Business News: At CES: Peeking into the Future of Tablets

Business News: At CES: Peeking into the Future of Tablets

At CES: Peeking into the Future of Tablets

Posted: 05 Jan 2011 08:01 PM PST

TV Makers Going Separate Ways on 3-D Formats May Confuse Buyers

Posted: 06 Jan 2011 04:18 AM PST

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By Cliff Edwards

(For more Bloomberg News coverage of the Consumer Electronics Show, go to EXT5 <GO>)

Jan. 6 (Bloomberg) -- Makers of big-screen televisions risk confusing shoppers with competing 3-D TV formats at a time when the higher-priced sets have been slow to catch on.

LG Electronics Inc., the world’s third-largest maker of liquid-crystal display sets, said yesterday at the Consumer Electronics Show in Las Vegas that it will offer large models using 3-D glasses like those in cinemas, joining Vizio Inc., the second-largest U.S.-based maker. On Jan. 4, Toshiba Corp. said it will sell sets that don’t use glasses starting midyear.

The dueling formats may complicate efforts by manufacturers and retailers to win over shoppers. In addition to format confusion, 3-D buyers are faced with higher prices, including glasses that can cost $150, and concerns about the availability of shows and movies to watch in three dimensions.

“While TV manufacturers have bold plans and a lot of new products, consumers remain cautious,” said Paul Gray, director of TV Electronics Research for DisplaySearch, a Santa Clara, California-based industry researcher. “Consumers have been told that 3-D TV is the future, but there still remains a huge price jump and little 3-D content to watch.”

DisplaySearch estimates 3.2 million 3-D TVs were shipped worldwide last year, and projects the total will reach more than 90 million in 2014. That suggests 3-D will expand to 41 percent of all flat-panel shipments from 2 percent in 2010.

Heavy, Uncomfortable

The companies are ditching the stereoscopic 3-D standard used in first-generation sets sold starting in 2010. Those require active-shutter, or battery-powered, glasses to combine images into the 3-D effect. Customers complained about the $100 to $150 price and weight of such glasses, said Matthew McRae, chief technology officer of Irvine, California-based Vizio.

“We heard they were uncomfortable, they were heavy, they had to be recharged,” McRae said. “As a mass consumer product, it clearly was not the right technology.”

Vizio will include four pairs of the lighter, cinema-style glasses with each TV, McRae said.

Samsung Electronics Co., the world’s largest maker of televisions, plans to stick with active-shutter glasses this year, the company said yesterday in Las Vegas. The Suwon, South Korea-based manufacturer introduced a new 3-D glasses design that weighs less than a pound and creates a lighter picture.

Masaru Kato, Sony Corp.’s chief financial officer, said in October that sales of 3-D sets, projected to account for 10 percent of the Tokyo-based company’s 25 million annual TV sales target, were trailing previous expectations.

3-D Oversold

Manufacturers may have overhyped 3-D, said Mike Fasulo, chief marketing officer of Sony Electronics. Early adopters found scant 3-D content to watch and some complained of headaches caused by image flickering, he said.

Sony plans to exhibit glasses-free 3-D TVs in Las Vegas in both LCD and organic light-emitting diode models, Hiroshi Yoshioka, an executive deputy president, said yesterday.

In 2010, Sony, cable TV programmer Discovery Communications Inc. and Imax Corp., the operator of large-screen theaters, announced plans for a 3-D network called 3net to start this year. Hollywood studios and other content providers also are expected to release additional Blu-ray titles in 3-D. Walt Disney Co.’s ESPN 3D plans to expand its programming to 24 hours a day next month, the company announced yesterday in Las Vegas.

Consumers may initially be confused by the different types of 3-D sets available, said Skott Ahn, chief technology officer for Seoul-based LG Electronics.

“We’re trying to remove technical barriers and make the price of 3-D more reasonable,” Ahn said in an interview.

Chinese television manufacturers, Vizio and others are using technology that is similar to LG’s, which should shorten the format war, said Havis Kwon, president of LG Electronics Home Entertainment.

“The market will move toward the solution that best answers the needs of the consumer,” Kwon said.

--Editors: Rob Golum, Anthony Palazzo

#<473219.6698075.2.1.77.31389.96># -0- Jan/05/2011 19:44 GMT

To contact the reporter on this story: Cliff Edwards in San Francisco at cedwards28@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net

Silicon Valley's Other Craig (Barratt) Cashes In

Posted: 05 Jan 2011 08:01 PM PST

Windows to Run on ARM Chips

Posted: 05 Jan 2011 11:55 PM PST

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By Dina Bass and Ian King

(For more Bloomberg News coverage of the Consumer Electronics Show, go to EXT5 <GO>)

Jan. 5 (Bloomberg) -- Microsoft Corp. said the next version of its Windows personal-computer operating system will run on ARM Holdings Plc’s chip technology for the first time, making a deeper push into the market for tablet computers.

Windows will work with ARM-based chips made by Nvidia Corp., Qualcomm Inc. and Texas Instruments Inc., Redmond, Washington-based Microsoft said today at the Consumer Electronics Show in Las Vegas. The new operating system is designed for smaller, thinner devices with longer battery life.

Microsoft is playing catch-up to Apple Inc. in the market for devices that are larger than smartphones yet less powerful than laptops, and it’s facing pressure from Google Inc., also making a foray into tablets. The system marks a shift in Microsoft’s alliance with semiconductor maker Intel Corp., which has also struggled in the area of tablets and mobile devices.

Microsoft Windows President Steven Sinofsky previewed the new software running on chips at a press conference at the show.

The Windows software will be tailored for battery-powered devices, such as tablets, netbooks and other handhelds.

The software will also work with Intel and Advanced Micro Devices Inc. chips, as have previous versions of Windows.

ARM chips are used in most smartphones, as well as Apple’s best-selling iPad tablet, which was introduced last year.

Windows for ARM

While other versions of Microsoft programs aimed at phones and mobile devices already work on ARM chips, this is the first time the software maker will produce a full version of Windows available on that technology.

Intel is trying to make its own forays into tablets and smartphones, squaring off against ARM’s technology. ARM, based in Cambridge, England, sells the rights to use its patents and chip designs and doesn’t manufacture the electronic components.

Apple sold 7.46 million iPads from the product’s April debut through September. The device accounted for 95 percent of the tablet market last quarter, according to Strategy Analytics.

Microsoft declined to comment on timing for the release other than to say the company is sticking with its previous timeline for a new Windows every two to three years. The last version went on sale in October 2009.

--Editors: Tom Giles, Lisa Wolfson.

To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net; Dina Bass in Seattle at dbass2@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

Still Fighting Fires at Bank of America

Posted: 05 Jan 2011 08:01 PM PST

BofA Introduces Fees to Replace Debit-Card, Overdraft Charges

Posted: 06 Jan 2011 03:54 AM PST

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By Hugh Son

Jan. 6 (Bloomberg) -- Bank of America Corp., pressured by U.S. regulations limiting debit-card and overdraft fees, is set to give its retail customers a choice: do more financial transactions through the company, or pay a monthly fee.

The biggest U.S. lender by assets is introducing four new accounts where users pay fees unless they keep minimum balances, make regular deposits, use credit cards or take advantage of online services, said Joe Price, head of the Charlotte, North Carolina-based company’s consumer-banking operations.

Banks including JPMorgan Chase & Co., the second-largest bank by assets, and No. 3-ranked Wells Fargo & Co. are seeking to replace revenue lost from consumer-protection rules by boosting fees. Bank of America, with $633 billion in retail deposits as of September, has said overdraft, credit and debit- card fee limits may squeeze annual revenue by $4 billion starting this year.

“You can pay with cash, or you can pay with behavior,” said Bart Narter, senior banking analyst at Boston-based consulting firm Celent. “They’re restructuring their pricing to deal with the new realities.”

Bank of America starts trials of the four account types this month in Massachusetts, Arizona and Georgia, and expects to move all customers to the accounts starting in 2012, Price said yesterday in a telephone interview. Higher minimum balances can earn rewards like multiple accounts, and discounts on services including money orders and checkbooks. A fifth program for those with $50,000 in combined balances includes concierge services and higher interest rates.

The plans “provides you the choices on how to compensate us,” Price said. “In some cases that means you need to bring us more business because you like all these features, and it costs us more to provide that.”

The trials will test various monthly fees, starting from about $6 to $9, said Anne Pace, a spokeswoman for the bank.

JPMorgan was weighing higher credit-card rates and monthly fees, Chief Executive Officer Jamie Dimon said in July.

“If you’re a restaurant and you can’t charge for the soda, you’re going to charge more for the burger,” Dimon said.

--With assistance from Alexis Leondis in New York. Editors: Dan Reichl, Andrew Pollack

To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net

Pesek: The Year of the Bubble

Posted: 06 Jan 2011 03:55 AM PST

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By William Pesek

Jan. 6 (Bloomberg) -- Welcome to the year of the bubble.

It may seem an odd assertion at a time when many key economies are in, or on the verge of, recession. Yet near-zero interest rates in Washington, Tokyo and Frankfurt have a way of wreaking havoc with markets and human psychology. It’s not a reach to say we have a bubble in bubbles.

The forces that will make for an interesting 2011 go beyond monetary policies. A variety of market-shaking bubbles might inflate before our eyes -- some in asset markets, others in flawed perceptions. Here are eight.

No. 1. Hot money. It’s terrific that the MSCI AC Asia Pacific Index jumped 14 percent last year, far outpacing MSCI’s broader indexes. It would be better, though, if the gains had more to do with fundamentals and less with ultra-low rates.

The Bank of Japan’s largess has long seeped overseas to boost stock, bond and property prices near and far. The so- called yen-carry trade -- borrowing cheaply in yen and using the funds for riskier bets overseas -- was the forerunner of a similar dollar trade. Federal Reserve policies sent tidal waves of liquidity toward Asia in 2010. It could reach disastrous proportions, leaving a trail of ruin in its wake.

No. 2. Decoupling theory. The bubble here is the unsustainable belief that Asia can grow rapidly no matter what happens among the biggest economies. Don’t bet on it. It’s great that China is growing 9.6 percent and that India is zooming along at 8.9 percent.

Nothing, though, would serve Asia better than a rebound in growth in the U.S., euro zone, Japan and the U.K, which combined make up $34 trillion in annual output. Asia has done a stellar job staying afloat since Wall Street’s collapse in 2008. Developing economies may be able to live for a couple of years without the majors. Good luck keeping up that performance in the year ahead.

No. 3. Food prices. A Jan. 3 Times of India headline raised a question in many an Asian mind: “Can government do nothing legally to check prices?” The answer is, Not much.

The United Nations’ Food and Agriculture Organization predicts that the global cost of importing foodstuffs totaled $1.026 trillion in 2010, compared with $893 billion in 2009. We haven’t seen anything yet. Imbalances in supply and demand and regional trade rigidities will accelerate the trend, swamping developing nations with the most basic of problems: Filling the bellies of those powering their economic rise.

No. 4. Income inequality. Surging prices of everything from food to transportation pushed Indonesian inflation to a 20-month high in December. The trajectory of everyday prices is a fast- developing setback to Asia’s efforts to narrow its gaping rich- poor divide.

Rising costs for cooking-oil, rice and fish may mean little to the average Goldman Sachs Group Inc. staffer. To a family living on $3 a day and already spending two-thirds of income on food, they are devastating. Rising wealth disparities could foreshadow a year of tensions, as failed harvests and inflation cause famines, riots, hoarding and trade wars worldwide. The bubble here would be one in human suffering.

No. 5. Wacky weather. Australia’s experience tells the story. A few months ago, drought was imperiling its economic outlook. Today floods that some are characterizing as “biblical” have economists calculating the implications for commodity prices.

Forget temperatures and focus on the increasing frequency of freaky weather patterns from Miami to Mumbai. Now, economist Dennis Gartman, who writes a Suffolk, Virginia-based newsletter, says investors should sell the Australian dollar against the euro as flooding threatens exports of coal and wheat. Funny how it takes Mother Nature to make anyone bullish on the euro.

No. 6. Currency reserves. Why any economy needs $2.7 trillion of them is beyond me. And it’s not just China that is trapped into adding to its currency stockpile to keep its existing holdings from losing value. Japan has more than $1 trillion, while Taiwan, South Korea, Hong Kong, Singapore and Thailand have a combined $1.3 trillion. Talk about an unproductive use of wealth -- and a risk that’s growing by the day with no easy fix in sight.

No. 7. Geopolitical risks. Leave it to Kim Jong-Il to remind investors that the biggest surprises aren’t coming from economic or corporate reports, but rogue regimes like Kim’s in North Korea. Expect Pyongyang’s provocations to increase exponentially in frequency and seriousness.

Also expect a bull market in territorial disputes. Faced with growing uncertainty, governments are desperate to placate the masses. The desire to unify the home population may lead to growing rifts between neighbors. Those seeking shelter from these brewing storms explains why gold is almost $1,400 an ounce.

No. 8. Group of 20. Any optimism that European officials can avert disaster might be seen as irrational. The same goes for the belief that China can grow about 10 percent annually forever or that Japan’s leaders can defeat deflation. The real perceptions bubble is that a disparate grouping of 20 nations can tame out-of-whack markets and imbalances that were decades in the making. The year ahead might turn any, or all, of these accepted wisdoms on their head.

(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)

--Editors: James Greiff, Peter Vercoe

Click on “Send Comment” in the sidebar display to send a letter to the editor.

To contact the writer of this column: William Pesek in Tokyo at wpesek@bloomberg.net

To contact the editor responsible for this column: James Greiff at jgreiff@bloomberg.net

Cadillac Studies New Models to Build on 35% Sales Gains

Posted: 06 Jan 2011 05:00 AM PST

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By David Welch

Jan. 6 (Bloomberg) -- Cadillac, General Motors Co.’s luxury brand, is studying seven new model concepts to lure new buyers and build on the fastest sales growth among premium carmakers, two people familiar with the plans said.

The brand has looked at a small sport-utility vehicle, a large flagship sedan, a subcompact car to rival Bayerische Motoren Werke AG’s Mini Cooper, and a Cadillac version of the Chevrolet Traverse and Buick Enclave SUVs, said the people, who didn’t want to be named because the plans are private.

Cadillac is studying the models after sales rose 35 percent last year, topping all luxury automakers, led by the SRX sport- utility vehicle and the CTS coupe. The brand is seeking to ease reliance on those models, which accounted for 66 percent of its deliveries, and lower the age of its average buyer from 62.

“They understand Cadillac can’t thrive as a one-car and one-SUV brand,” said Jim Hall, principal of 2953 Analytics Inc., a consulting firm in Birmingham, Michigan. “They need more product to survive.”

The brand is introducing two models next year, a larger XTS sedan and a compact car. Cadillac also sells the Escalade large SUV and the STS and DTS sedans, all of which have become a smaller portion of its sales. The STS and DTS may go out of production in June of this year, according to a forecast by Lexington, Massachusetts, research firm IHS Automotive.

Toyota Motor Corp.’s Lexus was the U.S. luxury sales leader last year, with 229,329 deliveries, compared with Cadillac’s 146,925. Cadillac also trails Daimler AG’s Mercedes-Benz and Volkswagen AG’s Audi, which both sell eight models or more.

High-Volume Models

Cadillac will first look to add to high-volume luxury models, then move onto more specialized categories, said Don Butler, the brand’s U.S. marketing vice president. Butler declined to comment on internal discussions about new vehicles.

“We have got to get the core covered with a compact, a mid-sized luxury car, a mid-sized crossover SUV and a large car,” Butler said in an interview. “That’s 85 percent to 90 percent of the luxury market right there. After that, we will look at opportunities for specialty vehicles.”

At last year’s Detroit auto show, then-Vice Chairman Bob Lutz said Cadillac would make a version of the Chevrolet Volt plug-in hybrid called the Converj. That plan was soon dropped, people familiar with the matter said.

Cadillac will gain sales volume with models that already are planned, Butler said. Cadillac should pick up buyers once the brand starts selling the small car that will take on the BMW 3-Series and the Audi A4, he said.

The company hasn’t decided whether to make the small SUV or the subcompact, the people familiar with the matter said. The large SUV, which would use the Chevrolet Traverse’s chassis and frame, is likely to built, one person said. The models would go on sale about the middle of the decade, the people said.

Revamped Marketing

Cadillac also is revamping its marketing to attract younger, more affluent consumers. The average Cadillac buyer makes $118,000 a year, about $60,000 less than Audi and BMW customers and $73,000 less than Mercedes owners, according to data compiled by Strategic Vision Inc., a market research firm in San Diego.

The average Cadillac buyer, at 62 years old, is younger only than the average customer of Ford Motor Co.’s Lincoln brand at 64, according to Strategic Vision. The typical Audi buyer is 48 years old, and the average for BMW is 50.

“The traditional Cadillac buyer is still comfortable with the products,” Alexander Edwards, Strategic Vision’s president, said in an interview. “With brands like Lexus getting negative press, there will be opportunities for people to reinvestigate what Cadillac has been up to. It could take two to three years for that process to take place.”

Targeting Imports

GM Global Chief Marketing Officer Joel Ewanick, who joined the company from Nissan Motor Co. in May, is aiming Cadillac’s advertising at consumers who typically choose imported luxury cars. One of his first moves was hiring the Minneapolis-based Fallon Worldwide ad agency for the $275 million account. The first new work debuted during the Rose Bowl football game broadcast on ESPN on New Year’s Day.

Chief Executive Officer Dan Akerson has pushed the product team and marketers to get assertive and look for growth opportunities, Ewanick said.

Part of the strategy entails defining Detroit-based GM’s Buick as a luxury brand that competes with Toyota’s Lexus with stylish cars offering a quiet, comfortable ride, while Cadillac is portrayed as bolder and more aggressive, Ewanick said.

Buick traditionally has sat one step below Cadillac in the GM brand hierarchy that former Chairman Alfred P. Sloan defined as “a car for every purse and purpose.”

Instead, Buick and Cadillac will target what Ewanick said are two kinds of luxury buyers -- those who want understated and comfortable cars and those seeking bold and sporty autos.

‘More Extreme’

“We don’t make luxury cars, we make Cadillacs,” Ewanick said, quoting a new advertisement. “By using that kind of language, we’re making the Cadillac brand more extreme on one end of the luxury market and letting Buick play on the other.”

The ads created under Ewanick’s direction highlight Cadillac’s designs, powerful engines and individuality.

One commercial shows a dowdy, affluent couple celebrating an anniversary at the long dining room in their classically decorated mansion. Narrator Lawrence Fishburne calls it “blue- blooded” and “cold.”

In a quick contrast, the ad then shows Cadillac’s new CTS coupe making quick turns through a city landscape, and the camera narrows in on the vehicle’s sharp lines. Fishburne says in the ad that Cadillac is “red-blooded.”

Big Advertisements

Cadillac also will return to advertising at large sporting events and at high-traffic locations, Butler said. Billboards with video of the CTS coupe will be placed around the Nasdaq MarketSite Tower in New York’s Times Square, Ewanick said.

Late last year, Cadillac started bringing back some of the sponsorships that the brand had before GM went into bankruptcy in June 2009. In November, Cadillac said it would sponsor the annual World Golf Championships PGA event in Miami in March.

Cadillac said in December it is re-entering the Sports Car Club of America, or SCCA, racing series. The brand’s new race car will be on display at the Detroit show next week, said Nick Twork, a GM spokesman.

--Editors: Kevin Orland, Jamie Butters.

To contact the reporter on this story: David Welch in Southfield, Michigan, at dwelch12@bloomberg.net.

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net.

Ford to Unveil Electric Focus

Posted: 05 Jan 2011 08:30 PM PST

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By Keith Naughton

(Adds closing shares in the last paragraph.)

Jan. 5 (Bloomberg) -- Ford Motor Co. will unveil a battery- powered version of its Focus small car on Jan. 7 in an attempt to grab some of the publicity rivals General Motors Co. and Nissan Motor Co. are getting from their electric models.

Chief Executive Officer Alan Mulally will introduce the Focus Electric as he delivers the keynote address at the Consumer Electronics Show in Las Vegas, and Executive Chairman Bill Ford will reveal the car at a ceremony in New York.

“The message we are sending in New York and Las Vegas is simple: Ford is serious about electrified vehicles as part of our plan to make fuel economy affordable,” Derrick Kuzak, product development chief, said today. “The new Focus Electric is the company’s first global electric production car and one of a family of five electrified vehicles coming from Ford in the U.S. by 2012 and in Europe by 2013.”

Ford, the first U.S. automaker to sell a hybrid, will introduce its electric car after Nissan’s battery-powered Leaf and GM’s Chevrolet Volt plug-in debuted last year. Dearborn, Michigan-based Ford also will be introducing new hybrid models at next week’s Detroit auto show.

“Ford is offering consumers the power of choice and an ownership experience designed specifically to make it easier for customers to enjoy their electrified vehicles and maximize the energy-saving benefits,” Kuzak said.

Models such as the Focus Electric and Escape hybrid sport- utility vehicle will be 10 percent to 25 percent of its worldwide fleet in 2020 as governments mandate higher fuel efficiency, Nancy Gioia, Ford’s director of global electrification, said last year.

U.S. Standards

Automakers are developing models powered all or in part by electricity to meet standards such as the U.S. rules for average fuel economy by company of 35.5 mpg in 2016, up from 25 mpg now.

Ford now sells three hybrid models -- the Escape SUV, and the Fusion and Lincoln MKZ sedans -- and last year introduced an electric version of the Transit Connect commercial van. Hybrids accounted for 1.8 percent of Ford’s U.S. sales last year.

Industrywide hybrid sales peaked at 3.3 percent in the U.S. market in August 2008 after gasoline topped $4 a gallon, according to Gioia. Last year, the gasoline-electric vehicles accounted for 2.4 percent of U.S. auto sales, according to researcher Autodata Corp. of Woodcliff Lake, New Jersey.

Ford rose 51 cents to $17.89 at 4:02 p.m. in composite trading on the New York Stock Exchange. That was the highest closing price since May 23, 2002.

--Editors: Kevin Orland, Jamie Butters.

To contact the reporter on this story: Keith Naughton in Southfield, Michigan, at Knaughton3@bloomberg.net.

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net

Wall Street Turns Stock Gains Into Losses With Structured Notes

Posted: 06 Jan 2011 05:01 AM PST

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By Zeke Faux

Jan. 6 (Bloomberg) -- Banks sold more than $6 billion of bonds linked to the performance of stocks last year, promising returns of as much as 64 percent at a time when interest rates were at historic lows.

Instead of reaping such extraordinary gains, reverse convertibles, as the products are known, lost 1 percent on average, according to data compiled by Bloomberg on 1,481 of the securities sold in the U.S. last year that matured by Nov. 30. The Standard & Poor’s 500 Index returned 8 percent during that period and corporate bonds gained 11.1 percent, including reinvested interest, Bank of America Merrill Lynch index data show.

“Here’s an asset class that’s basically failed on all counts,” said Glenn Tongue, a money manager who oversees about $200 million with Whitney Tilson at T2 Partners LLC in New York. “I doubt these are being pitched as an opportunity to lose 1 percent.”

Barclays Plc, based in London, and UBS AG in Zurich led more than a dozen banks selling reverse convertibles, which are short-term bonds generally marketed to individuals that convert into stock if a company’s share price plummets. The securities are being created as part of a boom in structured notes, or bonds packaged with derivatives whose values are derived from assets including stocks, bonds, currencies and commodities, or from events such as changes in interest rates.

Sales Soar

Structured note sales rose 46 percent last year to a record $49.4 billion in the U.S., Bloomberg data show. The securities fed demand from individual investors frustrated with record low rates on everything from certificates of deposit to money market funds with the Federal Reserve holding its target interest rate for overnight loans between banks in a range of zero to 0.25 percent since 2008. Banks issued $33.9 billion in 2009, according to StructuredRetailProducts.com, a database used by the industry.

Royal Bank of Scotland Group Plc sold $1.15 million in three-month notes tied to Rochester, New York-based Eastman Kodak Co. on June 10 that paid 24 percent annualized interest, a filing with the U.S. Securities and Exchange Commission shows. That’s 24 times the average rate on one-year certificates of deposit, according to data from Bankrate Inc. in North Palm Beach, Florida.

Buyers couldn’t lose money unless shares of the camera maker fell to below $3.54 from $5.06. Kodak dropped to $3.50 on Aug. 31 in New York trading. RBS converted the bonds into stock and investors lost about 18 percent even with the high interest rate.

RBS Losses

Investors lost an average of 2 percent on the 180 reverse convertibles issued by RBS last year that matured by Nov. 30, Bloomberg data show. The securities had a total face value of $69.3 million. Pholida Phengsomphone, an RBS spokeswoman, declined to comment.

“This isn’t something that a retail investor calls up and asks for,” said Marilyn Cohen, who oversees $250 million as chief executive officer of Envision Capital Management in Los Angeles. “Is it ever explained to them that you might end up with the stock and there’s a large probability that will happen?”

Buyers profited on 75 percent of the notes analyzed by Bloomberg. The average return was negative because investors lost more on the unprofitable ones than they gained on those that made money. Investors also took on credit risk because the notes are unsecured debt.

SEC Examination

“There’s no free lunch,” Tongue said. “If you’re going to get super-standard returns, that means you’re taking super- standard risks.”

Reverse convertibles aren’t traded on exchanges and their performance isn’t reported publicly. Investors lost $27 million on the $2.19 billion of securities compiled by Bloomberg. Banks also sold $4.56 billion of reverse convertibles whose returns weren’t included because they didn’t mature by Nov. 30.

Kenneth Lench, head of the SEC’s structured products unit that investigated Goldman Sachs Group Inc.’s subprime-mortgage investments, said in a September interview that the agency was examining whether brokers overcharged investors for the notes. He declined to comment for this article. SEC Enforcement Director Robert Khuzami said at a Senate Judiciary Committee hearing the same month it has looked at reverse convertibles.

“The reason these are popular is they’re kind of an easy sale,” said Charlie O’Flaherty, who used to oversee U.S. structured products and derivatives at Bank of Ireland. The products are marketed as a way to earn higher yields during times when stock prices are stable and interest rates are low, he said. Buyers aren’t told how they have performed in the past, he said.

Bank Fees

Banks charged fees that average 1.6 percent on a three- month reverse convertible, or about 6 percent a year, the data show. The average annual fee on stock mutual funds is 1 percent, according to the Investment Company Institute, a trade group in Washington.

The three-month reverse convertibles sold by Edinburgh- based RBS and linked to Kodak, a photography company founded more than 100 years ago, paid brokers a 2.75 percent commission.

The fees, which sometimes exceeded the securities’ maximum possible yield, cut into returns and probably account for the losses, said O’Flaherty, who left the industry last year to manage his own investments.

Professional money managers generally don’t buy reverse convertibles because they can pay less in fees by trading derivatives directly, according to Tongue and O’Flaherty. Small investors would need a computer model and access to options pricing data to see if they’re being compensated fairly for the risks they’re taking on, O’Flaherty said.

‘Big-Boy Investor’

“If you were a big-boy investor, you’d just do it yourself,” O’Flaherty said. “You’d structure it yourself and take all the middlemen out.”

Leroy and Carol Conklin, a retired couple in Sun City Center, Florida, said they were pitched an investment in reverse convertibles by James Tuberosa, a broker at H&R Block Financial Advisors whom they met at the retirement community’s annual FunFest fair.

They bought reverse convertibles from Tuberosa in 2007 and 2008, including $20,000 of notes linked to Mooresville, North Carolina-base home improvement retailer Lowe’s Cos. that paid 9 percent and that the broker called corporate bonds, the Conklins said in an interview.

“I said, ‘Boy, this is a good investment,’” said Leroy Conklin, 80, who earned a Silver Star in the 1950-1953 Korean War and worked as a high school principal.

‘No Idea’

The Lowe’s notes converted into stock at a $4,000 loss, said Jason Doss, the Conklins’ lawyer at Doss Firm LLC in Marietta, Georgia. The couple lost more than $130,000 on reverse convertibles overall, Doss said.

“We feel so stupid,” Carol Conklin said, adding that she still has “no idea” what derivatives are.

The Conklins filed an arbitration claim that’s pending against Ameriprise Financial Inc., which bought H&R Block’s financial advisory business in 2008. Tuberosa, who works for Ameriprise in Sun City Center, declined to comment, as did Benjamin Pratt, an Ameriprise spokesman. A hearing is scheduled for May.

State regulators are seeing an “influx of concerns and complaints” from individual investors about structured products, including reverse convertibles, said Joseph Borg, director of the Alabama Securities Commission. Brokers who sell the investments sometimes don’t understand them, Borg said in a telephone interview.

Losses, Gains

Barclays sold $757.4 million of reverse convertibles in 588 offerings in the U.S. last year that matured by Nov. 30, the most of any bank, Bloomberg data show. Investors lost about 2 percent on average. Kristin Friel, a Barclays spokeswoman, declined to comment.

Royal Bank of Canada’s 505 reverse convertibles with a total face value of $372.9 million lost 1 percent on average, as did Wells Fargo & Co.’s 27 with a face value of $156.8 million, Bloomberg data show. Morgan Stanley issued $294.9 million in seven deals that lost an average of 6 percent.

Citigroup Inc. sold $274.1 million of reverse convertibles in 15 deals that made an average of 6 percent, the data show. Investors made an average of 1 percent on the 114 JPMorgan Chase & Co. reverse convertibles with a face value of $85.2 million that Bloomberg analyzed. UBS sold 44 with a total face value of $177.7 million that also made about 1 percent on average.

Spokesmen for the banks declined to comment.

JPMorgan Fees

JPMorgan, based in New York, charged about 3 percent on average in fees, the data show. In some cases, the fixed fees gave banks and brokers more profit than investors could earn on the securities.

The bank sold a three-month note on April 27 linked to West Chester, Ohio-based steelmaker AK Steel Holding Corp. that paid 3.5 percent in interest over the term of the security, or 14 percent on an annualized basis, according to an SEC filing. JPMorgan charged 5.2 percent in fees.

The bond couldn’t be converted into stock unless shares of the company fell more than 20 percent from their initial level of $17.43. AK Steel plummeted and triggered the conversion when it dropped to $13.40 on May 20. Investors lost 13 percent. Justin Perras, a JPMorgan spokesman, declined to comment.

“It sounds too good to be true, but the markets are stacked against you,” said Envision’s Cohen. Reverse convertibles are “really a toxic product,” she said.

Linked to TiVo

On May 11, JPMorgan sold $800,000 of reverse convertibles linked to TiVo Inc. that paid 64 percent a year in interest, according to a prospectus the bank filed with the SEC. Three days later, the Alviso, California-based digital-video recording pioneer dropped 42 percent after an adverse court ruling. Investors ended up losing 42 percent, including interest. The bank charged 1.75 percent in commission on the two-month notes.

While banks must pay competitive commissions to brokers, the fees on some short-term reverse convertibles are “very high” compared with other investments, said Richard Sandulli, a former head of structured products at Morgan Stanley and Wells Fargo who left the industry last year and is now a consultant.

Most structured products are “valuable tools” that spread the fee over a longer period of time, he said. Paying too much commission cuts into investors’ returns and encourages brokers to act against their clients’ best interests, he said.

“Just because something can be sold doesn’t mean it should be,” Sandulli said.

--Editors: Richard Bedard, Alan Goldstein

To contact the reporter on this story: Zeke Faux in New York at zfaux@bloomberg.net.

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net.

European Buyers Take Biggest Share of Bonds for Irish Bailout

Posted: 06 Jan 2011 05:00 AM PST

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By Jonathan Stearns

Jan. 6 (Bloomberg) -- Investors in Europe bought almost three quarters of the 5 billion euros ($6.6 billion) in bonds sold yesterday by the European Union to help finance the aid package for Ireland, according to the EU.

Europe accounted for 71.5 percent of the allocation of the five-year securities, the European Commission in Brussels said today. Asia represented 21.5 percent and the Americas 6 percent, the commission, the EU executive arm, reported in an e-mail.

Central banks and other “official” institutions represented 38.5 percent of the allocation, while fund managers accounted for 24.5 percent, banks 22 percent and insurance and pension companies 12 percent, according to the commission.

The issue was the first by the commission through its European Financial Stabilization Mechanism as part of the EFSM’s 22.5 billion-euro share of the 85 billion-euro Irish rescue.

The bonds were priced to yield 12 basis points more than the mid-swap rate, leading to an interest rate for the EU of 2.59 percent, the commission said yesterday. The interest rate on the loan to Ireland as a result will be 5.51 percent and the funds will be disbursed on Jan. 12, according to the commission.

--Editors: James Hertling, Andrew Atkinson

To contact the reporter on this story: Jonathan Stearns in Brussels at jstearns2@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

British Airways Picks Troubled Rolls-Royce Engine to Power A380s

Posted: 06 Jan 2011 05:00 AM PST

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By Howard Mustoe and Steve Rothwell

(Updates with comment from analyst in eighth paragraph.)

Jan. 6 (Bloomberg) -- British Airways Plc picked Rolls- Royce Group Plc’s Trent 900 engine to power its Airbus SAS A380 aircraft, boosting sales prospects for a model that blew up on a Qantas Airways Ltd. superjumbo in November.

Europe’s third-biggest airline agreed to buy the Trent 900s for 12 A380s to be delivered from 2013, Rolls-Royce said in a statement today. It will also equip 24 Boeing Co. 787s with Trent 1000s like the one that exploded on a test-bed in August.

“In the aftermath of the Qantas incident to have a customer sign up for Trent 900s is really rather reassuring,” said Sandy Morris, an analyst at Royal Bank of Scotland with a “buy” on shares of London-based Rolls-Royce.

British Airways signed the A380 contract, first flagged in 2007, after Chief Executive Officer Willie Walsh affirmed his “absolute confidence” in the engine, spokesman Euan Fordyce said by telephone. Rolls is pleased that one of its biggest airline clients continues to “trust” in its gear, CEO John Rose said.

Rolls, the world’s biggest engine maker after General Electric Co., said today’s order has a list price of $5 billion, including servicing and engines for a further seven A380s and 18 787 Dreamliners that British Airways has options to buy.

Sydney-based Qantas resumed A380 flights on Nov. 27, more than three weeks after the blowout that forced an emergency landing in Singapore and grounded six planes. Australia’s No. 1 airline has yet to reinstate superjumbo services to Los Angeles amid concern about the need to fly at full power on the route.

Oil Fire

The explosion, probably caused by an oil fire in one of the A380’s four engines that led the intermediate pressure turbine disc to disintegrate, according to the European Aviation Safety Agency, will endanger sales of the model, which competes with the GP7200 made by GE and United Technologies Corp.’s Pratt & Whitney unit, Agency Partners analyst Nick Cunningham has said.

British Airways last spurned Rolls-Royce in 1991, when it placed a $1.4 billion order for GE’s GE90 engine to power 15 Boeing 777 aircraft, a decision that caused “ructions” at the time, said Howard Wheeldon, senior strategist at BGC Partners.

“It was a big disappointment and the first time British Airways had gone to another supplier when they could have bought from Rolls,” Wheeldon said from London. “That BA has continued confidence in the Trent 900 and 1000 has to be positive.”

The Trent 1000 powerplant that exploded in August closed a test-bed in Derby, England, for at least three weeks. Rolls- Royce hasn’t said what went wrong.

Rolls was trading up 1.7 percent at 665 pence as of 12:52 p.m. in London, valuing the company at 12.4 billion pounds ($19 billion) after the stock advanced 29 percent last year. British Airways was today priced 1.7 percent higher at 292.6 pence.

--Editors: Chris Jasper, Benedikt Kammel.

To contact the reporter on this story: Howard Mustoe in London at hmustoe@bloomberg.net; Steve Rothwell in London at srothwell@bloomberg.net

To contact the editors responsible for this story: Benedikt Kammel at bkammel@bloomberg.net; Kenneth Wong at kwong11@bloomberg.net

Brazil Sets Reserve Requirement to Stem Real Rally

Posted: 06 Jan 2011 04:59 AM PST

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By Andre Soliani and Matthew Bristow

(Updates with Mendes comment in fourth paragraph, analyst comment in sixth paragraph.)

Jan. 6 (Bloomberg) -- Brazil’s central bank set reserve requirements on short dollar positions held by local banks in its third attempt since October to stem a rally in the currency. The real fell as much as 0.8 percent after the announcement.

The new rules have the potential to reduce short positions in the dollar to $10 billion from $16.8 billion in December as banks seek to avoid paying reserve requirements on currency operations, Aldo Mendes, the central bank’s director of monetary policy told reporters in Brasilia.

Starting April 4, Brazilian banks will need to deposit in cash at the central bank 60 percent of their short positions in U.S. dollars above $3 billion or their capital base, whichever is smaller. The reserves will not earn interest, Mendes said.

“It’s bad for the economy when the system swings to one extreme,” Mendes said.

Policy makers in Latin America are trying to stem currency gains as fast economic growth and low interest rates in rich nations attract capital inflows to the region. Finance Minister Guido Mantega said this week that Brazil’s government is ready to take new measures to prevent the dollar from “melting” and stem the real’s 38 percent rally against the dollar since 2009.

No Lasting Effect

The measure could weaken the real in the short-term, though is unlikely to have a lasting effect, said Andre Perfeito, chief economist at Gradual Investimentos.

“This measure won’t be efficient, because the real’s appreciation is based on fundamentals,” Perfeito said in a telephone interview from Sao Paulo.

Since October, Brazil’s central bank has twice raised, to 6 percent, a tax foreigners must pay to buy fixed income and derivative assets. President Dilma Rousseff, in her inaugural address Jan. 1, pledged to protect the country “from the indiscriminate flow of speculative capital.”

Brazil’s real fell as much as 0.8 percent after the announcement before paring losses. The currency weakened for the third straight day by 0.5 percent to 1.6821 per U.S. dollar at 7:52 a.m. New York time. Yields on the interest rate futures contract due in January 2012 rose three basis points to 12.12 percent.

Latin America

Other emerging markets including Chile and Peru have stepped up their battle against the weak dollar in recent days.

Chile this week said it will buy $12 billion in the foreign-exchange market to weaken the peso, the region’s best- performing currency over the past six month. Peru’s central bank on Jan. 1 extended reserve requirements for banks to their overseas units to stem inflows increasing volatility in the sol.

Mantega said Jan. 4 that the government has an “infinite” number of tools at its disposal to affect the country’s exchange rate and support exporters hurt by the currency gains.

Brazil’s trade surplus narrowed 20 percent last year from 2009 as a stronger currency and the fastest economic growth in more than two decades fueled imports.

Perfeito said today’s move by the central bank shows that Rousseff’s top concern is preventing the real from strengthening further. The move raises the risk bank President Alexandre Tombini won’t raise the benchmark Selic rate this month to control inflation running at a 23-month high, he said.

Selic Impact

“Perhaps they won’t increase the Selic next meeting, because they are trying so hard to control the exchange rate,” Perfeito said. “That’s my worry right now.”

Traders are betting policy makers will raise the benchmark rate by 50 basis points, to 11.25 percent, at their Jan. 18-19 policy meeting, according to Bloomberg estimates based on interest rate futures contracts. Brazil’s real interest rates accounting for inflation, the highest in the Group of 20 nations, are a magnet for speculative capital, Mantega has said.

Brazilian consumer prices, as measured by the IPCA-15 index, jumped 5.79 percent in the 12 months through mid- December. That’s the highest inflation rate in nearly two years.

Mendes said today’s move had no connection with monetary policy.

In 2009, Brazilian banks held $2.9 billion in long positions in dollars, swinging to $16.8 billion in short positions at the end of 2010, Mendes said.

The measures are “prudential” and could spur dollar purchases that weaken the real and reduce the central bank’s daily dollar purchases, he added.

Nelson Barbosa, the Finance Ministry’s executive secretary, said today’s measures had been under consideration since 2008 and will reduce volatility in the foreign exchange market.

--Editors: Harry Maurer, Joshua Goodman

To contact the reporter on this story: Matthew Bristow in Brasilia at mbristow5@bloomberg.net; Andre Soliani in Brasilia at asoliani@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net

Stocks Rise on Growth Outlook as Bank Risk Climbs, Euro Weakens

Posted: 06 Jan 2011 04:57 AM PST

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By Stephen Kirkland

Jan. 6 (Bloomberg) -- Stocks rose, sending the MSCI World Index to a two-year high, on speculation economic growth is accelerating. The euro declined and the cost of protecting against default by the region’s banks increased.

The MSCI World Index added 0.4 percent at 7:45 a.m. in New York. Standard & Poor’s 500 Index futures gained 0.3 percent. The euro weakened 0.3 percent against the dollar. An index of credit-default swaps on subordinated debt of European banks and insurers reached the highest since March 2009, according to JPMorgan Chase & Co. Brazil’s real slid as the central bank introduced some reserve requirements. Rubber jumped to a record.

Economists raised forecasts for U.S. nonfarm payrolls after a report yesterday showed companies added the most jobs since records began in 2001, while Federal Reserve Bank of Kansas City President Thomas Hoenig said America’s economy is strengthening. Ireland’s central bank said it might have to do more for its lenders, heightening concern Europe’s most-indebted countries will struggle to finance deficits.

“Most economists have lifted their estimates” for tomorrow’s payroll data, Athanasios Vamvakidis, a foreign- exchange strategist at Bank of America Merrill Lynch Global Research in London, wrote in a report. “The link between the euro periphery crisis and a weaker euro is about to become stronger.”

The Stoxx Europe 600 Index gained 0.9 percent to its highest since before the bankruptcy of Lehman Brothers Holdings Inc. in September 2008. BP Plc rallied 1.7 percent after the U.S. panel investigating the Gulf of Mexico oil spill said Halliburton Co. and Transocean Ltd. were partly to blame.

ARM, Lagardere

ARM Holdings Inc. jumped 7.6 percent to a 10-year high after Microsoft Corp. said the next version of its Windows operating system will run on ARM’s chip designs. Lagardere SCA surged 5.5 percent after Goldman Sachs Group Inc. added France’s biggest publisher to its Pan-Europe Buy List.

Banco Santander SA, Spain’s largest lender, slid 1.3 percent. KBC Groep NV, Belgium’s biggest bank, tumbled 3.4 percent after saying it will take additional provisions of as much as 330 million euros ($434 million), partly related to its Irish loan book. The Markit iTraxx Financial Index of default swaps on 25 European banks and insurers rose as much as 14 basis points to 355, before trading at 351, JPMorgan prices show.

Ireland may set up a second asset management agency to take over additional loan portfolios that banks are being forced to sell as part the country’s 85 billion-euro bailout agreement, according to Jill Forde, a central bank spokeswoman. Credit- default swaps on Ireland’s debt fell from a record to 625, according to CMA. Irish 10-year bond yields slipped two basis points to 9.17 percent.

Portugal, Belgium

The yield on the Portuguese 10-year bond advanced five basis points. The extra yield investors demand to hold Portuguese 10-year bonds instead of benchmark German bunds rose eight basis points to the most in more than a month.

Belgium’s 10-year bonds slid, sending the yield up five basis points to 3.99 percent, while the extra yield versus bunds increased five basis points to 105 basis points. Swaps on its government debt rose four basis points to a record 223, according to CMA. Belgium’s political crisis deepened as the nation’s leaders failed to restart seven-party talks to form a government, prolonging the deadlock in Europe’s third-most- indebted country.

The gain in U.S. stock-index futures indicated the S&P 500 may extend yesterday’s climb to its highest level since September 2008. The yield on the 10-year U.S. Treasury note slipped four basis points to 3.43 percent.

Jobless Claims

A Labor Department report today may show initial claims for jobless insurance were 408,000 last week, holding near a 30- month low, according to a survey. The data comes a day before December nonfarm payrolls figures, which economists forecast will show the U.S. economy added 150,000 jobs, up from 140,000 estimated earlier this week. The unemployment rate slid to 9.7 percent from 9.8 percent, according to the median forecast.

The Shanghai Composite Index declined 0.5 percent after central bank Governor Zhou Xiaochuan said inflation pressures in China were rising. India’s Sensitive Index fell 0.6 percent after the International Monetary Fund said the nation’s central bank may have to keep raising interest rates to curb inflation.

Turkey’s ISE 100 National Index jumped 1 percent and bonds rallied after the government sold $1 billion of 30-year notes at what the Ankara-based Treasury said was the lowest-ever interest rate for that maturity.

Reserve Requirements

The Brazilian real slipped 0.5 percent to 1.6815 versus the dollar after the central bank introduced reserve requirements on short positions in U.S. dollars held by local banks in a move that may help stem a rally in the currency.

The euro fell for the fourth day versus the dollar, and weakened against 12 of its 16 most traded peers. The Australian dollar depreciated 0.2 percent against the U.S. currency, also dropping for the fourth consecutive day.

Swollen rivers are forcing more evacuations in the Australian state of Queensland, where floods have caused more than A$5 billion ($5 billion) in damage across an area the size of France and Germany.

South Korea’s won rose 0.5 percent versus the dollar as exporters forecast increased sales and investment amid signs of an economic recovery in the U.S., the country’s second-largest export market.

Copper advanced 0.5 percent in London after earlier rising as much as 1.1 percent. Wheat fell 0.7 percent to $8.03 a bushel in Chicago and rubber climbed to an all-time high of 440.8 yen a kilogram ($5,308 a metric ton) in Tokyo.

--With assistance from Claudia Carpenter, David Merritt, Abigail Moses, Daniel Tilles and Jason Webb in London. Editors: Stephen Kirkland, Stuart Wallace

To contact the reporter on this story: Stephen Kirkland in London at skirkland@bloomberg.net.

To contact the editor responsible for this story: Paul Sillitoe at psillitoe@bloomberg.net.

Intel Offers Remedies to EU Concerns on McAfee Bid

Posted: 06 Jan 2011 04:56 AM PST

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By Aoife White

(Adds analyst comment in fifth paragraph.)

Jan. 6 (Bloomberg) -- Intel Corp., the world’s largest chipmaker, made proposals to the European Union to address antitrust concerns about its $7.68 billion purchase of McAfee Inc.

Intel offered commitments to the EU and regulators extended their deadline to rule on the deal by two weeks to Jan. 26, the European Commission said in a statement on its website today. Regulators didn’t give details on Intel’s proposal.

“We are continuing to work with the commission,” Chuck Mulloy, a spokesman for the Santa Clara, California-based company, said in a phone interview yesterday before the EU made its statement. “We continue to expect closing the transaction in the first half of 2011.”

Intel, the world’s biggest chipmaker, is counting on McAfee to help it add security measures to its semiconductors for computers, smartphones and other devices. The EU is looking at whether Intel’s plan to build computer-security features into its chips would affect competitors, the Wall Street Journal reported last month.

“These two business segments are mostly unrelated right now, so I don’t expect there’s a significant antitrust issue,” said Thomas Becker, an analyst at Commerzbank in Frankfurt. “I wouldn’t expect the concessions to involve anything really major, like selling part of McAfee.”

Calls to Mulloy’s office and mobile phone seeking comment on Intel’s offer outside normal office hours were not immediately returned.

‘Extraordinarily Burdensome’

Offering remedies in the first part of an EU merger review can help a company avoid an “extraordinarily burdensome” deeper probe that can last up to four months, said Robert Fleishman, a lawyer with Steptoe & Johnson LLP in Brussels.

Intel won U.S. approval for the deal last month.

Intel in 2009 was fined 1.06 billion-euros ($1.39 billion) by the EU over allegations the company impeded competition by giving rebates to computer makers that buy all or almost all of their chips from Intel.

--With assistance from Joel Rosenblatt in San Francisco and Matthew Campbell in Paris. Editors: Peter Chapman, Christopher Scinta.

To contact the reporter on this story: Aoife White in Brussels at awhite62@bloomberg.net.

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net.

ARM Soars in London on Microsoft Windows System Deal

Posted: 06 Jan 2011 04:56 AM PST

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By Jonathan Browning

(Updates with analyst comment in third paragraph.)

Jan. 6 (Bloomberg) -- ARM Holdings Plc jumped the most in almost seven months in London trading after Microsoft Corp. said the next version of its Windows operating system will run on ARM’s chip designs for the first time.

ARM, which designs semiconductors that power Apple Inc.’s iPhone, rose as much as 13 percent. Microsoft said yesterday it will work with ARM-based chips, as it aims to produce an operating system running on smaller, thinner devices with longer battery life and catch up with Apple in the tablet computer market.

“Microsoft has always been tied to Intel and the fact that it’s now embracing ARM is an acceptance that ARM is the dominant force in mobile and now perhaps beyond mobile,” said Paul Morland, an analyst at Peel Hunt in London.

ARM, based in Cambridge, England, signed a licensing agreement with Microsoft in July, to let the company access designs to build its own devices. ARM may start receiving royalties on chip shipments from 2012, Morland said.

ARM rose as much as 63.1 pence to 534.5 pence, the biggest intraday jump since June 10, and traded at 516 pence as of 9:24 a.m. The shares have climbed 22 percent since the start of 2011, giving the company a market value of 6.8 billion pounds ($10.6 billion).

The Windows software will be tailored for battery-powered devices, such as tablets, netbooks and other handhelds, Washington-based Microsoft said yesterday at the Consumer Electronics Show in Las Vegas.

While other versions of Microsoft programs aimed at phones and mobile devices already work on ARM chips, this is the first time the software maker will produce a full version of Windows available on that technology.

The operating system also marks a shift in Microsoft’s alliance with semiconductor maker Intel Corp., which has struggled in tablets and mobile devices.

--Editors: Robert Valpuesta, Simon Thiel.

To contact the reporter on this story: Jonathan Browning in London jbrowning9@bloomberg.net.

To contact the editor responsible for this story: Vidya Root at vroot@bloomberg.net.

The Court Case Haunting Health Care

Posted: 29 Dec 2010 02:00 PM PST