stock-exchange-

SEC Says Circuit Breakers for S&ampP 500 Stocks Will Start Within Two Weeks

June 4, 2010

By Nina Mehta and Whitney Kisling (Corrects when NYSE trading curbs began in first paragraph after “NYSE’s System” subhead.) June 4 (Bloomberg) — The U.S. Securities and Exchange Commission delayed trading curbs for Standard & Poor’s 500 Index stocks when they rise or fall 10 percent in five minutes, saying they will be implemented within two weeks. The announcement was made in an e-mailed statement. NYSE Euronext said earlier today that it won’t start its trial of the system on June 7 because it hadn’t received SEC authorization. Nasdaq OMX Group Inc., based in New York, is prepared to introduce circuit breakers on the S&P 500 companies it lists on June 14, pending SEC approval, spokesman Robert Madden said. Regulators asked stock exchanges to impose coordinated trading pauses following the May 6 rout that erased $862 billion from U.S. equities in less than 20 minutes. The SEC and Commodity Futures Trading Commission proposed six potential causes of the crash 12 days later, including curbs that applied at the New York Stock Exchange and not elsewhere. “The majority of work needed on the circuit breaker needed to be done by the listing exchanges,” said William Karsh , chief operating officer of Direct Edge Holdings LLC in Jersey City, New Jersey. His firm is converting two U.S. trading stock venues into exchanges. “We’re prepared to go forward as soon as they are,” he said. Dow Falling 10% Stock exchanges on May 18 proposed methods to halt trading across their markets when a stock in the S&P 500, the benchmark index for U.S. equities, moves 10 percent in five minutes. When a stock hits that threshold, its trading would be paused for five minutes. That would supplement existing rules, including a halt when the Dow Jones Industrial Average falls 10 percent from the previous day’s closing price. Credit Suisse Group AG said the circuit breakers suggested by exchanges should be broadened to more stocks and operate throughout the day. They should also lead to a 10-minute halt in trading instead of a 5-minute pause, according to a letter the firm sent the SEC today. The document hasn’t been posted on the agency’s website yet. “We think a ten-minute halt would be a reasonable compromise: long enough to allow humans time to make rational decisions, while still short enough to avoid overly disrupting the markets,” the Zurich-based brokerage wrote. Less than that wouldn’t give investors enough time to conduct “meaningful analysis and understand the reasons behind a sudden price drop, and then make a rational decision to buy or sell,” it said. Identical Curbs Nasdaq ’s chief executive officer said today that equities and derivates exchanges in the U.S. need to adopt the same trading curbs in response to last month’s plunge. “We believe there should be one set of unified circuit breakers,” Robert Greifeld , the chief executive officer of New York-based Nasdaq, told reporters in New York today. “That uniform set of circuit breakers shouldn’t be just in the cash markets but should include futures markets.” Nasdaq said on June 2 that it would also introduce a mechanism to pause trading in all companies listed on its market if shares rise or fall a set amount that varies based on share prices in 30 seconds. The program, which would begin in the third quarter, would only apply on the Nasdaq Stock Market. The shares could continue to trade elsewhere. NYSE’s System NYSE Euronext’s New York Stock Exchange has had a system in place since 2006 that slows down trading if a stock moves rapidly. NYSE holds automated auctions to gather buy and sell orders and determine a price based on that demand. These auctions can take place in less than a second or after trading has paused for half a minute or more. Greifeld said uncertainty about what markets including CME Group Inc. ’s Chicago Mercantile Exchange, the world’s largest futures market, will do when markets swing should be eliminated. CME is regulated by the CFTC, not the SEC. “We have to think first and foremost about our issuers,” Greifeld said. Companies want assurance that the prices of their shares are not arbitrary or unrelated to the value of the firms, he said. Nasdaq will end the pause after one minute. Greifeld also said his firm plans to modify rules to eliminate stub quotes, which are bids and offers that some have blamed for exacerbating the May 6 plunge in U.S. stocks. 12,300 Trades Canceled Some stocks fell to pennies that day as sell orders executed against stub quotes. Brokers can set those as low as a 1 cent a share because they’re never expected to be used. Nasdaq canceled about 12,300 trades from 2:40 p.m. to 3 p.m. on May 6, or 59.3 percent of the total number of voided transactions across markets. NYSE, which already had volatility curbs in place, voided no trades. The goal over the “short term is to have stub quotes be replaced by quotes that are realistically priced to the market at the time,” Greifeld said during an interview with reporters today. Companies such as Accenture Plc traded for 1 cent on May 6. One way to avoid this could be to require market makers to quote “within 15 percent of the market,” he said. Some brokers and algorithms send orders into the market that shouldn’t have been submitted on May 6, he said. These included “dumb sell-short orders” and other requests to sell shares at a “dumb price,” he said. To contact the reporters on this story: Nina Mehta in New York at nmehta24@bloomberg.net ; Whitney Kisling in New York at wkisling@bloomberg.net .

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New York Times Circulation Is Holding Up to WSJ Assault, CEO Robinson Says

June 4, 2010

By Greg Bensinger June 4 (Bloomberg) — New York Times Co. Chief Executive Officer Janet Robinson said the namesake newspaper is holding on to its circulation as the Wall Street Journal promotes its New York section and cuts advertising rates. “We are definitely not seeing any effect in regard to the circulation,” Robinson said today in an interview in New York. “Are they discounting? Yes, they are, very, very heavily.” The two newspapers have been fighting for readers on their home turf as industry circulation sales have plunged. News Corp. ’s Journal introduced its metro section in April, in part to attract readers from the New York Times. Times Co., based in New York, has maintained its own advertising rates since the Wall Street Journal ’s “Greater New York” section debut, Robinson said. “If they’d like to leave those dollars on the table and give free advertising, we’re more than happy to clean them up,” she said. The New York Times reported average nationwide circulation in the six months through March fell 8.5 percent to 951,063, while circulation at the Journal, which counts paying Web readers, rose less than 1 percent to 2.09 million in the period, data from the Audit Bureau of Circulations show. Emily Edmonds, a Wall Street Journal spokeswoman, had no immediate comment. Times Co. lost 29 cents, or 3.3 percent, to $8.64 at 12:10 p.m. in New York Stock Exchange composite trading . The shares had declined 28 percent this year before today. To contact the reporter on this story: Greg Bensinger in New York at gbensinger1@bloomberg.net

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P&ampG’s Consumer Changes to He From She With Men’s Thermal Scrubs

June 4, 2010

By Mark Clothier June 4 (Bloomberg) — After spending decades luring women with products such as Olay skin cream, Procter & Gamble Co. is about to tell men they need pampering too. P&G will introduce a pre-shave thermal scrub, which it likens to a hot towel at the barber shop, along with a cooling after-shave moisturizer next week. The four products, selling for $7 to $9, make up the first skin-care line aimed at men since P&G’s $61 billion acquisition of Gillette five years ago. P&G is seeking to persuade buyers of Gillette razors to take better care of their skin after the company’s sales fell 3.3 percent last year. It’s also a further push into higher- margin beauty products for the world’s largest consumer-products company, which makes Charmin toilet paper and moved into cosmetics in the 1980s. “We have an aspiration to be the biggest and best beauty and grooming company,” Chip Bergh , who heads P&G’s grooming unit, said in a telephone interview. “But we can’t get there unless we win with men.” Gillette’s new ProSeries line, including a face wash for sensitive skin and a moisturizer that protects against ultra- violet rays, will debut in North America June 6 and be available globally by the end of next year, Cincinnati-based P&G said. Trying It Chief Executive Officer Bob McDonald is tapping the men’s grooming market to help reach his goal of adding 1 billion new consumers by 2015. Worldwide sales of skin care, hair care, bath and shower products, and deodorant for men reached $26.6 billion last year, up 44 percent from 2004, according to research firm Euromonitor International Plc. “I expect this to be very profitable for them, but it’s going to require education to get people to try it and to get over the hump of the cost” of the products, said Matt McCormick , a portfolio manager at Cincinnati-based Bahl & Gaynor Inc., which has $2.8 billion under management, including P&G shares. Beauty products are among the more recession-resistant product categories, according to a Sanford C. Bernstein & Co. survey of U.S. consumers released in March. Consumers are less likely to buy a cheaper version of their favorite skin cream or perfume, than of detergent, batteries or diapers, the survey showed. P&G’s products will compete for customers with Beiersdorf AG’s Nivea for Men, L’Oreal SA ’s Men’s Expert and Unilever ’s Dove for Men skin-care lines. Gillette has an edge, because it’s a male brand that doesn’t need to make clear that it’s “for men,” said Bergh, the P&G executive. ‘Education and Marketing’ Getting U.S. men to pamper themselves will still be a hard sell, said Walter Todd , who helps manage $800 million at Greenwood Capital in Greenwood, South Carolina, including about 100,000 P&G shares as of March 31. “I don’t think the majority of men think about how soft their face is or how to care for it,” Todd said. “It’s not something that comes into my mind. Particularly, now with the economy, we’re still kind of watching how we spend our money and the last thing I’m going to go out and buy is some face cream.” Bergh, 52, said the market for men’s lotions can be similar to the last century’s evolution of women’s skin care, which for his mother’s generation consisted of cold cream. “That’s all been driven by education and marketing and the same will happen with guys,” he said. Marketing Campaign P&G, which started selling soap in 1837 and pioneered radio soap operas to promote them, will reach men through websites, blogs and online videos, and in stores, Bergh said. In the U.S., where P&G has about 68 percent of the blade and razor market, the company will include samples of the new products in cartridge refills for the Fusion and Mach3 razors, he said. The Gillette unit made up 9.5 percent of P&G’s $79 billion in sales in fiscal 2009. P&G has advanced 1.9 percent this year, compared with a 1.1 percent decline in the Standard & Poor’s 500 Index. The shares added 6 cents to $61.80 yesterday in New York Stock Exchange composite trading. Last June, the company acquired the Art of Shaving, a boutique chain that offers $100 chrome razors and $75 badger-fur shaving brushes, as well as Zirh, a premium skin-care brand. The brands joined P&G products including Old Spice deodorants and Braun electric shavers. Partnerships with Dolce & Gabbana and Hugo Boss could also be expanded beyond cologne, Bergh said. “We’ve got a portfolio of brands and the company’s support to win with him,” Bergh said of the male consumer. “We’ve got pretty strong plans to do just that.” To contact the reporter on this story: Mark Clothier in Southfield, Michigan, at mclothier@bloomberg.net

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UnitedHealth Chief Says Companies Will Keep Benefits for Workers in U.S.

June 3, 2010

By Alex Nussbaum June 3 (Bloomberg) — UnitedHealth Group Inc. , the biggest U.S. health insurer by sales, expects companies to keep offering benefits rather than force a migration of workers to the online exchanges created by the U.S. health-care law, said Chief Executive Officer Stephen Hemsley . Under the law passed in March, companies still face costs for employees’ coverage even if they buy it through the exchanges. Keeping their own plans will give employers the best chance of controlling medical expenses, Hemsley said in a presentation at an investor conference in New York today. He cited studies by the Congressional Budget Office, which said in December that 134 million people working at companies with 50 or more employees will still get benefits in 2016. “We don’t expect, nor would anyone else who’s modeling this actually expect, that kind of migration” into the exchanges, Hemsley said. Businesses “have thought about the fact that they can manage their costs more effectively.” Cigna Corp. CEO David Cordani , in a separate presentation at the same Sanford C. Bernstein & Co. conference, said it is unclear how companies will respond to the health-care law. Some may decide it is cheaper to let people buy on their own through the purchasing exchanges, he said. The online marketplaces open in 2014. Employers will spend the next three to five years weighing options, Cordani said. “Will there be a de minimis effect” on the large-employer market for insurance? “We don’t think so,” Cordani said. UnitedHealth, based in Minnetonka, Minnesota, rose 68 cents, or 2.3 percent, to $30.46 at 4:01 p.m. in New York Stock Exchange composite trading. Philadelphia-based Cigna, the fourth-biggest insurer, gained $1.04, or 3.1 percent, to $34.80. To contact the reporter on this story: Alex Nussbaum in New York at anussbaum1@bloomberg.net

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Copper Demand May Weaken as China Curbs Its Economy, Freeport, Codelco Say

June 3, 2010

By Matt Craze and Sara Eisen June 3 (Bloomberg) — Freeport-McMoran Copper & Gold Inc . and Codelco, the world’s two largest copper producers, said China’s plans to curb its economy threaten to reduce demand for the metal after prices slumped 15 percent in two months. The copper market will be “volatile” for as much as another year after China took measures to cool its property market, Codelco Chief Executive Officer Diego Hernandez said yesterday in an interview at Bloomberg headquarters in New York. The Asian nation is a “risk to the world’s market place in the near term,” Freeport CEO Richard Adkerson said in an interview. Chinese policy makers are trimming stimulus measures this year after a $1.4 trillion lending binge revived growth in 2009. Officials are targeting a 22 percent reduction in new loans and have sold bills and raised banks’ reserve requirements to suck money out of the financial system. Copper has slumped from a 20- month high in April on concerns about global economic growth. “In the short term, we are subject to the volatility of the world economy,” said Hernandez, a former head of BHP Billiton Ltd.’s base metals business who became chief executive of state-owned Codelco, based in Santiago, last month. Emerging market demand “could slow down for a while,” he said. Equity and commodities have slumped on speculation that Europe’s debt crisis will spread, hurting global economic growth. The Reuters/Jefferies CRB Index of 19 raw materials dropped 8.2 percent last month, the most since November 2008. Copper futures for July delivery dropped 3.6 cents, or 1.2 percent, to $3.0045 a pound on the Comex in New York at 8:59 a.m., down for a fourth straight session. Manufacturing Slowed Reports June 1 showed the rate of manufacturing gains slowed in China and the U.S., the world’s biggest copper users. European factory-output growth slowed more than previously estimated last month, figures showed yesterday. Copper prices in New York dropped 7.4 percent in May, the most since January. “China is cooling from very strong levels, the European recovery threatens to stall, and the U.S. is leveling out,” said David Thurtell , an analyst at Citigroup Inc. in London. China is seeking to limit inflation to about 3 percent this year and said May 13 it will crack down on price speculation and hoarding in some food commodities to reach the target. Consumer prices jumped 2.8 percent in April from a year earlier, the fastest pace in 18 months. “It’s positive” that China’s government is working to minimize inflation, Adkerson told Bloomberg Television today in an interview. “It will likely lead to a more sustainable situation going forward.” Expansion Plans Still, both companies are investing in expansion plans in expectation of rising future demand in China and other emerging economies. Combined, they account for about a fifth of global output of copper, which is used in plumbing and wiring. Codelco will invest $15 billion over the next five years to revamp production at its aging mines, Hernandez said. Production will rise to over 2 million tons a year from about 1.7 million tons through the increased spending, he said. Freeport, based in Phoenix, will spend $100 million this year to explore for copper and gold after cutting back on investments in 2009 amid concern over the world economy, Adkerson said in April. China, India and other emerging economies need copper “for their growth, urbanization, programs that they have and I don’t see how that could stop,” Hernandez said. Freeport rose $2.53, or 3.8 percent, to $69.02 as of 9:26 a.m. in New York Stock Exchange composite trading. The stock has dropped about 14 percent this year. To contact the reporters on this story: Matt Craze in Santiago at mcraze@bloomberg.net or Sara Eisen in New York at

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Nasdaq Proposes Tiered Circuit Breakers to Supplement SEC Volatility Rules

June 2, 2010

By Nina Mehta June 2 (Bloomberg) — Nasdaq OMX Group Inc. proposed an expansion on its markets of measures to halt stocks during periods of volatility, adding circuit breakers to all the companies it lists and a tiered system that pauses trading based on different percentage moves. The Nasdaq program would add halts for faster price changes than are covered by a Securities Exchange Commission proposal last month. While the agency will begin a pilot next week in which Standard & Poor’s 500 Index stocks that swing more than 10 percent within five minutes are delayed, Nasdaq will pause trading for a minute during moves over 30 seconds or less, said Eric Noll , executive vice president at New York-based Nasdaq. Exchanges and regulators are examining ways to slow down trading during investor panics after the market plunge on May 6 showed how conflicting rules across as many as 50 different U.S. equity venues may worsen selloffs. The rout erased $862 billion from the value of U.S. equities in less than 20 minutes and drove the Dow Jones Industrial Average to an almost 1,000-point decline, according to data compiled by Bloomberg. “We’ve always seen this as an issue,” Noll said. “With the circuit-breaker bands now being introduced in the marketplace, we can provide solutions that affect specific volatility concerns in our market.” The events on May 6 caused Nasdaq to pursue this mechanism “in a much more aggressive way,” he said. Mistakes, News The Nasdaq program will “prevent drastic volatility” without limiting moves justified by news, Noll said. At the end of the 60-second pause, the exchange will hold electronic auctions to reopen trading. “We’ll be able to re-gather liquidity through a brief halt,” Noll said. For shares below $1.75, trading would be paused after a 15 percent increase or decline within 30 seconds, he said. For stocks between $1.75 and $25, a halt would be triggered by 10 percent changes. From $25 to $50, a 5 percent move would lead to a pause, and for equities above $50, the threshold would be 3 percent, he said. Lower-priced stocks tend to rise or fall more as a percentage of their price than larger companies, partly because the smallest trading increment is a bigger proportion of their value, Noll said. Never Activated Nasdaq proposed the same curbs three years ago and the SEC approved it for a pilot of 100 stocks, Noll said. The exchange never implemented it because of concern about how the program would operate without a stock-by-stock circuit breaker across all markets, he said. The current proposal will begin in the third quarter. “We’d argue and have argued that in the absence of a market-wide stock-by-stock circuit breaker system, the functionality of an independently operated circuit breaker can cause problems on days of high volatility,” Noll said. Mechanisms for slowing down trading on the New York Stock Exchange known as liquidity replenishment points were triggered when losses deepened on May 6, according to NYSE Euronext Chief Operating Officer Larry Leibowitz . Rapid-fire price changes activated the LRPs, which cause the Big Board to switch to auctions administered by humans from electronic trading, encouraging orders to flood other venues with few if any buyers. The NYSE said most orders during the worst of the selloff remained on its exchange, as evidenced by the rebound in stocks when they resumed trading there and data showing its markets handled a larger-than-normal share of trading. The SEC and Commodity Futures Trading Commission proposed six potential causes of the crash 12 days later, highlighting losses in exchange-traded funds and futures, curbs that applied at the New York Stock Exchange but not elsewhere, and an unwillingness to match orders among some electronic traders. To contact the reporter on this story: Nina Mehta in New York at nmehta24@bloomberg.net .

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HP to Cut 9,000 Jobs, Take $1 Billion Charge in Shift to Computer Services

June 1, 2010

By Hugo Miller and Katie Hoffmann June 1 (Bloomberg) — Hewlett-Packard Co. , the world’s largest personal-computer maker, plans to cut 9,000 jobs and take a $1 billion restructuring charge as it beefs up its computer-services business to compete with International Business Machines Corp. HP is taking the steps to modernize its data centers and provide more automated services to customers at a lower cost, it said today in a regulatory filing . The Palo Alto, California- based company plans to replace about 6,000 of the eliminated positions in various countries. “These sets of actions will enable HP to grow better than the market,” Ann Livermore , executive vice-president for enterprise business, said today on a conference call. “This is a substantial opportunity for us and something that we think is a good opportunity for our clients as well.” The job cuts come after Hewlett-Packard raised its 2010 forecast last month for the third time since November as results beat analysts’ estimates on a revival in business spending. The company is looking to expand into more profitable services after the recession crimped corporate budgets for computer equipment. HP said the $1 billion in expenses for severance costs and asset impairments will be applied between now and fiscal 2013. The moves will result in net annual savings of $500 million to $700 million by the end of fiscal 2013, the company said. Dell, Xerox “It’s just another example of how this company is focusing more and more on revenue growth in their services business,” said Aaron Rakers , an analyst at Stifel Nicolaus & Co. in St. Louis. “IBM’s always going to have a big presence in services, but these guys are going to battle it out for big deals.” Hewlett-Packard isn’t the only hardware maker trying to gain ground on IBM, the world’s largest computer-services company. Dell Inc. , the No. 3 personal-computer maker, bought Perot Systems Inc. in November for about $3.9 billion. Round Rock-Texas based Dell said in February it plans to acquire more computer-services companies. Xerox Corp., based in Norwalk, Connecticut, completed its purchase of Affiliated Computer Services Inc. for about $6 billion in February to accelerate its focus on computer services amid declining sales of printing equipment. Hewlett-Packard fell 17 cents to $45.84 at 10 a.m. in New York Stock Exchange composite trading. The stock had dropped 11 percent this year before today. “We are very supportive of this move,” Louis Miscioscia , an analyst at Collins Stewart Plc in Boston, said today in a note. “We believed there was more to be done” for HP to catch up to IBM. To contact the reporter on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net

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Viacom Operating Chief Dooley Has Target Cash Bonus Raised to $9.5 Million

May 28, 2010

By Sarah Rabil May 28 (Bloomberg) — Viacom Inc.’s Thomas E. Dooley , promoted yesterday to the new post of chief operating officer, had his target annual cash bonus raised to $9.5 million. Dooley, 53, previously chief financial officer, was also granted 800,000 performance-restricted shares that will vest over four years, the New York-based media company disclosed in a regulatory filing today. His target bonus was previously $8 million, according to the filing. Viacom , the owner of MTV and Paramount Pictures, last year awarded Dooley total compensation of $27 million, based on U.S. reporting requirements. That included $2 million in salary, $10.2 million in stock awards and a bonus of $10 million, according to a regulatory filing. His base salary is unchanged. Viacom, controlled by Chairman Sumner Redstone, fell 69 cents, or 2 percent, to $33.61 at 4:15 p.m. in New York Stock Exchange composite trading . The Class B shares have climbed 13 percent this year. To contact the reporter on this story: Sarah Rabil in New York at srabil@bloomberg.net

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Ritchie Weighs Newsweek Bid as TV Guide Owner OpenGate Expresses Interest

May 28, 2010

By Greg Bensinger May 28 (Bloomberg) — Ritchie Capital Management LLC Chief Executive Officer Thane Ritchie , who sought to buy Sun-Times Media Group Inc. last year, said he is considering bidding on Newsweek magazine. Ritchie, who founded the Wheaton, Illinois-based asset management firm , didn’t provide details of his possible bid in an e-mail today. He would join OpenGate Capital LLC, a private- equity firm that said it is interested in the magazine. Washington Post Co. said this month it hired Allen & Co. to help with a sale of the weekly general news publication it has owned since 1961. Washington Post’s magazine division, including Newsweek, last year reported a $29.3 million operating loss. “We are interested,” OpenGate managing partner Andrew Nikou said today in an interview. He declined to provide details of the process, including how much the firm intends to bid. OpenGate, with offices in Los Angeles and Paris, bought TV Guide in 2008 for $1. The New York Post reported its possible bid earlier. Ritchie said he would make any offer personally, not on behalf of his firm. In 2009, Ritchie sought to reopen bidding for newspaper publisher Sun-Times Media, eventually ceding to Mesirow Financial Inc. CEO Jim Tyree . Frank De Maria , a spokesman for Newsweek in New York, didn’t return a phone call or e-mail message seeking comment. Washington Post fell $4.27 to $465.73 at 4:05 p.m. in New York Stock Exchange composite trading . The stock has risen 5.9 percent this year. To contact the reporter on this story: Greg Bensinger in New York at gbensinger1@bloomberg.net

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Prudential Plc Is Said to Seek Renegotiated Price for AIG’s Main Asia Unit

May 27, 2010

By Jacqueline Simmons and Zachary R. Mider May 27 (Bloomberg) — Prudential Plc is seeking to negotiate a lower price on its $35.5 billion offer for American International Group Inc. ’s main Asian unit, according to two people with knowledge of the situation. Prudential Chief Executive Officer Tidjane Thiam was in New York today to make his case in person to AIG executives that the price should be cut, said one of the people, who declined to be identified because the meeting was private. AIG’s CEO, Robert Benmosche , had resisted past efforts by Thiam to open discussions about a reduction in the price, the person said. Prudential needs to win support from 75 percent of shareholders for the purchase of AIA Group Ltd. Institutional investors with more than 15 percent of Prudential stock and private shareholders owning almost 5 percent plan to oppose the AIA deal, Neptune Investment Management Ltd. said yesterday. BlackRock Inc., Fidelity Investments and Capital Group Cos. are among major shareholders that have voiced concern about the deal, the person said. Some major shareholders are demanding a reduction to as low as $30 billion, a price AIG’s board is unlikely to approve, the person said. Should Prudential succeed in lowering the price for AIA, it will be the second time the insurer has changed the terms of the deal. AIG agreed earlier this month to accept a greater portion of debt and less cash after the Financial Services Authority , the U.K. regulator, forced Prudential to increase its capital reserves once the acquisition is complete. Rights Offering A $21 billion rights offer to fund the purchase would be the biggest in U.K. corporate history and the largest share sale to fund an acquisition on record. Prudential’s market value is about 13.9 billion pounds ($20.3 billion). Prudential’s annual general meeting is scheduled for June 7. AIG, which is selling assets to repay a U.S. bailout, had been planning a public offering of AIA until announcing the Prudential deal in March. AIG could return to the public- offering option if Prudential shareholders reject the deal, Jim Millstein , the U.S. Treasury Department’s chief restructuring officer, said yesterday in Washington. Mark Herr , a spokesman for AIG, and Prudential’s Ed Brewster declined to comment. Prudential shareholders are pushing for a price as low as $30 billion and the two insurers were in talks about the price, the Wall Street Journal reported earlier today. Stock Gain Prudential climbed 35 pence, or 6.8 percent, to 547.5 pence in London. The stock closed at 602.5 pence on Feb. 26, the last day’s trading before the deal was announced. AIG advanced $2.41, or 7.1 percent, to $36.46 in New York Stock Exchange composite trading. The Prudential deal was AIG’s largest since it agreed in 2008 to turn over a majority stake to the U.S. in exchange for a bailout that swelled to $182.3 billion. Completion of the AIA deal, and a separate agreement to sell American Life Insurance Co. to MetLife Inc., would enable AIG to pay down its Federal Reserve credit line, Benmosche said this week. AIG’s rescue includes the $60 billion credit line, as much as $69.8 billion in Treasury assistance and $52.5 billion to buy mortgage-related assets owned or backed by the company. To contact the reporters on this story: Jacqueline Simmons in Paris at jackiem@bloomberg.net ; Zachary R. Mider in New York at zmider1@bloomberg.net ;

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Tiffany Profit, Sales Beat Analysts’ Estimates on Growth in Asia, Europe

May 27, 2010

By Cotten Timberlake May 27 (Bloomberg) — Tiffany & Co. , the world’s second- largest luxury jewelry retailer, reported first-quarter profit and sales that exceeded analysts’ estimates. Earnings from continuing operations totaled 48 cents a share, New York-based Tiffany said today in a statement distributed on Business Wire. Analysts predicted 37 cents a share, the average of estimates compiled by Bloomberg. Sales jumped 22 percent, led by growth in Asia and Europe. Wealthy consumers have stepped up discretionary purchases as their confidence has improved amid economic recovery. Tiffany rose 99 cents, or 2.3 percent, to $43.59 in New York Stock Exchange composite trading yesterday. The shares had gained 1.4 percent this year before today. For the year, Tiffany forecast per-share profit of $2.55 to $2.60 compared with a March 22 projection of $2.45 to $2.50. Twenty analysts estimated $2.50, on average. Net income climbed to $64.4 million, or 50 cents a share, from $24.3 million, or 20 cents, a year earlier. Revenue in the three months ended April 30 gained to $633.6 million. Analysts predicted $613.4 million on average. Gross margin, the fraction of earnings left after subtracting the cost of goods, widened to 57.8 percent. Brian Tunick, an analyst with J.P. Morgan Securities Inc. in New York, estimated 57.2 percent. He rates the shares “neutral.” Tiffany operates 221 stores, 79 of them in the U.S. To contact the reporter on this story: Cotten Timberlake in Washington at ctimberlake@bloomberg.net

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Disney Secretary, Boyfriend Arrested in Plan to Sell Earnings Information

May 26, 2010

By Edvard Pettersson and David Glovin May 26 (Bloomberg) — A Los Angeles federal judge granted $50,000 bail to an assistant to Walt Disney Co. ’s head of corporate communications accused of leaking confidential stock tips about the entertainment company’s earnings. Bonnie Hoxie, the assistant to Zenia Mucha , was ordered to appear June 3 for a court hearing in New York, while her boyfriend, Yonni Sebbag, was detained without bail. Federal prosecutors in New York charged the pair today with sending letters in March to at least 33 investment companies including hedge funds with offers to sell confidential information about Burbank, California-based Disney. Los Angeles Magistrate Judge Patrick J. Walsh rejected a $10,000 bond for Hoxie before setting bail at $50,000, saying “there’s potential for her to be a flight risk.” Walsh said Sebbag “might be inclined to leave the country based on these charges.” Hoxie, 33, and Sebbag, 29, were arrested today in Los Angeles. The U.S. Securities and Exchange Commission today also sued them. “Hoxie and Sebbag stole Disney’s confidential pre-release earnings information and put it up for sale,” Robert Khuzami , the SEC’s enforcement director, said in a statement. “Fortunately, multiple hedge funds reported the illicit scheme, and the SEC and criminal law enforcement authorities acted quickly to stop this brazen attempt to establish an ongoing insider-trading business.” None of the funds acted on the tips, according to a person familiar with the matter. Second-Quarter Profit Disney, the world’s biggest media company , said May 11 that fiscal second-quarter profit climbed 55 percent on more successful film releases, including “Alice in Wonderland.” The shares fell that day after operating profit at the television unit that includes ESPN and ABC missed analysts’ estimates. “The Walt Disney Company has been fully cooperating with this investigation,” the company said in a two-sentence statement. On March 11, an undercover agent with the Federal Bureau of Investigation began reaching out to the pair, according to a criminal complaint filed today in New York. On May 8, the two gave undercover FBI agents an internal Disney “talking points” document that the company planned to use during its earnings presentation, according to the complaint. Three days later, they passed along Disney’s earnings per share, prosecutors said in the complaint. On May 14, Sebbag got a $15,000 cash payment from two undercover agents at a meeting on Long Island, New York, prosecutors said. Court documents detail communications between Sebbag and the undercover agents. ABC’s Audience “The most important thing in all that is to not get caught,” Sebbag wrote, according to the SEC complaint. The criminal complaint includes a March 15 e-mail that Sebbag allegedly sent to an undercover agent pretending to be a hedge fund trader. In the e-mail, Sebbag wrote that Disney Chief Executive Officer Robert Iger “is in serious and advanced negotiations” to sell the ABC network to two private equity firms, “but no price has been determined yet.” Sebbag offered to pass along new information as he learned it, according to the complaint. Disney said in its statement that “the reference in the complaint to conversations regarding the ABC Network were and are false.” Broadcaster ABC, third among major U.S. TV networks in prime-time viewers, is the only broadcaster whose audience shrank this season through May 24, according to Nielsen Co. ratings data. Iger told shareholders in March in San Antonio that, while he was comfortable with the company’s current assets, including ABC, he is always mindful of how to keep Disney growing. “There are no guarantees in terms of what will remain part of our company and what will not,” Iger said. The complaint doesn’t mention Mucha or suggest that the head of the company’s corporate communications unit engaged in any wrongdoing. Before joining Disney in 2002, Mucha was press secretary to New York Governor George Pataki . From 1986 to 1992, she managed two successful campaigns for U.S. Senator Alfonse D’Amato , a New York Republican. Mucha didn’t immediately return calls and e- mail messages seeking comment. Hoxie was to be released today as soon as she is processed. The judge ordered her to surrender her passport and not to travel other than for her court appearances. Hoxie and Sebbag were represented by public defenders who weren’t available for comment after the hearing. Disney rose 95 cents, or 2.9 percent, to $33.27 in New York Stock Exchange composite trading at 2:38 p.m. The case is U.S. v. Hoxie, 10-mag-01113, U.S. District Court, Southern District of New York (Manhattan). To contact the reporters on this story: David Glovin in New York federal court at dglovin@bloomberg.net ; Andy Fixmer in Los Angeles at afixmer@bloomberg.net .

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Treasury Sells 20% of Citigroup Holdings for $6.2 Billion, Still Owns 21%

May 26, 2010

By Bradley Keoun May 26 (Bloomberg) — The U.S. Treasury Department sold 20 percent of its shares in Citigroup Inc. at a profit during the past month and authorized adviser Morgan Stanley to keep selling under a pre-arranged plan. The government found buyers for 1.5 billion of its 7.7 billion shares in the New York-based company, generating $6.2 billion of proceeds for taxpayers, the Treasury said today in a statement. That works out to an average of $4.13 per share, or 27 percent more than the $3.25 price at which the Treasury converted $25 billion of bailout funds into Citigroup common shares last September. The sales left the Treasury with 6.2 billion Citigroup shares, or a 21 percent stake, down from 27 percent. The government authorized Morgan Stanley , which is handling the transactions, to sell another 1.5 billion of the remaining shares. The plan for the first 1.5 billion-share sale was authorized April 26. “We are pleased that Treasury is making significant progress in profitably selling its common shares in Citi,” said Stephen Cohen , a spokesman for the company. There were about 23 trading days during the sale period, indicating that Treasury sold on average about 65 million shares a day. Citigroup has fallen 16 percent on the New York Stock Exchange since then. Today the shares rose 8 cents, or 2.1 percent, to $3.86 in composite trading. To contact the reporter on this story: Bradley Keoun in New York at bkeoun@bloomberg.net

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U.S. Stocks Drop for Week on Growing Concern Over European Debt, Recovery

May 22, 2010

By Esmé E. Deprez May 22 (Bloomberg) — U.S. stocks fell this week, sending the Standard & Poor’s 500 Index to a three-month low, on growing uncertainty over European leaders’ plans to halt the debt crisis and economic data that raised doubts about the strength of the economic recovery. The S&P 500 broke a three-day losing streak yesterday as investors speculated equities may have fallen too much following a 12 percent retreat since April 23. Industrial and energy companies in the index including Boeing Co. and ConocoPhillips lost more than 5.3 percent as all 10 industry groups declined at least 2 percent. Sears Holdings Corp. plunged 18 percent, the most since November 2008, after its profit missed the average analyst estimate. The S&P 500 slumped 4.2 percent to 1,087.69 this week. It sank as low as 1,055.90 yesterday, falling below the weakest level reached during the May 6 crash that erased $862 billion in value in less than 20 minutes. The Dow Jones Industrial Average lost 426.77 points, or 4 percent, to 10,193.39 this week. “The concern is that there doesn’t seem to be a silver bullet to end the European debt fiscal crisis,” John Canally , a Boston-based economist at LPL Financial, which oversees $285 billion. “The market is waiting around for something to tell them it’s all better now.” The S&P 500 lost 5.6 percent during the first four days of the week amid concern European governments lack a common position on how to resolve the debt crisis. Germany’s BaFin markets regulator this week prohibited investors from naked short sales — speculating on declines in companies they don’t own — for 10 banks and insurers, as well as naked credit- default swaps on euro-area government bonds. No Coordination France said it wouldn’t follow Germany in introducing a ban and Italy’s Il Sole 24 Ore newspaper said Germany didn’t tell the European Central Bank before its move, citing ECB policy maker Jose Manuel Gonzalez-Paramo . Stocks also slumped after the government said initial jobless claims rose by 25,000 to 471,000 in the week ended May 15, exceeding the median forecast of economists surveyed by Bloomberg News and the highest level in a month. A Mortgage Bankers Association report showed a record share of the country’s mortgages were in foreclosure in the first quarter as job losses caused homebuyers to fall behind on payments. “This is not a typical retracement,” said Mohamed A. El- Erian , chief executive officer of Pacific Investment Management Co., which runs the world’s biggest bond fund, in an e-mail. “We are in uncharted waters on account of several issues, including what is going on in Europe.” 200-Day Average The decline accelerated on May 20 after the S&P 500 fell beneath its average for the last 200 days, a level watched by investors known as technical analysts. Manufacturing and transportation companies in the S&P 500 retreated 5.9 percent, the most among 10 industries. Boeing lost 7.5 percent to $64.56 even after the world’s second-biggest builder of commercial jets said its outlook for 2010 aircraft orders has improved. S&P 500 energy companies slumped 5.4 percent, the second- biggest decline, as crude oil fell 2.2 percent and slipped below $65 a barrel for the first time since July. ConocoPhillips lost 7.8 percent to $51.47. Exxon Mobil Corp. fell 4.3 percent to $60.88. Chevron Corp. retreated 4.3 percent $74.48. Appliance Discounts Sears lost 18 percent, the most in the S&P 500, to $88.61. The largest U.S. department-store chain reported first-quarter profit excluding some items of 2 cents a share, missing the average analyst estimate by 86 percent, after cutting prices on appliances to encourage consumers to resume spending on larger items as the U.S. economy rebounds. The May 6 rout drove the Dow to an almost 1,000-point drop. The Securities and Exchange Commission and Commodity Futures Trading Commission proposed six potential causes of the crash on May 18, highlighting losses in exchange-traded funds and futures, curbs that applied at the New York Stock Exchange but not elsewhere, and an unwillingness to match orders among some electronic traders. The U.S. Senate, bringing Congress to the brink of passing the most comprehensive regulation of the financial industry since the Great Depression, approved a bill on May 20 that imposes restrictions on proprietary trading by banks and creates a consumer protection agency designed to prevent lending abuses that triggered the housing collapse and the worst unemployment in almost three decades. Orders for factory goods, sales of new and existing homes and consumer spending probably climbed in April, indicating the U.S. recovery was strengthening before the European debt crisis rattled global financial markets, economists said reports next week may show. To contact the reporter on this story: Esmé E. Deprez in New York at edeprez@bloomberg.net .

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Ford Said to Add About 40 Jobs at Michigan Factory for Electric Vehicles

May 22, 2010

By Keith Naughton May 22 (Bloomberg) — Ford Motor Co. , working to electrify a quarter of its lineup, is adding about 40 jobs to a factory in Michigan as part of a plan to introduce four such models by 2012, two people familiar with the plan said yesterday. Mark Fields , the automaker’s president of the Americas, plans to announce the jobs and the next stage of Ford’s electric-vehicle strategy in a ceremony May 24 at an engine factory in Ypsilanti, Michigan, said the people, who asked to not be identified disclosing details prior to the announcement. Ford has cut almost half of its North American jobs since 2006. Ford will begin selling two electric vehicles and two new hybrids by 2012 and expects such models to be 10 percent to 25 percent of its worldwide fleet in a decade, the Dearborn, Michigan-based automaker has said. Automakers are developing models powered all or in part by electricity to meet U.S. government fuel-economy standards. “Ford has a good pedigree in electric vehicles,” Michael Robinet , an auto-industry analyst with CSM Worldwide in Northville, Michigan, said in a telephone interview. “Ford’s been at the forefront of layering in this new technology. It bodes well for their future.” Also at the ceremony will be Michigan Governor Jennifer Granholm , a Democrat, and Bob King , nominated as the next president of the United Auto Workers union, Ford said in a media advisory. “All I know is it’s another good-news event,” Liz Boyd , a spokeswoman for Granholm, said in an e-mail. John Stoll, a Ford spokesman, declined to comment. Hybrid Models Ford now sells four hybrid models and plans to introduce a gasoline-electric version of its Lincoln MKZ sedan, the brand’s best-selling model, this year. It also is rolling out in the U.S. electric versions of the Transit Connect van this year and Focus small car in 2011. The electric models will come out 6 to 12 months later in Europe, Ford said. U.S. rules require an average companywide fuel economy rating of 35.5 miles per gallon in 2016, up from 25 mpg now. Ford has eliminated 47 percent of its North American workforce since 2006, bringing the total to 70,000 by the end of the first quarter. It has cut costs and overhauled its model lineup to become less dependent on sport-utility vehicles and pickups. The automaker ended three years of losses to post a $2.7 billion net profit last year as the U.S. auto market fell to its lowest level in 27 years. Its U.S. sales are up 33 percent this year on models such as the Fusion hybrid. Ford rose 46 cents, or 4.3 percent, to $11.26 yesterday in New York Stock Exchange composite trading. The shares have risen 12.6 percent this year. To contact the reporter on this story: Keith Naughton in Southfield, Michigan, at Knaughton3@bloomberg.net .

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Ford Said to Add About 40 Jobs at Michigan Factory for Electric Vehicles

May 22, 2010

By Keith Naughton May 22 (Bloomberg) — Ford Motor Co. , working to electrify a quarter of its lineup, is adding about 40 jobs to a factory in Michigan as part of a plan to introduce four such models by 2012, two people familiar with the plan said yesterday. Mark Fields , the automaker’s president of the Americas, plans to announce the jobs and the next stage of Ford’s electric-vehicle strategy in a ceremony May 24 at an engine factory in Ypsilanti, Michigan, said the people, who asked to not be identified disclosing details prior to the announcement. Ford has cut almost half of its North American jobs since 2006. Ford will begin selling two electric vehicles and two new hybrids by 2012 and expects such models to be 10 percent to 25 percent of its worldwide fleet in a decade, the Dearborn, Michigan-based automaker has said. Automakers are developing models powered all or in part by electricity to meet U.S. government fuel-economy standards. “Ford has a good pedigree in electric vehicles,” Michael Robinet , an auto-industry analyst with CSM Worldwide in Northville, Michigan, said in a telephone interview. “Ford’s been at the forefront of layering in this new technology. It bodes well for their future.” Also at the ceremony will be Michigan Governor Jennifer Granholm , a Democrat, and Bob King , nominated as the next president of the United Auto Workers union, Ford said in a media advisory. “All I know is it’s another good-news event,” Liz Boyd , a spokeswoman for Granholm, said in an e-mail. John Stoll, a Ford spokesman, declined to comment. Hybrid Models Ford now sells four hybrid models and plans to introduce a gasoline-electric version of its Lincoln MKZ sedan, the brand’s best-selling model, this year. It also is rolling out in the U.S. electric versions of the Transit Connect van this year and Focus small car in 2011. The electric models will come out 6 to 12 months later in Europe, Ford said. U.S. rules require an average companywide fuel economy rating of 35.5 miles per gallon in 2016, up from 25 mpg now. Ford has eliminated 47 percent of its North American workforce since 2006, bringing the total to 70,000 by the end of the first quarter. It has cut costs and overhauled its model lineup to become less dependent on sport-utility vehicles and pickups. The automaker ended three years of losses to post a $2.7 billion net profit last year as the U.S. auto market fell to its lowest level in 27 years. Its U.S. sales are up 33 percent this year on models such as the Fusion hybrid. Ford rose 46 cents, or 4.3 percent, to $11.26 yesterday in New York Stock Exchange composite trading. The shares have risen 12.6 percent this year. To contact the reporter on this story: Keith Naughton in Southfield, Michigan, at Knaughton3@bloomberg.net .

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CBS Chief Moonves Says Replacing Older Shows With `Rookies’ Will Cut Costs

May 21, 2010

By Sarah Rabil and Andy Fixmer May 21 (Bloomberg) — CBS Corp. Chief Executive Officer Leslie Moonves said the broadcast network’s television production costs will drop with the cancellation of older, more expensive series such as “Cold Case.” “Our budgets for production will be lower in this coming season than they were this past season,” Moonves said today in an interview with Bloomberg Television in New York. “That happens when you cancel some of the aging shows that cost more and replace them with rookies that cost a bit less.” CBS, the most-watched U.S. broadcast network, presented advertisers with its new fall schedule this week, which has five new shows, including “$#*! My Dad Says,” starring William Shatner , and a remake of “Hawaii Five-O.” CBS also canceled “Numb3rs” and “New Adventures of Old Christine.” Moonves, 60, said advertising commitments for the next season are running ahead of a year ago. “What a difference a year makes. We’ve seen the trend, obviously the last six months, where advertising has come back big time,” Moonves said. “We’re going to do very well.” Cash, Debt As the advertising market improves, Moonves said CBS is considering options for returning cash to shareholders. He ruled out big acquisitions and said the company recently paid down debt and is resolving pension issues. CBS ended the first quarter with $872.7 million in cash and equivalents and $6.53 billion in long-term debt. “Number one, we want to see how much cash we have, we want to see if the economy continues like it is, if it’s robust,” Moonves said. “We want to see exactly where we are toward the end of the year, and we’ll make a decision.” CBS, based in New York, rose 44 cents to $14.32 at 4 p.m. in New York Stock Exchange composite trading. The shares have doubled in the past 12 months. Moonves said CBS News and Time Warner Inc.’s CNN have talked about partnerships and said there are reasons for the companies to work together. “I do not see it happening in the near future,” Moonves said. “Part of that has to do with the culture of the two organizations.” To contact the reporters on this story: Sarah Rabil in New York at srabil@bloomberg.net ; Andy Fixmer in Los Angeles at afixmer@bloomberg.net .

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AIG Bailout May Cost $2.9 Billion Less Than Estimated as Prospects Improve

May 21, 2010

By Hugh Son May 21 (Bloomberg) — American International Group Inc. ’s U.S. government rescue may cost taxpayers $2.9 billion less than previously estimated because prospects for the insurer have improved, the Treasury Department said. AIG’s bailout is expected to cost the Treasury $45.2 billion, based on March 31 data, compared with a $48.1 billion estimate from November 2009, the department said today in a statement . The New York-based insurer’s $182.3 billion rescue includes as much as $69.8 billion from Treasury, a $60 billion Federal Reserve credit line and up to $52.5 billion to buy mortgage-linked assets owned or backed by AIG. Chief Executive Officer Robert Benmosche said last month that AIG is “now on a path” to repaying the Fed after deals to sell two divisions for about $51.5 billion. AIG will turn to reducing its Treasury obligations after the sales are completed by year-end, he said. AIG posted a $1.45 billion first-quarter profit, and its plane-leasing and consumer-finance units were able to tap credit markets after being shut out in 2009. “The estimated costs for AIG decrease slightly due to its increased financial stability,” Treasury said in the presentation on its website. AIG climbed 80 cents, or 2.3 percent, to $35.61 in New York Stock Exchange composite trading at 2:14 p.m. The company has gained about 19 percent this year. AIG declined 4.5 percent in 2009 and plunged 97 percent in 2008, the year it was rescued by the U.S. to prevent losses at bank trading partners. Credit Line The insurer has tapped about $47.5 billion of its Troubled Asset Relief Program assistance as of March 31 and paid no dividends on the funds, Treasury said. Mark Herr , an AIG spokesman, declined to comment. There was “uncertainty” about the estimate for AIG losses because of the lack of a market for the government’s preferred shares in the insurer, Treasury said in a separate presentation . The department based its valuation partly on stock and debt prices and assumptions “about payouts in different outcomes.” The Government Accountability Office said in December that taxpayers will probably lose $30.4 billion on the AIG bailout. In April the congressional auditors released another report saying that the insurer’s subsidiaries are “showing signs of recovery.” The projected cost of TARP from bailouts in industries including banking and insurance narrowed by $11.4 billion to $105.4 billion, fueled mostly by gains as of March 31 in Citigroup Inc. stock held by the government and investments in U.S. automakers, according to Treasury. Congress authorized $700 billion for TARP in October 2008 to prevent a collapse of the U.S. financial system. The program has been criticized by lawmakers from both parties, including Senator Maria Cantwell , a Democrat from Washington, and Representative Jeb Hensarling , a Texas Republican, for helping big banks more than average citizens. To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net

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Honeywell Offers $1.1 Billion for France’s Sperian to Add Protective Gear

May 19, 2010

By Will Daley May 19 (Bloomberg) — Honeywell International Inc. , the maker of car turbochargers and aircraft components, offered to buy France’s Sperian Protection for 895.6 million euros ($1.1 billion), topping an offer from private-equity firm Cinven. Honeywell offered 117 euros for each share of protective gear maker Sperian, or 32 percent more than Sperian’s closing share price yesterday. Sperian’s board approved Honeywell’s cash offer, according to a statement today. Honeywell, based in Morris Township, New Jersey, will add Sperian to a division that includes Norcross Safety Products, which it acquired in 2008. Sperian posted sales of 660 million euros last year and employs about 6,000 workers in 13 countries. Honeywell said that including net debt, the transaction is valued at $1.4 billion. Honeywell fell 95 cents, or 2.1 percent, to $43.77 at 11:03 a.m. in New York Stock Exchange composite trading . To contact the reporter on this story: Will Daley in New York at wdaley2@bloomberg.net

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Wal-Mart Profit Rises 10% as International Growth Counters U.S. Sales Drop

May 18, 2010

By Chris Burritt May 18 (Bloomberg) — Wal-Mart Stores Inc. , the world’s largest retailer, said first-quarter profit increased 10 percent as growth in Mexico, Canada and China helped make up for sales declines at U.S. stores. Net income rose to $3.32 billion, or 88 cents a share, from $3.02 billion, or 77 cents, a year earlier, Wal-Mart said in a statement today. Analysts projected earnings of 85 cents, the average of 21 analysts’ estimates compiled by Bloomberg. International sales jumped 8.9 percent on a constant currency basis as the retailer expanded abroad to counter the 1.4 percent sales drop at U.S. Wal-Mart stores open at least a year. Chief Executive Officer Mike Duke said in the statement that customers, especially in the U.S., are still concerned about personal finances, unemployment and gas prices. “We see continued relative softness in the U.S., but international continues to be the great engine of growth of this company,” said Craig Johnson , president of Customer Growth Partners LLC, a consulting company based in New Canaan, Connecticut. Wal-Mart, based in Bentonville, Arkansas, gained $1.46, or 2.8 percent, to $54.19 at 10:15 a.m. New York Stock Exchange composite trading . The shares had slipped 1.3 percent this year before today. Retailers Beat Wal-Mart joined retailers Home Depot Inc. and Saks Inc. in reporting earnings that topped analysts’ estimates today. Saks, the New York-based luxury retail chain, reported a profit after marking down less merchandise. Home Depot, the biggest U.S. home-improvement retailer, said it is reducing promotional activity and raised its annual profit forecast. China, Brazil and other emerging markets generated the most international sales growth for Wal-Mart, while its U.K. supermarket chain Asda reported a decline in same-store sales, Chief Financial Officer Tom Schoewe told reporters on a call. Wal-Mart, which operates in 15 countries, has “a tremendous opportunity to expand the footprint of where we are today” with acquisitions, Schoewe said. He declined to provide specifics. Price cuts through the recession helped Wal-Mart boost sales last year while competitors reported declines. This year, the retailer has lowered prices on gas grills, lawn mowers and Procter & Gamble Co.’s Crest toothpaste and Bounty paper towels in so-called rollbacks aimed at driving sales growth. Wal-Mart said today it plans additional U.S. price reductions on items including cereal, ice cream and laundry detergent during the summer months. The retailer had projected sales at established U.S. Wal- Mart stores would fall no more than 1 percent in the first quarter ended April 30. For the second quarter, same-store sales for U.S. stores will range from negative 2 percent to positive 1 percent, Wal-Mart forecast today. Wal-Mart also offset the U.S. sales decline by managing costs. Operating, selling, general and administrative expenses rose 3.9 percent, slower than revenue growth of 5.9 percent to $99.8 billion in the quarter. (Wal-Mart executives discussed financial results on a recorded call. To listen, call +1-800-778-6902.) To contact the reporter on this story: Chris Burritt in Greensboro, North Carolina, at cburritt@bloomberg.net .

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Blackstone Said to Drop Plan to Buy Fidelity Information in Price Dispute

May 17, 2010

By Jason Kelly May 18 (Bloomberg) — Blackstone Group LP , Thomas H. Lee Partners LP and TPG Capital dropped a plan to bid for Fidelity National Information Services Inc., scuttling what would have been the biggest leveraged buyout in almost three years, said two people familiar with the decision. Talks fell apart as Fidelity National sought a higher price than the firms were offering, said the people, who declined to be identified because the negotiations are private. Shares of the Jacksonville, Florida-based company dropped 7.5 percent yesterday in extended trading. The private-equity firms had offered more than $15 billion, or about $32 a share, for Fidelity National, according to the people. That would have been the largest LBO since Blackstone’s $20 billion takeover in July 2007 of what’s now known as Hilton Worldwide. The breakdown of negotiations underscores the fragile recovery of buyouts, which surged to a record $1.6 trillion from 2005 to 2007 before credit markets froze. “What we had a couple years ago was a once-every-30-years environment, and you don’t expect that to come back any time soon,” said Steven Kaplan , a professor at the University of Chicago Booth School of Business. “The fact that they were considering it and that the banks were willing to do it means the market has thawed.” Representatives of the buyout firms and Fidelity National declined to comment or couldn’t immediately be reached after regular business hours. Buyouts announced by private-equity firms rose to $25.2 billion so far this year from $5.71 billion during the same period in 2009, according to data compiled by Bloomberg. Unspent Capital Private-equity firms are eager to spend the $500 billion in committed, unspent capital from institutional investors, according to researcher Preqin Ltd. “They want to do deals because of the capital overhang,” Kaplan said. Fidelity National fell to $26.62 in extended trading after closing at $28.88 yesterday in New York Stock Exchange composite trading . The company said in a statement yesterday it was exploring options including a leveraged buyout or a leveraged recapitalization. Blackstone and the other private-equity managers envisioned a deal that involved about $5 billion of equity they and additional buyout firms would commit, and banks had offered about $10 billion in financing, one person familiar with the deal said last week. Bank of America Corp., Barclays Plc, Citigroup Inc., Credit Suisse Group AG, Deutsche Bank AG and JPMorgan Chase & Co. were among the banks working on financing the takeover, said other people with knowledge of the matter. Fidelity National Information processes payments and issues cards for more than 14,000 institutions globally. The company had profit of $105.9 million in 2009 on revenue of $3.77 billion. To contact the reporter on this story: Jason Kelly in New York at jkelly14@bloomberg.net

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Universal Health Said to Near $2 Billion Takeover of Psychiatric Solutions

May 16, 2010

By Zachary R. Mider and Jason Kelly May 16 (Bloomberg) — Universal Health Services Inc. , the Pennsylvania-based operator of medical facilities, is nearing an agreement to buy Psychiatric Solutions Inc. for about $2 billion in cash, said people with knowledge of the matter. Universal Health is offering about $33 or $34 a share, said the people, who spoke on condition of anonymity because the talks are private. A committee of Psychiatric Solutions’s board favors Universal’s bid over a competing one from Bain Capital LLC and may reach an agreement as soon as today, these people said. The board of Psychiatric Solutions hasn’t yet approved a deal and talks may fall apart, one of the people said. For Universal Health Chief Executive Officer Alan Miller , adding Psychiatric Solutions would more than double the company’s revenue from psychiatric facilities. Universal Health had $1.3 billion of revenue from its behavioral health-care operations in 2009. Psychiatric Solutions had $1.8 billion of revenue for the same period. Universal Health, based in King of Prussia, Pennsylvania, also operates 25 acute-care hospitals and outpatient centers throughout the U.S., according to the company’s 2009 annual report. Spokespeople for Franklin, Tennessee-based Psychiatric Solutions, for Universal Health, and Bain declined to comment or couldn’t be reached. Goldman and Sherman & Sterling Psychiatric Solutions began exploring a sale months ago in the form of a management-led buyout involving Chief Executive Joey Jacobs and Bain, said the people with knowledge of the talks. The board ultimately entertained offers from rival medical services companies as well, these people said. The board’s committee is getting advice from Goldman Sachs Group Inc. and Shearman & Sterling LLP. Psychiatric Solutions rose 63 cents to $32.63 Nasdaq Stock Market trading on May 14. The shares have gained 54 percent so far this year. Universal Health advanced $1.34 to $39.04 in New York Stock Exchange composite trading. The shares are 28 percent higher this year. To contact the reporter on this story: Zachary R. Mider in New York at zmider1@bloomberg.net ;

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DK Matai: Systemic Crisis: The Rise of Machines, Casinos and Illiquidity

May 15, 2010

The unprecedented financial markets turmoil on May 6th and the deepening Eurozone debt crisis are together raising issues of systemic risk, not seen since the Lehman Brothers’ insolvency in September 2008. At one point on May 6th, the New York stock market plunged as much as 9.2 per cent wiping of $1 trillion in market value. The S&P 500 futures dropped like a stone losing more than 100 points and the Dow Jones Industrial Average (DJIA) managed a near 1,000 point plunge: all in the space of minutes. This is hardly the kind of behaviour which engenders confidence in the banking and financial community. High Frequency Trading (HFT) Role of Technology The sudden sharp downward spike lasting minutes was not caused by traders-in-a-pit shouting at each other. It was, instead, driven by tightly coupled multiple High Frequency Trading (HFT) computers. Today’s stock markets are overwhelmingly governed by mathematical algorithms programmed to jump in and out of the markets at lightning speed in a systematic search for casino trades that yield a quick profit. The role of technology in amplifying massive market spikes has now shot to the top of the global agenda for regulators post the near-meltdown of Wall Street earlier this month. Abrupt Illiquidity High Frequency Trading (HFT) algorithms provide the illusion of liquidity in today’s markets and May 6th is a testimony to how easily that liquidity can evaporate so abruptly. One of the reasons why regulators have indulged questionable High Frequency Trading (HFT) practices is that they believed this would bring greater liquidity into the markets, which saw an astonishing lack of liquidity in the immediate aftermath of the start of The Great Unwind in August 2007 and The Great Reset in September 2008. Today’s stock trading computer models include variables based on liquidity. Every high volume trader only has a single exit strategy: sell the stock or some synthetic derivatives version of it! Every one of the computer trading models is based on the notion that the liquidity will be there. What happens if it is not there? What happens if the volume introduced by High Frequency Traders (HFT) disappears altogether, or as some suggest about May 6th, they just decide to stop trading? In that event, Where do the buyers come from? If they don’t, the market plunges abruptly! Withdrawal Effects The stock market ecosystem has changed considerably in the last few years. The interdependencies have deepened just as they have expanded. At present, nearly 60 per cent of the US equity markets involve the use of a form of algorithmic or High Frequency Trading (HFT). That is a huge increase since the 1987 stock market crash, where computerised program trades were blamed for exacerbating falls. Less than 35 per cent of trading in NYSE-listed shares actually takes place on the New York Stock Exchange these days. Trading in equities takes place not only on the main exchanges — NYSE and NASDAQ — but on a multiplicity of other platforms, including “dark pools” and proprietary trading systems operated by primary brokers themselves. What does one call it when a significant percentage of volume of an exchange is concentrated in just a few hands? A clique of ‘Too Big To Fail’ players? Not only do we live in a global economy, we transact on a global network of networks, enmeshed into an elaborate web. These interdependencies have a significant problem: we don’t know when a node or trader disconnects until it’s too late! When a broker pulls their trading volume, especially when the market expects it to be there, what happens? There can be a lack of buyers, which in turn pushes stock prices lower, quickly and significantly. Which in turn triggers automated selling programs, pushing the market down to circuit breaker levels. Vital Human Intervention For most ordinary investors the idea of an exchange is still the physical monument of the New York Stock Exchange (NYSE) on Wall Street. But in reality, most shares change hands in proprietary data centres. The dramatic plunge in US equity markets has focused attention on High Frequency Trading (HFT) computer programs, and whether such technology can be regulated so as to prevent the kind of relentless selling seen recently. Recent events are sure to pile on pressure as the financial regulators consider various kinds of curbs, including mandating a system of “circuit breakers” across all trading venues. Contrary to popular opinion, this may work adversely given the near omnipresence of High Frequency Trading (HFT) platforms and their inherent need for sufficient liquidity. May 6th showed that machines don’t panic, they leave that to nervous humans! However, machines can decide not to run their algorithms when certain parameters and thresholds are crossed including lowered liquidity and volume. That may be an entirely logical response but, paradoxically, revival of markets requires non-linear human intervention and emotions to function normally! It was only when the machines were turned off and bottom fishing humans got involved that the free-fall of equities ended on May 6th! If every computer trading model expects a given volume, what happens when that volume falls? We get a massive plunge and deadlock. Without human intervention nothing can restart again! Fast and Furious The rise of “High Frequency Traders” using “Algo-trading” is so pervasive that some suspect it may be hard to see how, post May 6th, ordinary investors can be expected to trust market structures in which they have placed their faith for decades. Instead, they may be right to assume that markets serve the interests of short-term traders using state-of-the-art computer technology. The speed of trades is mind-boggling. Last month a US company unveiled a system that can handle a trade in 16 microseconds! Berserk Machines Has technology reached the point where machines pose systemic risks if they go berserk? By and large there are two sets of issues that can arise in High Frequency Trading (HFT) platforms. Either the programs contain bugs, accidental errors introduced by the programmers, or they are not built to cope with changes in their environment: in essence they inaccurately model the real-world so that when it misbehaves so do they. This seems to have been the problem during the Dow’s drop on May 6th: the automated trading bots had no concept of a trading time-out and there was no way of stopping them. Most complex computer programs stretch into hundreds of thousands of lines of code. If it is impossible to fully test a program that’s fifty lines long, one can begin to understand why it is dangerous to rely 100% on software for anything with hundreds of thousands of real-time participants. Conclusion We have long advocated that the dominance of High Frequency Trading (HFT) and diverse types of algorithmic models or “algos” could one day run amok and spark a massive systemic melt-down of the global financial markets, which would be on a scale that is difficult to envisage. The events of May 6th are a wake up clarion call and markets are dangerously unprotected from major misfiring algorithms operating on their own or in tandem with other HFT systems. The accelerating euro crisis could trigger similar event scenarios in the near future. Recent events show the kind of impact on market confidence that software trading bots going off on a tangent or “switching off” can cause: investors simply hate uncertainty and having these unexplained problems happening while everyone’s nervous does nothing to calm the global financial markets. Longer term systemic liquidity requires confidence that the playing field can produce winners and losers in a fair way and long term investment skills will be rewarded over short term casino gambling acumen. If traders and investors sense that markets are not only casinos, but ones where a massive software crash can wipe out everyone, they will not want to play within them at all! The rise of machines, casino trading and abrupt illiquidity scenarios is now upon us. What remains to be seen is the regulators’ response and our question would be: Can it work?

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Electronic Exchanges Empty NYSE Trading Floor

May 15, 2010

For 15 minutes last week, the New York Stock Exchange was bustling like it was 1999.

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Electronic Exchanges Empty NYSE Trading Floor

May 15, 2010

For 15 minutes last week, the New York Stock Exchange was bustling like it was 1999.

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Ford Plans Sales Incentives as European Sales Drop, Rivals Offer Discounts

May 14, 2010

By Chris Reiter and Keith Naughton May 14 (Bloomberg) — Ford Motor Co. is planning sales promotions after it lost market share in Europe last month when government incentive programs ended and competitors began offering discounts. Deliveries in Ford’s main 19 markets in the region fell 17 percent to 101,100 vehicles in April, the first decline in 11 months, its Cologne, Germany-based European division said today. Ford said its market share slid 1.1 percentage points to 7.8 percent as the company refrained from cutting prices. “The competitive pressure is tough,” Ingvar Sviggum , Ford of Europe’s vice president of sales and marketing, said in an interview. “There are a lot of cash rebates and we try to avoid that.” Ford may offer discounts on options on some models rather than rebates “to protect as much profitable share as we can,” Sviggum said. “We’ll just have to watch that we have the right balance between share and volume and profitability and margins.” Automakers are using deep discounts to stimulate demand in Europe’s still-fragile economy after the end of government- sponsored incentive plans, he said. Governments should consider restarting programs that gave consumers financial incentives to trade in older vehicles, Sviggum said. The industry annual sales rate dropped to 14.7 million autos last month, from 16 million in the first quarter, he said. The Dearborn, Michigan-based automaker posted a 2.5 percent increase to 492,500 vehicles this year through April and a 0.3 point drop in market share in the region, to 9 percent. The company’s Fiesta small car fell to second in April sales after taking the top spot in the year’s first three months, Sviggum said. Ford fell 24 cents, or 1.9 percent, to $12.18 at 9:50 a.m. in New York Stock Exchange composite trading . To contact the reporters on this story: Chris Reiter in Berlin at creiter2@bloomberg.net ; Keith Naughton in Southfield, Michigan, at Knaughton3@bloomberg.net

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J.C. Penney Profit Doubles on Promotions for Families; Year Outlook Raised

May 14, 2010

By Lauren Coleman-Lochner May 14 (Bloomberg) — J.C. Penney Co. , the U.S. department- store chain, raised its annual earnings forecast and posted its first quarterly profit increase in almost three years, helped by promotions aimed at families. Net income more than doubled to $60 million, or 25 cents a share, in the first quarter ended May 1 from $25 million, or 11 cents, a year earlier, the Plano, Texas-based company said today in a statement. Analysts predicted 25 cents, on average, according to estimates compiled by Bloomberg. The chain raised its annual profit forecast to $1.64 a share from $1.55. Analysts predicted $1.66. J.C. Penney plans to expand its market share this year, selling Liz Claiborne and MNG by Mango products in the fall. U.S. retailers are seeing consumers return to spending amid the economic recovery, with sales at stores open at least a year climbing in each of the past three months, according to the International Council of Shopping Centers, a New York-based industry group. Revenue rose 1.2 percent to $3.93 billion, J.C. Penney said May 6. Same-store sales rose 1.3 percent. J.C. Penney dropped $1.46, or 4.9 percent, to $28.17 yesterday in New York Stock Exchange composite trading . The shares have gained 5.9 percent this year. To contact the reporter on this story: Lauren Coleman-Lochner at llochner@bloomberg.net .

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Ford Says Mulally, Turning 65 This Year, Can Be CEO `as Long as He Wants’

May 13, 2010

By Keith Naughton May 13 (Bloomberg) — Ford Motor Co. Chairman Bill Ford said Chief Executive Officer Alan Mulally , who ended three years of losses in 2009 as rivals slid into bankruptcy, can remain in his post as long as he desires as he turns 65 this year. “Alan has been completely superb for this company,” Bill Ford told shareholders today in response to a question at their annual meeting in Wilmington, Delaware, adding that the company has no mandatory retirement age. “We’d like him to stay as long as he wants.” Mulally engineered Ford’s revival by rebuilding its namesake brand, leading the Dearborn, Michigan-based automaker to a $2.7 billion profit last year. He is attempting to overcome investor skepticism reflected in a stock slide more than three times deeper than the Standard & Poor’s 500 Index ’s drop since Ford posted $2.1 billion in quarterly net income last month. “The company is doing fantastic but I don’t know if there’s a lot of upside,” Jeffrey Spotts , a New York-based portfolio manager at the $250 million Prophecy Fund who sold his Ford holdings last month for an average return of 275 percent, said in an interview May 11. “When Ford’s outlook was very cloudy and not as positive, there were regular buy signals.” Investors betting on Mulally’s turnaround drove up the shares more than eightfold from mid-November 2008 through April 26, when they reached $14.46, a five-year high . Since April 26, Ford has fallen 12 percent through yesterday in New York Stock Exchange composite trading, outpacing the S&P 500’s 3.3 percent decline. Ford rose 10 cents to $12.78 at 11:30 a.m. in New York. ‘Continued Improvement’ “We’re clearly on schedule for continued improvement in 2011,” Mulally told reporters after the meeting. “We’re clearly on a path now of profitable growth.” Increased earnings next year will be driven by an improving economy and upcoming new models such as the redesigned Focus small car, he said. Ford traded for less than $2 when Spotts began accumulating shares in February 2009. Detroit-based General Motors Co. and Chrysler Group LLC of Auburn Hills, Michigan, were headed into court protection at the time, and both since emerged bolstered by government-backed restructurings. “Ford has taken advantage of the weakness of their competitors, and now the challenge will be to continue to outperform them,” said Efraim Levy , a Standard & Poor’s equity analyst in New York who advises holding Ford shares. “They’re not out of the woods yet.” Mulally, who turns 65 in August, joined Ford from Boeing Co. in 2006 and is presiding over his fourth annual meeting . Since his arrival, Ford cut its North American workforce by 47 percent and is now rolling out fuel-efficient small cars such as the Fiesta. ‘Competitive Disadvantage’ The company avoided the fate of its U.S. competitors by borrowing $23 billion in late 2006 before credit markets froze. The automaker put up all major assets, including the Ford name, as collateral to build a cash cushion to withstand losses while developing new models. Mulally has called the resulting debt a “competitive disadvantage.” Bill Ford said today the company must reduce debt before restoring its dividend . A payment restoration “is on a lot of my family’s minds,” he said in response to a question on when the automaker would resume making payments. “It’s very early days in our recovery and we still have a lot of debt. The most important thing we can do as a company is get the balance sheet in order.” Shareholders rejected a proposal opposed by directors to strip the Ford family of its 40 percent voting control of the automaker, the sixth straight such failure. The proposal won the backing of 29.2 percent of the shares voted, its highest ever. Last year, 19.5 percent supported it. The board includes two family members, Bill Ford and Edsel Ford II. To contact the reporter on this story: Keith Naughton in Wilmington, Delaware, at Knaughton3@bloomberg.net

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Stocks Rise as Sainsbury, BT Earnings Beat Estimates; U.S. Futures Advance

May 13, 2010

By Sarah Jones May 13 (Bloomberg) — European stocks climbed for a second day after SAP AG announced a $5.8 billion acquisition and earnings from J Sainsbury Plc and BT Group Plc beat analysts’ estimates. Asian shares and U.S. index futures advanced. Sage Group Plc and Autonomy Corp. rose more than 1.5 percent after SAP, the world’s biggest maker of business- management software, agreed to buy Sybase Inc. Sainsbury advanced 2.8 percent after posting an 18 percent gain in pretax profit. BT, the U.K.’s largest phone company, surged the most since July after saying operating profit climbed. The benchmark Stoxx Europe 600 Index increased 0.8 percent to 258.66 at 8:16 a.m. in London. The measure has surged 9.1 percent this week after the European Union unveiled a 750 billion-euro ($949 billion) financial assistance program aimed at stopping the region’s fiscal crisis from spreading and the U.K. and Spain pledged to shrink their budget deficits. In Asia, the benchmark MSCI Asia Pacific Index jumped 1.7 percent, led by computer-related companies after earnings from Tokyo Electron Ltd. to Tencent Holdings Ltd. boosted confidence in the industry. Futures on the Standard & Poor’s 500 Index rose 0.4 percent, indicating U.S. shares may extend yesterday’s gain. Sage, Britain’s largest software maker, rose 1.7 percent to 245.3 pence and Autonomy, the second-biggest, gained 1.6 percent to 1,816 pence after SAP agreed to acquire Sybase. Sybase, SAP Sybase shareholders will receive $65 a share, 56 percent higher than the closing price of $41.57 on May 11, before the deal discussions became public. Sybase, which is based in Dublin, California, soared 35 percent yesterday on the New York Stock Exchange, its biggest one-day gain since the company sold shares to the public in 1991. SAP shares slipped 2.5 percent to 35.16 euros today. Sainsbury climbed 2.8 percent to 337.3 pence. The U.K.’s third-largest supermarket chain said full-year underlying pretax profit rose 18 percent to 610 million pounds ($907 million), more than the 598 million-pound median estimate of 20 analysts compiled by Bloomberg. BT soared 6.6 percent to 128.5 pence, the biggest jump since July. The company said fourth-quarter operating profit rose 16 percent to 1.53 billion pounds, helped by job cuts. Operating profit had been estimated at 1.44 billion pounds on revenue of 5.17 billion pounds, according to the average estimates of analysts surveyed by Bloomberg. Credit Agricole SA declined 1.4 percent to 10.52 euros. France’s largest bank by branches said first-quarter profit more than doubled to 470 million euros as a rebound in corporate- and investment-banking earnings helped cushion losses from Greece. That missed the median estimate of 511 million-euro, according to a Bloomberg survey. To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net .

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Sprint Retreats From Plan to Offer Google Nexus One in Favor of HTC’s Evo

May 10, 2010

By Greg Bensinger May 10 (Bloomberg) — Sprint Nextel Corp. retreated from plans to offer Google Inc. ’s Nexus One mobile phone, the second U.S. carrier within two weeks to abandon the device in favor of other handsets powered by the Android operating system. Sprint will instead focus on the HTC Corp. Evo phone, which is set to debut this year and will run on fourth-generation, or 4G, networks, said Stephanie Vinge-Walsh, a spokeswoman for the third-largest U.S. wireless carrier. “We really feel that it’s better than Nexus One,” she said in an interview today. Verizon Wireless , the largest U.S. mobile-phone company, last month backed off from plans to carry the Nexus One, which was released this January. The phone competes with Apple Inc.’s iPhone and Research In Motion Ltd.’s BlackBerry. Mike Nelson, a spokesman for Mountain View, California- based Google, didn’t immediately return a call seeking comment. Sprint, based in Overland Park, Kansas, added 20 cents, or 5.1 percent, to $4.04 at 4:15 p.m. in New York Stock Exchange composite trading . The shares have gained 10 percent this year. Google climbed $28.51, or 5.8 percent, to $521.65 in Nasdaq Stock Market trading and has declined 16 percent this year. To contact the reporter on this story: Greg Bensinger in New York at gbensinger1@bloomberg.net

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Berkshire Says NetJets, Burlington Northern Helped Boost Quarterly Profit

May 7, 2010

By Andrew Frye May 7 (Bloomberg) — Warren Buffett ’s Berkshire Hathaway Inc., which reported a $3.6 billion first-quarter profit last week, said gains at private flight company NetJets Inc. and railroad Burlington Northern Santa Fe bolstered results. NetJets had pretax earnings of $57 million in the three months ended March 31, compared with a loss of $96 million in the same period a year earlier, Omaha, Nebraska-based Berkshire said today in its quarterly filing . Burlington Northern, which Berkshire acquired in February, contributed $282 million in earnings to Buffett’s firm. Berkshire’s results are improving as the economic recovery spurs demand for the luxury flights it operates, the diamonds it sells and the goods it hauls over rails. Buffett, the 79-year- old chief executive officer , said on May 1 that Berkshire is hiring again after cutting more than 20,000 jobs last year. “Burlington is in a great position to take advantage of the economy improving,” Gerald Martin , a finance professor at American University’s Kogod School of Business in Washington, said before today’s announcement. Berkshire has advanced 12 percent this year on the New York Stock Exchange after a 2.7 percent increase last year and a 32 percent decline in 2008. The Standard & Poor’s 500 Index is down less than 1 percent since Dec. 31. Railroad Buffett added Fort Worth, Texas-based Burlington Northern, the second-biggest U.S. railroad, to gain access to hauling routes in the U.S. West. The $27 billion takeover, Buffett’s biggest, was an “all-in wager” on the U.S. economy, Berkshire said. Berkshire’s NetJets, a seller of fractional jet ownership for business executives, is operating “at a very decent profit” after a $711 million loss last year, Buffett said on May 1. Berkshire, which was Burlington’s biggest shareholder before the buyout, recorded an investment gain of $979 million in the first quarter tied to the 22.5 percent stake it originally held. Berkshire posted derivative gains of $411 million, including $178 million of gains on its bet on four equity indexes. Book value jumped to $147.2 billion at the end of March from $131.1 billion on Dec. 31 on the Burlington Northern purchase. Book value per Class A share increased 5.8 percent in the first quarter to $89,374, Berkshire said. First-Quarter Profit The first-quarter net income, announced by Buffett at Berkshire’s annual meeting, compared with a $1.5 billion loss in the same period a year earlier. It was Berkshire’s fourth straight profit and its biggest since a $4.6 billion net income in the third quarter of 2007. Profit from regulated businesses, including power producer MidAmerican Energy Holdings, doubled to $555 million on the addition of Burlington Northern, Berkshire said on May 1. Manufacturing, service and retailing units like NetJets and brick-maker Acme Building Brands recorded $477 million of profit, up 85 percent from the year-earlier period. Profit from insurance units, including car-coverage specialist Geico and catastrophe-risk underwriter General Re, fell 3.5 percent to $1.16 billion on lower investment income. To contact the reporters on this story: Andrew Frye in New York at afrye@bloomberg.net .

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Dick Grasso: I Might Run Against Eliot Spitzer (VIDEO)

May 7, 2010

In an interview with ” Good Day New York “‘s Rosanna Scotto this morning, former head of the New York Stock Exchange Dick Grasso voiced support for the idea of giving Eliot Spitzer a second chance as an elected official. Grasso, a long-time political foe of Spitzer’s while he served as Attorney General, told Scotto, “America is a country of redemption. America is a country of people fleeing from oppression from other parts of the world. If Eliot is elected, it is because the people say he deserves a second chance.” Wow, that’s certainly a change of opinion for Grasso, who got down and dirty with Spitzer when the former Governor sued him for the return of over $100 million of his Wall Street pay package. But wait, what’s this? When asked by Scotto if he would ever vote for Spitzer, Grasso quickly retorted, “I might run against him.” Huh? Was he kidding? You tell us.

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Dick Grasso: I Might Run Against Eliot Spitzer (VIDEO)

May 7, 2010

In an interview with ” Good Day New York “‘s Rosanna Scotto this morning, former head of the New York Stock Exchange Dick Grasso voiced support for the idea of giving Eliot Spitzer a second chance as an elected official. Grasso, a long-time political foe of Spitzer’s while he served as Attorney General, told Scotto, “America is a country of redemption. America is a country of people fleeing from oppression from other parts of the world. If Eliot is elected, it is because the people say he deserves a second chance.” Wow, that’s certainly a change of opinion for Grasso, who got down and dirty with Spitzer when the former Governor sued him for the return of over $100 million of his Wall Street pay package. But wait, what’s this? When asked by Scotto if he would ever vote for Spitzer, Grasso quickly retorted, “I might run against him.” Huh? Was he kidding? You tell us.

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Blankfein Says Panel to Study Goldman Practices, Has No Plan to Step Down

May 7, 2010

By Christine Harper May 7 (Bloomberg) — Lloyd Blankfein , Goldman Sachs Group Inc. ’s chairman and chief executive officer, said the company will establish a new panel to examine its business practices. “I recognize that this is an important moment in the life of this institution,” Blankfein, 55, said at the firm’s annual shareholder meeting in downtown Manhattan. In response to a shareholder, Blankfein said he has “no current plans” to step down as leader of the New York-based bank. Goldman Sachs, which reported record earnings last year, was hit by a fraud lawsuit from the U.S. Securities and Exchange Commission and its executives were interrogated at a Senate subcommittee hearing last month. The company is also being investigated by federal prosecutors, said people familiar with the matter. The firm has said it didn’t do anything wrong and that the SEC’s case is “completely unfounded.” The stock dropped 23 percent since the SEC lawsuit was filed on April 16 through yesterday, making it the worst performer among the six largest U.S. banks by assets in 2010. First-quarter earnings were the second-highest for any quarter in the firm’s history. The new panel will be called the “business standards committee,” and Blankfein promised a rigorous self-examination by the firm. Goldman Sachs rose 92 cents to $143.24 at 10:04 a.m. in New York Stock Exchange composite trading . To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net

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Blankfein Says Panel to Study Goldman Practices, Has No Plan to Step Down

May 7, 2010

By Christine Harper May 7 (Bloomberg) — Lloyd Blankfein , Goldman Sachs Group Inc. ’s chairman and chief executive officer, said the company will establish a new panel to examine its business practices. “I recognize that this is an important moment in the life of this institution,” Blankfein, 55, said at the firm’s annual shareholder meeting in downtown Manhattan. In response to a shareholder, Blankfein said he has “no current plans” to step down as leader of the New York-based bank. Goldman Sachs, which reported record earnings last year, was hit by a fraud lawsuit from the U.S. Securities and Exchange Commission and its executives were interrogated at a Senate subcommittee hearing last month. The company is also being investigated by federal prosecutors, said people familiar with the matter. The firm has said it didn’t do anything wrong and that the SEC’s case is “completely unfounded.” The stock dropped 23 percent since the SEC lawsuit was filed on April 16 through yesterday, making it the worst performer among the six largest U.S. banks by assets in 2010. First-quarter earnings were the second-highest for any quarter in the firm’s history. The new panel will be called the “business standards committee,” and Blankfein promised a rigorous self-examination by the firm. Goldman Sachs rose 92 cents to $143.24 at 10:04 a.m. in New York Stock Exchange composite trading . To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net

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Market Fragmentation in U.S. May Get Regulatory Review as SEC Begins Probe

May 7, 2010

By Nina Mehta and Chris Nagi May 7 (Bloomberg) — Federal regulators reviewing yesterday’s stock plunge will try to determine if the five-fold increase in the number of American equity exchanges has left them unable to manage the biggest surges in volume. Almost 1.3 billion shares traded on U.S. markets in a 10- minute span starting at 2:40 p.m., six times the average, sending prices lower on platforms from New York to Kansas City. Nasdaq OMX Group Inc. said it canceled transactions in 286 stocks where swings grew too wide. Federal agencies began inquiries after more than $700 billion in value was erased in an eight-minute span. While most of the losses were reversed as the pace of trading slowed and exchanges were able to match buyers and sellers, the 998-point plunge in the Dow Jones Industrial Average raised concerns that the U.S. was entering another financial crisis. The Securities and Exchange Commission will try to determine if market participants accidentally or maliciously derailed trading, according to two people familiar with the situation. Lawmakers plan to hold hearings next week. “Markets aren’t supposed to work this way,” said Jamie Selway , managing director of White Cap Trading LLC in New York and a former chief economist at NYSE Arca, a unit of NYSE Euronext. “There was a mad rush for the exits. We just don’t know whether it was accidental or intentional.” Multiplying Markets The Standard & Poor’s 500 Index closed at 1,128.15 in New York, down 3.2 percent, after losing as much as 8.6 percent. The rout showed how the fragmentation of the U.S. equity market may suppress demand when it’s needed most, especially when the New York Stock Exchange attempts to calm trading, said James Angel , a finance professor at Georgetown University in Washington. NYSE Euronext Chief Operating Officer Larry Leibowitz said the Big Board prevented a bigger decline. While the first half of the intraday plunge probably reflected normal trading as concern increased that Greece’s credit crisis will spread, the selloff snowballed because of orders sent to venues with no investors willing to match them, Leibowitz said in a Bloomberg Television interview. Accenture Plc , Exelon Corp. and Philip Morris International Inc. were among U.S. stocks that dropped more than 90 percent as U.S. equities tumbled, before recovering within minutes, according to Bloomberg data. Prices fell to pennies in some companies after the New York Stock Exchange switched from electronic matching to auctions, a program that encourages some sell orders to flow to smaller exchanges that had few if any buyers, according to Leibowitz. Electronic Markets “If you look at the charts you can see fairly clearly where the trades came in,” he said from New York. “It’s that V-shaped drop where it came down and snapped right back up. You had some very high-cap stocks trading down 50 percent or large percentages in a split-instant because there really was no liquidity in electronic markets.” Increasing automation and competition have reduced the NYSE and Nasdaq’s volume in securities they list from as much as 80 percent in the last decade. Now, less than 30 percent of trading in their companies takes place on their networks as orders are dispersed to as many as 50 competing venues, almost all of them fully electronic. Twenty years ago, fewer than 10 exchanges competed for all U.S. equity trades. More than 29.4 billion shares changed hands in U.S. markets yesterday, the most since October 2008. In addition to traditional exchanges such as the NYSE, rivals Bats Global Markets Inc. in Kansas City and Jersey City, New Jersey-based Direct Edge LLC handled millions of trades. About 2.6 billion shares traded on the NYSE, the lowest level relative to overall volume in three years, data compiled by Bloomberg show. ‘A Mistake’ “When a large order or series of orders comes into electronic markets, they don’t really have any way to recognize either that they’re a mistake or to slow them down to attract the proper liquidity,” Leibowitz said. “Electronic markets actually traded all the way through the slower New York Stock Exchange markets where we were trying to slow down trading.” Rapid-fire orders trigger what the NYSE calls liquidity replenishment points, or LRPs, shifting the market into auctions. While the system is designed to restore order on the Big Board, trading is so fast during times of panic that orders routed past the exchange may swamp other venues and exhaust buy orders, said Angel at Georgetown. That’s when prices may plummet as orders execute against so-called stub quotes from market makers. Brokers can set the quotes as low as a penny a share because they’re never expected to be used. ‘Doesn’t Work’ “The LRP model doesn’t work,” Angel said. “The idea that when the market is going crazy you can slow down trading in one market and not others means that sell orders were churning through the books at every other market. NYSE dropped out of the running.” Nasdaq OMX said it will cancel stock trades that were more than 60 percent above or below price levels at 2:40 p.m. New York time, just before U.S. equities plummeted. The New York- based firm said it investigated trades between 2:40 p.m. and 3 p.m. CBOE Stock Exchange canceled 18 trades of 100 shares that took place at 1 cent in Accenture over seven seconds starting at 2:47 p.m. The trades occurred against stub quotes, according to David Harris, the exchange’s president. Trades were canceled on CBSX because the market is newer and its book of orders is “thinner,” which led to transactions occurring away from reasonable prices, he said. Connected Markets “We are all connected to each other,” Harris said. “We receive orders electronically and if an order requires an execution we execute it. If it’s away from the market and violates our clearly erroneous trade policy, we bust the trade.” The market rout triggered scrutiny from lawmakers. U.S. Representative Paul Kanjorski , a Pennsylvania Democrat, set a May 11 hearing. U.S. Senator Ted Kaufman , a Delaware Democrat, questioned whether markets that increasingly rely on computer algorithms to execute thousands of transactions in seconds triggered false trades. “This is unacceptable,” Kanjorski, who leads the House Financial Services subcommittee that oversees the SEC, said in a statement. “We cannot allow a technological error to spook the markets and cause panic.” Procter & Gamble Nasdaq’s decision means that trades in Cincinnati-based Procter & Gamble Co. , which fell as much as 37 percent for the biggest intraday drop in the Dow industrials, would stand. The world’s largest consumer products company said stock trades that pushed its shares down were probably an error. Computer programs that increase sell orders when stocks are falling may have exacerbated yesterday’s plunge, said Nick Colas , chief market strategist at BNY ConvergEx Group LLC in New York. Programs that may have smoothed out trading during periods of low volatility can “make market moves a lot worse” when equities are plunging, he said. “This was like what we saw happen on the worst days of the financial crisis in late 2008 and early 2009,” Colas said. “This is not a healthy dynamic. The markets need to work efficiently and properly, particularly during periods of stress.” To contact the reporter on this story: Nina Mehta in New York at nmehta24@bloomberg.net .

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Electronic Trading to Blame for Stock Market Plunge, NYSE’s Leibowitz Says

May 6, 2010

By Chris Nagi and Matt Miller May 6 (Bloomberg) — Computerized trades sent to electronic networks turned an orderly stock market decline into a rout today, according to Larry Leibowitz , the chief operating officer of NYSE Euronext. While the first half of the Dow Jones Industrial Average’s 998.5-point plunge probably reflected normal trading, the selloff snowballed because of orders sent to venues with no investors willing to match them, Leibowitz said in an interview on Bloomberg Television. “If you look at the charts you can see fairly clearly where the trades came in,” he said from New York. “It’s that V-shaped drop where it came down and snapped right back up. You had some very high-cap stocks trading down 50 percent or large percentages in a split instant because there really was no liquidity in electronic markets.” The selloff briefly erased more than $1 trillion in market value as the Dow average tumbled 9.2 percent, its biggest intraday percentage loss since 1987, before paring the drop. More than 29.4 billion shares changed hands on all U.S. venues today, including traditional exchanges such as the NYSE, rivals Bats Global Markets Inc. in Kansas City and Jersey City, New Jersey-based Direct Edge, and other electronic platforms. The level compares with 2.58 billion traded on the NYSE, making it the biggest gap in more than three years, data compiled by Bloomberg show. More Venues Increasing automation and competition have reduced the Big Board and Nasdaq’s volume in securities they list from as much as 80 percent in the last decade. Now, two-thirds of trading in their companies takes place off their networks because orders are dispersed across dozens of competing venues. Nasdaq OMX Group Inc. said it will cancel stock trades that were more than 60 percent above or below prices at 2:40 p.m. New York time, just before U.S. equities plummeted. The New York-based firm, which investigated trades between 2:40 p.m. and 3 p.m., said it will provide a list of stocks affected and the prices at which the trades will be canceled. “The fact that it snapped back so quickly made it clear that it was an aberration,” Leibowitz said. “When a large order or series of orders comes into electronic markets, they don’t really have any way to recognize either that they’re a mistake or to slow them to down to attract the proper liquidity on the other side. And so the electronic markets actually traded all the way through the slower New York Stock Exchange markets where we were trying to slow down trading.” To contact the reporters on this story: Chris Nagi in New York at chrisnagi@bloomberg.net ; Matt Miller in New York at mtmiller@bloomberg.net

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Blackstone, THL Said to Be in Talks to Buy Fidelity National Information

May 6, 2010

By Jason Kelly and Serena Saitto May 6 (Bloomberg) — Blackstone Group LP , the world’s biggest private-equity company, TPG Capital and Thomas H. Lee Partners LP are in talks to buy Fidelity National Information Services Inc. in what would be the largest leveraged buyout in almost three years, according to two people with knowledge of the situation. The deal is still under discussion and may not happen, said the people, who declined to be identified because the talks are private. Representatives of Blackstone, TPG and Thomas H. Lee declined to comment. Marcia Danzeisen , a spokeswoman for Fidelity National, didn’t return a call seeking comment. Private equity firms are taking advantage of a rebound in leveraged lending to put their capital to work after a two-year drought in deals. LBO funds worldwide have about $500 billion of unspent committed capital, according to researcher Preqin Ltd. Private-equity firms announced about $22 billion of company takeovers so far this year, compared with $3.9 billion during the same period in 2009. Excluding infrastructure investments, the biggest private equity purchase since July 2007 was that of IMS Health Inc., which agreed last year to sell itself to a group including TPG Capital for about $5 billion including debt. By comparison, in the first half of 2007 there were seven buyouts worth more than $15 billion, led by KKR & Co. ’s takeover of TXU Corp. for $43 billion including debt. Fidelity National rose $2.68, or 10 percent, to $28.68 at 4 p.m. in New York Stock Exchange composite trading. That values the company at about $10.8 billion. Payment Processing Thomas H. Lee Partners, also known as THL Partners, already owns about 4 percent of Fidelity National, according to data compiled by Bloomberg. Private-equity firm Warburg Pincus is the company’s largest shareholder, with about 11 percent. Fidelity National provides payment processing and issues cards for more than 14,000 institutions globally. The company had profit of $105.9 million in 2009 on revenue of $3.77 billion. Deutsche Bank AG, Credit Suisse Group AG and Bank of America Corp. are the banks working on the financing of the LBO, said one of the people. Deutsche Bank spokesman John Gallagher declined to comment, as did Bank of America spokesman John Yiannacopoulos . Credit Suisse’s spokesman Duncan King wasn’t immediately available to comment. The takeover discussions were previously reported today by the Wall Street Journal. To contact the reporter on this story: Jason Kelly in New York at jkelly14@bloomberg.net

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Nasdaq Investigating Potential Erroneous Trades After U.S. Market Plunge

May 6, 2010

By Michael Tsang and Elizabeth Stanton May 6 (Bloomberg) — Nasdaq OMX Group Inc. said it’s investigating potentially erroneous trades involving multiple securities between 2:40 p.m. and 3 p.m. New York time, when the U.S. stock market tumbled. The Dow Jones Industrial Average plunged almost 1,000 points today before paring its decline and ended down 347.80 points, or 3.2 percent, at 10,520.32. About $700 billion of U.S. stock-market value was erased in less than 10 minutes, data compiled by Bloomberg show. Trades in Accenture Plc that drove the second-largest technology consulting company’s stock price down more than 99 percent to a penny were canceled by the CBOE Stock Exchange, according to data compiled by Bloomberg. A total of 19 trades of 100 shares each were executed at 1 cent in seven seconds from 2:47 p.m. to 2:48 p.m. in New York, a minute after the Dow average plunged by the most since the market crash of 1987, the data showed. Eighteen of the trades were executed on the CBOE Stock Exchange and were canceled. The first trade that sent Accenture to a penny was executed on the Nasdaq Stock Market. That transaction has yet to be canceled, the data showed. Accenture shares closed today at $41.09 , down 2.6 percent in New York Stock Exchange composite trading. The Dow average lost as much as 998.5 points, or 9.2 percent, before paring its drop. The Standard & Poor’s 500 Index fell as much as 8.6 percent, its biggest plunge since December 2008, before trimming its decline to 3.2 percent. To contact the reporters on this story: Elizabeth Stanton in New York at estanton@bloomberg.net ; Michael Tsang in New York at mtsang1@bloomberg.net .

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HP Names Microsoft Veteran Veghte to Lead $3.6 Billion Software Division

May 5, 2010

By Connie Guglielmo and Dina Bass May 5 (Bloomberg) — Hewlett-Packard Co. named Microsoft Corp.’s former Windows marketing executive Bill Veghte to lead its $3.6 billion software division. Veghte, who left Microsoft in January, takes over from Tom Hogan , who was tapped last month to oversee sales, marketing and strategy for Hewlett-Packard’s enterprise business group, the company said today. Veghte, 42, starts May 17. A 20-year Microsoft veteran, Veghte had overseen marketing for the Windows operating system. He played a key role in convincing Chief Executive Officer Steve Ballmer to challenge Apple Inc. ’s Mac-versus-PC television ads in 2008, as Microsoft prepared to revive its flagship brand with Windows 7. At Hewlett-Packard, the world’s largest maker of personal computers and printers, Veghte will oversee a business that had the highest profit margin — 19 percent — of any division last quarter. Hogan, who was hired by CEO Mark Hurd in 2006 to expand software sales, helped with six software acquisitions that totaled more than $6 billion. “I’m a software guy,” Veghte said today in an interview. “I’ve spent a lot of time with customers. They’d like to see H-P do more.” Veghte, who lives in Washington state, said he will move to California, where he will report to Ann Livermore , executive vice president of the company’s enterprise business division. Hewlett-Packard, based in Palo Alto, California, rose 29 cents to $50.93 at 4 p.m. in New York Stock Exchange composite trading. The shares have lost 1.1 percent this year. To contact the reporters on this story: Connie Guglielmo in San Francisco at cguglielmo1@bloomberg.net ; Dina Bass in Seattle at dbass2@bloomberg.net

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Pearson Said Near Sale of IDC for $3.1 Billion to Warburg, Silver Lake

May 3, 2010

By Cristina Alesci and Zachary R. Mider May 3 (Bloomberg) — Private-equity firms Warburg Pincus LLC and Silver Lake are near an agreement to buy Pearson Plc’s Interactive Data Corp. , a provider of financial market data and services, for about $3.1 billion, a person with knowledge of the transaction said. A purchase may be announced as soon as today, said the person, who declined to be identified because a deal isn’t final and talks may collapse. Pearson owns about 61 percent of Interactive Data and said in January it was undertaking a preliminary review of strategic alternatives. The price is around the same level as Interactive Data’s market value as its stock jumped more than 30 percent in the months after Pearson disclosed it was exploring options. Two other groups of private-equity companies also bid for Interactive Data, according to the Wall Street Journal, which reported on the possible transaction yesterday. “It’s a fair price, a good company and great assets,” said Edward Atorino , a media research analyst at New York-based Benchmark Company LLC. “They’ve been trying to expand by acquisition and it hasn’t really come along. Maybe the new guys can piece it out and make some money. They could break it up.” Rory Mackin , a spokesman for New York-based Warburg Pincus, couldn’t be reached for comment. Jennifer Farrelly , a spokeswoman for Menlo Park, California-based Silver Lake, declined to comment. Spokesmen for Interactive Data and Pearson didn’t return voicemail and e-mail messages outside of regular business hours. Unspent Capital Buyouts are picking up after U.S. stocks rose 30 percent in the past year and a rally in credit markets fueled lending. Private-equity firms are sitting on an estimated half a trillion dollars in unspent capital commitments that they’re trying to put to work, according to researcher Preqin Ltd. Interactive Data, based in Bedford, Massachusetts, declined 40 cents to $33.47 on April 30 in New York Stock Exchange composite trading . Chief Executive Officer Ray D’Arcy forecast in February that the company would increase revenue to as much as $830 million this year and generate operating income margins of 25 percent to 26 percent. “Producing substantial net cash provided by operating activities has been a hallmark of Interactive Data’s business model for many years, and we expect this trend to continue in 2010,” he said in a Feb. 23 earnings statement. The company’s clients include investment funds, securities firms and banks. The sale leaves Pearson, owner of the Financial Times and Penguin Books, with cash to reinvest in its remaining education and publishing units. Pearson CEO Marjorie Scardino said on a March conference call with analysts that the company’s first use for cash is organic growth, followed by bolt-on acquisitions and a dividend. Pearson, based in London, advanced 1 penny to 1,051 pence in London trading on April 30. The stock has advanced 18 percent this year. To contact the reporters on this story: Cristina Alesci in New York at calesci2@bloomberg.net ; Zachary R. Mider in New York at zmider1@bloomberg.net .

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Buffett Says Berkshire Is Adding Workers After Reducing Payrolls in 2009

May 1, 2010

By Andrew Frye and Jamie McGee May 1 (Bloomberg) — Billionaire Warren Buffett , whose Berkshire Hathaway Inc. cut more than 20,000 jobs last year, said his company is now adding staff as a recovering economy boosts demand at its industrial units. “We do hire people when we have something for them to do,” Buffett told investors today in Omaha, Nebraska, where Berkshire is holding its annual shareholders’ meeting. “We are a net hirer now.” Berkshire swung to a profit in the three months ended March 31 after posting a loss in the first quarter of 2009, according to a slide posted by today at the company’s annual meeting of shareholders in Omaha, Nebraska. Berkshire has said its overall workforce fell last year by about 9.7 percent, or 23,970 jobs. The economy “picked up steam in March and April,” Buffett said today. That followed “sort of a sputtering recovery a few months ago.” Berkshire bought railroad Burlington Northern Santa Fe Corp. for about $27 billion in February in Buffett’s biggest acquisition , a deal he called an “all-in wager” on the U.S. economy. The purchase will reduce Berkshire’s reliance on insurance operations and housing-related businesses that faltered in the recession. ‘Seeing an Uptick’ The company posted net income of $3.63 billion in the first quarter, compared with a net loss of $1.5 billion in the same period a year earlier, according to the slide. In businesses that serve broad industries, like railroads, “we are seeing an uptick,” Buffett said. U.S. joblessness measured at 9.7 percent in March. The Labor Department said April 29 that fewer Americans filed claims for unemployment benefits the week before, a sign the economic rebound is beginning to lift the labor market. Initial jobless claims fell by 11,000 to 448,000 in the week ended April 24. The number of people receiving unemployment insurance and those getting extended payments decreased. Profit from insurance underwriting, including car-coverage specialist Geico and reinsurer General Re, rose to $226 million from $202 million in the year-earlier period, Berkshire said today in a statement distributed by Business Wire. Regulated businesses, including the railroad as well as utility and energy units, doubled to $555 million. Manufacturing, Service and Retailing Manufacturing, service and retailing jumped 85 percent to $477 million in the first quarter from $258 million in the same period in 2009. That group includes Marmon Holdings Inc., a maker of construction materials; carpet manufacturer Shaw Industries; and Fruit of the Loom, which produces underwear and other clothing, according to the company’s annual report. Berkshire didn’t break down results by unit. Fruit of the Loom and Shaw Industries reported the biggest job cuts among the parent company’s units in 2009. The maker of underwear and other clothing cut 7,944 workers last year, or 23 percent of staff, and Shaw shed 3,482 jobs, or 12 percent, according to Berkshire’s annual report. Berkshire’s Class A shares have risen 16 percent this year in New York Stock Exchange trading. They fell $1,476 to $115,325 in yesterday’s trading. In his annual letter to shareholders on Feb. 27, Buffett wrote that the U.S. residential real estate slump will end by about 2011 and “the credit crisis has abated,” boosting earnings potential. The U.S. economy expanded at a 3.2 percent annual rate in the first quarter as households spent more money, the Commerce Department said yesterday. Consumer spending rose the most in three years, and business activity in the U.S. expanded in April at the fastest pace in five years. “Though the path has not been smooth, our economic system has worked extraordinarily well over time,” Buffett said in a February 2009 letter to shareholders . “It has unleashed human potential as no other system has, and it will continue to do so.” To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net . Jamie McGee in New York at jmcgee8@bloomberg.net

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Chrysler May Boost U.S. Vehicle Sales With Biggest Monthly Gain Since 2005

April 30, 2010

By Katie Merx April 30 (Bloomberg) — U.S. auto sales strengthened a year after bankruptcies began to batter the auto industry, with Chrysler Group LLC forecast to post its biggest monthly gain since 2005. Industrywide deliveries in April may have risen to an annualized rate of 11.4 million light vehicles, the average of 8 analysts’ estimates compiled by Bloomberg. Chrysler, which entered Chapter 11 a year ago today before emerging controlled by Turin, Italy-based Fiat SpA , may have climbed 15 percent, 6 projections show. The yearly rate of domestic sales in April may be less than the 11.8 million seasonally adjusted annualized pace in March, when Toyota Motor Corp. offered its biggest incentives to counter global recalls, spurring competitors to add discounts. “The automotive industry is in full-blown recovery,” said Jesse Toprak , vice president of industry trends and insight for TrueCar.com in Santa Monica, California. “Toyota’s generous incentives in April continue to bring consumers back into dealerships; however, the impact of its incentive programs in the marketplace appears to have diminished slightly in April.” General Motors Co. , which entered bankruptcy on June 1, and emerged in July, may post a 7.2 percent increase when industry sales are announced on May 3, while Dearborn, Michigan-based Ford Motor Co. may report a jump of 28 percent. Chrysler’s last double-digit increase was 27 percent in July 2005 when the Auburn Hills, Michigan-based carmaker was part of DaimlerChrysler AG. Zero-Percent Financing Asia-based automakers also benefited from incentives. Toyota sales may have risen 34 percent, the average of 5 analysts. The Toyota City, Japan-based automaker extended the no-interest loans and discount leases it offered in April, and competitors followed. Honda Motor Co. , Japan’s second-largest automaker after Toyota, may say sales rose 15 percent, the average of 4 analysts, while No. 3 Nissan Motor Co. may have a 57 percent gain. Seoul-based Hyundai Motor Co. may increase 35 percent, according to Santa Monica, California-based Edmunds.com. “Honda sales in April got a boost from the uncharacteristically large offers it made available to prospective buyers, including zero-percent financing,” said Brian Johnson , a Barclays Capital analyst in Chicago. Manufacturers, dealers and investors use the annualized rate to account for seasonal buying patterns when comparing monthly totals. The average estimate for an industry sales pace of 11.4 million vehicles would be a 23 percent increase from the 9.3 million of a year earlier, according to Autodata Corp. Consumer Confidence Climbs Automakers were buoyed by consumer confidence that rose in April to its highest since September 2008, as measured by the Conference Board’s monthly index. “U.S. industry sales of light vehicles appear to have slowed down in April from the 11.8 million level achieved last month, as the initial boost from the large incentives offered since March by manufacturers across the board tapered off, and as automakers likely sold fewer cars to fleet customers,” Johnson said in an April 28 note to investors. Ford fell 42 cents, or 3.1 percent, to $13.16 at 12:42 p.m. in New York Stock Exchange composite trading . Toyota’s American depositary receipts , each worth 2 ordinary shares, dropped 81 cents, or 1 percent, to $77.30. Ford has gained 32 percent in 2010, and Toyota’s ADRs have declined 8.2 percent. ‘Feeling Better’ Toyota began offering incentives on March 2 such as subsidized leases after worldwide recalls of more than 8 million vehicles to fix defects linked to unintended acceleration and to adjust brakes. The company probably spent an average $2,416 on incentives on each vehicle this month, according to forecaster TrueCar.com. The industry average is about $2,798, TrueCar.com said. Incentives are down 4 percent from March 2009, when Detroit- based GM and Chrysler boosted spending ahead of their bankruptcy filings. John McEleney , who has a Toyota and a Buick, GMC and Cadillac dealership in Clinton, Iowa, said sales were up 30 percent at his Toyota store and increased about 20 percent among his GM brands. “Sales were really pretty good, but not quite as good as March,” McEleney said, adding that sales may keep gaining this year. “We’re seeing a lot more showroom traffic and a lot more Internet activity. People are feeling better about their jobs, too.” The following table shows estimates for car and light-truck sales in the U.S. Estimates for companies are a percentage change from March 2009. Forecasts for the seasonally adjusted annual rate, or SAAR, are in millions of vehicles. April had 26 selling days, the same as a year earlier. To contact the reporters on this story: Katie Merx in Southfield, Michigan, at kmerx@bloomberg.net ;

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Visa Profit Climbs 33% as Credit-Card Revenue Gains With Economic Rebound

April 28, 2010

By Peter Eichenbaum April 28 (Bloomberg) — Visa Inc. , the world’s biggest payments network, said fiscal second-quarter profit increased 33 percent as U.S. credit-card spending climbed for the first time since 2008. Net income for the three months ended March 31 was $713 million, or 96 cents a share, compared with $536 million, or 71 cents, in the same period a year earlier, the San Francisco- based company said today in a statement. The average estimate of 33 analysts surveyed by Bloomberg was 91 cents. Net operating revenue rose 19 percent, beating estimates, and Visa said revenue growth with be at the high end of its previous forecast. Chief Executive Officer Joseph W. Saunders , 64, is riding a shift by consumers from cash and checks to electronic payments as he widens Visa’s lead over No. 2 MasterCard Inc. Visa’s share of global purchase transactions rose to 64.79 percent last year from 64.09 percent in 2008, according to the Nilson Report, an industry newsletter. MasterCard’s fell to 26.5 percent. “We remain confident in delivering our guidance for fiscal year 2010,” Saunders said in the statement. “We are increasingly optimistic that economic growth will gradually improve.” Visa advanced 66 cents to $93.61 at 4 p.m. in New York Stock Exchange composite trading. The shares have gained 7 percent this year, and slipped 1.3 percent in extended hours. Quarterly operating revenue increased to $1.96 billion, exceeding the $1.92 billion average forecast of analysts in the Bloomberg survey. Visa derives more than half its revenue from the U.S. and has almost three-quarters of the U.S. debit-card market by purchase volume. That dominance helped the company weather the recession-driven drop in credit-card spending. Transactions Visa, which collects fees to shuttle payments between financial institutions, said processed transactions rose 14 percent from a year earlier to 10.6 billion. Payments with Visa credit cards in the U.S. climbed 3.4 percent to $182 billion, the first increase since the three months ended September 2008. U.S. debit-card spending rose 21 percent to $245 billion and has advanced every quarter since Visa’s March 2008 initial public offering. Saunders is looking to protect and expand Visa’s lead in processing Internet-based payments. Last week, the company agreed to buy CyberSource Corp. , based in Mountainview, California, for about $2 billion to defend its market share from electronic-commerce firms such as EBay Inc. ’s PayPal. MasterCard plans to report first-quarter results on May 4. To contact the reporter on this story: Peter Eichenbaum in New York at peichenbaum@bloomberg.net

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IBM Will Buy Back Up to $8 Billion of Stock, Increases Quarterly Dividend

April 27, 2010

By Katie Hoffmann April 27 (Bloomberg) — International Business Machines Corp. , the world’s biggest computer-services provider, boosted its dividend by 18 percent, almost double last year’s increase. The quarterly payout will rise 10 cents to 65 cents a share, IBM said today in a statement. The Armonk, New York-based company also is adding $8 billion to its current stock- repurchase plan, bringing the total to $10 billion. The increases may boost IBM’s appeal with investors after the company, led by Chief Executive Officer Sam Palmisano , posted its smallest profit increase last year since 2005. Last week, the stock dropped after IBM reported a decline in signings of service contracts last quarter, suggesting corporate spending on larger projects hasn’t picked up yet. The higher payout reflects the strength of IBM’s business moreso than the economy, Vice President of Financial Management Jesse Greene said today in an interview. The increases won’t affect its acquisition strategy, he added. IBM rose 32 cents to $131.05 at 11:04 a.m. in New York Stock Exchange composite trading . The shares were little changed this year before today. The payout increase marks the 15th year in a row IBM has raised its dividend, which is payable June 10 to shareholders of record May 10. To contact the reporter on this story: Katie Hoffmann in New York at khoffmann4@bloomberg.net

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American Air Delays First Chicago-Beijing Flight on Lack of `Viable’ Slots

April 26, 2010

By Mary Schlangenstein April 26 (Bloomberg) — American Airlines said it delayed the start of its daily Chicago-to-Beijing nonstop service until May 4 from today because of a dispute over takeoff and landing slots in the Chinese city. Customers are being rebooked on other flights and offered a full refund or a chance to fly at a later date, the Fort Worth, Texas-based unit of AMR Corp. said in a statement. American said it canceled the flights after Chinese authorities gave it slots for a 2:20 a.m. Beijing arrival and a 4:40 a.m. departure. “That just doesn’t work, because you couldn’t connect passengers to other flights in a timely fashion,” Mary Frances Fagan , a spokeswoman for American, said in an interview. “They’d be hanging around and waiting for hours on both ends. It’s not commercially viable based on what other competitors are operating. We’d be out of sync with others.” American said it applied for the slots at Beijing Capital International Airport in October 2009 and has been negotiating for new times since then. The airline held off canceling today’s flight in expectation it would be able to negotiate different times, Fagan said. The Chinese Embassy in Washington didn’t immediately respond to a call and e-mail seeking a comment. Today’s flight had been set to depart Chicago at 11:25 a.m. and arrive in Beijing at 1:55 p.m. the next day. The return flight would have departed from Beijing at 4:50 p.m. local time and arrived in the U.S. city at 4:40 p.m. Chicago time. The airline said it’s “hopeful” the issue will be resolved in time for the May 4 flight from Chicago. The initial service from Beijing was reset to May 5. The carrier said the new service “had been approved by the governments of both the United States and China.” AMR rose 6 cents to $7.84 at 4:15 p.m. in New York Stock Exchange composite trading . The shares have gained 1.4 percent this year. To contact the reporter on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

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Caterpillar Profit Tops Estimates on Improving Global Economy; Shares Gain

April 26, 2010

By Shruti Date Singh April 26 (Bloomberg) — Caterpillar Inc. , the world’s largest maker of construction equipment, posted its first earnings increase in seven quarters, exceeding analysts’ estimates, as the global economy began to improve. First-quarter profit excluding costs for a new health-care law was 50 cents a share, beating the average estimate of 39 cents a share in a Bloomberg survey of 21 analysts. Caterpillar stock rose the most since mid-February to become one of today’s biggest gainers in the Standard & Poor’s 500 Index . Full-year sales, profit and economic growth will be higher than executives previously predicted, Peoria, Illinois-based Caterpillar said today in a statement. Lower costs, aided by the elimination of about 37,000 workers and contractors from late 2008 to the end of 2009, helped compensate for a drop in machinery and engine sales. “For Caterpillar, there is clearly a cyclical recovery going on,” Joel Levington , a managing director of corporate credit for Brookfield Investment Management Inc. in New York, said in an interview after the results. “The key for Caterpillar is operational execution, which has been an area of challenge for this company over the past several years.” Net income was $233 million, or 36 cents a share, after a loss of $112 million, or 19 cents, a year earlier. The profit was its first year-over-year increase since the second quarter of 2008, before the U.S. financial crisis. Caterpillar rose $3.95, or 5.7 percent, to $72.73 at 10 a.m. in New York Stock Exchange composite trading. Earlier the shares rose 5.9 percent, the most in intraday trading since Feb. 9. The shares climbed 21 percent this year before today. 2010 Forecasts Full-year profit will be about $2.50 to $3.25 a share, compared with a January forecast of about $2.50, Caterpillar said today. Analysts, on average, estimated $2.66 a share. Sales fell to $8.24 billion, an 11 percent decline from the year-earlier quarter, before the full brunt of the financial crisis and global recession had shrunk revenue. Caterpillar today said sales in 2010 will rise to $38 billion to $42 billion, exceeding analysts’ average estimate of $36.6 billion. “They are seeing some strong trends, improvements in the economy, and the orders are coming,” Jeff Windau , an analyst for Edward Jones & Co. in St. Louis, said in an interview. “It just takes time to fill the channels and provide the products.” The first quarter may have been too early to reflect the uptick in orders, Windau said. Economic Outlook  Caterpillar raised its prediction for world economic growth in 2010 to 3.5 percent, from 3 percent in its previous forecast. The U.S. may expand 3.5 percent while developing economies may grow more than 6 percent, the company said. “Economic conditions are definitely improving, particularly in the world’s developing economies,” Chief Executive Officer James Owens said in the statement. “Industry activity and orders are significantly higher than last year and are at record levels in some areas.” First-quarter machinery sales fell about 1.5 percent to $5.26 billion, while engine sales dropped 28 percent to $2.29 billion. Financial products revenue declined 3.9 percent to $687 million. Total sales fell in all regions except for Latin America, which was unchanged, and Asia-Pacific, which gained 20 percent to $2.26 billion. Owens said the company is seeing increased order activity related to mining and energy. Sales of aftermarket service parts, which bottomed in the second quarter of 2009, improved in all regions and most robustly in Asia and Latin America. Inventories Flat After cuts in 2009, dealers held new machine inventories about flat with year-end 2009 and reduced engine inventories about $200 million, the company said. The company’s machines include excavators and bulldozers used in construction, haul trucks used at quarries and mines, and graders and loaders used to build highways and roads. The company also makes turbines used to generate electricity and engines that power ocean-going ships. Caterpillar cut about 19,000 full-time jobs and about 18,000 part-time and temporary workers from late 2008 through the end of last year as demand plunged amid the recession. Worldwide employment was 95,290 at the end of the first quarter, a drop of about 7,800 from the year-earlier period, the company said today. Caterpillar said today it has added back about 1,500 jobs since year-end because of higher production volume, including 600 in the U.S. To contact the reporter on this story: Shruti Date Singh at ssingh28@bloomberg.net

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Whirlpool Advances After Appliance Maker Boosts Annual Earnings Forecast

April 26, 2010

By Andrea Snyder and Matthew Boyle April 26 (Bloomberg) — Whirlpool Corp. , the world’s largest appliance maker, advanced 8 percent in early New York trading after increasing its profit forecast for the year and posting earnings that exceeded analysts’ estimates. Earnings per share will be as much as $8.50 this year, compared with a previous forecast of at most $7, the Benton Harbor, Michigan-based company said in a statement today. Excluding some items, profit will be $8.10 to $8.60, Whirlpool said. Analysts predicted earnings of $6.83, according to the average of estimates compiled by Bloomberg. Whirlpool climbed $8.13 to $110.35 at 8:08 a.m. before the start of New York Stock Exchange composite trading . The shares had gained 27 percent this year before today. First-quarter net income more than doubled to $164 million, or $2.13 a share, from $68 million, or 91 cents, a year earlier, the maker of KitchenAid refrigerators and Maytag washing machines said. Excluding some items, profit was $2.51. Sales increased 20 percent to $4.27 billion. To contact the reporters on this story: Andrea Snyder in Washington at asnyder5@bloomberg.net ; Matthew Boyle in New York at Mboyle20@bloomberg.net .

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Lions Gate Entertainment Amends `Poison Pill’ Plan to Let Carl Icahn Vote

April 23, 2010

By Ronald Grover April 23 (Bloomberg) — Lions Gate Entertainment Corp. said its board amended a “poison pill” shareholder rights proposal, and that proxy advisers Glass Lewis & Co. and Egan-Jones Proxy Services recommended investors vote for the plan. The change will let hostile suitor Carl Icahn , who holds almost 19 percent of the stock, vote his shares at a May 4 shareholder meeting on the plan, Lions Gate said in a regulatory filing today. The company said it made the change on the recommendation of a special board committee and other advisers. Icahn , who is offering $7 a share for Vancouver-based Lions Gate , received support from proxy advisers Riskmetrics Group Inc. and Proxy Governance Inc. Icahn urged investors to vote against the independent film studio’s efforts to make a hostile takeover more expensive. The views of Riskmetrics and Proxy Governance are at odds with those from Glass Lewis and Egan-Jones, which support Lions Gate management and the takeover defense they put in place March 12. Icahn’s offer values the company at about $826 million. The poison pill, designed to make a hostile takeover more difficult, would bar investors from accepting certain partial bids and grants the board too much discretion, Riskmetrics said, according to statement issued by Icahn. “The board’s action in implementing this reactionary rights plan raises some troubling concerns about its motivations and attention to shareholder rights,” Proxy Governance said. “The board has not provided compelling evidence of a need for this plan.” Lions Gate, run from Santa Monica, California, rose 29 cents to $7.18 at 4:15 p.m. in New York Stock Exchange composite trading . The shares have gained 24 percent this year. To contact the reporter on this story: Ronald Grover in Los Angeles at rgrover5@bloomberg.net

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Eastman Chemical Rises as Profit, Second-Quarter Forecast Exceed Estimates

April 23, 2010

By Jack Kaskey April 23 (Bloomberg) — Eastman Chemical Co. , the biggest U.S. maker of plastics for water bottles, rose the most in nine months in New York trading after the company’s first-quarter earnings and second-quarter forecast topped analysts’ estimates. First-quarter net income was $1.37 a share and second- quarter earnings will be $1.50 to $1.60 a share, Kingsport, Tennessee-based Eastman said yesterday in a statement. Profit was projected to be $1.15 a share in the first quarter, the average estimate of nine analysts surveyed by Bloomberg, and $1.19 in the second quarter, according to seven analysts. Chief Executive Officer Jim Rogers said on a conference call today he’s boosting output after first-quarter sales jumped 39 percent to $1.56 billion on higher demand and prices. Sales volumes in specialty plastics jumped 50 percent as products such as Tritan copolyester gained market share, Rogers said. “Eastman’s first-quarter performance gives us confidence that the company can continue to drive earnings significantly,” Charles Neivert , a New York-based analyst at Dahlman Rose & Co., said today in a note. Neivert raised his rating on the shares to “buy” from “hold” after Eastman’s “breakout” results. Eastman climbed $3.33, or 5 percent, to $70.45 at 12:37 p.m. in New York Stock Exchange composite trading. The shares earlier increased as much as 7.2 percent, the biggest intraday gain since July 24. Eastman gained 11 percent this year through yesterday. Possible Unit Sale The performance-polymers unit, which makes polyethylene terephthalate, or PET, for water bottles, reported a loss and may be sold after a strategic review, Rogers said. “It could very well lead to a divestiture,” Rogers said on the call. “We would expect something to happen this year.” Bank of America Merrill Lynch is serving as Eastman’s financial adviser in the review of strategic options for the PET business, the chemical maker said today in a statement. The PET business comprises about 81 percent of the performance-polymers unit’s sales, the company said in a presentation . The unit had $719 million of sales last year, according to Bloomberg data. Revenue has declined from $2.23 billion in 2004 as the company closed plants and sold assets outside the U.S. Net income in the first quarter surged to $101 million from $2 million, or 3 cents a share, a year earlier. Eastman said full-year earnings will be $5 to $5.25 a share. That compares with the $4.51 average estimate of eight analysts surveyed by Bloomberg. To contact the reporter on this story: Jack Kaskey in New York at jkaskey@bloomberg.net .

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