Archive for February, 2009

Yahoo CEO reorganizes company (Reuters)

Thursday, February 26th, 2009 | Finance News

SAN FRANCISCO (Reuters) –
Yahoo Chief Executive Carol Bartz on Thursday took the wraps off a broad reorganization plan designed to dismantle what she called the "silos" that had slowed down the Internet company.

The move came as Chief Financial Officer Blake Jorgensen became the latest executive to leave Yahoo, which has struggled to convince Wall Street that it has a solid growth strategy after turning down a takeover bid from Microsoft Corp last year.

Under the plan to simplify Yahoo's management structure, its various technology and product groups will be combined into one entity led by Chief Technology Officer Ari Balogh, according to an email Bartz sent to employees.

Yahoo will also divide the world into just two regions -- North America and International -- from four previously.

"Today I'm rolling out a new management structure that I believe will make Yahoo a lot faster on its feet," Bartz, who took the CEO reins six weeks ago, wrote on Yahoo's corporate blog. "We'll be able to make speedier decisions, the notorious silos are gone, and we have a renewed focus on the customer."

The changes follow weeks of meetings between Bartz, who replaced co-founder Jerry Yang in January, and Yahoo's various division heads as she familiarized herself with the company's many businesses.

Yang's 18-month stint as CEO was defined by his rejection of a $47.5 billion takeover bid from Microsoft, which the software maker subsequently withdrew.

Yahoo's stock price has sunk from $19.18 before Microsoft's offer to below $13 on Thursday, as revenue and profits have been pinched by an industrywide slowdown in advertising spending.

The goal of the new organization is to deliver the best possible consumer and advertiser experience, with greater speed and efficiency, according to a Q&A document distributed by Yahoo management to employees.

"It's premature to discuss our strategic options. For the time being, nothing is off the table and creating shareholder value is our first priority," it said. Yahoo added the changes were not driven by a desire to cut costs, but that the company is constantly reviewing its business and expenses.

TOP CONCERN: SEARCH BUSINESS

Pacific Crest Securities analyst Steve Weinstein said Bartz, the former CEO of software maker Autodesk Inc, has shown herself to be decisive and unafraid to take action in her short time at the company. But he noted that a reorganization alone is not enough to revive Yahoo's fortunes.

"What we really want to see is what direction does Carol want to go. That's the first step," Weinstein said. "And the second step is how well she actually executes."

Among the most pressing questions on investors' minds is the fate of Yahoo's search business, which is a distant second to Google Inc. There has been long-running speculation that the unit could be sold to Microsoft, or Yahoo could team up with another rival such as Time Warner Inc's AOL.

Yahoo tried to form a Web search partnership with Google last year as an alternative to a deal with Microsoft, but the deal collapsed under U.S. antitrust review.

On Wednesday, Jorgensen had told attendees at an investor conference that Yahoo was not opposed to a sale or partnership deal on search, leading some observers to believe that the company was moving closer to a deal with Microsoft.

Earlier this week, Microsoft CEO Steve Ballmer said a potential partnership with Yahoo as a means of competing with Google, which controls 63 percent of the U.S. search market.

Yahoo shares rose as high much as 7.3 percent to $13.39 on Jorgensen's comments. They were up nearly 4 percent at $12.98 on Nasdaq late Thursday.

SEARCHING FOR CFO

Yahoo has initiated a search for a new CFO, and Jorgensen will remain through a transition period, Yahoo said in a filing with the U.S. Securities and Exchange Commission on Thursday.

Bartz also said in the memo that Marco Boerries, head of the company's Connected Life group, has resigned. The Connected Life group, which focused on bringing Yahoo products to mobile devices, will be integrated into various parts of the new organization.

And she announced that Elisa Steele, an executive at NetApp Inc, will join Yahoo as chief marketing officer.

Hilary Schneider will continue to lead North America, while an international chief has yet to be found.

"International growth is critical for Yahoo, which has become too reliant on its U.S. business over the years," Bartz said in the email to employees.

A Yahoo spokeswoman said the company would not provide any official announcement on the reorganization, other than Bartz's blog post, calling it an internal matter.

In October, Yahoo announced plans to cut at least 10 percent of its workforce of roughly 15,000 employees. In the fourth quarter, Yahoo reported a $303 million net loss, while sales declined 1 percent year-over-year to $1.8 billion.

(Reporting by Alexei Oreskovic, editing by Tiffany Wu, Richard Chang)

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JPMorgan now cutting up to 14,000 jobs (Reuters)

Thursday, February 26th, 2009 | Finance News

NEW YORK (Reuters) –
JPMorgan Chase & Co (JPM.N) said it is cutting up to 14,000 jobs, more than previously disclosed, as it tries to reduce costs in the face of a slumping economy and higher credit losses.

The second-largest U.S. bank on Thursday said it now expects to shed as many 12,000 jobs from integrating the former Washington Mutual Inc (WAMUQ.PK), up from 9,200 announced in December. It also expects to cut up to 2,000 investment banking jobs.

JPMorgan announced the cuts in an all-day presentation to investors. The reductions are intended to help the New York-based lender weather the current economic turmoil, as its customers struggle with falling house prices, tight credit and increasing mortgage and credit card defaults.

Financial companies have announced close to 350,000 job cuts since August 2007, outplacement firm Challenger, Gray & Christmas has said.

JPMorgan expects $2.75 billion of savings from Washington Mutual, offset by $750 million of new investments. Retail banking chief Charlie Scharf expects most of the savings by the end of 2009, sooner than originally thought.

The bank in September paid $1.9 billion for the banking units of Washington Mutual, the largest U.S. bank or thrift ever to fail. It is shutting several hundred branches, but plans to open 120 new branches this year. It has more than 5,000 branches, up from 539 as recently as 2003.

Meanwhile, JPMorgan's investment bank expects to reduce its 28,000-person staff to between 26,000 and 27,000 by year-end, with cutbacks focused in technology and infrastructure, the unit's co-chief executive, Steve Black, said. Staffing could fall further if market conditions worsen, though it is "hard to imagine" a worse year for the unit than 2008, he said.

On Monday, JPMorgan unexpectedly cut its dividend 87 percent to help save $5 billion a year and achieve Chief Executive Jamie Dimon's goal of a "fortress" balance sheet. The bank got $25 billion last fall from the government's Troubled Asset Relief Program.

In afternoon trading, JPMorgan shares were up $1.82, or 8.4 percent, at $23.55 on the New York Stock Exchange. The KBW Bank Index (.BKX) of large U.S. lenders was up 6.3 percent.

HOME EQUITY, CREDIT CARDS UNDER PRESSURE

JPMorgan told investors that excluding Washington Mutual, it expects losses of $1 billion to $1.4 billion in each quarter this year from home equity loans to more creditworthy borrowers.

It said as many as 41 percent these borrowers will owe more than their homes are worth by the end of 2010, up from 27 percent at the end of 2008.

Scharf said California's housing market is showing signs of a bottom in home price deterioration, but Florida's is not. He also said that "we know New York is going to deteriorate.

He said losses on loans made as the housing boom was cresting "seem to be leveling out, at very high rates.... There will be an end in sight, just figuring out where it is not the easiest thing as we sit here today."

Housing problems and rising unemployment are also driving higher losses in JPMorgan's credit card business and may result in lower sales volume. Executives expect card losses to increase "materially" and are preparing for a 9 percent U.S. unemployment rate by year-end.

"The American consumer feels much poorer than in previous recessions," credit card chief Gordon Smith said.

JPMorgan maintained its first-quarter outlook for a 7 percent net charge-off rate in card services.

(Reporting by Elinor Comlay and Jonathan Stempel; editing by John Wallace)

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U.S. workers on jobless benefits at record high (Reuters)

Thursday, February 26th, 2009 | Finance News

WASHINGTON (Reuters) –
The number of U.S. workers drawing jobless aid jumped to a record high in mid-February, while the recession undercut demand for manufactured goods last month and sent new homes sales to their lowest since 1963.

The worsening global economic slump pushed new orders for long-lasting U.S. manufactured goods to a six-year low in January. The housing market, at the center of the downturn, continued to slow and sales of new home hit a record trough in January, according to government reports on Thursday.

"We are deteriorating about as fast as we can, the data today were pretty catastrophic. The economy is going to continue to contract, probably at least until the middle of the year," said Stephen Stanley, chief economist at RBS Greenwich Capital Markets in Greenwich, Connecticut.

Companies are cutting staff to lower costs as demand slumps and banks limit access to credit. However, rising unemployment is sapping consumer spending and piling pressure on an economy wallowing in a 14-month recession.

The government has stepped in with a $787 billion package of spending and tax cuts to break the downward spiral.

U.S. stocks shrugged off the data and investors focused on news that the government could request more money to shore up banks. Treasury debt prices, which normally rise on grim economic data, were weighed down by this week's historic issuance of $94 billion of government debt.

The number of people remaining on the benefits roll after drawing an initial week of assistance increased by 114,000 to a record 5.11 million in the week ended February 14, the most recent week for which data is available, the Labor Department said.

Initial claims for state unemployment insurance benefits increased to a seasonally adjusted 667,000 last week from 631,000 the prior week, the department said. It was the highest reading since October 1982.

The surge in weekly applications for unemployment benefits implied February's jobs report could show a decline in payrolls in excess of 700,000, according to some economists.

"It's getting uglier by the day. According to our model estimate, the recent surge in initial jobless claims signals a decline in February payrolls of about 750,000," said Harm Bandholz, an economist at Unicredit Markest & Investment Banking in New York.

In January, payrolls declined by nearly 600,000, the largest drop since 1974.

DURABLE ORDERS PLUNGE

A separate report from the Commerce Department durable goods orders dropped 5.2 percent to $163.8 billion in January, the lowest level since December 2002. Orders dropped 4.6 percent in November.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, fell 5.4 percent in January from a 5.8 percent drop in December.

Analysts said this pointed to a sharper contraction in first quarter gross domestic product than currently being forecast.

"We have been looking for signs that the economy's rate of decline might be slowing, but can't find any," said Nigel Gault chief U.S. economist at IHS Global Insight in Lexington, Massachusetts.

"The fourth quarter GDP decline is likely to be revised to a fall of more than 5 percent. The first quarter will be worse."

Data on Friday is expected to show that the economy contracted at a faster pace in the fourth quarter than the 3.8 percent decline the government estimated last month.

In another report, the Commerce Department said new home sales plunged 10.2 percent to a 309,000 annual pace, the lowest on records dating back to 1963, from 344,000 in December.

The median sales price in January tumbled 13.5 percent to $201,100 from a year earlier, the lowest level since December 2003, the department said. The percentage decrease was the largest since July 1970.

The inventory of homes available for sale in January was 342,000, the lowest in more than five years. However, because of the weak January sales pace, the supply of homes available for sale now equals 13.3 months, a record high.

Analysts are closely watching the supply of houses on the market for signs as to when the housing downturn will start bottoming. Many believe stability could return in the second half of the year, but much depends on whether the government's plans to prop up the fractured financial sector succeeds.

"There is a big overhang of homes on the market for sale. This suggests we will see further construction cuts and further downward pressure on home prices," said Michelle Meyer, an economist at Barclays Capital in New York.

(Additional reporting by Alister Bull; Editing by Tom Hals)

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