News Archive


U.S. Senate panel to hold hearing on AT&T-Time Warner deal on December 7


WASHINGTON The U.S. Senate Judiciary Committee’s antitrust subcommittee will hold a hearing on Dec. 7 on the proposed merger of Time Warner Inc (TWX.N) and ATT Inc (T.N), and the companies’ chief executives will testify, the committee said in a statement.

“The hearing will examine the impact of the proposed transaction on consumers, including the implications for competition and innovation in the creation and distribution of video content,” the statement said.

(Reporting by Eric Beech; Editing by Mohammad Zargham)

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Ford, GM pitch new strategies; Wall Street snubs them


DETROIT Ford Motor Co (F.N) and General Motors Co (GM.N) have worked all year to convince investors that they are no longer prisoners of the U.S. auto market cycle and have solid plans to fend off challenges from Silicon Valley interlopers.

This week, Wall Street looked at the Detroit companies’ stronger-than-expected quarterly results and turned thumbs down.

GM, the largest U.S. automaker, reported record third-quarter net income on Tuesday, but its shares have fallen nearly 5 percent since then.

Ford shares sank more than 1 percent on Thursday, bringing their year-to-date decline to about 17 percent, or about $7 billion of the company’s market capitalization.

(For graphic on Ford and GM earnings click tmsnrt.rs/1Nxqa9k)

The selloffs put more pressure on GM and Ford’s chief executive officers to accelerate cost-cutting and buy back more shares. They must also make tough decisions between slashing production to prop up prices, or gunning for market share at the risk of reducing profit margins, analysts said.

Highlighting Detroit’s problems with investors was the market’s response to Tesla Motors Inc’s (TSLA.O) results. Late on Wednesday, the electric luxury car maker headed by billionaire Elon Musk announced its first profitable quarter in three years, with net income of $22 million.

By comparison, GM reported net income of about $2.8 billion and Ford, nearly $1 billion.

Shares of Tesla were up 4 percent in afternoon trading on Thursday, boosting the company’s market value to more than $30 billion.

Wall Street has penalized GM and Ford shares this year because investors are convinced that a cyclical downturn is nigh for U.S. auto sales, which hit a record of about 17.5 million vehicles last year.

Ford said in July that the six-year auto boom since the economic crisis was over and that sales would erode from their 2015 peak while still plateauing at historically lofty levels.

Investors will watch as Ford and GM pursue contrary strategies for the fourth quarter in North America, where they generate nearly all of their profits.

GM said on Tuesday that it bulked up inventories at U.S. dealers by more than 110,000 vehicles during the third quarter, and executives said they anticipated strong demand to continue.

Ford, however, plans to cut fourth-quarter production in North America by 12.5 percent from a year earlier to keep dealers’ lots from overflowing and avoid profit-sapping discounts.

The company is idling one shift next week at a Kansas City, Missouri, plant that makes the F-150 pickup, its best-selling vehicle and one of its most profitable models.

The company disclosed on Thursday that it was also closing a plant in Wayne, Michigan, for an extra two weeks before the end of the year to adjust production to demand. That plant makes the light-selling Focus compact car.

Ford’s results reflect Detroit’s challenges. Third-quarter net income fell by more than 50 percent because of declining sales in North America, higher recall costs and a costly and complicated introduction of a new pickup.

Still, the company backed its full-year earnings outlook and said it expected to generate cash this quarter after burning through $2 billion in the third quarter.

CEO Mark Fields urged investors on Thursday to value Ford based on its efforts to break into new markets such as ride sharing and autonomous vehicles that promise higher profit margins.

However, GM’s $1.2 billion and Ford’s $500 million of publicly disclosed investments in these businesses are dwarfed by the $16 billion ride services leader Uber Technologies Inc {UBER.UL} has raised in debt and equity, according to a Reuters analysis.

For now, said Ford Chief Financial Officer Bob Shanks, “what’s happening to the company is what’s happening in North America.”

Ford’s North American revenue fell 8 per cent in the third quarter.

At GM, CEO Mary Barra has matched or beaten financial targets for profit, share repurchases and return on invested capital agreed upon with activist investors last year.

Still, GM shares are down nearly 8 percent this year.

“There are just a lot of headwinds due to the idea of peak auto,” Morningstar analyst David Whiston said. “GM’s just going to have to keep beating numbers and keep buying back their shares when it’s cheap like it is now.”

(Additional reporting by Paul Lienert in Detroit; Editing by Lisa Von Ahn)

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Belgium breaks deadlock over EU-Canada free trade pact


BRUSSELS Belgium’s regions agreed to a free trade pact with Canada on Thursday, ending weeks of uncertainty when internal divisions in just one country blocked the European Union of 500 million people sealing the landmark deal.

Prime Minister Charles Michel said the regions and linguistic communities had drafted a four-page addendum to the pact that answered their concerns.

The text addresses fears that a system to protect foreign investors could let multinationals block new rules on the environment, labour rights or public services – specifying that the “investment protection” regime would not come into force during an initial period. It also has a safeguard clause to protect agriculture in the event of a “market imbalance”.

“As a unilateral Belgian declaration, Canada’s approval will not be sought or needed,” a source close to the talks said, indicating the path was now clear to finalise the deal.

European Council President Donald Tusk gave the Belgian agreement to the Comprehensive Economic and Trade Agreement (CETA) a cautious welcome.

Belgium’s regional governments have until the end of Friday to consult their parliaments if needed, and ambassadors from other EU countries will also review the addendum.

All 28 EU governments back CETA, which supporters say could increase trade by 20 percent, but Belgium’s central government had been prevented from giving its consent because of objections led by the French-speaking Wallonia region.

Wallonia, along with the capital Brussels and Belgium’s groupings of French and German speakers, had opposed the deal for weeks, with fears about a flood of Canadian farm imports one of the main sticking points.

The premier of the Flemish region, Geert Bourgeois, said the original 1,598-page text of the trade deal stood.

“This (the addendum) is a clarification, the actual treaty does not change,” he said.

Canada has already agreed to a binding declaration to answer concerns raised by others, principally setting out the right of governments to regulate.

“POLITICAL HOSTAGE-TAKING”

Belgium will ask the European Court of Justice whether the investment protection system is in line with EU rules, with Wallonia still expressing reservations. Friends of the Earth described these as potential time bombs under the deal.

EU trade commissioner Cecilia Malmstrom said the investment protection system did not yet exist and the EU and Canada had time to set up a panel of independent judges to settle disputes.

“We are quite confident that it is perfectly in line with European law,” she told Reuters.

In Ottawa, Trade Minister Chrystia Freeland played down the suggestion that the Belgian addendum could effectively result in parts of CETA being unwound.

“Every trade agreement … has exit provisions,” she told reporters. “Trade agreements must be structured that way to permit national sovereignty.”

CETA could apply provisionally next year, assuming the European Parliament backs it. Its final implementation could take a few years, after all relevant national or regional parliaments have had their say.

Supporters say the deal will boost the EU economy by 12 billion euros ($13 billion) per year and Canada’s by C$12 billion ($9 billion) at a time of low growth. For Canada, it reduces reliance on the U.S. export market.

German trade groups said the CETA debacle should trigger a revamp of EU procedures.

“This is not a victory for democracy. It is political hostage-taking,” said BDI business association president Ulrich Grillo.

Failure to agree CETA with such a like-minded country as Canada would have undermined the EU’s ability to forge other deals and damage credibility already battered by Britain’s vote to leave the bloc and disputes over the migration crisis.

“I’m sorry for all other Europeans and our Canadian partners that they had to wait, but what we managed to get here is important not just for Wallonia but for all of Europe,” said Wallonia premier Paul Magnette.

(Additional reporting by Jeffrey Hodgson in Toronto, David Ljunggren in Ottawa and Gernot Heller and Andrea Shalal in Berlin; editing by Robin Pomeroy and Cynthia Osterman)

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Qualcomm to buy NXP for $38 billion in biggest chip deal


Smartphone chipmaker Qualcomm Inc (QCOM.O) agreed to buy NXP Semiconductors NV (NXPI.O) for about $38 billion in the biggest-ever deal in the semiconductor industry, making it the leading supplier to the fast-growing automotive chips market.

The acquisition will also help Qualcomm, which provides chips to Android smartphone makers and Apple Inc (AAPL.O), reduce its dependence on a cooling smartphone market.

With the deal, Qualcomm is taking a big bet on the so-called Internet of Things (IoT), which enables everyday objects such as fridges and cars to communicate with each other.

“The pace of innovation in automobile and IoT will increase dramatically and I think we look at it as a tremendous opportunity,” Qualcomm Chief Executive Steven Mollenkopf said on a conference call.

By 2020, some 21 billion IoT devices will be in use worldwide, up from fewer than 5 billion last year, research firm Gartner has estimated.

Qualcomm sat out the transformative consolidation that has swept the chip industry recently.

The deal announced on Thursday tops Avago’s $37 billion acquisition of Broadcom (AVGO.O) last year.

The equity value of Qualcomm’s offer is $37.88 billion, according to Reuters calculations based on the company’s fully diluted shares as of Oct. 2. Including debt, the deal is worth roughly $47 billion.

Qualcomm’s shares were up 4.9 percent at $71.55 in afternoon trading.

The $110 per share cash offer represents a premium of 11.5 percent to NXP’s Wednesday close.

NXP’s shares, which had risen 20 percent since reports of a potential deal emerged on Sept. 29, were marginally higher at $99.24.

SMOOTH SAILING?

Qualcomm said it expected the deal to clear regulatory scrutiny, given the complimentary nature of the two businesses.

Needham Co analyst Rajvindra Gill said there was not much overlap in products or end-markets between the two companies.

“There’s been a lot of semiconductor MA activity in the last two years and I haven’t seen one deal that has been delayed because of regulatory hurdles at this point,” Gill added.

The combined entity would have annual revenue of more than $30 billion.

NXP, based in the Netherlands, became the world’s biggest maker of automotive electronics after it bought U.S.-based Freescale Semiconductor for about $12 billion last December.

Goldman Sachs and JPMorgan have committed financing for the deal, which is expected to close by the end of 2017.

The deal is structured to use offshore cash flow in a tax-efficient manner to rapidly reduce leverage, Qualcomm said.

The company said it expected the deal to generate $500 million in cost savings annually within two years of closing.

Goldman Sachs and Evercore were financial advisers to Qualcomm, while Centerview Partners LLC advised its board. Paul, Weiss, Rifkind, Wharton Garrison LLP; Cravath, Swaine Moore LLP and Allen Overy LLP were legal counsel to Qualcomm.

Qatalyst Partners, Barclays and Credit Suisse were financial advisers to NXP and Skadden, Arps, Slate, Meagher Flom LLP and De Brauw Blackstone Westbroek provided legal advice.

(Reporting by Supantha Mukherjee and Narottam Medhora in Bengaluru; Editing by Shounak Dasgupta and Saumyadeb Chakrabarty)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/_0tF_vVwdBk/us-nxpsemiconductors-m-a-qualcomm-idUSKCN12R1AW

Twitter cuts jobs with eye on 2017 profit; Vine discontinued


Twitter Inc said Thursday it would cut 9 percent of its global workforce to keep costs down even as quarterly results eclipsed Wall Street’s beaten-down expectations, lifting shares that had fallen after a failed effort to sell the company.

More than 300 Twitter employees will be affected by the layoffs as part of a broader restructuring, a figure similar to an earlier round of reductions announced a year ago. Separately, the company announced it would discontinue Vine, a video app launched in 2013 that played brief clips on a repeat loop that struggled to compete with Facebook’s Instagram.

The reductions of staff and services were blunted somewhat by the backdrop of third-quarter revenue growth that slowed sharply but topped analysts’ expectations. Its stock was up 1.6 percent to $17.56, after rallying 5 percent in premarket trading.

Revenue rose about 8 percent to $616 million, above the average analyst estimate of $605.8 million. The company had reported a 20-percent rise in revenue in the previous quarter and 58 percent in the year-ago quarter.

Twitter, which has seen user growth stall amid competition from nimbler rivals such as Instagram and Snapchat, said its user base ticked up 3 percent to 317 million average monthly active users in the quarter.

Analysts, on average, had expected 316.3 million monthly active users, according to market research firm FactSet StreetAccount.

“The building blocks for revenue are increasing the number of users, and Twitter is not doing a particularly good job of that,” Wedbush Securities analyst Michael Pachter said. He added that Twitter needed to grow revenue by $200 million to $300 million a quarter to achieve 2017 profitability.

“The run-rate for the year is under $100 million in profit, so it is really hard to justify spending $15 or $18 billion to buy a $100-million profit (company),” Pachter said.

Total advertising revenue of $545 million grew 6 percent year-over-year, and 90 percent of it came from mobile.

Excluding items, the company earned 13 cents per share, beating the average estimate of 9 cents, according to Thomson Reuters I/B/E/S.

The company is “more disciplined about how we invest in the business” and intends to be profitable in 2017, said Chief Financial Officer Anthony Noto.

Among its priorities, Twitter is dedicated to growing its burgeoning live video offerings through partnerships with organizations such as the National Football League, Noto said. Advertisers are increasingly interested in live video because of its potential to reach new and younger audiences, he added.

Twitter hired bankers last month to field acquisition offers, but it has seen a dearth of potential bidders. Salesforce.com Inc, the last of a small cohort of companies including Walt Disney Co and Alphabet Inc believed to have been interested, said recently it would not pursue a deal.

The apparent lack of interest forced the social media company to consider a route anathema to aspiring tech startups: a major restructuring.

MORE LAYOFFS

Twitter had 3,860 employees globally as of June. The reduction of more than 300, chiefly in its sales, partnerships, and marketing efforts.

The cuts come about a year after a similar wave of layoffs of up to 336 employees were announced when Jack Dorsey, its co-founder who had been serving as interim chief executive, took over as permanent CEO. Since then, Dorsey has drawn criticism from some analysts for splitting his time between Twitter and Square.

The company said it expected cash expenditures of about $10 million to $20 million in the fourth quarter, mostly for severance costs.

On an investor call Thursday, Dorsey said he would not comment on speculation about a potential sale. He said in a statement that the company has “a clear plan, and we’re making the necessary changes to ensure Twitter is positioned for long-term growth.”

Asked by investors whether major events such as presidential debates or the Olympics affected Twitter’s quarterly growth in metrics, Noto said there needed to be such an event “every day” on the platform to meaningfully improve numbers, and “that’s where we’re headed.”

The popular but money-losing microblogging service spent aggressively on product development and marketing in recent years, betting it could afford losses as long as it attracted new users. But that growth stalled this year after it exceeded 300 million active monthly users, less than a fifth of Facebook Inc’s users and below Facebook’s Instagram.

The company’s net loss narrowed to $102.9 million, or 15 cents per share, in the third quarter, from $131.7 million, or 20 cents per share, a year earlier.

Twitter also said it would roll out “meaningful updates” next month affecting how it protects users from abusive content, an issue for which the company has endured growing criticism.

(Reporting by Supantha Mukherjee, Aishwarya Venugopal and Anya George Tharakan in Bengaluru; Editing by Saumyadeb Chakrabarty and Nick Zieminski)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/7O8YfFgeTiU/us-twitter-results-idUSKCN12R1GW

Samsung Electronics vows mobile rebound, dangles buyback after Note 7 shock


SEOUL Samsung Electronics Co Ltd on Thursday said it aims to recover quickly from the disastrous withdrawal of the fire-prone Galaxy Note 7 that dragged third-quarter mobile earnings to their lowest level in nearly eight years.

The South Korean giant said it was expanding its probe into the Note 7 fires beyond batteries, as it tried to reassure investors that it would get to the bottom of one of the worst product failures in tech history.

It also held out the prospect of greater returns by disclosing consideration of a share buyback, talked up its semiconductor business and promised to consider proposals for a corporate makeover from U.S. hedge fund Elliott Management.

“We know we must work hard to earn back your trust and we are committed to doing just that,” said Co-Chief Executive J.K. Shin as he apologized for the debacle at a general meeting in Seoul following the release of the company’s results.

Investors expect sweeping management changes in response to the Note 7 failure, especially after voting on Thursday to make parent conglomerate Samsung Group’s [SAGR.UL] de facto chief, Jay Y. Lee, a Samsung Electronics director.

Lee, 48, the son of patriarch Lee Kun-hee who has been hospitalized following a heart attack, will now have greater accountability at the group’s flagship company and a clearer mandate to play a public role in setting strategy.

But shareholders may have to wait for the Note 7 investigation to conclude before seeing any heads roll at the family-run conglomerate.

Samsung Electronics Chief Executive Kwon Oh-hyun said at the shareholder meeting the company would assign responsibility only after the crisis was resolved.

The world’s top smartphone maker posted a 96 percent plunge in third-quarter mobile earnings to 100 billion won ($88 million).

Overall operating profit was 5.2 trillion won ($4.6 billion), matching Samsung’s revised guidance and marking a two-year low. Before the Note 7 was discontinued, the firm had estimated a 7.8 trillion won profit.

The scrapping of Samsung’s flagship phone erased 0.1 to 0.2 percentage points from South Korea’s third-quarter GDP growth in quarterly terms, a finance ministry official told Reuters on Tuesday.

WHAT WENT WRONG?

The Apple Inc rival said it now aimed to achieve fourth-quarter mobile profit close to that of October-December of 2015, on the back of sales of Galaxy S7 phones and lower-tier models. Galaxy S7s – its other premium smartphones with smaller screens – were on track to set a new launch-year sales record for the company, it said.

Samsung has previously warned of another $3.1 billion hit to profit from the Note 7 withdrawal over two quarters. But it also said on Thursday it expects overall earnings to improve in the fourth quarter from a year earlier on a strong performance by its chip and display businesses.

As for what went wrong, Samsung still does not know what caused the fires in devices sent to customers as replacements for the initial 2.5 million Note 7s it recalled due to fire-prone batteries.

Co-CEO Shin said the battery might not be the only problem, suggesting the root cause may be more difficult to determine than had been hoped.

Investors now want a clear plan for how Samsung will revive earnings growth, repair its tattered brand image and boost shareholder returns, hence the company’s promise to consider a share buyback.

“The key is whether Samsung will be able to remove uncertainty surrounding Note 7 and maintain its leading position in the smartphone market,” LS Asset Management fund manager Kim Sung-soo said.

Samsung also said it was reviewing proposals by Elliott, which include a special 30 trillion won dividend. The company will respond to Elliott and announce its shareholder returns policy by end-November.

Samsung SDI, supplier of the batteries blamed for the first recall, reported a 110 billion won operating loss for the quarter on Note 7-related provisions – more than double its losses for the same period a year earlier.

Seeking to appease shareholders, SDI also announced a share buyback worth 298 billion won.

(Reporting by Se Young Lee; Additional reporting by Hyunjoo Jin and Joyce Lee; Editing by Stephen Coates and Edwina Gibbs)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/QafUk0inrbY/us-samsung-elec-results-idUSKCN12Q32X

Italy judge agrees tax probe settlement with head of Apple’s Irish unit: source


MILAN A Milan judge has accepted a settlement agreement with the head of Apple’s Irish-based unit Apple Sales International as part of a probe into allegations the U.S. tech giant failed to pay corporate taxes in Italy to the tune of 879 million euros ($959.43 million), a judicial source said.

Under the settlement agreement, a six-month jail sentence for the executive has been converted into the payment of a 45,000 euro ($49,126) fine, the source said.

Under Italian law, a settlement agreement does not imply an admission of guilt.

Milan prosecutors investigating the allegations have asked for the case against two managers from the Italian subsidiary of Apple to be dropped, the source said.

Apple was not immediately available for comment.

(Reporting by Emilio Parodi, writing by Silvia Aloisi, editing by Valentina Za)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/7Hc-RM0g_BA/us-italy-apple-taxes-idUSKCN12R10I

Oil rises above $50 as U.S. inventory drop balances OPEC doubts


LONDON Oil edged above $50 a barrel on Thursday as a further drop in U.S. crude inventories countered investor doubts that OPEC will be able to implement a production cut.

Crude inventories posted an unexpected drop of 553,000 barrels last week, and stocks of gasoline and distillates fell more than expected, raising hopes that a long-awaited market rebalancing is finally under way. [EIA/S]

Brent crude LCOc1 was up 22 cents at $50.20 a barrel as of 0845 GMT (4:45 a.m. ET), after falling in the last three days. U.S. crude gained 10 cents to $49.28.

“The global stock overhang must be reduced in order to see higher prices. Whilst such reduction is largely in the hand of OPEC, the re-balancing is already taking place in the U.S.,” Tamas Varga of oil broker PVM said.

The market was keeping an eye on escalating protests in Venezuela against the rule of President Nicolas Maduro, although there was no sign of any impact on the OPEC member’s oil output. Venezuelan production has been falling this year as low prices hit investment.

Doubts about the Organization of the Petroleum Exporting Countries’ supply cut deal weighed on the market.

OPEC agreed last month its first deal to restrain output in eight years to boost prices. But Iraq on Sunday called for Baghdad to be exempt, adding to the list of members seeking special treatment.

“Investors remain uncertain as to whether OPEC can implement the tentative agreement to cut production,” ANZ bank said.

A technical meeting at OPEC’s headquarters on Friday, and with officials from non-OPEC countries on Saturday, is supposed to come up with recommendations on how to implement the supply cutback to the oil ministers’ next meeting on Nov. 30.

The OPEC plan is designed to speed up the removal of a supply glut that is keeping oil prices at less than half their level of mid-2014, cutting exporters’ income and leading to investment cuts by oil companies worldwide.

(Additonal reporting by Henning Gloystein; Editing by Jane Merriman)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/Jhuw4Dcmt0E/us-global-oil-idUSKCN12R038

European shares up as banks reassure, dollar holds near highs


LONDON Reassuring results from some of Europe’s biggest banks gave financials a boost on Thursday and helped offset weakness in oil-related stocks, while higher bond yields underpinned the dollar.

As corporate earnings continued to dominate headlines, growing expectations that the U.S. Federal Reserve will raise interest rates by the end of the year have kept gains in risky assets in check.

Markets are now pricing in a 74-percent chance that the U.S. Federal Reserve will raise interest rates at its December meeting, according to CME Group’s FedWatch tool, following a series of hawkish comments from Fed policymakers.

Bets that the Fed will hike rates have driven the dollar to nine-month highs against a basket of currencies .DXY this week and have supported U.S. 10-year Treasury yields US10YT=RR.

The “steepening of the US yield curve works as a magnet for capital coming at this point in particular out of low yielding environments such as Japan and Switzerland,” said analysts at Morgan Stanley, adding that these flows will continue to support the dollar.

The dollar index was up 0.1 percent at 98.716, just off its recent highs.

An overnight slide in oil prices and underwhelming results from Apple (AAPL.O) soured the mood in Asian stocks where technology sectors led losses in Japan.

Europe’s STOXX 600 was up 0.3 percent, however, though defensive sectors such as healthcare and utilities provided the biggest boost to the index, reflecting investor caution.

Banks .SX7P, among the worst performing sectors in Europe this year, rose 0.5 percent helped by a surprise third-quarter profit at Deutsche Bank (DBKGn.DE) and forecast-beating numbers from Barclays (BARC.L) which, like its U.S. rivals, enjoyed a significant pick-up in bond trading revenue.

Data from the European Central Bank showing lending growth to euro zone companies and households grew at a steady pace last month was also seen helping the sector.

The euro EUR= was little changed against the dollar while sterling GBP=D4 rose after data showed Britain’s economy barely slowed in the third quarter despite the Brexit vote shock.

UK ten-year government bond yields GB10YT=RR rose to a 10-day high of 1.2 percent as the strong data further diminished the chance of a fresh interest rate cut by the Bank of England next week.

In commodity markets, crude oil futures rebounded from earlier losses as traders remained cautious that OPEC would be able to cut production come late November. [O/R]

U.S. crude CLc1 edged up 0.4 percent to $49.38 a barrel, while Brent crude LCOc1 added 0.7 percent to $50.33.

Spot gold XAU= rose 0.2 percent to $1,269.38 an ounce.

(Reporting by Vikram Subhedar; Editing by Raissa Kasolowsky)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/sGiJWeMt8gE/us-global-markets-idUSKCN12R02P