Avis buys car sharing firm Zipcar

2 January 2013 Last updated at 11:54 ET

The global car hire firm Avis Budget has agreed to buy Zipcar, the world’s biggest car-sharing firm, for $ 500m (£307m).

The car hire giant is buying into the fast-growing sharing market, which it says is worth $ 400m in the US.

Zipcar has 767,000 members, who pay an annual joining fee and then are charged by the hour to use its cars.

Avis is paying $ 12.25 per share for Zipcar, almost 50% more than the shares were trading at, at the end of 2012.

Zipcar, whose shares surged after the announcement, have three quarters of the US market.

Its most recent results showed that membership numbers had increased by almost a fifth at the end of 2012, and industry analysts suggest that rate of growth is set to continue.

When it floated on the Nasdaq exchange last year, Zipcar said it thought the US car sharing market would be worth $ 3.3bn by the end of the decade, up from $ 250m in 2009.

Similar growth rates are forecast for the European market, with analysts suggesting revenue of 2.6bn euros in 2016, up from 220m in 2009.

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Avis Budget Group’s acquisition should be seen as strategic; it is based on a prediction that people will increasingly want to buy ways to get around, referred to as mobility solutions, rather than buying cars.

On any given journey, more and more people will be choosing between shared cars or taxis, subways or trains, bicycles or old fashioned shoe leather, and smartphone technology is making it easy for them to mix and match.

Moreover, at a time when it appears to be more important to see and be seen in the world of social media, the car as a status symbol is losing its lustre.

The motor industry is doing all it can to adjust, though the big players’ responses often come across as sluggish, leaving gaps in the market for newcomers such as Zipcar to emerge.

“We see car sharing as highly complementary to traditional car rental, with rapid growth potential and representing a scalable opportunity for us as a combined company,” said Ronald Nelson, chairman and chief executive of the Avis Budget Group when he announced the Zipcar deal.

Car sharing has become popular in cities as individual cars are kept in residential streets, outside workplaces or student accommodation, and some people find using the service cheaper than owning their own car.

It cuts out servicing and maintenance costs and the cost of fuel is included in the hourly charge.

Avis Budget wants to accelerate the growth of Zipcar by putting more cars in more locations. It also plans to adopt some of Zipcar’s technology across the existing group.

Car sharing clubs give members a smartcard which they use to open the car, eliminating the need to go to an office to collect and return keys.

Some of the major car rental companies. including Hertz and Enterprise, have launched their own car sharing operations in the past few years.

Zipcar was founded in 2000 in Cambridge, Massachusetts, to take the European car-sharing idea to the US.

It has grown into the world’s biggest car-sharing firm, helped by recent mergers with US rival Flexcar and the purchase of UK company Streetcar and Spain’s Avancar, which it bought to expand its European operations.

Avis dropped from the second to the third largest car rental firm in the US in 2010, when Hertz took over Dollar Thrifty. Avis hopes to complete the purchase of Zipcar during early 2013.

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US may skirt ‘fiscal cliff’ but faces higher taxes

WASHINGTON (AP) — A last-ditch tax deal in the Senate might let the U.S. economy escape the worst of the so-called fiscal cliff and avoid going back into recession. But even if the House goes along, the tax increases likely coming in 2013 will dent economic growth anyway.

In the early hours of the new year, the Senate voted to end a long stalemate and raise taxes on upper-income households, extend long-term unemployment benefits and postpone decisions over government spending cuts, officials said. But any deal needs approval from the House.

About $ 536 billion in 2013 tax increases were scheduled to take effect Jan. 1, along with $ 109 billion in cuts from military and domestic-spending programs, if Democrats and Republicans could not reach agreement.

Mark Vitner, senior economist at Wells Fargo, said he expects budget policy, including the higher taxes in the Senate plan, to shave 0.8 percentage points off economic growth in 2013. The economy doesn’t have much growth to give. Vitner predicts it will grow just 1.5 percent in 2013, down from 2.2 percent in 2012.

The biggest hit to the economy is expected to come from the end of a two-year Social Security tax cut. The so-called payroll tax is scheduled to bounce back up to 6.2 percent from 4.2 percent in 2011 and 2012, amounting to a $ 1,000 tax increase for someone earning $ 50,000 a year.

“Even with this deal, fiscal policy will still be a net drag on economic growth,” Vitner said. “The expiration of the payroll tax holiday will reduce after-tax income for all workers and hit lower to middle income families the hardest.”

Mark Zandi, chief economist at Moody’s Analytics, calculates that the higher payroll tax will reduce economic growth by 0.6 percentage points in 2013. The other possible tax increases — including higher taxes on household incomes above $ 450,000 a year — will slice just 0.15 percentage points off annual growth, Zandi said.

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UK must stay in Europe, says CBI

31 December 2012 Last updated at 02:54 ET

The CBI says the UK needs to keep its place within the European Union to push for freer trade for its businesses.

The business lobby group says the UK should use the EU to help rebalance the economy towards exports and create new trade deals.

It is pushing for a new free trade deal between Europe and the US.

The CBI says although the EU and US have relatively open economies, there are many examples of obstacles to trade.

These include tariff costs and mismatched regulations, which form what it says are significant burdens on firms on both sides of the Atlantic.

It is undertaking a major project to flesh out what the UK’s global role should look like in a new Europe.

It wants to explore ways in which the UK can remain a leading location to do business globally, particularly by expanding export markets for high-growth small and medium-sized firms, without losing access to the EU single market.

The CBI’s director-general, John Cridland, said it was crucial for the UK to keep its place within Europe; “The UK has ensured its values of free and open trade have been at the heart of Europe over the last 40 years, helping to create one of the biggest successes of the European Union – the single market.

“It’s essential we stay at the table to bang the drum for businesses and defend our national interest, particularly protecting our world-class financial services industry to maintain our competitiveness internationally.”

He added that President Barack Obama and the EU’s political leaders needed to work to eliminate barriers to trade, which he said one study showed could save as much as 122bn euros (£100bn, $ 161bn) a year in business costs.

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Reasons to Be Scared of Microsoft Stock

The early days of January are typically a time of unbridled optimism. This will be the year we lose 10 pounds and learn to speak French; Japan will turn itself around; Microsoft (MSFT) stock will pull itself out of a decade of doldrums.

Most analysts are betting that the Redmond computer company’s time has come. The company’s fiscal-year revenue has nearly tripled to $ 74 billion in the last 10 years. At $ 27, the shares trade right at their 10-year average and yield more than it costs the company to issue debt. Redmond has Skunk-Worked an exciting new tablet and operating system it’s eager to showcase. It’s all backed by ridiculous amounts of free cash and a fortress-like balance sheet. The 12-month price target on the stock forecasts a 25 percent gain.

Still, the company has attracted at least one major detractor with a big megaphone: Barry Ritholtz, an asset manager who runs a quantitative research firm and founder of the well-trafficked blog The Big Picture. He considers the company a “classic value trap,” not unlike what its customers Dell (DELL) and Hewlett Packard (HPQ) were at the start of this annus horribilis. The problem, he says, is Microsoft Chief Executive Officer Steve Ballmer. “As long as he is running the show—he has missed every major trend in tech over the past decade—I have no confidence in the company.”

He has company. Activist investor David Einhorn has wanted Ballmer out for more than a year and was long the shares in hopes that such an ouster would boost Microsoft’s returns. The stock is up 3 percent this year, compared with the S&P 500’s 14 percent gain. The 13 years since Ballmer became CEO have included the Vista debacle, a thankfully thwarted bid to overpay for Yahoo! (YHOO), the ceding of search supremacy to Google (GOOG), and Apple’s (AAPL) envisioning and dominating much of the smartphone and tablet markets. Meanwhile, where’s that “Skype Phone” in every palm?

‘Value trap’ is a funny term, says Bill Koefoed, Microsoft’s general manager of investor relations. Microsoft, he says, is trading in line with the big-cap technology sector, which has recently been out of favor with investors.

“Enterprise tech hasn’t been as sexy to the press. But our relevance to the enterprise has grown in a huge way. Our database business is growing faster than Oracle’s (ORCL) and IBM’s (IBM).”

Koefoed says people focus on Windows, which provides a quarter of Microsoft’s overall revenue, but not on the comparable 25 percent contribution from the company’s servers and tools division, which he emphasizes that Ballmer has grown, from a $ 3 billion business, to a $ 19 billion enterprise over the past decade. ”Over time, the stock price works itself out. We’re doing a whole bunch of things to be shareholder-friendly. Over time, that will be reflected in our share price.”

Meanwhile, Koefoed says, it was under Ballmer that the company initiated and consistently increased its dividend—with Microsoft shareholders overwhelmingly backing the CEO last month.

Ritholtz is unpersuaded “Think of the difference between what is revealed by a single snapshot of Microsoft today vs. an extended video. Yes, you can see the current situation of lots of cash, a low price-earnings multiple, name recognition, enterprise usage. But what about the trajectory and changes to the underlying market for their goods and services?”

He says that other than Kinnect for Xbox 360, “it’s hard to see what Microsoft gets for its billions of [research and development] dollars.”

“The competitive landscape has been moving against Microsoft,” wrote N. Landell-Mills of Indigo Equity Research after Microsoft’s “uninspiring” latest quarterly report, which involved the company raising its dividend 15 percent. The analyst called the organization “un-innovative and complex” and “a digital dinosaur.”

The full rollout of Windows 8 could, of course, change that state of affairs. Not that early signs are promising.

With the PC replacement cycle stretched out and assailed by competition that Microsoft failed to oppose, Ritholtz has taken to comparing its fate to that of Maytag (WHR). “It was,” he says, “once hugely successful and innovative and created lots of products and markets. Now you replace your dishwasher every 10 years; that’s the only time you ever think of Maytag.”

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Starbucks’s $40,000 Bid for Bipartisanship

Starbucks’s (SBUX) campaign for a fiscal-cliff deal, in which employees of D.C.-area shops are encouraged to write “Come Together” on customers’ cups, has drawn a lot of attention – and some mockery. The Daily Beast called it “doppio,” and the move was ridiculed as as a sign of desperation on Twitter.

It is no empty gesture. Starbucks expects to sell up to 200,000 cups of coffee in the D.C. metro area on Thursday and Friday. While the coffee giant does not offer ad space on its cups, Gregory Browne, a sales associate at PromoMedia Concepts (which produces about 40 million cups for third-party advertisers each year in the U.S.), estimates the company could get $ 0.20 per cup from advertisers. At that rate, the two-day cup campaign in D.C. is worth up to $ 40,000—enough to buy a full-page ad in most newspapers. (Starbucks also bought ads in the Washington Post and the New York Times for the campaign.)

Twenty cents per cup seems high? The average rate to advertise on cups at independent coffee shops is about half that, says Browne, but Starbucks could command more thanks to its vast distribution. The company sells 4 billion cups each year globally.

Not that you’ll see ads there any time soon. “The cup is not for sale,” says Starbucks spokesperson Jim Olson. “It’s a very cherished, personal connection we have with our customers, not a marketing billboard.” Still, it does put the company’s anxieties about the political climate at center stage.

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Retailers launch online bargains

24 December 2012 Last updated at 12:20 ET

The battle for the consumer has moved online with retailers bringing forward the start of sales after reports of lacklustre spending on the High Street.

Marks & Spencer and John Lewis are among major names to start discounting online in the hope that shoppers will be browsing sites over Christmas.

Sales online have traditionally begun on Christmas Day or Boxing Day.

Reports that millions of consumers will spend the holiday shopping online prompted a warning from Church leaders.

Former Archbishop of Canterbury Lord Carey said Christmas was a “special time” and should be spent with family and not logging-on. “We are now in danger of the gadgets taking over our lives and we are not in control of them,” he said.

And Steve Jenkins, a spokesman for the Church of England, urged people to make time to go to church and “maybe spend a bit of time online spending their new Christmas vouchers”.

But with the British Retail Consortium (BRC) warning that Christmas sales generally were likely to be “acceptable” rather than “exceptional”, retailers are looking for every opportunity to maximise sales.

M&S began its sales online at midday on Monday, while department store John Lewis said it would cut online prices when its stores close at 1700 GMT.

Debenhams has already started its online sale. Online giant Amazon will start its sale on Christmas morning, a day earlier than usual.

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We suspect that people will likely be more careful in buying – or reluctant to buy – items that they don’t really want or need in the sales”

End Quote Howard Archer IHS Global Insight

A report from Ofcom, the telecoms regulator, has estimated that shoppers spend an average £1,000 a year online each year. This is more than in any other country, including the US.

The popularity of online retailing contrasts with continued problems for the High Street.

‘Modest’

The BRC forecast that £5bn would be spent in the shops on Saturday and Sunday combined, the last weekend before Christmas. But Richard Dodd, the BRC’s head of Media and Campaigns, said that was nothing to get excited about, adding: “It’s been a very busy weekend which will be crucial to delivering a Christmas that is acceptable, rather than exceptional.”

He forecast a modest increase in cash spending on a year go, but not necessarily any significant increase because household finances are under pressure.

Economist analyst Howard Archer at IHS Global Insight said the weakening in household finances could not come at a worse time for retailers, and it highlighted why Christmas spending was so modest.

“The suspicion has to be that consumers will be especially keen to take advantage of genuine major bargains in the sales to acquire items that they cannot otherwise afford or are reluctant to make at the moment,” he said.

“However, we suspect that people will likely to be more careful in buying – or reluctant to buy – items that they don’t really want or need in the sales.”

Nevertheless, some shops reported brisk trading.

Sainsbury’s reported its busiest ever hour in terms of customers served from midday to 1pm on Sunday, while 35 branches opened at midnight and traded until 6pm on Monday.

More than a million visitors were expected in London’s West End during the three-day period from Saturday to Christmas Eve, during which more than £100m was expected to be spent.

‘Critical condition’

Bluewater shopping centre in Kent was also anticipating a surge in sales on Monday as Saturday’s footfall was up 14% from the previous week.

And the problems facing retailers was underlined on Monday in a report by business recovery group Begbies Traynor. It estimated that tough Christmas trading conditions had left nearly 140 firms in a “critical” condition.

Book retailers were among those in significant distress, hit by competition from players such as Amazon, while convenience stores have suffered from the rising dominance of supermarkets.

However, online retailers have seen sales figures improve, Begbies said.

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Italy’s Monti opens door to seeking new term

ROME (Reuters) – Two days after stepping down, Mario Monti announced on Sunday he would consider seeking a second term as Italian prime minister if approached by allies committed to backing his austere brand of reforms.

The former European commissioner, appointed to lead an unelected government of experts to save Italy from financial crisis a year ago, resigned on Friday but has faced growing calls to seek a second term at a parliamentary election on February 24-25.

At stake is the leadership of the world’s eighth largest economy, where recession and public debt of more than 2 trillion ($ 2.63 billion) have aggravated investor concerns about growth and stability in the euro zone.

“If a credible political force asked me to be candidate as prime minister for them, I would consider it,” said Monti, who has imposed repeated tax hikes and spending cuts to shore up Italy’s strained public finances.

He had kept his position a closely guarded secret for weeks, and in recent days had appeared to be have strong doubts about whether to continue in front-line politics. He made clear that if he ran, it would probably be at the head of a centrist grouping.

Monti held back from committing himself fully to the race, and said he was aware any decision to stay in politics carried “many risks and a high probability of failure”.

“I am not in any party. I am ready to give my appreciation and encouragement, to be leader and to take on any responsibility I may be given by parliament,” he said.

As a senator for life, Monti has no need to run for election to parliament but he said he would publish a detailed agenda of recommendations for a future government and would potentially be willing to lead a party that adopted it as its own.

Still serving as caretaker leader, Monti is widely respected for restoring Italy’s reputation after the scandal-plagued era of his predecessor Silvio Berlusconi.

The former economics professor is backed strongly by Italy’s business establishment and by EU allies including German Chancellor Angela Merkel. He has been urged to stay by centrist groups ranging from disaffected former Berlusconi allies to the small UDC party, which is close to the Catholic church.

But there is little sign of enthusiasm for a second term among voters weary of his austerity policies. A survey last week showed 61 percent did not think he should stand. It said a potential centrist alliance under his leadership was likely to gain around 15 percent support.

BITTER ELECTION

Both Berlusconi’s center-right People of Freedom (PDL) party and the center-left Democratic Party (PD), which is leading in the opinion polls, have urged Monti not to stand in the election.

Berlusconi, who left office last year with fraud charges and a juvenile prostitution scandal hanging over him, has accused Monti’s “Germano-centric” government of worsening recession with austerity measures, including a deeply unpopular housing tax he has promised to scrap.

In an exchange which may give a taste of bitter campaigning to come, Berlusconi said his nightmare would be a government with Monti at its head and Gianfranco Fini, a former ally turned bitter foe who supports the premier, “coming out of the sewers”.

Fini’s lieutenant Fabio Granata responded by saying Berlusconi’s remark was “fitting for his court of thieves, mafiosi, corrupt politicians, slaves and prostitutes.”

Monti was also scathing about Berlusconi, whom he replaced as Italy teetered on the brink of disaster in November 2011.

He said he had been “bewildered” by the 76-year-old media tycoon’s frequent changes of position. And, in an interview with La Repubblica daily, he expressed incredulity that Italians might re-elect Berlusconi “after seeing the damage he did to the Italian economy and the credibility of the country”.

PD leader Pier Luigi Bersani, whose party has backed Monti in parliament and pledges to maintain the broad course he has set, was more cautious, saying he would look at Monti’s reform proposals closely but that it would be up to voters to decide.

Monti said he hoped the next government would have a strong majority to pursue a programme that would extend the reforms his government had begun, in areas ranging from the labor market to justice and cutting the bloated cost of the political system.

He said the next government must not make easy election promises or backtrack on reforms: “We have to avoid illusory and extremely dangerous steps backwards.”

During his 13 months in office, Monti hiked taxes severely and chopped backed spending while pushing through reforms of the pension system, labor market and parts of the service sector.

However, many analysts said his efforts were too timid to significantly improve the outlook of a chronically sluggish economy, and Monti himself said that Italy was “only at the beginning of the structural reforms” required.

Italy, the euro zone’s third-largest economy, has been in recession since the middle of last year. Consumer spending is falling at its fastest rate since World War Two and unemployment has risen to a record high above 11 percent.

(Editing by Barry Moody and Mark Trevelyan)

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News Corp publishing loses $2.1bn

21 December 2012 Last updated at 13:22 ET

News Corporation says its publishing wing incurred a $ 2.1bn (£1.3bn) loss in the last financial year.

Revenues fell 5%, partly as a result of the closure of the News of the World, which it stopped publishing after the phone-hacking scandal broke in the UK.

The company detailed the losses as it formally applied to US regulators the Securities and Exchange Commission to split its business into two.

News Corp plans to separate publishing from its film and TV business.

The publishing arm, which News Corp said had made a profit of $ 678m the year before, will be called New News Corp. It will include book publisher Harper Collins, the Times and the Sun newspapers in the UK, the Wall Street Journal, the New York Post and the Australian.

The more lucrative TV and film business will be the parent company and will be called Fox Group.

It will include the US news channel Fox News and the 20th Century Fox film studio.

‘Adverse trends’

The loss made by the publishing arm included a $ 2.6bn impairment charge, after writedowns of $ 1.3bn for goodwill and $ 1.3bn for other intangible assets, primarily newspaper mastheads and distribution networks.

These impairment charges were largely the result of “adverse trends affecting several businesses”, including a weakening economic environment in Australia and lower predicted revenues from certain businesses.

The charges also reflected the expected sale of certain assets at a value below their carrying value, News Corp said.

The company first announced its plan to split in June, after pressure from shareholders who were concerned about the damage done to the publishing business by the events at the News of the World.

Robert Thomson, who is currently the managing editor of the Wall Street Journal and previously edited the Times, will be head of the new publishing company.

He will receive an annual salary of $ 2m, and a performance-based annual bonus with a target of $ 2m.

Rupert Murdoch will carry on as chairman and chief executive of the parent company, for which his compensation totalled $ 30m in the last year.

His pay will increase “modestly” as he takes on the role of executive chairman of the publishing company.

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The NRA’s Solution: A Gun in Every School

With characteristic flair, the National Rifle Association held America in suspense for a week on how it would react to the Newtown (Conn.) school massacre and then came out, guns blazing.

Wayne LaPierre, the NRA’s longtime top official, left no doubt during his nationally televised press conference that the pro-gun lobby—pound for pound, the most effective single-issue advocacy group in Washington—will fight fiercely against any new restrictions on the lawful acquisition of guns, magazines, or ammunition.

Whether the group wins or loses the coming debate, it wins (more on that in a moment). First, here are the basics of what LaPierre had to say:

• Setting up schools as “gun-free zones” has been an utter failure. Schools require more security, including a police officer in every school. The NRA will lead a national “school shield” initiative headed by Asa Hutchinson, a former head of the Drug Enforcement Administration, former U.S. congressman, and former federal prosecutor.

• The nation ought to establish a comprehensive database of mentally ill individuals. Those who have been deemed mentally ill, alcoholic, or addicted to drugs are already banned by federal law from acquiring guns. LaPierre called for more thorough record-keeping, a demand made by many of his opponents in the gun-control camp.

• The national media, whom LaPierre repeatedly castigated, bear responsibility for random mass shootings because they provide saturation coverage of events such as the Newtown massacre, and that encourages “copycats.”

• Hollywood and makers of violent video games, which LaPierre called the worst kind of “pornography,” likewise bear responsibility for mass shootings. The entertainment industry, he said, creates an atmosphere in which young people view violence as routine and without consequence.

• Gun owners, however, do not bear responsibility for mass shootings, and more gun regulations are not needed, he said. Instead, he condemned federal prosecutors for pursuing fewer gun-crime cases. There are already 20,000 gun regulations on the books, LaPierre said.

• He accused the media of fomenting “hatred” of gun owners and the NRA. He also alluded to the danger of civic unrest in the event of another disaster similar to Sandy, the devastating storm that recently hit the East Coast. That’s a subtle signal in support of survivalists and others who stock up on armaments out of fear that the government can’t protect them in chaos.

The NRA, as will become apparent in weeks and months to come, has a structural advantage in this conflict with gun-control forces. It does not compromise, because it does not fear losing. By framing the debate as one of gun owners against the rest of society (the media, Hollywood, “political elites”), LaPierre is paving the way for his next fund-raising solicitation. If some new gun-control law gets enacted, that becomes evidence that the vast anti-gun conspiracy only wants more, that President Barack Obama eventually will come for YOUR guns—all of them.

The lobby and the industry whose fortunes it promotes thrive on controversy, observes Richard Feldman, a former NRA organizer and gun trade association executive. “If the NRA wins, it wins,” he says. “If it loses, it wins, too, because then it can raise money on its defeat—and go back and try again.”

A relevant datum that LaPierre did not stress as part of his presentation was that, as the industrialized democracy with the greatest prevalence of gun ownership—300 million firearms in private hands; 47 percent of households possessing one or more guns—the U.S. has the highest gun homicide rate among economically advanced countries.

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U.S. state, local spending expands for first time in 3 years

WASHINGTON (Reuters) – State and local government spending grew at a 0.3 percent annual rate in the third quarter, after 11 straight quarters of contraction, the U.S. Commerce Department said on Thursday.

The last time state and local spending expanded was in the third quarter of 2009, at a much more robust rate of 2.2 percent. Then, for nearly three years, spending contracted sharply, with the biggest drop in the first quarter of 2010 at 5.5 percent.

States are pinching pennies, keeping spending growth slow as the economy recovers from the 2007-09 recession and the federal government sends them fewer funds.

“The recent improvement in the national economy has not translated to strong growth in total state expenditures,” said the National Association of State Budget Officers (NASBO) in a report also released on Thursday.

Total state spending likely grew only 0.1 percent in fiscal 2012, the lowest level since the group began tracking state spending in 1987, NASBO said. Most states’ fiscal years end in June, which means that many have already started fiscal 2013.

The 2007-09 recession caused states’ revenues to plunge and, because all states except Vermont must end their fiscal years with balanced budgets, many slashed spending, calling special legislative sessions to make emergency mid-year cuts.

The federal government stepped in to help with the 2009 economic stimulus plan known as the American Recovery and Reinvestment Act (ARRA), which included the largest transfer of federal funds to states in U.S. history.

NASBO said state expenditures grew 3.8 percent in fiscal 2010 and 2.8 percent in fiscal 2011, mostly due to the assistance. By fiscal 2010 federal money made up nearly 35 percent of state spending, compared with 26.3 percent in fiscal 2008.

Now that the burst of stimulus money is over, states must once again shoulder the costs of public programs, even though their revenues are only beginning to return to pre-recession levels. Federal funds likely only represented 31.2 percent of state spending in fiscal 2012 and will continue to shrink, NASBO said.

“State revenues have not increased as fast as ARRA funds have declined, leading to a unique situation in which total state expenditure growth has slowed during the same time that the national economy has been improving,” it reported.

Meanwhile, spending demands continue to grow, particularly for the Medicaid healthcare program for the poor that states operate with partial reimbursement from the federal government.

Over the last three years, the portion of state spending going to Medicaid has risen to 23.9 percent from 22.2 percent. Many states worry that Medicaid will eat up their budgets, and leave fewer dollars for other areas.

Spending on education dipped to 19.8 percent in fiscal 2012, the first time on record that the portion has been less than 20 percent, NASBO said.

(Reporting by Lisa Lambert; Editing by Nick Zieminski)

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S&P raises Greece’s credit rating

18 December 2012 Last updated at 14:23 ET

Ratings agency Standard and Poor’s has raised the credit rating of Greece’s sovereign debt by six levels, praising the “strong determination” of fellow eurozone countries to help it stay as a member state.

S&P has increased Greece’s rating from “selective default” to “B-minus”.

The agency also praised the continuing efforts by Greece’s government to cut its spending.

Greece is currently receiving the second of two bailouts.

Last week, Greece started to receive the latest tranche of the bailout funds from the European Union and International Monetary Fund.

They agreed to release 49.1bn euros ($ 57bn; £37bn) after continuing austerity work by Greece, and a buyback of some of its debt.

A total of 240bn euros has been earmarked for Greece from the two bailout loans.

So far, Greece has received nearly 149bn euros (£119bn; $ 191bn) from the eurozone and the International Monetary Fund, out of that 240bn euros.

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This is a significant upgrade, which the Greek government will consider a vote of confidence, but it seems to be more of a vote of confidence in the euro in general. ”

End Quote

S&P said in its statement: “The upgrade reflects our view of the strong determination of European Economic and Monetary Union (eurozone) member states to preserve Greek membership in the eurozone.

“The outlook on the long-term rating is stable, balancing our view of the government’s commitment to a fiscal and structural adjustment against the economic and political challenges of doing so.”

Greece had to seek the bailouts to meet its debt repayments after years of overspending meant it could not keep up with its debt obligations.

The negative market opinion of Greece’s situation only worsened its position, as it pushed up the yield, or level of interest, that the the country had to offer on the sale of its new government bonds, in order to attract buyers.

The BBC’s economics editor Stephanie Flanders said of S&P’s announcement: “This is a significant upgrade, which the Greek government will consider a vote of confidence, but it seems to be more of a vote of confidence in the euro in general.

“Greece is not out of the woods economically, by any stretch of the imagination. But financial markets do now think a Greek exit from the euro is less likely.

“S&P is catching up with that market optimism with this upgrade. In theory, the fact that a large part of Greek sovereign debt has already been restructured also makes future defaults a bit less likely.”

BBC News – Business

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Hopes rise for “fiscal cliff” deal as Obama, Boehner meet

WASHINGTON (Reuters) – President Barack Obama and top Republican John Boehner met at the White House on Monday as hopes rose that Washington will be able to head off steep tax hikes and spending cuts that could push the economy into recession next year.

Aides from both parties said they were optimistic that a deal could be reached in the coming days to avert the “fiscal cliff,” as lawmakers set the stage for action before a year-end deadline.

“There’s been too much progress at this point and neither guy wants to go over the cliff,” a senior Republican aide said.

Although both sides still had major differences, investors were cheered by signs of progress. The Standard & Poor’s 500 index was up 0.72 percent in late afternoon.

“I think there’s a lot of expectation that a fiscal cliff deal of some sort does get done,” said Joseph Benanti, managing director of Rosenblatt Securities in New York.

Senate Democratic leader Harry Reid said his chamber will wrap up work on the issue after Christmas.

“It appears that we’re going to be coming back the day after Christmas to complete work on the fiscal cliff,” he said on the Senate floor.

Boehner, the speaker of the Republican-controlled House of Representatives, has edged closer to Obama’s demand to raise taxes on the wealthiest Americans. In return, Obama is considering a measure that would slow the rate of growth of Social Security retirement benefits by changing the way they are measured against inflation, according to a Senate Democratic aide.

GETTING CLOSER ON TAXES

In a step toward an agreement, Boehner has put forward a tax increase for those earning over $ 1 million annually, while Obama wants that threshold set at $ 250,000. Republicans could probably stomach a tax hike on incomes above $ 500,000, a Republican aide said.

The two sides face a deadline of December 31, when $ 600 billion in across-the-board spending cuts and tax hikes are due to begin kicking in, a jolt to the economy that could throw it back into recession.

Boehner’s latest proposal calls for $ 1 trillion in new tax revenue, which would come from raising rates and limiting deductions that the wealthiest can take. That is $ 400 billion less than the White House wants, but the gap between the two sides has narrowed by half in recent weeks.

Boehner could float the broad outlines of a deal with rank-and-file members on Tuesday. If there are no strong objections, he could try to finalize the deal on Wednesday, the Republican aide said.

A Democratic aide said that if a deal is reached by Saturday night, votes could be held in Congress next week.

Both sides declined to say what Boehner and Obama discussed at the meeting, which was also attended by Treasury Secretary Timothy Geithner.

The White House said Boehner’s latest proposal doesn’t meet its standards.

“Thus far the president’s proposal is the only proposal that we have seen that achieves the balance that is so necessary,” White House spokesman Jay Carney said at a news briefing.

Republicans understand that the clock is ticking and they are confident that Boehner will get a deal they can support in the coming days, a senior House Republican aide said.

Boehner “won’t sign off on a deal that doesn’t have enough votes to get through,” the aide said.

Republicans want substantial spending cuts in return for increased tax revenue, but any proposal to trim popular benefit programs like the Medicare health insurance plan for seniors will face fierce resistance from liberal Democrats, whose votes will be needed to get a deal passed.

Obama could also face strong opposition from Democrats if he agrees to Boehner’s proposal to slow the growth of Social Security benefits by changing the way the cost-of-living increases are measured against inflation, an approach that could save $ 200 billion over 10 years.

Obama also wants to head off another confrontation over the government’s debt limit, which will need to be raised in the coming months. Republicans insist that any increase in the government’s $ 16.4 trillion borrowing authority must be paired with an equal reduction in spending.

(Additional reporting by Thomas Ferraro, Mark Felsenthal and Jeff Mason in Washington and Gabriel Debenedetti and Angela Moon in New York; Writing by Andy Sullivan; Editing by Alistair Bell and Eric Beech)

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Abe’s challenge: Can he give Japan what money can’t buy

TOKYO (Reuters) – Even before Japanese voters returned Shinzo Abe‘s party to power, he had already won over financial markets with an economic revival plan as seductively simple as economists say it is risky: print money and spend it. Lots of it.

The Liberal Democratic Party’s landslide on Sunday is likely to sustain a market rally fuelled by economic stimulus hopes, but Abe’s economic legacy will probably be defined by how he tackles chronic ills that easy money alone cannot fix and that were largely ignored during the campaign.

The conservative leader set to return to the prime minister’s post he abruptly left in 2007 campaigned on a promise to double spending on public works and to push the Bank of Japan for radical action to end deflation and help exporters such as Toyota and Sony by taming the yen.

“The fact that Abe points to changes in the BOJ law or forex levels, or aggressive easing as solutions to Japan‘s problems is, if anything, worrying,” said Yuuki Sakurai, chief executive of Fukoku Capital Management which manages $ 19 billion in assets.

“They should be treated as tools to buy time to implement structural reforms, but we’re not hearing anything about deep reforms that the LDP wants to carry out.”

The so-called Abe trade – a 4 percent slide in the yen and more than a 10 percent rise in stock prices over the past month – shows that for now, most investors just want to see the new leader fulfill his pledges.

Analysts said they expected Sunday’s vote, which according to TV projections based on counted votes gave LDP and its ally a two-thirds lower house majority, to sustain that trend in the near-term.

“Abe’s economic policies will be implemented so the economy will improve next year. The problem is what happens after that,” said Koichi Haji, chief economist at NLI Research Institute in Tokyo. “The key is whether Abe can implement long-term structural reforms and growth strategies.”

The BOJ is poised to heed Abe’s calls for more aggressive easing and a more ambitious 2 percent inflation target, with markets expecting the central bank to ease policy for the fifth time this year on Thursday.

Investors also expect an extra budget of up to 10 trillion yen ($ 120 billion) as a down payment on Abe’s plan to spend such amounts per year over the next decade – double the current level – on public works long synonymous with the LDP.

Economists say pumping cash into the economy will only give it a temporary jolt if not followed by efforts to lift its growth potential and contain runaway debt.

In just three decades Japan has become the world’s oldest society, with those 65 or above making up nearly a quarter of a population that is greying and is estimated to have shrunk by over 260,000 in the last fiscal year alone.

Recipes to cope with it are well known: social security overhaul, including cuts in healthcare and pensions; boosting access to overseas markets and opening Japan to foreign goods, workers and investment; power sector revamp and bringing more women into the workforce.

All, however, carry political and social risks that Japan’s recent revolving-door leaders were unable or unwilling to take.

Left to sink or swim with swings in overseas demand for its exports and its currency, the world’s third-largest economy has been in and out of recession and dogged by low-grade deflation for the past two decades.

Now, in firm control of the lower house, Abe has a chance to prove his mettle and erase the memories of his first troubled year in office.

So far he has played it safe.

His “Abenomics” — a mix of potent monetary stimulus and big public spending — carries little political cost and he has been coy on touchy issues such the U.S.-led Trans-Pacific Partnership (TPP) free trade pact, or implementing sales tax increases.

With some luck, the new government may be even be able to call an end to a brief recession it entered last quarter.

Economists polled by Reuters last week predict the economy will start growing again in the first quarter of next year, largely due to expected recovery in China, Japan’s top export market.

TAX TEST

Abe’s first stern economic test will come after August, when the government, armed with second-quarter data, will decide whether the economy is strong enough to go ahead with a first round of planned sales tax increases.

With 10-year bond yields near a decade low below 0.7 percent, bond investors are now confident that he can steer the central bank to buy more bonds from the world’s most indebted government without setting off a market meltdown.

To keep that trust, Abe must convince investors that in his push for big scale-stimulus, he has not abandoned budget discipline. Economists say with Japan’s public debt at more than twice its economic output and climbing, the new government can ill-afford delaying a tax hike that has become a symbol of Tokyo’s fiscal rectitude. Their message is clear: “Just do it!”

“I hope they will go through with it,” said Takatoshi Ito, a Tokyo University professor, former adviser to the first Abe administration who is now mooted as a possible successor to BOJ Governor Masaaki Shirakawa when his term ends in April.

“Tax revenue is less than half of expenditures. Bond issuance is bigger than tax revenues. It’s like using a credit card for more than half of your monthly expenditure. It’s crazy, abnormal, you can’t go on like that.”

(Additional reporting by Kaori Kaneko, Antoni Slodkowski and Leika Kihara; Editing by Raju Gopalakrishnan)

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Best Buy extends deadline for founder bid

(Reuters) – Best Buy Co Inc agreed to extend the deadline to February 28 for founder Richard Schulze to make a bid for the company, continuing the uncertainty for shareholders over whether he can put a bid together.

Best Buy shares fell 14.2 percent to $ 12.12 on the New York Stock Exchange.

The company said on Friday the extension would allow Schulze to include the consumer electronics retailer’s full-year results as part of his due diligence review.

The new deadline will also give him more time to line up partners and financing for a bid. A source told Reuters on Thursday that Schulze didn’t have financing lined up in time for a December bid.

Schulze, who founded Best Buy in 1966, has said he would fund any deal through a combination of private equity and debt financing, as well as the reinvestment of some of his own equity in the company.

“Obviously with the extension, there is still some hesitation on the part of his private equity suitors about how much financing they would want to put up for this deal,” Morningstar analyst R J Hottovy said.

Under the extension, Schulze will be able to submit an offer any time during February, and the company will have 30 days to review and make a decision on the bid.

In August, Schulze made an informal proposal to acquire Best Buy for $ 24 to $ 26 per share, or a total of $ 8.16 billion to $ 8.84 billion. Including debt, it would be as much as $ 10.9 billion.

But Best Buy’s performance has continued to lag and its stock has slid since. Last month, the company reported a decline in same-store sales for the ninth time in the last 10 quarters.

Best Buy’s fortunes have faltered as consumers increasingly use its big box stores as showrooms for products they end up buying online at Amazon.com Inc and other websites.

To add to its troubles, the company forced out Schulze’s protégé, Brian Dunn, as chief executive earlier this year amid allegations he was having an inappropriate relationship with a female employee.

That scandal led to the ouster of Schulze from the board, and Best Buy hired turnaround expert Hubert Joly as CEO to come up with its own restructuring plan.

Schulze remains Best Buy’s largest shareholder with about one-fifth of the company’s outstanding shares.

If he can come in with a bid at about $ 16 or $ 17 a share when the market thinks the stock is only worth $ 12, it is in the interests of shareholders to extend the deadline, Hottovy said.

Others agreed.

“That’s really the best hope for investors, that Schulze takes it out because there’s been no other good news for the company,” said Rakesh Agrawal, principal analyst at San Francisco-based consulting firm reDesign Mobile.

Agrawal, who also advises hedge funds and money managers on the technology sector, said at this point the stock was trading entirely on whether a deal can get done or not.

A Best Buy spokesman said the extension will not affect the company’s day-to-day operations, especially during the all-important holiday season.

“We are determined to have a strong holiday season,” both in stores and online, spokesman Matt Furman said, adding that the company was moving “full speed ahead” with its turnaround plan.

(Writing by Brad Dorfman; Additional reporting by Olivia Oran in New York, and Siddharth Cavale in Bangalore; Editing by Jeffrey Benkoe)

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With SolarCity IPO, Elon Musk May Get Clean Tech Right

Over the past few years, Silicon Valley has pumped hundreds of millions of dollars into a vast array of “clean technology” companies. You probably can’t name many of them because, on the whole, they’ve been tremendous failures or totally underwhelming. Companies participating in particularly difficult areas such as solar have turned into laughingstocks and symbols of huge investments gone wrong.

There does, however, seem to be one person getting quite wealthy off green technology, and that’s Elon Musk, the chief executive of Tesla Motors (TSLA) and the chairman of SolarCity (SCTY). When SolarCity began trading on Thursday, its shares jumped more than 50 percent in early trading (although the company had lowered its IPO price in recent days due to lackluster demand). Musk is now the largest shareholder in a pair of public clean-technology companies. (Going into the offering, Musk owned 31 percent of SolarCity, according to a Securities and Exchange Commission filing. That would be worth $ 150.8 million at the $ 8 offering price. A second filing said he intended to buy more shares at the offering.)

“It’s possible that Elon’s two clean-tech companies will be the two most successful clean-tech companies in the U.S.,” said Peter Thiel, the entrepreneur, investor, and Facebook (FB) board member in an interview earlier this year. Thiel is an investor in Musk’s SpaceX venture.

Instead of playing in the cutthroat world of solar-panel production, SolarCity, founded in 2006, focused on leasing solar panels to consumers and businesses and making this process easier. It helps people calculate how much money they can expect to save with solar panels, sets up the financing, and coordinates the installation of the panel. Through the first nine months of the year, SolarCity brought in $ 103 million of sales. Its business has been booming, although the company has yet to turn a profit and is likely to see a number of the state and federal tax credits from which it benefits decline over time.

What makes Musk’s clean-technology empire intriguing are the ways in which he intertwines the businesses. Tesla, for example, has begun building out a network of solar-powered charging stations for its cars. People can drive long distances—San Francisco to Los Angeles, for instance—and refuel their Model S sedans for free using a type of superfast charger. Musk has pledged to keep this refueling service free “forever,” and it is SolarCity that helps set up the stations. Beyond this, Musk plans soon to unveil what he’s describing as a “new mode of transportation” that sounds like some kind of solar-powered, super-fast tunnel called the Hyperloop. (He describes it in some detail here.)

Musk helped come up with the business plan for SolarCity, which was then founded by his cousins, CEO Lyndon Rive and Chief Technology Officer Peter Rive. All the men grew up near each other in Pretoria, South Africa, where Musk led them on a variety of entrepreneurial ventures, including selling Easter eggs door to door. Their mothers were born in Canada, and at about age 15, Musk hatched a plan to move the entire clan to the U.S. after first obtaining Canadian citizenship. “Without Elon I would be stuck in South Africa,” Lyndon told me in an interview earlier this year. “His ability to help us leave the country was amazing.”

Lyndon eventually obtained his green card for the U.S. through his skills as an underwater hockey player. (Yes, this sport exists.) “The U.S. has this green card category for people with exceptional abilities, like if you’re really good at sports or an actor,” Lyndon says. “I’ve been playing the sport since I was 14, and to get the exception you have to prove that you’re one of the best players in the world.” Both Lyndon and his wife have played for the U.S. National Underwater Hockey team.

Once in the U.S., the Rive brothers started a data center software company called Everdream, which Musk bankrolled. Dell (DELL) eventually acquired the company for $ 120 million. The cousins took the money, gave their next venture a think, and all settled on SolarCity.

Both Tesla and SolarCity have their challenges. Tesla has just started pumping out its new Model S sedan at a regular rate. The good news is that it has thousands of back orders to fill. The bad news is that it needs to produce the machines profitability and reliably. Earlier this month, Musk revealed that Tesla had enjoyed a week of positive cash flow. Still, Tesla remains one of the most shorted stocks on the market, with big-time investors betting that Musk will fail. Mitt Romney drove this point home during the presidential debates, describing Tesla as a “loser.”

SolarCity has installed panels at more than 45,000 buildings and been at the forefront of an era when getting this type of technology put on a home or office became much, much easier. “Clean energy has taken a big hit, primarily on the solar side, because of a lot of the companies there were producing a commodity,” Lyndon says, referring to the solar-panel and substrate makers. “The stocks were overhyped because of overdemand and undersupply, and then supply caught up. This should not be a measurement of the market’s willingness to adopt clean energy. The market adoption is almost doubling every year.”

Businessweek.com — Top News

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TSX ends higher as financials gain; German data helps

TORONTO (Reuters) – Canadian stocks ended higher on Tuesday, helped by a strong showing from banks and other financial stocks as a German poll showed a sharp improvement in investor sentiment in Europe’s biggest economy.

The Toronto Stock Exchange‘s S&P/TSX composite index <.gsptse> added 51.89 points, or 0.42 percent, to close at 12,282.36.</.gsptse>

(Reporting by Alastair Sharp)

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China reports strong economy data

9 December 2012 Last updated at 06:49 ET

China’s economic growth rate may be gathering pace again, as the government released strong industrial output and retail sales figures.

Industrial production rose by 10.1% in November, compared with a year earlier, according to the official data from the National Bureau of Statistics.

This was better than expected, and the strongest performance since March.

At the same time, China’s retail sales increased by 14.9%. This was also the best showing for eight months.

‘Sweet spot’

The official economic data are the first to be released since the Communist Party appointed its new leaders last month.

The figures will be good news for them, but also for the world economy, as China’s factory output is indicative of global demand for the country’s consumer products.

Until the end of September, China had seen seven consecutive quarters of a slowing economic growth rate, due to both falling exports and weak domestic demand.

The data for the current three months from October to December will be released in the new year. For July to September, the rate of growth was 7.4%, down from 7.6% in the first quarter the year, and 9.2% for 2011 as a whole.

Other data released on Sunday showed that Chinese inflation rose slightly to 3% in November – from 2.7% in October.

“The Chinese economy is in the sweet spot now with rebounding GDP growth, rebounding earning growth and low inflation,” said Lu Ting, China economist at Bank of America Merrill Lynch.

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Employment ducks superstorm Sandy punch

WASHINGTON (Reuters) – Companies kept up their steady but slow hiring pace in November, defying predictions that superstorm Sandy would deal a big blow to the labor market.

While the unemployment rate fell to a near four-year low of 7.7 percent, that was only because many Americans gave up the hunt for work, tempering the signal from the stronger-than-expected payrolls growth.

A big drop in consumer confidence in December also offered a cautionary note on the economy’s health.

Nonfarm employment expanded by 146,000 jobs last month after gaining 138,000 in October, the Labor Department said on Friday. The increase was well above the 93,000 expected on Wall Street.

“We are moving in a trend-like modest job-growth environment,” said Michael Hanson, a senior economist at Bank of Bank of America Merrill Lynch in New York. “We really need to see payroll numbers break above 200,000 for a while to think we have a more sustained recovery underway.”

The government said Sandy, which slammed the densely populated East Coast in late October, did not have a substantive impact on the data. Economists had thought it would, with some predicting it would cut up to 75,000 jobs off payrolls growth.

Nevertheless, the storm did hit the economy hard.

Sandy knocked retail sales and industrial output in October and led to a big spike in claims for jobless benefits, one of the reasons economists expected job growth to slow.

A Labor Department survey of households found 369,000 workers were unable to make it to work in the aftermath of the storm and a further 1.1 million ended up working only part time. However, the department still considered them employed.

U.S. stocks were little changed at mid-day, with the downbeat reading on consumer confidence largely offsetting the stronger-than-expected payrolls data. Prices for U.S. government debt fell, while the dollar edged up against a basket of currencies.

MODEST TREND

November’s job gains left them just below the monthly average of 151,000 that has prevailed since January.

Economists consider that pace just enough to push the jobless rate lower over time. But they say roughly 200,000 to 250,000 jobs per month would be needed to make noticeable headway in absorbing the 22.7 million Americans who are either jobless or underemployed.

The 0.2 percentage point drop in the unemployment rate, which took it to its lowest level since December 2008, was due to a decrease in the size of the labor force, a suggestion frustrated Americans were giving up the hunt for work.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, fell back to near a 31-year low.

Heidi Shierholz, an economist at the Economic Policy Institute in Washington, said it could take more than 10 years for the unemployment rate to drop back to its pre-recession level around 5 percent at the current pace of job growth.

Last month, the retail sector accounted for more than a third of jobs gains, which economists tied to a brisk start to the holiday shopping season. Still, private hiring slowed to 147,000 from 189,000 in October, pulled down by a sharp decline in construction employment and weak manufacturing payrolls.

FISCAL CLIFF WORRIES

Employment continues to be held back by fears the government may fail to prevent the $ 600 billion in automatic tax hikes and government spending cuts set to take hold at the start of next year. The debt crisis in Europe has also weighed.

Worries about this so-called fiscal cliff hit consumer sentiment in early December. The Thomson Reuters/University of Michigan’s preliminary confidence reading plummeted to 74.5 from 82.7 in November.

“That confirms my belief that the only thing the economy has to fear is Washington itself,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

“There is some real underlying strength in the economy as the November jobs numbers indicate, but it could be wiped out by the games being played by our political representatives,” he said.

With the labor market far from full health, Federal Reserve policymakers, who meet on Tuesday and Wednesday, look certain to keep U.S. monetary policy on its current ultra-easy course.

Economists said an anticipated tightening of fiscal policy next year, even if a deal is reached to avoid completely going over the fiscal cliff, provides ample reason for the U.S. central bank to maintain its stance.

The retail sector added 52,600 jobs last month after rising 50,900 in October. The pace of retail hiring over the last three months was the fastest since 1995.

There were also increases in information and temporary help hiring. But transport, financial, education and health services employment slowed.

Manufacturing employment fell 7,000, marking the third month it has dropped this year.

Construction payrolls surprisingly tumbled 20,000, despite a surge in homebuilding, which is benefiting from the Fed’s effort to hold borrowing costs down. Economists said they expect construction jobs to rise in the coming months as the housing recovery returns full swing.

Average hourly earnings increased four cents. In the 12 months to November, average hourly earnings are up just 1.7 percent, underscoring the trouble workers are having keeping up with inflation.

(Additional reporting by Richard Leong in New York; Editing by Andrea Ricci, Tim Ahmann and James Dalgleish)

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Intel CEO Otellini expects insider to replace him

SAN FRANCISCO (Reuters) – Intel‘s outgoing chief executive, Paul Otellini, said he expected to be replaced by a company insider and also signaled that the top chipmaker could open its factories to strategic customers.

Otellini’s comments at a Sanford Bernstein investor conference on Wednesday stoked speculation the top chipmaker may manufacture mobile chips for Apple and pushed Intel’s shares higher on Thursday morning.

“For the right types of products and not to enable my competitors, I would certainly consider it. There’s a lot of stuff in the pipeline,” Otellini said, according to a Thomson One transcript.

“As you know it takes a while to move your designs over, to design them under our process, for us to be able to bring them in-house and so forth and our foundry customers aren’t going to announce that they’ve moved until they’ve moved because it would hurt them at their current suppliers, Otellini said.

RBC analyst Doug Freedman said Otellini’s comments about the possibility of open Intel’s plants to customers were more direct than previous ones.

Apple currently depends on Samsung Electronics to manufacture its mobile chips but the two companies are in a war over patents and also compete in smarpthones and tablets. Apple is believed to be looking for alternative suppliers.

Intel raised eyebrows on Wall Street and in Silicon Valley in November when it said it will consider an outsider to take over after Otellini unexpectedly announced he will retire in May, potentially ending a four-decade tradition of internal succession.

Some analysts took that as a sign that Intel, which has struggled to jump from the personal computer market to mobile, might be considering a transformative hire. But Otellini he expects the board to choose from among the chipmaker’s own executives.

“It’s not up to me but I think that’s the most likely outcome. I’m very comfortable with the internal candidates and the track record of internal versus external in our industry shows pretty clearly you want to stay inside if you can,” Otellini said.

While the idea of an iconic visionary stepping in to lift Intel into the mobile market – its Achilles heel – may sound attractive, it could open the chipmaker to new risks should it waver from its traditional focus on hard-core manufacturing.

“Even if you brought in Mr. or Ms. Perfect, that person is going to take whatever it is, two years to figure out the culture and the people and how systems work and stuff like that,” Otellini said.

“In this environment, why take the risk and take the time? So I think they will stay inside.”

Shares of Intel rose 1.66 percent to $ 20.17.

(Reporting By Noel Randewich; Editing by M.D. Golan)

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TSX ends higher as CP Rail gains on cost-cutting

TORONTO (Reuters) – Canadian stocks ended higher on Wednesday as optimism about Chinese economic growth boosted energy stocks and investors cheered a cost-cutting plan at Canadian Pacific Railway Ltd .

The Toronto Stock Exchange‘s S&P/TSX composite index <.gsptse> closed up 20.11 points, or 0.17 percent, at 12,157.29.</.gsptse>

(Reporting by Alastair Sharp)

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