Dec. 16 (Bloomberg) -- The following are the day's top business stories:
1. Oracle's Forecast Is Above Estimates on Hardware Acquisitions; Shares Gain 2. Stocks Gain, Treasury Yields Hold Near Seven-Month Highs on Economic Data 3. India's Bond-Purchase Plan May Ease Path to January Interest-Rate Increase 4. Pimco Favors Bank Bonds, Loans as Obama Moves to `Center': Credit Markets 5. FBI Arrests Executive, Insiders as U.S. Trading Probe Expands to Companies 6. Massey Said to Consider Takeover of International Coal, May Sell Company 7. Mitsubishi UFJ Trust Targets Asset-Management Deals in India, South Asia 8. Hero Buys Honda's $1.9 Billion Stake in India Motorbike Maker on Exports 9. Goldman Deal Pushes Commercial Mortgage Bond Sales Past $11 Billion Mark 10.Hedging Gas Tumbles to 30% of Production as Prices Slump: Energy Markets 11.Tencent Expansion Faces Hurdles After Trumping Microsoft, Yahoo in China 12.GM Set to Widen Lead Over Chinese Carmakers as Lure of Tax Subsidy Wanes
1. Oracle's Forecast Is Above Estimates on Hardware Acquisitions; Shares Gain
Oracle Corp., the second-largest software maker, forecast profit for the current quarter higher than analysts predicted, adding to evidence that it´s benefiting from an acquisition-fueled expansion into computer hardware. Profit excluding certain expenses will be 48 cents to 50 cents a share, Oracle Co-President Safra Catz said today on a conference call. That's higher than 47 cents, the average estimate of analysts surveyed by Bloomberg. That followed a report showing profit on that basis of 51 cents in the period ended Nov. 30, exceeding the 46-cent average of analysts´ predictions. Chief Executive Officer Larry Ellison is bulking up in hardware to supplement his software businesses, and making headway on a projection that Sun Microsystems Inc., bought this year, will add $1.5 billion to fiscal 2011 operating profit. That´s helping quell concerns that Oracle wouldn´t be able to integrate its more than $40 billion in acquisitions since early 2005, said Jason Maynard, an analyst at Wells Fargo Securities. "Years ago, people didn´t believe in the strategy," said Maynard, who is based in Santa Monica, California, and rates Oracle "outperform." "There were a lot of doubters on the Street. People have flipped."
2. Stocks Gain, Treasury Yields Hold Near Seven-Month Highs on Economic Data
U.S. stocks advanced, reclaiming two-year highs for benchmark indexes, while the dollar weakened as data on jobless claims, manufacturing and housing bolstered confidence in the world´s largest economy. Treasury 10- and 30- year yields retreated from seven-month highs. The Standard & Poor´s 500 Index rose 0.6 percent to 1,242.87 at 4 p.m. in New York, erasing yesterday´s drop and climbing for the seventh time in eight days. The Dollar Index, a gauge of the U.S. currency against six peers, fell 0.2 percent to 80.067. The 10-year Treasury yield declined 10 basis points to 3.43 percent after surging 26 basis points in the past two days, while the 30-year rate lost five points to 4.54 percent. Cotton jumped on signs supply may lag behind demand. Shares of consumer and transportation companies led the advance following the unexpected decrease in jobless claims, the first gain in housing starts in three months and the fastest growth in Philadelphia-area manufacturing since 2005. European stocks rallied in the final hour of trading as the region´s leaders began a two-day summit on the spreading debt crisis. "The overall direction of the economy is good," said David Kelly, who helps oversee $445 billion as chief market strategist for JPMorgan Funds in New York. "The unemployment data is the most important. It´s further confirmation that the labor market is on the mend," he said.
3. India's Bond-Purchase Plan May Ease Path to January Interest-Rate Increase
The Reserve Bank of India´s plan to address the biggest cash crunch in a decade with bond purchases may revive liquidity enough for the central bank to resume raising interest rates next month, say economists at JPMorgan Chase & Co. and Credit Suisse AG. The RBI yesterday left its benchmark repurchase rate unchanged at 6.25 percent after six increases in 2010 and unveiled plans to buy back 480 billion rupees ($10.6 billion) of government bonds to ease a cash squeeze caused by a record 1.1 trillion rupees of share sales this year. Governor Duvvuri Subbarao is trying to contain price expectations that have risen in the wake of a jump in costs of fuel and manufactured goods. With the benchmark rate below the 7.48 percent inflation rate, household savings and purchasing power are being eroded, risking a deeper impoverishment of the 828 million people who live on less than $2 a day. "The bond buyback will certainly bring relief to the extreme tight liquidity conditions," said Jahangir Aziz, the Mumbai-based chief economist at JPMorgan Chase. "Given the hawkish tone on inflation, the RBI will almost surely come back to raise rates in January."
4. Pimco Favors Bank Bonds, Loans as Obama Moves to `Center': Credit Markets
Pacific Investment Management Co., manager of the world´s biggest bond fund, is betting the rally in U.S. bank bonds is set for further gains with economic growth ready to accelerate next year. Bank of America Corp. and Citigroup Inc. are poised to be "two of the stars" in fixed-income markets in 2011, said Mark Kiesel, the global head of corporate bond portfolio management at Pimco in Newport Beach, California. The largest U.S. lenders are an attractive value compared with "every bank you can buy in the world," he said. Pimco, which boosted its forecast for economic growth last week, reaffirmed its conviction in bank bonds after the securities returned 7.62 percent this year, lagging behind the gain of 7.95 percent for investment-grade company debt, Bank of America Merrill Lynch index data show. Lenders and other U.S. corporate borrowers will benefit as the economy revives following President Barack Obama´s agreement to extend tax cuts, Kiesel said. "That was the catalyst that sparked upward revision in growth," said Kiesel, who was nominated for fixed-income manager of the year by Morningstar Inc. "That Obama is showing some indication he´s willing to move more toward the center, that´s net-net going to be marginally more positive for business."
5. FBI Arrests Executive, Insiders as U.S. Trading Probe Expands to Companies
Three people who worked at technology firms, including chipmaker Advanced Micro Devices Inc., were arrested along with an "expert networker" as federal prosecutors expanded a probe of insider trading to companies. A fifth man, Daniel DeVore, formerly a supply manager at Dell Inc., pleaded guilty in federal court in New York on Dec. 10 to conspiracy to commit securities fraud and wire fraud as part of the probe, prosecutors said today in a statement. He is cooperating with the investigation. Today´s arrests were the latest development in a nationwide investigation of illegal trading at hedge funds by Manhattan U.S. Attorney Preet Bharara, the Federal Bureau of Investigation and the Securities and Exchange Commission. DeVore and three of the four arrested today are accused of providing inside information about their companies to clients of Primary Global Research LLC, a consulting company that provides experts to investors. The fourth person arrested, James Fleishman, works at Primary Global. "A corrupt network of insiders at some of the world´s leading technology companies served as so-called consultants who sold out their employers by stealing and then peddling their valuable inside information," Bharara said in the statement.
6. Massey Said to Consider Takeover of International Coal, May Sell Company
Massey Energy Co., owner of the Upper Big Branch mine where 29 people died in April, is studying options ranging from a sale of the company to a takeover of Wilbur Ross´s International Coal Group Inc., according to three people with knowledge of the matter. Talks with International Coal, which first started this summer, began again following the Dec. 3 announcement that Massey Chief Executive Officer Don Blankenship will retire Dec. 31, said the people who asked not to be named because the talks are private. Earlier talks stalled in July and August after International Coal´s CEO Ben Hatfield expressed reservations about working again for Massey, the people said. Hatfield was employed for 23 years at Massey. He was executive vice president and chief operating officer there from June 1998 to the end of 2001. Ross, 73, held an initial public offering for International Coal in December 2005. He is its second-largest shareholder with about 12.2 million shares. International Coal has a market value of $1.4 billion compared with Massey´s value of $5.2 billion.
7. Mitsubishi UFJ Trust Targets Asset-Management Deals in India, South Asia
Mitsubishi UFJ Financial Group Inc.´s trust banking arm aims to sign investment agreements within a year with one to two asset management firms in South and Southeast Asia to keep pace with growth in the regions. Mitsubishi UFJ Trust and Banking Corp., a unit of Japan´s biggest bank by market value, has started searching for investment targets and plans to spend "several" billion yen on each deal, President Kinya Okauchi said. The trust bank is expanding outside of Japan as domestic demand wanes and it competes with domestic rival Sumitomo Trust & Banking Co., Okauchi, 59, said. In 2008 he acquired a stake in Aberdeen Asset Management Plc, the U.K.´s biggest independent fund manager. "India, of course, and Thailand, Vietnam and Indonesia are the countries we are interested in for our investment," Okauchi said in an interview in Tokyo on Dec. 15.
8. Hero Buys Honda's $1.9 Billion Stake in India Motorbike Maker on Exports
Hero Group plans to boost overseas sales at India´s biggest motorcycle maker and develop own-brand models after agreeing to buy Honda Motor Co.´s $1.9 billion stake in the company. "We have to go out and look for new markets," Pawan Kant Munjal, the son of Hero Group´s chairman and the chief executive officer of motorcycle maker Hero Honda Motors Ltd., said yesterday at a press conference in New Delhi. "Over the years, we hope to build volume, which will help our profit margins." Scrapping the Honda tie-up will free Hero Group from restraints in the partnership, enabling it to begin sales in more overseas markets as it seeks to reverse Hero Honda´s biggest profit drop in three years. The motorcycle maker will also add new products and use its existing sales network to fend off rising competition from Honda´s own unit in India, the world´s second-largest two-wheeler market. "The question is how fast and far they can grow their research and development facilities," said Juergen Maier, a fund manager at Raiffeisen Capital Management in Vienna, who helps manages about $1.3 billion of assets, including Hero Honda shares. For Tokyo-based Honda, "it won´t be easy for them to grow their market share as the market is still dominated by Hero Honda and Bajaj."
9. Goldman Deal Pushes Commercial Mortgage Bond Sales Past $11 Billion Mark
Goldman Sachs Group Inc. and Citigroup Inc. sold $876.45 million of bonds linked to U.S. commercial real estate, pushing 2010 sales to $11.5 billion as strategists forecast next year´s offerings will quadruple. Property owners are pushing banks to offer better loan terms as more lenders vie for a share of the $650 billion commercial-mortgage bond market. Between 20 and 25 institutions are seeking to originate loans they plan to package into securities, up from about five competitors a year ago, New York- based Standard & Poor´s said in a Dec. 2 report. Issuance plunged to $3.4 billion in 2009 from a record $234 billion in 2007 after the financial crisis froze credit markets. "The CMBS lenders came back quickly, and borrowers are benefiting," Greg Michaud, head of real estate finance at ING Investment Management Americas in Atlanta, said in a telephone interview. "Twelve months ago, borrowers were happy to get anything. Now they are really shopping around." Today´s sale, tied mostly to payments on shopping center and office-building loans, priced to yield 140 basis points more than the benchmark swap rate for a top-rated $376 million slice maturing in 9.84 years, according to a person familiar with it. The securities were initially marketed to yield between 130 and 135 basis points over swaps, said the person, who declined to be identified because terms aren´t public.
10.Hedging Gas Tumbles to 30% of Production as Prices Slump: Energy Markets
Natural gas companies are slashing their hedging of future output as prices tumble, raising the prospect of declines in drilling and production. About 30 percent of next year´s gas has been hedged, down from approximately 50 percent this year, according to analysts at Canaccord Genuity, RBC Capital Markets and Raymond James. Gas fell 27 percent so far in 2010 and settled at $4.048 per million British thermal units yesterday on the New York Mercantile Exchange, the lowest level in nine years for this time of year. Southwestern Energy Co., the largest gas producer in the Fayetteville shale of Arkansas, has so far sold a lower percentage of futures and swaps for 2011 production than for 2010. The drop in the availability of insurance suggests speculators don´t expect an increase in gas next year and leaves companies vulnerable to price fluctuations. "If producers are not able to hedge at attractive levels, they will be selling more gas at spot prices, and if spot prices remain depressed, that will leave less capital for drilling in the following year," said Biliana Pehlivanova, an analyst at Barclays Capital in New York.
11.Tencent Expansion Faces Hurdles After Trumping Microsoft, Yahoo in China
Tencent Holdings Ltd. overcame Microsoft Corp. and Yahoo! Inc. to conquer China´s instant- messaging market. Analysts doubt it can replicate that success with foreigners. The expansion of Tencent´s flagship QQ messaging service to English, Japanese and French speakers -- announced yesterday -- won´t be as successful as the Chinese version, analysts including Jiong Shao said. There are 637 million user accounts for QQ, more than Facebook Inc.´s subscribers globally. "They are going to have a lot more challenges to succeed overseas," said Shao, who has an "underperform" rating on Tencent as head of Hong Kong and China research at Macquarie Group Ltd. "Their competitive position is really only in China." Tencent, led by billionaire Chairman Ma Huateng, invested more than $300 million expanding in Russia and Thailand as sales of online games and QQ´s user additions in China slowed. The move to offer foreign-language versions of QQ and an English social-networking site reflect the Shenzhen, south China-based company´s concerns about growth at home, Shao said.
12.GM Set to Widen Lead Over Chinese Carmakers as Lure of Tax Subsidy Wanes
Fruit wholesaler Hao Hongfu will wait until next year to buy a car from a General Motors Co. venture in China, even though he could get a 1,545-yuan ($232) tax break for buying another vehicle now. The upcoming Baojun 630 sedan from SAIC-GM-Wuling Automotive Co. should be more reliable than a Chinese brand, Hao said. He wants another car to complement the Beiqi Foton Motor Co. pickup truck he uses to haul apples, pears and oranges in Shandong province. "It is a pity to give it up," Hao, 32, said of the consumption-tax rebate. "But the Baojun looks very nice. I want to try out a foreign product." Overseas automakers including GM, Ford Motor Co. and Nissan Motor Co. should benefit next year if the Chinese government ends the rebate as expected by Dec. 31, said Bill Russo, a Beijing-based senior adviser at Booz & Co. The subsidy, which cuts the tax from 10 percent of the purchase price to 7.5 percent, applies only to cars with engines of 1.6 liters or smaller, a segment dominated by Chinese models.
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