Ex-Tesco boss says fixing Leahy legacy to take three years

Friday, June 28th, 2013 | Finance News

By James Davey

LONDON (Reuters) - Tesco's former chairman , Ian MacLaurin, attacked the legacy of the retailer's previous chief executive Terry Leahy and told shareholders it could take three years for the world's No. 3 retailer to recover.

The group, which trails France's Carrefour and U.S. group Wal-Mart by annual sales, was one of Britain's most consistent performers until a profit warning in January 2012.

Tesco posted its first profit fall in two decades in April this year, wrote down the value of its global operations by $3.5 billion and confirmed plans to exit its loss-making business in the United States, Fresh & Easy, after spending five years trying to crack this market.

MacLaurin joined Tesco in 1973 as a management trainee and chaired the firm from 1985 to 1997, by which time it had overtaken J Sainsbury to become Britain's biggest retailer.

Leahy was chief executive from 1997 to 2011, a period when double-digit profit growth at the retailer was the norm.

MacLaurin told investors at Tesco's annual meeting on Friday that a CEO's performance should be judged both by day-to-day operations and their legacy.

"We're all very sad in this hall to see the legacy that Leahy left," he said.

"It is a very sad situation - your enormous writedowns, (and) the situation in America."

MacLaurin said Tesco's board and shareholders had to counter "an age of short-termism" by taking a long-term view and giving Phil Clarke - who took over from Leahy in March 2011 - and his team time to fix things.

"It is not going to happen overnight. This job is going to be probably two or three years," he said, noting that when rival Sainsbury's hit trouble in the early 1990s it took the retailer more than five years to reposition itself.

Reuters was not immediately able to contact Leahy for comment.

Tesco's current chairman Richard Broadbent said investors had to recognize that a focus on sustainable growth and delivering returns in the long term could impact underlying sales growth in the short term.

"Giving primacy to quarterly like-for-like sales does not automatically equate to long-term value creation," he said.

Earlier this month, Tesco posted a drop in quarterly underlying sales in its main British market, resuming a trend seen for most of the past three years and raising doubts about its 1 billion-pound turnaround plan.

Sales are also falling in South Korea, China and in eastern Europe.

Despite the underlying sales fall, Clarke insisted his recovery plan to revive the business in Britain, which accounts for two-thirds of group sales and profit, was on track.

"All our research tells us customers are beginning to notice the results of this change," he said.

Tesco avoided a rebellion from investors over executive pay at the annual meeting. Some 95.2 percent of shareholders who voted at the meeting backed the firm's executive pay report.

Investment advisory group Pensions Investment Research Consultants (Pirc) had called on investors to reject it in protest at what it regarded as excessive payoffs to two former executives.

Tim Mason, the former boss of Fresh & Easy, and Richard Brasher, ousted as the head of the UK business in March 2012, received pay-offs of 1.7 million pounds ($2.6 million) and 1.3 million pounds respectively in the 2012-13 year.

But the meeting was not without some shareholder grumbling.

"Why did you bungle the U.S. at a cost of 1 billion pounds plus," one shareholder.

Another shareholder criticized what he described as the "spin doctor type flatulence" of the annual report. One shareholder complained about Tesco's retailing in Britain of Guinness manufactured in Nigeria.

Shares in Tesco, down 12 percent over the last three months, were down 0.7 percent at 331.7 pence, valuing the business at about 27 billion pounds. ($1 = 0.6577 British pounds)

(Reporting by James Davey, Editing by Rosalba O'Brien and Jane Merriman)


RIM posts larger-than-expected loss, shares plunge

Friday, June 28th, 2013 | Finance News

TORONTO (AP) — Shares of BlackBerry maker Research In Motion plunged nearly 30 percent Friday after the company posted a loss and warned of future losses despite releasing its make-or-break new smartphones this year.

RIM also announced that it will stop developing new versions of its slow-selling tablet computer called the Playbook.

Analysts were looking for insight into how phones running RIM's new Blackberry 10 operating system are selling. It wasn't good.

RIM said it sold 6.8 million phones overall versus 7.8 million last year. That includes older models. In wasn't until well into a conference call with analysts that RIM announced that 2.7 million of the devices sold in the quarter were Blackberry 10 models.

RIM's Blackberry 10 operating system is critical to the company's comeback. New phones running the BlackBerry 10 software began selling around the world this year. The BlackBerry Z10, a touchscreen model and the Q10, which sports a keyboard, have received positive reviews, but there was a delay in getting them to market in the U.S.

The first quarter, however, included a substantial period of sales of the Z10 phone in the U.S. It didn't include sales numbers for the Q10 in the U.S. The Q10 just went on sale in the U.S. earlier this month.

Sales results and RIM's projections, however, signal that the new BlackBerry 10 phones are not selling well. The company said it anticipates it will generate an operating loss in the second quarter, too.

Mike Walkley, an analyst with Canaccord Genuity, said it's clear the new operating system has not turned the company around.

"With Z10, Q10, and Q5 all shipping in the August quarter and BlackBerry still guiding to a loss we believe that is strong evidence BB10 has not turned around BlackBerry in an extremely competitive smartphone market," Walkley said.

Chief Executive Thorsten Heins said on a conference call with analysts that the "transition takes time" and noted things are better compared to last year when "we were told the company was finished."

Shares of Research in Motion Ltd. dropped $3.93, or 27 percent, to $10.30 in morning trading Friday.

The BlackBerry, introduced in 1999, was once the dominant smartphone for on-the-go business people. But it lost its cachet not long after Apple released the first iPhone in 2007. Apple's device reset expectations for what a smartphone can do. RIM promised to catch up while developing new a software system called BlackBerry 10, which uses technology it got through its 2010 purchase of QNX Software Systems. But the company took more than two years to unveil new phones that were redesigned for the multimedia, Internet browsing and apps experience that customers now demand. During that time, RIM cut more than 5,000 jobs and saw shareholder wealth of more than $70 billion vanish.

The Canadian company said it lost $84 million, or 16 cents a share, in the three months ended June 1 on revenue of $3.1 billion. It lost $518 million, or 99 cents per share, on revenue of $2.8 billion a year ago.

Analysts expected RIM to earn 5 cents a share on revenue of $3.37 billion.

The number of BlackBerry users in the world also fell by four million to 72 million. RIM also said it anticipates it will generate an operating loss in the second quarter. Heins noted the highly competitive smartphone market makes it difficult to estimate revenue and levels of profitability.

Heins also announced on the call that he has halted further development of RIM's failed tablet offering, the Playbook. The Playbook has not sold well.

"Our teams have spent a great deal of time and energy looking at solutions that could move the BlackBerry 10 experience to Playbook, but unfortunately I am not satisfied with the level of performance and user experience and I made the difficult decision to stop these efforts and focus on our core hardware portfolio," Heins said.

Heins said they'll continue to support the PlayBook on the existing software platforms and configurations. Asked if RIM will continue to make the Playbook, a RIM spokeswoman said the company is evaluating its hardware strategy.

Colin Gillis, an analyst at BGC Partners, said said it's tough for RIM because it's hard to make money on handsets now.

"There are a lot of people that haven't been able to make it happen. For all the talk about Apple and Samsung, there are companies like Nokia and HTC," Gillis said.

Gillis said things look bleaker for the company and it's going to continue to be a struggle.

Jefferies & Co. analyst Peter Misek said the high end global smartphone market is saturated and brutally competitive.

"Everybody is coming to this reality. You talk to HTC, Samsung and even Apple, the high end is saturated. That's a fact," Misek said. "Anybody in the high end who wants a smartphone in the world has one, so you have to knock somebody away from another platform. That is a brutal, brutal market."

RIM has unveiled a lower-cost BlackBerry aimed at consumers in emerging markets, but hasn't said if the device will be available in North America.

Misek was expecting the company to sell 4 million BlackBerry 10 phones. He said the sale of 2.7 million new BlackBerry 10 phones was the most disappointing news Friday.


Wall St. slips in volatile session on quarter’s last day

Friday, June 28th, 2013 | Finance News

By Ryan Vlastelica

NEW YORK (Reuters) - Stocks edged mostly lower in a volatile session on Friday, with investors finding little reason to push shares higher after a three-day rally.

Shares fluctuated between steep losses and modest gains, trading flat for much of the session before pulling back. Technology shares were among the weakest of the day, pressured by weak corporate results, but the losses were partially offset by strength in energy and material shares.

Cyclical groups, which include materials and are tied to the pace of economic growth, have rallied this week on receding concerns that the Federal Reserve's stimulus program - widely credited with fueling the market's gains this year - would end soon.

Last week, Fed Chairman Ben Bernanke suggested the policy could be slowed if the economy improves, resulting in a selloff of nearly 5 percent, though that subsequently dissolved on signs that the end of the stimulus program wasn't imminent.

On the last trading day of June, both the S&P 500 and Nasdaq are on track to end a seven-month rally, while the Dow is set to end a six-month surge.

"The market is continuing to adjust as we try and figure out what's going on with respect to Fed policy, and we should continue to see volatility as things get sorted out," said Rex Macey, who helps oversee $20 billion in assets as chief investment officer of Wilmington Trust in Atlanta.

"We're cooling off a little bit after a few days of strong action," Macey added.

For the month of June, the Dow is down 1 percent, the S&P 500 is down 1.3 percent and the Nasdaq is down 1.6 percent.

An S&P index of technology shares <.splrct> fell 0.5 percent on Friday and ranked as one of the worst-performing S&P sectors.</.splrct>

Accenture PLC tumbled 10.8 percent to $71.55,making it the biggest drag on the S&P 500 after the company cut its full-year outlook. The results also put a dent in shares of competitor IBM , which dropped 2.8 percent to $190.16. IBM was the biggest weight on the Dow.

Energy and material shares advanced, with Newmont Mining up 7 percent at $29.65 and Nextera Energy up 1.5 percent at $81.66.

The Dow Jones industrial average <.dji> was down 52.11 points, or 0.35 percent, at 14,972.38. The Standard & Poor's 500 Index <.spx> was down 1.41 points, or 0.09 percent, at 1,611.79. The Nasdaq Composite Index <.ixic> was up 4.66 points, or 0.14 percent, at 3,406.52.</.ixic></.spx></.dji>

The S&P 500 has climbed 2.6 percent over the previous three sessions as economic data and comments from U.S. Federal Reserve officials soothed worries about an earlier-than-expected pullback of the Fed's stimulative bond purchases.

For the week, the S&P 500 is up 1.1 percent, ending a two-week string of declines.

The Dow is up 1.2 percent for the week, while the Nasdaq is up 1.4 percent.

For the second quarter, the Dow is up 2.7 percent, the S&P 500 is up 2.6 percent and the Nasdaq is up 4.1 percent.

Newmont Mining was the S&P 500's weakest performer in the second quarter, down 34 percent, while First Solar was the strongest, jumping 65 percent.

Friday's economic data showed that consumer optimism remained high in June. The Thomson Reuters/University of Michigan's final reading for June on the overall index on consumer sentiment was 84.1 points, slightly below a near six-year high of 84.5 in May. Economists polled by Reuters had forecast a final June reading of 82.8.

But a closely watched gauge showed that manufacturing activity declined in the Midwest this month. The Chicago Purchasing Manager Index fell in June to 51.6, below expectations.

U.S.-listed shares of Research in Motion plunged 25.6 percent to $10.78 after the BlackBerry maker offered few signs of a long-promised turnaround on Friday. It reported an unexpected quarterly operating loss, a dearth of details on sales of its make-or-break new line of devices and no return to profit expected in the current quarter.

Molycorp Inc jumped 8 percent to $6.06 after the rare earths producer said the U.S. Securities and Exchange Commission completed an investigation into the company and didn't recommend enforcement action.

Arch Coal Inc gained 4.7 percent to $3.77 after the company agreed to sell its Canyon Fuel subsidiary for $435 million in cash.

Investors can expect a surge of volume at the close on Friday when Russell Investments is expected to set the final update for the annual reconstitution of its indexes.

(Editing by Jan Paschal)