Google or Microsoft: Yahoo Should Pick Both

Yahoo might well be able to have its Google cake and eat Microsoft’s market share, too.
Faced with the prospect that Yahoo might give some of its search advertising business to Google, Microsoft recovered from its “we’ve moved on” tantrum and proposed combining its search ad business with that of Yahoo.
On the face of it, Yahoo now has a real choice between two options that might well help it increase search revenue and still keep its independence.
The most attractive option for Yahoo, however, might be to do both. That’s right: it should merge its search advertising unit with that of Microsoft. And for the year or two (at best) it will take to combine those two systems, it can let Google sell ads on some of its search terms, bringing in many hundreds of millions of dollars in much-needed cash.
This is a wacky structure, but it is essentially the same deal Yahoo is discussing with Google now. Yahoo doesn’t want to give up on search ads, presumably on the theory that there is room in the market for a No. 2 player and because search ads are tied at least a bit to display ads, which are essentially its core business. So it wants to take money from Google, in effect, to build its own rival to Google.
Google had a few reasons for talking about a deal that would help its closest rival. Money, for one: each search it can put an ad on is more money in the bank. Moreover, I suspect that Google is so cocky, with at least some reason, that it figures Yahoo won’t be able to catch up, even with a cash boost.
Google also has legal reasons to keep any deal with Yahoo flexible. It has so much market share in search ads that antitrust regulators would look askance at a long-term restrictive contract with Yahoo. (The deal they are discussing would allow others, including Microsoft, to bid for Yahoo’s search ad business. But Google makes so much more money on each search that it presumably would wind up selling most of the ads.)
There are some soft motives for Google as well. Love: Yahoo gave Google its first big break, allowing it to power Yahoo’s search engine. And hate: Google sees Microsoft as its mortal enemy, so it wants to help keep Yahoo out of Microsoft’s hands.
So why would Google agree to a deal even if Yahoo merges its search business with Microsoft? I’m not saying it is likely. But most of Google’s reasons for doing it still apply. It will still make money and at least temporarily increase its share of the search market. It also doesn’t have that much to fear from even a combined Yahoo and Microsoft. And since it is partway down the road toward offering Yahoo this sort of arrangement, why back out now?
Microsoft may find this concept more than a little disturbing. It doesn’t seem to buy the open nature of the proposed arrangement between Yahoo and Google, and it suggested that the proposed deal was one reason it walked away from its acquisition negotiations.
But if Microsoft wants Yahoo to consider its alternative arrangement, it needs to give it all of what it wants: independence, cash now to assuage shareholders, and the ability to have at least a piece of a search advertising business that could rival Google in the future.
Microsoft could do that, without involving Google, with its checkbook. It could offer to pay Yahoo enough cash to cover the gap between what Yahoo would earn on its own search ads and what Google would pay for them.
That is probably the most likely scenario here. (That is on the assumption that Yahoo doesn’t just sell its search ad business to Microsoft.) But it would be very amusing if Yahoo and Microsoft found a way to get Google to put up some of the money they need to build the Google killer they both dream of.

Virgin Mobile USA sees telecom consolidation

The head of Virgin Mobile USA (VM.N) said on Tuesday he expects more consolidation in the U.S. telecommunications industry, including deals among providers who rent space on larger operator's networks.


Chief Executive Dan Schulman also reiterated that Virgin was in preliminary talks with SK Telecom Co (017670.KS) "about a number of different potential opportunities." SK controls Helio, another U.S. mobile operator, which like Virgin rents network space to target young customers.

Schulman told the Reuters Global Technology, Media and Telecoms Summit that along with deals among mobile virtual network operators (MVNOs) he also expects other operators of wireline, wireless and cable networks to consolidate.

"I do believe you're going to see continued consolidation in this industry," Dan Schulman said. "That should not be surprising to anybody. Over the long term networks are commodities ... what you need is more and more scale and more and more cost efficiencies."

Virgin Mobile USA is partly owned by Richard Branson's Virgin (VA.UL) and Sprint Nextel (S.N).

Microsoft Appeals $1.4 Billion Fine by Europe

Microsoft asked Europe’s second-highest court to overturn or reduce a record fine of 899 million euros ($1.4 billion) from the European Union. The appeal was filed at the European Court of First Instance in Luxembourg, a Microsoft spokesman, Jesse Verstraete, said in an e-mailed statement. The European Commission, the E.U.’s antitrust authority, fined the company on Feb. 27 for failing to comply with a 2004 antitrust order. Under that decision, in which Microsoft was fined 497 million euros, the E.U. ordered the software maker to provide data to rivals to allow servers to connect to the Windows platform.

Microsoft and Bill Gates

SEATTLE - Microsoft Corp. is looking ahead to a strong fiscal 2009, with or without Yahoo.


The software maker gave Wall Street a first peek at guidance for next year indicating that strong worldwide sales would overpower hiccups in the U.S. economy that could depress information technology spending.

But investors disappointed with Microsoft's more immediate outlook for the current fourth quarter and with weaker-than-expected sales in the division responsible for Windows sent shares 4.6 percent, or $1.47, to $30.33 at the open of trade Friday.

Before diving into quarterly results Thursday, Microsoft Chief Financial Officer Chris Liddell spent a few minutes on a conference call with analysts reiterating the company's stance on its stalled bid to buy Yahoo Inc. In February, Yahoo's board rebuffed Microsoft's offer — worth $44.6 billion at the time — saying it undervalued the company. Since then, the value of the offer has fluctuated with Microsoft's share price; it was worth $44.06 billion Thursday.

"Unless we make progress with Yahoo towards an agreement by this weekend, we will reconsider our alternatives," he said. "These alternatives clearly include taking an offer to Yahoo shareholders or to withdraw our proposal and focus on other opportunities."

Microsoft CEO Steve Ballmer made similar comments in a speech in Italy on Wednesday, when he said his company is "prepared to move forward alone without Yahoo."

Liddell said Microsoft will issue an update on the Yahoo situation next week.

In the quarter ended March 31, Microsoft's profit fell 11 percent to 4.39 billion, or 47 cents per share, from $4.93 billion, or 50 cents per share, in the same period last year, when the software maker reported more than $1 billion in deferred revenue tied to delays in the launch of the Windows Vista operating system.

Revenue edged up to $14.45 billion from $14.4 billion in the year-ago quarter.

The results came in ahead of Wall Street's expectations on both measures. Analysts surveyed by Thomson Financial forecast a profit of 44 cents per share on $14.4 billion in sales.

Sales of Windows software were not as strong as Microsoft or analysts had predicted in the quarter, despite Microsoft's comments that sales of Vista licenses — now at 140 million, up from 100 million in January — are on track.

Revenue in that division fell 24 percent to $4.02 billion. While the miss wasn't quite that grand — that figure doesn't take into account a tough comparison with the year-ago quarter, when Microsoft booked $1.67 billion in deferred Vista revenue — analysts were disappointed.

"It just seems like people, including myself, everybody kind of got a little too comfortable with them being conservative," said Cowen and Co. analyst Walter Pritchard, who expected the company to sail past guidance as it has done in recent quarters.

Microsoft's miss was fueled by a few factors. Even though research groups like Framingham, Mass.-based IDC reported that PC shipments were better than expected in the quarter, Microsoft's independent calculation showed fewer PC shipments than expected.

The company has also seen increases in revenue in the last two quarters as people who once would have bought pirated software spent money on genuine Microsoft software instead. But in the third quarter, Microsoft wasn't able to get the bump it had expected. Liddell said a rash of unlicensed software in China kept Microsoft from meeting its targets.

Finally, Microsoft said inventory levels were high among some computer sellers at the end of the second quarter, which may have kept them from restocking as much as expected in the third quarter.

Sales in the segment that sells the Office productivity suite and other business applications edged down 2 percent to $4.75 billion from a year ago. Liddell said weak sales of Office to consumers and in Japan overall hurt the segment.

Server and tools sales rose 18 percent to $3.3 billion, helped by the launch of new versions of Windows Server and other major software franchises.

Revenue from the division responsible for the Xbox 360 video game system ballooned 68 percent to $1.58 billion, which Microsoft attributed to robust demand for game consoles.

Microsoft's online services business, which makes money primarily by selling advertising online, saw sales rise 40 percent to $843 million, but the division widened its operating loss in the quarter.

Microsoft upped its fiscal fourth-quarter guidance to a profit of 45 cents to 48 cents per share, barely meeting Wall Street's current view for 48 cents per share. The software maker forecast $15.5 billion to $15.8 billion in sales. Analysts were expecting revenue of $15.56 billion.

Microsoft also gave its first guidance for next fiscal year, which ends in June 2009. The company predicts a profit of $2.13 to $2.19 per share, on sales from $66.9 billion to $68.0 billion. Wall Street is currently looking for a profit of $2.10 per share on $66.52 billion in sales.

Investors sent shares down $1.60 to $30.33 in after-hours trading. Earlier in the day, the stock had gained 35 cents, or 1.1 percent, to close at $31.80.

Apple 2Q profit jumps 36 percent

SAN JOSE, Calif. - Apple Inc.'s fiscal second-quarter profit jumped 36 percent on blistering sales of Macintosh computers, but the company forecast lower-than-expected earnings and its stock price tumbled as much as 5 percent.


The Mac and iPod maker is believed to be especially vulnerable to slowing consumer spending in the United States because of its strong presence here versus overseas.

Apple shares fell $2.31, or about 1 percent, to $160.58, in after-hours trading. The stock had fallen nearly 5 percent earlier. It had closed up $2.69, or 1.7 percent, at $162.89 before its earnings were reported.

But the latest results showed that it was firing on all cylinders during the first three months of the year.

The Cupertino-based company earned $1.05 billion, or $1.16 per share, in its second quarter, which ended March 29. That's 9 cents per share better than what analysts surveyed by Thomson Financial were expecting.

During the same period last year, Apple earned $770 million, or 87 cents per share.

Revenue jumped 43 percent in the period to $7.51 billion — also beating Wall Street's expectations. Analysts were predicting Apple would rake in $6.96 billion in revenue.

Apple said it was the strongest sales and earnings performance during the March quarter in Apple's history.

Apple's chief financial officer, Peter Oppenheimer, declined in an interview to discuss how the company might be affected by slowing domestic consumer spending. Management is aware of the economic pressures but is focused on running the company, which performed "exceptionally well" and turned in an "awesome" quarter, he said.

The company forecast profits for the fiscal third quarter of $1 per share, short of the $1.10 per share in the average analyst estimate and at the low end of what all analysts polled were expecting.

Sales are expected to be about $7.2 billion, slightly above the $7.16 billion Wall Street was expecting.

Netflix forecasts disappoints investors

Netflix stock, up 49% this year, was hammered after the closing bell Monday when the company said it merely matched financial expectations in the first quarter, and then said it didn't expect to add many subscribers in the current period.

Netflix earned $13.4 million in the first quarter, up from $9.9 million a year ago on revenue that rose 7% to $326.2 million. The company ended the quarter with 8.2 million subscribers, 21% more than in the same quarter a year ago.

But while the company added a net 764,000 subscribers in the first quarter, it said it expects to end the current quarter with 8.3 million-8.5 million subscribers, translating -- at the low end -- to a gain of 60,000 this quarter.

Netflix, however, raised year-end guidance to 9.1 million-9.7 million subscribers, up 200,000 at both ends, but investors weren't impressed, and the stock was off as much as 15% in after-hours trading after rising 2% to $39.32 during the regular session.

Netflix CEO Reed Hastings also said Monday that he has struck three more partnerships for delivering movies over the Internet to TV screens, like one announced in January with LG Electronics.

Hastings declined to name the companies, but said one is small, and two are large. His intent is to get the Netflix watch-instantly system into Blu-ray Disc players, set-top boxes, game consoles and TV sets so that movies can be easily viewed on-demand by Netflix customers on TV screens and not just computers, as is the case now.

The large partners should introduce products in the fourth quarter, while the small partner's product is expected sooner, Hastings said.

Hastings said Netflix's subscription growth should be strong enough to "aggressively fund" the watch-instantly service, which today boasts 9,000 movie and TV titles.

EBay Profit Increases on New Selling Fees, PayPal

EBay Inc., the world's largest Internet auctioneer, posted first-quarter profit that rose more than analysts estimated on higher selling fees and increased revenue from its PayPal payment service.

The online retailer forecast annual sales and profit that were more than its projection in January.

International revenue rose 32 percent, helped by the dollar's decline and Europeans buying goods from the U.S. EBay raised fees for completed sales and lowered the price of listing items to attract a better selection of merchandise. Chief Executive Officer John Donahoe, who replaced Meg Whitman on March 31, is trying to improve buyers' experiences to compete with Amazon.com Inc. as an all-purpose online store.

``Essentially, they're doing the small things right and sticking to their knitting,'' Jeffrey Lindsay, an analyst with Sanford C. Bernstein & Co. in New York who recommends buying the shares, said yesterday. Donahoe ``has pushed forward things for the benefit of the buyer, which is essential to EBay's future, by addressing issues of fraud and buyer discomfort.''

Net income climbed 22 percent to $459.7 million, or 34 cents a share, the online retailer said yesterday in a statement. Revenue climbed 24 percent to $2.19 billion for the three months ended March 31.

Excluding some costs, EBay exceeded estimates by 3 cents.

Shares Rise

EBay, based in San Jose, California, rose 28 cents, or 0.9 percent, to $32.40 in Frankfurt trading as of 11:21 a.m. German time. The online retailer has fallen 3.2 percent this year before today, compared with a 19 percent decline by Amazon.com, the world's largest online retailer.

Twenty-two analysts surveyed by Bloomberg estimated average earnings of 39 cents a share. They predicted sales of $2.07 billion. In January, EBay projected so-called adjusted first- quarter earnings of 37 cents to 39 cents a share on sales of as much as $2.05 billion.

``They set the bar very low for the new CEO, and they had to set the bar low because of the uncertainty of the new fee changes,'' Tim Boyd, an analyst with American Technology Research, said in a Bloomberg Television interview from Greenwich, Connecticut. He recommends buying the shares.

EBay projected second-quarter earnings of 39 to 41 cents a share, excluding some costs, in line with analysts' estimates of 40 cents. The retailer projected revenue of as much as $2.15 billion.

Annual profit excluding costs will be $1.70 to $1.75 a share, an increase from EBay's January forecast of $1.63 to $1.67. Revenue may be as much as $9 billion, EBay said, higher than its previous prediction of as much as $8.75 billion.

Slowing Growth

The forecast reflects concern that EBay may be affected by a slowing of growth in electronic commerce, Chief Financial Officer Robert Swan said.

``We do not believe that we are immune,'' Swan said in a phone interview. ``Our sense is that our initiatives are driving the desired benefits, but the underlying economy is slowing.''

Donahoe, 47, joined EBay in 2005 from Bain & Co. He's said his three priorities for the company are improving its fixed- price business, which competes with Amazon.com, growing PayPal and bolstering customer safety and trust.

EBay bought Israeli software company Fraud Sciences Ltd. in January for $169 million to improve PayPal security. In March, EBay said it would fire 125 of its 15,500 employees as part of a global reorganization.

Completed Sale

While slashing listing costs, Donahoe boosted the cost of a completed sale. Customers who sell a $20 baseball card must now pay a fee of $1.75, compared with $1.05 previously, for example. Sellers rated highly by buyers for fast shipping can receive discounts.

The online company is also linking search results to seller ratings and experimenting in Australia with making PayPal a required channel for payment.

Previous changes have angered sellers, some of whom have attempted to organize boycotts of EBay.

``We may have sellers that make some noise and pull some items, but we're absolutely confident we'll improve the buyer experience, and that will make a better and more vibrant EBay,'' Donahoe said in a conference call with analysts and investors.

New listings rose 10 percent to 647.4 million from a year earlier, the second quarterly increase in a row, EBay said.

International revenue climbed at twice the pace in the U.S. Overseas sales make up 53 percent of EBay's revenue and cross- border buying made up 18 percent of merchandise volume.

PayPal revenue climbed 32 percent to $581.6 million as the payment unit signed agreements with JetBlue Airlines and Italy's Ferrari Store.

Revenue from Skype, Ebay's Internet-telephone unit, climbed 61 percent to $126.3 million in the quarter.

Profit was $377.2 million, or 27 cents a share, a year earlier.

Blockbuster offers $1 billion-plus for Circuit City

Blockbuster Inc (BBI.N), the No. 1 U.S. movie rental chain, said on Monday it has offered to buy electronics retailer Circuit City Stores Inc (CC.N) for about $1 billion to $1.3 billion in cash.



Blockbuster said it made the unsolicited approach in February, offering $6 to $8 per share. That represents a premium of 54 to 105 percent over Circuit City's closing share price of $3.90 last week, although the troubled retailer's stock traded above $21 last year.

Blockbuster Chief Executive and Chairman Jim Keyes, a former 7-Eleven CEO hired last year with a mandate to turn around Blockbuster, made the offer in a February 17 letter to Circuit City Chief Executive Philip Schoonover, but Blockbuster said Circuit City had so far failed to provide due diligence.

Keyes in the letter said the "new" Blockbuster would be "the most convenient source for media entertainment." Keyes has shifted Blockbuster from a heavy emphasis on online DVD rental to enticing customers through a variety of in-store and electronic offerings, including more emphasis on DVD sales.

Blockbuster said it made the proposal public, "because it believes the shareholders of Circuit City should have the opportunity to participate in determining the destiny of the company."

The combination would result in an $18 billion global retail company that would be "uniquely positioned to capitalize on the growing convergence of media content and electronic devices," the company said in its statement.

"We believe the combination will result in a compelling consumer proposition that will drive significant revenue and margin enhancements as well as costs synergies," Keyes said.

Circuit City was already talked of as a takeover target. Its shares have crashed to multiyear lows in the past year, as it has posted losses.

It has made store changes, including replacing more than 3,000 workers with lower-paid employees -- a move that disrupted its business and upset sales.

Circuit City had an average of 166.5 million shares in its most recent quarter. Its shares closed at $3.90 on the New York Stock Exchange on Friday.

Circuit City and Blockbuster were not available immediately for comment.

Samsung boss 'may quit' due to allegations

Samsung Group chairman Lee Kun-hee said Friday that he will consider structural and management changes -- including his own position -- over a corruption scandal that has rocked South Korea's biggest industrial conglomerate.


Lee Kun-hee has led Samsung Group for 20 years.

1 of 2 "I will deeply think about reshuffling the corporate management structure and the management lineup, including myself," Lee told reporters after a second round of questioning by an independent counsel probing allegations of bribery and other wrongdoing.

Asked if that meant he would resign, Lee said he "will think about it."

The independent counsel, sanctioned by South Korea's National Assembly and former president, began its probe in January. Investigators have until April 23 to collect evidence.

Kim Yong-chul, a former top lawyer for Samsung, claimed in November that the conglomerate had 200 billion won ($205 million) in a slush fund and used it to bribe prosecutors and judges.

He also alleged that Lee's wife, who heads a Samsung art museum, used some of the money to buy expensive paintings from abroad.

Samsung denied Kim's allegations when they were raised.

Lee, 66, was summoned the first time a week ago and questioned for almost 11 hours. Friday's questioning lasted about five hours.



Lee also said he assumed blame for the scandal and would "take full responsibility, either morally or legally," in remarks similar to ones he made upon emerging from questioning last week.

Samsung Group is a massive conglomerate consisting of dozens of businesses. It has interests in industries including electronics, shipbuilding, construction, insurance and leisure.

Lee, who has led the group for 20 years, is credited with turning Samsung Electronics Co., its flagship enterprise, into a top global brand. His late father established the conglomerate 70 years ago.

Besides the slush fund, bribery and art claims, investigators are looking into long-simmering allegations of murky dealings involving the family-run group's complex ownership structure.


South Korean conglomerates, known as "chaebol," have long been accused of influence-peddling as well as dubious transactions between subsidiaries to help controlling families evade taxes and transfer wealth to heirs.

Special prosecutors questioned Lee's wife for more than six hours last week. His son, an executive at Samsung Electronics, brother-in-law and senior Samsung Group officials have also endured hours of questioning.

Yahoo, Time Warner closing in on AOL deal

Yahoo Inc and Time Warner Inc are "closing in" on a deal where Yahoo would merge with Time Warner's AOL Internet unit, brushing aside Microsoft's bid for Yahoo, a source familiar with the talks said on Wednesday.

The source confirmed a Wall Street Journal story saying Yahoo would receive a cash investment from Time Warner in exchange for a 20 percent stake in the combined Yahoo-AOL business. The deal would exclude AOL's fading dial-up Internet access business and value AOL at about $10 billion.

A deal with Time Warner and AOL would be part of a multi-pronged strategy by Yahoo in which it would outsource Web search advertising operations to Google Inc, the source said.

Separately, The New York Times reported that Microsoft and Rupert Murdoch's News Corp are in negotiations on making a joint bid for Yahoo. That merger would join Yahoo, Microsoft Corp's MSN and News Corp's MySpace, the paper said.

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(Reporting by Eric Auchard

Boeing's Dreamliner hits more turbulence

Investors shake off the latest delay in the rollout of its much-anticipated 787




When Boeing Company announced Wednesday yet another delay in the production of its upcoming 787 commercial jet, company executives moved fast to convince Wall Street and its customers that it could deliver on its promises.

The hard sell worked - for now. Boeing stock surged 4% in trading Wednesday after the details of the delay - the third major slip in the production of the 787 - emerged and investors breathed a sigh of relief that the news, which they had expected, was not worse. Had Boeing announced a longer setback, company shares would likely have taken a beating.

But Boeing (BA, Fortune 500) doesn't have much room for error. Nothing short of the company's future in commercial jets is at stake with the 787, also known as the Dreamliner, as it battles archrival Airbus for control of the commercial skies.

The Dreamliner marks Boeing's first all-new airliner since the 777 in 1994. With its lighter weight, more streamlined design and efficient engines from Rolls Royce and General Electric (GE, Fortune 500), the Dreamliner is projected to be 20 percent more fuel efficient than comparably-sized aircraft. The materials used, chiefly the super-durable carbon-fiber composite, are projected to save 30 percent in maintenance costs

Airlines and airline leasing companies have ordered 892 Dreamliners, worth $145 billion at the list price, since it was made available for sale in 2003. That's a record for a new commercial jet - and evidence of how badly the industry badly needs and wants this plane.

Boeing can't afford any more delays. The latest production push puts the Dreamliner 15 months behind its original schedule. In the last six months, due to 787 delays and the loss of a major contract to competitors, Boeing's stock price has slipped almost 22 percent. If the company fails to hit its new schedule, expect a drubbing.

Company officials reassured investors Wednesday that no more delays are expected. The aircraft's maiden flight is now slated for the fourth quarter of this year. Deliveries of planes to Northwest (NWA, Fortune 500), Continental (CAL, Fortune 500) and other airlines signed on to buy them should begin in the third quarter of 2009, with 25 of the jets expected to be delivered by the end of 2009. That compares to 109 deliveries under the prior plan.

Pat Shanahan, a Boeing vice president who heads up the 787 program, told analysts during a conference call Wednesday morning that problems with partners supplying parts for the 787, ranging from metal fasteners to large sections of the fuselage, are at the root of the delays. Since January, when Boeing announced its last schedule slip, Shanahan has dispatched manufacturing experts to factories all over the world to solve the problems.

But Shanahan isn't guaranteeing that the necessary fixes have been made. "The issue is the capability in the supply chain to do the things that we need to have done, that's the untested part of this program," Shanahan told analysts. "That is where our energy and attention is."

The delays are worst for those airlines that are banking on the plane, which can fly the distance of a jumbo jet but has the capacity of a mid-size aircraft (about 250 passengers), to open up new routes. All Nippon Airways, the first customer for the 787 with 50 planes on order, is hoping to offer new routes in Asia - and isn't happy about the wait.

"We are extremely disappointed," as spokesman for the Japan-based airline said Wednesday. "We still have no details about the full delivery schedule, and we would urge Boeing to provide us with a 120% definitive schedule as soon as possible."

Yahoo not opposed to Microsoft deal at right price

Yahoo not opposed to Microsoft deal at right price
Reuters
Published: Monday, April 07
NEW YORK (Reuters) - Yahoo Inc is not opposed to Microsoft Corp's bid for the Web media company, as long as it is at the right price, Yahoo's board said on Monday in a letter to Microsoft Chief Executive Steve Ballmer.

"We have continued to make clear that we are not opposed to a transaction with Microsoft if it is in the best interests of our stockholders," the letter said. "Our position is simply that any transaction must be at a value that fully reflects the value of Yahoo, including any strategic benefits to Microsoft, and on terms that provide certainty to our stockholders."

Yahoo is responding to a three-week deadline issued by Ballmer in a letter to Yahoo on Saturday for Yahoo to agree to Microsoft's $31 a share cash-and-stock offer or risk seeing the bid lowered.







Font:****Yahoo shares slipped 2 percent in premarket trading to $27.80, after closing at $28.36 on Nasdaq on Friday.

Directors of Sunnyvale, California-based Yahoo rebuffed Microsoft's original offer in February, saying it undervalued Yahoo and that it is seeking alternatives.

"Our board has been actively and expeditiously exploring our strategic alternatives to maximize stockholder value, a process which is ongoing," Yahoo's board said on Monday. "All of these actions have been driven by our overarching commitment to maximize stockholder value.

"Our board's view of your proposal has not changed. We continue to believe that your proposal is not in the best interests of Yahoo! and our stockholders."

Yahoo shareholders and analysts say Yahoo's best options are to find an ally to help demonstrate Yahoo is worth more as an independent player, or surprise the market with a strong show in its quarterly results.

The consensus on Wall Street is that no "white knight" will emerge to whisk Yahoo away from Microsoft and its proposed cash-and-stock offer currently valued at $42.2 billion.

Check Out Line: Starbucks’ new brew

Check out the free coffee!

Starbucks will be handing out free 8-ounce samples of its new everyday brew called Pike Place Roast on Tuesday at 9 a.m. Pacific time (noon eastern).

But the free coffee is not just about generosity. Starbucks is counting on the new coffee as one tool to help reinvigorate U.S. traffic, which has been slowing in recent months.

The Pike Place Roast brew is supposed to remind consumers of Starbucks’ early Seattle roots. The company says the coffee has a smoother flavor and finish.

The new brew is one of several steps Starbucks announced last month — including a new customer rewards program and new espresso machines — as it tries to draw customers back amid a weak U.S. economy and competition in the coffee business from McDonald’s.

Motorola to Eliminate

Motorola Inc. said it would cut another 2,600 jobs, bringing to about 10,000 the number the company has eliminated since the beginning of 2007.

Motorola, which is struggling to cope with a sharp plunge in cellphone sales, said it expects to take a first-quarter pretax charge of $104 million resulting from severance costs related to the latest job cuts.

The Schaumburg, Ill., telecommunications-equipment maker said the estimate is composed of $113 million in charges for severance costs, partially offset by $9 million in reversals for accruals from prior periods that are no longer needed, according to a Securities and Exchange Commission filing Thursday.

The layoffs are the first wave of a planned $500 million cost-reduction for this year. "The work-force reductions are intended to make financial resources available for strategic business investment, while better aligning operational costs and expenses with business growth," Motorola said in a statement.

The company said all three of its business segments, as well as various corporate functions, are affected by these plans.

Included in the 2,600 jobs to be cut are 700 being eliminated as a result of Motorola's decision to end mobile manufacturing operations in Singapore by the end of 2008. Also included are 354 jobs in Plantation, Fla., where handsets for use on mobile broadband WiMax networks were being developed.

Apple's iTunes largest US music retailer

APPLE'S iTunes online music store has surpassed Wal-Mart Stores to become the largest music retailer in the US, the company said overnight.

Apple's statement, citing industry data, came on the same day that iTunes faced a new challenge as News Corporation's MySpace social networking site said it had formed an online music venture with three record labels.

News Corp is the parent company of the publisher of NEWS.com.au.

Apple said its announcement was based on consumer data collected in January and February by market research firm NPD that counted 12 songs being equal to one CD.

In February, NPD said iTunes overtook Best Buy and Target in 2007 to become the second largest US music seller.

Apple, which makes iPod media players, Macintosh computers and the iPhone, said iTunes had 50 million customers who had bought more than 4 billion songs since the store opened five years ago.

Shares in Apple rose 2.8 per cent to close at $US151.61 ($164) amid a 1.9 per cent gain in the broader Nasdaq market.

The stock is about 25 per cent below its all-time high hit in December, but has risen 25 per cent in the last month amid signs consumer worries over the economy have not dampened Apple's sales.

Wal-Mart Drops Lawsuit

Wal-Mart Stores Inc. is dropping a controversial effort to collect over $400,000 in health-care reimbursement from a former employee who is confined to a southeast Missouri nursing home since she suffered brain damage in a traffic accident.

The world's largest retailer said Tuesday in a letter to the family of Deborah Shank it will not seek to collect money the Shanks won in an injury lawsuit against a trucking company for the accident.

Wal-Mart's top executive for human resources, Pat Curran, wrote that Ms. Shank's extraordinary situation had made the company re-examine its stance. Wal-Mart has been roundly criticized in newspaper editorials, on cable news shows and by its union foes for its claim to the funds, which it made in a lawsuit upheld by a federal appeals court.

Insurance experts say it is increasingly common for health plans to seek reimbursement for the medical expenses they paid for someone's treatment if the person also collects damages in an injury suit. The practice, called "subrogation," has increased since a 2006 Supreme Court ruling that eased it.

Wal-Mart's Ms. Curran said the retailer was required by the rules of its plan to seek reimbursement from the Shank's settlement. But she said the case has made Wal-Mart revise those rules to allow for flexibility in individual cases. "Occasionally others help us step back and look at a situation in a different way. This is one of those times," Ms. Curran wrote in the letter.

Ms. Shank, 52, lost much of her memory and ability to communicate or walk in a crash between her minivan and a tractor trailer in May 2000. Her family sued the trucking company and won $700,000. Court records show that after attorney's fees and costs, the remaining $417,477 from the settlement went into a trust to care for Ms. Shank. The fund now has about $270,000, the family said.

Ms. Shanks' health insurance was through Wal-Mart, where she worked nights stocking shelves. After the Shanks won their lawsuit, Wal-Mart sued the Shank family to recover medical costs totaling about $470,000.

Wal-Mart won its case and subsequent appeals by the Shanks that went as far as the Supreme Court, which closed legal avenues this month by declining to hear the case.

The case put a spotlight on the growing use of reimbursement claims by health plans, experts say. Roger Baron, professor of law at the University of South Dakota and a specialist in health-plan law, said health plans have become "very aggressive" about subrogation since the 2006 Supreme Court decision.

"It's free money. They want the free money," Mr. Baron said.

Lynn Dudley, vice president for policy at the American Benefits Council in Washington, D.C., said the negative publicity around the case was beginning to draw the attention of lawmakers who might want legislation to stop or limit subrogation.

Mr. Baron said Wal-Mart's size -- it is the nation's largest nongovernment employer, with over 1.3 million workers -- means that its willingness to compromise in an individual case may have a wider impact on reimbursement practices by other health plans. "I'm so pleased to see an element of reason because so much of this subrogation has been about just blindly going after the money," Mr. Baron said.

Starbucks Plans Return to Its Roots

Howard D. Schultz, the chief executive of Starbucks, announced sweeping changes on Wednesday for the company as it seeks to reconnect with customers who have left for competitors or pared back their coffee budget in hard economic times.

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Times Topics: Starbucks CorporationThe initiatives are intended to restore an authentic coffeehouse experience to the stores and, in turn, re-energize an ailing stock that has lost half its value in the last 15 months.

In front of 6,000 investors, employees and analysts at the annual shareholder meeting on Wednesday, Mr. Schultz introduced an improved automated espresso machine that grinds coffee for each drink and has a lower height that will allow customers to see baristas making their beverage. He said the company would roll out the Swiss-made Mastrena machines to three-fourths of Starbucks stores by 2010.

Mr. Schultz also announced the acquisition of the Coffee Equipment Company, the four-year-old Seattle-based maker of the Clover coffee machine, which brews a more expensive, higher-quality coffee one cup at a time. The price was not disclosed. Starbucks will roll out Clover systems in select markets.

Mr. Schultz described a host of other plans: a pungent new coffee blend, a partnership with Conservation International to certify environmentally responsible whole-bean espresso products, and a rewards program for users of the Starbucks customer card.

Beginning in mid-April, users of the customer card will be able to customize their drinks — with soy milk or vanilla, for example — at no cost.

The announcements are intended to help Starbucks hang on to customers in the face of intensifying competition for brewed coffee from Dunkin’ Donuts and McDonald’s, which is widely introducing espresso beverages this year.

“This was more of a position statement. They are going back to their core,” said Sharon Zackfia, a securities analyst with William Blair & Company. “They are saying, ‘We are not going to change who we are, we are going to defend turf aggressively.’ ”

Mr. Schultz obliquely referred to the powerful new rivals in an afternoon question-and-answer session with reporters. “A lot of people are making unique claims about coffee and what they do,” he said. “What’s interesting to me is that they are not coffee roasters.”

But Mr. Schultz tried largely to keep the focus on the company’s internal challenges and future moves. “This is the first time the U.S. business is under pressure; it’s a character test,” he said. “But it’s not about the economy. We don’t want to use that as an excuse. And it’s not about the competition. Don’t believe the media hype. There’s no coffee war going on. This is about us.

“We somehow evolved from a culture of entrepreneurship, creativity and innovation to a culture of, in a way, mediocrity and bureaucracy,” Mr. Schultz said.

His remarks combined self-criticism with musings on the turbulent economy, which he noted was reducing traffic to Starbucks stores. The company faces a hurdle that may be impossible to overcome in the short term: Will penny-pinching Americans, in the grip of an economic downturn, still pay $4.10 for their daily dose of white chocolate mocha-flavored coffee?

Mr. Schultz said several times that the economy looked grim for the rest of the year, particularly in regions of the country hit hard by the subprime mortgage crisis.

Starbucks has also suffered from rising wholesale prices for coffee and dairy products. In the face of those pressures, Mr. Schultz returned as chief executive 11 weeks ago after serving eight years as chairman. He quickly announced 600 layoffs and the closing of 100 of the least profitable Starbucks stores in the United States. He also said Starbucks would stop selling a line of breakfast sandwiches that were served warm, creating an aroma that overwhelmed that of the coffee in stores.

At the heart of the new announcements is a desire to revisit the company’s early devotion to high-quality coffee. The new coffee blend, called Pike Place Roast, is a reference to the location of the first Starbucks store. Starbucks will introduce the blend in stores next month. Baristas will be directed to brew smaller batches of coffee and refresh the coffee in urns every 30 minutes. Today, coffee can sit in Starbucks’s urns for as long as two hours.

Mr. Schultz called the new blend “a coffee so fresh that those people who drink it with milk and sugar will want to drink it black because of the sweetness.”

Microsoft Buys Virtualization Maker Kidaro

Microsoft on Wednesday announced its intention to purchase a small Israeli company called Kidaro, which makes desktop virtualization management solutions for the enterprise. No purchase price has been revealed thus far, but an Israeli business journal reports the price as $100 million. Microsoft has been investing heavily in virtualization technologies lately and now offers a comprehensive range of virtualization solutions.

"The acquisition of Kidaro is an important component of our virtualization strategy, and it delivers a powerful new tool to help enterprise customers optimize their desktops," says Microsoft general manager Shanen Boettcher. "Kidaro's seamless user interface and management capabilities allow enterprises to more easily use and manage Virtual PCs."

Kidaro's solutions work with existing Microsoft virtualization products like Virtual PC to help enterprises deploy, operate, and secure virtual machines in their businesses. Kidaro also extends Virtual PC with new functionality, such as the ability to expose individual virtualized applications instead of just full PC environments, the latter of which can be confusing to users.

One question about this purchase involves Kidaro's support of non-Microsoft virtualization technologies. The company currently supports VMWare virtualization products as well, but it's unlikely that Microsoft will actively continue this support moving forward.

HP rethinks research, aims to speed ideas to market

Positioning itself to capitalize on the new era of "cloud computing," Hewlett-Packard on Thursday announced a dramatic restructuring of its research efforts, refocusing from 150 projects into 20 to 30 larger projects that reflect a new vision for an "everything as a service" Web.

Showcasing several ongoing projects with names like CloudPrint and Mediascape, HP executives emphasized that the revamp would not entail a reduction of investment in research, or an abandonment of "blue sky" exploratory research. But the strategic shift, they said, is to gear HP Labs for accelerating innovation to commercial uses.

HP Labs, encompassing more than 600 researchers in seven locations around the world, has its headquarters on Page Mill Road in Palo Alto, a short distance from HP's corporate headquarters.

"It's one place where there is still R left in R&D," said HP Chief Executive Mark Hurd, suggesting that other technology companies are focused more on development than research. "So this is a big deal for us."

The reorganization has been led by Prith Banerjee, an entrepreneur and academic who was hired by Hurd six months ago to lead HP Labs.

Banerjee said the approach HP took in the past was "appropriate" for the time but that advances of the Internet have made HP Labs' past approach of many small projects out of date.

HP Labs' global research troops, Banerjee said, are being reorganized into 23 non-physical "labs" of 20 to 30 members each.


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Their work will focus on five areas, which Banerjee described as "information explosion," "dynamic cloud services," "content transformation," "intelligent infrastructure" and "sustainability."
In an interview with the Mercury News, HP Executive Vice President Shane Robison said the initiative initially caused "angst" among researchers. But he said friction was minimized by empowering the researchers to orchestrate the priorities themselves.

Many ongoing projects will be shelved. "We're going to pick the gems that fit with the themes and make sure they're staffed for success," Robison said. The effort will "increase the probability of success and shorten the time frame."

A video highlighted how HP was examining how, in data centers, energy could be saved by replacing copper wires with light beams to transfer data. Another demonstration showed how devices with geographic sensors could be used to turn the surrounding physical world into a digital game - and how a laptop empowered by such location technologies and connected to a more intelligent network could effectively "look inside" a buildings' wall.

Hurd said HP Labs would be more "transparent" than in the past. A Web site called HP IdeaLab, at www.hp.com, offers peeks at ongoing projects, inviting feedback from consumers and outside researchers.

However, Robison said HP remains committed to doing proprietary rather than open-source research.

"We want our researchers to publish, but we want them to file patents," he said.

HP Labs, which first opened in 1966, is part of the legacy of company founders Bill Hewlett and David Packard, who first tinkered with vacuum tubes in a garage about a mile away. The sprawling lab facility is on the short list of Silicon Valley's leading corporate research centers, along with SRI, Xerox PARC and IBM's Almaden Research Center.

Competition and the accelerating pace of innovation has created more pressure for such centers to concentrate on projects that can be commercialized, as opposed to advancing science for its own sake.

While Hurd has emphasized cost cutting and finding new efficiencies to enhance the bottom line, HP Labs continues to conduct far-reaching research into the possibilities of such fields as nanotechnology and quantum science. But those projects also are expected to have a clear road map toward commercialization.

In recent years, HP Labs has been involved in developing computer chip circuitry at the atomic scale and software to automate data centers On one recent tour, for example, researchers discussed how they envision enhanced video-conferencing technologies such as HP's Halo or Cisco System's TelePresence to evolve into three-dimensional holograms.

Blockbuster finish for movie-rental co.

DALLAS - Blockbuster Inc., the movie rental company, said Thursday its fourth-quarter profit more than quadrupled as it cut costs and adjusted prices for its online subscription service.


The Dallas-based company also said it would restate financial results over the past three years — relatively minor adjustments in the few millions.

Overall, 2007 was a money-losing year marked by a summer retreat in its online service that competes with Netflix Inc. But Blockbuster said it would return to profitability this year and earn $5 million to $25 million.

Its shares fell 31 cents, or 10.2 percent, to $2.73 Thursday. They have traded in a 52-week range of $2.66 to $7.30.

Blockbuster said it earned $38.1 million, or 18 cents per share, in the quarter ended Jan. 6, up from $8.3 million, or 4 cents per share a year ago.

Excluding one-time costs such as severance payments to laid-off workers, Blockbuster said it would have earned $54.9 million, or 26 cents per share.

Analysts, who usually exclude one-time items from their estimates, had expected profit of 18 cents per share, according to a survey by Thomson Financial.

Revenue rose 3.6 percent to $1.57 billion, beating analysts' forecast of $1.44 billion.

Sales at stores open at least a year, a key figure in retailing, rose 2.9 percent.

Chairman and Chief Executive James Keyes said the results show there's still life in movie-rental stores.

"There has been a lot of skepticism about the store format, but we believe they are underutilized," Keyes said in an interview.

Keyes said Blockbuster can boost in-store rentals further by keeping new releases on the shelves.

"Today, you'll find "American Gangster" in stock in virtually every store," he said. "That's a big change."

The company trimmed operating expenses to $723.9 million from $736.8 million a year ago. That was partly due to lower advertising spending on its Total Access online program.

Keyes said Total Access has 3.1 million customers, unchanged since the end of September. Netflix has said it gained 451,000 subscribers in the last three months of 2007, ending the year with 7.5 million.

Blockbuster raised prices sharply for online customers who also want unlimited free exchanges at the chain's stores. But it cut prices for many online customers who get movies only by mail and don't swap them for more DVDs in the stores.

Keyes said the company is continuing to test new pricing strategies, such as lower prices for one-day rentals, partly to compete with DVD-rental kiosks springing up in grocery stores. Another option, he said, would give customers the option of paying an extra annual fee to get lower pre-rental prices — he compared it to Costco membership.

Citigroup analyst Tony Wible said he was "excited" by the fourth-quarter results. He said Blockbuster was helped by "more rational" pricing for Total Access and store closings by its smaller rival Movie Gallery Inc., which is operating under bankruptcy protection.

For the fiscal year, Blockbuster said it lost $85.1 million, or 45 cents per share, compared to a profit of $39.2 million, or 21 cents per share, in 2006. Revenue edged up to $5.54 billion from $5.52 billion in 2006.

Blockbuster said it would restate past results downward by $1.9 million last year, $4.2 million in 2006 and $4.2 million in 2005.

The company also said it would report weaknesses in accounting for expense accruals and foreign currency exchange adjustments.

Carrefour in Talks to Sell Property; Profit Stagnates (Update2)

Carrefour SA, the world's second- largest retailer, plans to sell 1.5 billion euros ($2.3 billion) of property this year as billionaire Bernard Arnault and Colony Capital LLC become its biggest shareholders.

Chief Executive Officer Jose Luis Duran said today that the supermarket owner is in talks with ``several private investors'' and real estate would become Paris-based Carrefour's ``second business.'' The retailer also reported second-half profit was little changed today amid French discounting.

Carrefour rose as much as 4.4 percent in Paris trading after the Halley family said it wouldn't vote as a bloc, freeing members to sell their shares. The family initially resisted demands by Arnault and Colony to sell property, and has lost half its investment since combining its Promodes SA chain with Carrefour almost a decade ago. Carrefour still plans an initial public offering for Carrefour Property, though not before 2009.

Arnault and Colony ``are likely to want to restructure the company'' now that the Halleys have dissolved their pact, said Chris Hogbin, an analyst at Sanford C. Bernstein in London. ``I think that is what the shares are responding to.''

Carrefour rose 2.02 euros to 48.46 euros at 1:36 p.m. in Paris trading. The stock is still down 9 percent this year, compared with a 4.3 percent gain by Wal-Mart Stores Inc., the only retailer of greater size.

Halley Agreement

Arnault, France's richest man, and Colony Capital LLC, a Los Angeles-based private-equity investor, said they plan to ``exploit the group's ability to create value'' as Carrefour struggles with stagnant sales in France.

Their Blue Capital venture bought 9.1 percent of Carrefour a year ago and will become the biggest investor on April 15, when the dissolution of the Halleys' pact takes hold and Carrefour holds its annual shareholder meeting.

Family members currently control 13 percent of Carrefour shares and 20 percent of its voting rights. Robert Halley, the patriarch who became chairman last year, plans to retain his title. The family will lose its two other board seats.

Duran said during a press conference in Paris today that Carrefour plans to sell up to 1.5 billion euros of real estate by the end of 2008 to private and institutional investors.

Property Sales

``We do not believe it's in Blue Capital's mind to launch a full bid,'' Citigroup analysts including Jerome Samuel wrote in an e-mailed note. Still, the Halleys' move ``presents a possible opportunity'' for Blue to increase its control amid ``apparent disagreements'' within the Halley family, they wrote.

Pressure from Colony and Arnault had prompted Carrefour to announce it was pursuing an initial public offering for its property business. That plan was later put on hold as stock markets slumped around the world.

``The markets are too shaky, too volatile at the moment,'' said Chief Financial Officer Eric Reiss in an interview after the press conference. ``We don't want to suffer big discounts. We want to show that we have a strong real-estate story.''

The retailer may sell a further 3 billion euros of real estate, and will hold an IPO for Carrefour Property when market conditions permit. Duran said a property IPO won't happen in 2008 and the company plans to keep majority control of its real- estate assets.

Carrefour Property represents about 250 hypermarkets and 500 supermarkets in France, Spain, and Italy, according to Reiss, who estimates its total value between 20 billion euros and 25 billion euros.

Second-Half Earnings

``We put in a dedicated group of managers, and expect to make property our second business,'' Duran said. ``It's obvious that Colony has considerable expertise in real estate, and they have input on our property strategy,'' the executive said.

Second-half profit was unchanged at 1.57 billion euros, according to Bloomberg calculations, and full-year operating profit in France fell 5.7 percent amid discounts by rivals such as Groupe Auchan SA. Dutch retailer Royal Ahold NV today reported that second half profit rose 5.4 percent rise to 470 million euros.

Full-year profit rose 1.4 percent to 2.3 billion euros. Net income from recurring operations rose 0.7 percent to 1.87 billion euros, compared with the 1.9 billion-euro average compiled by Bloomberg from 14 analyst estimates. Carrefour reiterated its 2008 target of growing operating profit faster than sales.

Earnings were ``bang in line'' and the guidance is ``not surprising, but it's reassuring that it's not worse,'' Bernstein's Hogbin said.

French Discounts

Rising food prices in France, combined with pressure from competitors to keep prices low, eroded profitability. Food suppliers in France raised their prices by up to 10 percent since the beginning of 2008, Duran said.

French operating profit in 2008 will still grow faster than sales for the first time in four years as the company cuts logistics costs, Duran said during a conference call.

Carrefour spent $1.1 billion last year to buy Brazil's Atacadao and bulked up in Poland by purchasing Royal Ahold NV's local supermarkets. Operating profit in Latin America jumped 87 percent and it increased 28 percent in Asia.

Profit is ``entirely driven by emerging markets'' at Carrefour, Jaime Vazquez, an analyst at JPMorgan Chase & Co. in London, said before the figures were released. He has an ``overweight'' recommendation on the stock.

The retailer also plans to open its first Russian store in the second half this year and five more next year, Duran said. Carrefour is not in talks with India's Wadia family to form retail partnership in the country, the executive said.

UBS shares sink anew on writedown fears

Swiss bank UBS AG (UBSN.VX) came under renewed pressure on Thursday due to speculation it had sold a huge portfolio of risky mortgages at a deep discount and that the scale of its subprime losses was rapidly mounting.


Analysts said they believed UBS had sold its Alt-A investments -- U.S. mortgages ranked between prime and subprime -- to bond manager Pimco (ALVG.DE) for 70 cents to the dollar, taking a deep discount on a 26.6 billion Swiss franc ($25.7 billion) portfolio.

Analysts also see the ailing bank making further writedowns on a massive 400 billion franc portfolio of repurchase agreements as it rushes to cut its exposure to the capital markets in general and to risky assets in particular.

While selling the Alt-A assets would free UBS of some of the uncertainty that has dogged its share price, the cost could be heavy, entailing additional losses. By contrast, any writedown on its repo portfolio may raise fears of more losses to come.

"Managing down a 2.3 trillion Swiss franc mortgage-heavy balance sheet in a turning credit cycle will be costly and risky and could overhang the earnings power of business," Morgan Stanley said in a note to clients.

UBS, the European bank hit hardest by the credit crisis, has said it is well positioned to withstand further losses after raising 19 billion francs in emergency capital. Analysts largely agree that the bank could take more big hits without needing more emergency cash from shareholders or new investors.

But fears that the bank has become a hostage to fortune -- unable to offload about $90 billion in risky investments and subject to the whims of the U.S. real estate sector -- continue to weigh on its shares.

"UBS may choose to sell down its workout book of mortgages, taking larger upfront losses to reduce uncertainty on capital ratios," Morgan Stanley said.

UBS declined to comment.

NEW LOWS

UBS shares fell over 4 percent to a new five-year low before recovering slightly to trade down 1.55 percent at 31.74 francs, compared with a 1 percent fall in the DJ Stoxx European bank index (.SX7P). UBS shares have shed 42 percent in the past three months alone -- far more than any other major European bank.

Meanwhile, many analysts have increased their estimates of how much UBS stands to lose to the U.S. credit crisis.

Analysts at J.P. Morgan said they now expected UBS to write down 18.5 billion francs in total assets in the first quarter, compared with their previous estimate for 15 billion in writedowns, as a result of the Alt-A sale.

Merrill Lynch analysts said potential further writedowns at UBS could total $21 billion.

Analysts at Morgan Stanley said they had raised their worst-case potential loss estimates for UBS to $15-25 billion from previous estimates of $10-15 billion as a result of any Alt-A sale and repo repricing.

Analysts at bank Exane BNP Paribas said the Alt-A sale, if confirmed, would weigh on shares, as would reputational damage to the franchise.

"Worries on the eventual damage stemming from the bank's fall from the once-world-class wealth management franchise as well as uncertainty on the actual value of the toxic securities will inevitably continue to weigh on the stock price," Exane BNP Paribas said in a note to clients.

Speculation is rising that the group may seek a radical restructuring that could include the sale of its U.S. wealth management activities or the separate bourse listing of its flagship international private bank.

Gates dethroned; Buffett is richest

After 13 years as the wealthiest person in the world, Microsoft's co-founder drops to third place, behind the Oracle of Omaha and Mexico's Carlos Slim Helú. Buffett and Gates are the only Americans in the top 10.

Warren Buffett is the richest person on the planet.

Riding the surging price of Berkshire Hathaway (BRK.A, news, msgs) stock, the man called America's most beloved investor has seen his fortune swell to an estimated $62 billion, up $10 billion from a year ago. That massive pile of scratch puts him ahead of Microsoft (MSFT, news, msgs) co-founder Bill Gates, who had been the richest person in the world for the past 13 years.


No. 3:

Bill Gates


Gates is now worth $58 billion and is ranked third in the world. He is up $2 billion from a year ago and would have been perhaps as rich -- or richer -- than Buffett had Microsoft not made an unsolicited bid for Yahoo (YHOO, news, msgs) at the beginning of February. (Microsoft is the publisher of MSN Money.)

Microsoft shares fell 15% between Jan. 31, the day before the company announced its bid for the search-engine giant, and Feb. 11, the day we locked in stock prices for the 2008 World's Billionaires list. More than half of Gates' fortune is held outside Microsoft shares.

Mexican telecom tycoon Carlos Slim Helú is the world's second-richest person, with an estimated net worth of $60 billion. His fortune has risen $11 billion since last March.


No. 2: Carlos Slim Helú

No. 4: Lakshmi Mittal

No. 5: Mukesh Ambani
Buffett, whose fortune is estimated based on his stake in Berkshire Hathaway and assets he holds outside the company, declined to comment on his net worth.

The race for the title of world's richest person has been extremely competitive in recent months. Class A shares of Berkshire Hathaway soared 25% between mid-July and the day we priced our list. The stock hit an all-time high of more than $150,000 a share in December. At that time Buffett
was worth roughly $65 billion. Berkshire Hathaway shares closed at $137,100 per share Tuesday, down 2% since an announcement Friday that the company's net earnings had fallen 18% in the fourth quarter of last year.

AT&T to ramp up India operations

Calcutta, March 5: Global telecom major AT&T will increase its investment in emerging markets such as India to expand its infrastructure.

The company had earlier stated that it would target India to consolidate its mobile operations outside the US.

AT&T will invest $1 billion worldwide this year — up 33 per cent from last year — to build undersea cables and expand its network services.

Last year, AT&T spent $750 million outside the US of its total investment of $18 billion.

In India, it will set up three nodes and an Internet data centre. A node is a connection facility, either a redistribution or an end point, for data transmission.

A node is programmed to recognise, process or forward transmissions to other nodes.

AT&T has seven nodes in India and will add three, one each in Delhi, Pune and Calcutta. The Internet data centre will be set up in Bangalore, AT&T’s India CEO and managing director Sanjiv Bhagat told reporters in New Delhi.

He said the company was considering the option of setting up a customer briefing centre in India for product demonstration.

Revenues from India increased 85 per cent year-on-year in 2007, Bhagat said. He declined to give further details.

AT&T has applied for a mobile licence in India in partnership with Mahindra Telecommunications.

It plans to focus on large entities rather than on individual customers.

In the US, AT&T focuses on consumer operations while for its overseas operations, it caters to multinational companies.

Expansion in West Asia is also on the company’s radar.

The $1-billion investment will be mainly to build a subsea optical fibre cable in Asia and for an Ethernet network in Europe and Asia.

Google exec hired as Facebook's chief operating officer

Facebook announced Tuesday that it has wooed a top executive away from Google to be the hot online social networking website's chief operating officer.


Sheryl Sandberg is leaving her post as vice president of global online sales and operations at Google to manage marketing, human resources, business development and other day-to-day operations at Facebook.

"I have learned so much during my time at Google, and I've loved working with the people there," Sandberg said in a statement. "I am thrilled to have this opportunity."

The hire comes as Facebook strives to increase its global popularity by making its website available in an array of languages.

Facebook unveiled a German version of its website on Tuesday and promises to have it available in French by spring.

"We're really excited to bring German-speaking users the ability to access Facebook in their native language," said Facebook vice president of product management Matt Cohler.

"We currently have over a million active users in German-speaking countries."

Facebook unveiled a Spanish version of its website in February.

Software applications made freely available let people opt for Spanish or German instructions, alerts, news feeds and other information provided by Facebook as part of the user interface.

Facebook users can critique each other's translations, resulting in a communal effort to improve the software and build an accurate dictionary of terms.

Facebook users have always been able to post profiles, messages or other content in their native languages, but the framework for the website was only in English prior to February.

"Sheryl is a great manager who will help scale Facebook's operations globally," said Facebook founder and chief executive Mark Zuckerberg.

"Sheryl understands Facebook's goal of connecting everyone in the world and is passionate about building a business that will enable us to realize this mission."

Sandberg worked as a US treasury secretary's chief of staff prior to taking a job with Google six years ago. She will start her job at Facebook's headquarters in Palo Alto, California, on March 24, the company said.

Costco posts higher quarterly results

NEW YORK (Reuters) - Costco Wholesale Corp (COST.O) posted higher quarterly profit on Wednesday, meeting Wall Street estimates, and the No. 1 U.S. warehouse club operator posted a bigger-than expected gain in February sales at its locations open at least a year.

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Profit rose to $327.9 million, or 74 cents per share, for its fiscal second quarter ended February 17, compared with $249.5 million, or 54 cents per share, a year before.

Its year-ago results included a pretax charge of $84.4 million related in part to a stock options review.

Wall Street had, on average, forecast earnings of 74 cents per share, according to Reuters Estimates.

For February, its sales at warehouse clubs open at least a year, known as comparable store sales, rose 7 percent, helped by higher gasoline prices. Analysts, on average, were expecting a gain of 6 percent, according to 13 analysts polled by Reuters Estimates.

Customers pay an annual membership fee to shop in Costco's warehouse clubs, which sell everything from discounted flat-panel televisions and diamond rings, to bulk-sized packages of toilet paper and soda. Costco also operates gasoline stations at many of its locations.

The company's main rivals are Sam's Club, owned by Wal-Mart Stores Inc (WMT.N), and BJ's Wholesale Club Inc (BJ.N).

Warehouse clubs, like Costco, have been seen as a bright spot in the struggling U.S. retail sector as cash-strapped shoppers, worried about the weakening U.S. economy, have headed to the clubs in search of lower priced food and gasoline.

Quarterly sales rose to $16.62 billion from $14.8 billion a year earlier, while membership fee revenue rose to $342.92 million from $307.32 million.

Its quarterly comparable store sales rose 7 percent, with sales advancing 5 percent at its U.S. stores and 17 percent internationally.

During the quarter, Costco said the average sales price for a gallon of gasoline was up 29 percent. Excluding the effect of gasoline, its U.S. comparable sales in the second quarter would have been up 3 percent, it said.