News Archive

Outlook for PC shipments worsens: IDC

Thu Aug 29, 2013 4:24pm EDT

SAN FRANCISCO (Reuters) – The outlook for the struggling personal computer industry is worse than was previously believed, according to market research firm IDC, which on Thursday cut its 2013 forecast for global PC shipments for at least the second time.

Worldwide shipments of PCs are likely to fall 9.7 percent this year as consumers continue to favor mobile gadgets, IDC said in a report.

That is much worse than IDC’s prediction in March that PC shipments would fall 1.3 percent this year and below its forecast in May of an 7.8 percent annual drop.

The growing popularity of tablets and smartphones has thrown the PC industry into its longest downturn on record and IDC said it expects PC shipments to keep falling at least through next year.

China and other developing economies had been a source of healthy demand for PCs in the face of falling sales in the United States and Europe. But shipments in those countries are now set to decline in 2013 even more than in wealthy regions, IDC said.

Also on Thursday, IDC nudged lower its forecast for 2013 tablets, pointing to the growing use of smartphones with large screens as well as an expected demand for new categories of wearable devices such as smart watches.

Global tablet shipments are now expected to grow 57.7 percent from last year to 227.4 million units, instead of 229.3 million units, IDC said.

(Reporting by Noel Randewich; editing by Gunna Dickson)

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L’Oreal CEO says ready to buy out Nestle stake in 2014: paper

Thu Aug 29, 2013 4:06pm EDT

PARIS (Reuters) – L’Oreal (OREP.PA) will be ready to buy Nestle’s 29.5 percent stake in the French cosmetics giant next year, French daily Les Echos reported, citing L’Oreal Chief Executive Jean-Paul Agon.

The newspaper quoted Agon as saying L’Oreal would have the means to buy the Swiss food group’s holding from April 2014, when a 10-year mutual right of first refusal with L’Oreal’s founding Bettencourt family expires, allowing Nestle to sell.

Agon told the paper the French group would be ready to buy Nestle’s holding, valued at around 22 billion euros ($29.09 billion), according to a front-page excerpt of Les Echos’ Friday edition made available late on Thursday.

Nestle said this week it wanted to keep all options open regarding its L’Oreal stake.

The Bettencourt family said last week it had no plans to sell its 30.5 percent stake in L’Oreal, responding to speculation that the group’s shareholder structure could change.

New York brokerage Liberum estimates L’Oreal could buy Nestle’s stake if it sold its 9 percent holding in pharmaceuticals maker Sanofi (SASY.PA) and borrowed funds for as much as three times its net debt to earnings before interest, tax, depreciation and amortization.

It estimates L’Oreal could raise as much as 35 billion euros in 2014 for deals or share buy-backs.

“L’Oreal would prefer to buy out Nestle to secure independence,” Liberum analyst Pablo Zuanic said.

L’Oreal posted improved profit margins on Thursday and said it had net cash of 572 million euros on its balance sheet at the end of June.

(Reporting by Astrid Wendlandt; editing by Tom Pfeiffer)

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Nasdaq says software bug caused trading outage

Thu Aug 29, 2013 4:02pm EDT

NEW YORK (Reuters) – Nasdaq OMX Group’s (NDAQ.O) massive trading halt last week was due to a software bug and other internal technology issues triggered by problems at NYSE Euronext’s (NYX.N) Arca exchange that led a key backup system to fail, the exchange operator said on Thursday.

Nasdaq said it was “deeply disappointed” by the three-hour outage on August 22, and while it pointed to connection problems between rival NYSE’s electronic exchange Arca and the Nasdaq-run system that receives all traffic on quotes and orders for Nasdaq stocks, it took ultimate responsibility for the glitch.

“Our backup system did not work,” Bob Greifeld, Nasdaq’s chief executive, said in an interview.

“There was a bug in the system, it didn’t fail over properly, and we need to work hard to make sure it doesn’t happen again,” he said, referring to the inability of the system to fully revert to backup mode.

New York Stock Exchange parent NYSE declined to comment.

Nasdaq said it was in the process of identifying potential design changes to make the Securities Information Processor, or SIP, more resilient, “including architectural improvements, information security, disaster recovery plans and capacity parameters.”

The exchange plans to present its initial recommendations for change to the SIP governing committee, made up of U.S. exchanges and the Financial Industry Regulatory Authority, within 30 days.

Nasdaq said that on the morning of August 22, Arca connected and disconnected to the SIP more than 20 times, eating up capacity. It said the SIP’s capacity was further eroded as Arca sent a stream of inaccurate stock symbols to the SIP, generating numerous rejection messages.

Each data port connecting to the SIP can handle 10,000 messages per second, Nasdaq said. But in this case, the traffic from Arca was more than double that, the exchange said.

“The confluence of these events vastly exceeded the SIP’s planned capacity, which caused its failure and then revealed a latent flaw in the SIP’s software code,” the Nasdaq report said.

This software flaw prevented the processor’s built-in backup system from resetting properly, delaying the return of data. With the system degraded, the exchange said it decided to halt trading to ensure fair market conditions.

Nasdaq said it took 30 minutes to resolve the problem and then nearly three more hours to test and evaluate scenarios to reopen the market in a fair and orderly manner.

“Nasdaq OMX is deeply disappointed in the events of August 22 and our performance is unacceptable to our members, issuers and the investing public,” the exchange said. “While getting to 100 percent performance in all of our activities, including our technology is difficult – it is our objective.”

(Editing by Kenneth Barry and Matthew Lewis)

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U.S. soup sales, acquisitions boost Campbell Soup’s profit

Thu Aug 29, 2013 9:44am EDT

(Reuters) – Campbell Soup Co (CPB.N), the world’s largest soup maker, reported a better-than-expected quarterly profit, helped by acquisitions and strengthening U.S. sales of soups and sauces.

Under a turnaround effort led by Chief Executive Denise Morrison, the company has been revamping its offerings with new soups and sauces and improving existing lines after several seasons of weak soup sales.

The company, which sells Prego pasta sauces and Pepperidge Farm cookies, has also been buying brands in the fast moving perishable foods business.

Over the past year, Campbell bought Bolthouse Farms, which makes refrigerated salad dressings and baby carrots; Plum Organics, which makes baby food; and Kelsen, a cookie brand.

Total sales rose 13 percent to $1.82 billion in the fourth quarter ended July 28, slightly below analysts’ estimates of $1.84 billion, according to Thomson Reuters I/B/E/S.

Sales was $1.72 billion, excluding the operations of some European businesses the company plans to sell.

Acquisitions accounted for 13 percent of the sales from continuing operations.

Sales from its U.S. soup and sauce business rose 7 percent in the quarter and accounted for about 29 percent of sales from continuing operations.

The company’s adjusted earnings rose 9 percent to $142 million, or 45 cents per share in the quarter, beating analysts’ estimates of 42 cents per share.

Campbell said it expects adjusted earnings to grow 3 to 5 percent for fiscal 2014. Sales from continuing operations are expected to grow 5 to 6 percent.

The Camden, New Jersey-based company’s shares fell 3 percent to $43.50 in premarket trade on Thursday.

(Reporting by Siddharth Cavale in Bangalore; Editing by Maju Samuel and Savio D’Souza)

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Wall Street edges lower after data; Syria eyed

Thu Aug 29, 2013 9:38am EDT

NEW YORK (Reuters) – U.S. stocks edged lower at the open on Thursday as traders awaited developments in Syria, and as stronger-than-expected U.S. economic data lent weight to the possibility of a wind-down soon in the Federal Reserve’s stimulus program.

The Dow Jones industrial average .DJI fell 4.07 points or 0.03 percent, to 14,820.44, the SP 500 .SPX lost 1.32 points or 0.08 percent, to 1,633.64 and the Nasdaq Composite .IXIC added 4.143 points or 0.12 percent, to 3,597.492.

(Reporting by Chuck Mikolajczak; Editing by Bernadette Baum)

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Easing stimulus, oversupply to weigh on oil next year: Reuters poll

Thu Aug 29, 2013 9:35am EDT

(Reuters) – Middle Eastern unrest is seen putting a floor under oil prices this year, while increasing supply and a stronger dollar driven by an expected easing of U.S. stimulus will push prices lower in 2014, a Reuters poll showed.

The 30-analyst August poll forecast Brent crude oil averaging $107.20 per barrel in 2013, below the $108.02 average so far this year. The international benchmark averaged $111.70 last year.

Brent will average $104.90 a barrel in 2014 and $102.70 in 2015, the monthly poll showed.

“Crude oil prices are likely to decline over the coming years due to higher crude oil production, both from the OPEC and non-OPEC as well as gradual withdrawal of quantitative easing in the United States,” CRISIL Research Director Rahul Prithiani said.

Reuters foreign exchange surveys showed the U.S. dollar would be stronger against other major currencies in a year from now. A strong U.S. unit makes dollar-denominated commodities such as Brent more expensive for holders of other currencies, weakening demand and weighing on prices. GBP/POLL EUR/POLL

Analyst Chris Tevere of GAIN Capital said if a reduction of stimulus from the U.S. Federal Reserve began to weigh on growth, it could have a downward effect on oil prices in 2014.

Most analysts expect the recent premium in oil prices over tensions in the Middle East will be transitory, petering out later in the year.

“We donĀ“t believe that we will (be) talking about supply disruptions in Egypt, Iraq and Libya at the end of the year,” LBBW analyst Frank Klumpp said.

U.S. crude, or West Texas Intermediate (WTI), is expected to average $97.80 a barrel this year and $98.80 in 2014, according to the poll.

Brent is expected to hold a premium of $9.40 per barrel on average over U.S. crude in 2013, the poll showed, lower than the $10.92 closing average seen so far this year. The spread is expected to average $6.20 in 2014.

Fifteen of 30 analysts see Brent above $107, the median forecast for 2013, while 14 of 28 analysts see WTI above $97.8, the median for this year.

BNP Paribas, Bernstein, CIBC World Markets, Goldman Sachs and Raiffeisen Bank International had the highest Brent forecast of $110.00 for 2013.

Banco BPI had the highest WTI forecast of $103.00 for 2013. Raymond James had the lowest forecasts – $102.75 for Brent and $90.75 for WTI for 2013.

(Editing by Dale Hudson)

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WestJet to purchase 65 Boeing 737 MAX aircraft

Thu Aug 29, 2013 9:32am EDT

TORONTO (Reuters) – Canada’s WestJet Airlines Ltd (WJA.TO) said on Thursday it has reached a preliminary agreement to purchase 65 737 MAX aircraft from Boeing Co (BA.N), moving to expand its fleet with more fuel-efficient aircraft.

The 737 MAX series is due to enter production in 2015, with deliveries to customers starting in 2017. It is the latest version of Boeing’s top-selling 737 jet, which has been in production for more than four decades.

The narrow-body 737 MAX is set to compete with the A320neo made by Airbus (EAD.PA). Boeing said in May it expects the craft to burn 13 percent less fuel than current 737 models.

Calgary-based WestJet said it plans to buy 40 of the 737 MAX 8 aircraft and 25 of the smaller 737 MAX 7 planes, with delivery to begin in September 2017. The MAX 8 will accommodate between 162 and 175 passengers, while the MAX 7 will fit 126 to 140 passengers.

WestJet also said that 15 of its existing Next-Generation 737 aircraft orders, currently scheduled for delivery between December 2014 and 2018, will be filled by 737 MAX aircraft instead.

Including the new orders, WestJet’s future Boeing 737 aircraft deliveries total 92. WestJet’s current fleet consists of 103 Boeing Next-Generation 737s and four Bombardier Inc (BBDb.TO) Q400 NextGen aircraft.

WestJet expects to sign a final purchase agreement for the 737 MAX aircraft before the end of September.

The airline said it now expects capital expenditures to range between C$210 million and C$220 million for the third quarter of 2013, and between C$690 million and C$710 million for the full-year. It previously forecast C$100 million to C$110 million for the third quarter and C$610 million to C$630 million for the full year.

WestJet’s move comes as competition among Canadian airlines is heating up, with Air Canada (ACb.TO), the country’s largest airline, boosting capacity with the launch of its Rouge airline this summer. Rouge, a low-cost carrier, is aimed at high-volume leisure travel heading to the Caribbean, the United States and other international markets.

WestJet itself recently launched Encore, a regional carrier aimed at competing head-to-head with Air Canada on some routes to smaller cities and towns where Canada’s biggest airline has enjoyed a monopoly.

(Reporting by Euan Rocha; Editing by Gerald E. McCormick and John Wallace)

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China’s ‘Big Four’ banks beat second-quarter estimates but concerns linger

Thu Aug 29, 2013 9:21am EDT

SHANGHAI/HONG KONG (Reuters) – China’s top four banks posted better-than-expected quarterly profits this week, even as their stock market valuations remain the lowest in Asia, highlighting how pessimism about slowing Chinese economic growth is overshadowing resilient profitability in the sector.

After years of break-neck gains, profit growth at Chinese banks is expected to slow sharply this year as new loan growth moderates and profit margins get squeezed by policy reforms allowing banks to offer higher rates on customer deposits.

This, along with concerns about a rise in non-performing loans as the slowing economy and rising indebtedness pressure borrowers, have driven China bank share prices down hard this year. Chinese banks are trading at rock-bottom valuations despite reporting profits that would still be the envy of lenders in other markets.

“Since last year the market has been extremely suspicious of the Chinese banking sector,” said Jiang Jianqing, chairman of Industrial and Commercial Bank of China (ICBC), the world’s largest bank by market capitalization.

“They’ve pressured our (price-to-earnings) and (price-to-book) ratios to low levels. Such good profits, such good returns, such good quality. We think it’s a little bit unfair,” Jiang told a news conference in Beijing.

The China Banking Association said last month it expects net profit growth for China’s 17 listed banks to slow to 8 percent in 2013 from 19 percent in 2012.

But this week the Big Four – ICBC (1398.HK)(601398.SS), China Construction Bank (0939.HK)(601939.SS), Agricultural Bank of China (1288.HK)(601288.SS) and Bank Of China (3988.HK)(601988.SS) – reported combined first-half earnings growth of 12.5 percent and all beat analysts’ estimates for second-quarter earnings.

Still, an index tracking Shanghai-listed banks .SSEBKI has fallen 9.1 percent this year, underperforming a 7.6 percent decline for the broader Shanghai Composite Index.

“Some investors may think that single-digit percentage growth is unexciting, which is why the sector is only trading at about par to book,” said Grace Wu, a Daiwa Securities analyst in Hong Kong.

Chinese bank shares are the cheapest in the Asia-Pacific region with a 12-month forward price-to-earnings ratio of 4.8, and the third cheapest in the world after Argentina and Bahrain, according to Thomson Reuters Starmine data.

The top four banks’ mean price-to book ratio is at a historic low of 1.1, according to StarMine.

“Based on the strong correlation between (returns on equity) and (price-to-book) ratios for the top 100 global banks, the Chinese banks are trading at a sizeable 50 percent discount to their global peers,” Michael Werner, China bank analyst for Bernstein Research in Hong Kong, wrote in a note on Wednesday.


China’s bank chiefs have also been cautious, even gloomy, in their public remarks about the second half of the year even while reporting expectation-beating results.

“Interest rate liberalization will have a rather large negative influence. It will shrink our net interest margin,” Bank of China chairman Tian Guoli said at a press conference in Hong Kong on Thursday.

China’s banks are expected to win approval for the issuance of tens of billions of yuan in negotiable certificates of deposit, Reuters reported exclusively last week, in a move that would constitute another step towards liberalizing China’s domestic interest rates.

Pang Xiusheng, vice president at China Construction Bank, said at a news conference on Monday that CCB expects a rise in bad loans in the second half of the year.

In a sign that more loans may turn sour later this year, ICBC reported that overdue loans not designated as non-performing rose to 69.2 billion yuan, or 0.73 percent of all loans, from 0.71 percent at end-2012.

That contrasts with official non-performing loan (NPL) levels, which remained steady across the big four banks. At AgBank, for example, the non-performing loan ratio fell to 1.25 percent in the first half from 1.27 percent at the end of March. But overdue loans not yet designated as NPLs rose to 94.5 billion yuan as of end-June from 87.9 billion at the end of December.

Indeed, some analysts have warned that attractive profits in the first half were due in part to less robust provisioning against bad loans. AgBank set aside 10.0 billion yuan in the second quarter, down from 10.8 billion in the same period last year.

While industry-wide average net interest margins rose slightly to 2.59 percent in the second quarter from 2.57 percent in the first quarter, data from China’s banking regulator show that is still lower than the 2.75 percent margin in the fourth quarter last year.

Banks have in part compensated for declining interest margins by bolstering the fees and commissions they make from selling other products.

For ICBC, for example, fee-based income rose 23 percent in the January-June period, much faster than the 5.8 percent rise in interest income. BOC’s fee income also jumped, rising 24.0 percent to 69.0 billion yuan. ($1 = 6.1202 Chinese yuan)

(Additional reporting by Michael Flaherty and Bi Xiaowen in HONG KONG, Patturaja Murugaboopathy in BANGALORE, Zhang Shengnan and Xie Heng in BEIJING; Editing by Chris Gallagher)

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U.S. GDP accelerates sharply in second quarter

Thu Aug 29, 2013 9:07am EDT

WASHINGTON (Reuters) – The U.S. economy accelerated more quickly than expected in the second quarter thanks to a surge in exports, bolstering the case for the Federal Reserve to wind down a major economic stimulus program.

Other economic data on Thursday showed the number of Americans filing new claims for jobless benefits fell last week, a potential sign of faster hiring in August.

U.S. gross domestic product grew at a 2.5 percent annual rate in the April-June period, according to revised estimates released by the Commerce Department. That was more than double the pace clocked in the prior three months.

The reports could boost confidence that the economy is turning a corner despite government austerity measures and a still-high jobless rate.

The government had initially estimated that GDP expanded at a 1.7 percent rate in the second quarter. But recent data on trade showed that exports climbed during the period at their fastest pace in over two years.

The government also said data from retailers showed that businesses had restocked their shelves at a faster pace in the April-June period than initially estimated.

Economists polled by Reuters had forecast the economy growing at a 2.2 percent pace.

Many economists expect the economy will accelerate further in the second half of the year as austerity measures begin to weigh less on national output.

That drag was evident in the second quarter, when spending contracted at all levels of government. Indeed, Thursday’s data showed the economic drag from spending cuts was greater in the second quarter than initially estimated.

Still, the data could make officials at the U.S. central bank more confident in their plan to begin reducing monthly bond purchases later this year.

“The market will take (the data as a sign that) tapering would be more likely next month,” said Scott Brown, an economist at Raymond James in St. Petersburg, Florida.

Yields rose on U.S. government debt and the dollar strengthened against the euro.

The Fed’s program has reduced borrowing costs and helped spark a recovery in the nation’s housing market, which collapsed during the 2007-09 recession.

In the second quarter, investments in housing accounted for nearly a fifth of the economy’s growth during the period.

However, other reports have suggested that housing began to look more shaky toward the end of the quarter. Expectations that the Fed could trim its $85 billion in monthly bond purchases as early as September have driven mortgage rates sharply higher since May.

The bond-buying program is one of America’s last major economic stimulus programs, as the federal government’s fiscal austerity began dragging on the economy in late 2010.

In the second quarter, higher taxes appeared to hold consumers back. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, slowed to a 1.8 percent growth pace after rising at a 2.3 percent rate in the first quarter.

Corporate profits, however, unexpectedly climbed in the second quarter. After subtracting taxes paid by corporations, profits rose at a 4.2 percent annual rate, the fastest gain since late 2011.

A separate report showed the number of Americans filing new claims for unemployment benefits fell in line with expectations.

Initial claims for state unemployment benefits slipped 6,000 to a seasonally adjusted 331,000, the Labor Department said. Claims have not strayed too far from the 330,000 level since mid-July, bolstering expectations of an acceleration in the pace of employment gains in August.

(Reporting by Jason Lange; Additional reporting by Lucia Mutikani in Washington and Richard Leong in New York; Editing by Paul Simao)

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