farmland and $108million on equipment.

Vasily Pechersky, 64, who runs Valars' 41,230-hectare Sarmat farm, north of Taganrog, says his winter wheat yield was 4.4 tons per hectare, on a par with U.S. yields. He credits his U.S.-made New Holland tractors and harvesters as well as higher use of fertilizers and new technologies. "One New Holland harvester stands in for two Russian-made ones," he says. Russian-made tractors sit to one side, covered in rust.

The Russians still have challenges to overcome. Investors such as Podolsky bought land at top prices right before the global financial crisis and are struggling to pay off debts. Valars may sell shares on the market to repay $500 million of debt before investing anymore in farming: Wheat-growing brought "zero" profit last marketing year after a plunge in prices, says Podolsky. The Grain Union is asking Moscow for $320 million in subsidies to improve the profitability of exports. Such state aid could help Russia's growers compete even more ferociously with the U.S. on price.

China wage hikes boost costs but might help sales

2010-06-09T00:22:00.000-07:00

By JOE McDONALD

The cost of hiring Chinese workers who supply the world with inexpensive furniture and toys is climbing. But workers with more money to spend is good news for foreign companies that see them as customers, not just factory labor.

Areas throughout China have raised local minimum wages and some foreign employers have given out hefty pay hikes. That, combined with an expected rise in China's currency against the dollar this year, will squeeze exporters of clothing and other low-margin goods, possibly forcing thousands to close or move to cheaper countries such as Vietnam.

"It is very difficult for us," said Danny Lau, chairman of the Hong Kong Small and Medium Enterprises Association. He said some 2,000 to 3,000 of an estimated 50,000 Hong Kong-owned factories in southern China's Pearl River Delta, an export hub, might close this year.

But putting more money in workers' pockets will help turn them into consumers and accelerate China's growth as a major market for imports from Boeing jetliners to Brazilian soybeans.

"This is good news. It's going to start driving consumer spending," said Standard Chartered economist Jinny Yan.

Beijing and other Chinese cities have raised minimum wages by up to 20 percent as part of efforts to narrow a yawning income gap that communist leaders worry is fueling political tensions. It was the first rise since the minimum wage was frozen in 2008 to help exporters hold down prices amid the global crisis.

Communist authorities who normally bar independent labor activity have allowed workers to demonstrate and sometimes carry out brief strikes for higher wages.

On Sunday, Taiwanese-owned Foxconn Technology Group announced the second in a series of raises that would increase pay by up to 65 percent at its factories in the southern city of Shenzhen. The company employs 300,000 people there making iPhones and other goods for Apple Inc., Sony Corp., Dell Inc., Nokia Corp. and Hewlett-Packard Co.

The wage hikes fit Beijing's economic strategy, which calls for encouraging China's own consumers to spend more in order to reduce reliance on exports and investment to drive growth.

The ruling party also is trying to shift more money down the economic ladder to defuse public anger that Chinese workers have gotten too little out of a boom that has created dozens of billionaires.

Wages as a share of China's gross domestic product have fallen steadily since the 1980s, from 56.5 percent in 1983 to 36.7 percent in 2005, according to figures from the umbrella group for legally permitted unions, the All-China Federation of Trade Unions, reported by the government newspaper Global Times.

Even at that level, rising incomes made China the biggest auto market last year by vehicles sold and a leading market in industries from air travel to fast food. Retail sales in April were up 18.5 percent from a year earlier.

"Demand is picking up because people have more money in their pockets," said Jing Ulrich, JP Morgan's chairwoman for China equities. She said higher wages could boost demand for products as varied as fast food and sporting goods.

Foreign companies' focus on China as a market was highlighted by a survey released in April by the American Chamber of Commerce in China. It found the top priority for 58 percent of its member companies was producing in China for sale to local consumers. Only 14 percent said their priority was to produce for export.

The wage hikes are likely to hit employers hardest in China's southeast. The area has thousands of factories
many owned by Hong Kong or Taiwanese investors that compete in global markets. Many have razor-thin profit margins and little power to pass on higher costs to customers.

The region was battered in 2008 by the collapse in global consumer spending. Thousands of factories closed and the government said as many as 30 million people were thrown out of work.

Wei Senchuan, general manager of Suzhou Hong Sheng Printing Co. in the eastern city of Suzhou, which makes housings for computers bound for export, said the minimum wage rise will add 6 to 7 percent to his costs.

Asked whether he could pass that on to customers, Wei said, "impossible."

Even after the latest increases, Chinese wages are still a fraction of those in the United States or Europe. Foxconn says pay for its employees in Shenzhen will be about 2,000 yuan ($293) a month.

"We don't see an end to an era of cheap Chinese goods," said Yan of Standard Chartered.

The minimum wage hikes should raise growth in domestic consumption by about 0.2 percentage points this year, according to Jun Ma, chief China economist for Deutsche Bank. He said that would come at the cost of a 0.4 percentage point rise in inflation and a 0.6 percentage point decline in exports.

The wage hikes "will serve as an important impetus to speed up the income distribution reform and economy upgrading," Ma said in a report.

Taiwanese companies had invested an estimated $122 billion and employed 14.4 million people on the mainland as of last year, according to Hung Chia-ko, a researcher at Taiwan's National Chengchi University.

Some are shifting operations to Southeast Asian nations such as Vietnam and other low-wage economies. But many are too dependent on China's networks of distributors and materials suppliers, say economists and company managers. And even in such places as Vietnam, with 80 million people, the labor pool seems small by comparison.

"Vietnamese workers go on strike every day," said Andrew Yeh, head of the Dongguan Business Association of Taiwan Investors in Dongguan, a city near Hong Kong, and the boss of a company that makes computer cables.

"And you have to be close to the market," Yeh said. "How do you set up your base in Vietnam and export to China?"

How to Harness Your Emotions

2010-06-08T00:53:00.000-07:00

By Bill Bartmann

You can't always control your reactions, but you can use them to help you make the right decisions.

We all know that first impressions are extremely important when meeting people. Equally important are your first reactions in new situations. When was the last time you spent any time thinking about the quality of those reactions?

I'm talking here about your instantaneous, knee-jerk emotional reflexes--the kind you form in a second or less. These reactions are extremely powerful for two reasons: They come from the core of your being, and they leave a lasting impression.

For example, I built my business on several principles, one of which was extreme attention to tracking our results and improving our ability to bid on loan portfolios and collect on them. One day it came to my attention that some people were padding their results, potentially throwing off our predictive model. I went ballistic. I won't bore you with all the details, but suffice it to say that I invented new expletives on the spot, in front of many people.

Sure, I was right about explaining in no uncertain terms that cheating would not be tolerated, but in my zeal to deal with the bad apples, I overreacted and shocked even the good employees. Instead, I should have followed four key steps I have since developed for improving the quality of business decisions:

1. Know your reflexes. If you're like me, you have many reflexes. Some of them might tell you that you've seen something before or that something will take a long time to figure out. Sometimes your reflex tells you that the person who wrote what you're reading is an idiot. Identifying these reactions will help you notice how frequently you experience them and ultimately how accurate they are.
2. Gauge your reactions. Once you're aware of your reflexes, take note of the ones that light up the next time you get new information. In my business career of 40 years and counting, I've been in numerous situations where I was told something couldn't be done. To me, those are fighting words, and my immediate reflex is to want to prove that person wrong. I've learned to take a moment and first determine if it can't truly physically be done--in which case I'll move on--or if it's doable, but no one's pulled it off--yet. Even if I could pull it off, I guard against accepting a time-consuming dare just to prove myself again.
3. Early on, be especially careful what you say. If you take a quick verbal stand on an issue, it means your mouth has taken a position before your brain had a chance to weigh the matter. Now, not only are you saddled with the issue at hand, but also with the desire to exhibit consistency. It's best to let the matter play out in your head even for just one minute longer before you let the world know what you think.
4. Temper your pattern-recognition reflex. Jerome Groopman is a distinguished doctor and professor at Harvard Medical School. In his book, How Doctors Think, Dr. Groopman explains that many highly experienced doctors fall into the trap of premature diagnosis because they've seen similar symptoms before, they know the previous outcome and they're pressed for time. Experienced entrepreneurs are no different. When the matter is complex, slow down and think twice about shoe-horning today's challenge into the solution you used last year.

In the fast lane of business, the smart entrepreneur distinguishes between reflexes and thorough evaluation. You may find it hard to change your reflexes, but you'll get the best results when you mentally step back to observe and stress-test them. Then, when you make your decisions and commitments, you'll be better able to judge how solid your basis is for making them. When it comes to making sound business decisions, you don't need to take a course or study a textbook; all you need are two simple words--know thyself.

Today business startup projects Expense Reduction Analyst

2010-06-08T00:20:00.000-07:00

Hi everyone my name is Seit Eren and today I'll present you '' Expense reduction Analyst" business project

Save people money as an expense reduction analyst.

Business Overview

Calling all seasoned business managers, controllers, CFOs, operations managers, accountants and administrators! You can greatly profit from your business experience and budgeting skills by starting an expense reduction consulting service aimed at all businesses, from small and local to multinational corporations. Expense reduction consultants provide clients with a multitude of services: developing short- and long-term budgets, analyzing fixed and variable overhead, increasing employee productivity, analyzing product and service costs and developing expense reduction strategies to meet each client's specific needs. The objective of the expense reduction exercise is to uncover costs associated with doing business that can be reduced or eliminated entirely while maintaining or increasing the overall efficiency, productivity and profitability of the business. Many expense reduction consultants specialize in their field of expertise'manufacturing, food services, retail, or small business, for example. The most powerful marketing asset that expense reduction specialists have at their disposal is the fact that through analysis of business operations, they generally save clients anywhere from 2 to 50 times their consulting fees in expense reduction savings.

Business Coasts Expense reduction Analyst:

Startup Costs: 5 000- 10 000 $
Home bassed :Can be opered from home
Part time : Can be opered part time

The Market
Business owners as well as large corporations.

Touch, and Go Touch-based technology isn't just for the iPhone and iPad.

2010-06-08T00:14:00.000-07:00

By Jonathan Blum Entrepreneur magazine

Apple's iPhone and iPad are not the only things that work with a touch of the finger. Touch-based technology is finding its way into everything from laptops to printers to once-forgettable desktop PCs--some of which fill critical niches for the smaller enterprise.

Take the Acer Aspire Z5600, a 23-inch all-in-one touch-enabled desktop PC.

The unit packs a hefty 2.33GHz processor, as much as 8GB of RAM and a full terabyte (1000GB) of storage in a single silver enclosure. Reminiscent of the Apple iMac in appearance, the Aspire Z5600's functions can be operated with either a traditional keyboard and mouse or your--or your customer's--fingers.

That opens the box to myriad business possibilities: For example, the PC, which retails for $999, could be set up as a low-cost informational kiosk in retail shops or offices. John Karabian, a product manager at Acer, said touch-enabled desktops are being used as data entry points where customers can order food or view high-end cosmetics options at a retail store.

And for all of its marketing prowess, Apple is far from being today's top end of touch: Windows 7 has touch technology built into its core operating system, and third-party software vendors are lining up to offer value-added tools for touch.

"The iPad and Apple are only the beginning," says Francois Jenneau, sales and business development director for Stantum, a European multitouch display application developer. "Customers now want to touch their data. There is no going back."

Chrysler recalling 365,000 Jeep Wranglers

2010-06-07T23:47:00.000-07:00

By Peter Valdes-Dapena

Chrysler Group is recalling about 365,000 Jeep Wranglers worldwide, about 290,000 of those in the United States, because they could develop brake fluid leaks.

The carmaker is recalling all model year 2006 through 2010 Wranglers, both two-door and four-door versions.

Fasteners that hold the front fender liners in place could come loose. That, in turn, could allow the fender liner to come into contact with tubes that carry hydraulic brake fluid, causing a leak that would result partial loss of braking power at one wheel.

"The company is not aware of any accidents, injuries or property damage related to this issue," Chrysler said in a statement.

The automaker plans to notify owners of affected vehicles so that they can have them brought in for repairs. To fix the problem, parts of the liner that could touch the brake lines will be removed, Chrysler said, a repair that will be performed by dealers at no cost to the customer.

Wrangler owners can contact Chrysler at 1-800-853-1403 or the National Highway Traffic Safety Administration at 1-888-327-4236.

Chrysler recently recalled about 285,000 minivans in the U.S. for an electrical wiring problem and 25,000 small cars for a problem in which the gas pedals could become stuck. To top of page

Starbucks CEO: "We spend more on health care than coffee"

2010-06-07T23:38:00.000-07:00

By Beth Kowit Fortune

When Howard Schultz returned as CEO of Starbucks in January of 2008, he hadn't realized how bad things had gotten. With the company opening an eye-popping seven new stores a day at its peak, Starbucks' business model had spiraled out of control.

"We had embraced growth as a reason for being instead of a strategy," he said during a visit to Fortune's offices last week, as he outlined Starbucks' path over the last two years.

Schultz, who was and still is the company's chairman, dropped his involvement with all other boards and outside distractions. From then on everything for him would be about only two things: Starbucks and his family. "The Brooklyn kid in me wants to make sure we prove everyone wrong," he says. (Note that while Starbucks might be from Seattle, Schultz is a born and bred New Yorker.)

He started the Starbucks (SBUX, Fortune 500) turnaround with what for many companies is the hardest thing to do: confessing its sins. Schultz had to tell his employees that the company had made mistakes and would pay the price by taking $600 million in costs out of the business. Part of that would come from laying off employees and shutting down 600 stores. 80% of them had been open for less than two years.

Even amid the cost-cutting Schultz refused to drop health care for his employees, a line item that tallies $300 million. That's more than the company spends on coffee. A shareholder called Schultz and said the crisis would provide him the perfect cover to cut benefits for part-time employees. He refused, and told his investor if he felt so strongly about it he should sell his stock. (The shareholder ended up cutting his position.)

Much to the dismay of Wall Street, Schultz decided to stop reporting monthly same-store sales in an attempt to move the pressure from producing good numbers to producing good coffee. "Monthly comps are like a harness around your neck," he says.

As the company cleaned up its internal mess, competition from serious industry players started to loom for the first time. McDonald's (MCD, Fortune 500) had rolled out its McCafe line and launched a marketing campaign that partly took aim at Starbucks. Dunkin' Donuts also was expanding, and independent coffee stores had turned into threats.

Starbucks' premium image also started to backfire. "Starbucks became the posterchild for excess," Schultz says. Consumers who had once embraced the brand's cachet now started to view the $4 latte as frivolous and a not very smart purchase.

Today Starbucks has managed to avert crisis and is diving into new areas of growth beyond simply opening new stores. Schultz says its VIA instant coffee line, which many saw as a move of desperation, will have 37,000 points of distribution by the end of the month. The company sees a hungry market in China and India, and in the U.S. the company is pushing out its newly rebranded Seattle's Best line.

Expect some of its stores to undergo a facelift with its recently renovated location on Spring Street in New York City as the model: community table, locally sourced and environmentally friendly materials, and a look that evokes its original location at Pike Place in Seattle. The Spring Street store uses a brewing system called Clover, which uses vacuum press technology.

Right now less than 20% of sales come from outside its stores, but Schultz plans to change that as he brings Starbucks more into the consumer products company realm. Because the company doesn't have any franchises, it can sell its products in supermarkets without having to worry about cannibalization from its stores.

Despite the one-time backlash against its premium image, Schultz says Starbucks has become a haven for people facing tough times. Job applications have never been higher. Employee turnover has dropped. The unemployed who have nowhere else to go spend their days in the company's stores. And perhaps its smartest marketing move of all: These customers can stay all day, and Starbucks won't ever ask them to leave

Inland Real Estate, PGGM in retail joint venture

2010-06-07T23:31:00.000-07:00

nland Real Estate Corp. said Monday that it has formed a joint venture with the Dutch financial firm PGGM to acquire $270 million worth of grocery-anchored and community retail centers in the midwestern U.S.

PGGM, a pension fund administrator and asset manager, will contribute $20 million in equity and Inland Real Estate will provide three retail centers worth $45 million to the joint venture. The properties are located in Arden, Minn.; Elk Grove, Ill.; and Buffalo Grove, Ill.

Inland Real Estate will add more properties after the initial investment, and PGGM will contribute an additional $130 million in equity. PGGM will own a 45 percent stake of the joint venture and Inland Real Estate will hold the remaining 55 percent.

The joint venture will acquire more assets during the next two years.

Shares of Inland Real Estate rose 13 cents to $7.77 in morning trading.

Euro's Eroding Value May Drag On Earnings Of U.S. Companies

2010-06-07T23:27:00.000-07:00

The upcoming earnings season should shed light on the painful impact the euro's 15% drop this year vs. the dollar is having on U.S. companies, especially those that garner much of their sales in Europe.

A wide range of American firms — including those in high tech, retail and manufacturing — will likely report lower revenue due to the slumping euro. In some cases, the weak currency will hurt profit margins or key financial metrics, such as average selling prices.

U.S. companies aren't the only ones feeling the pinch. Shares of some Chinese solar panel makers, which generate a big chunk of sales in Europe, have been slammed due to disappointing earnings tied to the weaker euro.

Currency swings are nothing new to U.S. firms, which typically use financial hedging strategies to offset unfavorable exchange rates. The euro's drop vs. the dollar, which began in November and picked up in April, has been unusually sharp for a major currency. The euro is down 19% since Nov. 25 and 10% since April 14.

"What's unsettling is that the corporate hedgers, whatever strategy they're following to manage their currency exposure, were likely caught off-guard by a large move like that," said Brian Dolan, chief currency strategist at Forex.com, part of Gain Capital.

He added: "A lot of companies and institutions didn't see it coming as late as March."

Companies thought the euro would return to being worth more than $1.50, a level it last reached in December, Dolan says. Instead it's trading nearly 19% lower, dipping at times under $1.22. "A lot of them underestimated the risk of a sharp decline in the euro and were caught flat-footed," said.

How big a hit on revenue companies take when they report second-quarter earnings may depend on their European sales and how well their hedging strategies worked. Firms typically use futures contracts, options orders and trade in the derivatives market to offset fluctuating currencies.

A wave of research reports from stock analysts suggests the weaker euro's impact on second-quarter results may be widespread.

In a report published on June 1, Susquehanna's Marianne Wolk lowered her second-quarter earnings estimates for Google (NMS:GOOG), eBay (NMS:EBAY), Priceline (NMS:PCLN) and Expedia (NMS:EXPE). The analyst lowered her fourth-quarter 2010 and first-quarter 2011 revenue targets for Google based on a forecast that the dollar's strength will continue.

Cowen & Co. apparel maker analyst John Kernan said in a June 1 report that "rapid deterioration in the euro" is the top near-term risk for Guess (NYSE:GES - News), Phillips-Van Heusen (NYSE:PVH - News) and Polo Ralph Lauren (NYSE:RL - News).

"Euro exposure clouds visibility into estimates," he wrote.

Guess, which garners 35% of sales from Europe, on May 27 lowered its second-quarter earnings guidance. "The euro has now weakened significantly below our planning assumptions," said Carlos Alberini, Guess' chief operating officer who left later to join Restoration Hardware as co-CEO.

Big-cap companies on average generate 14% of sales in Europe, while small-cap stocks generally have less exposure, with 4% of sales, says S&P analyst Howard Silverblatt. The top 20 U.S. companies in European sales include General Electric (NYSE:GE - News), Ford (NYSE:F - News), Johnson & Johnson (NYSE:JNJ - News), Pfizer (NYSE:PFE - News), Kraft (NYSE:KFT - News), McDonald's (NYSE:MCD - News), Cisco Systems (NMS:CSCO), Coca-Cola (NYSE:KO - News), Best Buy (NYSE:BBY - News), Intel (NMS:INTC) and cruise ship operator Carnival (NYSE:CCL - News).

"Currency translation is going to be a drag on earnings. We expect to see a lot of text and numbers on that for the second quarter as companies explain the impact of the euro," Silverblatt said.

Citigroup analyst Walter Pritchard in a May 25 research note wrote that VMware (NYSE:VMW - News), Oracle (NMS:ORCL), Adobe (NMS:ADBE) and Symantec (NMS:SYMC) are among high-tech firms with sales exposure to the weak euro.

"Revenue impact is clear ... EPS impact less clear but still negative," Pritchard said in the note.

He said that because the effectiveness of hedging strategies fades, a weaker euro could have more impact on earnings in 2011.

Broadpoint AmTech analyst Mark McKechnie in a June 2 report said Qualcomm, a maker of electronic chips for mobile phones, may see lower average selling prices because of the weaker euro: "Given near-term hedging, we assume (a weaker euro) does not impact earnings until the December 2010 quarter."

Colin Sebastian, an analyst at Lazard Capital Markets, said in a June1 report that Internet firms Amazon and eBay as well as some video game companies have exposure to the weak euro.

Adam Fleck, equity analyst at Morningstar, says U.S. firms that manufacture goods in Europe will see less impact on profits because of lower operating costs. "The magnitude of the currency fluctuation is a factor, but companies do have natural hedges by moving production closer to customers," Fleck said. "Caterpillar (NYSE:CAT - News) and 3M (NYSE:MMM - News) have done that."

Jeffrey Immelt, GE's CEO, took that tack on a conference call on May 19. "We've got a European manufacturing base and a European revenue base that are more or less matched," he said. "So while (the weak euro) may have some impact on revenue, it shouldn't have a big impact on earnings."

Some CEOs claim that concern over the euro is overblown.

"A higher euro is good for us with our business in Europe, but a bad euro isn't probably as negative as some of the things that have been written," Hewlett-Packard (NYSE:HPQ - News) CEO Mark Hurd said on the company's earnings call on May 18.

HP said on the call that its models assume the euro's exchange rate vs. the dollar stabilizes in the mid-1.20s range. Other companies are in the same ballpark.

The euro's decline has leveled off since Tuesday. It closed at $1.22. However, many economists believe the shared currency could fall further in the long run.

And some of Europe's political leaders support an "orderly" decline because a weaker euro helps boost exports.

At Forex.com, Dolan forecasts the euro will trade at 1.15 vs. the dollar by year-end. On the plus side, he notes that's not far from the 10-year-old currency's average of 1.17 vs. the dollar.

Facebook Gaining on Google’s YouTube in Web Video

2010-06-04T00:23:00.000-07:00

By Douglas MacMillan Bloomberg

Social-networking website Facebook Inc. is growing faster than Google Inc.’s YouTube as a place to watch videos.

Clips generated by Facebook users were watched by 41 million people in April, more than three times as many as a year earlier, when there were 13 million. YouTube grew 25 percent to 135 million unique viewers over the same period, Reston, Virginia-based data researcher ComScore Inc. said this week.

Contending with Google in video is a step in Facebook’s bid to become the go-to website for content-sharing. It surpassed Google’s search engine in weekly hits in March, becoming the most visited site in the U.S. for the first time, according to New York-based data tracker Experian Hitwise.

A rival to YouTube poses challenges for Mountain View, California-based Google, which bought the money-losing service, with its clips of robot-riding cats, fraternity drinking games and other amateur videos, for $1.65 billion in 2006. Analyst Doug Anmuth of Barclays Capital in New York has said YouTube may see its first year of profitability in 2010. Google doesn’t break out its sales by segment.

“What people are doing now more and more is uploading their own home videos to share with friends and family,” said Colin Dixon, an analyst at Frisco, Texas-based researcher Diffusion Group. “YouTube is a very public place,” whereas Facebook may offer more privacy, he said.

Growing Popularity

Facebook, based in Palo Alto, California, has the fifth- largest audience for Web videos, ComScore said, behind properties run by Google, Yahoo! Inc., News Corp., and Vevo, the music-video site jointly operated by Sony Corp., Universal Music Group and Abu Dhabi Media Co.

Since April 2009, the social network has climbed past AOL Inc., Viacom Inc., Microsoft Corp., and Hulu, a video site whose owners include Walt Disney Co. and News Corp., ComScore said.

A report released today by the Pew Internet & American Life Project shows social-networking sites are more popular for posting clips than video-sharing sites.

Among respondents to a survey conducted by the group, 52 percent of people who said they upload videos to the Web do it through sites such as Facebook or News Corp.’s MySpace. Less than half, or 49 percent, do it through video-sharing sites like YouTube and Google Video, according to the report, “The State of Online Video,” which surveyed 763 adult Internet users in the U.S. during June 2009.

Privacy Controls

There’s demand among some Web users for controls that limit who can see their videos, said Kristen Purcell, author of the report and associate director of the project, a branch of the Washington nonprofit Pew Research Center.

Thirty-nine percent of video uploaders interviewed said they don’t let anyone other than family and friends watch their clips. About as many, 35 percent, say they sometimes feel they should be more careful about the videos they post.

Chris Dale, a spokesman for Google, said uploads to YouTube “have been trending in the right direction.” He wouldn’t comment on whether social-networking sites have affected usage of the video service.

Facebook was started in 2004 and first enabled users to share videos in May 2007.

“We generally don’t comment on third-party data,” Kathleen Loughlin, a spokeswoman for Facebook, said in an e- mail.

The degree to which sites like Facebook are gaining on YouTube remains a matter of debate, according to Brett Wilson, chief executive officer of TubeMogul, an online-video distribution service based in Emeryville, California.

Of clips uploaded in the 30 days through June 2 by TubeMogul’s 180,000 users, 1.2 percent chose Facebook and 17 percent picked YouTube.

“The growth rate of Facebook is extraordinary, but the raw numbers are nowhere near YouTube,” Wilson said.

Jobs data likely to show burst of temporary hiring

2010-06-04T00:19:00.000-07:00

By JEANNINE AVERSA,

The nation's employers likely unleashed a wave of hiring last month, but it probably won't be repeated.

Most of the jobs expected to have been generated in May were for census workers hired on a temporary basis by the federal government. Such hiring is expected to have peaked in May and then begin tailing off in June.

By contrast, hiring by private employers — the backbone of the economy — may have slowed down a bit in May.

All told, the Labor Department's new employment snapshot released Friday morning is likely to be seen as further evidence that the job market is healing. Yet it's still years away from normal health and from recouping the millions of jobs wiped out by the recent recession.

Employers eliminated 7.8 million jobs from the start of the recession in December 2007 through April. To fill that hole and keep up with a growing work force, the economy would need to create a net 14.3 million jobs, said Mark Zandi, chief economist at Moody's Analytics. He doesn't see that happening until early 2015.

"The gap is likely to close only gradually," said Dennis Lockhart, president of the Federal Reserve Bank of Atlanta.

The United States probably added a net total of 513,000 jobs last month, economists predict. That would be an improvement from the 290,000 jobs added in April, the most in four years. And May's figure would mark the biggest monthly gain in payrolls since more than 1 million jobs were generated in September 1983, when the country was recovering from a severe recession.

But a huge chunk of May's net job gains — perhaps 300,000 to 400,000 — could come from the government's hiring of temporary census workers.

Census hiring typically peaks in May. That ensures the government has enough door-knockers to pursue people who didn't mail back their census forms. Higher productivity among census workers and a high mail-in response rate, though, could reduce the number of census workers needed. If so, the job total would come in lower than expected.

Jobs created by private companies in May could amount to around a net 175,000. That would mark a slowing from the 231,000 private jobs produced in April.

The unemployment rate is expected to drop a notch to 9.8 percent, from 9.9 percent, helped by the hiring of census and other workers. Still, economists think the rate will move higher this summer as census hiring fizzles and more people enter the work force looking for jobs.

The unemployment rate in October hit 10.1 percent, a 26-year high. Some analysts think it could go a bit higher and peak at 10.2 or 10.4 percent by June. That's lower than some forecasts earlier this year of 11 percent.

About 125,000 new jobs are needed each month just to keep up with population growth and prevent the unemployment rate from rising.

The prospect of persistently high unemployment is likely to prevent consumers from going on the kinds of shopping sprees they typically do during early phases of recoveries. That's a key reason why this recovery isn't as energetic as those usually seen in the past.

Hiring isn't expected to be consistently strong enough to quickly drive down the unemployment rate this year. Economists think the rate will remain above 9 percent by the November midterm elections. That could make Democratic and Republican incumbents in Congress vulnerable.

Only 20 percent of Americans consider the economy in good condition, according to an Associated Press-GfK Poll conducted in mid-May.

Despite the slow healing process, the job market is in a much better state than it was last year. Employers were still slashing payrolls then — 387,000 jobs were cut just in May last year. So far this year, the economy has created a net 559,000 jobs.

"Businesses are more confident that they have the financial resources to invest and hire," Zandi said. "It isn't a straight line of improvement, but the job market is headed in the right direction."

Chrysler LLC said and Ford Motor Co. last month announced plans to hire as auto sales have risen. But others are still laying off workers. Hewlett-Packard Co. said this week it is cutting 9,000 jobs in its technology services division. And chocolate-maker Hershey Co. may cut 600 jobs.

Sands CEO says Las Vegas business coming back: report

2010-06-04T00:11:00.000-07:00

Reuters

Business in Las Vegas is picking up, particularly on weekends, as the economy recovers, Las Vegas Sands Corp (LVS.N) Chief Executive Sheldon Adelson said on Thursday in an interview on the CNBC network.

The casino billionaire said the meeting business in Las Vegas wasn't helped last year by government criticism of bankers who held meetings in the famed U.S. gambling mecca.

Still, "the weekends are coming back strong and I think by next year we'll probably be 80 percent of normal for the group business," Adelson told CNBC.

Gaming revenue rose 2.4 percent on the Las Vegas Strip to $467.1 million in March from a year earlier, even as gaming revenue overall for the state of Nevada slipped 0.7 percent in the month to $912.2 million, the state Gaming Control Board reported in May.

March was the second-straight month this year that gaming revenue increased on the Vegas Strip, where Sands operates the Palazzo and Venetian resorts.

Las Vegas Sands also owns properties in Macau and opened a $5.7 billion casino resort in Singapore in April. Adelson said business in Asia "never went down" as Vegas grappled with the recession.

Adelson also told CNBC his company would like to enter Japan, saying "there's a lot of conversation in Japan about legalizing gaming."

Shares of Las Vegas Sands closed up 2.8 percent to $24.93 on the New York Stock Exchange on Thursday. They have risen about 67 percent this year.

Warren Buffett defends credit rating agencies

2010-06-03T00:02:00.000-07:00

Billionaire investor Warren Buffett has defended credit rating agencies for failing to spot the US mortgage bubble that sparked the financial crisis.

Giving testimony in New York, Mr Buffett said the agencies "made the wrong call," but added that so did everyone else, including himself.

He said the US had been in "mass delusion" for not recognising that the housing market had overheated.

The agencies gave high ratings to US mortgage-related debt that went bad.

'Deeply disturbing'

Mr Buffett, the largest shareholder of the Moody's credit rating agency, was speaking before the US Congress's Financial Crisis Inquiry Commission (FCIC).

This is investigating the role of the credit rating agencies in the financial crisis in the view to introducing tougher legislation.

The agencies have been accused of giving over-generous ratings to investment packages that included US mortgage debt that subsequently turned bad when homeowners defaulted on their payments.

The European Union is also proposing a new watchdog to oversee the agencies.

"The entire American public was caught up in a belief that housing prices could not fall dramatically," said Mr Buffett.

He added that if he had known how far the US housing market would collapse, he would have sold his investment firm's stake in Moody's, which currently stands at 13%.

Moody's chief executive Raymond McDaniel admitted to the commission that his company "is certainly not satisfied" with the performance of the ratings it gave the mortgage-linked debt.

He added that it was taking steps to improve its ratings process.

However, he had earlier said in written testimony that investors should only use credit ratings as a guide, "not a buy, sell or hold recommendation".

Conflict of interest?

Rating agencies such as Moody's, Standard & Poor's and Fitch Ratings have been criticised for conflicts of interest because their fees are paid by the banks whose deals they rate

Billions of dollars of complex debts that were given the highest "AAA" rating by Moody's, Standard & Poor's and Fitch, went bad during the financial crisis.

FCIC chairman Phil Angelides said in his opening remarks that Moody's had profited greatly from rating mortgage-backed debts.

He noted that the firm's revenues soared from $600m (£412m) in 2000 to $2.2bn in 2007, just as the US housing market bubble had peaked.

Mr Angelides said that while the company profited, "the investors who relied on Moody's ratings didn't do very well."

The commission's vice chairman, Bill Thomas, said the aim of the inquiry was to determine whether the rating agencies were "a cause of the crisis or one of the victims".

Former Moody's managing director Jay Siegel admitted to the hearing that only 10% of the firm's employees had any direct experience working in the mortgage lending business.

Meanwhile, another former Moody's managing director, Gary Witt, criticised the role of hedge funds in the financial crisis, describing them as "wolves, hunting in packs, eating what they killed".

Mr Witt said that by contrast, the rating agencies were "scapegoats", whose primary function was "to absorb the blame for the sins of the community".

One investment fund, the Montana Board of Investments, said in written testimony to the FCIC that it would not have bought into the mortgage linked debt "without the over-inflated ratings published by the rating agencies".

"On the face of it, it seems preposterous for the rating agencies to have suggested that these complex, exotic creations were as risk-free as US government bonds," it said.

"But at the time, the board still had confidence in the rating agencies, and assumed the [investment] vehicles had been thoroughly vetted and that default risks were low."

New legislation

The Senate's draft of new financial services legislation proposes that the rating agencies should be chosen by an independent board of regulators.

It is hoped this would discourage rating agencies from providing overly-generous ratings in order to please the banks who pay them.

The Senate's proposal is, however, one of a number of differences with the House of Representatives' own version of the legislation.

These will need to be reconciled before the new law can be finalised.

Europe is also looking to reform regulation of credit rating agencies, with the European Commission announcing on Wednesday that it plans to create a new pan-European watchdog to control how they operate.

Under the proposals, banks would be forced to disclose full details on their financial transactions to all the rating agencies

Ethanol Fuel

2010-06-02T23:53:00.000-07:00

Ethanol (Ethyl Alcohol or Grain Alcohol) is commonly used in alcohol. The recent surge in interest for alternative fuel sources is driving research to use Ethanol as a transportation fuel source. The articles on this page deal with this form of ethanol use. There is still a great deal of debate about the pros and cons of ethanol as fuel. Ethanol is commonly used as a fuel source additive and not as a fuel substitute.

Biodiesel Rental Cars from Bio-Beetle

2010-06-02T23:46:00.000-07:00

Would you believe there exists a company that offers rental cars which are entirely powered by biodiesel? In support of their mission statement to be the “greenest” and “best” rental car company on the planet, Bio-Beetle Eco Rental Cars began their environmentally conscious business endeavor in 2003 with only a single car. The company was not, and still isn’t, supported by a major car manufacturer. Powered by biodiesel, each Bio-Beetle has been purchased and developed individually by the founders as funds allow. The founders of Bio-Beetle believed their business venture was a great way to demonstrate environmental consciousness and have, therefore, slowly built the foundation for the only rental car company of its kind available.

For the unacquainted, biodiesel is a clean-burning fuel that is made from 100% renewable sources. It can be used in place of standard diesel fuel as well, which as we know is made from fossil fuels and is nonrenewable. In reality, most items that call for regular diesel fuel, such as vehicles and generators, can utilize this environmentally friendly alternative. In the case of Bio-Beetle, the company utilizes 100% vegetable-oil-based biodiesel. In fact, most of the biodiesel is actually made from used cooking oil.

The process for utilizing used cooking oil to power a vehicle is quite simple. Restaurants that cook fried foods like French Fries or Fried Chicken normally operate deep fat fryers. When it is time to change the oil in these fryers, it is generally done so by a pumping company contracted by the restaurant for such purposes. The used cooking oil that is collected from the process can then be brought by the pumping company to a biodiesel processor. Once at the processor the oil is filtered and then put through a process known as Transesterification. It is a process by which the vegetable oil is mixed with an alcohol (typically methanol) and a catalyst (lye) to separate and create two important commodities: biodiesel (also known as methyl esters) and glycerin (the common ingredient in soap).

The result of this process is extremely friendly to environment, and it supports the zero-waste philosophy of the Bio-Beetle company. Yet in addition to utilizing used cooking oil, Bio-Beetle Eco Rental Cars takes it one step further, employing earth friendly coolants, synthetic engine oil and non toxic cleaners as well. And the idea is spreading, at least in terms of the company’s influence: in 2006 Bio-Beetle expanded its business beyond Maui, Hawaii and into Los Angeles, California to serve the LAX airport and vicinity. Although it may be small steps at first, Bio-Beetle is definitely showing the nation what measures it can take to help protect the planet today.

Eco-Friendly Planes Designed by MIT-Led Team on the Anvil

2010-06-02T23:38:00.000-07:00

The NASA Research Program ‘N+3′ has thrown open a challenge for exploring the potential to develop quieter subsonic commercial planes as well as supersonic commercial aircraft that burn less fuel and pollute less. The team led by MIT are working on developing two models to meet the NASA criteria as well to accommodate the demands created by increased air traffic by 2035 A.D.

NASA’s plans:
NASA’s plans are for designing planes that have fuel-burn reduction, emissions reduction and which can take off from shorter runways. Four teams – one led by MIT, Boeing, GE Aviation and Northrop Grumman work on subsonic designs. AeroAstro faculty & students, ED Greitzer, Principal Investigator, Professor H Nelson Slator, Aurora Flight Sciences Corporation and Pratt & Whitney have jointly developed concepts and technologies to design D series and H series aircrafts that will meet the stringent criteria demanded by NASA.

D Series:
This will be the “double bubble” series to replace the Boeing 737 class aircraft conceived with reconfiguring the traditional tube and wing structure. Resembling two soap bubbles joined together, a wider structure was created with two side-by-side partial cylinders and engines were moved to the rear of fuselage. Using the BLI (boundary layer ingestion) technique, engines use less fuel. Because it travels 10% slower and the planes have longer and thinner wings, smaller tail, most drawbacks of this design are mitigated somewhat. Planes wider size saves time by allowing quicker loading and unloading.

Twin advantages of D Series:
There are two types of D series on the anvil:

A high tech version with 70% fuel-burn reduction.
A traditional aluminum body plane with current jet technology but on double-bubble design.
Advantages:

Use less fuel by about 50%.
Very good environmental performance.
Traditional design will help better integration with existing airport infrastructure and so save money otherwise needed to fit radically different designs.
H Series:
The 350-passenger 777 class ‘hybrid wing body’ planes will be larger but will be based on the same technology as D Series. A Triangular-shaped hybrid wing body and a wider fuselage result in improved aerodynamics while larger centre creates a forward lift and balances the plane without the need for a tail. Propulsion architectures and technology are under study still awaiting further exploration.

I Phase over:
With first phase of research and design is over, the MIT team is awaiting word about continuing into the second phase of program to meet more of NASA’s objectives. Sanction of additional funds and approval of the designs and technology identified in the first phase will be know in the next few months.

Future Plans:
Whether or not the work continues for NASA, the researchers hope to continue to develop these models, testing them and collaborating with manufacturers to make the concepts a reality.

Increase Renewable Energy Sources – Generate More Jobs

2010-06-02T23:24:00.000-07:00

This has been the slogan that GE, one of the leading power suppliers and energy delivery technology pioneers, propagated all through the ‘Capture the Wind‘ tour across US. GE Energy, comprised of GE Power& Water, GE Energy services and GE Oil & Gas is on an all out effort to promote wind industry’s growth in USA. GE, largest supplier of wind turbines producing some 40% of US’ wind power, has been sponsoring the ‘Capture the Wind’ tour for garnering support at grass-root level for a cleaner energy in future.

They have been toting a 131-foot-long wind-turbine blade serving as a mobile petition to be signed by all supporters. This is to create awareness that promoting wind power industry will generate new jobs and make US self-sufficient in energy production. Their goal is the Wind-Power 2010 Convention at Dallas where the blade will be on display.

Texas, as the country’s largest wind power producer is hosting Wind-Power 2010 – world’s largest wind-power conference – at the Dallas Convention Centre. Along with Matt Guyette, Renewables Global Strategy Leader, GE Energy, Dallas Mayor Tom Leppert, and AWEA CEO Denise Bode attended the opening ceremony. The need for strong leadership support from federal government for focussing on development of renewable energy sources was the hot topic.

Emphasizing that wind energy is a more affordable and purer form of energy available in US, Mr. Body called for a “strong national Renewable Electricity Standard (RES)”. Mr. Guyette said, “The key message of our tour is that the people of America have the power to choose a cleaner, smarter energy future.” Congress inaction in this field was greatly regretted.

In spite of a 10-gigawatt production and 85,000 strong work force, wind power accounts for not even 2% of entire nation’s power supply. A positive approach by the congress towards long-term wind energy power policy and establishing a national level renewable and cleaner energy standard will boost power generation and employment opportunities.

Mr. Guyette quoted the examples of China and Europe and requested for quick action on the part of government to promote wind power energy sources. He expressed hopes that, “American technology and innovation, combined with strong public support, can help to drive continued growth in the wind power industry, leading to the creation of thousands of new jobs.”

Web Booms in East Europe, but Not News

2010-06-02T23:15:00.000-07:00

By Marius Dragomir Businessweek

Internet usage and advertising are soaring in the former communist east, but online journalism isn't making money—a threat to the media industry

Ten or so years ago, when a Prague journalist disgruntled with the pressures from editors and owners he was grappling with exulted in a Czech pub over the freedom and infinite possibilities the Internet would bring, he was condescendingly told by many of his friends to come back to earth. Who could imagine that advertisers would pump their money into a platform accessed by such a limited audience back when television could freeze millions of Czech eyeballs for hours in front of Titanic or a football match?

A decade later, across the region, web sites are mushrooming, the online population is booming, and advertising euros are pouring into the Internet, helping counteract the general downturn in ad spending. But how much journalism are people consuming? Sadly, not much.

GENERATION OF GENERALISTS

The rise of the Internet, I've heard many academic voices claim, means that traditional media outlets can't profit online because they are too stubborn to get rid of their old potpourri content model. In the past, such scholars argue, newspapers threw in a bit of everything in their struggle for revenue: news articles and features alongside weather forecasts, sports, crosswords, classifieds, and naked women. This is not the way to go in today's world where specialization is gaining ground, they say.

Totally agreed. There is an increasing appetite for Internet magazines covering niche topics ranging from transportation to retail to cement manufacturing, as well as for targeted paid content demanded by all kinds of professions and groups. But general interest news still has to be free of charge and come packaged with a hodgepodge of other content to appeal to readers. At least, that's how the public at large consumes Internet content in Eastern Europe.

Overwhelmingly, generalist portals such as Seznam.cz in the Czech Republic or dir.bg in Bulgaria dominate online preferences across Eastern Europe, according to a fresh study by researchers at Warsaw-based online researcher Gemius and the Interactive Advertising Bureau (IAB) Europe. Such web sites usually offer a Yahoo (YHOO)-like online diet that consists of links to organizations and retailers, web-based email services, search functions, and an aggregation of news stories picked up from all kinds of sources.

Alarmingly for the media industry, the Gemius and IAB survey – which covered 12 countries in the region – also indicated that on average, only one or two established media outlets appear among the 10 most popular web sites in each country.

Furthermore, in countries like Estonia, Hungary, and Latvia, news sites run solely by established media are completely missing from the top 10. Slovakia and the Czech Republic have healthier online media environments. In Slovakia, the web sites of the daily newspapers SME, Pravda, and Novy cas, and of the country's largest commercial TV station Markiza (CETV), all rank among the 10 most visited web sites.

In the neighboring Czech Republic, idnes.cz, operated by Mlada fronta Dnes, the largest-circulation serious daily, and Novinky.cz, a joint venture of the daily newspaper Pravo and the Seznam portal, are among the 10 most visited sites. The two attract a combined monthly total of over 5.5 million users, which is more than half the Czech population.

The potential audience for mainstream media sites is also high elsewhere. For instance, the site gazeta.pl in Poland, a portal linked with the major daily newspaper Gazeta Wyborcza, clocks about 7.5 million monthly users.

Aside from portals, the other main category of massively-trafficked sites in the region is social networks. In every country in the study, at least one social networking site appears among the most visited web sites nationally, with Poland's find-a-classmate site nasza-klasa.pl leading at 9.2 million monthly users.

OLDIES BUT GOLDIES

Despite the dramatic growth in Internet penetration and online advertising over the past decade, Eastern Europe still lags behind its western peers. Last year, only five Eastern European countries – the Baltic states, the Czech Republic, and Slovenia – exceeded 50 percent Internet penetration. Ukraine was at the bottom of the heap, with only 18 percent of households online, according to the IAB. The same is true for online advertising spending in the region, which ranges in annual figures from a mere 2 euros per user in Ukraine to a more decent 24 euros per user in the Czech Republic.

The east also does poorly in terms of broadband access. On average, only about 15 percent of the population in Eastern Europe has a broadband connection. The lowest numbers are in Bulgaria and Croatia, where fewer than 10 broadband connections are available for every 100 inhabitants, far below the EU average of 22.5 percent, as measured by the European Competitive Telecommunications Association.

However, recent years' sustained growth of Internet use heralds rosy days for the online market in Eastern Europe. Since 2007, the Internet penetration in the region has grown by an average of 32 percent a year, much of it broadband, according to the International Telecommunication Union (ITU). At the same time, online advertising spending has been growing in the past two years at annual rates of over 50 percent. In 2009, some 15 percent of all ad money in tech-friendly Estonia went to the Internet; elsewhere, though, the figure is still under 10 percent.

The online audience is also growing more mature and wealthy. Youth up to 24 years of age still account for the largest share of Internet users in the region, but their share is constantly declining, while rates are rising for those who grew up in the 1990s and are now entering their prime earning years.

We have good indications of what the future will bring to the Internet in Eastern Europe, but it's still difficult to say what it will mean for online journalism. What is clear is that the next five or so years will be a crucial period for the online media to win readers. This means investment. Without it, in several years, the Internet in most of the region might turn into a news-free web

AT&T Puts Caps On iPhone Data Usage As Mobile Video's Rise Taxes Networks

2010-06-02T22:54:00.000-07:00

AT&T (NYSE:T - News) on Wednesday shook up pricing for smart phone and tablet PC users, ending unlimited data plans for new customers that buy Apple's (NMS:AAPL) iPad and iPhone.

AT&T also lowered rates for subscribers that consume less Internet content, possibly spurring a new round of price-cutting.

The announcement comes as Apple is expected to unveil its newest iPhone on Monday, at the start of its annual developer's conference.

The new iPhone reportedly will have "tethering" capability, meaning it can be used as a wireless modem to connect to laptop computers or other devices.

AT&T's move comes roughly six months after the telecom carrier ignited a consumer backlash by suggesting that it was mulling ways to curb network usage by data-hungry subscribers.

Now, AT&T is the first carrier to press ahead "with what is likely to be a rapid industrywide transition to tiered pricing for wireless data," said Craig Moffett, an analyst at Bernstein Research.

The pricing change applies only to smart phones and the iPad, not laptops with wireless broadband. Verizon Wireless, co-owned by Verizon Communications (NYSE:VZ - News) and U.K.-based Vodafone (NMS:VOD), has signaled that it plans to shift to a tiered, meter-based billing system when it launches a fourth-generation, LTE data network, expected in the second half of this year.

AT&T and other phone companies have struggled to meet surging data demand, despite investing billions of dollars each year in their wireless networks. AT&T has been pummeled at times with complaints over poor network performance in markets such as New York and San Francisco.

The company, however, has claimed that about 2% of iPhone users are wireless hogs, downloading tons of data and clogging the wireless network.

Wednesday, AT&T said it will charge new customers that buy iPhones or Apple iPad tablet PCs $25 per month for 2 gigabytes of data, with higher prices if usage exceeds that amount. AT&T says existing iPhone and iPad customers can switch to the $25 monthly, 2 GB plan as well. AT&T has charged $30 a month for unlimited data since June 29, 2007, when Apple rolled out its first iPhone.

AT&T says the great majority of iPhone subscribers use less than 2 GB, but mobile users are accessing more video and other high-bandwidth content, so switching plans could be a gamble for users. And it's likely the unlimited data plan attracted many buyers of the iPhone and especially the iPad, which many owners use to view video and other high-bandwidth content.

AT&T has been the exclusive U.S. provider of service for the iPhone and iPad, though Verizon Wireless has been in talks with Apple.

AT&T's shift to usage caps could ease Internet consumption, but it and other wireless carriers are expected to have to continue to spend heavily to improve their networks.

Some analysts say AT&T's move should usher in a more profitable business model for carriers as smart phone usage proliferates. Smart phones, including BlackBerrys made by Research In Motion (NMS:RIMM) and handsets based on Google's (NMS:GOOG) Android operating system, accounted for 34% of new handset sales in the first quarter, says market tracker NPD.

Shares in AT&T, down about 12% in 2010, rose 1.85% on Wednesday. Shares in Verizon Communications and Sprint Nextel (NYSE:S - News) also rose.

AT&T's strategy may increase price competition at the low-end, some analysts say.

Besides the $25 2 GB plan, AT&T says it will charge new customers $15 per month for 200 megabytes of data. If subscribers go over that limit, AT&T will tack on $15 for another 200 megabytes.

T-Mobile USA, owned by Germany's Deutsche Telekom (NYSE:DT - News), recently rolled out new rate plans that charge $25 for 200 megabytes of data. Verizon offers a $10 monthly data plan for 25 megabytes.

"Other operators will follow with cuts to their data plans and (we) would not rule out a family plan data rate being offered," wrote Walter Piecyk, an analyst at BTIG Research, in his company blog.

On the high end, analyst Moffett says he does not expect Clearwire (NMS:CLWR), which operates a high-speed data network, to lower its prices.

AT&T says 98% of its smart phone customers consume less than 2 GB of data monthly, while 65% use less than 200 MB.

AT&T and most wireless carriers limit data usage for laptops to 5 GB per month. Buyers of the new iPhone will have to pay $20 extra a month for tethering to laptops.

While most wireless users today gobble up less than 2 GB of data a month, new services could shift usage patterns. Google is poised to deliver more Web video to Android phones. Sprint is touting video calls with its new HTC EVO phone, the first 4G phone on the U.S. market.

AT&T aims to get in front of exploding data traffic, says Tim Horan, an Oppenheimer analyst.

"We are not sure what drove the specific timing other than probably very high-end iPad and iPhone users continuing to pressure (AT&T's) network ...," Horan wrote in a research note.

Australia's economic growth slows

2010-06-02T00:23:00.000-07:00

Australia's economy grew for a fifth straight quarter in the first three months of the year, but at a slower rate than the previous quarter.

Official figures show GDP in the three months to March was 0.5% higher than in the same period last year.

Growth for the last three months of 2009 was also revised up to 1.1%, giving Australia a growth figure of 2.7% for the year to the end of March.

Finance minister Wayne Swan called the figures "another very solid outcome".

He said the continued growth of the economy demonstrated its strength relative to other developed economies.

Australia avoided falling into recession last year, thanks largely to continued demand for its natural resources from China.

But the economy has also benefited from a significant economic stimulus package.

Growth in GDP was driven by an 11.6% increase in public investment, the Australian Bureau of Statistics said.

But Mr Wayne said the withdrawal of some stimulus measures was an encouraging sign that the recovery was self-sustaining.

Investors also reacted positively, with the Australian dollar rising on the hope that interest rates would continue to rise.

On Tuesday, Australia's reserve bank opted to keep rates on hold at 4.5% following a series of increases.

Prudential abandons bid for AIA

2010-06-02T00:16:00.000-07:00

UK insurer Prudential has scrapped plans to buy AIA, the Asian business of US insurer AIG.

The deal collapsed after Prudential failed to negotiate a lower price for AIA.

In March, Prudential agreed to buy AIA for $35.5bn (£24.6bn), but last week asked for the price to be cut to nearer $30bn after shareholder opposition.

AIG said on Tuesday that it would not "not consider" any revision to the terms of the deal.

The Prudential said it faced £450m ($653m) in costs related to the deal, including a break fee of about £152m.

Hard thinking

Prudential had sought to fund the takeover by raising £14.5bn from shareholders through a rights issue, the biggest in the UK's history.

But a number of the company's shareholders were opposed to the bid, believing the price being offered was too high.

They formed a rebel shareholder group, the Prudential Action Group, which planned to oppose the deal at a shareholder vote due to be held on 7 June.

That vote will not now be held.

Prudential chairman Harvey McGrath said the firm had taken heed of its investors wishes.

"We listened carefully to shareholders over the price and initiated a renegotiation of the terms with AIG," Mr McGrath said.

"Unfortunately, it has not been possible to reach agreement... we are therefore withdrawing from the transaction."

The collapse of the deal is expected to raise questions about the future of both him and his chief executive, Tidjane Thiam, with the company.

One of the Pru's bigger shareholders, Robert Talbot, chief investment officer at Royal London Asset Management, said some hard thinking was now needed.

"There certainly needs to be a proper review as to how the board came to the decision that this was the right deal at the right price - and who most strongly proposed that particular transaction," Mr Talbot told BBC Radio 4's Today programme.

The BBC's business editor, Robert Peston, said the deal was "an important event in the history of British stock market capitalism".

"It shows that conventional investment institutions are prepared to act more like the independent owners of a business and not as absentee landlords too readily compliant with the wishes of managers," he said.

Google: We don't do Windows

2010-06-02T00:05:00.000-07:00

Posted by Seth Weintraub

Google is phasing out its use of Microsoft's Windows on desktops, citing security concerns stemming from the recent Chinese hacking incident

It must be nice to be a Google employee. You get to work with the smartest engineers out there. You get gourmet cafeteria food and all kinds of amenities. But best of all, you aren't given some generic, locked-down PC that you aren't familiar with. You get to pick what platform you want to be on: Mac, Windows, or Linux.

Well, you were able to pick Windows, but now that option is off the table according to a story today from the Financial Times.

They get quotes from a number of employees who say the reasoning behind the move is security-related and specifically a result of the recent Chinese hacking incident...

"We're not doing any more Windows. It is a security effort"
"Many people have been moved away from [Windows] PCs, mostly towards Mac OS, following the China hacking attacks"
"Particularly since the China scare, a lot of people here are using Macs for security"
The recent Chinese hacking of Google was done through Microsoft (MSFT) Windows computers on the Google's (GOOG) corporate network.

Windows is technically still an option, but you need to have some seriously good reasons to have it on your desktop. Those reasons need to be justified to the office of Google's CIO and approved. Otherwise, it is a Mac or a Linux box.

I'd imagine that some IE browser testing machines would need to be running Windows. Also, people developing Outlook migration tools for Google Apps and developers of Windows software like Google Earth and SketchUp will need the operating system.

Obviously, Google would eventually love it if its employees used its own Linux-based desktop OS product, ChromeOS, as soon as its is ready for prime time. For now, though, Apple's (AAPL) Macs and, to a lesser extent, Linux are the answer.

But ChromeOS is the future and it seems pretty apparent that Google is heading in that direction. A few more Googler quotes:

"Before the security, there was a directive by the company to try to run things on Google products. It was a long time coming."
"A lot of it is an effort to run things on Google product," the employee said. "They want to run things on Chrome."

After Disaster, Oil Service Bargains for Long-Term Investors

2010-06-01T23:57:00.000-07:00

By David Bogoslaw Businessnews

The BP rig blowout has hammered the oil services companies that work in the Gulf of Mexico. But analysts say, in the long run, companies can benefit from new rules

Less than a year ago, when low oil prices and uncertainty about the timing of an economic recovery made investors nervous about energy bets, the oilfield services industry was the place to be, since oil producers couldn't afford not to continue drilling. Now, in the wake of what's said to be the biggest environmental disaster in U.S. history, the near-term outlook for oilfield services companies doesn't look nearly as bright. But for investors willing to stick with battered stocks such as Cameron International (CAM) or Halliburton (HAL)—for a year or two—stiffer regulations on drilling in the Gulf of Mexico could mean enhanced opportunities. And while the sector remains risky, there could be some bargains.

The near-term impact of the blowout of BP's (BP) Deepwater Horizon rig has been rough on companies working in the Gulf. On May 27, President Obama declared a six-month moratorium on all deepwater drilling in the Gulf of Mexico, which affects all wells drilled in waters deeper than 500 feet. The following day, Interior Secretary Ken Salazar announced tough safety and control regulations on rigs working in the Gulf. And on June 1, the Obama Administration said it was investigating whether any criminal or civil laws were violated in the rig disaster.

But since about 30 percent of the oil the U.S. consumes comes from the Gulf, it's unlikely the Obama Administration would choose to permanently ban drilling there, say some analysts. The fact that minerals royalties are a major source of federal revenue makes that option even more unlikely, according to Tim Parker, an energy analyst at T. Rowe Price (TROW).

Earnings Impact
The ban on deepwater drilling is sure to hurt oil services companies' earnings for the second half of 2010 and for the full year. Parker expects earnings to be reduced by 5 percent to 10 percent on the low end and 10 percent to 15 percent on the upper end. The impact might be worse if companies don't trim their cost structures, says Parker, who expects them to move personnel around to manage expenses.

Still, Parker sees this as a short-term money issue. "If you have a one-year time horizon, you'll be very happy owning these stocks," he says. "You could own these things for the next two years and get them cheap for the next six months."

In a research note for FBR Capital Markets (FBCM) on May 27, Rob MacKenzie estimated that Transocean's (RIG) earnings before interest, taxes, depreciation, and amortization (EBITDA) for 2010 would drop by up to 14 percent if the deepwater permit moratorium were extended by six months and all its deepwater rigs working in the Gulf of Mexico went idle after its current wells for roughly another five months of downtime. Diamond Offshore's (DO) 2010 EBITDA would decrease by up to 28 percent under the same scenario. The financial impact of the drilling ban could be reduced if the rigs were hired to drill sidetrack wells, or secondary wellbores drilled away from the original hole, which are exempted from the drilling permit moratorium, or if rigs were moved to projects in other geographic regions, he wrote. MacKenzie reaffirmed his outperform rating on Transocean and market perform rating for Diamond Offshore.

Moving a rig to Brazil, the drilling region closest to the Gulf, would result in the loss of a month's worth of revenue for an operator, while a move to West Africa would cause an even longer disruption in revenue, says Geoff Kieburtz, an analyst at Weedon & Co. in Greenwich, Conn.

Contractor Uncertainty
There's additional uncertainty for contractors if other operators take a cue from Cobalt International Energy (CIE), which on June 1 invoked the force majeure provision under its drilling contract with Diamond Offshore for a rig that was ready to start drilling an exploratory well in the Gulf. That means that revenues which contractors believed were locked in may not be if the operators refuse to pay, citing events beyond their control.

Of the big four multi-service companies, Baker Hughes (BHI) is most exposed to the Gulf of Mexico, where it generates a bigger portion of its total revenues relative to other regions, says Will Riley, co-manager of the Guinness Atkinson Global Energy Fund (GAGEX). "If you can get over the fact that earnings will be weak this year, the outlook for next year looks good," he says.

These companies' balance sheets are generally strong, so they can withstand short-term earnings pressure, Riley says. His fund, which manages $95 million in assets, has maintained both its direct and indirect exposure to the Gulf. While he doesn't own shares of Noble Group (NE) or Ensco International (ESV), two other companies that are active in the Gulf, he believes both would be good bargains fairly soon.

More risk-averse investors might want to avoid companies directly exposed to the Gulf of Mexico, but most stocks in the multi-services group have potentially fallen too far and will "require serious attention" fairly soon, says Riley.

Revenue Boost
Ironically, the stricter safety regulations the Interior Dept. is calling for will likely increase oil services companies' revenues in the long term as some of the services they aren't currently required to provide will be mandated in the future, says Parker of T. Rowe Price. Enhanced safety procedures could include stronger control systems such as a cement bond log, which gauges the quality of a cement bond on a well's exterior casing by measuring variations in the acoustic signal traveling down the casing wall between a transmitter and receiver. "[Currently], you don't have to do that for every job." Halliburton is one of the leading providers of this service.

Another gainer from new rules might be Cameron International, which made the blowout preventer, or BOP, installed on the Deepwater Horizon rig. The company probably won't be held liable for the Apr. 20 explosion, since the various problems with the blowout preventer that may have caused its malfunction aren't the result of a product defect or design flaw, Gabelli & Co. said in a May 25 research note. Cameron, with about a 40 percent share of the BOP market, "will be a beneficiary of a new equipment cycle to increase safety standards" for offshore drilling. Blowout preventers represent an estimated 10 percent to 15 percent of Cameron's annual revenue, the note said.

One recommendation from the Interior Dept. is that every floating rig in the Gulf would have to have redundant shear rams—the part of the blowout preventer that cuts through drill pipe and forms a seal against well pressure—as a backup safety measure. Although the Deepwater Horizon rig did have two shear rams, that isn't a typical configuration, says Weedon's Kieburtz. Multiple shear rams would boost equipment sales for Cameron and the other leading BOP manufacturer, National Oilwell Varco (NOV), he adds.

Aftermarket Maintenance
Cameron and National Oilwell would also benefit from increased aftermarket activity if new regulations require the original blowout preventer manufacturers to have a hand in maintenance after sales to contractors. Transocean had done all the maintenance on the blowout preventer involved in the Deepwater Horizon incident since buying it from Cameron in 2001.

Shares of other drilling equipment manufacturers, such as FMC Technologies (FTI) and Dril-Quip (DRQ), have dropped considerably since the oil spill, making them more attractive to investors willing to take a risk. Riley says he's always believed they were relatively expensive stocks to own, but for investors who can get comfortable with valuations, the new regulatory environment should boost these companies' sales.

Two other names in the industry, Oceaneering International (OII) and Subsea 7 (S8J:GR), which manufacture underwater remotely operated vehicles, or ROVs—the tethered robots that function as oil producers' eyes and hands on the ocean floor—stand to gain from improved operating capabilities in ROVs that may be required as a result of the BP disaster, says Parker at T. Rowe Price.

German jobless rate falls and retail sales rise

2010-06-01T23:48:00.000-07:00

German unemployment fell sharply in May, data from the national labour agency showed on Tuesday, while retail sales picked up as Europe's biggest economy pushed on despite the eurozone financial crisis.

The unemployment rate fell to 7.7 percent of the workforce, the lowest rate since December 2008, from 8.1 percent in April.

"In these difficult times, the labour market has provided good news," Labour Minister Ursula von der Leyen said in Berlin, before noting that repercussions of the economic crisis last year "have remained limited."

Across the 16-nation eurozone however, unemployment reached a record of 10.1 percent in April, with almost 16 million people out of work, the European Union said in Brussels.

Germany had more good news to report meanwhile, as the national statistics office said shoppers headed back to the high street in April, pushing up retail sales for the first time this year.

They gained a seasonally-adjusted 1.0 percent from March, in line with analysts' forecasts, the Destatis office said.

Export-orientated Germany has been pressured by European Union neighbours to boost domestic consumption and help those who do not manage to achieve Berlin's constant trade surpluses.

The end of a harsh winter along with factors such as the German government's short-work programme and a pick-up in crucial exports have helped the country weather the storm battering peripheral eurozone countries like Greece, Portugal and Spain.

Berlin's latest unemployment figure was the lowest May reading since 1992 and the 11th monthly decline in a row.

The seasonally-adjusted number of jobseekers fell by 45,000 or nearly three times more than a forecast of 17,500 compiled by Dow Jones Newswires.

"Successful labour market reforms, the government's famous crisis tool of short-work schemes and companies' prudence have made the labour market the bright spot of the recession," ING senior economist Carsten Brzeski noted.

German officials have subsidised shorter working hours so companies did not have to lay off as many workers amid the country's worst post-war recession, and can be brought back to full-time status as orders for German wares bounce back.

That means fewer new workers are likely to be hired now, but also that "the latest level of joblessness is now only slightly higher than at the end of the previous economic boom," noted IHS Global Insight senior economist Timo Klein.

"It still has to be called a jobs miracle that the largest post-war recession by far has only led to a short-lived spike in joblessness," he said.

The recent substantial drop reflects a true rise in demand for labour," and added that prospects for the jobs market "continue to remain favorable for the time being."

The biggest question mark is whether efforts to redress government finances and uncertainty generated by the eurozone's fiscal crisis will weigh on growth later this year, economists said.

CDC Software earnings outlook misses forecast

2010-06-01T23:47:00.000-07:00

Business software maker CDC Software Corp. indicated Tuesday that earnings in 2010 and 2011 would be lower than what Wall Street was expecting, but revenue would be higher.

CDC Software said it expects to earn $1.15 to $1.25 per share in 2010, excluding certain items, on adjusted revenue of $220 million to $230 million. Analysts surveyed by Thomson Reuters were looking for earnings of $1.27 per share and $219 million in revenue.

For 2011, the software maker forecasts earnings of $1.35 to $1.45 per share, excluding items, on $245 million to $255 million in adjusted revenue. Analysts have been predicting earnings of $1.48 per share and $238 million in revenue.

CDC Software cited strong sales in its software-as-a-service business, which sells customers access to programs running on servers operated by CDC, rather than the traditional software licenses for programs that customers install and maintain on their own.

But the company has made several recent acquisitions as it expands the software-as-a-service part of its business, which it said will weigh on results in the near future.

"As a result, we believe that we will recognize less revenue up front compared to our traditional license model, and will also be realizing more expenses in R&D, sales and marketing and other integration-related costs," Bruce Cameron, president of CDC Software, said in a statement.

The company said its 2010 guidance also reflects possible effects of two to three "significant" potential acquisitions.

Shares fell 26 cents, or 3 percent, to $8.28 in early afternoon trading.

Economy strengthens behind building, manufacturing

2010-06-01T09:31:00.000-07:00

By MARTIN CRUTSINGER

The economic recovery gained strength on the biggest rise in construction spending in nearly a decade and the 10th straight month of expansion for the manufacturing sector.

Temporary government incentives fueled most of the construction spending increases in April. Industry spending rose 2.7 percent with gains in all major sectors, the Commerce Department said Tuesday.

In a separate report Tuesday, the Institute for Supply Management, a trade group of purchasing executives, said its manufacturing index dipped slightly in May from a nearly six-year high in April. But the 59.7 reading for May was well above the 50 level that indicates expansion.

Export orders rose last month despite the debt crisis in Europe that threatens to spread.

"The European fiscal crisis doesn't appear to have harmed the prospects of U.S. manufacturers, at least not yet," wrote Paul Ashworth, senior U.S. economist with Capital Economics.

The news was welcomed on Wall Street. Stocks erased early losses after the two reports signaled a lift in the economic recovery. The Dow Jones industrial average rose about 40 points in midday trading after sliding in early trading.

Construction spending was boosted by a homebuyer tax credit, which helped residential construction surge 4.4 percent in April. The tax credit expired at the end of April.

Government spending also rose on the strength of federal support. The 2.4 percent increase was aided by the economic stimulus program that Congress passed in February 2009. State and local spending jumped 2.3 percent and federal spending rose 2.9 percent.

The other major sector, nonresidential construction, climbed 1.7 percent. That marked the first advance in this category since March 2009. The strength in April came from gains in private sector work on communications projects and power generation facilities. Construction of office buildings and the category that includes shopping centers fell in April.

Commercial building projects have suffered in the weak economy through rising loan defaults and tighter credit. That has made it harder for developers to get financing.

Ian Shepherdson, chief U.S. economist at High Frequency Economics, said the spike from the homebuyer tax credit is likely to fade now that it has expired.

He discounted the unexpected rise in nonresidential activity and said it could possibly be revised away next month.

"These numbers are hugely unreliable ... and we expect a downward revision next month," he said.

Homebuilders have expressed optimism that construction will keep improving even with the expiration of the homebuyer tax credits.

Luxury homebuilder Toll Brothers Inc. reported last week that it had a narrower loss in its latest quarter and had seen a surge in new home orders. The company said the strength in orders was holding up in May even though the homebuyer tax credits had come to end.

PulteGroup Inc., the nation's largest homebuilder, reported in early May that it had been able to reduce its loss for the first quarter and expected to be profitable this year. That would mark a major turning point for the company, which has posted losses in 14 consecutive quarters.

In the manufacturing report, the group's employment index, which measures employers' willingness to hire, rose 1.3 percentage points to 59.8. That was the highest level since May 2004.

New orders, a gauge of future production, were unchanged at 65.7. "We haven't lost much in the way of momentum," said Norbert Ore, chairman of the ISM's manufacturing survey on a conference call. "The manufacturing sector continues to move ahead."

Hewlett-Packard to cut 9K jobs in services unit

2010-06-01T09:25:00.000-07:00

By BARBARA ORTUTAY

Hewlett-Packard Co. said Tuesday it will lay off about 9,000 workers in the unit that provides technology services to other businesses as the company consolidates and automates its commercial data centers.

The cuts will be made over about three years and amount to some 3 percent of HP's global work force of 304,000 employees as of October 2009, the most recent figure available. The company said it plans to replace two-thirds of those jobs, hiring 6,000 people to boost its global sales and delivery staff.

HP said the job cuts will result from productivity gains and automation in the data centers, which are clusters of computers that HP's business customers tap into to store data, run software and perform other tasks. Like most companies that offer such services, HP has data centers around the world. HP did not specify the locations of its planned cuts.

Once it completes the restructuring, HP said it will see savings of about $500 million to $700 million a year.

HP, which is based in Palo Alto, Calif., said it will take $1 billion in charges, about half of it in the current quarter and the rest by October 2013, the end of its fiscal year. The charges, which are largely for severance expenses, will be excluded from the company's adjusted earnings results.

HP, the world's biggest maker of PCs and printers and the top technology company by revenue, has been working to expand its business in other areas as PC profit margins are usually thin. To boost its services business, the company bought Electronic Data Systems, a rival of IBM Corp., in 2008, cutting 24,600 jobs as part of that acquisition.

HP said the commercial data centers will help its corporate clients run their businesses faster and more efficiently. Ann Livermore, executive vice president for HP Enterprise Business, said the company is confident its actions will "provide a foundation for growth for the next 10 years."

"We believe that these sets of actions will enable HP to grow better than the market," she said in a conference call with analysts.

Standard & Poor's equity analyst Tom Smith applauded HP's latest actions, calling them the "next step toward efficiency gains" after the initial integration of EDS.

In addition to business services, HP is also pushing into the mobile market with its planned acquisition of struggling smart phone maker Palm Inc., announced in April.

HP's shares rose 4 cents to $46.05 in midday trading Tuesday.

China aims to be become supercomputer superpower

2010-05-31T23:50:00.000-07:00

By Jonathan Fildes BBC News

China is ramping up efforts to become the world's supercomputing superpower.

Its Nebulae machine at the National Super Computer Center in Shenzhen, was ranked second on the biannual Top 500 supercomputer list.

For the first time, a second Chinese supercomputer appears in the list of the top ten fastest machines.

However, the US still dominates the list with more than half the Top 500, including the world's fastest, known as Jaguar.

The Cray computer, which is owned by the Oak Ridge National Laboratory in Tennessee, has a top speed of 1.75 petaflops.

One petaflop is the equivalent of 1,000 trillion calculations per second.

It is used by scientists conducting research in astrophysics, climate science and nuclear energy.

How fast is the Jaguar Supercomputer?

The Jaguar supercomputer performs 1,750 trillion calculations a second. How long does it take an average PC to match its performance in different time periods
By comparison, China has 24 machines in the list. Its fastest has a top speed of 1.20 petaflops, more than double the speed of its previous top supercomputer. However, it has a theoretical top speed of nearly 3 petaflops, which would make it the fastest in the world.

The fastest machine in the UK - which has 38 supercomputers on the list - is housed at the University of Edinburgh. It has a top speed of 0.27 petaflops.

"The Top 500 list definitely has an element of flag waving," said Dr Jon Lockley, manager of the Oxford Supercomputing Centre.

By comparison, China has 24 machines in the list. Its fastest has a top speed of 1.20 petaflops, more than double the speed of its previous top supercomputer. However, it has a theoretical top speed of nearly 3 petaflops, which would make it the fastest in the world.

The fastest machine in the UK - which has 38 supercomputers on the list - is housed at the University of Edinburgh. It has a top speed of 0.27 petaflops.

"The Top 500 list definitely has an element of flag waving," said Dr Jon Lockley, manager of the Oxford Supercomputing Centre.

Quick thinking

He said China was rapidly becoming a "player" in high performance computing.

Dawning, the company behind the fastest Chinese machine, is reportedly building an even faster machine for the National Supercomputer Center in Tianjin. In addition, it is also developing home-grown silicon chips to power the behemoths.

Their use of high-performance computers is really systematic of their industrial emergence," Dr Lockley told BBC News.

The machines tend to be used for industrial research, such as aircraft design and petroleum exploration.

Dr Lockley said this was becoming increasingly common around the world.

"Whenever possible, everything is done in a supercomputer," he said.

"Look at Formula One - it's getting rid of all of its wind tunnels and replacing them with supercomputers. It's the same in the aerospace industry as well.

"It means you can all the modelling in the supercomputer and then do just one real world test."

Many of the US machines, by contrast, are owned by the government and are used to monitor the nuclear weapon stockpile

The US has one other petaflop machine - owned by the US Department of Energy. Roadrunner, as it is known, held the top spot until Jaguar displaced it in 2009.

All others machines on the list run at so-called teraflop speeds.

A teraflop is the equivalent of one trillion calculations per second.

Spy machines

However, scientists are already thinking about so-called exascale machines which would be able to crunch through one quintillion (one million trillion) calculations per second.

An exascale computer has been proposed to process data from the Square Kilometre Array (SKA), a series of thousands of telescopes spread over 3,000km. The telescope will be based in either Australia or South Africa.

"At that sort of size the challenge is trying to programme the machines,"" said Dr Lockley.

"It has to be fault tolerant - you can't have a situation where an entire task falls over if one bit fails."

The top 500 list was published at the International Supercomputing Conference in Hamburg, Germany.

It ranks machines by speed. However, according to Dr Lockley, determining which machine is the quickest is a difficult issue.

"It's measured against a theoretical benchmark - if you ran a real-world application you might get a very different answer".

It is also a voluntary list and therefore does not include all machines, such as those at the Oxford Supercomputing Centre and many classified machines owned by governments.

"The spooks have got some pretty big machines," said Dr Lockley

Euro crisis boosts sales of luxury goods overseas

2010-05-31T23:39:00.000-07:00

By Lucy Hooker BBC News

French leather goods maker, Louis Vuitton, which opened its latest flagship store in London this week, is riding a wave of rising profits on the back of Europe's economic crisis.

While policy makers in Brussels tear their hair out, Europe's luxury retailers are quietly smiling at the fall in value of the single currency.

Since November, the euro has lost a fifth of its value against the dollar, a trend which boosts profits for companies which export to the US and the Far East.

And luxury goods companies, from watchmakers to dress designers, which source their products in eurozone countries, have seen their costs fall sharply and revenues rise.

Louis Vuitton's chief executive, Yves Carcelle, says he welcomes the fall in the euro's value.

"I honestly think, and I'm not the only one to think that, that for the last four years the euro was overvalued compared to other currencies."

Louis Vuitton is part of the world's largest luxury goods group, LVMH.

"Because we manufacture in our factories in France and Italy and sell all over the world, it's more of a breeze for us now than the squeeze we've had in the past four years," Mr Carcelle adds.

What's in store?

The new Louis Vuitton shop in London's New Bond Street showcases leather travel luggage, accessories and furniture for the French brand at prices which range from $150 to $70,000.

The UK is not a member of the euro but the pound has also fallen sharply in recent months, giving a boost to the spending power of London's many tourists and expat residents.

"We are talking about thousands of people not millions, but there is a market place that's untouched (by the downturn)," says Ben Elliot, who runs the international concierge service, Quintessentially.

They're not spending on such ostentatious things. The bling factor - that's gone to an extent. But if you just look at the financial results of businesses in that sector, they've either cut costs or the appetite for cars, holidays, and the luxury sector is back."

This week Britain's Burberry, famous for its classic check-patterned accessories, said that profits for last year rose 23%.

Richemont, Swiss owner of the Cartier and Montblanc brands, saw April sales rebound by 24% after a difficult year.

Sales have also been rising for France's Hermes and Italy's Prada.

Crisis, what crisis?

But Richemont's deputy chief executive officer, Richard Lepeu, struck a cautious note.

"What is going on in the western world is not very encouraging, look at Europe and what may happen in the US as well."

"The only piece of good news is Asia-Pacific that continues to boom

No company likes uncertainty, so the problems in Brussels are being closely watched in Paris and Milan.

"Anything that impacts consumer confidence could also have an impact on luxury demand. But so far we haven't seen that," says Dennis Weber at Evolution Securities in London.

Spain, Greece and Portugal, where the problems are most acute, are relatively small luxury markets.

And Yves Carcelle says he's sure the story will have a happy ending.

"You know Europe, we've seen through the last 60 years, we have always advanced through crisis. It's only through crisis that steps are made."

"I don't like it, but it was probably the only way to force all the governments together, to have more discipline on their budgets and on their deficits and more centralised government of the eurozone

Indian economy sees 'strong' growth

2010-05-31T23:15:00.000-07:00

BBC news

India's economy grew at an annual rate of 8.6% in the three months to March, largely thanks to growth in manufacturing, official data has shown.

That marked an increase on the 6.5% growth seen in the previous quarter.

Analysts say the figures from the Central Statistical Organisation are likely to keep the central bank on its path of gradual rate increases.

The Reserve Bank of India (RBI) raised interest rates in April and March as it battles high levels of inflation.

The economy for the year ending March 2010 grew by 7.4%, ahead of the RBI's January forecast of 7.2%.

'Momentum'

"I expect the current economic momentum to remain," Indian Finance Minister Pranab Mukherjee said after the figures were released.

He added that he expected the economy to grow by 8.5% in the financial year to March 2011.

However, some analysts cautioned that going forward, the Indian economy could be impacted by the continuing government debt woes in Western Europe.

"If Europe's problems continue, it may cause a domino effect across the globe, weakening trade and consumer confidence again," said Mridul Saggar, chief economist at Mumbai-based Kotak Securities

ECB warns of more bank loan losses

2010-05-31T22:54:00.000-07:00

By Krista Hughes and Paul Day REuters

The European Central Bank warned on Monday that euro zone banks face up to 195 billion euros in a "second wave" of potential loan losses over the next 18 months due to the financial crisis, and disclosed it had increased purchases of euro zone government bonds.

As the euro recouped losses but remained on the back foot after a cut in Spain's credit rating and China warned that the global economy remained vulnerable to sovereign debt risks, Spain assured investors it would reform its rigid labor market even if employers and trade unions cannot agree.

The ECB said euro zone banks would need to make provisions for further losses this year of 90 billion euros, and 105 billion in 2011, on top of some 238 billion euros in bad debts written off by the end of 2009. That was the first time it has given an estimate for next year.

Although total write-downs from bad loans and securities between 2007 and the end of 2010 were likely to be lower than previously expected, the ECB said in its latest Financial Stability Report, write-downs this year and next year would be still larger if heightened sovereign debt risk and the impact of government belt-tightening dragged down economic growth.

The ECB began buying up mostly Greek, Portuguese and Spanish bonds on May 3 in a contentious move to calm debt markets and support an $1 trillion stabilization package for the euro agreed by the European Union and the International Monetary Fund.

The central bank said in a statement it had settled 35 billion euros in bond purchases by May 28, up from 26.5 billion a week earlier. It did not detail the nationality of the debt but ECB officials have said it is mostly from south European countries hardest hit by financial market turmoil.

The ECB acknowledged in its report that euro zone debt tensions may force it to delay a phasing-out of cheap lending operations designed to help banks through the financial crisis.

After Lehman Brothers collapsed in September 2008, the ECB began offering euro zone banks unlimited, flat-rate loans in a bid to revive inter-bank lending and keep credit flowing to the real economy.

ECB governing council member Axel Weber, president of Germany's powerful Bundesbank, urged a tight cap on the bond buying program and said the extraordinary steps taken to ease the euro zone debt crisis posed a risk to price stability.

"The purchases of government bonds in the secondary market should not overshoot a tightly-capped limit," Weber said in a speech prepared for delivery in Mainz, Germany. He did not suggest a figure.

Spain, the fourth-largest euro zone economy, saw its credit rating downgraded a notch by Fitch Ratings agency from the maximum AAA to AA+ late on Friday after a 15 billion euro austerity program squeaked through parliament by a single vote.

Market reaction to the downgrade was limited, partly because U.S. and British markets were closed for holidays on Monday.

The euro recouped losses incurred after the Spanish debt downgrade to trade at around $1.23 but remained on the back foot as the downgrade highlighted ongoing structural weaknesses in the euro zone. The 10-year Spanish-German bond spread widened only slightly but Spanish stocks fell 0.7 percent while the index of leading European shares gained 0.4 percent.

Labor Reform

Spanish Economy Minister Elena Salgado told a conference in Madrid that the government aimed to pass a much anticipated labor market reform by the end of June with or without consensus with the unions and business representatives.

The minority Socialist administration extended the deadline for an agreement by one week from Monday but officials have said the social partners are still far apart.

The left-leaning daily El Pais said the government planned to allow companies to make greater use of cheap work contracts for a broader range of employees, reducing redundancy payments and making it easier to fire workers.

Trade unions have threatened to strike if the government imposes the reform by royal decree, a move that would set the ruling Socialists on a collision course with their traditional allies in organized labor.

In a sign of continued international concern about the impact of Europe's problems, China warned that Europe's struggle to contain ballooning debt posed a risk to global economic growth, raising the specter of a double-dip recession.

Premier Wen Jiabao, addressing business leaders during an official visit to Japan, issued his warnings a day after France admitted it would struggle to keep its top credit rating.

"Some countries have experienced sovereign debt crises, for example Greece. Is this kind of phenomenon over? Now it seems that it's not so simple," Wen said. "The sovereign debt crisis in some European countries may drag down Europe's economic recovery.

He added it was too early to wind down stimulus deployed during the 2007-2009 financial crisis.

Governments around the world ran up record debts during the $5 trillion effort to pull the economy out of its deepest slump since the Great Depression and now face a tough balancing act: how to reduce debt without choking off growth.

ECB Governing Council Member Mario Draghi warned that austerity programs by European governments could snuff out a fragile recovery unless they were coordinated internationally.

Economic sentiment in the euro zone fell in May, defying analysts expectations of a slight improvement, in part due to the wave of austerity announcements.

However, ECB President Jean-Claude Trichet said the economy may expand more than expected in the second quarter.

The fact that not just fiscally weak southern European countries, but also nations such as France and Germany at the euro zone's core are under pressure to cut debt and deficits amassed during the financial crisis, is adding to concerns.

(Additional reporting by Sarah Morris in Madrid, Martin Santa and Sakari Suoninen in Vienna, Marc Jones in Frankfurt; Writing by Paul Taylor; Editing by Ron Askew and Susan Fenton)

FTSE 100 closes lower

2010-05-31T22:48:00.000-07:00

The leading stock exchange closed fractionally lower on Friday as discouraging US consumer spending raised concerns that the pace of the economic recovery may be slowing.

The FTSE 100 index fell 0.13 percent to end at 5,188.43 points.

Lloyds Banking Group (LBG) was the most traded stock, seeing 288 million shares change hands, followed by the Royal Bank of Scotland (RBS), which saw 153 million units switch owners.

The day's best-performing security was Severn Trent, which added 39 pence -- or 3.36 percent -- to end at 1,198, followed by fellow water company United Utilities, which gained 15 pence -- or 2.86 percent -- to finish at 539.5.

Oil giant BP was the session's worst blue chip performer, losing 26 pence -- or 4.99 percent -- to close at 494.8, followed by banking group Standard Chartered, which lost 45 pence -- or 2.68 percent -- to end at 1,637.

Meanwhile, the pound fell against the euro and the dollar.

At 17:15, the pound was trading at 1.171 euros, down from 1.178 at the same time on Thursday, while sterling stood at 1.448 dollars, down from 1.455 over the same period.

Dyson Credits Profit Surge to Heavy R&D

2010-05-28T00:29:00.000-07:00

By Sarah Arnott

The British maker of pioneering vacuum cleaners, hand driers, and fans saw profits double in 2009 and attributes its success to investment in innovation

Dyson Ltd. is already an icon of British inventiveness, and the company says its latest soaring financial results vindicate a strategy committed, above everything else, to research and development (R&D).

The vacuum-cleaner pioneer yesterday reported that operating profits doubled to £190m in 2009 and turnover shot up by 23 per cent to £770m. The secret of the success is all about investment, according to Dyson's chief executive, Martin McCourt.

"We have kept investment in research, design and development running very high all the way through both the good economic times and the bad," Mr McCourt said. "The results are a clear recognition that people do want machines that incorporate new ideas and new technologies."

Dyson's latest show-stopper is the Air Multiplier – a futuristic desk fan with no blades and, according to the company, no buffeting. It went on sale in Australia last October and within six weeks accounted for a whopping 60 per cent of the market. It is now available in the US, the UK, Japan, France and Germany, and the company has high hopes it will do similarly well.

Another big seller is the Air Blade – described by Mr McCourt as "the first electric hand-drier that actually dries your hands." After two years, the Air Blade is on sale in 20 markets and turning a healthy profit.

"It has gone down really well – not least because facility managers can see that not only does it dry your hands better, but it is also lower your costs because it doesn't have a heater in it and you don't have reams of paper piling up," Mr McCourt said.

But Dyson's staple product – the vacuum cleaner – is also selling well, albeit in new guises. The financial results saw a major boost from the City, a handheld cleaner launched in Japan early last year that quickly became the country's best-selling vacuum. And there is also the DC25 Ball Vacuum – much like the traditional bag-less model through which the company shot to fame, but with a ball instead of wheels. The Ball already represents more than half of the company's US and UK sales after just one full year on the market.

Dyson is the poster child of British engineering, and a beacon for efforts to rebalance the economy away from an undue reliance on financial services. Although the actual manufacturing was moved to Malaysia in 2002, all the company's R&D is done in the UK, and the group's founder – the high-profile inventor Sir James Dyson – was asked by the Conservative Party last year to lead a taskforce aimed at making Britain a leading hi-tech exporter.

The company bats away critics' claims that the company has betrayed its allegiance to British industry by shifting production to Malaysia. The move made sense for the company, partly because of cost factors, partly because of the strong supply chain for components in the Far East. And, according to the Dyson model, it is the intellectual property that is important, not the production.

"It is not about where you manufacture something, it's about where the ideas are created," Mr McCourt said. "The ideas happen here, at our invention centre in Malmsbury."

Dyson certainly puts its money where its mouth is. The company invested £42m in R&D last year, and will spend more still in 2010. The strong financial results prove it is a strategy that works, says Mr McCourt. And the company is recruiting another 350 engineers this year, doubling its engineering headcount to 700.

The model is at the heart of Sir James's recommendations in his Ingenious Britain report, published with Tory support shortly before the election. With the Conservatives now in government – and an emergency Budget due on 22 June – there is the hope of action, notwithstanding the parlous public finances.

Much needs to be done to make Dyson the norm rather than the exception. Part of the problem is culture. Companies need to be ready to back up their ideas with research, design and development. But there is also much the state can do.

One big ask is on tax credits. The report calls on the Government to refocus the R&D tax credit on hi-tech, small businesses and new start-ups, and says the rate should go up to 200 per cent once the public finances allow. The other major piece is education. Britain churns out a fraction of the science and engineering graduates of a fast-growing economy like China.

"There needs to be a culture change, with higher value placed on science and engineering. And there needs to be more and better teaching available.

"We need people not just dreaming of becoming bankers and advertisers," Mr McCourt said. "We need children wanting to make things."

Dyson's Hits and Misses

Sir James Dyson is one of Britain's best-known inventors, and his highly profitable vacuum cleaner empire has produced a net worth estimated at more than £500m.

His first success was the DC01, the first Dyson machine, bag-less and incorporating patented "Dual Cyclone" technology. The DC01 was launched in 1993 and quickly became a best-seller. Since then, dual cyclone has been superceded by "root cyclone," which has also proved highly successful. But Sir James was not content to stick to vacuum cleaners. The Air Blade hand drier is proving a hit. And the group has high hopes for the futuristic Air Multiplier bladeless fan, launched in Australia last year and quickly the market leader. But there have been some major hiccups along the way. Sir James himself is almost proud of how long the original DC01 design took to perfect. He made some 5,127 prototypes of his original vacuum before he hit on the solution – evidence, he says, that failure helps to hone the creativity.

But there were also some blind alleys once the company had become a worldwide success. In 2000, Dyson launched the world's first "dual drum, counter rotating" washing machine. But consumers' response was lukewarm and after three, unprofitable, models, the lines were discontinued. Meanwhile, Dyson's first robotic vacuum cleaner never made it beyond the trial stage. Billed as "the vacuum cleaning system of the future," the DC06 was too heavy and too expensive for production without further development.

Shell Buys U.S. Gas Assets From East Resources for $4.7 Billion

2010-05-28T00:16:00.000-07:00

By Fred Pals Bloomberg

Royal Dutch Shell Plc, Europe’s largest oil producer, agreed to buy most of the assets of closely-held East Resources Inc. for $4.7 billion in cash, expanding its portfolio of U.S. unconventional gas deposits.

East Resources owns and operates more than 2,500 producing oil and gas wells in New York, Pennsylvania, West Virginia, and Colorado and is actively exploring drilling programs in Wyoming, according to its website. It has been operating in the Marcellus Shale Area for 25 years.

Companies from India’s Reliance Industries Ltd. to Japan’s Mitsui & Co. are spending billions of dollars on drilling to dislodge natural gas from shale -- sedimentary rock composed of mud, quartz and calcite. Shell expects its share of gas in total output to rise to 52 percent in 2012.

“They’ve seen others take material positions in U.S. gas, and this is one way they can also play a part in that business,” said Jason Kenney, head of oil and gas research at ING Commercial Banking in Edinburgh.

The acquisition is the second-biggest oil and gas deal this year, after BP Plc’s acquisition of deepwater assets from Devon Energy Corp. for $7 billion in March, according to Bloomberg data.

“We are enhancing our world-wide upstream portfolio for profitable growth, through exploration and focused acquisitions, and through divestment of non-core positions,” Chief Executive Officer Peter Voser said in a statement today.

Exxon Mobil Corp., the biggest U.S. oil company, agreed in December to buy XTO Energy Inc., the country’s largest natural gas producer, for $31 billion to gain control of shale-gas assets

Google's Latest Launch: Its Own Trading Floor

2010-05-28T00:04:00.000-07:00

By Douglas MacMillan

The search giant is hiring Wall Street vets to manage a $26.5 billion pile of cash

Last fall, some unusual job listings began cropping up on Google's (GOOG) website. Amid the requests for programmers and engineers were postings for bond traders and portfolio analysts. By spring, tech blogs were speculating about what was going on at Google.

The answer was very un-Silicon Valley. Google, it turns out, has launched a trading floor to manage its $26.5 billion in cash and short-term investments. The hoard is the third-biggest cash pile among U.S. tech companies, after Microsoft (MSFT) and Cisco's (CSCO).

One of the company's goals is to improve the returns on its money, which until now has been managed conservatively. Google doesn't disclose its rate of return on investments or the targets it has set, but analyst Aaron Kessler of ThinkEquity estimates the company's 2010 return (including interest income and realized and unrealized gains before tax) at around 2.5 percent. That's a higher return than some other large Internet outfits, such as Yahoo! and Amazon, he says.

Google is using some of its money to buy back shares in the wake of its $750 million acquisition of mobile advertising firm AdMob, which was an all-stock deal. The transaction was cleared by U.S. regulators on May 21. Investors have been wondering what else the company intends to do with its cash. IBM (IBM) recently announced plans to spend $20 billion over five years on acquisitions. Hewlett-Packard (HPQ) just bought Palm (PALM) for $1.2 billion. "Google could do 10 Palm kind of deals," says Michael Yoshikami, president and chief investment strategist of YCMNET Advisors, which owns Google shares. "That would be a pretty decent use of their money." Beyond the AdMob buybacks, Google has said it has no plans to return cash to shareholders.

Google's trading room opened in January. The plan is to keep the war chest growing safely and ready to be deployed should the right mergers-and-acquisitions opportunities arise. The investment team has grown to more than 30 people, up from six three years ago. Many of the new arrivals are former Wall Streeters who left lucrative careers at Goldman Sachs (GS), JPMorgan Chase (JPM), and other banks. The man in charge is Brent Callinicos, Google's 44-year-old treasurer, who joined from Microsoft in 2007, back when Google had $11 billion in cash. "This isn't fast money, this is patient money," he says. His crew works in a recently remodeled finance building on the company's corporate campus in Mountain View, Calif., complete with a rock climbing wall, massage chairs, murals of tropical sunsets, and bamboo wall panels. In a second-floor space accessed by key card—the trading room—the Wall Street vets tap out trades at desks with six computer screens.

Craig A. Jeffery, managing partner of Atlanta-based consultant Strategic Treasurer, says the financial technology at banks and most corporate treasuries tends to be an unwieldy hodgepodge of disparate software applications. If you're crunching numbers in Excel, you probably have to cut and paste the results manually into your foreign- exchange analytics software. Callinicos got around the coordination problem by tapping in-house engineers to meld the various pieces of software into one dashboard for trading and managing cash. "Callinicos built this mosaic of systems and a way of relating them together," says Jeffery.

That woven-together technology gives Google a trading advantage: It shows the value of the company's holdings all over the world in near-real time. This is harder than it sounds. Jeffery says that most treasuries with dozens of bank relationships in multiple countries can see the values of only 60 percent or 70 percent of their positions at any given time. Google's systems can monitor 98 percent of its holdings in real time, says Callinicos. "One of the toughest parts of [managing cash] is extracting the right data for the right decisions at the push of a button," says Wolfgang J. Koester, CEO of FiREapps, a maker of financial software. Callinicos "has been an industry leader on this."

Born in South Africa, Callinicos came to the U.S. at age 16. After receiving an MBA from the University of North Carolina, he landed in Microsoft's finance department in 1992 and became treasurer in 2000. By the time Microsoft's cash neared $60 billion in 2004—the year the company paid out a one-time $32 billion dividend—it was generating returns of more than 7 percent.

After a couple years of cautious cash management at Google, Callinicos says he's beginning to build a higher-risk, higher-return portfolio. Since last year he has pulled away from U.S. government notes and moved into corporate debt securities ($4.9 billion as of Mar. 31, up from $695 million the year before), agency residential mortgage-backed securities ($3.3 billion, up from $60 million), and foreign government bonds ($332 million, up from zero).

Google is still building its team. Its website lists openings for a foreign government bond trader, a risk analyst, and a portfolio analyst of agency mortgage-backed securities. Callinicos says he's looking for different qualities than those that large banks are seeking. "We're not trying to become a Wall Street firm," he says. "This is Google. It's eclectic." He cites Ranidu Lankage, who came to Google after a full-ride at Yale and a two-year stint at Lehman Brothers. When he's not analyzing Google's portfolio, Lankage is a star of Sri Lankan-style rap and R&B. He landed his first record deal with Sony (SNE) at age 19.

Callinicos wouldn't comment on what he pays his staff, though Gustavo G. Dolfino, senior managing director at financial recruiting firm Accretive Solutions, says Google pays finance staffers significantly less than what they would make on Wall Street. (Google has not retained Accretive Solutions.) He adds that what Google jobs lack in pay they make up for in stability. "Everybody knows that Google isn't going anywhere."

Spanish austerity vote helps reverse euro decline

2010-05-27T23:31:00.000-07:00

By Daniel Trotta Daniel Trotta

Spain turned to austerity while China and the United States offered soothing words about Europe on Thursday, providing a respite in the euro-zone debt crisis that allowed markets to recover.

Spain's governing Socialists won parliamentary approval for a 15 billion euro ($18.4 billion) austerity package by a single vote in an effort to cut its budget deficit and regain market confidence.

Fears that soaring Greek budget deficits and violent street protests could infect other euro zone countries sparked a sell-off that had pushed the euro currency to a nearly four-year low versus the U.S. dollar after losing 8 percent this month.

But the euro rebounded 1.6 percent versus the dollar and 1.4 percent versus the yen while the continent's main stock index climbed 2.9 percent.

U.S. stocks rose sharply with the S&P 500 closing 3.3 percent higher, its largest gain on a percentage basis since May 10, although volume was below average. The Dow gained 2.9 percent to close above 10,000 points at 10,259. The Nasdaq rose 3.7 percent for the day.

Global markets received a boost when China reaffirmed its long-term strategy of diversifying currency holdings away from the dollar and denied it was reviewing its holdings of euro sovereign bonds.

The People's Bank of China said in a statement that a Financial Times report that the State Administration of Foreign Exchange (SAFE) was concerned about its exposure to euro-zone debt was groundless.

The central bank said Europe would remain one of China's main investment markets and Beijing would support actions to help the European Union resolve its debt crisis.

The United States also offered comforting comments when Treasury Secretary Timothy Geithner said America and Europe broadly agreed on the need for controls on risk-taking, playing down differences on financial regulation.

"I think we all agree we want more conservative restraints on capital and leverage," Geithner said after talks in Berlin with German Finance Minister Wolfgang Schaeuble.

Washington has grown increasingly concerned that the effects of the Greek fiscal blowout could spread beyond Europe, with banks prone to a similar meltdown that roiled world markets during the 2007-2009 financial crisis.

A day earlier in London, Geithner chided Europeans for their response to the crisis, saying, "What markets want to see is action."

The Kuwait Investment Authority also denied a media report that the Gulf oil producer's sovereign wealth fund was reducing its exposure to the euro zone, saying there was no change to its long-term investment strategy in Europe.

BANKER BONUSES UNDER FIRE

The crisis has hardened attitudes among some European Union lawmakers toward the financial industry, with one EU lawmaker proposing bankers forfeit up to 70 billion euros in bonuses over the next decade to pay for an emergency crisis fund.

The plea by Sharon Bowles, head of the European Parliament's influential Economic and Monetary Affairs Committee, added to the momentum for a bank levy proposed by the 27-country bloc's executive body, the European Commission.

Germany agreed to a 110 billion euro Greek rescue and the $1 trillion emergency scheme only in return for pledges of drastic spending cuts from potential beneficiaries.

Greece, Portugal, Spain and Italy have all agreed to push through multibillion-euro savings despite fierce opposition from trade unions and sometimes violent street protests.

Spanish Prime Minister Jose Luis Rodriguez Zapatero owed his thin victory on the deficit-cutting plan to the abstention of Catalan nationalist lawmakers, underlining his precarious position.

Spanish trade unions were meeting to consider protest action over the planned public-sector wage cuts, pension freeze and civil service hiring restrictions.

French unions were staging a day of action against government proposals, still to be spelled out in detail, to increase the retirement age.

(Reporting by Sonya Sowsett in Madrid; Simon Rabinovitch and Aileen Wang in Beijing; Glenn Sommerville in Berlin; Editing by Paul Taylor, Tomasz Janowski and Jan Paschal)

Bladeless Wind Turbine – Inspired by Nikola Tesla

2010-05-27T00:33:00.000-07:00

A research company in New Hampshire recently patented its bladeless wind turbine, which is based on a patent issued to Nikola Tesla in 1913. This wind turbine is christened as the Fuller Wind Turbine. This turbine is developed by Solar Aero. The specialty of Fuller Wind Turbine is it has only one rotating part, known as the turbine-driveshaft. The entire machinery is assembled inside a housing. Wind turbines are often disliked by environmentalists because they kill birds and bats and often generate noise for the residents living nearby.

The wind industry is trying to find a solution to the problem by working with environmental groups, federal regulators, and other interested parties. They are trying to develop methods of measuring and mitigating wind energy’s effect on birds. The Fuller Wind Turbine offers hope to bird lovers and environmentalists.

Fuller Wind Turbine has several advantages over the traditional ones having blades. Fuller Wind Turbine has a screened inlet and outlet. If you try to get a closer look at this wind turbine you can see the only movement visible is as it adjusts to track the wind. This wind turbine can be utilized by the military surveillance and radar installations because there are no moving blades to cause difficulties.

Another plus attached to this wind turbine is that it won’t cost a heaven when you get its power. According to manufacturers this turbine is expected to deliver power at a cost at par with the coal-fired power plants. If you want to probe deeper, its good news that total operating costs over the lifetime of the unit are expected to be about $0.12/kWh.

If we take the maintenance angle it won’t cause much headache because it’s a bladeless turbine. The turbine maintenance requirements are not colossal and it would result in lower lifetime operating costs. The turbine is mainly supported on magnetic bearings. Another advantage is all of the generating equipments are kept at ground level. This will lead towards easy maintenance of equipments. The company comes out with encouraging figures and proclaims “final costs will be about $1.50/watt rated output, or roughly 2/3 the cost of comparable bladed units.”

If we take a look at the Tesla turbine patented in 1913, it operates using the viscous flow of a fluid to move the turbine and as a result generates energy. The Tesla turbine has a set of smooth disks fitted with nozzles that send out a moving gas to the edge of the disk. The gases drag on the disk by following the principle of viscosity and the adhesion of the surface layer of the gas. As the gas slows and adds force to the disks, it twirls in to the center exhaust. Because the rotor has no projections, it is very strong and sturdy. One has to be careful about the disk space because disks in the turbine need to be closely spaced so that they can trap the viscous flow. The Tesla turbine has extremely thin disks to reduce turbulence at the edges and that makes them effective. In 1913, Tesla was unable to find metals of adequate quality to make this work effectively. But now almost a century later, those limitations have been surmounted.

Solar Aero’s current prototype is a modest trailer-mounted unit. But inventor says that their other models “should be capable of 10kW output with no problem.” If this technology takes off smoothly it would remove many hurdles attached with conventional wind turbines and more environment friendly.

Nanosolar: Solar Power at a Lower Cost

2010-05-27T00:22:00.000-07:00

In a market-friendly scenario, Nanosolar claims to be able to produce electricity at 5-6 cents/kilowatt hour almost as cheap as power from coal and at about one-third the cost of other solar power. Nanosolar claims: Nanosolar claims mass production of solar power will now become feasible with their differently manufactured solar panels. Conventional silicon-made solar panels have a stiff competitor from CIGS semiconductor printed solar panels – composed of copper, gallium, indium and selenium – which perform as good as conventional solar panels in lab conditions. An inexpensive printing process makes it ideal for mass production by an automated facility with robots and other hi-fi equip

Solar panels re-invented:
The low efficiency which haunted Nanosolar raising the cost of installation of solar-power arrays and which necessitated more solar panels has been addressed successfully by Nanosolar. The larger panels they are now using generate more power; with modifications that cut the cost, the larger panels generate 160 watts as against 70 watts by First Solar.

Power output:
According to Martin Roscheisen, Nanosolar’s CEO, in sunny locations, power plants with these panels could produce electricity at 5-6 cents per kilowatt hour. Mr. Roscheisen claimed even the 16.4 % energy conversion in sunlight as against 20% energy conversion in the lab and only 11% of that energy into electricity by Nanosolar is high enough compared to conventional solar panels.

Raring to go!
Based at Germany and enjoying a huge market thanks to government’s incentives for the solar cells made of CIGS semiconductor, Nanosolar is ready to storm the market with producing solar cells twice as fast as the conventional solar-panel factories. He is ready to give First Solar a run for its money.

Not bankable?
But the claimed low costs are attainable only at close-to-capacity operation level which is at best a distant possibility. Because despite all improvements, under the current economic scenario, Nanosolar is finding it tough to find banks willing to back power plants which may be ready to use their solar panels. Now the panels are not yet “bankable;” but Nanosolar is hoping for a better future.

How a business makes it to $1 million

2010-05-27T00:02:00.000-07:00

By Gary Stern CNNMoney

After a year with the Peace Corps in Kenya, husband and wife team Kevin Ward and Renice Jones returned to the U.S. with a business idea: import Kenyan crafts and provide artisans with an affluent new market for their wares.

The idea that launched Global Crafts was simple. Building a profitable business around it wasn't. Less than 50% of new ventures make it to year five, and fewer still grow big enough to cross a key milestone: $1 million in annual sales.

Global Crafts made it -- but it took eight years and a few false starts to get there.

In 2002, the couple launched Global Crafts as a 650-square-foot retail store in New Smyrna Beach, Fla. The sleepy beach town had few buyers interested in gifts and crafts from overseas.

"We didn't sell many items. No one cared about eliminating poverty," Ward says. The store managed only $50,000 in sales, forcing the couple to scrape by on minimal salary.

Instead of carrying on with a flawed business plan, Ward took a step back and started over.

In 2003, Global Crafts shuttered its retail store and started selling wholesale on the Web, targeting the 100 stores in the U.S. that specialized in handmade overseas items. Ward and Jones invested $40,000, opened a 1,100 square-foot-warehouse, and gained Fair Trade Federation accreditation, boosting their credibility with retailers. Following Fair Trade's principles, Global Crafts pays craftspeople 50% upfront and 50% when the item is shipped.

Suddenly, it was a whole new ballgame -- and much more successful. "Wholesale brings volume," Ward says. "Fair trade is a niche market, and it's easier to sell to a limited number of buyers if you know who they are."

Global Crafts targeted retailers through direct marketing and by sending them free samples, attracting 50 accounts. By keeping its wholesale prices low -- $8 to $12 for wire bangles, bracelets, and napkin rings -- the company grew sales to $200,000 in 2004.

Revenue rose 40% a year from 2005 to 2007, as Ward and Jones learned how to boost sales by customizing products and offer incentives. Despite its growing business, Global Crafts continued with a very lean staff of just four people besides the founders: a brand manager plus one employee to process orders and two workers to fulfill them.

But in 2008, the recession hit and business faltered. Ward went back to the drawing board a second time.

Global Crafts launched a second website that year, Gifts with Humanity, to target retail customers. It formed partnerships with Amazon (AMZN, Fortune 500), World of Good, and Overstock.com's Worldstock, which carry its items in return for a cut of the sales.

In 2009 -- with the economic downturn peaking -- Global Crafts had its best year ever and crossed the seven-figure mark. Its annual sales were $1.3 million, with 65% of the revenue coming from the wholesale and the rest from the new retail brand. This year, Global Crafts is on track for sales of $2 million.

Ward says there's two secrets to Global Crafts' success: customer service and search optimization.

"We get orders out the next day. If it's on the website, it's in stock," he says. The company invests $40,000 a year in Google ads, so Global Crafts shows up prominently when potential customers search for "fair trade jewelry."

Carmen Iezzi, executive director of the Fair Trade Federation, attributes Global Craft's success to having "great products, and working directly with its artisan partners to develop products. It eliminates the middlemen who might distort prices."

Now that it's nearing $2 million dollar in sales, Ward is toying again with a once-abandoned strategy.

"We're considering opening several retail stores," he says. With access to a $300,000 credit line, Global Crafts would go after a highly trafficked site this time around. If the first store succeeds, Ward says he would consider franchising.

Which illustrates the real key to building a seven-figure business: Learning from and fixing your inevitable mistakes.

Oil falls 2% in global sell-off

2010-05-26T23:55:00.000-07:00

By Annalyn Censky CNNMONEY.com

Oil futures slumped 2% Tuesday as political tension between North and South Korea -- and Europe's continued economic woes -- sparked a sell-off in global stock markets.

What prices are doing: Crude for July delivery, fell $1.46, or about 2%, to settle at $68.75 a barrel Tuesday.

Gasoline prices fell for the 19th consecutive day, slipping to $2.780 a gallon from $2.793 the day before, according to a survey by motorist group AAA.

What's moving the market: Asian financial markets posted steep losses, pushing down oil prices, after North Korea threatened military action against South Korea Tuesday, according to reports by South Korean news agency Yonhap.

European financial markets also declined after a Spanish bank bailout turned attention to the financial health of other European banks.

Meanwhile, U.S. stocks fell about 1.6%.

A combination of economic factors have driven oil prices down over the past month, as investors flee to safe-haven buys such as the dollar and Treasurys.

Europe's debt crisis and volatile financial markets have fueled doubts about a global economic recovery, causing concern for oil traders who were expecting demand for fuel to rise this year. Weekly inventory reports from the U.S. government also show oil stockpiles are building up faster than demand.

The dollar has risen about 9.7% against the euro in the last month, adding to the downward pressure on oil. Because oil is priced in the greenback, a stronger dollar makes it more expensive for foreign investors.

What experts are saying: Europe's debt crisis has investors doubting that a global economic recovery will boost demand for oil, and rising tensions between North and South Korea only piled on the negativity, said Phil Flynn, senior market analyst with PFG Best.

"Obviously the European situation has been the ongoing story, but their bank stocks have fallen again today, and that is reducing confidence that this economic crisis is going to go away any time soon. It also increases the likelihood that demand for oil will be aversely affected," Flynn said

Drive My Car (Please?)

2010-05-26T23:50:00.000-07:00

By Iain Roberts Bloomerg

The auto industry is in dire need of innovation. Here's a look at some of the more promising ideas for a "car" of the future

The automobile industry is in the midst of a huge transition. Consumers who were once lured into purchase decisions by iconic designs, strong brands, or high performance ratings now want all that and more. As today's drivers spend increasing amounts of time on the road, they crave vehicles that complement their always-on, hypermobile lifestyles and that support the car as a makeshift office, an entertainment center for the kids, and a cargo hold for their inner weekend warrior.

Industry innovators are getting onboard, looking at changing behavior, cultural trends, technological shifts, and analogous industries to figure out how best to meet consumer needs. The automakers that successfully make cars "do" more—in other words, deliver smart, personalized services to drivers on demand—stand the best chance of setting themselves apart from the competition. The most sought-after vehicles will be those that act as just another node in a driver's existing network of devices. The connected car experience is the new reality. Here are a few of the early offerings to hit the market.

Inside the Connected Car
Increasingly, the "connected car" is putting people directly in control of their digital lives while they're behind the wheel. Early this year, Ford (F) announced an integrated "driver experience" for its Ford, Lincoln, and Mercury vehicles. MyFord Touch connects the driver's phone, media, navigation, and vehicle settings via one seamless interface controlled by touch or voice commands. No more missed calls or fumbling for your iPod while you're on the highway.

IDEO participated in the initial development of the MyFord system, and through that I've come to believe that the next generation of connected experiences will likely disrupt this model further by embracing a more "open" approach to innovation: dashboards that are customized by drivers. Imagine, for instance, being able to choose your car's software from a store full of applications developed by automakers, third parties, or even consumers. In other words, the car is becoming a technology platform that evolves with us over time.

Better still, these offerings should allow for safer driving. As connected experiences become more embedded and natural to use, drivers will be able to keep their eyes and attention on the road, rather than on the dashboard or audio-control system. GM recently unveiled a windshield concept in which an interior coating turns the entire piece of glass into a heads-up display. By integrating devices, media, and vehicle sensors into the system, GM can present contextually relevant information, such as road warnings and navigational information in the driver's line of sight with the road. While it may be a few years before any of these developments reach their full potential, it's clear that smart use of technology will ultimately allow drivers to stay connected, on their own terms.

From Connected Car to Connected Ownership
Connected cars have the ability to build histories of vehicle performance, movement patterns, and even the driver's purchase preferences. The data collected from the car and all those connected mobile devices present automakers and third parties with opportunities to develop unique products and services. The possibilities extend well beyond driving into the wider experience of car ownership and, by providing more positive touch points, have the potential to convert consumers into brand loyalists.

BMW's Teleservice collects driver data to improve the experience at the dealer—a moment that's often one of frustration and disappointment for consumers. Teleservice actively monitors each auto's maintenance needs, recording potential problems, and when needed, calling the vehicle's owner to schedule an appointment. The data that have already been collected keep faultfinding, reducing time at the service center to a minimum, something most customers can appreciate.

Alternately, Fiat's Web-based EcoDrive service analyzes driving behavior, rating it on a simple scale and making actionable recommendations about what the driver might do differently to improve fuel economy. EcoDrive also lets car owners rate their performance against other Fiat drivers within their community of users. It's like Nike+ for cars—and the healthy competition provides incentive for participation. Fiat claims that the system could improve efficiency figures up to 15 percent.

Third parties are already getting in on the game. Progressive Insurance's MyRate pilot scheme uses data from a connected vehicle, such as how often and how far it's driven, to calculate a customer's monthly premium.

This is just the beginning. Imagine the possibilities as the auto industry's ability to process data and synthesize patterns improves. Could car companies monitor and promote safer, or more economical, driving behavior through new incentive programs? Or perhaps, one day, your daily latte order may be ready and waiting when you pull into the coffeehouse's parking lot—a perk for which people might pay extra.

Bloomberg BusinessWeek Business Exchange

2010-05-26T23:29:00.000-07:00

by: David Welch Bloomberg

Nissan Motor Co. CEO Carlos Ghosn made the rounds in the U.S. the last two days pumping up his electric-car plans. He said the automaker and its global partner, French carmaker Renault SA, will be able to build 500,000 electric cars a year by 2014. To back up his bold plan, he announced a $1.7 billion investment in a lithium-ion battery plant in Smyrna, Tenn. All told, Nissan is dropping $5 billion from 2007 to 2012 for its ambitious play to be the leader in electric cars. The U.S. government loaned Nissan $1.4 billion of the cash for the battery plant. So in essence, we all have a piece of his gamble.

And it’s a big one. The challenges to selling electric cars in big numbers are pretty obvious. The Leaf, Nissan’s five-passenger compact that hits the market later this year, can go 100 miles before needing to recharge. That recharge takes hours. And be careful about that 100 miles. That’s in the city, where stop-and-go driving recharges the battery. Out on the highway, it could get half of that, says Jim Hall, principal of auto consulting firm 2953 Analytics. That will limit its appeal, especially because American city boulevards aren’t exactly electric avenues lined with charging stations. The cars aren’t cheap either. The Leaf will sell for $25,280 after U.S. tax subsidies. That’s at least $5,000 more than most cars its size.

Cue up the ire of green-car fans. They hate hearing that electric cars might not populate every garage from here to Shanghai. Yes, many Americans only drive 20 miles to work and back. For them, the Leaf will be wonderful. Ghosn is also counting on China to snap up a lot of these. He said that his goal of selling half a million EVs would be less than 1 percent of the global car market.

All of that makes sense. But Ghosn will be rolling out cars faster than most big car markets—namely the U.S., Europe and even China—plan to install public charging stations. Renault and Nissan won’t be the only companies selling some kind of high-tech car. Ghosn says he doesn’t see the Chevrolet Volt as a rival to the Leaf since the Chevy has a small gasoline engine to recharge the battery, while the Leaf is electric-only.

I beg to differ. Some buyers want something green and clean. Whether the car runs only on electricity or gets super-high gas mileage makes little difference to some of those customers. To them, the Volt is more practical and has the same high-tech, green appeal. It will be an alternative. Adding more to the fray, Ford plans to sell two electric vehicles by 2012. Toyota is now teaming up with Tesla to build an electric car.

Is Ghosn crazy? Plenty of critics said so when Renault bought a stake in troubled Nissan in 1999. Ghosn made a money maker out of it. He may be overreaching this time. But he remains undeterred. He said the critics will not change the path he is on. He could prove them wrong again by becoming a leader well before others have the derring-do to go electric. He may also lose a lot of money in the process.

Buffett, Moody's CEO to testify to crisis panel

2010-05-26T23:20:00.000-07:00

By Karey Wutkowski Reuters

Warren Buffett, the chief executive of Berkshire Hathaway Inc, will testify next week before the U.S. panel examining the causes of the deep financial crisis.

The Financial Crisis Inquiry Commission, a Congressionally appointed panel charged with writing by the end of the year a full account of the crisis, said Buffett will testify with Moody's Corp Chief Executive Raymond McDaniel on June 2 in New York.

The hearing will look at the credibility of credit ratings, and the investment decisions made based on those ratings, the panel said in a release on Wednesday.

Credit rating agencies have been accused of contributing to the global financial crisis by assigning inflated ratings to subprime mortgage-related products.

Buffett earlier this month defended credit rating agencies as an investment, including stakes by Berkshire Hathaway.

He told Berkshire's annual meeting that rating agencies "made the same mistake" that he, politicians, mortgage brokers and others did in overestimating the health of the housing market.

During the first quarter of this year, Buffett further reduced his stake in Moody's, which stood at about 13 percent as of March 31.

Buffett said at the annual meeting on May 1 that the agencies, which also include McGraw-Hill Cos' Standard & Poor's and Fimalac SA's Fitch Ratings, have scant capital needs and have strong pricing power.

Buffett will be one of the biggest names to appear before the 10-member panel, which is modeled after the Pecora Commission that probed the 1929 Wall Street crash.

In the past few months, the commission has also heard from Goldman Sachs CEO Lloyd Blankfein, JPMorgan CEO Jamie Dimon, former Federal Reserve Chairman Alan Greenspan and former Bear Stearns CEO James Cayne.

It must deliver its findings to Congress and President Barack Obama by December 15.

Also scheduled to testify on June 2 are current and former Moody's executives, including Nicolas Weill, the group managing director for Moody's Investors Service, and Brian Clarkson, former chief operating officer for Moody's Investors Service.

The full list of witnesses can be found at: http://www.fcic.gov/hearings/06-02-2010.php

Credit rating agencies are facing tough reforms in the financial regulation legislation moving through Congress.

The Senate version of the bill would have the government set up a clearinghouse to match rating agencies on a semi-random basis with debt issuers.

That could ease pressures the agencies face to assign rosy ratings to securities issued by the firms that hire them, backers said.

Another provision in the Senate's legislation would require federal regulators to develop their own standards of credit-worthiness rather than rely solely on assessments from rating agencies.

Shares of credit rating agencies dropped when the Senate approved the measures on May 13, but it is unclear whether they will make it into the final bill, which must be melded with a version passed by the U.S. House of Representatives.

Hoku Corp. reports $2 million 4Q loss

2010-05-26T23:16:00.000-07:00

Hoku Corp. is reporting a net loss of $2 million for its fiscal fourth quarter ended March 31, more than double the $904,000 it lost in the same quarter last year.

The clean energy products and services company said Wednesday that it lost $5.4 million for the fiscal year ended March 31, compared to a $3 million loss in fiscal 2009.

Hoku President and CEO Scott Paul attributed the higher loss in fiscal 2010 primarily to preparations for recently completed pilot production runs and to payments to Idaho Power for reserve power capacity in advance of the company's plant startup.

Hoku is building a $390 million plant in Pocatello, Idaho, to produce polysilicon, a product used for making solar panels.

April factory orders rise on demand for aircraft

2010-05-26T07:59:00.000-07:00

By MARTIN CRUTSINGER, AP

A rebound in demand for commercial aircraft lifted April orders for big-ticket goods, further evidence that manufacturers are helping to drive the economic recovery.

Requests for durable goods increased 2.9 percent last month, the Commerce Department said Wednesday. It was the best showing in three months and more than double expectations.

Excluding transportation, orders in the highly volatile manufacturing sector fell 1 percent. But that came after the March figures were revised to show a 4.8 percent jump.

A durable good is a product expected to last at least three years, such as a refrigerator.

U.S. companies are benefiting from rising demand both at home and in major export markets.

There are concerns that a debt crisis in Europe could derail the global recovery. Financial markets have been roiled in recent weeks by fears that the problems facing Greece could spread to other heavily indebted European countries, such as Spain and Portugal.

But economists say the U.S. manufacturing industry may be strong enough to weather Europe's troubles.

" April's durable goods orders figures demonstrate that, despite the fiscal meltdown in Europe, the recovery in the American manufacturing sector is still gathering momentum," said Paul Ashworth, senior U.S. economist at Capital Economics.

For April, the 2.9 percent rise in orders was led by a 228 percent surge in demand for commercial aircraft. The increase reflected strong demand for aircraft manufactured by Boeing Co. It also more than offset a 71.2 percent plunge in March in this highly volatile category.

Orders for motor vehicles were up 1.6 percent following an even stronger 4.5 percent gain in March. Automakers continue to dig out of the deep downturn that hit their industry over the past two years. Total manufacturing orders rose 16.1 percent.

The 1 percent drop in orders excluding transportation was a result of declines in a number of areas that had big gains in March.

Orders for primary metals such as steel fell 2 percent. Demand for heavy machinery dropped 5.9 percent after a surge of 10.5 percent in March. Computers fell 3 percent, although orders for communications equipment rose 7.1 percent. Orders for appliances were down 6.9 percent.

Non-defense capital goods excluding aircraft, considered a good proxy for business investment plans, dropped 2.4 percent. But that came after a 6.5 percent increase in March.

The European debt worries have pushed the value of the dollar up 14 percent this year against the euro. That will make American products less competitive in European markets.

There is also concern that the austerity measures that Greece and other European countries are having to implement will dampen demand for American exports and could push Europe back into recession.

At the moment, economists believe the United States will be able to offset weaker exports to Europe with stronger domestic growth, helped by failing oil prices and lower interest rates.

The U.S. economy has been growing since last summer as the country emerges from the worst recession since the 1930s. The overall economy, measured by the gross domestic product, grew at an annual rate of 3.2 percent in the first three months of this year. Economists believe that figure will be revised up to 3.4 percent growth when the new GDP estimate is released Thursday.

New US homes sales jump

2010-05-26T07:53:00.000-07:00

Sales of new US homes rose unexpectedly in April, according to official figures published Wednesday, as Americans rushed to take advantage of expiring tax breaks.

Sales of newly constructed single-family homes increased 14.8 percent in one month, well beyond market expectations.

The rise came in the dwindling days of the government's homebuyer tax credit, which expired at the end of April.

The policy was designed to help the US real estate market recover from a crippling recession that has seen house prices slump and mortgage borrowing become more difficult.

Analysts had expected sales of around 425,000, versus the whopping 504,000 posted.

The rate for March was revised up to 439,000, from 411,000

Ford to hire 220 to make hybrid parts

2010-05-25T03:09:00.000-07:00

By Blake Ellis CNNMONEY

Ford Motor Co. said Monday it plans to invest $135 million and hire 220 workers to create parts for its new hybrid and electric vehicles.

Ford (F, Fortune 500) will add a total of 170 jobs at its Rawsonville and Van Dyke Transmission plants in Michigan, as well as more than 50 electric vehicle engineer positions.

The new hires will work to design, engineer and produce battery packs and electric-drive transaxles for the company's hybrids that go into production in North America in 2012.

The initiative will bring work to Michigan that is currently performed by suppliers in Japan and Mexico, Ford said Monday in a prepared statement.

"Electrified vehicles are a key part of our plan to offer a full lineup of green vehicles, and we are building a center of excellence in the U.S., here in Michigan, to keep Ford on the cutting edge," said Mark Fields, Ford president of the Americas. "Today's announcement is another important step in our larger strategy to launch a family of hybrids, plug-in hybrids and full electric vehicles around the world."

The launch of the new hybrid in 2012 is part of Ford's plan to introduce five electrified vehicles in the U.S. by 2012 and in Europe by 2013, the automaker said.

Wal-Mart slashes iPhone price to $97

2010-05-25T02:55:00.000-07:00

By Chavon Sutton Cnn Money

Wal-Mart, the world's largest retailer, plans to slash the price of Apple's 16GB 3GS iPhone to $97 beginning Tuesday.

Apple (AAPL, Fortune 500) is widely expected to unveil a brand-new iPhone next month, and could be working with retailers to clear out its remaining inventory of the about-to-be-outdated model.

At the new price, customers will save $100 on Apple's smart phone, which currently sells for $199. The deal requires that the phone be purchased with a two-year contract from AT&T, the iPhone's exclusive service provider.

"It is our commitment to always lead on price," Mehrdad Akbar, Wal-Mart's (WMT, Fortune 500) senior category director for wireless, in a prepared statement about the price change.

Apple sold 8.3 million iPhones last quarter, more than twice the amount sold during the same period a year ago.

Wal-Mart's pre-Memorial Day price whack comes as technology giants such as Google (GOOG, Fortune 500), Research in Motion (RIM) and Hewlett-Packard (HPQ, Fortune 500), which recently snapped up Palm, vie for top dog status in the smart phone market. Industry analysts say that worldwide smart phone sales topped 54 million units in the first quarter, up nearly 49% from a year ago.

At $97, Wal-Mart's price slightly undercuts the $99 price tag several analysts anticipated for the remaining iPhone 3GS stock. When consumers get sight of a new iPhone model on the horizon, sales of the existing model typically falls off sharply.

In the furor surrounding last month's theft of a new iPhone prototype, Apple filed legal documents claiming that leaked details of the new model would be "immensely damaging" to the company because "people that would have otherwise purchased a currently existing Apple product would wait for the next item to be released."

Marks & Spencer reports annual profit gain

2010-05-25T02:48:00.000-07:00

British retailer Marks & Spencer on Tuesday reported a 3.6-percent gain in annual net earnings but voiced caution on its prospects in light of expected government austerity measures.

The company said profit in the 53 weeks to April 3 came to 536.3 million pounds (610 million euros, 750 million dollars) from sales that rose 5.2 percent to 9.537 billion pounds.

In the 52 weeks to March 27 sales gained 3.2 percent to 9.3 billion pounds.

"We have had a satisfactiory start to the first quarter," said chairman Stuart Rose.

But he added that consumers were "naturally cautious" ahead of the release of the British budget on June 22.

"We therefore remain cautious about the outlook for the year ahead," Rose said in a statement.

Britain's new coaliton government of Conservtives and Liberal Democrats on Monday presented plans to cut 6.2 billion pounds from ministerial budgets, seen as a foretaste of tougher measures to come.

Economists here are talking of possible tax hikes that could discourage consumer spending.

Marks and Spencer said earnings before taxes and exceptional items in the 52 weeks to March 27 rose 4.6 percent to 632.5 billion pounds, eclipsing company expectations of a range of 620-630 million pounds.

Debt in the period was cut back by 422.4 million pounds to 2.1 billion.

The dividend was lowered to 15 pence per share from 15.7 while employees shared bonuses totalling 81 million pounds.

Advertisers Give Google TV a Warm Reception

2010-05-25T00:09:00.000-07:00

By Olga Kharif Bloomberg

Google's interactive TV platform might lower costs and improve the targeting of ad spots. Could 'smart' TV redefine advertising?

Say you're watching TV and an ad for Chevy's Silverado pickup catches your eye. Come this fall, viewers using Google's new interactive television technology will be able to type the object of their desire into an onscreen search box and launch a YouTube GOOG video or surf over to Chevy's (FIATY) website.

Advertisers foresee a new medium to get their message to consumers. "Google is going to revolutionize the way we use media," says Shattuck Groome, president of New York ad agency Gotham Direct Interactive, which buys TV ads for brands that include M&M's candy and Zappos.com (AMZN). "It's the future of advertising."

Gotham Direct already buys TV ads for clients through a prior initiative called Google TV Ads, an online marketplace where advertisers can upload video spots and place them on more than a dozen networks, including ABC Family (DIS), through services from the DISH Network (DISH) and TiVo (TIVO). Groome says he's looking forward to being able to measure precisely who is viewing the ads Gotham creates—and to pay only for ads that viewers actually watch.

Google announced its plans for "smart" TVs at its Google I/O developer conference in San Francisco on May 20. Google software will put Web content on televisions and will work with Intel (INTC) chips in TVs from Sony (SNE) and a set-top box from Logitech International (LOGI) that will allow Google TV to run on generic sets. Using Google TV, viewers will be able to search for Web programming through an onscreen search box that presents the results on their TV screens.

Big savings for Advertisers?
Advertisers say Google TV will let them reach TV viewers faster, more cheaply, and more effectively than via traditional TV spots. With Google, advertisers will know exactly who viewed their ad, how many people clicked on it, and how many people chose to use a "click-to-call" feature to contact advertisers immediately.

The platform could make TV advertising more affordable, too. Today advertisers pay thousands or even millions of dollars per spot to push fast food, cars, and beer. But an online video ad costs about only $30 per 1,000 viewings, according to the Diffusion Group, a market researcher. Jeroen Coppelmans, vice-president for the Americas at Spotzer Media, which produces video ads for small businesses, says that "someone with a budget of a couple of dollars a day could do TV advertising

Google hopes Google TV will help it create revenue streams in addition to that from ads linked to searches conducted by computer users on PC Web browsers. Those ads contributed the bulk of the company's $23.7 billion in 2009 revenues. TV advertising in the U.S. accounted for $83 billion in spending last year, according to the Diffusion Group. If Google were able to grab even a small chunk of it, the company would tap a lucrative source of revenue.

smartphone-like remote controls
Google TV brings the company's familiar search box into the living room. The company describes the technology as creating an "entertainment hub" that lets viewers search channels, record shows, and find websites. "Many times, I see an interesting commercial and can't do anything with it," Rishi Chandra, a Google senior product manager, said at Google I/O. He added in an interview: "Now your TV advertising becomes interactive …. Every advertiser has a website."

At first, advertisers won't know whether the ads they buy through Google's advertising network are being viewed on PCs or on TVs. Google plans to let advertisers tailor messages for Google TV viewers, however. "We are looking at ways for advertisers to target specific devices," says Chandra. To facilitate typing, he says, manufacturers are working on remote controls that might resemble smartphone keyboards.

Although TV, cable, and technology companies have been pushing the idea of interactive TV since the early 1990s, the concept hasn't taken off. Among Google competitors pursuing interactive TV are Apple (AAPL), Microsoft (MSFT), Yahoo! (YHOO), and Wal-Mart Stores (WMT), which bought online movie rental service Vudu on Feb. 22. Nearly half of the flat-panel TVs sold in 2013 will be Web-enabled, up from 19 percent this year, according to consultant ABI Research.

Do consumers want full TV Web access?
Yahoo may roll out a TV advertising program in the coming months, says Russ Schafer, a senior director of marketing at the company. Yahoo's Connected TV service, which was launched last year and lets users stream movies online from Amazon.com and Blockbuster (BBI), is available on more than 2.5 million devices from Sony, Vizio, Samsung, and LG Electronics. Yahoo recently demonstrated the ability to show TV viewers a Macy's (M) ad and let them forward a related coupon to a cell phone.

Wal-Mart's Vudu service may offer advertising capabilities in the future as its audience expands, says Executive Vice-President Edward Lichty.

Microsoft's Mediaroom service lets telcos, including AT&T (T) and Deutsche Telekom (DT), offer access to such websites as Facebook on subscribers' TV screens. Ben Huang, Microsoft marketing director, says consumers may not want full Internet access on their TVs, as Google is proposing. "If the point is to allow open Web surfing on a TV, I'm not sure that's what the consumer wants," he says.

from cable companies: Canoe Ventures
Cable companies stand to lose most if Google TV takes off. "There's been enormous frustration among ad agencies about what they can do with the television platform," says Bill Niemeyer, a senior analyst at Diffusion Group. Interactive TV ads "could be a $10 billion to $20 billion industry over the course of the decade," he says. Much of that money may come out of advertisers' TV budgets, he says.

Cable companies and telcos are fighting to defend their turf. Comcast (CMCSA), Cablevision (CVC), and Time Warner Cable (TWC) have been testing interactive TV ads for months.

Comcast and other operators have formed Canoe Ventures, which has developed set-top box software that makes TV ads' effectiveness easier to measure. An overlay on customers' TV screens lets them request direct mail or coupons by pressing a button on their remote. On May 17, Canoe announced that Comcast, Discovery Communications (DISCA), NBC Universal, and Rainbow Media plan to launch the technology in this quarter.

Advertisers face a number of options to combine TV's reach with the Web's precision. Still, interactive TV is seeded with wild cards, including questions about how aggressively TV manufacturers will buy into it and how hard it is to predict consumer tastes. "It's too early to tell," says Darren Herman, chief digital media officer at ad agency Kirshenbaum Bond Senecal + Partners, whose clients include Delta Air Lines (DAL) and Victoria's Secret. "All these folks are currently wearing diapers."