Opposition mounts to Summers as possible Fed chief

1 of 2. Former U.S. Treasury Secretary Lawrence H. ''Larry'' Summers speaks during a financial and economic event at the London School of Economics (LSE) in London March 25, 2013.

Credit: Reuters/Jason Alden/POOL

By Pedro da Costa and Mark Felsenthal

WASHINGTON | Thu Jul 25, 2013 11:13pm EDT

WASHINGTON (Reuters) - President Barack Obama could be months away from announcing his pick to replace Ben Bernanke at the Federal Reserve, yet critics are already making an unusual public effort to stop one contender in the race - former U.S. Treasury Secretary Lawrence Summers.

The outcry has come not from Republicans, but the left wing of the Democratic Party. Summers advised Obama, was treasury secretary under former President Bill Clinton, led Harvard University and was chief economist for the World Bank. He helped tame the Asian financial crisis that threatened to sweep the globe under Clinton.

But liberals blame him for spearheading financial deregulation that they charge helped create the financial crisis, and say his work at hedge fund D.E. Shaw makes him the epitome of a revolving door between Wall Street and government.

A representative for Summers, who writes an opinion column for Reuters, declined to comment for this article, as did the White House and the Fed.

Some powerful Democrats, including former Treasury Secretary and one-time Citigroup executive Robert Rubin, have been speaking up behind the scenes for Summers, according to multiple sources with close ties to the Fed or the White House.

If Obama tapped Summers, he would be picking him over the Fed's current vice chair, Janet Yellen, who is seen as the other main candidate for the job.

Both Yellen and Summers would be expected to hew fairly close to the policy course set by Bernanke.

Supporters of Summers argue he should have an edge given his crisis-management experience.

"When there is consensus, who the Fed chair is hardly matters, and the times when it matters are the times when you have to think outside the box, and then his strengths shine," said Brad DeLong, a professor at the University of California, Berkeley, who worked with Summers in the Clinton Treasury Department.

According to aides, Senate Democrats who oppose him have penned a letter urging Obama to choose Yellen, who has been a major force in the Fed's efforts to stimulate a sluggish U.S. recovery using unconventional monetary policies. Yellen would be the first woman to head the central bank.

Democratic Senator Sherrod Brown of Ohio was circulating the letter, the aides said. It was unclear how many senators had signed it, but several Democrats have already spoken out in favor of Yellen and against Summers.

"I am for Janet Yellen. I am taking that position," Democratic Senator Tom Harkin of Iowa told Reuters.

A spokeswoman for Brown did not respond to emails requesting comment, and a Fed spokeswoman said Yellen declined to comment.

Bernanke's second four-year term at the helm of the central bank expires on January 31, 2014. While he has not discussed his plans, it is widely expected he will step down.

Some critics of Summers wonder why Obama might turn down a woman for a man who has been accused of sexism. As president of Harvard, Summers sparked a firestorm by suggesting intrinsic aptitude might explain why relatively fewer women reach top academic positions in math and science - comments for which he later apologized.

"The president's track record of appointing women is mediocre at best," Greg Valliere, chief political strategist at Potomac Research Group, said in a note to clients. "So there's a brilliant female candidate to replace Ben Bernanke; she's highly respected within the Fed - and Obama is going to appoint someone who will never live down his comments that women lack the qualifications for some university jobs?"

CONCERNS ON REGULATION

When he served as Treasury chief under Clinton, Summers helped clinch the law that revoked the Depression-era Glass-Steagall Act, which separated investment banking activities from those of commercial, deposit-taking institutions.

That opened the gate for commercial banks to get involved in riskier financial products, such as the credit default swaps that were at the heart of the 2007-2009 financial crisis.

Moveon.org, a liberal group that provided major support to both Obama presidential campaigns, is circulating a petition entitled: "Don't let Larry Summers head the Fed," which accuses him of laying the groundwork for the deep U.S. recession.

Senate Banking Committee member Jeff Merkley, a Democrat from Oregon, told Reuters he would find a nomination of Summers "disconcerting."

"Many questions need to be asked and answered related to his philosophy of regulation and deregulation," he said.

LEANING TOWARD SUMMERS?

A person with close ties to the Obama administration said he had reason to believe the president was closely considering Summers, and perhaps even leaning toward him. The source said Obama would likely view Summers' ties to Wall Street and crisis-management experience as important attributes.

At the same time, sources familiar with thinking inside the Fed say staff and some members of the central bank's board are concerned Summers' often blunt manner could be a detriment in shaping policy at the consensus-driven central bank.

Those sources requested anonymity given the sensitive nature of the personnel discussions.

Yellen has been the runaway favorite to replace Bernanke in media polls of financial market participants, but analysts say Summers has the advantage of a close relationship with Obama.

He also has powerful supporters.

"His allies have been ginning up support, making it clear that he's interested - and that's the kiss of death. If you want a major job in this town, you have to be coy," Valliere said.

A person familiar with the nomination process said Obama had yet to make a decision. An announcement is not expected until the autumn.

(Additional reporting by Jeff Mason and Rachelle Younglai in Washington, Jonathan Spicer in New York and Ann Saphir in San Francisco; Editing by Peter Cooney)

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Paulson will not testify in Tourre trial

By Nate Raymond and Katya Wachtel

NEW YORK (Reuters) - Hedge fund billionaire John Paulson will not testify in the high-profile civil case against former Goldman Sachs Group Inc bond trader Fabrice Tourre, who is on trial in federal court in New York.

The U.S. Securities and Exchange Commission accuses Tourre of failing to tell investors that 57-year-old Paulson's hedge fund firm intended to bet against Goldman Sachs' Abacus 2007-AC1. The $2 billion offering was tied to subprime mortgage bonds and known as a synthetic collateralized debt obligation.

Tourre denies wrongdoing.

On Monday morning U.S. District Judge Katherine Forrest cited a July 28 letter by Tourre's lawyers saying they no longer plan to call Paulson and others on their witness list to testify.

Sean Coffey, a lawyer for Tourre, confirmed the legal team would not be calling Paulson, as did a spokeswoman for the Southern District of New York in an emailed statement.

Paulson's firm had helped to select the securities that were packaged into the deal. The SEC says Tourre told investors that Paulson's firm was investing in Abacus, suggesting he expected the price of the securities to rise, when actually the hedge fund was shorting it.

The shorting of the deal was part of Paulson's broader bet against the U.S. housing market in 2007, which earned him Wall Street fame and billions of dollars.

The trial may draw to a close sooner than expected. Closing arguments may take place Tuesday or Wednesday, Forrest said on Monday morning.

"Summations are expected to be heard on Wednesday, though this is subject to change," the court spokeswoman said.

The case is SEC v. Tourre, U.S. District Court, Southern District of New York, No. 10-03229.

(Reporting By Katya Wachtel and Nate Raymond; Editing by Lisa Von Ahn)

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Pending home sales pull back in June as rates rise

By Paige Gance

WASHINGTON (Reuters) - Contracts to purchase previously owned U.S. homes fell in June, retreating from a more than six-year high and suggesting rising mortgage rates were starting to dampen home sales.

The National Association of Realtors said on Monday its Pending Homes Sales Index, based on contracts signed last month, decreased 0.4 percent to 110.9. May's index was revised down to 111.3, the highest since December 2006, from a previously reported 112.3.

Economists polled by Reuters had expected signed contracts, which become sales after a month or two, to fall 1.0 percent.

Compared to last year, contracts were up 10.9 percent.

Stocks and bonds mostly ignored the report, but the dollar trimmed earlier losses against the yen.

The housing market has been a bright spot in the economy, providing a buffer from fiscal austerity in Washington. Existing home sales fell in June, but selling prices hit a five-year high in a sign the housing recovery was still on track. In addition, new home sales rose last month.

However, an index from the Mortgage Bankers Association that measures loan applications for home purchases has declined 10 percent since early May, a sign of the toll higher borrowing costs are starting to take.

"Mortgage interest rates began to rise in May, taking some of the momentum out of contract activity in June," said NAR chief economist Lawrence Yun. "The persistent lack of inventory also is contributing to lower contract signings."

Rates on 30-year fixed rate mortgages have climbed about a full percentage point since early May on expectations the U.S. Federal Reserve may begin scaling back its bond-buying stimulus program as early as September.

"We had such an outsize gain in May and I think what we saw was a good number of people that were trying to beat the punch and pull the trigger on buying that home before mortgage rates rose even further," said Sam Bullard, senior economist at Wells Fargo in Charlotte, North Carolina.

Contracts were up in the West, where they reached the highest level since November 2009, but down in the Midwest and South. The index for the Northeast was unchanged.

(Reporting by Paige Gance; Editing by Andrea Ricci)

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Pending sales of US homes slip from 6-year high

WASHINGTON (AP) — The number of Americans who signed contracts to buy homes dipped in June from a six-year high in May, a sign that sales could stabilize over the next few months.

The National Association of Realtors said Monday that its seasonally adjusted index for pending home sales ticked down 0.4 percent to 110.9 in June. The May reading was revised lower by a percentage point to 111.3, but it was still the highest since December 2006.

The slight decline suggests higher mortgage rates may be starting to slow sales. Still, signed contracts are 10.9 percent higher than they were a year ago. There is generally a one- to two-month lag between a signed contract and a completed sale.

Economists were relieved after seeing only a modest decline. They said that shows higher mortgage rates are having only a small impact on the home sales market.

"All told ... pending home sales held up fantastically well," Dan Greenhaus, chief global strategist at BTIG, an institutional brokerage, said in a note to clients.

The average rate on a 30-year fixed mortgage has jumped a full percentage point since early May and reached a two-year high of 4.51 percent in late June.

Rates surged after Chairman Ben Bernanke said the Federal Reserve could slow its bond-buying program later this year if the economy continues to improve. The Fed's bond purchases have kept long-term interest rates low, encouraging more borrowing and spending.

In recent weeks, Bernanke and other Fed members have stressed that any change in the bond-buying program will depend on the economy's health, not a set calendar date.

Since those comments, interest rates have declined. The average on the 30-year mortgage was 4.31 percent last week.

Even with higher mortgage rates, signed contracts increased in the West last month. They were unchanged in the Northeast and fell in the South and Midwest.

Home sales and prices have climbed since early last year, buoyed by solid hiring and historically low mortgage rates. Housing has been an important driver of economic growth this year as other parts of the economy have languished, such as manufacturing and business investment.

Sales of previously occupied homes slipped last month, after a big rise in May to the highest level in 3 ½ years.

But new-home sales jumped in June to the fastest pace in five years, boosting confidence that the housing recovery is strengthening.

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Perrigo to buy Elan for $8.6B, seeks tax savings

DUBLIN (AP) — U.S. drugmaker Perrigo agreed Monday to buy Ireland's Elan for $8.6 billion in a deal that should allow the rapidly growing company to reduce its tax bill and boost its royalty stream.

Perrigo Co. said it would pay Elan Corp.'s investors $6.25 per share in cash and $10.25 in Perrigo stock, an 11 percent premium over Elan's closing price Friday. Elan shares in Dublin surged 13 percent higher to 12.58 euros ($16.71), above Perrigo's offer price, following news of the takeover.

After spending four months defeating a series of hostile, lower-priced takeover bids by Royal Pharma, Elan earlier in July said it was open to better offers. Several potential U.S. suitors sought to acquire Elan's flow of royalties from drugs it helped develop, particularly the multiple sclerosis fighter Tysabri.

Perrigo, which has been headquartered in the small western Michigan town of Allegan since 1887, said it would move its tax residence to Ireland and hopes to cut its tax liabilities nearly in half as it grows non-U.S. sales.

Perrigo is already the largest maker of generic drugs for major retail chains in the United States, including Walgreens and Wal-Mart. It has rapidly expanded overseas since 2005 with acquisitions in Israel, Britain, Mexico and Australia.

A new Irish base would allow Perrigo's non-U.S. sales to be taxed at a much lower rate. Ireland imposes 12.5 percent tax on corporate profits, one of the lowest rates in Europe, whereas the United States levies 35 percent.

Perrigo and Elan said a transitional company called New Perrigo would be registered in Ireland and traded on the New York and Israeli stock exchanges. They said the merger meant existing Perrigo investors would own 71 percent of the company, Elan investors the rest.

Perrigo's chief executive and chairman, Joe Papa, said the move to Ireland should produce more than $150 million in increased net profits annually because of lower taxes and efficiencies from combined operations.

"This strategic transaction aligns with Perrigo's acquisition strategy and our previously stated intentions to grow our international business. We expect New Perrigo to create tremendous value for our shareholders," Papa said in a statement.

Elan is one of the great boom-bust-and-recovery stories of Ireland. In the late 1990s, its shares soared as the company positioned itself as a pioneer of biotechnology and, in particular, a leader in efforts to find a treatment or cure for Alzheimer's disease.

But Elan faced ruin in 2002 after its Alzheimer's trials failed and the company was caught hiding losses in Enron-style accounting tricks.

A new management team led by former Merrill Lynch banker Kelly Martin drastically pared down Elan and focused on developing Tysabri. The intravenously delivered drug was designed to slow or halt the paralyzing effects of MS, an incurable disease of the central nervous system that afflicts millions worldwide.

Tysabri, a joint venture with the Massachusetts-based drugmaker Biogen Idec, faced disaster after its launch in 2005 when it was linked to development of a rare, often fatal brain-inflammation disease. But Elan and Biogen Idec persuaded U.S. and European regulators to put Tysabri back on the market in 2006 and the drug, prescribed under restricted rules reflecting its risks, has steadily grown to become a world-leading treatment for MS patients.

Elan sold much of its ownership share of Tysabri to Biogen Idec in February for $3.25 billion in cash and a minority share in future royalties. That deal opened up a behind-the-scenes scramble among several U.S.-based companies to acquire Elan for its healthy cash flow and Irish tax base.

The agreement with Biogen Idec means New Perrigo would collect up to 25 percent of future royalties from Tysabri, which had global sales of $1.6 billion last year.

Perrigo's proposed takeover of Elan, subject to regulatory approval in the United States and Ireland, is expected to be completed by the end of 2013.

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Photos: Frank Lloyd Wright Homes For Sale

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Photos: Rock Icon's Former Home on Sale

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Polish LOT still seeking damages from Boeing over Dreamliner

WARSAW | Fri Jul 26, 2013 9:07am EDT

WARSAW (Reuters) - Poland's flag carrier LOTLOT.UL said on Friday it would continue to pursue hefty damages from Boeing(BA.N) over the grounding of the Dreamliners, which the airline said hurt its efforts to restructure its ailing business.

"We are demanding from Boeing concrete sums that we have been able to calculate," said LOT CEO Sebastian Mikosz. "Unfortunately, it's not possible to estimate all the losses to our image related to the loss of credibility among some of our customers."

LOT was the first European airline to add Boeing's Dreamliner to its fleet before they were grounded over problems with their batteries. LOT currently has four Dreamliners.

(Reporting by Chris Borowski)

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Polish LOT still seeking damages from Boeing over Dreamliner

WARSAW | Fri Jul 26, 2013 9:07am EDT

WARSAW (Reuters) - Poland's flag carrier LOTLOT.UL said on Friday it would continue to pursue hefty damages from Boeing(BA.N) over the grounding of the Dreamliners, which the airline said hurt its efforts to restructure its ailing business.

"We are demanding from Boeing concrete sums that we have been able to calculate," said LOT CEO Sebastian Mikosz. "Unfortunately, it's not possible to estimate all the losses to our image related to the loss of credibility among some of our customers."

LOT was the first European airline to add Boeing's Dreamliner to its fleet before they were grounded over problems with their batteries. LOT currently has four Dreamliners.

(Reporting by Chris Borowski)

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Probe opened as Air India Boeing Dreamliner oven overheats midair

An Air India Airlines Boeing 787 dreamliner takes part in a flying display during the 50th Paris Air Show at the Le Bourget airport near Paris, June 14, 2013 file photo.

Credit: Reuters/Pascal Rossignol

NEW DELHI | Fri Jul 26, 2013 5:19am EDT

NEW DELHI (Reuters) - An oven in a Boeing Co (BA.N) Dreamliner operated by Air India AIN.UL overheated during a domestic flight this week causing smoke but did not interrupt services, the state-run Indian carrier said, adding an investigation has begun.

India's aviation regulator said it was examining the incident and had sought a report from Air India.

The incident follows a fire earlier this month on a parked Ethiopian Airlines-owned 787 Dreamliner and caused extensive damage to the plane. The entire global fleet of Dreamliners was grounded for three months earlier this year due to separate battery-related problems.

Separately, Japan's ANA Holdings Inc 9202.T, which operates the world's biggest fleet of Dreamliners, said on Friday it found damage to the battery wiring on two 787 locator beacons.

The overheating of the oven during a July 24 flight from New Delhi to Kolkata did not cause a fire, an Air India spokesman said, adding they were in touch with Boeing over the issue.

"Even if there is a minor incident, it is always referred to investigation," the Air India spokesman said.

Boeing said in a statement it was aware of the issue and was working with Air India.

"Prima facie we feel that it's something to do with the oven, not with the machine (plane) as such," Arun Mishra, who heads India's civil aviation regulator, said over phone, but added he can comment further only after getting the investigation report.

Air India, which is the only Indian carrier so far to operate Dreamliner planes, has seven of the jets and has orders for 20 more.

(Reporting by Devidutta Tripathy; Editing by Matt Driskill)

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Publicis says to make major corporate announcement

Maurice Levy, French advertising group Publicis Chief executive, attends a Reuters Global Media and Technology Summit in Paris June 12, 2012.

Credit: Reuters/Mal Langsdon

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Publicis says to make major corporate announcement

Maurice Levy, French advertising group Publicis Chief executive, attends a Reuters Global Media and Technology Summit in Paris June 12, 2012.

Credit: Reuters/Mal Langsdon

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Publicis, Omnicom say major clients welcome merger

PARIS (Reuters) - The chief executives of Publicis and Omnicom said they had spoken to major clients about their planned merger and did not anticipate major problems with big advertisers defecting to rivals in the transition period.

Publicis CEO Maurice Levy said the reaction to the merger from all the company's major clients had been "extremely positive".

Competing sector executives and analysts expect that the Publicis Omnicom merger could spur some big customers to switch agencies to avoid conflicts.

Holding companies such as Omnicom and Publicis own networks of agencies and PR firms within the larger group. They're designed to work independently so that competing clients - Pepsi and Coca-Cola for example - are placed in separate networks to avoid conflict.

"We're going to work extremely hard to resolve any client conflict issues with creative solutions," said John Wren, the Omnicom CEO.

(Reporting by James Regan; Editing by Leila Abboud)

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Qatar Airways grounds one 787, cites 'minor' technical problem

A Qatar Airways Boeing 787 Dreamliner lands at Le Bourget airport near Paris, June 16, 2013, one day before the 50th Paris Air Show. The air show runs from June 17 to 23.

Credit: Reuters/Pascal Rossignol

DUBAI | Fri Jul 26, 2013 7:54am EDT

DUBAI (Reuters) - Qatar Airways said on Friday it had taken one of its 787 Dreamliners out of service following what it described as a "minor" technical issue.

The airline and Boeing (BA.N), the airplane's manufacturer, declined to give further details but industry sources said they were treating seriously reports that the aircraft had been grounded for days after a problem with an electrical panel.

According to web tracking service Flightaware, the aircraft, registered as A7-BCB, has not flown since Sunday, an unusually long downtime for a long-haul jet designed to save fuel bills.

Qatar Airways confirmed an aircraft had been taken out of service, but said no flights had been cancelled as a result.

"This is a minor issue for us, and not an incident, so we are not commenting," a spokeswoman said.

A spokeswoman for Boeing said, "We request that you channel all your enquiries to Qatar Airways."

Two industry sources said smoke had been reported near an electrical compartment while the jet was on the ground in Doha. It was not clear whether passengers were on board at the time, but the aircraft's next flight was carried out by another model.

(Reporting by Praveen Menon, Siva Govindasamy, Tim Hepher, Editing by Christian Plumb)

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Qatar grounds a 787 as glitches pile up on Boeing jet

A Qatar Airways Boeing 787 Dreamliner lands at Le Bourget airport near Paris, June 16, 2013, one day before the 50th Paris Air Show.

Credit: Reuters/Pascal Rossignol

By Praveen Menon and Siva Govindasamy

DUBAI | Fri Jul 26, 2013 11:49am EDT

DUBAI (Reuters) - Qatar Airways said on Friday it had taken one of its Boeing 787 Dreamliners out of service following what it described as a "minor" technical issue, as pressure mounted on the plane maker over possible new electrical problems with the advanced jet.

The airline and Boeing Co declined to give further details but industry sources said they were treating seriously reports that the aircraft had been grounded for days after smoke was seen near an electrical panel.

The 787 has suffered a spate of mishaps in recent weeks, including a spontaneous fire on an Ethiopian Airlines-owned 787 that broke out while the plane was parked at a remote stand at London's Heathrow airport for eight hours on July 12.

According to Web-tracking service Flightaware, the Qatar Airways aircraft, registered as A7-BCB, has not flown since Sunday, an unusually long downtime for a long-haul jet designed to save on fuel bills.

Qatar Airways confirmed an aircraft had been taken out of service, but said no flights had been canceled as a result.

"This is a minor issue for us, and not an incident, so we are not commenting," an airline spokeswoman said.

A spokeswoman for Boeing said, "We request that you channel all your enquiries to Qatar Airways."

Two people familiar with the matter, asking not to be identified, said smoke had been reported near an electrical compartment while the jet was on the ground in Doha. A failure in a similar bay caused a fire during a test flight in 2010, and three of the jets, including one owned by Qatar Airways, had electrical problems last December.

A fire-brigade supervisor in Doha said it did not have any record of an incident with an airport-related call last week.

India's aviation regulator said earlier it had started an investigation after an oven in a 787 operated by Air India overheated during a domestic flight, causing smoke.

There was no interruption to services.

Japan's ANA Holdings Inc, which operates the world's biggest fleet of Dreamliners, also said on Friday it had found damage to the battery wiring on two 787 locator beacons, made by Honeywell International Inc.

The U.S. Federal Aviation Administration and Boeing instructed airlines to inspect or remove the beacons, after UK investigators found two wires pinched together in the beacon inside the Ethiopian Airlines Dreamliner at Heathrow. The resulting fire caused extensive damage to the plane.

PAST PROBLEMS

Last December, three 787s had electrical problems that were made public. United Airlines experienced problems with electrical panels on two 787s, one of which diverted to another airport during a flight from Houston. Qatar Airways said that month that it grounded one of its 787 jets because of the same problem United had experienced. Boeing later traced the problem to faulty circuit boards in the panel.

In January, regulators grounded the global fleet of 50 Dreamliners after batteries burned on two jets within two weeks. Regulators lifted the grounding in April after Boeing redesigned the battery system, which supplies backup power to the jet and is unrelated to the emergency beacon, known as an emergency locator transmitter, or ELT, that is designed to send out a signal to help rescuers locate an aircraft wreckage.

Qatar Airways Chief Executive Akbar Al Baker said in May that the airline had to forego $200 million in lost profit because of the grounding of 787 planes, but has received compensation from Boeing for the losses. At least one other airline says it is still seeking compensation.

BOEING 'HIGHLY CONFIDENT'

Aviation experts say it is common for the reported number of incidents to rise when an aircraft is in the spotlight, and that all new aircraft models have incidents when they first enter service. The 787 began service in the fall of 2011.

Even aircraft with decades of service regularly suffer glitches that go unreported and rarely pose a direct threat to safety.

However, aviation experts say U.S. and British authorities investigating the previous fires may seek to establish whether anything can be learned from a pattern of reported incidents connected in various ways to the jet's electrical systems.

Boeing Chief Executive Jim McNerney said this week he remained "highly confident" in the future of the 787 Dreamliner program and the integrity of the company's newest airplane.

The 787 incorporates a raft of changes in the way passenger jets are designed, including greater use of electrical systems that save weight compared with older hydraulics. It is the first passenger jet built mainly from lightweight carbon-composites.

Boeing shares were down 0.9 percent at $105.76 late on Friday morning on the New York Stock Exchange.

(Additional reporting by Siva Govindasamy, Tim Hepher, Tim Kelly, Devidutta Tripathy, Regan Doherty; editing by Christian Plumb, Alwyn Scott and Matthew Lewis)

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Renault reports weak earnings on Iran write off

PARIS (AP) — French carmaker Renault blamed a massive write off on the value of its operations in Iran for a steep drop in its first half earnings.

The maker of the Clio and Megane hatchbacks said Friday it took a 512-million-euro ($680-million) charge to write off the entire value of its Iran operations, which are threatened by international sanctions on the Islamic republic.

Along with other charges, including restructuring of factories in France, that left Renault's first-half earnings at only 39 million euros, down from 734 million euros a year earlier, the carmaker said in a statement Friday.

New car sales continued to fall as international growth couldn't offset poor markets in Europe, especially in France. Renault said a worsening in market conditions would put in doubt its full-year targets, including higher worldwide registrations.

Renault's business in Iran consists of assembling vehicle kits it sends there. Tougher U.S. sanctions on the Islamic regime that came into effect last month mean Renault cannot get its money out of Iran, leading to the charge against its second quarter earnings.

Earlier this month, the European automakers' association ACEA said car sales slumped 6.6 percent in the first half of the year amid signs of continued deep recession and high unemployment in Europe.

To cope with the dwindling market in Europe, automakers have announced factory closures and put off new car launches.

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Report: Germany rules out 2nd debt cut for Greece

BERLIN (AP) — Germany's finance minister has categorically rejected a second writedown of Greek debt.

Wolfgang Schaeuble told weekly Bild am Sonntag in an interview that Greece would continue to receive support beyond 2014 if needed and provided the country meets the demands of international creditors.

Schaeuble was quoted as saying "it's certain, however, that there will be no second debt writedown for Athens."

Extracts of the interview, to be published Sunday, were released by the paper Saturday and confirmed by the Finance Ministry.

With Germany's general election two months away, Chancellor Angela Merkel's conservative government has been at pains to appear firm on Greece's international bailout, which is unpopular with many Germans.

Last year Greece's debt was restructured with private-sector bondholders.

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Reports: Ad giants Omnicom, Publicis in talks

NEW YORK (AP) — Omnicom and Publicis are close to striking a deal that would combine the two advertising giants into the world's largest advertising firm, according to media reports.

Such a merger would create a firm with a market value of more than $30 billion, surpassing London-based industry leader WPP PLC. A combined firm would allow for more pricing power, though the decrease in competition could present regulatory hurdles in the U.S. and Europe. Client conflicts also could be an issue.

Omnicom Group Inc., based in New York, owns BBDO Worldwide, DDB Worldwide Communications Group and TBWA Worldwide, among other agencies. Paris-based Publicis Groupe SA runs its namesake agency as well as Leo Burnett Worldwide, Saatchi & Saatchi and DigitasLBi.

An announcement is expected Sunday at Publicis' headquarters.

Spokespeople for Omnicom and Publicis couldn't immediately be reached for comment on Saturday. Bloomberg News first reported the talks aftermarket on Friday, citing an unnamed person familiar with the deal.

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Retail Sales Fall, Sending Stocks Down

(Credit: Bryan Mitchell/AP Photo)

Retail sales fell by 0.4 percent in March, according to the Commerce Department, the biggest drop in nine months. The major stock market indexes slid on the news.

Taxes went up at the beginning of the year for everyone who gets a paycheck and that may finally be affecting consumers’ ability to spend.  Consumer spending, which makes up two-thirds of U.S. economic activity, is a major barometer of the strength of the economy.

This report was not entirely unexpected as the March jobs report showed a drop in retail employment. It was also a colder than usual March in much of the country and the early Easter holiday may have had an impact on spending.

There were, however, two bright spots in the report. First was a rise in spending at restaurants as Americans may have diverted some cash to eat out more.  Spending on furniture also rose, the result of an improving housing market.

On the whole, today’s report doesn’t bode well for the economy.  As economist Joel Naroff explained it in a note, “first quarter growth should be decent, but decent is not good enough nearly four years after the end of the recession.”

The Dow Jones industrial average fell 42 points to 14,822 at 11:20 a.m. ET.

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SAC Capital pleads not guilty; reinsurance unit eyed

By Bernard Vaughan and Svea Herbst-Bayliss

Fri Jul 26, 2013 6:55pm EDT

n">(Reuters) - Billionaire investor Steven A. Cohen's hedge fund pleaded not guilty on Friday to insider trading charges in federal court, as questions also surfaced about the future of SAC Capital's Bermuda-based reinsurance unit, SAC Re.

Ratings company, A.M. Best Co., and the Bermuda Monetary Authority, which regulates insurers on the island, said they were monitoring developments one day after prosecutors charged the hedge fund and various affiliates with four criminal counts of securities fraud and one count of wire fraud.

A year ago A.M. Best gave SAC Re a top rating. But if the company were to cut its rating of the unit, which had $567.8 million in assets at the end of 2012, in the wake of criminal charges, people may shy away from doing business with the insurer, industry experts said.

"Buyers of reinsurance from SAC Re will be on the phone with their brokers telling them to move out," said Andrew Barile, an independent industry consultant. Buyers have plenty of choice in the reinsurance industry, experts said, adding it would be relatively easy to change companies.

Separately, outside investors with the $14 billion hedge fund also expressed some uncertainty about what to do with their money only weeks before an August 16 redemption deadline.

SAC had presided over a culture from 1999 to 2010 where employees flouted the law and were encouraged to tap their personal networks for inside information about publicly traded companies, prosecutors said on Thursday.

The criminal case imperils the future of one of Wall Street's largest hedge funds and could end Cohen's career of managing outside money. His average annualized returns of 25 percent beat most of his rivals.

Prosecutors did not file criminal charges against Cohen personally, but the U.S. Securities and Exchange Commission has filed a separate civil case against him for failing to supervise two employees.

The SEC is expected to delay its civil case while the criminal trial proceeds. The U.S. attorney also brought a civil case seeking forfeitures and money laundering penalties from Cohen.

The government's evidence in the criminal case includes a lot of "court-authorized wiretaps" and "a large number of electronic recordings," such as emails and instant messages, Antonia Apps, an assistant U.S. attorney who has prosecuted other insider-trading cases, told U.S. District Judge Laura Taylor Swain.

Jonathan Gasthalter, a spokesman for SAC, declined to comment. A representative for SAC Re did not return a call seeking comment.

U.S. Attorney Preet Bharara, who brought the charges, declined to give a specific dollar figure for the amount his office is seeking from SAC. But in court papers, prosecutors contend SAC made "hundreds of millions of dollars" in illegal profits from insider trading, and the penalties they seek could be up to three times the amount of the illegal gains.

SAC sought to assure investors its assets were not frozen and redemptions would continue unhindered. Skittish investors have already withdrawn roughly $4 billion from the firm in the first half of the year.

Blackstone Group, Ironwood Capital and Magnitude Capital all withdrew funds earlier this year. Morgan Stanley, which had client money invested with Cohen also took steps to reduce exposure to SAC in the months leading up to the indictment, according to a person familiar with situation.

Morgan Stanley's exposure is now minimal. A spokeswoman for the bank declined to comment on whether the bank would seek to redeem its remaining funds in the wake of the criminal charges.

While some investors have been loyal to Cohen, one person, who declined to be named, said the new charges worried him. "The real worry is that the regulators are relentless and their sights are set on Steve and they will not stop at nothing to bring him down."

Others said they would wait a little longer to make a decision and await for any communication from the fund. If investors submit a redemption request by August 16, they will get half their cash back by the end of September and the remainder by the end of December.

WAITING FOR EVIDENCE The strength of U.S. prosecutors' case will become clearer once the evidence they are planning to use is laid out, legal experts said.

"Over the next six months you'll get a sense for why the DOJ charged the entity and failed to charge any of the high-ranking executives," said defense lawyer Andrew Wise, a partner at Miller Chevalier.

Several former SAC employees, including Noah Freeman, Jon Horvath, Donald Longueuil and Wesley Wang, have pleaded guilty to charges of criminal insider trading.

Judge Swain set a September 24 court date to discuss evidence.

SAC's lawyers on Friday included: Ted Wells, Daniel Kramer and Michael Gertzman of Paul, Weiss, Rifkind, Wharton & Garrison; and Martin Klotz and Michael Schachter of Willkie Farr & Gallagher.

The criminal case is U.S. v. SAC Capital Advisors LP et al, U.S. District Court, Southern District of New York, No. 13-cr-00541. The civil case is U.S. v. SAC Capital Advisors LP et al in the same court, No. 13-05182.

(Reporting by Bernard Vaughan in New York and Svea Herbst-Bayliss in Boston; Additional reporting by Sarah N. Lynch in Washington, Emily Flitter and Katya Wachtel in New York; Editing by Matthew Goldstein, Paritosh Bansal, Gerald E. McCormick, Jeffrey Benkoe and Leslie Gevirtz)

View the original article here

SAC Capital pleads not guilty; reinsurance unit eyed

By Bernard Vaughan and Svea Herbst-Bayliss

Fri Jul 26, 2013 6:55pm EDT

n">(Reuters) - Billionaire investor Steven A. Cohen's hedge fund pleaded not guilty on Friday to insider trading charges in federal court, as questions also surfaced about the future of SAC Capital's Bermuda-based reinsurance unit, SAC Re.

Ratings company, A.M. Best Co., and the Bermuda Monetary Authority, which regulates insurers on the island, said they were monitoring developments one day after prosecutors charged the hedge fund and various affiliates with four criminal counts of securities fraud and one count of wire fraud.

A year ago A.M. Best gave SAC Re a top rating. But if the company were to cut its rating of the unit, which had $567.8 million in assets at the end of 2012, in the wake of criminal charges, people may shy away from doing business with the insurer, industry experts said.

"Buyers of reinsurance from SAC Re will be on the phone with their brokers telling them to move out," said Andrew Barile, an independent industry consultant. Buyers have plenty of choice in the reinsurance industry, experts said, adding it would be relatively easy to change companies.

Separately, outside investors with the $14 billion hedge fund also expressed some uncertainty about what to do with their money only weeks before an August 16 redemption deadline.

SAC had presided over a culture from 1999 to 2010 where employees flouted the law and were encouraged to tap their personal networks for inside information about publicly traded companies, prosecutors said on Thursday.

The criminal case imperils the future of one of Wall Street's largest hedge funds and could end Cohen's career of managing outside money. His average annualized returns of 25 percent beat most of his rivals.

Prosecutors did not file criminal charges against Cohen personally, but the U.S. Securities and Exchange Commission has filed a separate civil case against him for failing to supervise two employees.

The SEC is expected to delay its civil case while the criminal trial proceeds. The U.S. attorney also brought a civil case seeking forfeitures and money laundering penalties from Cohen.

The government's evidence in the criminal case includes a lot of "court-authorized wiretaps" and "a large number of electronic recordings," such as emails and instant messages, Antonia Apps, an assistant U.S. attorney who has prosecuted other insider-trading cases, told U.S. District Judge Laura Taylor Swain.

Jonathan Gasthalter, a spokesman for SAC, declined to comment. A representative for SAC Re did not return a call seeking comment.

U.S. Attorney Preet Bharara, who brought the charges, declined to give a specific dollar figure for the amount his office is seeking from SAC. But in court papers, prosecutors contend SAC made "hundreds of millions of dollars" in illegal profits from insider trading, and the penalties they seek could be up to three times the amount of the illegal gains.

SAC sought to assure investors its assets were not frozen and redemptions would continue unhindered. Skittish investors have already withdrawn roughly $4 billion from the firm in the first half of the year.

Blackstone Group, Ironwood Capital and Magnitude Capital all withdrew funds earlier this year. Morgan Stanley, which had client money invested with Cohen also took steps to reduce exposure to SAC in the months leading up to the indictment, according to a person familiar with situation.

Morgan Stanley's exposure is now minimal. A spokeswoman for the bank declined to comment on whether the bank would seek to redeem its remaining funds in the wake of the criminal charges.

While some investors have been loyal to Cohen, one person, who declined to be named, said the new charges worried him. "The real worry is that the regulators are relentless and their sights are set on Steve and they will not stop at nothing to bring him down."

Others said they would wait a little longer to make a decision and await for any communication from the fund. If investors submit a redemption request by August 16, they will get half their cash back by the end of September and the remainder by the end of December.

WAITING FOR EVIDENCE The strength of U.S. prosecutors' case will become clearer once the evidence they are planning to use is laid out, legal experts said.

"Over the next six months you'll get a sense for why the DOJ charged the entity and failed to charge any of the high-ranking executives," said defense lawyer Andrew Wise, a partner at Miller Chevalier.

Several former SAC employees, including Noah Freeman, Jon Horvath, Donald Longueuil and Wesley Wang, have pleaded guilty to charges of criminal insider trading.

Judge Swain set a September 24 court date to discuss evidence.

SAC's lawyers on Friday included: Ted Wells, Daniel Kramer and Michael Gertzman of Paul, Weiss, Rifkind, Wharton & Garrison; and Martin Klotz and Michael Schachter of Willkie Farr & Gallagher.

The criminal case is U.S. v. SAC Capital Advisors LP et al, U.S. District Court, Southern District of New York, No. 13-cr-00541. The civil case is U.S. v. SAC Capital Advisors LP et al in the same court, No. 13-05182.

(Reporting by Bernard Vaughan in New York and Svea Herbst-Bayliss in Boston; Additional reporting by Sarah N. Lynch in Washington, Emily Flitter and Katya Wachtel in New York; Editing by Matthew Goldstein, Paritosh Bansal, Gerald E. McCormick, Jeffrey Benkoe and Leslie Gevirtz)

View the original article here

SAC Capital seeks protective order on operations after charges

NEW YORK (Reuters) - Steven A. Cohen's $15 billion hedge fund SAC Capital Advisors is working on an agreement with U.S. prosecutors for an order to "reasonably protect all parties legitimate interests" as the firm faces criminal insider trading charges.

SAC spokesman Jonathan Gasthalter said in statement on Thursday that a prosecution by the U.S. Attorney in Manhattan "is not intended to affect the ongoing operations of SAC's business, prevent investor redemptions, or impact the interests of any of SAC's counterparties."

He said it was not an attempt to freeze any of the hedge fund's assets.

"We anticipate that we and the U.S. Attorney's Office will agree to a protective order intended to reasonably protect all parties' legitimate interests, but will expressly permit SAC to continue its operations in the ordinary course."

(Reporting By Emily Flitter; Editing by Grant McCool)

View the original article here

SAC gets cut by 'edge', a word Cohen hated

By Lauren Tara LaCapra, Matthew Goldstein and Emily Flitter

NEW YORK | Thu Jul 25, 2013 7:46pm EDT

NEW YORK (Reuters) - Until recently, having an "edge" was a coveted trait on Wall Street. After the federal indictment on Thursday of billionaire investor Steven A. Cohen's hedge fund for insider trading, it is becoming a four-letter word.

In painting a picture of a cutthroat culture at SAC Capital Advisors LP, U.S. prosecutors used the word "edge" 14 times to describe the way traders and analysts allegedly went to great lengths to obtain inside information and insights that no one else on Wall Street had about publicly traded companies.

In one particularly rueful battle between competing portfolio managers at SAC, the indictment talks about two underperformers jealously questioning whether a third really had the "black edge" - parlance for inside information.

The Department of Justice's rare move to indict an entire organization instead of a few individuals could sound the death knell for one of Wall Street's most successful hedge funds and end Cohen's career of managing outside money.

But other fund managers and a Wall Street historian said it could have far-reaching effects beyond SAC, and may change how hedge funds do business forever — especially funds that rely on getting an information to buy and sell stocks.

"This truly is the end of an era in that the days where a manager could say ‘give me your money and trust me' are gone," said Peter Rup, chief investment officer at Aretmis Wealth Advisors.

Charles Geisst, a financial historian and professor at Manhattan College, said the indictment was "a very big deal, as big as Arthur Andersen or Drexel," referring to the accounting firm and the investment bank that went out of business after being indicted.

"This is going to be a nail in the coffin of hedge funds, whose glittery, glossy reputation is starting to slowly erode," Geisst said. "Hedge fund guys were viewed as smarter than everyone else, but now it doesn't seem like they were performing smarter analysis; it seems like they were just getting access to inside information."

SAC Capital has not been convicted of a crime and denies any wrongdoing. Cohen may yet be able to stay in business because more than $8 billion of the fund's roughly $15 billion of assets belong to him and his employees.

Cohen is also no doubt counting on his employees, who are known to be fiercely loyal, to stick with him. Even now, Wall Street headhunters say they aren't seeing a flood of resumes from SAC Capital traders and analysts.

In a statement on Thursday, the firm said it "has never encouraged, promoted or tolerated insider trading and takes its compliance and management obligations seriously." It added that the individual employees who admitted to wrongdoing are not representative of the firm as a whole.

In marketing materials, SAC Capital has described its information edge as being a totally lawful one and the by-product of the so-called mosaic theory of investing, which involves gathering information from multiple sources to build an investment thesis.

However, just how Cohen, who launched SAC Capital in 1992 with just $25 million, managed to generate some of the best returns in the $2.2 trillion industry always has remained a bit of a mystery. Over its history, the firm has provided investors a 25 percent return on average annually, even after charging some of the industry's highest fees.

The mosaic theory of stock-picking is becoming something of a relic, with computer-driven quantitative trading replacing the need for knowing whether a company's earnings will be worse or better than expected or whether it would be taken over. The use of industry consultants to gather bits of information to build an investment thesis has also fallen into disgrace with prosecution of traders who used so-called expert networks to build investment theses.

"I hardly know Stevie Cohen, but he was a great money manager for a long time. How he did it, I really don't know," said hedge fund pioneer Michael Steinhardt on Wednesday, as word of the imminent indictment of SAC Capital was spreading across Wall Street.

NETWORK OF CONTACTS

Cohen has said he is no fan of the term "edge." In a 2011 deposition related to a separate lawsuit by a Canadian insurer, Cohen said, "I hate that word" when an opposing lawyer asked him whether it was used at SAC to describe having an advantage over other investors.

Yet, prosecutors said employees were hired for their network of contacts and then expected to come up with million-dollar trading ideas in stocks. Compliance and legal worries were often ignored, they said.

SAC's computer and phone systems had designated inboxes and voicemails set up for traders to deliver their edgiest ideas, prosecutors said. Cohen also held "semi-regular" Sunday evening calls and in-person conversations" with traders to hear their best trading ideas.

Some examples cited by prosecutors: an SAC job candidate who shared a house in the Hamptons with the chief financial officer of a large publicly traded industrial company; a portfolio manager who allegedly traded on inside information he said he had received from "a friend of my cousin" who worked in the finance department of Dell Inc; and an analyst who had a "buddy" who happened to be a "senior guy at Microsoft."

Representatives for Dell and Microsoft Corp did not immediately comment on the indictment.

Howard Ross, a financial recruiter with BOC Staffing Solutions, said the scandal has changed what job candidates have to highlight in their resumes.

In the indictment, prosecutors alleged that SAC's due diligence reports on candidates had no reference "to ethics, integrity, compliance." On one occasion, SAC even hired a candidate despite his reputation for insider trading.

Ross said, "Compliance, regulatory controls and risk - those are the three hottest areas that we're dealing with these days."

"There's definitely been a huge shift because managers are now accountable not just for the bottom line but for making sure they're running cleaner, safer operations," he said.

(Additional reporting by Katya Wachtel and Jennifer Ablan in New York and Svea Herbst-Bayliss in Boston; editing by Paritosh Bansal and Richard Chang)

View the original article here

SAC gets cut by 'edge', a word Cohen hated

By Lauren Tara LaCapra, Matthew Goldstein and Emily Flitter

NEW YORK | Thu Jul 25, 2013 7:46pm EDT

NEW YORK (Reuters) - Until recently, having an "edge" was a coveted trait on Wall Street. After the federal indictment on Thursday of billionaire investor Steven A. Cohen's hedge fund for insider trading, it is becoming a four-letter word.

In painting a picture of a cutthroat culture at SAC Capital Advisors LP, U.S. prosecutors used the word "edge" 14 times to describe the way traders and analysts allegedly went to great lengths to obtain inside information and insights that no one else on Wall Street had about publicly traded companies.

In one particularly rueful battle between competing portfolio managers at SAC, the indictment talks about two underperformers jealously questioning whether a third really had the "black edge" - parlance for inside information.

The Department of Justice's rare move to indict an entire organization instead of a few individuals could sound the death knell for one of Wall Street's most successful hedge funds and end Cohen's career of managing outside money.

But other fund managers and a Wall Street historian said it could have far-reaching effects beyond SAC, and may change how hedge funds do business forever — especially funds that rely on getting an information to buy and sell stocks.

"This truly is the end of an era in that the days where a manager could say ‘give me your money and trust me' are gone," said Peter Rup, chief investment officer at Aretmis Wealth Advisors.

Charles Geisst, a financial historian and professor at Manhattan College, said the indictment was "a very big deal, as big as Arthur Andersen or Drexel," referring to the accounting firm and the investment bank that went out of business after being indicted.

"This is going to be a nail in the coffin of hedge funds, whose glittery, glossy reputation is starting to slowly erode," Geisst said. "Hedge fund guys were viewed as smarter than everyone else, but now it doesn't seem like they were performing smarter analysis; it seems like they were just getting access to inside information."

SAC Capital has not been convicted of a crime and denies any wrongdoing. Cohen may yet be able to stay in business because more than $8 billion of the fund's roughly $15 billion of assets belong to him and his employees.

Cohen is also no doubt counting on his employees, who are known to be fiercely loyal, to stick with him. Even now, Wall Street headhunters say they aren't seeing a flood of resumes from SAC Capital traders and analysts.

In a statement on Thursday, the firm said it "has never encouraged, promoted or tolerated insider trading and takes its compliance and management obligations seriously." It added that the individual employees who admitted to wrongdoing are not representative of the firm as a whole.

In marketing materials, SAC Capital has described its information edge as being a totally lawful one and the by-product of the so-called mosaic theory of investing, which involves gathering information from multiple sources to build an investment thesis.

However, just how Cohen, who launched SAC Capital in 1992 with just $25 million, managed to generate some of the best returns in the $2.2 trillion industry always has remained a bit of a mystery. Over its history, the firm has provided investors a 25 percent return on average annually, even after charging some of the industry's highest fees.

The mosaic theory of stock-picking is becoming something of a relic, with computer-driven quantitative trading replacing the need for knowing whether a company's earnings will be worse or better than expected or whether it would be taken over. The use of industry consultants to gather bits of information to build an investment thesis has also fallen into disgrace with prosecution of traders who used so-called expert networks to build investment theses.

"I hardly know Stevie Cohen, but he was a great money manager for a long time. How he did it, I really don't know," said hedge fund pioneer Michael Steinhardt on Wednesday, as word of the imminent indictment of SAC Capital was spreading across Wall Street.

NETWORK OF CONTACTS

Cohen has said he is no fan of the term "edge." In a 2011 deposition related to a separate lawsuit by a Canadian insurer, Cohen said, "I hate that word" when an opposing lawyer asked him whether it was used at SAC to describe having an advantage over other investors.

Yet, prosecutors said employees were hired for their network of contacts and then expected to come up with million-dollar trading ideas in stocks. Compliance and legal worries were often ignored, they said.

SAC's computer and phone systems had designated inboxes and voicemails set up for traders to deliver their edgiest ideas, prosecutors said. Cohen also held "semi-regular" Sunday evening calls and in-person conversations" with traders to hear their best trading ideas.

Some examples cited by prosecutors: an SAC job candidate who shared a house in the Hamptons with the chief financial officer of a large publicly traded industrial company; a portfolio manager who allegedly traded on inside information he said he had received from "a friend of my cousin" who worked in the finance department of Dell Inc; and an analyst who had a "buddy" who happened to be a "senior guy at Microsoft."

Representatives for Dell and Microsoft Corp did not immediately comment on the indictment.

Howard Ross, a financial recruiter with BOC Staffing Solutions, said the scandal has changed what job candidates have to highlight in their resumes.

In the indictment, prosecutors alleged that SAC's due diligence reports on candidates had no reference "to ethics, integrity, compliance." On one occasion, SAC even hired a candidate despite his reputation for insider trading.

Ross said, "Compliance, regulatory controls and risk - those are the three hottest areas that we're dealing with these days."

"There's definitely been a huge shift because managers are now accountable not just for the bottom line but for making sure they're running cleaner, safer operations," he said.

(Additional reporting by Katya Wachtel and Jennifer Ablan in New York and Svea Herbst-Bayliss in Boston; editing by Paritosh Bansal and Richard Chang)

View the original article here

SAC gets cut by 'edge', a word Cohen hated

By Lauren Tara LaCapra, Matthew Goldstein and Emily Flitter

NEW YORK | Thu Jul 25, 2013 7:46pm EDT

NEW YORK (Reuters) - Until recently, having an "edge" was a coveted trait on Wall Street. After the federal indictment on Thursday of billionaire investor Steven A. Cohen's hedge fund for insider trading, it is becoming a four-letter word.

In painting a picture of a cutthroat culture at SAC Capital Advisors LP, U.S. prosecutors used the word "edge" 14 times to describe the way traders and analysts allegedly went to great lengths to obtain inside information and insights that no one else on Wall Street had about publicly traded companies.

In one particularly rueful battle between competing portfolio managers at SAC, the indictment talks about two underperformers jealously questioning whether a third really had the "black edge" - parlance for inside information.

The Department of Justice's rare move to indict an entire organization instead of a few individuals could sound the death knell for one of Wall Street's most successful hedge funds and end Cohen's career of managing outside money.

But other fund managers and a Wall Street historian said it could have far-reaching effects beyond SAC, and may change how hedge funds do business forever — especially funds that rely on getting an information to buy and sell stocks.

"This truly is the end of an era in that the days where a manager could say ‘give me your money and trust me' are gone," said Peter Rup, chief investment officer at Aretmis Wealth Advisors.

Charles Geisst, a financial historian and professor at Manhattan College, said the indictment was "a very big deal, as big as Arthur Andersen or Drexel," referring to the accounting firm and the investment bank that went out of business after being indicted.

"This is going to be a nail in the coffin of hedge funds, whose glittery, glossy reputation is starting to slowly erode," Geisst said. "Hedge fund guys were viewed as smarter than everyone else, but now it doesn't seem like they were performing smarter analysis; it seems like they were just getting access to inside information."

SAC Capital has not been convicted of a crime and denies any wrongdoing. Cohen may yet be able to stay in business because more than $8 billion of the fund's roughly $15 billion of assets belong to him and his employees.

Cohen is also no doubt counting on his employees, who are known to be fiercely loyal, to stick with him. Even now, Wall Street headhunters say they aren't seeing a flood of resumes from SAC Capital traders and analysts.

In a statement on Thursday, the firm said it "has never encouraged, promoted or tolerated insider trading and takes its compliance and management obligations seriously." It added that the individual employees who admitted to wrongdoing are not representative of the firm as a whole.

In marketing materials, SAC Capital has described its information edge as being a totally lawful one and the by-product of the so-called mosaic theory of investing, which involves gathering information from multiple sources to build an investment thesis.

However, just how Cohen, who launched SAC Capital in 1992 with just $25 million, managed to generate some of the best returns in the $2.2 trillion industry always has remained a bit of a mystery. Over its history, the firm has provided investors a 25 percent return on average annually, even after charging some of the industry's highest fees.

The mosaic theory of stock-picking is becoming something of a relic, with computer-driven quantitative trading replacing the need for knowing whether a company's earnings will be worse or better than expected or whether it would be taken over. The use of industry consultants to gather bits of information to build an investment thesis has also fallen into disgrace with prosecution of traders who used so-called expert networks to build investment theses.

"I hardly know Stevie Cohen, but he was a great money manager for a long time. How he did it, I really don't know," said hedge fund pioneer Michael Steinhardt on Wednesday, as word of the imminent indictment of SAC Capital was spreading across Wall Street.

NETWORK OF CONTACTS

Cohen has said he is no fan of the term "edge." In a 2011 deposition related to a separate lawsuit by a Canadian insurer, Cohen said, "I hate that word" when an opposing lawyer asked him whether it was used at SAC to describe having an advantage over other investors.

Yet, prosecutors said employees were hired for their network of contacts and then expected to come up with million-dollar trading ideas in stocks. Compliance and legal worries were often ignored, they said.

SAC's computer and phone systems had designated inboxes and voicemails set up for traders to deliver their edgiest ideas, prosecutors said. Cohen also held "semi-regular" Sunday evening calls and in-person conversations" with traders to hear their best trading ideas.

Some examples cited by prosecutors: an SAC job candidate who shared a house in the Hamptons with the chief financial officer of a large publicly traded industrial company; a portfolio manager who allegedly traded on inside information he said he had received from "a friend of my cousin" who worked in the finance department of Dell Inc; and an analyst who had a "buddy" who happened to be a "senior guy at Microsoft."

Representatives for Dell and Microsoft Corp did not immediately comment on the indictment.

Howard Ross, a financial recruiter with BOC Staffing Solutions, said the scandal has changed what job candidates have to highlight in their resumes.

In the indictment, prosecutors alleged that SAC's due diligence reports on candidates had no reference "to ethics, integrity, compliance." On one occasion, SAC even hired a candidate despite his reputation for insider trading.

Ross said, "Compliance, regulatory controls and risk - those are the three hottest areas that we're dealing with these days."

"There's definitely been a huge shift because managers are now accountable not just for the bottom line but for making sure they're running cleaner, safer operations," he said.

(Additional reporting by Katya Wachtel and Jennifer Ablan in New York and Svea Herbst-Bayliss in Boston; editing by Paritosh Bansal and Richard Chang)

View the original article here

Samsung emphasizes components as smartphones peak

SEOUL, South Korea (AP) — Samsung plans to plow a record pile of cash into its semiconductor and display panel businesses, hoping to reduce reliance on sales of high-end Galaxy smartphones that are poised to peak after two years of blistering growth.

Samsung Electronics Co., the world's largest smartphone maker, reported record profit for a sixth straight quarter on Friday. But the result still disappointed investors who expected Samsung to book even higher earnings after the Galaxy S4, its latest iteration of the flagship smartphone, was launched in April. The handset scored 10 million sales in the month after its launch.

Samsung's division that makes and sells handsets, smartphones and tablet computers has been the motive force behind the South Korea company's run of bumper profits, with Galaxy smartphone shipments jumping every quarter. In the three months ended June 30, the division contributed two-thirds of the company's entire operating profit.

Samsung, which does not disclose its smartphone sales figures, is estimated by research firm IDC to have shipped 72.4 million smartphones in the April-June quarter, compared with Apple's 31.2 million iPhone sales. Samsung's second quarter smartphone sales were double what it sold in the final quarter of 2011, an indication of how fast the company expanded its business and outpaced rivals.

But investors who once cheered the explosive sales growth now fret that consumer appetite for top-of-the-range smartphones is close to being sated. Cutting-edge features have lost some of their luster as there is now a wide choice of new devices with equivalently fast processors, powerful cameras and crisp roomy displays.

Emerging markets remain a source of growth but the middle classes in such countries flock to cheaper smartphones that are less profitable for manufacturers such as Samsung and Apple Inc. They also face additional competition from Chinese companies that specialize in affordable handsets.

Samsung's share price has dropped 14 percent since January, cutting $30 billion from its market value. Robert Yi, senior vice president of investor relations at Samsung, blamed global economic conditions that prompted foreign investors to pull funds from Asian financial markets including South Korea.

But many analysts said weaker-than-expected sales and profit from Galaxy smartphones is the key factor behind the tumbling share price. Analysts including those at JP Morgan Chase cut their sales forecasts for the Galaxy S4 by more than 20 percent in June, predicting shipments would weaken after the first quarter it was on sale.

Samsung said it expected a higher profit contribution from its components businesses in the future.

It plans record-high capital expenditure this year, which will help ramp up production of its mainstay memory chips and strengthen its expansion in the mobile processor market. Out of 24 trillion won ($21.6 billion) of annual capital spending, it allocated 13 trillion won to the semiconductor business and 6.5 trillion won to its display panel business.

In the latest quarter, Samsung's display panel business posted a higher profit over a year earlier thanks to demand for advanced displays called OLED, primarily used in Galaxy smartphones. Even as PC shipments fell in the spring quarter, demand for tablet PCs and data servers propped up prices of memory chips accounting for larger semiconductor profit.

In smartphones, Samsung is also facing a similar challenge to Apple in that consumers are increasingly buying its older less expensive models rather than the latest version.

IDC said discounted prices of the Galaxy S III, a predecessor of the S4, renewed consumer interest during the second quarter and contributed to Samsung's shipment growth. Yet it also likely dragged on earnings from handsets.

Samsung's mobile business posted a lower profit in the three months ending June compared with the previous quarter because of higher marketing costs after the S4 launch. It was first time in a year that the mobile division did not report an increase in profit from the previous quarter.

Samsung said the average handset price will moderately decline in coming quarters as the proportion of mid-tier smartphone sales increase. It also released variations of the Galaxy series to offer cheaper handsets and fend off competition from Chinese rivals.

Many analysts also expect Samsung to mark down the Galaxy S4's price in the fall and winter quarters as rivals, including Apple, will release new models.

Samsung's April-June net profit jumped 50 percent over a year earlier to 7.77 trillion won ($6.9 billion), below the market forecast of 7.96 trillion won, according to a survey of analysts by FactSet, a financial data provider.

Operating profit was also at a record high of 9.53 trillion won, up 48 percent. Sales rose 21 percent to 57.46 trillion won.

___

Follow Youkyung Lee on Twitter: https://www.twitter.com/YKLeeAP

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Samsung sees smartphone ASP down in third-quarter due to cheaper models

SEOUL | Thu Jul 25, 2013 9:13pm EDT

SEOUL (Reuters) - Samsung Electronics Co Ltd (005930.KS) on Friday expected its average selling prices of smartphones to decline slightly in the third quarter, because of the growing portion of mid- and low-end smartphones.

The South Korean company also forecast its tablet shipments would jump by slightly more than 30 percent in the July to September period from the preceding quarter.

The remarks were made by Kim Hyun-joon, vice president of Samsung's mobile business, during an earnings conference call.

(Reporting by Hyunjoo Jin; Editing by Jacqueline Wong)

View the original article here

Samsung sells 76 million smartphones in second quarter, boosting market share: report

Samsung Electronics Co's latest Galaxy S4 phone is seen during its launch at the Radio City Music Hall in New York March 14, 2013.

Credit: Reuters/Adrees Latif

View the original article here

Samsung sells 76 million smartphones in second quarter, boosting market share: report

Samsung Electronics Co's latest Galaxy S4 phone is seen during its launch at the Radio City Music Hall in New York March 14, 2013.

Credit: Reuters/Adrees Latif

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Samsung to invest in chips, panels as smartphone outlook dims

1 of 3. A Samsung Electronics laptop computer is displayed at a shop in Samsung's main office building in central Seoul July 23, 2013.

Credit: Reuters/Lee Jae-Won

By Miyoung Kim

SEOUL | Fri Jul 26, 2013 12:26am EDT

SEOUL (Reuters) - Samsung Electronics Co Ltd (005930.KS) announced a $1 billion increase in investment on Friday, hoping a strong recovery in semiconductors will make up for weakening smartphone growth as it faces mounting pressure to produce eye-catching new gadgets.

The high-end smartphone market, which Samsung dominates along with Apple Inc (AAPL.O), is slowing and the South Korean giant is struggling to convince investors it can crack the rapidly growing low-end segment, where its rivals include China's Huawei Technologies Co Ltd HWT.UL and ZTE Corp (000063.SZ).

Samsung on Friday reported a 47.5 percent rise in April-June operating profit of a record 9.53 trillion won ($8.54 billion), in line with its estimate.

But profits at its mobile division, which generates two thirds of its total earnings, slipped 3.5 percent from the previous quarter even with the launch of its flagship Galaxy S4 in late April, sparking concerns its mobile growth momentum may have stalled as competition intensifies.

Executives offered little to give investors hope that a new market-shifting breakthrough in high-end smartphone technology is around the corner, fueling uncertainty over a segment which appears to have peaked in the first quarter after driving a series of record profits for Samsung in recent years.

Mobile division profit was still up 52 percent from a year ago but even that fell short of expectations, as slower sales of old models like the S3 and the marketing bill for the S4 took their toll.

"It is clear that the global smartphone market is stalling because of the slowing growth of high-end smartphones and rising competition from lower-priced smartphones," said Ahn Young-hoe, a fund manager at KTB Asset Management, which owns Samsung shares.

"There is no major momentum for Samsung. The key is whether Samsung, which sources smartphone parts in-house unlike Apple, will be able to cut parts costs and increase volume and market share to offset reduced smartphone margins."

Samsung warned that global smartphone sales growth could weaken further in the third quarter, and said it expected stiffer competition due to new product launches. Apple is expected to release the iPhone 5S and a low-end iPhone later this year.

"As we go into a typically strong season for the IT industry, we expect earnings to continue to increase," Samsung said in its earnings statement.

"However, we cannot overlook delayed economic recovery in Europe and risks from increased competition for smartphones and other set products."

HOT CHIPS

Samsung forecast stronger earnings in the second half thanks in part to its component business, which was staging a solid recovery on the back of soaring prices for semiconductors used in personal computers and mobile devices.

Capital spending in 2013 would increase by more than 1 trillion won to 24 trillion won, and could rise further depending on market conditions. More than 80 percent of that expenditure would be devoted to chips and flat panels such as liquid crystal displays and organic light emitting diode technology, seen as the next big thing in television.

The world's biggest maker of memory chips and televisions said profits from its chip business rose 71 percent to 1.76 trillion won in the second quarter.

Shares of Samsung, worth $172 billion, traded down 0.8 percent on Friday, lagging a 0.1 percent gain in the broader market .KS11.

The stock has lost 14 percent or 32.7 trillion won ($29.4 billion) since early June, hit by a series of brokerage downgrades sparked by fears the high-end smartphone market had reached saturation.

Those concerns eased somewhat on Tuesday when Apple reported stronger-than-expected iPhone sales, even if demand was stoked by aggressively discounted older models. The California-based company still reported a fall in quarterly profit of 22 percent as its margins slipped in the absence of new products.

Research firm Strategy Analytics said Samsung sold 76 million smartphones in the second quarter to take 33.1 percent of the market, widening the gap with second-ranked Apple which saw its share shrink to 13.6 percent.

"I expect Samsung's smartphone profit to stagnate in the current quarter compared to the previous quarter as there are no sensational products in the market. This is a problem facing not only Samsung but Apple and the entire industry," said Samsung Securities Analyst Harrison Cho.

"Apple's new iPhone, which is expected to be released early September, will be nothing new." ($1 = 1112.8500 Korean won)

(Reporting by Hyunjoo Jin; Editing by Stephen Coates)

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Samsung to invest in chips, panels as smartphone outlook dims

1 of 3. A Samsung Electronics laptop computer is displayed at a shop in Samsung's main office building in central Seoul July 23, 2013.

Credit: Reuters/Lee Jae-Won

By Miyoung Kim

SEOUL | Fri Jul 26, 2013 12:26am EDT

SEOUL (Reuters) - Samsung Electronics Co Ltd (005930.KS) announced a $1 billion increase in investment on Friday, hoping a strong recovery in semiconductors will make up for weakening smartphone growth as it faces mounting pressure to produce eye-catching new gadgets.

The high-end smartphone market, which Samsung dominates along with Apple Inc (AAPL.O), is slowing and the South Korean giant is struggling to convince investors it can crack the rapidly growing low-end segment, where its rivals include China's Huawei Technologies Co Ltd HWT.UL and ZTE Corp (000063.SZ).

Samsung on Friday reported a 47.5 percent rise in April-June operating profit of a record 9.53 trillion won ($8.54 billion), in line with its estimate.

But profits at its mobile division, which generates two thirds of its total earnings, slipped 3.5 percent from the previous quarter even with the launch of its flagship Galaxy S4 in late April, sparking concerns its mobile growth momentum may have stalled as competition intensifies.

Executives offered little to give investors hope that a new market-shifting breakthrough in high-end smartphone technology is around the corner, fueling uncertainty over a segment which appears to have peaked in the first quarter after driving a series of record profits for Samsung in recent years.

Mobile division profit was still up 52 percent from a year ago but even that fell short of expectations, as slower sales of old models like the S3 and the marketing bill for the S4 took their toll.

"It is clear that the global smartphone market is stalling because of the slowing growth of high-end smartphones and rising competition from lower-priced smartphones," said Ahn Young-hoe, a fund manager at KTB Asset Management, which owns Samsung shares.

"There is no major momentum for Samsung. The key is whether Samsung, which sources smartphone parts in-house unlike Apple, will be able to cut parts costs and increase volume and market share to offset reduced smartphone margins."

Samsung warned that global smartphone sales growth could weaken further in the third quarter, and said it expected stiffer competition due to new product launches. Apple is expected to release the iPhone 5S and a low-end iPhone later this year.

"As we go into a typically strong season for the IT industry, we expect earnings to continue to increase," Samsung said in its earnings statement.

"However, we cannot overlook delayed economic recovery in Europe and risks from increased competition for smartphones and other set products."

HOT CHIPS

Samsung forecast stronger earnings in the second half thanks in part to its component business, which was staging a solid recovery on the back of soaring prices for semiconductors used in personal computers and mobile devices.

Capital spending in 2013 would increase by more than 1 trillion won to 24 trillion won, and could rise further depending on market conditions. More than 80 percent of that expenditure would be devoted to chips and flat panels such as liquid crystal displays and organic light emitting diode technology, seen as the next big thing in television.

The world's biggest maker of memory chips and televisions said profits from its chip business rose 71 percent to 1.76 trillion won in the second quarter.

Shares of Samsung, worth $172 billion, traded down 0.8 percent on Friday, lagging a 0.1 percent gain in the broader market .KS11.

The stock has lost 14 percent or 32.7 trillion won ($29.4 billion) since early June, hit by a series of brokerage downgrades sparked by fears the high-end smartphone market had reached saturation.

Those concerns eased somewhat on Tuesday when Apple reported stronger-than-expected iPhone sales, even if demand was stoked by aggressively discounted older models. The California-based company still reported a fall in quarterly profit of 22 percent as its margins slipped in the absence of new products.

Research firm Strategy Analytics said Samsung sold 76 million smartphones in the second quarter to take 33.1 percent of the market, widening the gap with second-ranked Apple which saw its share shrink to 13.6 percent.

"I expect Samsung's smartphone profit to stagnate in the current quarter compared to the previous quarter as there are no sensational products in the market. This is a problem facing not only Samsung but Apple and the entire industry," said Samsung Securities Analyst Harrison Cho.

"Apple's new iPhone, which is expected to be released early September, will be nothing new." ($1 = 1112.8500 Korean won)

(Reporting by Hyunjoo Jin; Editing by Stephen Coates)

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Samsung's 2Q profit record high but below forecast

SEOUL, South Korea (AP) — Samsung Electronics reported a record-high profit for a sixth straight quarter but still disappointed investors who had higher expectations for the world's largest smartphone maker.

Samsung said Friday its April-June net profit jumped 50 percent over a year earlier to 7.77 trillion won ($6.9 billion).

The bottom line was lower than the market forecast of 7.96 trillion won, according to a survey of analysts by FactSet, a financial data provider.

Operating profit was also at a record high of 9.53 trillion won, up 48 percent. Sales rose 21 percent to 57.46 trillion won.

Samsung's latest quarterly report indicates that its explosive profit growth driven by Galaxy smartphone sales may be slowing as smartphones have become mainstream in developed countries. Emerging countries remain a source of growth for smartphone vendors, but consumers there flock to cheaper smartphones, leaving smaller margin to the manufacturers.

Samsung's division that makes and sells handsets, smartphones and tablet computers was the key force behind its latest run of record-setting profit. In 2012, the mobile division contributed 67 percent of Samsung's overall operating profit.

Samsung says its mobile business posted a lower profit compared with the previous quarter on marketing costs. It was first time in a year that the mobile division reported a smaller profit than the earlier quarter.

The Galaxy S4, the latest iteration of its flagship smartphone, hit 10 million sales in the first month of its sales in May, making inroads as Apple did not refresh its iPhone and iPad. But some analysts including those at JP Morgan Chase revised down their sales forecasts of the Galaxy S4 by more than 20 percent, expecting the handset's shipments after the first quarter of launch will weaken.

Many analysts also expect Samsung to mark down the prices of the Galaxy S4 in the fall and winter quarters as rivals, including Apple, will release new models.

Samsung said the smartphone market may expand at a slower rate in the current quarter but it still plans to increase shipments. Samsung has also released variations of Galaxy smartphone series to offer cheaper handsets and fend off competition from Chinese rivals.

The South Korean company is the world's largest smartphone maker. In the January-March quarter, it sold more smartphones than next four vendors combined and one in every three smartphone sold in the period was made by Samsung, according to market researcher IDC.

The company also said Friday that it plans a record-high capital expenditure for this year. Out of 24 trillion won ($21.6 billion) of annual capital spending, 13 trillion won will go to its semiconductor business and 6.5 trillion won will be spent on its display panel business.

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Siemens' board to discuss management's future at weekend: sources

The logo of Siemens AG company is pictured atop a factory in Berlin October 9, 2012.

Credit: Reuters/Fabrizio Bensch

By Jens Hack and Maria Sheahan

MUNICH | Fri Jul 26, 2013 1:42pm EDT

MUNICH (Reuters) - Members of Siemens' (SIEGn.DE) supervisory board will meet at the weekend to discuss the future of the German engineering group's management, two people familiar with the matter said on Friday, a day after the firm abandoned its 2014 profit target.

There was some respite for Chief Executive Peter Loescher on financial markets, with shares in one of Europe's biggest industrial producers rising 1.4 percent after sinking around 8 percent on the profit warning a day earlier.

But with concern among financial investors growing about Loescher's ability to turn around one of Europe's biggest industrial producers, sources told Reuters that supervisory board members representing workers and shareholders had called separate emergency meetings for this weekend.

The agenda for both meetings - which come ahead of a joint meeting scheduled for Wednesday, a day before the company releases third-quarter results - includes an item on "the future composition of management", one of the sources said.

Siemens' supervisory board has 20 members and, as is customary in Germany, half of them represent the interests of workers and the other half those of shareholders in one of Germany's three biggest companies by market value.

"I'm facing headwinds now, but it's never been like me to give up or strike the sails quickly," Loescher told German daily Sueddeutsche Zeitung in a preview of an interview due to run on Saturday.

Loescher has faced criticism for being too slow to react to the global economic downturn, and his credibility has been undermined by a string of profit warnings as management over-estimated the speed of economic recovery.

A symbol of Germany's industrial backbone and the high added-value economic model that makes it the envy of the rest of Europe, Siemens is suffering from the stuttering global demand that saw German exports fall the most since late 2009 in May.

But while that substantially reflects the problems of the rest of the euro zone and a slowdown in China, some of Siemens' competitors seem to be showing improvement where the German firm is not.

General Electric (GE.N) last week unveiled a surprise jump in its backlog of orders for locomotives, X-ray machines and scores of other products, and Dutch rival Philips (PHG.AS) has reported robust orders for ultrasound and scanning products.

FAILING TO DELIVER

Loescher last year launched a program to save 6 billion euros ($8 billion) over two years. But Siemens, whose products range from gas turbines to fast trains and hearing aids, has so far failed to make the progress Loescher promised.

On Thursday, the company said in a very brief statement it no longer expected to reach a target of raising its core operating profit margin to at least 12 percent from 9.5 percent by 2014.

"We have to face the tough reality of a weak global economy, especially in Siemens' important core markets, and realize that the 12 percent is not reachable from today's point of view," Loescher said in the interview with Sueddeutsche Zeitung.

Siemens is scheduled to release third-quarter results on Thursday, and analysts expect Loescher to elaborate at that time on what prompted the company to scrap its margin target.

German media are speculating on who could replace Loescher if push came to shove. Magazine Manager Magazin said that shareholder representatives favor Siegfried Russwurm, chief executive of Siemens' bread-and-butter Industry business.

Newspaper Die Welt said one option was to name finance chief Joe Kaeser as CEO, while another was for supervisory board Chairman Gerhard Cromme, who brought Loescher to Siemens six years ago, to take the helm on an interim basis.

Another possibility is that CFO Kaeser and Russwurm could share the job as co-CEOs, Sueddeutsche Zeitung said.

(Reporting by Jens Hack; Writing by Maria Sheahan; Editing by Patrick Graham)

View the original article here

Siemens' board to discuss management's future at weekend: sources

The logo of Siemens AG company is pictured atop a factory in Berlin October 9, 2012.

Credit: Reuters/Fabrizio Bensch

By Jens Hack and Maria Sheahan

MUNICH | Fri Jul 26, 2013 1:42pm EDT

MUNICH (Reuters) - Members of Siemens' (SIEGn.DE) supervisory board will meet at the weekend to discuss the future of the German engineering group's management, two people familiar with the matter said on Friday, a day after the firm abandoned its 2014 profit target.

There was some respite for Chief Executive Peter Loescher on financial markets, with shares in one of Europe's biggest industrial producers rising 1.4 percent after sinking around 8 percent on the profit warning a day earlier.

But with concern among financial investors growing about Loescher's ability to turn around one of Europe's biggest industrial producers, sources told Reuters that supervisory board members representing workers and shareholders had called separate emergency meetings for this weekend.

The agenda for both meetings - which come ahead of a joint meeting scheduled for Wednesday, a day before the company releases third-quarter results - includes an item on "the future composition of management", one of the sources said.

Siemens' supervisory board has 20 members and, as is customary in Germany, half of them represent the interests of workers and the other half those of shareholders in one of Germany's three biggest companies by market value.

"I'm facing headwinds now, but it's never been like me to give up or strike the sails quickly," Loescher told German daily Sueddeutsche Zeitung in a preview of an interview due to run on Saturday.

Loescher has faced criticism for being too slow to react to the global economic downturn, and his credibility has been undermined by a string of profit warnings as management over-estimated the speed of economic recovery.

A symbol of Germany's industrial backbone and the high added-value economic model that makes it the envy of the rest of Europe, Siemens is suffering from the stuttering global demand that saw German exports fall the most since late 2009 in May.

But while that substantially reflects the problems of the rest of the euro zone and a slowdown in China, some of Siemens' competitors seem to be showing improvement where the German firm is not.

General Electric (GE.N) last week unveiled a surprise jump in its backlog of orders for locomotives, X-ray machines and scores of other products, and Dutch rival Philips (PHG.AS) has reported robust orders for ultrasound and scanning products.

FAILING TO DELIVER

Loescher last year launched a program to save 6 billion euros ($8 billion) over two years. But Siemens, whose products range from gas turbines to fast trains and hearing aids, has so far failed to make the progress Loescher promised.

On Thursday, the company said in a very brief statement it no longer expected to reach a target of raising its core operating profit margin to at least 12 percent from 9.5 percent by 2014.

"We have to face the tough reality of a weak global economy, especially in Siemens' important core markets, and realize that the 12 percent is not reachable from today's point of view," Loescher said in the interview with Sueddeutsche Zeitung.

Siemens is scheduled to release third-quarter results on Thursday, and analysts expect Loescher to elaborate at that time on what prompted the company to scrap its margin target.

German media are speculating on who could replace Loescher if push came to shove. Magazine Manager Magazin said that shareholder representatives favor Siegfried Russwurm, chief executive of Siemens' bread-and-butter Industry business.

Newspaper Die Welt said one option was to name finance chief Joe Kaeser as CEO, while another was for supervisory board Chairman Gerhard Cromme, who brought Loescher to Siemens six years ago, to take the helm on an interim basis.

Another possibility is that CFO Kaeser and Russwurm could share the job as co-CEOs, Sueddeutsche Zeitung said.

(Reporting by Jens Hack; Writing by Maria Sheahan; Editing by Patrick Graham)

View the original article here