Business Blog Posts

Alarm about the risk of another economic downturn, after the U.S. Federal Reserve's dire forecast at its two-day policy meeting which finished on Wednesday, pushed world stocks to 13-month lows as investors shed risky assets from portfolios and scurried to safer havens.

The surging dollar and yen, and consequent sharp moves lower in major European and U.S. stock indices overnight, sparked talk of governments stepping in to soothe nerves. Japanese news service Jiji reported on Friday that the G20 was preparing an emergency statement to confirm cooperation on the euro zone debt crisis.

That news helped the beleaguered euro which has slid to a 10 year low against the yen earlier. It climbed 0.7 percent on the day to $1.3561 against the dollar.

S&P 500 futures stabilized and were trading up 0.7 percent, though Asian stock markets looked set to extend their weakness with South Korea's KOSPI .KS11 off 3.3 percent in early trading.

The South Korean won briefly strengthened against the dollar as dealers suspected heavy dollar-selling by the authorities following a verbal warning from the government and the central bank.

South Korea became the latest emerging economy to pledge action to stem its falling currency on Friday after Brazil moved to protect its currency from a sharp slide, in what appeared to be a sudden shift in strategy.

With Japanese markets shut on Friday for a public holiday, traders said investors looking to raise cash might do so by selling shares in Hong Kong, putting further pressure on the Hang Seng .HSI which has already lost 8 percent this week and is at a 26-month low.

The MSCI Asia ex-Japan index .MIAPJ0000PUS was down 1.1 percent in early trade. Indonesian stocks, the region's best performing stock index this year, plunged almost 9 percent as investors bailed.

Commodity markets, copper in particular, bore the brunt of the global rout that accompanied the Fed's gloomy outlook with Brent crude oil futures posting their biggest single-day loss in six weeks.

Copper sank 7.5 percent while the CRB commodity index .CRB lost 4.4 percent.

Gold lost its sheen as a safe haven as U.S. gold futures posted their biggest sell-off in a month while silver crashed nearly 10 percent lower.

(Reporting by Vikram Subhedar; Editing by Daniel Magnowski)

The decision was made without a formal CEO search and piled renewed criticism on the board, which investors have blamed -- at least in part -- for the storied company's recent missteps.

Chairman Ray Lane, who becomes Executive Chairman with a mandate to help Whitman run a sprawling $120 billion empire with over 300,000 employees, tried to assure disillusioned investors by saying HP is making a fresh start with a new CEO and -- crucially -- a virtually revamped board of directors.

Lane vowed that the days of board dysfunction -- the wire-tapping scandal, the firing of Mark Hurd after a sexual harassment probe, and the hiring of Apotheker -- were over.

The board works well together, he said.

"It's amazing how they challenge the management team, challenge each other," Lane said in an interview. "They are smart, they bring great insight to the table and I think we make good decisions."

Analysts had speculated that Apotheker's departure might presage a backtracking on major decisions taken during his 11-month term and announced -- back to back in haphazard fashion -- on August 18. But HP reassured investors on a conference call the board will not reverse course.

"I don't think we ought to be going back in history. This board did not select Leo. This is not the board that was around for pretexting," Lane said, referring to the scandal in which HP hired investigators who impersonated its board members and journalists to obtain their phone records.

"This is not the board that fired Mark Hurd," he noted. "We are embarrassed about the communications of decisions that could have been done much better. But we carefully considered the decisions made. It is our operating execution that needs to improve."

Whitman, an Internet retail expert with a mixed track record, is not an obvious choice to revive HP, analysts said. The failed California gubernatorial candidate transformed eBay from a few dozen employees in 1998 into a global Internet retail powerhouse, but the final years of her reign were marked by sputtering growth, intensifying Wall Street criticism and a string of unwise acquisitions, including of Skype.

She has been an HP director about eight months. While her elevation surprised many with its seeming hastiness -- for the second time, internal candidates such as enterprise chief David Donatelli were passed over -- Apotheker's ejection had been a matter of time.

He becomes the third straight HP CEO shown the door.

"Some might be saying maybe Meg Whitman isn't the right person, either. She's not a hardware person," said Auriga analyst Kevin Hunt. But HP "just needs someone to set the direction."

Defending her track record, Whitman said as head of eBay she had been a major purchaser of HP enterprise products.

"So I actually understand this space relatively well," she told Reuters in an interview. "What I bring to this table is leadership, management skills, strategic vision, communications and an execution orientation to deliver the result."

Whitman said HP remained committed to completing a review of its PC division before the year ends, and expected to close the pricey $12 billion acquisition of British software maker Autonomy Corp Plc as planned.

HP's shares closed down 4.8 percent at $22.80, wiping out much of Wednesday's 6.6 percent gain.

"We would view any decision not to conduct a comprehensive search of internal and external candidates for a permanent CEO role as unsatisfactory and unnecessarily hasty," Sanford Bernstein analyst Toni Sacconaghi, who has been openly critical of HP's board, wrote in a note earlier on Thursday.

Lane, however, fired back by saying Whitman was handpicked for her communication, people and execution skills, while Apotheker fell short on several fronts.

Lane himself will also be taking on a bigger role in the company as executive chairman.

"I am here to help Meg execute on the business," Lane said. "I will be standing behind her and I will be working in areas that maybe I can help with a little more than she can do herself."

QUESTIONS?

In less than a year on the job, Apotheker, formerly SAP AG CEO, slashed HP's forecasts for three straight quarters and struggled to reverse a 50 percent plunge in the share price.

The storied Silicon Valley computer maker is fighting to restore its crumbling credibility. Whitman has to galvanize growth at a company that gets more than a third of its revenue from a slowing European economy, and is struggling to offset sliding PC revenue with services and software.

"We are at a critical moment and we need renewed leadership to successfully implement our strategy and take advantage of the market opportunities ahead," said Lane.

Whitman's record at eBay came under scrutiny during her failed campaign for California's governorship. Analysts question whether her stewardship of eBay prepared her to steer a sprawling enterprise and computer giant.

The billionaire is credited with catapulting eBay into the upper echelons of a then-nascent e-commerce arena, and taking it public. But critics note she pushed hard to acquire Internet telephony service Skype, beginning a long and ultimately fruitless attempt to wring value from it. EBay eventually unloaded it, and it ended up with Microsoft Corp.

Her successor, John Donahoe, spent years engineering a turnaround and trying to rekindle stalled growth.

"While we believe she has proven to be a very capable manager helping grow eBay from a start-up into one of the largest Internet companies, we think an ideal candidate for HP should have extensive experience in the enterprise market," Stern Agee analyst Shaw Wu said in a client note.

Better choices would include HP enterprise chief Dave Donatelli and PC head Todd Bradley, two names that had also made the rounds in Silicon Valley for the top job after Mark Hurd's ouster in August 2010, he added.

On a more personal level, opponents and media on the campaign trail last year raised questions about Whitman's fierce temper and imperious manner with employees, and even about her integrity after it emerged that the wealthy former CEO had employed an illegal alien maid.

Whitman has her work cut out to try and turn the lumbering ship around. On Thursday, Chief Financial Officer Cathie Lesjak warned that HP's revenue outlook remained uncertain with Europe still soft and public spending weak.

But she made it clear it was imperative to speed up discussions around the personal systems group, or PC division.

"This decision is not like fine wine. It's not going to get better with age," Whitman said. "I am going into this with an open mind."

(Writing by Edwin Chan; Editing by Gunna Dickson, Gerald E. McCormick and Richard Chang)

The move, effective immediately, confirmed earlier reports on the impending change.

"We are at a critical moment and we need renewed leadership to successfully implement our strategy and take advantage of the market opportunities ahead," said Ray Lane, who has moved from non-executive chairman to executive chairman of HP's board.

Referring to Apotheker, Lane said the board believes "the job of the HP CEO now requires additional attributes."

The board also plans to appoint an independent director.

But the group was not preparing to make changes to its strategy, one source told Reuters.

This was contrary to Wall Street speculation that Apotheker's departure -- which would make him the third straight HP CEO shown the door -- might presage a backtracking on major decisions taken during his term.

Those included a possible spinoff of its personal computer division -- the world's largest -- and the planned acquisition of British software maker Autonomy Corp Plc, which has some investors worried that HP is overpaying.

HP's board convened again Thursday to thrash out a host of issues, including jettisoning Apotheker, who in less than a year on the job slashed sales forecasts several times, backtracked on promises to integrate mobile software into devices and struggled to halt a 50 percent plunge in the share price.

But Whitman, whose forte is consumer and Internet retailing, might not be an ideal choice, analysts say.

The failed California gubernatorial candidate transformed eBay from a few dozen employees in 1998 into a global Internet retail powerhouse, but the final years of her reign were marked by sputtering growth, intensifying Wall Street criticism and a string of unwise acquisitions, including of Skype.

HP's shares closed down 4.8 percent at $22.80, wiping out much of Wednesday's 6.6 percent gain. Investors' enthusiasm over a change at the top has waned and the Street has turned its attention toward HP's uncertain fundamentals, analysts say.

The storied Silicon Valley computer maker is fighting to restore its crumbling credibility. If Whitman took the reins, she would have to galvanize growth at a company that gets more than a third of its revenue from a slowing European economy, and is struggling to offset sliding PC revenue with services and software.

"Some might be saying maybe Meg Whitman isn't the right person, either. She's not a hardware person," said Auriga analyst Kevin Hunt. But HP "just needs someone to set the direction."

QUESTIONS?

The full HP board had not formally voted on Whitman's appointment as CEO but the process to usher her in was on track, the two sources told Reuters.

Whitman's record at eBay came under scrutiny during her ill-fated campaign for California's governorship. Analysts question whether her stewardship of eBay prepared her to steer a sprawling enterprise and computer giant.

The billionaire is credited with catapulting eBay into the upper echelons of a then-nascent e-commerce arena, and taking it public. But critics note she pushed hard to acquire Internet telephony service Skype, beginning a long and ultimately fruitless attempt to wring value from it. EBay eventually unloaded it, and it ended up with Microsoft Corp.

Her successor, John Donahoe, spent years engineering a turnaround and trying to rekindle stalled growth.

"While we believe she has proven to be a very capable manager helping grow eBay from a start-up into one of the largest Internet companies, we think an ideal candidate for HP should have extensive experience in the enterprise market," Stern Agee analyst Shaw Wu said in a client note.

Better choices would include HP enterprise chief Dave Donatelli and PC head Todd Bradley, two names that had also made the rounds in Silicon Valley for the top job after Mark Hurd's ouster in August 2010, he added.

On a more personal level, opponents on the campaign trail last year raised questions about her fierce temper and imperious manner with employees, and even about her integrity after it emerged that the wealthy former CEO had employed an illegal alien maid.

(Writing by Edwin Chan; Editing by Gunna Dickson, Gerald E. McCormick and Richard Chang)

Wall Street suffered its worst selloff in a month on Wednesday on worries about the health of the economy after the Fed said there were "significant downside risks."

Adding to worries, data showed China's manufacturing sector contracted for a third straight month in September. The world's second-biggest economy is vulnerable to fading demand from the United States and Europe, its biggest export markets.

"Hidden behind the Greek drama over the past few weeks and unveiled again yesterday with the (Fed) statement and action, the unfolding global economic slowdown is back to front and center," said Peter Boockvar, equity strategist at Miller Tabak + Co in New York.

The Fed launched a program Wednesday to lower long-term borrowing costs and bolster the housing market, saying it will sell $400 billion of short-term Treasury bonds to buy the same amount of longer-term U.S. government debt.

S&P 500 futures fell 25 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures slid 226 points, and Nasdaq 100 futures dropped 45 points.

FedEx Corp (FDX.N) reported higher quarterly profit but pared its outlook for the full year early Thursday.

United Technologies Corp (UTX.N) is acquiring aircraft components maker Goodrich Corp (GR.N) in a $16.5 billion cash deal. It would be the largest deal since 2000.

Investors will watch the two-day Group of 20 meeting in Washington for any further policy response in tackling the global slowdown and euro zone debt crisis.

Investors also awaited U.S. weekly jobless claims at 8:30 a.m. EDT and the Federal Housing Finance Agency Home Price Index for July at 10 a.m. EDT.

Economists in a Reuters survey predicted that jobless claims fell to 420,000 from 428,000 in the previous week.

In an abrupt shift in strategy, the United Auto Workers union has focused its contract negotiations on Ford Motor Co (F.N) after talks stalled with Chrysler.

Bank of America Corp (BAC.N) shook up its Merrill Lynch unit, eliminating more than a half of the firm's regional manager jobs.

Exxon Mobil Corp (XOM.N) might receive much less compensation than the U.S. oil giant wanted from Venezuela for the nationalization of its assets in 2007.

Wall Street stocks suffered their worst drop in a month after the Fed's announcement, with the Dow Jones industrial average .DJI dropping 2.5 percent, the Standard & Poor's 500 Index .SPX losing 2.9 percent and the Nasdaq Composite Index .IXIC falling 2 percent.

(Reporting by Angela Moon; editing by Jeffrey Benkoe)