NY Post Apple-Beats deal all about red-hot music exec Iovine

Apple-Beats deal all about red-hot music exec Iovine

Apple’s expected deal to buy Beats Electronics for $3.2 billion is really about one man — Jimmy Iovine.
The tech titan was so anxious to snag the 61-year-old music industry veteran that it made one of its largest acquisitions ever in order to do it, sources tell The Post.
In the business, it’s called acqui-hiring — the acquiring of a company just to hire its key human assets.
Tim Cook, Apple’s CEO, hopes Iovine, the head of Universal Music Group’s Interscope, Geffen and A&M labels, wants to blast the Cupertino, Calif., company into a new era in the music subscription streaming business.
Iovine helped the late Apple co-founder Steve Jobs create the multibillion dollar iTunes download business — now 11 years old.
That model has served Apple well — earning it boatloads of profits — but downloads are now in decline and a new idea is needed.
Iovine is being drafted to drive Apple into the $1 billion streaming music business, which globally grew 51 percent in 2013, according to the IFPI.
Global download revenue fell 2.1 percent.
“The electronics are a drag-along,” said one music source. “They want Jimmy and they wanted streaming.”
Ironically, Iovine pitched Jobs on a subscription music service years ago in partnership with MTV, sources said.
Jobs said they had it all wrong and wanted to stick with iTunes, sources said.
“Jimmy is much more of a ‘Steve-type’ person and Cook is the operator,” said one source, explaining the rationale behind the hire. “They have no larger-than-life characters, and people in the music business respect Jimmy.”
Iovine had been trying to sell the business for years to both HTC and Sony, sources said.
Sony/ATV CEO Marty Bandier cheered the move, saying, “We look at this as a real opportunity to grow an interactive streaming business. Apple has finally arrived.”
Apple is expected to announce its eye-popping $3.2 billion Beats Electronics acquisition in the next week, with some expecting Beats co-founders Iovine and Dr. Dre to show up at Apple’s Worldwide Developers Conference on June 2.
Investors were not initially too excited about the proposed pick-up as Apple shares barely budged on Friday, closing down 0.4 percent, to $585.54.
Iovine is still negotiating his way out of a UMG contract — but Apple is keen to get him on board as soon as possible to repair its relationships with the labels after failing to make iTunes Radio a success.
Iovine’s hire may threaten Robert Kondrk, vice president of Apple iTunes Content, music industry sources said.
At the same time, Apple’s acquisition of Beats music-streaming service may put pressure on Google to buy a music-streaming service of its own — with many believing Spotify, which is prepping for a fall public offering, being the most likely, sources said.
Google already has a big slice of the music-streaming business in YouTube and is readying a second subscription business through its leading video streaming site.
It also operates Google Play Music All Access, a streaming site.

Barron's : Gundlach, Einhorn, Ackman: What the Smart Money Is Buying Now

Gundlach, Einhorn, Ackman: What the Smart Money Is Buying Now
Stocks earning a thumbs-up at last week's annual Sohn conference included Humana and Moody's.

The 19th annual Sohn Investment Conference last Monday in Manhattan featured a slew of stock picks and a handful of pans from some famous investment managers, including headliner David Einhorn of Greenlight Capital, who took a shot at athenahealth (ticker: ATHN), a highflying electronic medical-records company that he thinks could fall as much as 80% from its recent high. Given his strong record of Sohn short recommendations, including Lehman Brothers in 2008, Einhorn's critique sent shares of athena down 15% on Wednesday, to $108; they finished the week at around $113.

Bill Ackman of Pershing Square recommended Fannie Mae (FNMA), while Larry Robbins of top-performing Glenview Capital was bullish on managed-care operators Humana (HUM) and WellPoint (WLP). Philippe Laffont of Coatue Management talked up Liberty Global (LBTYA), the European cable-TV giant controlled by John Malone, while Zach Schreiber of PointState Capital was bearish on domestic oil but bullish on a pair of refiners, Valero Energy (VLO) and Marathon Petroleum (MPC), that would benefit from cheaper feedstock.

Bond maven Jeffrey Gundlach of DoubleLine Capital argued that demographic and income trends don't support U.S. housing bulls. He recommended that investors short a basket of housing stocks. Longtime hedge fund manager Paul Tudor Jones lamented the plight of "macro" investors like himself, who depend on volatile stock, bond, and currency markets at a time of unusual global calm. There was even a plug for Gazprom (OGZPY), Russia's natural-gas giant, from Jim Grant of Grant's Interest Rate Observer.

THE SOHN CONFERENCE, which raises money for pediatric cancer research, attracts strong support from New York's hedge fund community. Einhorn, a regular presenter at Sohn, said that athenahealth is representative of "bubble stocks" in technology that have become untethered from fundamentals. The company is unprofitable based on GAAP accounting (generally accepted accounting principles), and yet had a market value of $8 billion at its peak in February, when the stock topped $200.

Bulls, Einhorn said, justify athena's valuation by using outlandish growth projections stretching out a decade or more, and by comparing it with other stocks that trade at rich multiples, based on revenue. Operating in a highly competitive market, athena has weak margins and "falling earnings estimates," Einhorn said. He added that the company amounts to a "service business, not a software business," as bulls maintain, and thus lacks any meaningful operating leverage.

Robbins, in prefacing his bullish comments on Humana, joked that "there's an alarming outbreak of old people in the U.S." One of Humana's major businesses is providing managed care to the elderly through the increasingly popular Medicare Advantage program. He said that Humana, then trading around $110, was valued around 11 times his 2015 earnings projection of $10 per share, adding that his estimate could turn out to be $1 too low. Robbins said that Humana, WellPoint, and other managed-care companies "have weathered the storms" and should benefit from new members coming from Obamacare, as well as programs to enroll more dual-eligible Medicare/Medicaid recipients. WellPoint, he added, should get a boost from regaining control of its pharmacy-benefit management business in 2019, which could add $2 a share to earnings. The business was sold to Express Scripts under a 10-year deal in 2009. Robbins also recommended Monsanto (MON), arguing the company's genetically modified seeds will continue to take market share.

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David Einhorn of Greenlight Photo: Eduardo Munoz/Landov
Ackman, one of Fannie Mae's largest holders, said the mortgage giant, which was put into conservatorship by the U.S. government in 2008, along with Freddie Mac (FMCC), could rise to $23 or more from a recent price of $4. The fate of Fannie Mae and Freddie Mac is mired in politics amid congressional proposals to wind them down and develop alternative ways to backstop the American mortgage market.

Ackman argues that Fannie Mae has a great low-risk business in guaranteeing home mortgages and that the best alternative for Uncle Sam is to allow Fannie and Freddie to survive and build their capital, to avoid a repeat of their collapse during the financial crisis. He maintains that the government would benefit from such an approach because it owns almost 80% of both Fannie and Freddie through warrants. "We're prepared to sit down and make a deal tomorrow," Ackman added.

LIBERTY GLOBAL WAS LAUDED by Coatue's Laffont because of its strong position in the European cable-TV market; its shareholder-friendly management, led by Malone; and its takeover appeal to a host of potential buyers, including Vodafone (VOD) and perhaps even Comcast (CMCSA). Laffont contended that the shares, now at about $42, could hit $100. European cable providers have a lot of room to grow because they're less dominant in providing video and broadband services than their U.S. counterparts.

Liberty Global should benefit from the rollout of bandwidth-heavy services such as streaming video, as companies like Netflix expand in Europe. Laffont said Liberty trades for just 11 times free cash flow, and that the company is likely to aggressively repurchase shares in coming years. "We have incredible confidence in management," he added.

Gundlach called the single-family housing market "overrated." He said that it had gotten artificial support from cash buyers, including companies formed by the likes of Blackstone Group (BX), but that those purchasers are pulling back. "The argument for pent-up demand is dubious," Gundlach argued, pooh-poohing the theory that young people who put off buying homes in the wake of the 2008-'09 financial crisis will storm into the market. "Where are the first-time buyers?" he asked. Amid weak incomes and higher apartment rents, it's tough for young adults to save for a down payment. It's no wonder that sales of new single-family homes have been persistently weak. Pressure on the housing market could come from sales by aging baby boomers, too. Gundlach is also skeptical of the widespread view that annual housing starts, now running below one million units, will rebound. "For the rest of my career, we may never see a year of 1.5 million starts again," he said. Starts topped two million in 2006. He suggested that investors short the SPDR S&P Homebuilders ETF (XHB).

Grant made a case for what he called a "reviled business," Gazprom, the Russian behemoth that controls about 17% of global natural-gas reserves. The risks, he said, are "too obvious" for a company that "is an instrument of Vladimir Putin's not universally popular foreign policy." Gazprom's appeal is a superlow valuation—less than three times projected 2014 and 2015 net income—and profits that, Grant joked, come "after stealing." Noting that "good things happen to cheap stocks," Grant said positive developments could include a long-term deal to supply gas to energy-hungry China. Based on reserves, Gazprom is valued at less than 10% of ExxonMobil (XOM), and has a dividend yield of about 5%.

PointState Capital's Schreiber said U.S. crude prices, now around $100 per barrel, "are going lower, much lower." With the nation's production projected to rise by one million barrels a day in both 2014 and 2015, "an ocean" of oil could form in the middle of the country, depressing the price of the U.S. benchmark, West Texas Intermediate. It could drop as low as $80 a barrel without prompting drilling cutbacks, Schreiber predicted. Refiners like Valero and Marathon Petroleum could benefit because they purchase U.S. crude and sell petroleum products based on higher global prices. They have free-cash yields of about 11%; shareholder-friendly managers who are returning cash to holders through dividends and buybacks; and opportunities to sell assets, at attractive prices, to master limited partnerships that they control, he concluded.

Paul Tudor Jones said that times are tough for macro investors. "This is as difficult a year as I have ever seen in my career," he lamented. His fund is down about 4% in 2014, The Wall Street Journal reported. A key reason is low volatility as the Federal Reserve and other major central banks keep short rates near zero. Tudor Jones said the Treasury market's recent reaction to strong April employment data was a big surprise. "You had everything you wanted for fixed income to get killed, and yet at the end of the day bonds closed up."

CHRIS SHUMWAY of Shumway Capital recommended Moody's (MCO) because of its high returns; good growth prospects; and duopolistic market position with rival Standard & Poor's, which is owned by McGraw-Hill Financial (MHFI). "We focus on long-term after-tax returns, and Moody's fits that to a T," he said. He maintains that Moody's can turn mid-single-digit revenue growth into a 20% annual total return on its stock through operating leverage and share buybacks. In his view, Moody's, now trading at about $80, could have 80% upside.

Mariko Gordon of Daruma Capital recommended a trio of stocks. Electronics for Imaging (EFII) is a play on the shift to digital printing, she said, adding that its shares, recently around $38, could hit $60. H.B. Fuller (FUL), a maker of specialty adhesives, is getting a lift from a management team that has stabilized margins in the face of volatility in raw-materials prices. Gordon sees upside to $70 for the stock, recently around $47. Her third pick, Pacira Pharmaceuticals (PCRX), is a play on its postoperative pain killer, Exparel, a longer-acting form of a generic drug. Gordon sees increasing use of Exparel leading to a potential doubling in the stock from a recent $75.

The Sohn conference sponsors an annual investment-presentation contest judged by Einhorn, Ackman, and others. The winner this year was a Columbia University M.B.A. candidate, Michael Guichon, who pitched Fiat (FIATY), arguing that the Italian auto maker, which owns Chrysler, is significantly undervalued. "It's the cheapest auto manufacturer in the world," he said, trading for about three times earnings before interest, taxes, depreciation, and amortization. Guichon says Fiat is inexpensive, based on potential profits and a sum-of-the-parts analysis that reflects its valuable high-end Ferrari, Alfa Romeo, and Maserati franchises, as well as Chrysler. Guichon likes management, led by Sergio Marchionne, and says profits could hit 2.5 euros a share by 2016, versus 74 European cents last year. His price target is €16.50 ($22.83), just over double the recent quote of €8.

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Michael Novogratz of Fortress Investment Group recommended Brazilian stocks, which have fallen from favor in recent years amid an economic slowdown, stubbornly high inflation, and problems at state-controlled Petrobras (PBR). Though he didn't offer specific stock picks, he said the market looks appealing and could get a lift if Brazil's President Dilma Rousseff loses her re-election bid this year.

EVEN THE BEST INVESTORS make bad calls— something to keep in mind when assessing the Sohn speakers' selections. Many of last year's picks and pans were unexceptional, as the table on this page shows.

Several of the bullish recommendations trailed the Standard & Poor's 500, which rose 16% in the past year. Notable winners were Level 3 Communications (LVLT), up 90%, and Google (GOOGL), 25%. The biggest loser was Dex Media (DXM), the Yellow Pages company, which fell 44%.

Jim Chanos' idea of shorting disk-drive makers Seagate Technology (STX) and Western Digital (WDC) didn't pan out; they rose 19% and 43%, respectively. Nor did Gundlach's short recommendation for Chipotle Mexican Grill (CMG), up 42%. But Jon Jacobson of Highfields Capital was on target with his bearish call on Digital Realty Trust (DLR), an owner of buildings that house server farms for cloud-based computing and other services. It fell 21%.

FT : Pfizer launches fight back against AstraZeneca takeover critics

Pfizer launches fight back against AstraZeneca takeover critics

21 Aug 2009, San Diego, California, USA --- Scientist Joan Cao works in a lab at Pfizer on Friday, August 21, 2009 in San Diego, CA. Many pharmaceutical companies are in a race to find cancer killing drugs. --- Image by © Sandy Huffaker/Corbis©Corbis
Pfizer has launched a fight back against critics of its proposed £63bn takeover of AstraZeneca but did not make any fresh promises on jobs or investment despite pressure from the UK government for stronger commitments.
Instead, Pfizer reiterated its intention to keep a big presence in the UK and said the deal would be a “win-win” for shareholders and patients.

The comments from Ian Read, Pfizer chairman and chief executive, signalled an attempt to get back on the front foot after a week in which the proposed takeover has faced mounting resistance from politicians and scientists.
In a video statement on Saturday, Mr Read said the strength of AstraZeneca’s UK-based science and its plan to build a new research centre in Cambridge was one of the main attractions for buying the company.
“By combining these two companies we . . . strengthen the ability to bring products to patients,” he said. “I see this as a win-win for society, a win-win for shareholders, and a win-win for stakeholders.”
Pfizer has promised to keep 20 per cent of the two companies’ combined research workforce in the UK for at least five years after a merger, but critics have highlighted the company’s record of making big cuts to R&D after previous takeovers.
George Osborne, UK chancellor, on Saturday said he would take a “hard-nosed” approach to any deal. “We have to make sure those are real promises that we can hold them to,” he told BBC Radio 4’s Today programme. “My only interest in the potential bid that Pfizer might make for AstraZeneca is securing good British jobs and good British science.”
Mr Read is due in London on Tuesday and Wednesday to be quizzed by UK lawmakers in separate hearings by parliament’s business and science committees.
In his video statement, he said: “When we looked at AZ, we liked their science. We liked where their science is being done, which is in the UK, and we know we have good science in the UK in the Cambridge, Oxford, London and other universities.”
David Cameron, UK prime minister, this week floated the possibility of expanding government powers to subject the proposed deal to a “public interest test” but Mr Osborne on Saturday said the UK must remain an open economy.
“We have benefited enormously from foreign companies like Tata coming in and turning around our car industry or Nissan creating its cars in the north east of England,” he said. “AstraZeneca itself, of course, is a British company that grew by taking over foreign companies.”
Mr Read admitted there would be cuts in some parts of the two companies but said this would be good for society as well as shareholders by increasing efficiency.
“Governments are all around the world pressurising the industry to produce products of higher value and with more productivity, at lower cost,” he said. “One way of doing that is to consolidate and is to take out overlapping functions.”
Political scrutiny of the proposed deal has spread across the Atlantic in recent days with some Democrats on Capitol Hill critical of Pfizer’s plan to shift its tax domicile to the UK to escape higher rates in the US.
Mr Read said tax and cost savings resulting from the merger would allow the company to invest more in science.
Mr Osborne told the BBC that the UK’s so-called patent box tax break that Pfizer has cited as an incentive for buying AstraZeneca would only benefit the US company if it was “generating real intellectual activity in the UK”.
AstraZeneca, Britain’s second-biggest pharmaceuticals company, has so far refused to enter talks over what would be the biggest foreign takeover in UK history.
However, there is widespread expectation among investors that Pfizer will return with an improvement on its latest £50-per-share cash and stock proposal before the May 26 deadline for it to make a firm bid.
Mr Read said the deal would allow AstraZeneca shareholders to “get an immediate benefit from the cash that we would pay them, it allows them to participate in a very strong combined company with great cash flows and great portfolio, and it allows a very efficient allocation of capital by my company.”
Dismissing concern from AstraZeneca over the risks involved in such a big takeover, Mr Read said he thought it would be “easy” to integrate the companies’ research operations.
His statement came a day after Pfizer announced a research partnership with several top UK universities to hunt for cures to rare diseases. The tie-up with scientists from Cambridge university, Imperial College London, King’s College London, Queen Mary University London, University College London and Oxford university was portrayed by Pfizer as further evidence of its commitment to UK science.

(BFW) Germany’s Gabriel Favors European ‘Solution’ for Alsto


Germany’s Gabriel Favors European ‘Solution’ for Alstom: Monde
2014-05-10 15:49:45.939 GMT


By Fabio Benedetti-Valentini
     May 10 (Bloomberg) -- “We share entirely France’s position
on searching for a European solution,” German Economy Minister
Sigmar Gabriel told Le Monde after he met France’s Arnaud
Montebourg in Berlin yesterday.
  * Decision is up to companies, Gabriel tells Monde
  * Gabriel is from the Social Democratic Party, Chancellor
    Angela Merkel’s junior coalition partner
  * NOTE: Merkel Open to Backing Siemens on Alstom After
    Hollande Talks
  * NOTE: Related story


For Related News and Information:
First Word scrolling panel: FIRST<GO>
First Word newswire: NH BFW<GO>

To contact the reporter on this story:
Fabio Benedetti-Valentini in Paris at +33-1-5365-5095 or
fabiobv@bloomberg.net
To contact the editors responsible for this story:
Frank Connelly at +33-1-5365-5063 or
fconnelly@bloomberg.net;
Edward Evans at +44-20-3525-3190 or
eevans3@bloomberg.net

(BFW) Siemens May Transfer Rail-Signaling Business to Alstom


Siemens May Transfer Rail-Signaling Business to Alstom: Echos
2014-05-10 16:42:51.286 GMT


By Fabio Benedetti-Valentini
     May 10 (Bloomberg) -- Siemens may improve its offer for
Alstom’s energy business by transfering its rail-signaling unit
to Alstom Transport, Les Echos says on its website, citing two
people familiar with the matter.
  * Siemens seeking to counter General Electric’s $17 billion
    bid for Alstom’s energy unit
  * NOTE: Merkel Open to Backing Siemens on Alstom After
    Hollande Talks


For Related News and Information:
First Word scrolling panel: FIRST<GO>
First Word newswire: NH BFW<GO>

To contact the reporter on this story:
Fabio Benedetti-Valentini in Paris at +33-1-5365-5095 or
fabiobv@bloomberg.net
To contact the editors responsible for this story:
Frank Connelly at +33-1-5365-5063 or
fconnelly@bloomberg.net;
Edward Evans at +44-20-3525-3190 or
eevans3@bloomberg.net
James Amott, Heather Langan

Barron's The Big three

When George Evans, portfolio manager of Oppenheimer International Growth (ticker: OIGAX), isn't worrying about what the future will look like for his investments, it's likely that he'll be reading for pleasure.
The native of the U.K., who graduated from Oxford with a joint bachelor's and master's in geography, and then earned an M.B.A. from Wharton, says he reads an "enormous amount," including history, armchair science, and novels. Though this reading is not directly tied to his day job, "You never know where ideas come from," he says. "It's tremendously important to read extensively."
The search for big ideas is how he manages his $17.9 billion fund. The three big themes represented in the portfolio today—mass affluence, new technology, and aging—will drive long-term trends that will benefit certain companies, says Evans, 54.
The fund has returned an average of 10.1% annually over the past 10 years, vastly outpacing the MSCI ACWI ex-U.S. benchmark, which gained 7.8% a year over the same period, and beating 100% of its peers in Morningstar's foreign growth category over the decade.
To be picked, stocks must pass a number of particularly high hurdles. First, the companies, none of which are U.S.-based, need to be larger than $3 billion in market value. That alone cuts the list to 2,200.
Within that group, Evans looks for high-quality companies that will still be around in five to 10 years and have the capability to deliver high earnings from growing revenue. For instance, owners of luxury brands tend to be able to draw in customers consistently and keep growing, he says.
The hunt for companies that can sustain outperformance runs against the market belief that returns have a tendency toward the mean. Evans' research says differently. "There is a set of companies that has maintained or even improved returns," he says. "That is the type of mismatch that drives outperformance."
On a more quantitative basis, he looks for stocks that have the potential to double over a five-year period. That trims suitable stocks to 500—Evans' target list. He whittles it further, to 125 or so, based on returns on capital and some stress-testing.
The testing involves looking at how a company would perform under good and bad scenarios using discount rates of as high as 10% or 15% a year. The idea, he says, is to get comfortable with how much downside risk there is and the degree of upside potential. The resulting portfolio tends to hold smaller companies, with an average market value of $15 billion, versus the category average of $32 billion. Evans says there's no conscious effort to seek out smaller companies, but there's a lower probability that megacaps can double over five years.
The portfolio typically has a low turnover. Last year it was 12%, with 12 new stocks added. "We are active investors with a bias for inaction," he says.
The theme of mass affluence, or growing wealth in emerging economies, is a primary theme: About a third of the revenue generated by the companies in the fund comes from emerging markets.
That's a prime reason Evans likes two drinks companies—Pernod Ricard (RI.France), which owns Absolut, Chivas, Beefeater, and Jameson, and Diageo (DEO), which owns Johnnie Walker, J&B Scotch, Bushmills, Captain Morgan, and many other brands. "There is an enormous power of global brands in emerging markets," he says. "People want to own the brands they trust." The trend toward buying premium brands will intensify as emerging markets continue to grow and incomes swell.
Diageo's sales grew 5% last year, for example, but the emerging-markets regions did far better—the Latin America division grew 15%. Plus: "One in three bottles of what is called whiskey is consumed by someone in India," Evans says.
WITH REGARD TO TECHNOLOGY, Evans is particularly interested in the subtheme of "data deluge." He sees a world where data are being created in ever larger volumes.
"What we are pumping down the pipes is getting bigger, and that takes a lot of bandwidth," he says. That presents a plethora of opportunities for the right companies. Overall, the data-deluge category accounts for about 20% of the fund, says Evans, the largest driver of his new-technology theme.
The fund's biggest bet is telecommunications giant BT Group (BT), which owns a network of fiber optics and broadband, which Evans says will drive huge profits. He likens it to owning something like a telecom version of the New Jersey Turnpike, a toll road. Over time, more and more people will be using the network and paying to do so, all of which will benefit BT.
Evans isn't worried that the company is based in the slower-growth region of Europe—the vast majority of its revenue comes from the United Kingdom—as opposed to hotter emerging markets. "We are much more interested of the dynamic within the economy rather than the absolute growth of the economy," he says. Or put another way: Even in a sluggish economy things change, and some industries can grow quickly.
SAP (SAP), the fund's second-biggest holding, also looks set to benefit from the coming data deluge. Along with U.S.-based Oracle, SAP dominates the enterprise resource-planning business. Its heavy investment in technology means the company has a huge advantage in processing data as well as working with cloud technology.
As companies start to spend more on technology, especially on cloud-related initiatives, SAP is well positioned to capture the growth due to the strength of the relationships it already has with big corporations.
When evaluating a new company, being part of one of the major themes is good, but two is even better. That's where Roche Holding (ROG.Switzerland) comes in. It fits both the aging theme and the technology theme.
"It has the best cancer [drug] franchise and is a leading company in diagnostics. It's run its business incredibly well," says Evans. He also points out that it has much less vulnerability to patent expiration than many other companies.
SIMON CONSTABLE is the host of WSJ Live's News Hub show on WSJ.com.
E-mail: editors@barrons.com

WSJ : The Money or the Mouse: On the Morals of Markets

The Money or the Mouse: On the Morals of Markets

Rarely would a scientific paper about lab mice interest both Karl Marx and Adam Smith. Nevertheless, these polar opposites when it comes to markets might find a recent publication in the journal Science intensely provocative.

Critics of market economies say that they make participants indifferent to costs imposed on third parties (foreign workers, polluted communities, endangered animals, etc.)—in other words, that markets degrade morals. In what may have been a first, the German economists Armin Falk of the University of Bonn and Nora Szech of the University of Bamberg wanted to test this idea empirically.

They gave volunteers €10 ($13.90) and told them that as standard lab protocol, a young, healthy mouse would be killed unless the volunteers bought it for €10—in which case it would live out its life, well cared-for. Did they want to take the money or save the mouse? Of the subjects, 46% wanted to kill the mouse for the money. This constituted the baseline for individual decision-making.

Now for a "bilateral market" involving pairs of subjects. If each pair could agree on a way to split €20, the mouse would die, and the pair would get the money; otherwise, the mouse lived. Thus the mouse became a third party to the pair's dealings. In this case, 72% of subjects would kill the mouse.

Why the difference? Perhaps some subjects in the bilateral situation would have saved the mouse in the individual scenario but now thought, "I have no right costing this other person money because of my morals." To see if this was the case, the researchers tweaked the individual scenario. If someone decided to kill the mouse, both he and a stranger would each get €10. Conversely, a participant's moral stance of refusing to kill the mouse would also cost someone else money.

Despite the change, once again, only around 46% of the subjects chose money over mouse. The 72% bilateral-market kill rate hadn't occurred because there were two people with financial stakes; instead, the authors suggest, the rate resulted from the involvement of two decision makers, thus psychologically diluting any guilt.

Next, the researchers tried a "multilateral market" with many participants. This time, subjects who failed to reach an agreement with one partner to split €20 and kill a mouse could just move on to the next person. Now 76% chose money over the mouse.

I was surprised that the number in this case wasn't significantly higher than with the bilateral market. But Drs. Falk and Szech subsequently showed that a core of about 20% of individuals will never take money over the mouse, regardless of financial incentive. The bilateral condition's 72% rate would seem to represent being near a ceiling, so the multilateral scenario couldn't raise the rate much higher.

Finally, the scientists focused on how small the payments needed to be for someone to pick the mouse over money. With repeated multilateral interactions, the value of the mouse's life steadily declined. Markets erode morals, the authors concluded.

Not so fast, said some critics on the Web and in a letter published in the journal Science, where the original paper appeared: The bilateral market condition is more like a negotiation than a real market. True, but the finding is no less striking if it just models negotiation. Another criticism is that this experimental "market" is artificial because it lacks regulatory oversight. But that's why regulatory oversight exists. And there was the most loudly voiced criticism: A mouse is not a person, not even an undocumented farmworker earning a pittance or a child working in a factory in Bangladesh.

But the point isn't whether a mouse and a person are equivalent; it is that a mouse's life is worth progressively less when decision-making responsibility is spread around and it's easy to conclude, "If I don't do the deal, someone else will anyway." It's hard to imagine that the psychology underlying this phenomenon only applies to one narrow experimental condition—or that the study's only significance is, "Mice of the world, unite!"

FT : Murdoch eyes pan-European Sky combination

Murdoch eyes pan-European Sky combination

Rupert Murdoch is exploring using his minority stake in BSkyB to combine his Sky-branded businesses in the UK, Italy and Germany into a pan-European pay-television platform, according to people familiar with the situation. A transaction is at the early stages of consideration which would see the £14bn UK satellite and broadband group buy the Sky Italia and Sky Deutschland businesses he controls through 21st Century Fox, his US entertainment group, the people said. One person cautioned that no deal talks were taking place between BSkyB and Fox, and that no transaction was imminent, but another said Fox was keen to explore a pan-European combination to create more value from three currently fragmented assets.

Any deal would depend on “stars aligning”, a third person added, including Sky Italia securing Serie A football rights and the share price of the publicly quoted Sky Deutschland, in which Fox has a controlling stake, being at an affordable level. The Sky Deutschland business, with more than 3.5m subscribers, had a market capitalisation of more than €5.5bn on Friday and is majority-owned by Fox. The value of Sky Italia, which has almost 5m subscribers and is owned outright by Fox, is less clear. Mr Murdoch and his son James tried in 2010 and 2011 to buy full control of the UK group in which Fox holds a 39.1 per cent stake but were derailed by political uproar in the wake of revelations about phone hacking at their UK newspapers. James Murdoch, the former BSkyB chief executive and chairman who chairs Sky Deutschland and is Fox’s co-chief operating officer, said last year that the company needed to “resolve” its pay-TV strategy in Europe, saying the separation between BSkyB, Sky Italia and Sky Deutschland was “not optimal”. The three companies already share set-top box technology and other costs. However, a unified set-up could allow them to bid for sports and entertainment rights on a Europe-wide basis, potentially outflanking BSkyB’s major rival BT, whose television strategy is limited to the UK. The idea of combining Fox’s European pay-TV businesses, first reported by Bloomberg, could require reassurances to European regulators. It would also have to win over independent investors in BSkyB. One of the perceived obstacles to a long-mooted European tie-up has been whether shareholders in the UK business would welcome increased exposure to the Italian television market. ©Bloomberg Rupert Murdoch: regretted 'ever [having] agreed to' BSkyB’s IPO Rupert Murdoch said two years ago that he regretted “ever [having] agreed to” BSkyB’s initial public offering in 1994, although he added “they were different times and there were probably monetary pressures which encouraged it”. The UK, Italian and German businesses, which between them have 19m television subscribers, are at different stages. Sky Deutschland’s customer numbers are growing, while Sky Italia’s have been shrinking. Meanwhile, Sky Italia does not yet offer broadband, which has been one of the growth engines for BSkyB in the UK. There has also been speculation that a combined ‘Sky Europe’ would subsequently seek to enter France, by acquiring Canal Plus. The move comes as pay-TV operators across Europe ponder how to respond to online video services such as Netflix, which already has an estimated 2m subscribers in the UK and which analysts expect to launch in France and Germany in the autumn. Fox and BSkyB declined to comment.

FT : London black taxis threaten gridlock over Uber

London black taxis threaten gridlock over Uber

London black taxi drivers are threatening to cause gridlock in the capital on June 11 over the authorities’ refusal to prosecute Uber for what they regard as the app-enabled cab service’s violation of the operating regulations. Steve McNamara, of the Licensed Taxi Drivers’ Association, accused Transport for London, which regulates the sector, of letting Uber operate as both a minicab and a taxi operator.

This is because even though the San Francisco-based company is classified as a minicab service, it charges passengers using calculations based on time taken as well as distance travelled and does not have to quote a price in advance or accept a destination address. This is unlike existing minicab operators and more like black taxis. Uber fares also rise at busier times. Uber, which was set up by Travis Kalanick in 2009 and now operates in almost 100 cities, has triggered many disputes around the world. Last month Brussels threatened Uber drivers with €10,000 fines for carrying private passengers, a decision branded “outrageous” by Neelie Kroes, the EU’s digital commissioner. Three days later a Berlin court sided with the local taxi association against Uber. Mr McNamara said: “We’re not asking Uber to be banned. They could operate with their app, they just need to change a few things. If everyone else is following the rules, why shouldn’t they?” Black cab operators have launched a judicial review against TfL for failing to prosecute Uber and have decided on a street protest – at a yet-to-be-determined location – because they believe TfL are procrastinating. “We do predict severe chaos, gridlock and perhaps mayhem,” Mr McNamara said. “TfL has become a regulator which won’t regulate – a type of chocolate teapot.” TfL, which is holding talks on the issue with all those involved, said it was investigating Uber but believes it is operating legally. “We have seen no evidence to suggest that Uber London Ltd are not fit and proper to hold a London private hire vehicle operator’s licence but no final decisions have been made while Uber’s operating model is still under investigation,” a spokesman said. TfL has said that bookings made via apps do not have to record the main destination or quote a fare. Furthermore, smartphones used by private hire drivers to relay journey information to a remote location so a fare can be calculated “do not constitute the equipping of a vehicle with a taxi meter”. Addison Lee, the country’s largest minicab company, accepted that technology always disrupted markets and that it had benefited from using disruptive technology. But Alistair Laycock, an Addison Lee spokesman, agreed that the black cab drivers had some justifiable grievances. “The problem is that the regulations are not being applied equally to everyone,” he said. “Uber is working between two models.” Mr Laycock said that if Uber was allowed to continue operating then Addison Lee “would assess that and adapt accordingly”.

Weekly Market Update: Markets Muddle Through Dow +0,43% S&P -0,14% Nasdaq-1,26%

- Global equity markets muddled through this week as participants watched earnings season wind down. There was little in the way of big data reports to drive trading, although the China consumer price index rose at its slowest pace in a year and a half, prompting renewed calls for more stimulus measures. China reported improvement in its trade data, while the March US trade report was very strong, as exports rebounded to the second highest level on record, led by strong gains in sales of aircraft, autos and farm goods. The post-decision ECB press conference was the highlight of the week, as President Draghi hinted that the ECB council was prepared to take action at the next meeting, if necessary. Global bond yields fell to new record lows late in the week as investors positioned themselves for another round of ECB easing. Benchmark yields for debt issued by Spain, Italy and Ireland all hit their lowest levels since the nations entered the Eurozone, while Portugal's benchmark yield fell to levels last seen in 2009. In Ukraine, the violence continued although there was some indication that the Russian side could be opting for a less confrontational approach. The DJIA notched an all-time intraday high around 16,622 on Thursday, while declines in momentum stock hobbled the Nasdaq again. For the week, the DJIA added 0.4%, the S&P500 slipped 0.1% and the Nasdaq lost 1.3%.

- In her semi-annual monetary policy report to Congress, Fed Chair Yellen reiterated a lot of her rhetoric from recent speeches and offered little commentary that was new. Yellen said that low inflation is mostly transitory, that weak Q1 GDP was mostly due to weather, and that continuing policy accommodation is warranted. The only moderately impactful comment was that the recent flattening in the housing market may last longer than expected. The Fed's Fisher, Tarullo, Plosser, and Stein also spoke this week, and the most remarkable thing was how similar all their comments seemed: Q1 GDP weakness was due to weather, the taper will end on schedule, rates will remain low so long as inflation is below 2%. Interestingly, Fisher said he would like to get rid of the 'dot chart' forecasting future rates, calling it a flawed tool.

- The situation in Ukraine worsened over the weekend after dozens of pro-Russia separatists died in a building fire in Odessa last week and government forces continued military operations in the east, surrounding Slovyansk. Midweek the Russian side made conciliatory comments: after meeting with the OSCE to consult on a roadmap for calming tensions, Russia President Putin called for postponement of May 11th independence referendums in south and east Ukraine and said Ukraine's presidential election on May 25th was a move in the right direction. He also claimed Russian military forces were withdrawn from the border with Ukraine, although NATO later said that no troops had been pulled back.

- Earnings season is winding down at this point, with the retailers, Deere and Cisco on tap next week. Of the 451 S&P 500 constituents that have released results this earnings season, 76% have beaten estimates for profit, while 53% have exceeded projections for revenue. The Nasdaq continued to be a big source of weakness as investors sold off four-letter biotech and tech names at any hint of trouble: between Monday's close and the first hour of trading on Wednesday, the Nasdaq lost 2.5%, and saw plenty of volatility through week's end. Tesla was down 15% on lackluster Q2 earnings guidance. Groupon fell 20% on concerns about its Q1 earnings quality.

- Between the closing bell on Monday and midafternoon on Wednesday, shares of Twitter lost nearly one quarter of their value in heavy volume after its second post-IPO share lockup expired. Shares dipped to post-IPO lows below $30 after 475M shares became eligible for sale, although they regained some ground in the latter half of the week, reaching $33. Co-founders Jack Dorsey and Evan Williams and CEO Dick Costolo said in April they had no intentions to sell their shares, but other insiders likely got out, especially given that none of them sold stock during the IPO.

- Alibaba filed for its US IPO this week. Officially the filing was for $1.0 billion, but nearly everybody expects this figure to rise to $15-20 billion eventually. Most observers expect the massive offering will begin pulling money away from other high-growth tech names. Note that Yahoo owns 23% of the firm, and it plans to sell about two-fifths of its stake in the offering, which could generate in excess of $10 billion and more than double Yahoo's cash stockpile. Asked about the windfall, Yahoo CEO Mayer would only say that Yahoo intends to be "good stewards of capital."

- Barclays outlined its turnaround strategy this week and it involves buckets of blood. The UK bank said it would cut 20,000 jobs (~14% of total workforce), 14,000 of which would be gone by the end of 2014, and ax big parts of its investment banking business. Barclays will focus on four core areas: retail and corporate banking, credit cards, banking in Africa and finally a much diminished investment banking unit. In addition, Barclays will set up a 'bad bank' to run off around €90 billion worth of risk-weighted assets.

- In M&A news, the contentious $35B merger of equals between Publicis and Omnicom has been called off. Reports pointed to frayed relations at the top level of management in addition to regulatory snags surrounding tax issues. Publicis and Omnicom were said to have lost various large contracts due to the delayed closing of the merger. Other contentious M&A deals saw new developments as well. Regulatory momentum appears to be building against Pfizer's offer for AstraZeneca, on concerns it is trying to game international taxes. Meanwhile Allergan reportedly continues its search for a white knight alternative to Valeant's hostile takeover bid, but it appears it has not gotten any nibbles yet. In the consumer tech space, Apple was said to be close to inking a $3.2B deal to acquire hip hop legend Dr. Dre's Beats Electronics. Beats got its start in high-end headphones, however most analysts suggest Apple is most interested in the firm's streaming music service, given the dismal performance of its own iTunes Radio streaming service.

- At Thursday's post-ECB decision press conference, "Super Mario" demonstrated that his verbal intervention powers retain their potency. ECB President Mario Draghi said the central bank would be comfortable taking action in June, if it were needed, driving the biggest move in EUR/USD since the March FOMC meeting when Yellen uttered her now famous six-month remark. Ahead of the conference, EUR/USD was testing the key 1.4000 level, while after the comment about June action the pair dropped steadily without looking back, settling around 1.3760 on Friday for one-month lows. June Bund futures hit a fresh contract high while the 10-year German govt yield hit a 12-month low below 1.44%. Analysts are now forecasting cuts of both the refi rate and deposit facility of 10-15bps at the next ECB meeting. One observer highlighted that Draghi has now partially abandoned Trichet's principle that the ECB never pre-commits by admitting that the committee had laid the ground work for action next month.

- Sterling pushed out to five-year highs just shy of 1.700 ahead of the BoE rate decision. The big move up on Tuesday was fueled by an FT article that asserted the MPC would discuss raising rates for the first time in the current cycle at Thursday's meeting. No action was taken on Thursday and there was no statement, so it will be two weeks before the minutes give an idea of what was discussed at the MPC meeting. In any case, GBP/USD drifted lower until early on Friday, when weaker data sent the pair from 1.6930 to around 1.6840.

- China's April CPI (+1.8% v +2.4% prior) slowed sharply to its lowest level in a year and a half, putting it even further away from the official 2014 target of +3.5%. Slowing growth in food prices (+2.3% v +4.1% prior) was behind most of the deceleration. The April PPI numbers remained in deflation territory for the 26th consecutive month, although the decline narrowed for the first time in five months. Economists said the April CPI would mostly likely be the lowest in the first half and would not prompt policymakers to take any proactive steps, though it could give officials more leeway to relax monetary policy if necessary. An improvement in China April trade data pointed at recovery after consistently disappointing prints over the past few months. Both imports and exports grew despite expectations of another month of y/y declines.