News Archive

Microsoft targets $20 billion in annual cloud revenue by 2018

SAN FRANCISCO (Reuters) – Microsoft Corp is targeting $20 billion in annual revenue from its cloud-computing businesses by the end of fiscal 2018, Chief Executive Satya Nadella said on Wednesday, signaling a tripling of such revenue in three years.

The world’s largest software company is one of the leaders in the cloud, essentially providing computing power and storage to customers through its network of data centers.

Microsoft said last week that its total commercial cloud revenue, which includes online versions of its Office and Dynamics applications, is running at $6.3 billion per year.

Its closest rival in the cloud, Inc, said last week its competing Amazon Web Services operation took in $1.57 billion in revenue in the quarter, which would also equal an annual rate of $6.3 billion.

(Reporting by Bill Rigby. Editing by Andre Grenon)

Article source:

Fed’s downgrade of economic outlook signals longer rate hike wait

WASHINGTON (Reuters) – The Federal Reserve downgraded its view of the U.S. labor market and economy on Wednesday in a policy statement that suggested the central bank may have to wait until at least the third quarter to begin raising interest rates.

The Fed’s statement put in place a meeting-by-meeting approach on the timing of its first rate hike since June 2006, making such a decision solely dependent on incoming economic data.

The data, however, have been getting worse. Just hours before the Fed’s statement, the U.S. government reported that first-quarter gross domestic product came in much weaker than expected.

The central bank acknowledged that growth had slowed in the winter months, a dimmer assessment of the economy than its view in March. And while it said the poor performance was in part due to transitory factors, it pointed to soft patches across the economy, in a sign it may have to hold off hiking rates until at least September.

“The committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term,” the Fed said in its statement, following a two-day meeting of its policy-setting committee.

U.S. Treasury yields added to earlier gains and short-term interest-rate futures contracts dropped slightly after the Fed statement before paring the losses. Futures traders continue to bet the Fed will wait until December to raise rates, and give an October rate rise just a 46 percent chance, according to CME FedWatch.

The Fed’s guidance on Wednesday differed little from its last meeting. But unlike its March policy statement, this time the central bank did not effectively rule out hiking rates at its next meeting.

That still makes a June move a possibility, though the data would have to sharply improve in the next two months for that to happen.


The economy grew at an anemic 0.2 percent annual rate in the first quarter, the Commerce Department reported early on Wednesday, well below economists’ expectations for 1.0 percent growth and the fourth quarter’s 2.2 percent expansion.

In its statement, the Fed said the pace of job gains had moderated, a downgrade of its view last month and a reflection of the poor March employment data. It also noted that the underutilization of labor resources was little changed – it had used the term “improved” in its March statement.

“On net it seems to be a little dovish given the weaker-than-expected activity we have seen,” said Gennadiy Goldberg of TD Securities.

The Fed’s view of inflation changed only slightly, as it hinted at the recent stabilization of oil prices and a leveling off of the U.S. dollar by saying “inflation continued to run below” its longer-term objective. At its last meeting the Fed had described inflation as having “declined.”

“We all know the Fed would love to start normalizing rates, but the simple fact is, the data does not warrant that action right now,” said Wayne Kaufman, chief market analyst at Phoenix Financial Services in New York.

There were no dissents in the Fed’s policy statement on Wednesday.

After the release of the statement, the Fed held a conference call with reporters to test a new conference call system that increases its flexibility to explain an interest rate hike in months when one of its quarterly press conferences is not already scheduled.

(Reporting by Michael Flaherty; Additional reporting by the New York markets team and Ann Saphir; Editing by David Chance and Paul Simao)

Article source:

GM to invest billions of dollars in U.S. plants: source

DETROIT (Reuters) – General Motors (GM.N) on Thursday will announce a multibillion-dollar, multiyear investment in several U.S. manufacturing plants in a move to boost production and vehicle quality, a person familiar with the matter said.

GM has scheduled a press conference at its stamping plant in Pontiac, Michigan, to make a “major U.S. manufacturing announcement.” A spokesman declined to provide further details.

The largest U.S. automaker is expected to reveal plans to make capital investments in plants and equipment, including body shops and stamping plants, said the person, who asked not to be identified. The investments are expected to create jobs, but it is unclear how many.

The announcement comes as GM and the United Auto Workers union gear up to negotiate a new master contract this fall for GM’s roughly 50,000 U.S. hourly workers. UAW leaders have pushed for the Detroit automakers to invest in union-represented factories.

GM has budgeted $9 billion for global capital spending in 2015, up from last year’s $7 billion, to pay for vehicle launches and investments in new technology. It has historically spent about two-thirds of its capital outlay in North America and officials have said that would remain true going forward.

The U.S. plants receiving the new investments will not be identified, the source said, but will likely include the Pontiac plant at which the announcement will be made. The plant stamps metal parts used for 20 different vehicles.

Separately, GM is weighing a $1.3 billion investment in its large SUV plant in Arlington, Texas, that would add 589 jobs. City officials in Arlington are expected on Wednesday night to give necessary approvals for the project.

GM has said only that it is looking at investing in the Texas plant to fund upgrades and no decision has been made, but it has told city officials it wants to move fast.

GM executives have talked about their desire to break bottlenecks at the Texas plant that have held back production of highly profitable big SUVs like the Cadillac Escalade. Most GM truck plants have been running at or near full capacity to meet demand.

Automakers have been wary of adding too much production capacity in North America, and risk undoing gains in pricing power they have achieved since making painful cuts during the financial crisis. GM and rivals have instead pushed to increase output at existing plants using additional shifts, overtime and investments to improve efficiency.

(Editing by Ted Botha)

Article source:

Coke executive pay approved, but by lower-than-average margin

NEW YORK/BOSTON (Reuters) – Coca-Cola Co (KO.N) shareholders on Wednesday approved the beverage maker’s pay for top executives by a lower-than-average margin in the face of concerns by large proxy advisers.

Coke said preliminary results from its annual shareholders meeting in Atlanta showed 80.4 percent of votes cast were in favor of its executive compensation, about 10 percentage points below the average for a company in the Standard Poor’s 500 index .SPX.

While the vote is only advisory, it indicates shareholder sentiment, and the company faced an investor revolt over its executive pay last year.

“The vote should pressure the Coca-Cola board to not only reform pay practices further but to move faster on fixing Coca-Cola’s business,” said a statement from David Winters, chief executive officer of Wintergreen Advisers, Coke’s most vocal critic on executive pay.

Coke, which is struggling to grow amid weak demand for carbonated soft drinks, said some of its largest shareholders supported its executive compensation.

“This outcome reflects support for the enhancements made in the past year to strengthen executive compensation as well as the direct engagement with shareowners,” the Atlanta company said in a statement.

Last fall, Coke revised its equity plan to make it less heavily weighted toward stock options.

Pay consulting firm Semler Brossy said shareholder support for executive pay among SP 500 companies averaged 92 percent in 2014. It was running at a similar level so far this year among 65 companies that have held their advisory votes.

Semler Brossy Managing Director Todd Sirras called the result at Coke “a solid B,” and said it was hard to say whether the figure will lead the company to make more compensation changes.

Institutional Shareholder Services, which advises pension funds, mutual funds and other money managers, had recommended investors vote against the pay of the company’s top leaders, including Chairman and CEO Muhtar Kent, who earned $25.2 million in 2014.

Another proxy adviser, Glass Lewis Co, had recommended investors support the pay, but said in a report it is concerned that bonus limits at the company are too high.

Meanwhile, two large pension fund overseers, the California State Teachers’ Retirement System and the Canada Pension Plan Investment Board voted against the pay detailed in Coke’s proxy released in March, according to disclosures on their websites. , Each holds less than 1 percent of Coke shares.

(Reporting by Anjali Athavaley; Editing by Richard Chang and Lisa Von Ahn)

Article source:

U.S. economy stumbles in first quarter as weather, low energy prices weigh

WASHINGTON (Reuters) – U.S. economic growth nearly stalled in the first quarter as harsh weather dampened consumer spending and energy companies struggling with low prices slashed spending.

Gross domestic product expanded at an only 0.2 percent annual rate, the Commerce Department said on Wednesday. That was a big step down from the fourth quarter’s 2.2 percent pace and marked the weakest reading in a year.

A strong dollar and a now-resolved labor dispute at normally busy West Coast ports also slammed growth, the government said.

While there are signs the economy is pulling out of the soft patch, the lack of a vigorous growth rebound has convinced investors the U.S. Federal Reserve will wait until late this year to start hiking interest rates.

The recovery is the slowest on record and the economy has yet to experience annual growth in excess of 2.5 percent.

“The U.S. economy has yet to demonstrate the self-sustaining resilience that the Fed wants to see before raising interest rates,” said Diane Swonk, chief economist at Mesirow Financial in Chicago. “A June liftoff is now off the table, our forecast for a September move holds but even that has become tenuous.”

Fed officials at the end of their two-day policy meeting on Wednesday acknowledged the softer growth, but shrugged it off as “in part reflecting transitory factors.”

The dollar hit a nine-week low against a basket of currencies. Prices for U.S. Treasury debt fell in line with a global bond sell-off, sparked by a poorly received five-year German bond auction. U.S. stocks were trading lower.

Economists had expected the economy to expand at a 1.0 percent rate. The sharp growth slowdown is probably not a true reflection of the economy’s health, given the role of temporary factors such as the weather and the ports dispute.

“The extent and depth of the weakness in today’s GDP report, sets the U.S. up for another disappointing though somewhat better GDP report in the second quarter. We are not ready to throw in the towel for the year,” said Scott Anderson, chief economist at Bank of the West in San Francisco.


The economy has had a jerky recovery from the 2007-2009 financial crisis, with the first quarter marking only the latest setback. The government did not quantify the impact of the weather, the strong dollar, lower energy prices and the ports disruptions on growth last quarter.

Economists, however, estimate unusually cold weather in February chopped off as much as half a percentage point, with the port disruptions shaving off a further 0.3 percentage point.

The weather impact was evident in weakness in consumer spending. Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, slowed to a 1.9 percent rate. That was the slowest in a year and followed a brisk 4.4 percent pace in the fourth quarter.

The sharp moderation in consumer spending came even though households enjoyed huge savings from a big drop in gasoline prices. Consumers boosted their savings to $727.8 billion from $603.4 billion in the fourth quarter, which should provide a tailwind for future consumer spending.

Construction also took a hit, while lower energy prices, which have cut into domestic oil production, undermined business investment.

Spending on nonresidential structures, which includes oil exploration and well drilling, tumbled at a 23.1 percent rate. That was the fastest pace of decline in four years and the first contraction since the first quarter of 2013.

The decline was driven by mining exploration, shafts and wells investment, which plunged at a 48.7 percent pace.

Nonresidential structures lopped off 0.75 percentage point from growth.

Schlumberger (SLB.N), the world’s No. 1 oil-field services provider, has slashed its capital spending plans for this year by about $500 million to $2.5 billion, while competitor Halliburton (HAL.N) cut its by about 15 percent to $2.8 billion.

Economists believe the bulk of the spending cuts were front-loaded into the first quarter, and they expect they will present less of a drag on growth in the April-June quarter.

“The weakness in business investment in response to the oil price shock may be transitory, but we continue to have doubts that the next leg of faster investment will kick in if GDP growth, especially consumer demand, does not improve significantly,” said Dana Peterson, an economist at Citigroup in New York.

The dollar, which gained 4.5 percent against the currencies of the United States’ main trade partners in the first quarter, weighed on trade, as did the West Coast ports dispute. Trade subtracted 1.25 percentage points from first-quarter growth.

There was a surprise increase in inventory accumulation, which added 0.74 percentage point to GDP growth.

Inventories increased $110.3 billion, the largest gain since the third quarter of 2010 and one that suggests inventories will weigh on growth in the second quarter.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

Article source:

Former Goldman banker acquitted of all charges in rape case

RIVERHEAD, New York (Reuters) – A former Goldman Sachs banker was found not guilty on Wednesday of charges that he raped an Irish student at his rental home while vacationing in Long Island in the summer of 2013.

After a three-week trial, Judge Barbara Kahn acquitted Jason Lee, 38, of the most serious charge of rape at a Suffolk county court in Riverhead, New York. The charge carried a maximum sentence of 25 years in prison.

Kahn also acquitted Lee of the lesser charges of sexual misconduct and assault in the third degree, which each carry a maximum of a year in prison.

Kahn said the prosecution had not met the burden of proof beyond a reasonable doubt. Kahn also noted that the alleged victim’s brother did not testify at the trial even though he was present on the evening in question.

Lee, a former managing director at Goldman, did not testify at his trial and waived the right to a jury, opting instead for a bench trial in front of Kahn.

After the verdict, Lee left the courtroom stone-faced, flanked by his lawyers, and did not respond to questions from the press. He got into a black Jeep Patriot that was waiting outside the courthouse and left immediately.

He had been accused of barging into a bathroom and raping the woman, who was 20 years old at the time, after a night of drinking at a local night spot. His lawyers argued throughout the nearly three-week trial that the encounter in his $32,000-per-month luxury Hamptons vacation rental was consensual.

“These were false accusations and we are deeply troubled that it went this far,” Edward Burke, one of Lee’s lawyers, told reporters.

Suffolk County District Attorney Thomas Spota said the prosecution had made every effort to contact the alleged victim’s brother, but he chose not to testify at the trial. He said he thought the prosecution had proved its case nonetheless.

“I can’t account for the judge’s thinking,” Spota said. “We disagree.”

On Tuesday, defense attorney Andrew Lankler said in his closing statement that prosecutors failed to prove beyond a reasonable doubt that sex was not consensual and that key points of the prosecution’s case were inconsistent.

The prosecutor, Assistant District Attorney Kerriann Kelly, said inconsistencies concerned “peripheral details” and that Lee’s actions subsequent to the alleged attack had clearly shown “consciousness of guilt”.

(Reporting by Edward Krudy; Editing by David Gregorio)

Article source:

McDonald’s tests custom burger program with drive-thru option

LOS ANGELES (Reuters) – McDonald’s Corp (MCD.N), working to revive U.S. sales amid fierce competition, is testing “TasteCrafted,” a more modest version of its custom sandwich program that will cost franchisees less to install and can be offered through drive-thru windows.

Word of the test, which appears to be a simplified version of McDonald’s “Create Your Taste” customization project, lands just before new Chief Executive Steve Easterbrook is scheduled to unveil his corporate turnaround plan on May 4.

McDonald’s U.S. restaurant sales have declined for six straight quarters, hobbled by tough competition from more nimble chains such as Wendy’s Co (WEN.O), Chick-fil-A and Chipotle Mexican Grill Inc (CMG.N). But McDonald’s own missteps in its top profit market also have led to large and complicated menus that have slowed down service.

McDonald’s is trying TasteCrafted in a limited number of restaurants near Atlanta, Portland, Oregon, and Southern California, spokeswoman Lisa McComb said. She declined to give a count of restaurants in the test.

As many as 30 McDonald’s restaurants in Central California towns such as Santa Barbara and San Luis Obispo are offering TasteCrafted, which allows diners to choose burgers, sandwiches, McWraps and salads in a variety of “chef inspired flavors,” Janney Capital Markets analyst Mark Kalinowski said in a client note.

As many as seven more restaurants in Oregon are running the test, said Kalinowski, who did not immediately respond to requests for comment.

“The franchisee investment is small…. From what I know, this could be rolled out nationally in a few months, whereas Create Your Taste would take (two to three) years,” one industry source said in Kalinowski’s note.

The TasteCrafted program offers sandwiches made with beef or chicken, three choices of buns and four different topping flavors: bacon clubhouse, pico guacamole, hot jalapeno and ranch deluxe. The flavor choices for McWraps and salads are southwest and cucumber ranch.

Franchisees have been pushing back against Create Your Taste, a custom sandwich program introduced by McDonald’s previous CEO. Create Your Taste is being tested in a small number of restaurants in California, Illinois, Wisconsin, Georgia, Missouri and Pennsylvania, McComb said.

U.S. franchisees have complained that Create Your Taste will exacerbate already slow service. They also say that the installation price of more than $100,000 per restaurant is not justified, in part because the custom sandwiches are not offered through the drive-thrus that account for more than 60 percent of U.S. restaurant sales.

(Reporting by Lisa Baertlein in Los Angeles; Editing by David Gregorio)

Article source:

Turner, HBO help Time Warner beat Street view

(Reuters) – Time Warner Inc reported quarterly profit and revenue above analysts’ expectations, boosted by higher advertising and subscription revenue at its Turner division and Home Box Office network.

Revenue at Turner, which owns channels such as CNN, TNT and Cartoon Network as well as NCAA.Com, rose 4.5 percent in the quarter, helped by the NCAA Division I men’s basketball tournament and growth in Turner’s news businesses.

Advertising revenue at Turner grew 4 percent, while subscription revenue rose 3 percent.

Evercore ISI analyst Vijay Jayant said the advertising growth at Turner was better than expected.

Revenue at HBO, whose popular shows include hit medieval fantasy series “Game of Thrones”, increased 4.4 percent.

HBO’s standalone streaming service, HBO Now, was launched on Apple Inc’s devices this month, in time for the fifth season premiere of “Game of Thrones”, reaching millions of viewers who do not subscribe to pay TV.

“The initial response (to HBO Now) has been very positive both in terms of subscribers and usage,” Chief Executive Jeff Bewkes said on a post-earnings call.

Time Warner said the “Game of Thrones” premiere was watched by a total of 18.1 million people in its first two weeks, over 1 million more than the viewership for the prior season’s first episode.

Turner and HBO together account for more than half of Time Warner’s total revenue.

Revenue in the company’s Warner Bros. Studio business rose 4.3 percent, helped mainly by higher licensing revenue from subscription video-on-demand sale of “Friends” and the box-office success of Clint Eastwood’s war film “American Sniper”.

The company’s net income, however, fell to $970 million, or $1.15 per share, in the quarter ended March 31, from $1.29 billion, or $1.42 per share, a year earlier.

Net income was hurt due to an increase in marketing costs primarily related to the launch of HBO NOW and higher spending on original programing.

Excluding items, the company earned $1.19 per share from continuing operations.

Revenue rose to $7.13 billion from $6.80 billion.

Analysts on average had expected earnings of $1.09 per share and revenue of $7.0 billion.

Shares of Time Warner, which rose 2 percent before the opening bell, were little changed in afternoon trading.

(This story has been refiled to add dropped word “than” in fourth paragraph)

(Additional reporting by Lehar Maan in Bengaluru; Editing by Saumyadeb Chakrabarty)

Article source:

Twitter’s growth seen hinging on luring advertisers

(Reuters) – Twitter Inc’s (TWTR.N) slowing revenue and user growth has raised further doubts about its ability to entice advertisers to spend more on its platform – at least in the near term.

Shares of the micro-blogging website operator, which warned on Tuesday that user growth was off to a slow start in April, fell 5.2 percent to $40.07 in early trading on Wednesday.

Twitter’s market value fell by a fifth, or about $5 billion, on Tuesday after its disappointing first-quarter results were released in error an hour ahead of schedule.

At least 15 brokerages cut their price targets on the stock.

“…Simply put, advertisers aren’t willing to bid up or spend as much with TWTR as expected,” RBC analysts said in a research note, cutting their price target to $$47 from $54.

Advertising has been seen as a growth driver for Twitter, but the RBC analysts said the company appears to have “hit an ROI (return on investment) wall with its advertisers.”

Twitter’s ad revenue per monthly average user has now decelerated for three consecutive quarters, and its outlook implied a further slowdown in the second quarter.

Analysts had expected the company’s new advertising products, particularly its app install ads, to start driving growth in the latest quarter.

That didn’t happen as much as expected.

Barclays Capital downgraded the stock to “equal weight” from “overweight” and Janney Capital to “neutral” from “buy.”

Barclays cuts its price target to $44 from $60, while Janney cut to $44 from $53. Stifel cut its price target from $38 to $36, the lowest among brokerages that cut their price targets.

Twitter has been making big product changes to boost user growth, but user numbers grew by just 18 percent from a year earlier in the quarter – the slowest growth in five quarters.

“We have been optimistic, longer-term, on Twitter’s ability to monetize their logged-out user base and we continue to see that as an opportunity,” Barclays analyst Paul Vogel wrote.

“All of these things, unfortunately, look like they may take some time.”

So far, Twitter’s efforts to capture more revenue per user pale when compared with social media rival Facebook Inc (FB.O).

Facebook reported last week that it had 1.44 billion monthly active users, generating revenue of $3.54 billion – about $2.46 per user. Twitter’s 302 million users generated $436 million in revenue – or about $1.44 each.

“TWTR is several years behind FB in its monetization story …” MKM Partners analyst Rob Sanderson wrote in a note.

(This story corrects share movement and price in paragraph 2)

(Reporting by Tenzin Pema and Supantha Mukherjee in Bengaluru; Editing by Ted Kerr)

Article source: