Citigroup emerging market chief Biglari to leave: memo

Monday, 11 February 2013

New York, Feb 3: Hamid Biglari, a 12-year veteran of Citigroup (NYS:C) who was most recently head of emerging markets, is leaving the company, according to a memo from new CEO Mike Corbat.

Biglari, also a vice chairman and a member of the company's business development committee, will "explore other professional opportunities," according to the memo.

Biglari is the latest senior executive to leave as Corbat realigns the company's chain of command. In October, Corbat was suddenly named CEO to replace Vikram Pandit, whom the board pushed out.

Biglari, a former physicist and McKinsey consultant, joined Citigroup when Sanford "Sandy" Weill was its chief executive. He held senior positions at the bank, mainly at its investment bank, through multiple chief executives.

When Vikram Pandit was CEO, Biglari helped the bank figure out its post-crisis strategy. In October 2009, Biglari told the Wall Street Journal that Citigroup had to remake itself. He equated the bank's transformation to the switch that IBM (IBM.N) made in the 1990's, when IBM Chief Executive Louis Gerstner focused less on areas like hardware and more on providing software and information technology services.

"People were writing IBM off then but Gerstner completely reinvented the company," Biglari said. "We, too, have to make the elephant dance," he added, referring to the title of Gerstner's 2003 memoir, "Who Says Elephants Can't Dance?"

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Facebook shares rise in buildup to mystery event, earnings

San Francisco, Feb 3 : Facebook Inc's stock opened above $32 for the first time since July as anticipation about upcoming products and financial results underscored Wall Street's renewed confidence in the online social network.

Facebook will host its first major press event at its headquarters in Menlo Park, California, since its troubled initial public offering in May, triggering a guessing game among technology observers and online blogs about what it could unveil - everything from a smartphone to a search engine.

"There's a lot of speculation. Nothing to me seems to be that certain," Jefferies & Co analyst Brian Pitz said.

"If I were to bet, I'd think it was something that was ad-platform related. I'm not convinced on the phone," said Pitz, citing previous comments by Facebook's leaders including CEO Mark Zuckerberg that making a smartphone would be the "wrong strategy" for Facebook.

In an email to reporters last week, Facebook invited the media to "come and see what we're building" without providing details.

Some analysts said the stock's recent gains - shares are up roughly 17 percent since the start of the year - may have more to do with the company's upcoming fourth-quarter financial results, slated for January 30.

"The stock is up because they have driven a dramatic increase in the ad load of their mobile app which is giving investors hope that they exceeded expectations," BTIG analyst Richard Greenfield said.

Shares were down about 1.3 percent to $31.30 in mid-afternoon trading.

The world's No.1 social network with 1 billion users, Facebook became the first U.S. company to debut on stock markets with a value of more than $100 billion. Its value subsequently plunged by more than 50 percent on mounting concerns about slowing revenue growth and the challenges of making money as users shift from personal computers to mobile devices.

Facebook surprised Wall Street in the third quarter by announcing that mobile ads accounted for 14 percent of its total ad revenue. Some analysts expect the company to report further growth in its nascent mobile ad business for the fourth quarter.

Zuckerberg, who founded Facebook in his Harvard dorm room, has said that mobile is the "most misunderstood aspect" of Facebook. But he has repeatedly poured cold water on rumors that Facebook would build its own smartphone to compete against Apple Inc's iPhone and smartphones based on Google Inc's Android operating system.

During an on-stage interview at a conference in September, Zuckerberg said that he believed search could be a ripe area of growth for Facebook.

"Facebook is really uniquely positioned to answer a lot of the questions that people have," Zuckerberg said, such as finding a good restaurant or learning more about a job opportunity.

Still, many technology observers believe that Facebook is more likely to improve the search capabilities within Facebook than to develop a full-fledged search engine that indexes all the Web's content and competes head-on with search leader Google.

Among the other items that technology blogs and analysts speculate might be unveiled were new standalone apps for Apple's iPad tablet, new features to display video ads and even a new wing of corporate headquarters.

Some cautioned that expectations of a game-changing new product were likely to cause disappointment.

"There's no way they're announcing anything that has financial impact, or they wouldn't do it now, they'd wait two weeks," said Wedbush Securities analyst Michael Pachter, citing Facebook's upcoming earnings.

"Why would you announce something that has a financial impact during the quiet period?," he said.

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Number of working poor families grows as wealth gap widens

Washington, Feb 3 : The number of U.S. families struggling with poverty despite parents being employed continued to grow in 2011 as more people returned to work but mostly at lower-paying service jobs, an analysis released shows.

More working parents have taken jobs as cashiers, maids, waiters and other low-wage jobs in fast growing sectors that offer fewer hours and benefits, according to The Working Poor Project, a privately funded effort aimed at improving economic security for low-income families.

The result is 200,000 more such working families - the so-called "working poor" - emerged in 2011 than in 2010, according to the report, based on analysis of the most recent U.S. Census Bureau data.

About 10.4 million such families - or 47.5 million Americans - now live near poverty, defined as earning less than 200 percent of the official poverty rate, which is $22,811 for a family of four.

Overall, nearly one-third of working families now struggle, up from 31 percent in 2010 and 28 percent in 2007, when the recession began, according to the analysis.

"Although many people are returning to work, they are often taking jobs with lower wages and less job security, compared with the middle-class jobs they held before the economic downturn," the report said.

"This means that nearly a third of all working families ... may not have enough money to meet basic needs."

The findings come three years after the nation's recession officially ended in the second half of 2009.

Brandon Roberts, co-author of the report, said the results were somewhat of a surprise after Census officials last year said the U.S. poverty rate had stabilized.

"As the economy has improved one would expect that the benefits of that improvement would to some extent tie to these low-income families, and we'd see a decrease or at least a stabilization in the numbers," said Roberts, whose project is funded by four groups, including the Annie E. Casey Foundation and the Ford Foundation, and focuses on state policies.

"But the reality, the data show that the benefits of - even though it's modest economic growth - it's not going to these low-income families," he added.

The group's analysis adds to the body of data focused on the slipping U.S. middle class even as there are signs of the nation's economy slowly coming back to life with improvements in the housing sector and lower unemployment rate.

For some Americans, the comeback has yet to begin.

Data showed that the top 20 percent of Americans received 48 percent of all income while those in the bottom 20 percent got less than 5 percent, the report said.

The analysis also found regional differences.

States in the South, such as Georgia and South Carolina, and those in the West, such as Arizona and Nevada, had the greatest increase in the number of working poor. The increase was slower in the Mid-Atlantic and Northeast.

"It's important to draw attention to the fact that there are real families behind those statistics," said Alan Essig, who heads the Georgia Budget and Policy Institute, adding that his state is still struggling with housing and unemployment.

The effect of near poverty on the growing number of U.S. children living in such families - an increase of 2.5 million youths over five years - is also a concern.

In 2011, roughly 23.5 million, or 37 percent, of U.S. children lived in working poor families compared with about 21 million, or 33 percent, in 2007, the report said.

Part of the problem is that more parents are working in service-sector jobs that require long hours at night and on weekends and so face child-care difficulties, along with low wages and involuntary part-time status, the analysis showed.

About 25 percent of low-income parents work in one of eight jobs: cashiers, cooks, health aides, janitors, maids, retail clerks, waiters and waitresses, and drivers, it said.

Such jobs often pay minimum wage, which can vary state-by-state, although the U.S. federal minimum wage standard has stood at $7.25 an hour since 2010.

"Any little thing - a child getting sick, a car breaking down ... those are quite significant events for these working families," Roberts said.

Focusing on state policies to boost education and jobs training for their parents could help, the report concluded. Others have also pointed to other options such as greater access to paid sick leave and increased minimum wages.

"Folks in our state are working hard, but for many families, working hard just isn't enough. Things need to change," said F. Scott McCown of the Texas-based Center for Public Policy Priorities.

Roberts said some federal policies in the recent agreement averting the so-called fiscal cliff were good news. The law that avoided higher taxes and across-the-board cuts kept two key tax credits and extended unemployment benefits.

He said the recent agreement to avoid higher U.S. taxes and across-the-board cuts helped by keeping two key tax credits and unemployment benefits. But those policies were in place in 2011, when Census gathered its data.

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Dell in talks to go private, shares surge

New York, Feb 3 : Dell Inc is in talks with private equity firms on a potential buyout, two sources familiar with the matter said, confirming reports that sent shares in the world's No. 3 PC maker soaring 13 percent to nearly a eight-month high.

The firms are now holding discussions on a deal with billionaire Chief Executive and founder Michael Dell, who owns about 14 percent of the company, according to one source with knowledge of the matter.

The Wall Street Journal cited unidentified sources as saying TPG and Silver Lake could team up on an offer, possibly in conjunction with other investors such as pension funds. JPMorgan Chase & Co was also involved in the negotiations, it added.

The first source said any potential deal could be structured as a management-led buyout with Michael Dell at the helm.

Talks had progressed for two to three months, heating up in late 2012, and a deal could be reached in six weeks, the Journal cited sources as saying.

Dell, which has steadily ceded market share to Hewlett Packard and China's Lenovo, declined to comment on what it called rumors and speculation.

The company has lost 40 percent of its value since last year's peak, and is trying to reinvent itself as a seller of higher-margin services to corporations - an internal overhaul that might be conducted away from public scrutiny.

Some analysts say taking the company private, an idea that has surfaced sporadically in past years, makes sense.

But others pointed to the sheer expense of such a deal, an outsized debt burden of some $4.5 billion and murky prospects as a major player in a PC market that's dwindling with the advent of tablets such as Apple Inc's iPad.

"The market value of Dell has come down so much that a buyout has become something that is plausible. They have about $5 billion in net cash and also free cash flow generation that could sustain payments on debt from a leveraged buyout," said S&P Capital IQ analyst Angelo Zino.

"However, we think it's unlikely, given the sheer size of Dell and where the stock is currently trading at."

A buyout of the $19 billion company would be one of the largest deals since the global recession.

Bloomberg first reported that Dell and private equity firms were discussing a deal.

Before news of the deal emerged, Sanford Bernstein analyst Toni Sacconaghi speculated that Dell was worth $12 a share on a sum-of-parts basis, of which the PC business was worth about $4.70. In a report last week, the analyst said Dell could conceivably be split along its PC and enterprises segments, though such an approach would significantly reduce much-needed scale.

Shipments of computers by the company, now reinventing itself as a provider of computers and services to corporations and government agencies, plummeted 21 percent in the fourth quarter, according to IDC. In the third quarter, its profit slid 47 percent.

Overall sales of PCs over the holidays slid for the first time in more than five years, according to industry researcher IDC.

Another industry research firm, Gartner, estimated that Dell lost 2 percentage points of market share in the fourth quarter, slipping to 10.2 percent from 12.2 percent a year earlier.

Dell's fortunes have waxed and waned. Since Michael Dell founded the company in 1984 out of his college dorm room with $1,000, the company has grown into a global PC powerhouse that pioneered just-in-time inventory management and online sales of custom-built computers.

But when Dell handed the reins of his company to long-time lieutenant Kevin Rollins in 2004, sales and customer service began to slip. With the board's blessing, Michael Dell returned in January 2007 to turn his company around, only to run into the global recession and a shift by consumers toward powerful, mobile devices like tablets.

At a Sanford Bernstein investors' conference in 2010, Dell said he had considered taking the company private. He told investors at the time that a transformation of his company that he had hoped to effect upon his return was "incomplete."

Those comments triggered a round of speculation, but most analysts said buying out such a large company would be difficult because of the massive financing requirements.

Michael Dell now owns 244 million shares in the company, and last year was ranked the 22nd richest American with a fortune of $14.6 billion.

Dell's stock soared to an intra-day high of $12.83 in afternoon trade - the highest since May 2012 - after a brief trading suspension. It closed at $12.29.

Its traded bonds also came under pressure over fears of a significant hike in leverage. Its 4.625 percent, 2021 bonds were trading 80 basis points wider at 210 basis points over U.S. Treasuries, while its 2.3 percent, 2015s were about 30 basis points wider at 88 basis points over Treasuries.

"It can be difficult to realize the full value of various corporate assets ... during transition periods, and executing on a long-term transformation as a private company could have advantages," argued ISI analyst Brian Marshall.

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