Tuesday, 31 January 2012

I turned down Facebook: Mark Zuckerbeg's college room-mate admits expensive mistake

Mark Zuckerberg's college room-mate, Joe Green, has revealed how he turned down an invitation to help start Facebook, perhaps costing himself hundreds of millions of dollars.

By Nick Allen, Los Angeles

9:42PM GMT 30 Jan 2012

Mr Green, who remains friends with the Facebook founder, shared a dorm with him at Harvard in 2004. He was asked by Mr Zuckerberg to abandon university to start the social networking website.

But Mr Green listened to his father and stayed at Harvard while his friend moved to Silicon Valley and begin his rise to becoming a billionaire.

With Facebook expected to file for an initial public offering soon Mr Zuckerberg, 27, is now worth an estimated $17.5 billion (£11 billion).

Mr Green said he had decided not to join Mr Zuckerberg in the Facebook venture after their previous project, Facemash, got them into trouble at Harvard. The rudimentary site was used to rate female students "hot or not."

Mr Green told ABC News: "We'd got into a little bit of trouble with the previous project and my father, who's a professor, was not too happy with the prospect of me getting kicked out of school. Zuckerberg likes to make fun of my dad for this, but we're still very close."

Mr Green went on to work for John Kerry's failed presidential bid but is himself highly successful.

He now runs a multi-million dollar business called Causes, which aims to get people "civically engaged" by using Facebook to allow them to suggest charities and good causes to each other. Its aim is to "empower anyone with a good idea or passion for change to impact the world."

Friday, 27 January 2012

Bernanke has "finger on trigger" for new bond buys

Bernanke at FED summit in Washington on Nov 9, 2011

By Ann Saphir and Jonathan Spicer

CHICAGO/NEW YORK | Thu Jan 26, 2012 9:03am EST

(Reuters) - The Federal Reserve has moved closer to embarking on a new round of its controversial money-pumping after the central bank and its chairman Ben Bernanke highlighted a grim outlook for the U.S. economy.

Bernanke on Wednesday opened the door a bit wider for the Fed to return to buying securities in the months ahead to buttress a weak recovery and keep inflation from slipping too far below its newly adopted 2-percent target.

"It sounds like the finger is on the trigger," said Thomas Simons, a money market economist at Jefferies & Co.

The Fed's announcement that it was unlikely to raise interest rates until at least late 2014, more than a year beyond its previous guidance, immediately pushed down Treasury bond yields and Bernanke's comments to the media raised expectations of a further round of so-called quantitative easing, or QE3.

It remains to be seen if the potential political backlash proves too daunting.

The prospect of the Fed pumping yet more money into the U.S. economy was seized upon by Republican hopeful Newt Gingrich to slam President Barack Obama's record. That highlighted the political pitfalls for the Fed in an election year.

Barring an unexpected pick-up in inflation or the U.S. economy suddenly kicking into a higher gear, Bernanke said it was logical that the Fed should look at ways to do more to help.

"The framework makes very clear that we need to be thinking about ways to provide further stimulus if we don't get improvement in the pace of recovery and a normalization of inflation," he told a quarterly news conference.

"Probably the main take-away from the press conference is the sense conveyed by Bernanke that it would not take much of a disappointment in growth or inflation to get the Fed to start another round of QE," said Michael Feroli, chief U.S. economist at J.P. Morgan.

"In fact, from his answers it's not even clear any disappointment would be necessary to see more QE," Feroli wrote in a note, adding he was not forecasting another round of asset purchases even if the bar for action was low.

The Fed in late 2008 slashed interest rates to near zero and has since bought $2.3 trillion in long-term securities in an unprecedented drive to spur growth and revive the economy after the worst recession in decades.

Yet the recovery has been slow and the outlook issued by the Fed on Wednesday was bleak.

With core inflation now at 1.7 percent and Fed officials forecasting unemployment to stay above 8 percent this year, many analysts took Bernanke's comments to mean QE3 is all but inevitable.


The Fed has trained its sights on the stalled housing market in recent months, so any move to QE3 is most widely expected to involve buying mortgage securities to help bring down further already record-low mortgage interest rates.

Some economists said Bernanke may wait until the end in June of the Fed's "Operation Twist", which involves selling short-term bonds and buying longer-term ones in its $2.9 trillion portfolio to push down long-term interest rates further.

Bernanke may also want to wait until the market has absorbed his sweeping changes in communications policy which included the Fed adopting an explicit inflation target and releasing the interest rate projections of its policymakers for the first time on Wednesday.

Buying more mortgage-backed securities would drive down longer-term rates on mortgages with a view to countering what remains a drag on a U.S. economy still struggling to emerge from the worst recession in generations.

"I think it could happen any time now, based on the language that we saw today," said Eric Stein, a portfolio manager at Eaton Vance in Boston.

"I would think the first thing would be squarely focused on purchasing mortgage-backed securities, partially because Treasury yields are already so low, and housing is one of the major issues."


The blowback from a heavy round of MBS purchases could be just as fierce as that provoked by the Fed's second round of quantitative easing which was announced in November 2010.

QE2, which targeted Treasuries, attracted sharp criticism from Republicans who warned it could fuel inflation and crimp the Fed's ability to tighten policy eventually, and who accused Bernanke of going beyond the central bank's mandate.

"People are now expecting more QE, and that would be in mortgages," said John Canally, investment strategist and economist at LPL Financial in Boston. "I think economically they (the Fed) would want to do that, but I don't know if politically they can withstand the forces against it."

Republican presidential candidates have repeatedly criticized the Fed and Bernanke on the campaign trail. Asked about the Fed's latest statement, Gingrich said it was "a sign of the failure of the entire Obama program" that Bernanke is bracing for such weak economic growth that he will have to keep rates low for so much longer.

At the same time the Fed is "putting in future inflation expectations," Gingrich told reporters in Florida on Wednesday. "It's more of Bernanke laying down a very bad future."

Foreign countries slammed the Fed's previous bond-buying programs, saying they artificially weakened the U.S. dollar and hurt their exporters. Brazil's finance minister talked of a "currency war."

Some economists say the political pressure on the Fed may prove too heavy.

"A third round of QE is still beyond them - or maybe the chairman simply doesn't have the stomach for the congressional mauling that further asset purchases would have precipitated....," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.

Nonetheless, many others expect that the Fed will act again.

Economists at 12 of 18 primary dealers, the large financial institutions that do business directly with the Fed, believe the central bank will undertake further quantitative easing, according to a Reuters poll after Bernanke's news conference.

Some top investors have placed their bets, too.

Bill Gross, who runs the world's largest bond fund, has ramped up purchases of mortgage-backed securities which at the end of November accounted for 43 percent of his holdings. The self-styled "bond king" said last month that any QE3 would likely be focused on the housing sector.

Keith Wirtz, chief investment officer at Fifth Third Asset Management, with $18 billion in assets, said the Fed had gone "all in" with its promise to keep rates low through late 2014, and predicted that any rise in long-term borrowing costs would push the Fed to buy more bonds.

"Brace for QE3 if rates start to move higher on the long end," he said.

(Reporting by Ann Saphir and Jonathan Spicer; Additional reporting by Jennifer Ablan, Sam Youngman, Rodrigo Campos and Karen Brettell; Editing by Kim Coghill)

Thursday, 19 January 2012

America's Most Promising Companies: The Top 20

Digital Broadcasting Group's front page
What if someone told you the most promising company in America aimed to compete with multiple multibillion-dollar giants in a traditional industry with un-software-like profit margins? Then what if they told you that the same company had clocked explosive growth through the deepest recession in recent memory—and it was just getting started?

Meet Smashburger, tops on our new list of America’s 100 Most Promising Companies–privately held up-and-comers with compelling business models, strong management teams, notable customers, strategic partners and precious investment capital. Since 2007, the Denver-headquartered patty chain will have grown to 143 locations (half company-owned, half franchised) and $54 million in annual revenue by the end of 2011. Another 450 franchise agreements are already on the books.

The companies on our AMPC list hail from 22 industries, with software-and-services taking the biggest slice (35%). Some fast facts: 90 have raised outside capital; 70 have a CEO who is also one of the founders; 12 have one younger than 35 years old; 7 have yet to generate revenue; and one sells a burger topped with pastrami. None of these outfits may blossom into the next Google or Apple, but all, it appears, have bright futures.

Take BOKU, at No. 2. Founded in 2008, the company (fiscal 2010 sales: $55 million) creates software that helps online merchants process payments using a customer’s cell phone number in place of a credit card; it then takes a small cut of each transaction. Big customers include Facebook and Electronic Arts. BOKU has raised $42 million in venture capital from stalwarts Andreesen Horowitz, Khosla Ventures, and others. Founders Mark Britto, Ron Hirson, and Erich Ringewald have each sold companies they founded or lead.

Digital Broadcasting Group, at No. 3, launched in 2006. It produces online videos–marketing disguised as entertainment–for corporations and places them (as well as traditional video ads) among a network of 2,600 websites. Customers include Wal-Mart Stores, American Express, Coca-Cola and Ford. CEO Chris Young sold KlipMart, an online video ad company, to Doubleclick in 2006.

Those are the kind of ingredients promising companies are made of—which leads us to the point of this whole exercise.

You’d have to be living under the dirt that’s under the rock not to have noticed that the business press loves rankings. Readers devour, dissect and debate them. More to the point, rankings sell advertising—and that leads to more rankings.

Company rankings are a popular confection, if often an ultimately unsatisfying one. That’s because most are based on a single metric (such as revenue, assets or market capitalization) and don’t take a comprehensive approach to evaluating a business’ health—or more importantly, its potential.

Sizing up younger, privately held firms is even harder. Their fortunes can change very quickly, and they aren’t obliged to share their plans and finances with the public. The default: Cajole as many companies as possible into revealing their annual sales figures and stack them accordingly.

These short cuts are understandable given the effort, resources and skill deeper due diligence requires—not to mention the abiding fascination with rankings, however unenlightening they might be.

How, then, to find hidden gems with scintillating prospects?

To sharpen our search, FORBES teamed up with CB Insights, a New York City-based data firm that tracks investment in high-growth private companies. With $650,000 in grants from the National Science Foundation, CB Insights has developed complex software called Mosaic to help lenders and investors dole out capital more efficiently. We married Mosaic’s data-crunching with old-fashioned reporting to assemble a list of up-and-comers with big growth potential.

Mosaic mines data from 30,000 sources (from press releases and social networks to job boards and court filings) to come up with one score that measures a company’s potential. Think of it as the SAT score for private companies—something that lenders, investors and vendors can use to quickly gauge whom they want to do business with. “Five years from now we expect Mosaic will help the best private companies access capital at more favorable terms and win more customers,” says CB Insights cofounder Anand Sanwal, 38.

Mosaic’s algorithms look at a host of signals that collectively paint a picture of a company’s health. Example: If turnover in the management ranks is ticking up, that’s a negative signal. A new distribution deal with a large strategic partner is a favorable signal. The hard part: extracting all those “digital footprints” (job postings, product reviews, press reports, debt filings—all in different digital formats) and assembling them in a meaningful way.

There are two powerful advantages to this approach. First, aggregating data from thousands of sources would take far too long to do by hand. Second: “Mosaic assesses these dimensions not just on an absolute basis but relative to competitors,” adds Sanwal. “It implicitly considers relative performance.”

Our hunt began with a free online survey. Entrepreneurs could nominate their own companies or be nominated by those familiar with their businesses (lawyers, accountants, p.r. types). Contenders had to be privately held, for-profit, stand-alone businesses (as opposed to divisions of bigger firms). Companies that hadn’t yet generated revenue but had compelling business models were given a look, too.

(To encourage participation, we offered contenders the chance to be selected to attend a two-and-a-half day small business bootcamp at Aileron, in Dayton, Ohio, established by billionaire pet food titan Clay Mathile.

Using the Mosaic score as a preliminary ranking, we honed the list by gathering additional data via a second, more detailed survey (also free) to get a better sense of each company’s growth potential. We asked for annual revenue and the number of employees for 2008 and 2010, and estimates for 2011. (Companies had to verify existing revenue via a corporate tax return or an accounting opinion letter from an independent accounting firm.) We also took into account the size of the addressable market, the strength of major competitors, the experience of the management team, any significant customers and strategic partnerships, the amount of outside capital raised and how much of the founders’ own stash was on the line (the more the better). Then we spoke with representatives of each company to confirm the information and get additional color on their operations.

Our ranking of 100 promising companies is chocked with interesting outfits poised to take off. For the full list, click here. Here are a few more names and nuggets from the Top 20:

No. 7 Allonhill

Annual revenue (latest fiscal year): $19.3 million

Founded in 2008, the company audits individual residential mortgage loan files for institutions that buy or sell mortgage-backed securities. Everything from the borrower’s income and property value to the authenticity of signatures gets a look from one of Allonhill’s 530 employees. Founder and CEO Sue Allon funded the company with proceeds from the sale of her last company, Murrayhill, which also managed risk for mortgage securities, in 2004.

No. 11 uSamp

Annual revenue (latest fiscal year): $22.7 million

Founded in 2008, the company makes online-survey software and has a network of 6.5 million respondents globally in its stable. The company charges according to the number and demographics of the respondents. J.D. Power & Associates is a marquee customer. Co-founders Gregg Lavin and Matt Dusig are childhood friends who together launched and sold two previous companies. They raised $10 million in venture capital from Openview Partners in 2010.

No. 14 Contour

Annual revenue (latest fiscal year): $15.1 million

Makes small, rugged cameras that athletes attach to their helmets or bodies for hands-free recording. Each camera comes with free video editing software; other features include a Bluetooth connection that turns a user’s mobile phone into a viewfinder. Sells through Best Buy and Dick’s Sporting Goods. Marc Barros and Jason Green started the company in 2003 after winning $20,000 at an undergraduate business plan competition. They raised $5 million from Montlake Capital and Black Oak Capital in November 2010.

No. 19 IntegriChain

Annual revenue (latest fiscal year): $5.7 million

Founded in 2007, the company makes software for pharmaceutical companies looking for a better window into their “forward supply chains”—that is, sales and inventory data from distributors and local pharmacies. (Say you wanted to tally the inventory at a single pharmacy, or even see the number of units that pharmacy sold on any given day.) Clients—including Novartis, Johnson & Johnson, and GlaxoSmithKline—sign three- to five-year contracts for access to IntegriChain’s dashboard which can display data myriad ways to make sales teams more efficient. The company raised $3.25 million in venture capital in early 2011.

Tuesday, 17 January 2012

CEO of the Year: Cloud, Fire lifted Amazon’s Bezos

In 2011 he cemented role atop new economy in most uncertain of times

By Shawn Langlois, MarketWatch

SAN FRANCISCO (MarketWatch) — A lot of people made money on Inc. in 2011, but Jeff Bezos wasn’t one of them.

The founder and chief executive, who takes home a nominal salary of $81,840, holds more than 88 million shares. And while Amazon’s stock leapt nearly 40% from the beginning of the year to its 2011 high in October, it’s since come back to Earth, ending the year off about 4%.

Not that Bezos is worried.

True to form, Bezos, who turned 48 last week, whipped through the year on a series of bold initiatives and innovations that cemented Amazon’s superpower status at the pinnacle of the digital economy, alongside the likes of Apple, Google and Facebook, all of which are now major competitors for Bezos in one way or another.

And so, for his imagination, his long-term focus and his sheer optimism in the face of the most uncertain of economic times, Bezos has been named MarketWatch CEO of the Year.

His moves in 2011 gave millions of customers new and faster ways to consume books, music and more from Bezos and from all manner of other vendors in his galaxy. They gave thousands of workers new jobs. And they significantly added value to long-term investors, even as they gave nearsighted investors plenty of new jitters.

From his cloud drives to massive expansion of online-order-fulfillment centers to the wildly successful launch of the Kindle Fire tablet, Bezos spent 2011 rethinking and re-engineering Amazon’s relationship with customers. Time and again along the way, the company took on industry heavyweights, often beating them to the punch.

Bezos and Amazon “come up with better ideas [and have] executed them well, and now they’ve built a significant moat around what they’ve created,” says Jay Freedman, fund manager at Crystal Rock Capital Management, which counts Seattle-based Amazon among its top holdings. “Frankly, Amazon just keeps putting people out of business”
Short term sacrifices

To be sure, Amazon’s trials and tribulations aren’t for the fainthearted investor. The stock opened 2011 at $180 and built its way up to $246.71 in mid-October, before entering a prolonged slide to end the year lower, at $173.10.

Bonds with the investment community were frayed in the fall, when Amazon’s 44% jump in sales to $10.88 billion was overshadowed by its net income’s plunge to $63 million from $231 million in the comparable quarter of 2010. Making matters worse in the eyes of the bean counters, Amazon warned it might lose money in the fourth quarter while ratcheting up spending on the Fire and other projects.

Over the longer term, however, the stock has outperformed, and, even with the late-2011 pullback, Amazon has equaled Apple’s gains over the past five years. Indeed, for all the questions raised about making money in the here and now, the stock today commands an overweight rating, the highest possible, based on a FactSet Research survey of analysts who cover the $80 billion company.

“Bezos has demonstrated that he has incredible vision, and that he will invest huge dollars and huge resources if he believes in something,” says Eric Best, who worked under Bezos in the company’s early days. “I wouldn’t rule out anything from Amazon at this point.”

Clearly, Wall Street’s fascination with the short term hasn’t stopped Bezos from pushing boundaries, and that’s just fine with his ever-growing customer base.

“Bezos has earned the right to go wherever he wants to go, and the customers will follow,” Crystal Rock’s Freedman explains. “Amazon has spent massive amounts of money to get people their product quickly and relatively cheaply in order to further engender their loyalty.”

When Bezos was asked at the annual shareholder meeting last summer if should be considered a technology, infrastructure or e-commerce company, he answered simply, “Yes.”

He wasn’t joking, either. No signature guffaw.

Amazon’s steady buildout of diversified new products and ventures in 2011 has taken dead aim at such formidable incumbents as Apple Inc. , Google Inc. and Netflix Inc

To some, Amazon may seem to be at a disadvantage, considering the strengths of the competition. But to Best, who went on to found Mercent Corp., a company that helps merchants sell items via Amazon and eBay, Bezos is at his best when he takes on daunting, and risky, concepts.

“If you want to win market share in hypergrowth spaces like tablets, digital media and cloud computing, you have to be committed and make the right level of investment,” Best says. “Bezos has been consistent in demonstrating his willingness to do just that since the company started.”

Of course, Amazon won’t be putting Apple out of business any time soon. But it does pose the first credible threat to Apple’s dominance of the tablet market, which the iPad effectively created.

The Kindle Fire is a 7-inch tablet that sells for the relative bargain price of $199. The iPad starts at $499. The new Amazon device was launched in mid-November.

Amazon hasn’t released specific sales numbers, beyond a press release in December indicating sales were going well.

But Barclay’s analyst Anthony DiClemente just raised his fourth-quarter sales forecast for the Fire from 4.5 million to 5.5 million units and projected sales in 2012 of more than 18 million. That would be enough to give Amazon a commanding presence in the non-iPad tablet market.

Even at 5 million units, in the fourth quarter, Amazon’s share of the of the tablet market would be 25%, according to J.P. Morgan estimates.

The device, which industry insiders say sells at loss, is a gateway to Amazon’s burgeoning library of movies and television shows. Thousands of those are available, and unlimited, for Amazon Prime members, who get two-day shipping and bundled media content for $79 a year.

That’s the beauty of the Amazon that Bezos created. Using its significant leverage and vast product range, the company is able to absorb short-term losses and turn them into profits, and customer loyalty, over time.

Of course that strategy doesn’t come cheaply.

The number of full- and part-time employees at the company soared from 31,200 at the end of the third quarter in 2010 to 51,300 at the end of the third quarter in 2011. That surge came as the company moved to add 13 distribution centers world-wide to speed delivery of the goods demanded by its customers. Amazon has justified the buildup by noting that it hadn’t added any such facilities since the financial crisis of 2008.

“While investments in infrastructure and new products are heavy in the near term,” J.P. Morgan analyst Doug Anmuth says, “we believe they are appropriate for driving long-term growth and they widen Amazon’s competitive moat. Amazon is the best long-term growth story in the Internet space.”
Space race

Born in Albuquerque, N.M. and raised in Houston and Miami, Bezos graduated from Princeton University in 1986 and found employment on Wall Street, rising to vice president positions at Bankers Trust and D.E. Shaw before hatching the idea for an online bookstore and heading west. His Amazon salary may be a relative pittance, and he takes no stock awards, but the company spends $1.6 million on his personal security.

Not one to rest on his many successes, Bezos has also put himself deep into the space race alongside fellow star-chasing billionaires Richard Branson and Elon Musk. His Blue Origin spaceflight company won a $22 million contract from NASA to build systems capable of sending astronauts to the International Space Station.

Though details and progress reports are closely guarded, Blue Origin aims to give the public a chance to experience spaceflight — and, in fine Amazon fashion, to do so at relatively competitive prices.

After that, who knows? Shuttling common folk into outer space would be a tough act to follow, but, if Bezos’s track record is any indication, it would probably be just another steppingstone en route to his next venture.

“We are willing to invent. We are willing to think long term,” Bezos told shareholders last summer. “We start with the customer and work backward — and, very importantly, we’re willing to be misunderstood for long periods of time.”

Shawn Langlois is a reporter for MarketWatch in San Francisco.

Friday, 13 January 2012

Why gold may be losing its glitter

Metal’s long-term case seems intact, but speculators face hurdles

SAN FRANCISCO (MarketWatch) — The bloom is off the golden rose.

Investors who have recently jumped on the gold bandwagon will need plenty of patience this year, as the anemic global economy and better prospects for the U.S. dollar combine to dim gold’s allure.
While buyers are likely to see their gold holdings rise in value for a 12th consecutive year, any advance is expected to be more modest than in recent years.

Muted returns from gold would test short-term traders. Yet those who own gold as a long-term answer to currency concerns and for portfolio diversification could find their patience is rewarded. Investing in gold-related companies is also a reemerging trend.

“I don’t think (gold) will be the slam dunk that it has been,” said Jay Feuerstein, chief investment officer at 2100 Xenon Group, a Chicago-based managed futures fund. Short-term gold speculators are likely to have a tougher time with the metal this year, he added.
Dollar disciple

The absence of catalysts to drive buyers to gold is affecting both demand and price.

Gold ended at a record $1,891.90 an ounce last Aug. 22 as talk of additional quantitative easing from the Federal Reserve reached a fever pitch. But gold is down about 15% since then, closing Thursday at $1,647.70 an ounce. Prices fell 10% in December alone.

Still, gold managed a 10% gain for 2011, much better than the Standard & Poor’s 500-stock index SPX, which finished the year flat on a price basis.

Large and small investors alike have cut gold positions over the past year. Holdings in SPDR Gold Trust GLD, the largest exchange-traded fund backed by gold, offer a good picture of the fund liquidation that has taken place in recent months.

The ETF’s gold holdings have remained around 1,250 metric tons for most of December and so far this year, but that’s still a 2.4% decrease from December 2010, when the fund had 1,281 metric tons. Holdings jumped 13% in 2010.

Gold investors have seen no signs that the Fed will ease anytime soon, while the euro zone debt crisis has taken the euro down several notches.

European headlines still impact gold futures, to be sure, but increasingly the metal has traded on U.S. dollar moves.

The dollar is seen as firming this year as the U.S. economy shows strength relative to other developed nations. Read more: Look for 2012 to be the year of the dollar.
Portfolio hedge

If significant short-term gains are not in the cards, gold still has a supporting role in a balanced portfolio, Feuerstein said. Gold is a hedge against inflation and currency fluctuations, he added, though he recommended having no more than 5% of one’s portfolio tied to gold.

Feuerstein sees gold ending 2012 not much beyond $1,700 an ounce, with some peaks and valleys along the way but mostly staying under the dollar’s thumb.

That said, support for higher gold prices is rooted in Europe’s unresolved debt situation and ongoing concerns about the heath of European banks, Feuerstein said.

One of the most optimistic forecasts for gold comes from Michael Widmer, a metals analyst with Bank of America Merrill Lynch in London, who sees gold approaching $2,000 an ounce by year-end.

The same forces that pushed gold close to $1,900 last year are still evident, some analysts say, offering support for the metal. Moreover, gold serves other purposes including being a way to offset currency risk, to insulate a portfolio from global economic uncertainty, and as protection against “black swan”-type geopolitical upheaval.

“We still have low growth in a lot of countries, and we still have high debt in a lot of countries,” Widmer said. He added that gold could trade in a wide range in 2012, possibly testing lows of around $1,450 an ounce, and he noted that he’d be a buyer at that level.
Into the mines

Gold’s massive run has left a cloud on gold-related stocks. Shares of gold miners have greatly underperformed the metal itself, as the companies were weighed down by rising production costs. But investors might want to give the miners another chance.

Newmont Mining Corp. has started a trend likely to be followed by more companies this year. Newmont was the first to offer gold-linked dividends, a move widely viewed as a response to criticism that miners have been hoarding cash at the expense of their investors.

“You will see others do it,” said Rick de los Reyes, a portfolio manager with T. Rowe Price Group in Baltimore. Even if a company’s dividend is not directly linked to prices, dividend payouts will increase, he added.

De los Reyes manages a fund with about $800 million in equities related to base- and precious metals mining. He’s looking to buy more shares of smaller companies rather than the safer, but less compelling, major gold miners, he said. Smaller companies are likely acquisition targets and offer the best upside potential, he noted.

De los Reyes cited three companies that share the virtues of having good management and strong production growth prospects.

Eldorado Gold Corp. is a “premier” mid-tier gold company, he said. “It is a very well managed company with a pristine balance sheet,” Unlike many of its competitors, Eldorado has a long history of “underpromising and overdelivering,” he added.

The others are smaller Agnico-Eagle Mines Ltd and Osisko Mining Corp.

Agnico-Eagle made a series of missteps recently, and it is expected to offer lower earnings guidance next month, but de los Reyes said the market has already priced in this event and is likely to reward Agnico going forward — not least because most of the company’s assets are in lower-risk countries such as Canada, Mexico and Finland.

Osisko also had its share of operational issues and the stock has suffered accordingly, but it is expected to ramp up production, de los Reyes added.

Claudia Assis is a San Francisco-based reporter for MarketWatch.

JPMorgan profit falls, but sees hope in economy

JP Morgan Chase's New York Branch

By David Henry

Fri Jan 13, 2012 9:35am EST

(Reuters) - JPMorgan Chase & Co's fourth-quarter profit fell 23 percent, in line with Wall Street expectations, as the European debt crisis depressed trading and corporate deal-making, dragging down shares of the major U.S. banks.

But Chief Executive Jamie Dimon said the largest U.S. bank by assets was seeing signs of improvement in U.S. loan demand and credit quality as the economy recovers.

"I believe you are seeing real loan growth," Dimon said in a conference call with reporters.

JPMorgan is the first major U.S. bank to announce results for the fourth quarter. Its figures show Wall Street firms such as Goldman Sachs Group Inc and Morgan Stanley are in for a tough quarter as investment banking suffers.

Others such as Bank of America Corp and Citigroup Inc, which also report results in the coming days, could benefit from the stronger business loan demand that JPMorgan experienced but could also face problems in investment banking and housing loans.

JPMorgan's results "show that there are major headwinds against the banking industry and it requires a strong management team to battle the headwinds," said Rick Meckler, president of investment firm Libertyview Capital Management in New York.

"The bigger negatives tend to be the housing and mortgage situation and investors questioning, 'Have we really hit bottom in this sector or is this just a black hole?'"

JPMorgan shares fell 2.9 percent in premarket trading. Goldman Sachs was down 2.2 percent, Morgan Stanley was down 1.8 percent, and Bank of America was down 2 percent.

Dimon expressed renewed concern about the European debt crisis, saying he was "very, very cautious."

"I would put myself in the 'increasing worried' category," he said.


JPMorgan said fourth-quarter net income was $3.72 billion, or 90 cents a share, down from $4.83 billion, or $1.12 a share, a year earlier.

Wall Street analysts, on average, had expected 90 cents a share, according to surveys by Thomson Reuters I/B/E/S.

Revenue declined 17 percent to $22.2 billion on an adjusted basis. Investment banking revenue fell 30 percent to $4.36 billion, hurt by a 39 percent drop in underwriting and advisory fees, a 13 percent decline in fixed income, and a 31 percent fall in equity markets.

The results were complicated by an accounting adjustment that reduced earnings by 9 cents per share to reflect a change in the market value of JPMorgan debt during the quarter. In the third quarter, the accounting adjustment added 29 cents per share to profits.

The bank also booked additional expenses for litigation, primarily for mortgage matters, totaling 8 cents a share. It said reducing its loan loss reserves added 11 cents per share to the earnings.

"The earnings show how well JPMorgan can be managed in one of the roughest times," said money manager Michael Holland, founder of Holland & Co. "They were able to pull off a meet-or-beat quarter."

"We all knew the fourth quarter would be difficult," said Gary Townsend of Hill-Townsend Capital. "But the overall economic outlook has been improving from an economic standpoint starting in December."

The bank's return on equity, a key measure of shareholder profits, fell to 8 percent from 11 percent a year earlier and 9 percent in the 2011 third quarter.

The company's quarter-end share count declined 4 percent from a year earlier as it bought back stock.

(Additional reporting by Jed Horowitz in New York, Rick Rothacker in Charlotte, North Carolina, and Ben Berkowitz in Boston; editing by John Wallace)

Wednesday, 11 January 2012

Exclusive: Dell plots late-2012 consumer tablet launch

A man cleans the Dell Logo in an exhibition in Hannover, Germany, Feb 2010
By Poornima Gupta

LAS VEGAS | Wed Jan 11, 2012 7:51am EST

(Reuters) - Dell Inc intends to launch its first consumer tablet computer in late 2012, marking its entry into a hotly contested and increasingly crowded arena that has already claimed arch-foe Hewlett Packard.

The once-dominant corporation founded by Michael Dell has seen a growing crop of tablets and smartphones entice consumers away from PCs. But Dell learned from the hastiness of some of its peers and understands better now how consumers value the "ecosystem" of a tablet as much as the hardware, chief commercial officer Steve Felice said.

The Texas company, which has slipped steadily in the global PC sales rankings, had dipped its toe in the waters with an enterprise-focused, "Streak" tablet. It now plans a bigger push into the consumer arena, Felice told Reuters at the Consumer Electronics Show in Las Vegas.

While rivals from HP to Research in Motion introduced a spate of gadgets with much fanfare and went toe-to-toe with the still-dominant Apple Inc iPad, Dell kept a low profile with good reason, Felice said.

"We have been taking our time. The general failure of everyone that's tried to introduce a tablet outside of Apple" suggested Dell made a prudent choice, Felice said in an interview. "You will see us enter this market in a bigger way toward the end of the year. So we are not really deemphasizing it, we are really being very careful how we enter it.

"When you are talking about PC, people are more focused on the hardware itself. When you are talking about the tablet or the smartphone, people are interested in the overall environment its operating in," he added. "As we have matured in this, we are spending a lot more time in the overall ecosystem."


Felice was coy about which non-Apple operating system Dell might adopt -- Microsoft Corp's upcoming Windows 8 or Google Inc's popular Android -- saying both were viable options.

But Felice did say he liked the feel of Microsoft's touch-enabled operating system, which would be well-timed when it emerges later this year in light of recent high-profile product failures, from HP's now-defunct TouchPad to RIM's Playbook.

"There hasn't been a lot of advancement and it's given Microsoft a good window to come into the market with Windows 8. I like the touch Windows 8 feature," said Felice, who previously headed Dell's large enterprise division.

"We like Windows 8 but we continue to develop with Android as well. We are still going to be more choice-driven, based on the feedback we get from customers."

Dell's maiden foray into consumer tablets comes as the iPad and other well-received gadgets such as Samsung's Galaxy eat into PC sales. Some industry executives maintain that tablets do not cannibalize to the extent imagined.

On Monday, Michael Dell said at an event in the southern Indian city of Bangalore that tablets were an "additional device."

Others warn that clunky laptops are coming increasingly under threat as tablets grow more powerful and take on a plethora of tasks from Web surfing to sophisticated graphics and video manipulation.

"When we introduce the products, they will be consumer products, but we are going to make sure that they are very compatible with the business marketplace, which we don't think Apple has addressed," Felice said. "There's lot of use in the commercial sector that requires security and more compatibility, and I think we will be able to address that in a better way."

(Editing by Edwin Chan and Matt Driskill)

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Forex trade emails cast doubt on SNB's Hildebrand

A general view of the Swiss Federal Palace(r) and the Swiss National Bank in Bern in this October 2011 picture

By Catherine Bosley

ZURICH | Tue Jan 10, 2012 9:27am EST

(Reuters) - The supervisory council of the Swiss National Bank forced Philipp Hildebrand to step down as chairman after emails about a currency trade by his wife failed to clear him of involvement in the deal, newspapers reported on Tuesday.

Hildebrand's wife Kashya, a former hedge fund trader who now runs a Zurich art gallery, bought 400,000 Swiss francs ($418,000) worth of dollars on August 15, three weeks before her husband oversaw steps to cap the rise of the safe-haven franc. She later sold the dollars at a higher rate.

Hildebrand quit his post on Monday, saying he could not provide conclusive evidence that he had been unaware of the trade and that the intense public scrutiny over the affair was compromising his credibility.

Only last week, he resisted calls to step down, saying he only learned of his wife's trade a day after she made it.

Emails between Kashya, Hildebrand and their Sarasin bank client advisor Felix Scheuber, released by the SNB on Monday, showed the central banker had been involved in discussions on a dollar trade but left it unclear whether he had approved it.

After examining the email exchange, the SNB's advisory council indicated to Hildebrand on Saturday that his position was no longer tenable, two Swiss newspapers reported.

One member of the bank council contacted by Reuters who declined to be named did not directly confirm the report but noted that Hildebrand had failed to thank the bank council at his farewell news conference.

In a statement on Monday, the council said it accepted Hildebrand's decision to resign which it said he had taken in order to protect the institution.

Hansueli Raggenbass, the head of the SNB council which was discussing on Tuesday choosing a new member for the three-person policy-setting governing board, declined to comment on the reports as he arrived at the central bank.

But Raggenbass defended his handling of the scandal: "I'm convinced that I've done the job correctly and with engagement."


In a note summarizing an August 15 meeting, advisor Scheuber said Hildebrand "would leave it up to his wife Kashya to decide" whether to buy dollars. Scheuber said he made the trade later that day after meeting Kashya at her art gallery office.

In an email from Hildebrand to Scheuber the following day, copied to his wife and the SNB general counsel, he wrote: "We never discussed any dollar purchases yesterday. Given Kashya's email response and copy to me, I assume she gave you the order.

"In future, for compliance reasons, you are not authorized to execute any currency transactions unless the order comes from me or I confirm it," he said, adding "Kashya: sorry about that but currencies really are a special case here."

Scheuber replied: "Yes, Kashya yesterday gave me the verbal order, followed by the email later on. I also remember you saying in our yesterday's conversation that if Kashya wants to increase the USD exposure then it is fine with you."

Jean-Pierre Roth, the former SNB chairman who handed over to Hildebrand two years ago, said his successor should have reversed the trade as soon as he became aware of it.

"He knew that several days later he would change monetary policy which would affect the franc exchange rate," Roth told daily Le Temps. "He made a serious error of judgment unfortunately and today he must pay the consequences.

"In a very difficult economic and monetary environment, the credibility of the SNB has been hurt, the bank is weakened."

David Marsh, co-chairman of the Official Monetary and Financial Institutions Forum, agreed.

"At a time when central banks all over the world have become far more active and much more exposed to publicity as a result of the financial crisis and its aftermath, central bankers have to show almost superhuman probity in all their financial dealings. This, manifestly, Hildebrand did not do," he wrote.

The SNB's supervisory council said on Monday Vice Chairman Thomas Jordan, who joined the SNB in 1997, would take over as chairman for the time being, with the government expected to confirm him soon in the position permanently.

Jordan, who enjoys a solid reputation, heads the SNB's regulatory department, which is pushing for flagship banks UBS and Credit Suisse to firm up their balance sheets.

Jordan said on Monday he was prepared to take the top job on a permanent basis if the government asked him to do so and stressed his determination to continue to enforce the 1.20 per euro cap on the franc that the SNB imposed on September 6.

The SNB is likely to look for another German speaker to replace Hildebrand on the governing board to complement French-speaking Jean-Pierre Danthine and German-speaking Jordan. Swiss public institutions always seek to balance representatives from the different language groups in this multilingual country.

The three most likely internal candidates are the current deputy members: Thomas Moser, Thomas Wiedmer or Dewet Moser.

Other names mentioned were those of university professor Beatrice Weder di Mauro as well as Aymo Brunetti and Serge Gaillard, both board members of the State Secretariat for Economic Affairs (SECO).

The SNB council said on Saturday it would overhaul its internal rules concerning board members' own trading and examine all transactions they made over the past three years.

The Swiss franc, which Hildebrand had fought to stop soaring on safe-haven buying driven by the euro zone debt crisis, rose slightly on the news of his departure. But the market is not seen testing the franc cap because of the upheaval.

"The credibility of a central bank does not depend on one person," said Daniel Hartmann of Bantleon Bankan, "Besides, with Thomas Jordan the SNB has an experienced person on the board. The exchange rate will be influenced more by other factors, such as the euro zone crisis."

(Writing by Emma Thomasson; Editing by Mike Peacock)