News Corp sells Myspace

News Corp has sold Myspace for $35 million, a fraction of what it paid for the once-hot social media site even as a new generation of Web-based start-ups is enjoying sky-high valuations.

Advertising company Specific Media will team with the singer Justin Timberlake to acquire Myspace in a deal that caps a tumultuous period of ownership under Rupert Murdoch’s News Corp, which swooped in to buy Myspace for $580 million in 2005.

At the time, Myspace was among the world’s most popular websites, and News Corp’s success in beating out rival Viacom Inc in a bidding war was viewed as a major victory for Murdoch. Since then, however, Facebook has eclipsed Myspace in popularity, and the deal has become a hard lesson in what can happen when a traditional media company imposes its will on a start-up.

It also shows how quickly audience — and investor — tastes can shift in the world of social networking. Indeed, Wednesday’s deal contrasts sharply with the current frenzy over social media companies, including LinkedIn, Twitter and Groupon, among investors looking for the next big thing.

Another of the hot start-ups, Zynga, an online social game company, plans to raise up to $2 billion in an initial public offering that could be filed by Thursday, valuing the company at $20 billion

“This is a mistake that will repeat itself,” James McQuivey, an analyst with Forrester Research, said of the Myspace saga. “I’m not sure that someone being pushed on by early round investors, someone reading their own press, which is praising them, will stop and say, ‘Wait, is this a one-year fad, a two-year fad? Or is this a five-year to ten-year change in the way things are done?’”

The Myspace transaction calls for News Corp to retain a minority stake in the website, the companies said in a statement, confirming a deal that was reported earlier.

Specific Media, which specializes in digital advertising, did not disclose financial terms. It announced, however, that Timberlake — who happens to have played Facebook adviser and investor Sean Parker in the movie “The Social Network” — would take an ownership stake and serve a “major role” in developing a strategy for Myspace.

A source familiar with the transaction said the deal is worth $35 million and is a mix of cash and stock. News Corp will retain about 5 percent, the source said.

Additionally, more than half of Myspace’s 500-strong workforce is expected to be laid off because of the sale, the source said.

The deal comes after a four-month bidding process in which a number of different possible buyers surfaced, including other social networking sites and private equity firms. The auction had been expected to fetch in the neighborhood of $100 million.

In the end, the sale serves as the latest example of what can happen to a once coveted company with a rocket-like trajectory that quickly loses its luster as competitors zoom past it in popularity.

Founded in August 2003 by Chris De Wolfe and Tom Anderson, Myspace was conceived as a way for friends and fans to connect with one another as well as with their favorite bands and artists.

Myspace, a kind of musical version of pioneer social network site Friendster, fast became wildly popular with teenagers and young adults, who spent hours designing their own pages with their favorite digital wallpaper, posting photos and adding friends.

At its peak in 2008, Myspace attracted nearly 80 million people in the United States, almost double that of Facebook.

The growth was too fast and Myspace had trouble scaling the number of users who were flocking to the site. Meanwhile Facebook had opened up its platform to third-party developers, such as Zynga and its popular FarmVille game. That attracted more people and kept them on the site.

By 2011, the number of U.S. visitors to Myspace fell to about 40 million while those visiting Facebook totaled about 150 million, according to online measurement firm comScore.

For the quarter ended March 2011, News Corp reported a segment operating loss of $165 million, mainly due to declines at Myspace.

Christine Lagarde named IMF chief

WASHINGTON—The International Monetary Fund named French Finance Minister Christine Lagarde as its next managing director, catapulting her into the middle of a deepening European debt crisis that threatens global financial markets.

Ms. Lagarde, 55 years old, who assumes the job next Tuesday, will have to lead an international institution while showing independence from her previous positions as part of the French government, with skeptics watching carefully for signs of whether she gives financially troubled European nations preferential treatment. Some emerging-market officials have already suggested Greece has won more latitude from the IMF than their countries would have received in a crisis.

The first woman and 11th consecutive European to hold the top position at the world’s emergency lender, Ms. Lagarde also faces the tasks of giving developing economies more power within the IMF and helping the institution recover from the sudden resignation last month of its former chief, Dominique Strauss-Kahn, who remains under house arrest in New York City on sexual-assault charges.

“I will make it my overriding goal that our institution continues to serve its entire membership with the same focus and the same spirit,” Ms. Lagarde said on Tuesday after her appointment. “The IMF must be relevant, responsive, effective, and legitimate, to achieve stronger and sustainable growth, macroeconomic stability, and a better future for all.”

During her interview with the IMF board last week, she pushed back against complaints that her French nationality creates a potential conflict of interest in European policy debates. The IMF’s managing director has an “exclusive duty of loyalty” to the fund, Ms. Lagarde said at the time. “I will not shrink from the necessary candor and toughness in my discussions with the European leaders.”

Ms. Lagarde’s sole rival for the job, Mexico’s central banker Agustín Carstens, suggested that Ms. Lagarde, as a European, might have a conflict in dealing with European economies. “We’d have a situation where the borrowers dominate a creditor institution. I think that’s an issue we should consider,” he said earlier this month at the Peterson Institute for International Economics.

One of her first tasks as IMF chief will be to help hammer out a second bailout package for Greece. A year after the euro zone and the IMF agreed to a €110 billion ($157 billion) rescue for Greece, Athens is once again negotiating with European leaders and the IMF. This time, the aid package involves the private sector.

The Greek negotiations will give Ms. Lagarde an early opportunity to show her independence, though analysts don’t expect her to deviate from her oft-stated position of supporting Greece and maintaining the integrity of the euro zone. As part of the French government, she has argued forcefully for Greece’s rescue packages, and has stood firmly with France and the European Central Bank against German proposals to reschedule Greece’s sovereign debt. Within Europe, France’s banks are among those most exposed to Greece’s debt woes.

“She has a strong knowledge of Europe’s situation,” said Nicolas Veron, a fellow at the Bruegel think tank in Brussels. “She will have trouble taking a stance that would be very different from the one she took as a finance minister.”

One of France’s longest-serving finance ministers, she played a key role from the beginning of the euro-zone debt crisis, helping bring together nearly a half-trillion euros of state guarantees to provide a safety net for ailing members of the currency area.

Speaking on French television after being named to the IMF post, Ms. Lagarde urged Greece’s creditors to come to the negotiating table, in language that appeared more forceful than she had used before. “All lenders must come to Greece’s bedside, but Greece must also be responsible and keep a close eye on its public finances, and those who are the most vulnerable,” she said.

Ms. Lagarde still has legal questions hanging over her in her home country. Earlier this month, a French criminal court said it would decide on July 8 whether to launch a probe into accusations that Ms. Lagarde overstepped her authority as finance minister in 2007 when dealing with a controversy pitting tycoon Bernard Tapie against the French state, or to dismiss the case. She has repeatedly said her intervention was lawful and has denied any wrongdoing.

Before the IMF board picked Ms. Lagarde, the IMF’s chief counsel discussed with French President Nicolas Sarkozy‘s office the potential risks posed by the Tapie case to allay the board’s concerns, according to a person familiar with the matter. After discussing the potential for hearings at which Ms. Lagarde may have to testify and the circumstances surrounding the case, the board was ultimately satisfied by the facts, this person said. Regardless, Ms. Lagarde told the board she would waive the diplomatic immunity that the managing director’s position gives the holder, he said.

The IMF’s 24-person executive board used its traditional “consensus” approach, rather than a formal vote, to settle on Ms. Lagarde over Mexico’s Mr. Carstens.

The U.S. government’s endorsement of Ms. Lagarde on Tuesday morning sealed the appointment, giving her clear backing from governments casting more than half the IMF’s votes. Treasury Secretary Timothy Geithner said her “exceptional talent and broad experience will provide invaluable leadership for this indispensable institution at a critical time for the global economy.”

After her appointment was announced, Mr. Carstens said, “I hope that under Ms. Lagarde’s direction, the IMF will make meaningful progress in strengthening the governance of the institution, so as to assure its legitimacy, cohesiveness, and ultimately, its effectiveness.”

Brussels forces VW to delay MAN plan

Volkswagen has been forced to delay plans to gain effective control of MAN’s supervisory board after the European Commission told it to await regulatory clearance before pursuing closer co-operation with truckmaker Scania.

Europe’s biggest vehicle manufacturer last month launched a mandatory offer for MAN, after its shareholding rose slightly above 30 per cent. The offer expires on Wednesday.

VW had planned to nominate three new MAN supervisory board members at the truckmaker’s annual general meeting on Monday, which would have taken its total representatives on MAN’s supervisory board to five.

But all three of the proposed candidates – including Martin Winterkorn, VW’s chief executive – are also board members at Scania, the rival Swedish truckmaker that VW already controls.

Before the meeting, minority shareholder representatives had strongly criticised the intended appointments, on the grounds that they breached Germany’s standards on corporate governance.

As the meeting opened, Ferdinand Piëch, VW’s chairman, announced that on the advice of the EU’s executive VW had decided to withdraw the proposed candidates and would nominate three others instead.

VW said it was in “constructive discussions” with Brussels over merger control clearance and said was confident of being able to submit the formal application in the coming weeks.

Munich-based MAN – which also makes buses and diesel engines and is profiting from booming demand in emerging markets, particularly Brazil – has advised its shareholders to reject VW’s bid of €95 for each ordinary share as too low.

However, MAN’s management supports closer co-operation with Scania, arguing that synergies – estimated by VW at around €200m per year – would benefit both companies, particularly given the industry’s ever greater technical complexity and fierce competitive environment.

Georg Pachta-Reyhofen, MAN’s chief executive, said co-operation with VW and Scania would also deliver purchasing advantages and possibly allow MAN to broaden its product range to include smaller trucks.

MAN remains adamant, however, that jobs, manufacturing sites and its brand-identity must be preserved.

VW, which aims to surpass Toyota as the world’s biggest carmaker by 2018, said the current take-up of its tender offer was in accordance with its expectations.

Nokia, Siemens Rethink Venture

Nokia Corp. and Siemens AG have shifted their focus to restructuring their joint venture in telecommunications-networking equipment, after failing to reach a deal with bidders for a controlling stake in the unprofitable business, people familiar with the matter said.

In the latest blow to beleaguered cellphone maker Nokia, which controls the venture, the company and Siemens now are exploring a “self-help” deal for the business, which is known as Nokia Siemens Networks. Under such a deal, each company might put more cash into the venture, the world’s No. 2 maker of wireless-networking gear, the people said.

Talks to sell a controlling stake in the venture to a consortium that includes private-equity firms Gores Group LLC and Platinum Equity LLC are unlikely to go anywhere, the people said.

Some of the people said the talks haven’t died completely. A private-equity group that includes Kohlberg Kravis Roberts & Co. and TPG Capital dropped out of the auction earlier. Final bids were due three weeks ago.

“NSN has real momentum and innovation, and shareholder interests are aligned in building a strong and profitable company,” said a Nokia spokesman, who declined further comment. Earlier this month, Nokia had said it was “in constructive talks with multiple parties.”

A spokesman for Finland-based Nokia Siemens, which has more than 60,000 employees and had nearly $20 billion in revenue last year, declined to comment.

Representatives for Siemens, Gores and the other private-equity firms either declined to comment or couldn’t be reached.

While it was unclear what stands in the way of a deal between Nokia Siemens and Gores and Platinum, one of the people said Nokia Siemens is uneasy striking a deal with the buyout firms, which are known for investing in distressed assets.

Nokia and Siemens each owns 50% of the venture, but Nokia has four of its seven board seats. Nokia consolidates the venture’s results in its financial statements. With Nokia Siemens Networks losing nearly $1 billion last year, the sale of a majority stake could have let Nokia remove a major drag on its results.

Siemens has grown frustrated with its partner’s inability to find a solution, the people said. They said one potential outcome is that the German industrial conglomerate, which is on sounder financial footing than Nokia, could take control.

KKR and TPG still could strike a deal that would involve them taking a small stake in Nokia Siemens, the people said. Bankers have said the venture could be valued at about $3 billion.

Nokia and Siemens’s effort to find a solution to the venture’s woes has dragged on for nearly a year. Any resolution is likely weeks, if not months, away, one of the people said.

Though Nokia Siemens has had three consecutive quarters of strong revenue growth, it has recorded only two profitable quarters since it was formed in 2007.

The venture recorded €12.7 billion ($18.02 billion) in revenue last year, representing roughly 30% of Nokia’s total. The venture had an operating loss of €686 million last year, following a €1.6 billion loss the year before. Nokia doesn’t report net income for the unit.

Nokia Siemens has been hurt by stiff competition from rivals, such as Telefon AB L.M. Ericsson, the market leader in wireless gear, and global economic headwinds.

Nokia, meanwhile, has been losing cellphone market share to Apple Inc. and devices based on Google Inc.’s Android operating system. Nokia’s decline has accelerated lately, with its shares plunging after it warned late last month that its core handset division may not make a profit in the second quarter. Its American depositary receipts fell 2.3% to $5.88 in New York Stock Exchange trading Friday. The ADRs were trading around $8.20 when the company issued the warning.

Interest rates must rise worldwide, says BIS

 

 

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The Bank for International Settlements (BIS) has warned that low interest rates across the globe are a threat to world financial stability.

The BIS warned low cost of borrowing had resulted in a credit and property price boom that was fuelling inflation, especially in emerging economies.

Central banks across the globe have cut interest rates in an attempt to boost growth after the 2008 financial crisis.

However, BIS warned that the policy may prove to be counterproductive.

“The prolonged period of very low interest rates entails the risk of creating serious financial distortions, misallocations of resources and delay in the necessary deleveraging in those advanced countries most affected by the crisis,” the bank said in its annual report.

The BIS is an organisation of international central banks which is not accountable to any national government.

‘Inflation fighting credibility’

While loose monetary policies and availability of easy credit have triggered growth, there has been a flip side to it as well.

Emerging economies, especially in Asia, have had to deal with rising prices for food and other essential commodities.

This has pushed up the cost of living and has threatened to derail growth in many developing nations.

The BIS warned that the central banks needed to change their policies in order to deal with the situation.

“Tighter global monetary policy is needed in order to contain inflation pressures and ward off financial stability risks,” it said.

“It is also crucial if central banks are to preserve their hard-won inflation fighting credibility,” the bank added.

One of the biggest concerns that economists and analysts have about low interest rates is the formation of asset bubbles.

They have warned that availability of easy credit and low interest rates are driving up property prices to unsustainable levels.

“Property prices in a number of emerging market economies are advancing at staggeringly rapid rates, and private sector indebtedness is rising fast,” the BIS said.

It also warned that the trend was very similar to that triggered by the global financial crisis.

“Emerging market economies managed to escape the worst of the crisis, but many now run the risk of building up imbalances very similar to those seen in advanced economies in the lead-up to the crisis,” the bank said.

The BIS warned that the surge in property prices had resulted in over development in the real estate market, leaving large numbers of properties unsold.

“It will take years to absorb this overhang,” the bank said.

The bank warned that if not addressed immediately, a crash in the property market may derail economic growth in emerging economies.

“All financial crises, especially those generated by a credit-fuelled property price boom, leave long-lasting wreckage,” the bank said.

Bank for International Settlements BIS-Caruana says no plans to publish list of G-SIFIs

There are no plans to make public the list of global systemically important banks which face a capital surcharge, Jaime Caruana, the head of the Bank for International Settlements, said on Sunday.

“For the time being we will publish the methodology and this methodology will be applied to each and every bank,” Caruana told a news conference after the annual meeting of the BIS, which is a central bank of central banks.

“I don’t think at least at the beginning (there was) the intention to publish these names of the banks.”

Global banking regulators have agreed on a proposal to slap an extra capital charge of 1 to 2.5 percent on the world’s biggest banks to make them safer by 2019.

China blurs A380 order, backs 747 amid EU row

China downgraded the announcement of an Airbus superjumbo order and signed up for the Boeing 747-8 as deals worth $9 billion coincided with a row over European emissions trading rules, industry sources said.

The deals both involved parts of the HNA airlines group and had been planned before the Paris Air Show, they said, but the decision not to announce the names of the buyers triggered one of the mysteries of this week’s event.

Industry sources said plans to announce a high-profile $3.8 billion deal between Airbus and Hong Kong Airlines for 10 A380 superjumbos were called off on Thursday because of China’s anger over European plans to charge airlines for emissions.

China threatened last month to hold back on purchasing Airbus aircraft because of the EU emissions trading scheme, which airlines body IATA has called illegal.

Additionally, industry sources said a company affiliated to the same carrier, Hainan Airlines, was behind the unexpected announcement of an anonymous deal at Boeing this week.

Boeing said an unidentified airline had provisionally committed to 15 747-8 passenger jets worth $4.8 billion.

Airlines often choose to buy jetliners without identifying themselves to their competition, but such announcements are rarely made at air shows which are designed for publicity. Boeing also rarely announces deals before they are confirmed.

Airbus (EAD.PA) and Boeing (BA.N) declined to comment and representatives of the HNA Group were not available.

Hong Kong Airlines is 46 percent owned by HNA Group, the parent of Hainan Airlines Co Ltd (600221.SS).

TEMPTING TARGET

Airbus and Boeing both brought their largest passenger jets to the show, a biennial event which rotates with the Farnborough Air Show in Britain.

The 747-8 with 467 seats is Boeing’s first stretched version of the 747 and is in the midst of flight testing. It will enter service initially as a freighter, then in a passenger version.

The 525-seat A380 is the world’s largest airliner and Europe’s most high-profile aircraft since Concorde, making it a tempting target in any political tensions affecting aerospace.

The Airbus deal has not itself been blocked and is in the manufacturer’s order book, but the decision to cancel a signing ceremony is a clear protest signal, the industry sources said.

Aircraft purchases also need Chinese government approval.

The 747-8 purchase followed competition between Airbus and Boeing for the Hong Kong Airlines order.

While advancing development of its own smaller airplane, China tends to balance orders between the two foreign suppliers.

From Jan 1 next year, the EU will require all airlines flying to Europe to be included in the Emissions Trading Scheme (ETS), a system that compels polluters to buy permits for each tonne of carbon dioxide they emit above a certain cap.

China’s top aviation industry body ramped up pressure on the European Union earlier this month, saying it would give full support to legal action against the forced entry of airlines into the EU’s carbon trading scheme.

Antitrust fixes loom Deutsche Boerse AG/NYSE Euronext

Complex antitrust questions hang over Deutsche Boerse AG and NYSE Euronext just weeks before shareholders decide whether to endorse a blockbuster exchange merger, though no significant regulatory fixes are expected.

If investors back the $9 billion deal next month, they will have no further say as the two companies sit down at the bargaining table with European regulators in what are expected to be delicate negotiations through the end of the year.

Based on informal discussions so far in Brussels, the exchange operators do not expect to have to accept “structural remedies” such as divesting businesses to seal the deal, two sources familiar with the transaction said, though less severe “behavioral remedies” — on pricing, for example — may be required.

At issue is the strangle-hold Deutsche Boerse and NYSE Euronext would have on Europe’s exchange-based futures market and, significantly, on clearing those trades.

Shareholders and analysts say it is very difficult to predict how the European Commission will react to the near-monopoly, what demands it could make, and whether the companies will ultimately be able to create the world’s largest market operator as planned.

“We’re going to vote for the deal hoping it happens. What we don’t know how to handicap is the European regulatory process — we just can’t do that,” said Timothy Hoyle, director of research at Pennsylvania-based Haverford Trust Co, which owns 1.2 million shares of NYSE Euronext, parent of the New York Stock exchange.

“In our conversations with the NYSE, they’ve led us to believe that they believe they’ll gain regulatory approval with minimal concessions,” he said.

Though merger votes are common before regulators sign off on deals, the stakes are high since antitrust and political concerns thwarted two exchange takeovers this year: Singapore Exchange’s $8 billion purchase of Australia’s ASX Ltd, and an unsolicited bid for NYSE Euronext from Nasdaq OMX Group and IntercontinentalExchange Inc.

Bank of Italy Governor Mario Draghi Appointed to Succeed Trichet at ECB

Bank of Italy Governor Mario Draghi was appointed as the next president of the European Central Bank, avoiding a delay that risked complicating the handling of the sovereign-debt crisis.

Draghi’s appointment was approved at a summit of European Union leaders in Brussels today, an EU spokesman said. The 63- year-old Italian will take over from Jean-Claude Trichet as the head of the Frankfurt-based ECB, beginning an eight-year term on Nov. 1.

The announcement was made after last-minute wrangling. French President Nicolas Sarkozy had sought assurances that another Italian on the ECB’s six-member board, Lorenzo Bini Smaghi, would quit early to make way for a Frenchman, three officials said earlier today.

Sarkozy was backed into a corner by the release of a draft statement, prepared overnight, that proclaimed Draghi as the next ECB president. Coming as European leaders sought to project a united front over a second bailout for debt-stricken Greece, the deal was clouded by the same political maneuvering that marked the appointment of the outgoing ECB president.

A Massachusetts Institute of Technology-trained economist with a stint at Goldman Sachs Group Inc. on his resume, Draghi had already been backed by finance ministers and was the only candidate to take over the Frankfurt-based ECB.

The leaders praised the ECB’s record of maintaining price stability in the region, according to draft summit conclusions obtained by Bloomberg News.

“The euro is based on sound fundamentals, and we are deeply satisfied with the track record of price stability achieved since the inception of the euro,” they said in the draft text, which will be finalized later today.

The euro was lower against the dollar, on course for a third weekly drop, the longest run since February. The euro was at $1.4229 at 11:32 a.m. in London, down 0.2 percent on the day, after trading as low as $1.4197 earlier.

Airbus Posts Runaway Paris-Order Victory

Airbus SAS scored a runaway order victory over Boeing Co. (BA) at the Paris Air Show as the revamped A320neo, launched last December, came of age with a succession of deals that climaxed with an $18 billion, 200-jet contract from AirAsia Bhd., the biggest in the company’s 40-year history.

Airbus won 418 firm orders with a list price of $44 billion, more than 16 times the worth of Boeing’s 23 contracts priced at $2.4 billion. The total of 441 sales valued at $46.4 billion shared between the companies was 86 percent higher than at last year’s Farnborough show, which alternates with the Paris event and produced 237 orders spread more evenly between the rivals.

Deals were dominated by 667 contracts or commitments for Airbus’s re-A320neo as airlines seeking to cut fuel costs rushed to buy a re-engined model claiming a 15 percent efficiency gain over existing single-aisle models. Boeing, which hasn’t decided whether to upgrade its 737 or build a new jet by 2020, fared better in the wide-body market, securing 19 contracts for the 747-8 jumbo before Airbus, the No. 1 planemaker since 2003, hit back with 12 commitments for its A380 double-decker.

“Airbus had a very good show,” said Richard Aboulafia, vice president of Teal Group, a Fairfax, Virginia-based consultant. “The success of the neo has been considerably greater than expectations, and it’s pretty clear now that Boeing has got to rethink its narrow-body product strategy and timing.”

European Aeronautic, Defence & Space Co., the owner of Airbus, rose as much as 53 cents, or 2.4 percent, to 22.38 euros and was little changed as of 3:38 p.m. in Paris trading. EADS has gained 25 percent since the start of the year, compared with Boeing’s 11 percent advance.

Airbus, based in Toulouse, southern France, also announced 312 order pledges valued at $28.2 billion, versus 88, worth $14.8 billion, at Boeing, which has its headquarters in Chicago.

“The A320neo has effectively drawn the battle lines,” Kenneth Herbert, an analyst at U.S.-based Wedbush Securities, said in a note to investors. “We estimate the potential for 1,200 competitive narrow-body orders over the next five years, based on our airline fleet composition analysis, many of which are critical for Boeing to win.”

Airbus took months deciding whether to proceed on the neo, after stretching its engineering resources too thinly on previous programs. The A380, while gaining some new business at this year’s show, remains an unprofitable program that won’t break even before 2014 at best after the double-decker jet was hobbled by production glitches and cost overruns.

Bombardier Inc. (BBD/B), the third-biggest planemaker, won 10 firm orders for its new CSeries plane from an undisclosed buyer, together with 20 commitments from Korean Air Lines Co. The Canadian company also sold 10 of its latest Global business jets to VistaJet of Switzerland and six to Australia’s AvWest.

Still, Bombardier failed to secure an order from Qatar Airways Ltd., which said it had shelved plans to buy the CSeries while indicating that an A320 order could come before the end of the show, which runs through the weekend.