RIM shares drop after minor board shuffle

By Alastair Sharp

TORONTO | Thu Jun 14, 2012 6:35pm EDT

TORONTO (Reuters) - Shares of Research In Motion fell 2.5 percent on Thursday after the struggling BlackBerry maker named a financier to replace a telecom executive on its board, disappointing investors looking for more sweeping changes.

The company, whose share price has tumbled alongside its once-dominant share of the smartphone market, also said it paid its new CEO more than $10 million in the company's last fiscal year and gave him hundreds of thousands of stock options to take the top job in January.

It also revealed millions of dollars in payments to former co-CEO Jim Balsillie, when he parted ways with RIM.

"There may be some tough questions asked or some shareholder backlash if the change at the top is just this," said Sameet Kanade, an analyst at Northern Securities, referring to the announcements, made in a filing ahead of RIM's annual meeting next month.

Kanade said the filing suggested the company was making little progress toward the broad changes investors are seeking.

RIM has lost favor as the email-centric BlackBerry falls behind in a fast-changing smartphone market now dominated by Apple Inc's iPhone and devices using Google Inc's Android software.

Still, the nomination of financier Timothy Dattels to the board could indicate RIM is more seriously considering going private, or mulling a leveraged buyout for the company.

Dattels, a senior partner at private equity firm TPG Capital LP, previously served as Goldman Sachs' head of investment banking for Asia excluding Japan.

He replaces Antonio Viana-Baptista, a former Telefonica SA executive who had been a RIM director since September 2009. RIM said Viana-Baptista opted out so he could spend more time in his role as CEO of Credit Suisse in Iberia.

RIM is proposing the re-election of the remainder of its board at an annual meeting on July 10. It said it would look to add one or more new board members in the current fiscal year.

RIM's Nasdaq-listed shares closed 2.5 percent lower at $10.40 on Thursday. The stock has lost more than 70 percent of its value over the past year.

COMPENSATION ISSUES

The company said Thorsten Heins, who was promoted to chief executive earlier this year, received total compensation of $10.2 million in fiscal 2012, which ended late in March. He received an award of 400,000 restricted stock units, which vest over a three-year period, for taking the top job.

"It didn't excite anyone," Fred Ketchen, director of equity trading at ScotiaMcLeod, said of the filing. "I think the money aspect is a factor" in the stock decline, he said.

A year ago, RIM narrowly avoided a vote of confidence on its management when an investor withdrew a motion to split the CEO and chairman roles after the company promised to study the issue. The roles were shared at the time by Mike Lazaridis and Jim Balsillie.

Some watchers were hoping for more agitation this year.

"It would be nice to see an activist make a play but they would have to believe that it could be fixed and they don't," said Eric Jackson, a fund manager at Ironfire Capital.

Lazaridis and Balsillie stepped down from their roles in January, though Lazaridis remains an influential member of the board, serving as vice-chairman. When Heins took over as CEO in January, board member Barbara Stymiest became chairwoman.

"Over the past six months, the board and Thorsten have been proactively working together to introduce significant changes in the company as we move towards the launch of our next generation BlackBerry platform," said Stymiest in a statement.

"We are actively exploring new partnerships and other opportunities to extend the reach of BlackBerry and enhance long-term value for all RIM stakeholders," she added.

In its filing, RIM said Balsillie was paid $4.8 million in relation to his resignation, while Lazaridis was paid more than $850,000. Both had agreed to cut their base salary to $1 in their last days in the top job.

Balsillie's stock options, which he will be able to access quicker since he left the board in March, takes the total value of his entitlements to $7.9 million. Lazaridis would receive entitlements totaling $3.9 million should he leave the board, and would retain an office, company car and driver.

The smartphone maker, headquartered in Waterloo, Ontario, has warned it expects to post an operating loss in the quarter just ended. Those numbers are due to be released on June 28.

That latest warning follows a stream of lowered earnings forecasts, product delays, writedowns and an embarrassing global network outage that left millions of people without email on their BlackBerry phones for several days.

A string of senior staff have left - including RIM's top salesman and chief lawyer last month - and it has hired bankers for a strategic review that could lead to an overhaul of its business model or less drastic moves such as partnerships and licensing deals. It has not ruled out a sale of the company.

(Additional reporting by Euan Rocha and Jon Cook in Toronto; Editing by Frank McGurty)

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Samsung LCD lines hit by brief power outage

Students walk out of a showroom at the headquarters of Samsung Electronics in Seoul October 28, 2011.

Credit: Reuters/Jo Yong-Hak

SEOUL | Fri Jun 15, 2012 12:18am EDT

SEOUL (Reuters) - Samsung Display, a unit of Samsung Electronics Co, said four flat-screen production lines had stopped briefly on Thursday due to a power outage -- a development that may mean sizeable losses.

Although production was only halted for 10 minutes, even a short stop can render some panels obsolete.

"Samsung may have to report some costs, because around 70 percent of panels which were in the process of production during the blackout become useless," said an analyst who declined to be identified.

Shares in Samsung Electronics, tumbled 3 percent in morning trade, underperforming a 0.7 percent decline in the broader market.

Samsung, which competes with local rival LG Display and Japan's Sharp Corp, has since restored 60 percent of production and has said it expects the lines to return to full output later on Friday.

The lost output, mainly large-sized panels for TVs and computer monitors, is unlikely to have major impact on sales or global LCD market, where supplies are plentiful due to weak consumer demand.

The plant in Tangjeong, southwest of Seoul, houses Samsung's most advanced LCD production lines. The four lines have a combined monthly output capacity of 320,000 panels.

Its parent Samsung Electronics separated out its loss-making flat-screen business in April to combine it with a more promising AMOLED (active matrix organic light-emitting diodes) flat-screen operation, currently used mainly in high-end smartphones.

(Reporting by Miyoung Kim; Editing by Edwina Gibbs)

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Cognizant enters into $330 million deal with ING U.S.

Reuters - Information technology services provider Cognizant Technology Solutions Corp said it entered into a $330 million deal with the U.S. unit of Dutch insurer ING Groep NV to expand the business process management contract between the two companies.

Under the deal, Cognizant will purchase ING's facility in North Dakota and sub-lease some of the insurer's offices in Iowa. More than 1,000 ING U.S. employees will be transferred to Cognizant under the seven-year deal.

The new center will be an integral part of Cognizant's global delivery network and will allow the company to provide an expanded range of business process services in the insurance and financial services industries, the IT services firm said.

Cognizant will provide "a comprehensive array of insurance business process services" to ING U.S., a provider of retirement, investment management and insurance services.

Shares of the Teaneck, New Jersey-based Cognizant were up about 1 percent at $59.18 on Thursday on the Nasdaq.

(Reporting by Siddharth Cavale in Bangalore; Editing by Sreejiraj Eluvangal)

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Exclusive: Dell made rival $2.15 billion bid for Quest: sources

(Reuters) - Dell Inc is the "strategic bidder" that offered to buy Quest Software for $2.15 billion in cash, trumping a bid by Insight Venture Partners, sources familiar with the matter told Reuters.

The No. 2 U.S. personal computer maker is the unidentified company mentioned in a statement made by Quest, which disclosed on Thursday that it had received an offer from a "strategic bidder" of $25.50 per share - a 7 percent premium to Quest's Wednesday close of $23.86.

Dell is being advised by Bank of America Merrill Lynch, two of the sources said.

Quest's shares rose more than 9 percent to finish at $26.06 on Thursday.

Dell has been actively buying companies to expand its offerings to business and diversify away from personal computers, a market whose growth is decelerating as Apple Inc's iPad and other mobile devices pull customers away.

This week, it told investors its focus on the hardware and software needs of corporate customers was gaining momentum. Quest could shore up Dell's businesses in data management and protection and Windows server management.

On-again, off-again talks between Dell and Quest had broken off last month. The PC maker at that time was planning to offer between $23 and $26 per share to buy the software maker.

Dell, Quest and Bank of America declined to comment. Insight was not available for comment

On Tuesday, Chief Executive Michael Dell told analysts that his software business remained "modest" and was one area where he could envision his company growing rapidly.

Quest -- which makes software to monitor the flow of data through networks -- has worked with Dell since 2004 and is one of the PC maker's top 10 partners. Dell ranks among Quest's five largest partners.

THREE DAYS TO RESPOND

Quest agreed to be bought by Insight for $23 per share in March, but it also cast around for a better offer.

Insight would have the right to match rival offers, or adjust its own bid. The venture capital investment firm now has three days to respond on the offer, Quest said on Thursday.

If Quest were to strike a new deal, it would have to pay Insight a break-up fee of either $4.2 million or $6.3 million, depending on the timing of the deal.

"It's a very small breakup provision," Wunderlich Securities Inc analyst Brian Freed said, adding that it was "recognition by management that there were likely other buyers at higher levels."

Aliso Viejo, California-based Quest is led by Chief Executive Vinny Smith, who has served as either chairman or the CEO for more than a decade.

Any deal with Quest is fraught with complications as roughly 34 percent of Quest is owned by Smith, who took over in February after Doug Garn stepped down, citing poor health.

Big companies can bid aggressively for smaller ones with key technology, as was the case when Dell and Hewlett-Packard Co got into a bidding war for data storage company 3Par Inc in 2010. Dell spurred that fight with an $18-a-share bid, but HP ended up buying the company for $33 a share.

And there may be a lot of upside left in Quest's price.

"The offer from Insight was in the bottom 10 pct in the valuation range for software companies in the sector over the last two years," Freed said.

(Reporting By Poornima Gupta in San Francisco, Nadia Damouni in New York. Additional reporting by Supantha Mukherjee and Sruthi Ramakrishnan in Bangalore and Luisa Beltran in New York; Editing by Supriya Kurane, Anthony Kurian, Saumyadeb Chakrabarty)

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Renesas close to securing support but outlook murky

TOKYO | Fri Jun 15, 2012 2:25am EDT

TOKYO (Reuters) - Japan's Renesas (6723.T) is in final talks to receive $1.3 billion in financial support from major shareholders and banks, sources said, briefly sending its shares up sharply but failing to dispel worries about the struggling chipmaker's long-term prospects.

Renesas, hit by a strong yen and fierce competition from rivals such as South Korea's Samsung Electronics (005930.KS), is being urged to take tough restructuring steps after sinking to a 62.6 billion yen ($790 million) net loss in the fiscal year that ended in March.

Sources familiar with the matter said Renesas, whose main shareholders are Mitsubishi Electric (6503.T), Hitachi (6501.T) and NEC (6701.T), was likely to receive 100 billion yen ($1.3 billion) in support in exchange for implementing a tough turnaround plan.

Analysts questioned if it would be enough for the world's fifth-biggest chipmaker.

"I think the fact that the shares haven't recouped more of their recent losses shows that investor concerns about the company haven't entirely been removed," said Toshiyuki Kanayama, a senior market analyst at Monex Inc.

"I think this news is good for the shares in the short term, but the outlook remains uncertain," he said.

Renesas shares jumped as much as 21 percent on Friday to a one-month high of 381 yen, before trimming gains to close up 1.3 percent at 320 yen. The stock has recovered somewhat from an all-time low of 198 yen hit in May, but is still well below levels around 600 yen seen earlier this year.

The sources spoke on condition of anonymity because the talks are not public.

LSI STRUGGLES

Renesas, the world's leading maker of microcontroller chips used in cars, had been planning to raise more than 100 billion yen to cover a sweeping restructuring plan that would cut at least 12,000 jobs, sources told Reuters last month.

Japanese media said Renesas' turnaround plan, which involves selling and shutting down several domestic plants and laying off workers, could be finalized as early as next week after negotiations with the major shareholders and banks.

Of particular focus is how Renesas can revive its money-losing system LSI unit - its worst performing division - which makes system-on-chip products combining processing and other functions used in a range of digital electronics.

Sales in the system LSI division fell 35.5 percent in the last fiscal year, becoming a major drag on the company as Japanese consumer electronics makers cut production of televisions and other goods.

Renesas had been in discussions with Fujitsu (6702.T) and Panasonic (6752.T) to combine their system LSI chip operations, but the talks reportedly stalled as Renesas grappled with mounting losses and after the February bankruptcy of DRAM chip maker Elpida Memory (ELPDF.PK).

Fujitsu's president told the Asahi newspaper in an interview this week that his company would be keen on restarting talks if Renesas carries out an aggressive turnaround plan, in a bid to confront global competition and preserve Japan's semiconductor industry.

Japanese chipmakers are strong in technology, but are struggling to meet the funding demands needed for constant plant and technology upgrades to manufacture ever cheaper, faster chips. ($1 = 79.2650 Japanese yen)

(Writing and additional reporting by Mari Saito; Editing by Chris Gallagher)

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Nokia cuts 10,000 more jobs as losses deepen

1 of 5. Nokia employees arrive for a personnel briefing in Oulu, June 14, 2012. Loss-making Finnish cellphone maker Nokia plans to cut another 10,000 jobs globally in its biggest revamp in recent history, while it warned the second-quarter loss from its cellphone business would be larger than expected. The cuts, which include the closure of Nokia's only plant in Finland, bring total planned job cuts at the group since Elop took over as chief executive in 2010 to more than 40,000.

Credit: Reuters/Markku Ruottinen/Lehtikuva

By Tarmo Virki

PARIS | Fri Jun 15, 2012 12:13am EDT

PARIS (Reuters) - Nokia plans to cut 10,000 more jobs, bringing the total to one in three staff, as it loses market share to cellphone rivals Apple and Samsung and burns through cash, raising new fears over its future.

In a second profit warning in nine weeks, Nokia said on Thursday that its phone business would post a deeper-than-expected loss in the second quarter due to tougher competition, which it expected to continue.

Once the world's dominant mobile phone provider, Nokia was wrongfooted by the rise of smartphones and is struggling to keep up with Apple, Samsung and Google. It is also losing market share in cheaper, more basic phones.

Chief Executive Stephen Elop is placing hopes of a turnaround on a new range of smartphones called Lumia, which use largely untried Microsoft Corp software. But Lumia sales have so far been slow, exasperating investors who have seen its stock crash more than 70 percent since it announced the software switch in February 2011.

"The job cuts and profit warning underline the seriousness of the challenges Nokia is facing, particularly in light of the eye-watering competition from Apple and Samsung," said Ben Wood, head of research at CCS Insight.

Nokia, whose cash position is increasingly scrutinized by investors, also said restructuring-related cash outflows would be around 650 million euros in the remaining three quarters of 2012 and around 600 million in 2013.

With the cost of Nokia's debt rising, the most bearish of analysts in a Reuters poll last month said the company could even be at risk of default if it fails to slow its cash burn.

Over the past five quarters, the onetime darling of mobile telcoms has eroded its cash pile by 2.1 billion euros - a rate that would wipe out its entire 4.9 billion reserves in a couple of years.

Analysts at JP Morgan said on Thursday they expect operating losses, combined with restructuring outflows, to leave Nokia with 1.63 billion euros cash at the end of next year.

"This is not a comfort zone for a company as large as Nokia," the analysts said.

Nokia's five-year credit default swaps (CDS) were at a new all-time high of 933 basis points on Thursday according to Markit. This means it costs $933,000 annually to buy $10 million of protection against a Nokia default using a five-year CDS contract and implies a default probability of 55 percent.

Bernstein analyst Pierre Ferragu said he expects the company to have minimal net cash position at the end of its restructuring.

"We therefore see continued potential downside to the recent stock price and maintain our underperform rating," Ferragu said.

Shares in Nokia were down 16 percent to 1.87 euros, below the psychologically important 2 euros mark, not seen since 1996.

Analysts have said that even with the dramatic fall in the share price, the worsening outlook made it hard to judge how much lower the shares could go.

"I won't comment on the stock price anymore, since it's been seen over and over, that there is no definitive bottom," said Evli analyst Mikko Ervasti.

"People are worried over Lumia sales. I think expectations for the third quarter will be cut," said Nordea analyst Sami Sarkamies.

The 10,000 job cuts, which include the closure of Nokia's only plant in its homeland Finland, bring total planned cuts at the group since Elop took over as chief executive in 2010 to more than 40,000 staff, or every third worker.

Of the latest job cuts, 3,700 will take place in Finland, where the firm will also close its plant in Salo - the last major cellphone manufacturing site in western Europe, the cradle of the global industry.

"This is a major blow. This is due to the operational mistakes made already during the previous CEOs. Maybe the signs of success are running low for Elop too," said Antti Rinne, chairman of labor union Pro.

Nokia said it expects its operating margin in the second quarter to be below the negative 3 percent level reported in the first quarter due to pressure on its smartphone business. It previously forecast it would be similar to or below that level.

On average analysts forecast the second-quarter phone unit margin to be at -4.6 percent, narrowing to -2.2 percent in the third quarter.

Nokia also said it would sell luxury phone business Vertu to venture firm EQT and revamp its management team. ($1 = 0.7953 euros)

(Additional reporting by Eero Vassinen and Terhi Kinnunen in Helsinki; Editing by Erica Billingham)

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Samsung LCD lines hit by brief power outage

Students walk out of a showroom at the headquarters of Samsung Electronics in Seoul October 28, 2011.

Credit: Reuters/Jo Yong-Hak

SEOUL | Fri Jun 15, 2012 12:18am EDT

SEOUL (Reuters) - Samsung Display, a unit of Samsung Electronics Co, said four flat-screen production lines had stopped briefly on Thursday due to a power outage -- a development that may mean sizeable losses.

Although production was only halted for 10 minutes, even a short stop can render some panels obsolete.

"Samsung may have to report some costs, because around 70 percent of panels which were in the process of production during the blackout become useless," said an analyst who declined to be identified.

Shares in Samsung Electronics, tumbled 3 percent in morning trade, underperforming a 0.7 percent decline in the broader market.

Samsung, which competes with local rival LG Display and Japan's Sharp Corp, has since restored 60 percent of production and has said it expects the lines to return to full output later on Friday.

The lost output, mainly large-sized panels for TVs and computer monitors, is unlikely to have major impact on sales or global LCD market, where supplies are plentiful due to weak consumer demand.

The plant in Tangjeong, southwest of Seoul, houses Samsung's most advanced LCD production lines. The four lines have a combined monthly output capacity of 320,000 panels.

Its parent Samsung Electronics separated out its loss-making flat-screen business in April to combine it with a more promising AMOLED (active matrix organic light-emitting diodes) flat-screen operation, currently used mainly in high-end smartphones.

(Reporting by Miyoung Kim; Editing by Edwina Gibbs)

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