From Nokia chief to Bill Gates, guessing game begins on new Microsoft CEO

Nokia Chief Executive Stephen Elop demonstrates the camera technology of the company's latest high-end smartphone, the Lumia 1020, at the company's headquarters in Espoo, during an interview with Reuters, July 17, 2013.

Credit: Reuters/Ritsuko Ando

LONDON | Tue Aug 27, 2013 5:51pm BST

LONDON (Reuters) - As Steve Ballmer bows out of Microsoft Corp, the guessing game over who will replace him has started with a British bookmaker putting Nokia's Stephen Elop as the favourite.

Ballmer, 57, unexpectedly announced his retirement last Friday after more than three decades at the world's largest software company, including 13 years as chief executive.

With no heir apparent, Ladbrokes opened up betting on successors for Ballmer who will depart within the next year, with Elop, 49, topping a list of 26 candidates with odds of 5/1.

British and Irish bookmakers offer a wide range of bets as a niche sideline to more lucrative wagers on sports. Online gambling is far more restrictive in the United States.

Elop, a Canadian, led Microsoft's business division before becoming chief executive of the Finnish firm Nokia in 2010 with a brief to revive the once-undisputed leader in mobile phones.

Senior Nokia employees say he has forced them to make faster decisions. But Nokia's ability to compete in the global smartphone market is increasingly questioned; its market share stands at around three percent, far behind Samsung and Apple which control around 50 percent between them.

Internal Microsoft candidate Kevin Turner, chief operating officer, is second favourite with odds of 6/1 to replace Ballmer, according to Ladbrokes. In third is former Microsoft executive Steve Sinofsky, who left the company last November.

The top female candidate in the stakes is internal head of devices and studios, Julie Larson-Green, in fourth place.

Microsoft co-founder Bill Gates is ranked as a 50/1 shot to return to fill the void but he is considered more likely than rank 100/1 outsider Tim Cook, CEO at Apple.

Ladbrokes' spokesman Alex Donohue said the market was a "who's who of high fliers" in the technology world. "With a year to go we anticipate that this market will smash all previous records for technology betting," Donohue said in a statement.

(Reporting by Belinda Goldsmith; Editing by Pravin Char)

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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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U.S. chief executives can't break cost-cutting habit

By Lewis Krauskopf, Patricia Kranz and Lucia Mutikani

Fri Jul 26, 2013 6:16pm EDT

n">(Reuters) - A disconcerting trend lurks beneath the recent round of solid profit forecasts announced by companies ranging from United Technologies Corp (UTX.N) to Wendy's Co (WEN.O): More than three years into the recovery, CEOs are still relying on cost cuts to prop up earnings.

While the cuts are not as severe as those that followed the 2008 financial crisis, companies remain cautious, mindful that revenue growth is still tepid. As a result, many appear to be more comfortable wringing efficiencies out of their businesses than gearing up for accelerated production.

The risk is those cuts may be too deep at this stage in the economic cycle, and prevent companies from responding if and when demand takes off.

"Corporate America has cost-cut just about as much as they can," said Jeffery Saut, chief investment strategist at Raymond James Financial. "I think the economy is going to pick up, and if you're understaffed and don't have enough throughput in your factories, yeah, I think you're going to miss out on some things."

Of course many companies, including Coca Cola Corp (KO.N) and 3M Co (MMM.N), are expecting an uptick in demand through next year. U.S. business spending on capital goods is rising and even Europe is showing some very early signs of life.

Thomson Reuters data shows that revenue growth among S&P 500 companies over the next six months is expected to rise 2.2 percent, and 3.9 percent in the first six months of 2014. That compares with the 0.8 percent rise that companies posted from January through June of this year.

But the brightening forecasts aren't stopping many companies - even those with bulging order books like Boeing Corp. (BA.N) and General Electric Co (GE.N) - from remaining defensive.

Boeing, which employs about 174,000, has said it expects to cut more workers this year than the 8,000 to 10,000 it plans to hire. And GE Chief Executive Jeff Immelt told analysts this quarter that cost controls were one of the company's "execution levers," given that he sees no improvement in the business environment for the rest of the year.

"There is continuing concern about the economy," said Chad Moutray, chief economist for the National Association of Manufacturers. "There still is a bit of a wait-and-see approach out there."

The cost cuts are not necessarily through jobs. In fact, U.S. employment gains in the first half held steady at about 200,000 a month. Even though growth has slowed in recent months, some economists say many businesses have no choice but to beef up staff, after aggressively wielding the axe during the 2007-2009 recession.

Those reductions were part of a brutal cost-cutting cycle that helped businesses build a $1.8 trillion cash stockpile. Analysts say firms still want to hold the line on costs, but now have little choice when it comes to hiring.

To compensate, some U.S. companies are paring back elsewhere. Ford Motor Co (F.N) closed two British factories this week and plans to close one in Belgium by the end of next year. Meanwhile, it is looking to hire 3,000 U.S. salaried workers this year.

Instead of layoffs, Wendy's said on Tuesday it would sell 425-company operated stores to franchisees to save money.

And General Electric Co (GE.N) said it planned to cut costs this year with a mix of layoffs, coordination of large purchases of supplies and its "simplification program," though the conglomerate declined to provide details.

PRESSURE FROM INVESTORS

In calculating strategy, revenue is crucial. Among industrial companies that reported quarterly results as of Wednesday, revenue rose only 1.3 percent, according to Thomson Reuters data.

"The absence of revenue growth is what's driving the cost cuts," Vertical Research Partners analyst Jeff Sprague said. "Companies continue to run things very tightly. They can't control the macro, so they're trying to control what they can."

In general, S&P 500 companies are expected to post revenue increases of 1.6 percent this quarter against an estimated 4.1 percent profit increase, according to Thomson Reuters I/B/E/S.

"Investors are expecting a certain return," said Greg Harrison, senior research analyst for Thomson Reuters. "When revenue is not growing and the economy is growing slowly, the only way to give them that return is to cut costs or buy back shares."

Take United Technologies. The diversified manufacturer earlier this week lifted its full-year profit forecast despite warning that revenue would end up at the lower end of its previous outlook.

United Tech, with more than 218,000 employees, said some 575 employees in its Pratt & Whitney jet engine business accepted buyout offers last week, while the company has begun laying off workers at its Sikorsky helicopter unit. Similar cuts at other units may follow.

Those trims still stand to be far less severe compared with a round of layoffs in March 2009, when United Tech announced it would slash 11,600 jobs as a result of the economic downturn.

Oversupply plaguing the mining and metals industries has led to a wave of spending pullbacks. The latest to do so was mining equipment maker Caterpillar Inc (CAT.N), which said on Wednesday it would reduce costs after announcing a 43.5 percent drop in quarterly profit.

Many of the industrial cuts reflect a consistently sharper focus on efficiency among large companies, analysts said, rather than a reaction to a setback.

"The more mature the company, the more ingrained a process it is for them," said Daniel Holland, an analyst at Morningstar.

CALIBRATING SPENDING

But industrial companies are not the only ones cutting costs. McDonald's Corp (MCD.N) and advertising company Interpublic Group of Cos (IPG.N) pulled back spending in regions where they are seeing weakness - China and Europe, respectively. The moves illustrate how companies may be more adept at calibrating spending to meet demand.

While companies had been attuned to the need to increase efficiency, the focus sharpened after the recession, analysts said.

"You've got a much more cost-conscious discipline in corporations than you did six years ago before the crisis," said Oliver Pursche, president of Gary Goldberg Financial Services.

The question for these companies is whether they are nearing the point that cost cuts could damage their operations.

"We're certainly getting to the point where you are starting to cut into the muscle of these operations," said John Dowling, a portfolio manager with the investment advisory firm Golub Group.

(This story is refiled to fix Wendy's ticker symbol to WEN.O in first paragraph)

(Additional reporting Lisa Baertlein, Sruthi Ramakrishnan, Julie Gordon, Allison Martell, Ernest Scheyder, Caroline Valetkevitch, Alison Griswold, Atossa Araxia Abrahamian, Alwyn Scott, James B. Kelleher; editing by Edward Tobin and L Gevirtz)

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GSK replaces China chief amid corruption scandal

By Ben Hirschler

LONDON (Reuters) - GlaxoSmithKline has appointed one of its top European executives as the new head of operations in China, amid a corruption scandal there that has rocked Britain's biggest drug maker.

Herve Gisserot, senior vice president for Europe, will take over as general manager from Mark Reilly, who will remain with the company as a senior member of the management team, a spokesman said on Thursday.

Reilly, currently in Britain, will continue to help lead GSK's response to the Chinese government's bribery investigation - but the spokesman declined to say whether he would travel back to China.

Reilly has been working at GSK's headquarters on the outskirts of London since arriving from China in early July for what people familiar with the situation said at the time were routine meetings.

"From what we understand and have been told by the authorities there are no allegations of wrongdoing against Mark (Reilly)," the spokesman said.

Gisserot will transition over the coming weeks into his new role, where his prime focus will be to ensure that GSK's China business continues to operate as smoothly as possible.

FINANCE HEAD FREE TO TRAVEL

At the same time, travel restrictions on GSK's finance head for China, Steve Nechelput, which had prevented him from leaving the country, are believed to have been lifted, the spokesman added.

Nechelput will continue in his role as finance director for GSK China and will remain based there. News last week that Nechelput had been stopped from leaving China sparked concern about the scale of the probe facing GSK, although GSK said he had not been questioned or detained by authorities.

Chinese police have detained four Chinese GSK executives in connection with allegations that the drug maker funneled up to 3 billion yuan ($489 million) to travel agencies to facilitate bribes to doctors and officials.

GSK has admitted that some Chinese executives appeared to have broken the law but Chief Executive Andrew Witty said on Wednesday that head office had had no knowledge of the alleged wrongdoing.

Witty said the "deeply disappointing" episode appeared to involve certain senior local staff working outside GSK systems. He has commissioned law firm Ropes & Gray to carry out an independent review into what happened.

In addition to running much of Europe for GSK, new China head Gisserot has also acted as president of the French pharmaceutical industry trade body LEEM, a position the group said he would give up at the end of August.

(Editing by Kate Holton and Patrick Graham)

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Opposition mounts to Summers as possible Fed chief

By Pedro da Costa and Mark Felsenthal

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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