April 25, 2024

You are here: Home / Archives for morgan stanley

Common Sense: Amazon.com and Jeff Bezos Talk Long Term and Mean It

December 17, 2011 by Leave a Comment

But shareholders seem never to have gotten the message. In October, when Amazon reported strong third-quarter revenue growth and earnings that were pretty much what the company had predicted, but indicated it would be spending more to support continued growth, investors hammered its stock. Amazon shares dropped nearly $30, or 13 percent, to $198 a share in just one day, Oct. 25. This week they were trading even lower, at $181.

Over the years, Amazon shares have been periodically buffeted by short-term results that seem to have disappointed investors. “The stock has been bumpy,” a Morgan Stanley analyst, Scott Devitt, told me this week. “Investor trust seems to go in cycles.”

The notion that public companies should maximize shareholder value by managing for the long term is pretty much gospel among good-governance proponents and management experts. Jack Welch advanced the concept in a seminal 1981 speech at the Pierre Hotel in New York and elaborated on it in subsequent books and articles while running General Electric, when G.E. was widely lauded as the best-managed company in the country. It has been especially championed in Silicon Valley, where technology companies like Google have openly scorned Wall Street analysts and their obsession with quarterly estimates and results by refusing to issue earnings guidance.

Amazon, in particular, has been true to its word to manage for the long term. It remains one of the world’s leading growth companies and its stock has soared 12,200 percent since its public offering. In late October it reported quarterly revenue growth of 44 percent to almost $11 billion, which came on the heels of 80 percent growth a year ago. “We’re seeing the best growth which we’ve seen since 2000, meaning in 2010 and so far over the past 12 months ending September,” the chief financial officer, Thomas Szkutak, told investors in October. But operating earnings fell sharply to $79 million. While that was in line with most estimates, Amazon offered a forecast for the fourth quarter in which it said it might lose as much as $200 million or earn as much as $250 million, and even the high end would represent a 47 percent drop.

The reason Amazon is earning so little while selling so much is that it is spending so much on long-term growth. It’s opening 17 new fulfillment centers — airport hangar-size storage and shipping facilities — this year and aggressively cutting prices. Its profit margin for the quarter was just 2.4 percent, and it said it might be zero for the fourth quarter. (By comparison, Wal-Mart’s margins are 6 percent on revenue of $440 billion. )

Amazon seems to be taking customer focus to new levels, willing to run its ever-bigger global business while earning little or nothing in return. To the dismay of some, Mr. Bezos even takes a long-term view of price cuts. “With rare exceptions, the volume increase in the short term is never enough to pay for the price decrease,” he told shareholders in 2005. But that kind of thinking, he added, is “short term. We can estimate what a price reduction will do this week and this quarter. But we cannot numerically estimate the effect that consistently lowering prices will have on our business over five years or 10 years or more.” Selling at low prices may undercut profits, but they create “a virtuous cycle that leads over the long term to a much larger dollar amount of free cash flow, and thereby to a much more valuable Amazon.com,” Mr. Bezos said.

Article source: http://feeds.nytimes.com/click.phdo?i=8cc770d495ec910587dce36325137705

Filed Under: Business News Tagged With: , ,

Fair Game: Secrets of the Bailout, Now Revealed

December 4, 2011 by Leave a Comment

It is dispiriting, of course, that we are still learning about the billions provided to various financial firms during the crisis. Another sad element to this mess is that getting the truth requires the legal firepower of an organization as rich as Bloomberg.

But that’s the way our world works. Billions are secretly showered on troubled financial institutions to stave off disaster. Individuals get little or no help.

Here are some of the new figures:

Among all the rescue programs set up by the Fed, $7.77 trillion in commitments were outstanding as of March 2009, Bloomberg said. The nation’s six largest banks — JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley — borrowed almost half a trillion dollars from the Fed at peak periods, Bloomberg calculated, using the central bank’s data.

Those six institutions accounted for 63 percent of the average daily borrowings from the Fed by all publicly traded United States banks, money management and investment firms, Bloomberg said.

Numbers for individual companies were equally astonishing. For example, the Fed provided Bear Stearns with $30 billion to see it through its 2008 shotgun marriage with JPMorgan. This was in addition to the $29.5 billion in assets purchased by the Fed from Bear to assist in the buyout by JPMorgan. Citigroup, meanwhile, tapped the Fed for almost $100 billion in January 2009 — its peak during the crisis — and Morgan Stanley received $107 billion in Fed loans in September 2008.

Some may see all this as ancient history or as ho-hum disclosures that confirm what everybody already knew — that our banks were on the precipice and that only hundreds of billions of dollars could save them. The Fed says that the money it lent in these programs was paid back without generating any losses.

But the information is revealing nonetheless. The fact is, investors didn’t know how dire the situation was at these institutions. At the same time that these banks were privately thronging the teller windows at the Fed, some of their executives were publicly espousing their firms’ financial solidity.

During the first three months of 2009, for example, when Citigroup’s Fed borrowing apparently peaked, Vikram Pandit, its chief executive, hailed the company’s performance. Calling that first quarter the best over all since 2007, Mr. Pandit said the results showed “the strength of Citi’s franchise.”

Citi’s earnings release didn’t detail its large Fed borrowings; neither did its filing for the first quarter of 2009 with the Securities and Exchange Commission. Other banks kept silent on these activities or mentioned them in passing with few specifics.

These disclosure lapses are disturbing to Lynn E. Turner, a former chief accountant at the S.E.C. Since 1989, he said, commission rules have required public companies to disclose details about material federal assistance they receive. The rules grew out of the savings and loan crisis, during which hundreds of banks failed and others received government help.

The rules are found in a section of the S.E.C.’s Codification of Financial Reporting Policies titled “Effects of Federal Financial Assistance Upon Operations.” They state that if any types of federal financial assistance have “materially affected or are reasonably likely to have a future material effect upon financial condition or results of operations, the management discussion and analysis should provide disclosure of the nature, amounts and effects of such assistance.”

Given these rules, Mr. Turner said: “I would have expected some discussion in the management discussion and analysis of how this has had a positive impact on these banks’ operating results. The borrowings had to have an impact on their liquidity and earnings, but I don’t ever recall anybody saying ‘we borrowed a bunch of money from the Fed at zero percent interest.’ ”

I asked officials at Citigroup and Morgan Stanley about these disclosures. Jon Diat, a spokesman for Citigroup, said the bank’s disclosures in its quarterly filings with the S.E.C. “were entirely appropriate.” He added that Citi and other financial services firms “utilized numerous government programs that provided significant funding capacity and liquidity support which helped increase the flow of credit into the economy.”

Article source: http://feeds.nytimes.com/click.phdo?i=f900fa9ee73f5e56f0a2f54265298a19

Filed Under: Business News Tagged With: , ,

DealBook: At Top Colleges, Anti-Wall St. Fervor Complicates Recruiting

November 29, 2011 by Leave a Comment

Protesters greeted students meeting with Morgan Stanley recruiters in New Haven.Christopher Capozziello for The New York TimesProtesters greeted students meeting with Morgan Stanley recruiters in New Haven.

NEW HAVEN — College students seeking jobs on Wall Street have always had hurdles to overcome — grueling applications, endless rounds of interviews and fierce competition for the relatively few available spots at top firms.

This year’s Wall Street hopefuls have had a new force to contend with: the wrath of their peers.

Banks and hedge funds have long wooed undergraduates from elite colleges with lavish dinners, personalized e-mails and free trips to New York for interviews. It’s all part of an annual courtship ritual known as on-campus recruiting.

But this fall, the antibank animus of the Occupy Wall Street movement has seeped onto college campuses. At some schools, anger at big banks has turned the on-campus recruiting process into a crucible of controversy.

“I teach financial markets, and it’s a little like teaching R.O.T.C. during the Vietnam War,” said Robert J. Shiller, a professor of economics at Yale University. “You have this sense that something’s amiss.”

Even at universities traditionally considered to be Wall Street feeder schools, student bodies are becoming polarized over recruiting. At Harvard, Dartmouth and Cornell, student newspapers have featured polemic columns that urged fellow students to consider working somewhere — anywhere — outside finance. At Stanford, an opinion column that took aim at Wall Street’s “aggressive, sophisticated and well-funded recruitment system” resulted in “Stop the Brain Drain,” an online campaign that is trying to stem the tide of top students flooding into banks, hedge funds and private equity firms.

“We think it’s really problematic,” said Nathan Gusdorf, 22, a senior at Dartmouth College who is an organizer of the Occupy Dartmouth movement. “There’s a culture here that takes a lot of people and directs them towards jobs in the finance industry. We breed a lot of the technocrats who go on to administer the global financial system.”

Wall Street has been steadily losing its allure on college campuses since the financial crisis, when many banks reduced hiring and left many finance-minded graduates in the lurch. Amid new uncertainty and lower profits, banks are again laying off workers, and most of those still working in the industry have seen their paychecks shrink.

Goldman Sachs, which was hard hit by this year’s downturn, canceled its annual information session for undergraduates at the University of Pennsylvania, traditionally one of its core recruiting schools. At Harvard, only 17 percent of last year’s class planned to go into financial services after graduation, according to a survey of graduating seniors, compared with 25 percent in 2006, before the crisis.

But with the added vitriol of Occupy Wall Street, this year’s recruiting process is even more forbidding.

The new recruiting climate was on display at Yale in mid-November, when a group of Yale students turned a Morgan Stanley information session into a protest site. While their fellow students, clad in suits and clutching folders with résumés, filed into The Study at Yale, a local hotel, to learn more about the investment bank, a group of approximately 25 Yale undergraduates protested outside. They held signs and chanted slogans like “Take a stance, don’t go into finance” and “25 percent is too much talent spent” — a nod, protest organizers said, to the quarter of Yale graduates who typically take finance and management consulting jobs after graduation.

Mark Lake, a Morgan Stanley spokesman, said in a statement: “Morgan Stanley respects and supports everyone’s right to protest and express their opinions. The event was well attended and we plan to continue to provide opportunities for discussions like this with any interested students.”

Yale, which has graduated financial heavyweights like Stephen A. Schwarzman, the co-founder of the Blackstone Group, is traditionally considered a Wall Street feeder school. But the Occupy New Haven movement wants to change the focus.

Alexandra Brodsky, a Yale senior who helped organize Tuesday’s protest, said in an interview that recruiting “serves to divide the campus.”

Ms. Brodsky added that she had recently begun openly questioning the career choices of her finance-minded friends, because “these are people who could be doing better things with their energy.”

Kate Orazem, a senior in the student group, added that Yale students often go into finance expecting to leave after several years, but end up staying for their entire careers.

“People are naïve about how addictive the money is going to be,” she said.

Even without protests and antagonism, Wall Street firms would very likely have drawn a smaller percentage of the Ivy League’s class of 2012 than top-flight firms in other industries.

According to a recent survey conducted by Universum, a consulting firm, the most coveted positions among young workers these days are jobs at technology firms like Google, Apple and Facebook. The highest rated investment bank in the survey, JPMorgan Chase, was ranked 41st, with only 2 percent of respondents listing the firm as their first choice of employer.

But for those students still hoping to land a job in finance, the added peer pressure has forced some of their enthusiasm underground.

“I can feel when my students tell me they’re going into I-banking, they’re a little more reserved about it than they used to be,” said Chris Wiggins, an associate professor in Columbia University’s department of applied physics and applied mathematics.

Mr. Wiggins, who is also an organizer of HackNY, a technology-focused group that tries to steer engineers and programmers away from Wall Street, said that the well-oiled recruitment process would be difficult to stop.

“Zero percent of people show up at the Ivy League saying they want to be an I-banker, but 25 and 30 percent leave thinking that it’s their calling,” he said. “The banks have really perfected, over the last three decades, these large recruitment machines.”

Several days before the Morgan Stanley recruiting session at Yale that was greeted by protests, a recruiting session for Goldman Sachs confirmed that those machines, however battered, are still in operation. At the event, more than 100 students filed into a ballroom at the Omni Hotel, where they mingled with Goldman recruiters.

Nicholas Lombardo, a junior at Yale who attended, said that although he hoped to land a job on Wall Street upon graduation, he was not planning to spend more than two or three years working in finance. He said that he had some concerns about the financial industry, but that the prospect of learning basic financial skills in a challenging, fast-paced environment had won out.

“My friends and I joke about, ‘Oh, are you going to the dark side?’ ” Mr. Lombardo said. “But it still seems like the smart thing to do.”

Article source: http://feeds.nytimes.com/click.phdo?i=d50854f25baa09238c656c6eb6d0fffc

Filed Under: Business News Tagged With: , ,

F.C.C. and Cable Companies Push to Close Digital Divide

November 9, 2011 by Leave a Comment

On Wednesday, the F.C.C. will announce commitments from most of the big cable companies in the United States to supply access for $9.99 a month to a subset of low-income households. The low introductory price is meant to appeal to new customers who have not had broadband in the past.

The F.C.C. is billing the initiative as the biggest effort ever to help close the digital divide. Because no federal funds are being invested, the initiative relies in large part on the cooperation of private companies. One such company, Comcast, started offering $9.99 monthly broadband service to some low-income households this year after promising the F.C.C. that it would do so when it acquired control of NBCUniversal.

By enlisting the cable companies as well as a wide range of nonprofit groups that will educate eligible families about the low-cost access, “we can make a real dent in the broadband adoption gap,” Julius Genachowski, the F.C.C. chairman, said in a telephone interview Tuesday.

Mr. Genachowski has made broadband deployment and adoption the top priority of his tenure at the F.C.C. The government estimates that about one-third of American households, or 100 million people, do not have high-speed Internet access at home. Some of those homes simply do not have access to service, but most do and choose not to receive it, for reasons involving cost and perceived relevance to their lives.

To address the first point, along with the low monthly price, a technology company will supply refurbished computers for low-income households for $150; Microsoft will provide software; and Morgan Stanley will help develop a microcredit program so that families can pay for those computers.

To address the second point, job Web sites and education companies will offer content that will, in theory, make online access more valuable.

Eligibility will be limited to those households that have a child enrolled in the national school lunch program and that are not current or recent broadband subscribers. About 17.5 million children are enrolled in the school lunch program. That limitation is likely to disappoint advocates who would like more affordable access extended to all households.

For those households, the $9.99 monthly price will apply only for a two-year period. The price is akin to an on-ramp for new customers, with the hope being that they will decide to pay more for access once they have had it for a while.

The F.C.C. said the initiative would begin in the spring and reach all parts of the country in September 2012. It is similar in some ways to Adoption Plus, a partnership that was proposed two years ago, but never carried out, by the National Cable Telecommunications Association, a cable trade group.

The participating cable companies — including almost all of the biggest ones in the country, like Time Warner Cable, Cox and Charter — are not expected to sustain a significant financial loss. Broadband service normally has a high markup, and the $9.99 price will more than cover the overhead costs of providing monthly Internet service.

The announcement on Wednesday will not include two companies that are major players in the broadband business, Verizon and ATT. The F.C.C. is reviewing ATT’s proposed acquisition of T-Mobile.

Asked why the cable companies were willing to participate, Mr. Genachowski said he thought they “looked at this and said, this is an important national challenge, let’s be part of the solution.”

Article source: http://feeds.nytimes.com/click.phdo?i=61423d2c521b15c8ab754da0afa6cf6f

Filed Under: Business News Tagged With: , ,

DealBook: Morgan Stanley Posts $2.15 Billion Profit

October 19, 2011 by Leave a Comment

Morgan StanleyMary Altaffer/Associated PressJames P. Gorman, Morgan Stanley’s chief executive, said the firm “effectively navigated turbulent markets” in the quarter.

Morgan Stanley, buoyed by solid performances in its core divisions and a huge one-time accounting gain, announced third-quarter earnings of $2.15 billion, compared with a loss of $91 million a year ago.

The company’s profit of $1.16 a share handily beat analyst predictions of 30 cents a share, according to Thomson Reuters. In contrast, Goldman Sachs, weighed down by losses on its investments in its own account, reported a loss of $428 million on Tuesday, compared with a $1.7 billion profit a year ago.

Excluding the accounting gain Morgan Stanley notched earnings of three cents a share. Analysts had been forecasting an 11 cent loss.

James P. Gorman, Morgan Stanley’s chief executive, said the firm “effectively navigated turbulent markets” in the quarter.

Morgan Stanley Smith Barney, the firm’s global wealth management division, continued to be a steady performer, posting net revenue of $3.26 billion this quarter, compared with $3.1 billion in the year-ago period. Still, the business got hit by the market turmoil, even as the firm logged record inflows. The division had $1.6 trillion assets under management in the quarter, down from $1.7 trillion in the previous quarter.

Institutional securities, bolstered by a $3.4 billion gain on the value of Morgan Stanley’s debt, had its third-quarter revenue increase 122 percent percent, to $6.45 billion. Asset management reported revenue of $215 million for the period, down 73 percent from the previous year on losses in firm investments.

Morgan Stanley achieved a strong return on equity, something that many firms have found to do this difficult environment. Return on equity from continuing operation, a key measure of profitability, was 14.5 percent, compared with 9 percent in the second quarter. Return on equity measures the amount of money that a company delivers on each share, and is a closely watched ratio among investors.

The firm declared a five cent quarterly dividend for its shareholders. It will be paid on November 15 to shareholders who had stock on October 31.

So far this year, Morgan Stanley has set aside $12.69 billion to cover compensation and benefits, up 6 percent percent from year-ago levels. The firm had 62,648 employees on the payroll at the end of the third quarter, down slightly from the 62,964 employees in the previous quarter.

The firm’s third-quarter results come during a tough time for financial stocks, which have struggled amid regulatory uncertainty and a weak global economy. Shares of Morgan Stanley have fallen 38.9 percent this year, to $16.63 a share.

Article source: http://feeds.nytimes.com/click.phdo?i=32b82fc177b96cba344d1653f9eff3fd

Filed Under: Business News Tagged With: , ,

Fair Game: What Investors Don’t Know About Europe

October 8, 2011 by Leave a Comment

That’s what Timothy F. Geithner, the Treasury secretary, told Congress last week, trying to allay concerns that American banks might be hurt by the escalating crisis in Europe.

Investors have heard such assurances before, and they have learned to take them with a barrel of salt. Remember how the subprime crisis was going to be “contained”?

As the situation in Europe deteriorates, our own financial institutions are coming under growing scrutiny from investors. American banks have made loans to European ones. Some have also written credit insurance on the debt of European institutions and troubled nations like Greece. So if a default were to occur, some banks here would be on the hook.

Last week, officials at Morgan Stanley worked overtime trying to calm investors about the bank’s exposure to Europe. The company had $39 billion in exposure to French banks at the end of last year, not counting hedges and collateral. (Some analysts argue that the amount today is far lower, and at the end of the week, Morgan Stanley appeared to have relieved investor fears.)

Whatever the case, American banks have been writing more credit insurance lately. As of the end of June, some 34 federally insured commercial banks had sold a total of $7.5 trillion of credit protection, on a notional basis, according to the Comptroller of the Currency. That was up 2.3 percent from the end of March.

To be sure, these figures represent the total amount of insurance written and do not reflect other offsetting trades that bring down these banks’ actual exposure significantly.

For investors, the challenges in trying to assess the true exposures are real. Many of the risks in these institutions are maddeningly hard to plumb, and open to a range of interpretations. The fact is, investors must deal with significant gaps in the data when trying to analyze a bank’s exposure to credit default swaps. Even the people who set accounting rules disagree on how these risks should be documented in company financial statements.

A recent report by the Bank for International Settlements noted: “Valuations for many products will differ across institutions, especially for complex derivatives which may not trade on a regular basis. In such cases, two counterparties may submit differing valuations for valid reasons.”

Investors, therefore, have to trust that the institutions are being appropriately rigorous.

To compute the fair value of derivatives contracts, financial institutions estimate the present value of the future cash flows associated with the contract. On this part, everyone agrees.

But there are two subsequent steps in the valuation exercise that can produce wide variations on an identical exposure. First is the manner in which an institution offsets its winning and losing derivatives trades to come up with a so-called net exposure. Accounting rule makers disagree about the right way to approach this process.

Standard setters in the United States allow an institution to survey all the contracts it has with a trading partner and compute exposure as the difference between winning trades and losing ones.

International standard setters have taken a different view. They have concluded that investors are better served by knowing the gross figures of all of an institution’s trades, both the profitable ones and the money losers. Those favoring this approach say it gives investors more information and greater insight into the risks on the books, like how concentrated the bank’s bets are.

A recent report from the Bank for International Settlements illustrates how different the exposures can be, depending on which approach is used. Posing three hypothetical examples, the report noted that while the gross values of various derivatives totaled $41, the same trades dropped to $17 after netting, as is allowed in the United States.

THE second area where investors must rely on institutions to do the right thing involves the collateral that has been supplied to secure derivatives contracts. Banks reduce their exposure to a possible loss by the amount of collateral they have collected from a trading partner.

But is the collateral solid? Is the bank valuing it properly? Can it be located quickly? This, again, is a gray area.

The B.I.S., in its most recent quarterly review, highlighted these challenges. It said that gleaning information about collateral was difficult, and that arriving at a proper valuation was, too.

Further problems arise when it comes time to pay off a bet in a bankruptcy and close out one of these trades. At such a moment, liquidating collateral can put pressure on other positions carried by an institution, the B.I.S. noted. It is unclear whether institutions’ portfolio and collateral valuations reflect this reality.

Some investors who have been worrying about potential losses associated with European banks may have taken comfort in the results of financial stress tests conducted earlier this year by the Committee of European Banking Supervisors. Of the 91 top European banks tested — accounting for 65 percent of bank assets — only seven failed the toughest measures.

But, as an August report by Dun Bradstreet pointed out, these tests were not as stringent as they might have been. They only assessed the risks posed by deteriorating assets in banks’ trading accounts. The tests did not measure those assets carried in the so-called held-to-maturity accounts.

“In order to give a more adequate picture of European financial sector risk beyond the short term,” Dun Bradstreet said, “we believe the hold-to-maturity bonds should have been included in the stress tests.” There is clearly a great deal that investors do not know about exposures to Europe, notwithstanding the assurances from Mr. Geithner and others. Three years ago, investors were ignorant of the risks in faulty mortgage securities. If we’ve learned anything from that episode, it’s that what you don’t know can, in fact, hurt you.

Article source: http://feeds.nytimes.com/click.phdo?i=9b1b79f44f9066654b87443fc873b02d

Filed Under: Economy News Tagged With: , ,

DealBook: Mack to Step Down as Chairman of Morgan Stanley

September 16, 2011 by Leave a Comment

7:42 p.m. | Updated

Morgan Stanley’s chairman, John J. Mack, will step down at the end of year, paving the way for the company’s chief executive, James P. Gorman, to take on that role as well.

The bank announced Mr. Mack’s retirement late Thursday morning shortly after its board met by telephone to vote on the transition.

Revolving Door
View all posts

Mr. Mack, a former chief executive of the company, has been chairman since early 2010. He is expected to retain a senior advisory role. He is working on a book about leaders and his years on Wall Street, which is scheduled to be published next September by Simon Shuster.

Mr. Mack, a graduate of Duke University, is expected to join other corporate boards. He already serves on the boards of a number of nonprofit organizations and is chairman of the panel of economic advisers for Jon M. Huntsman Jr., a Republican presidential candidate.

The decision to have Mr. Gorman succeed Mr. Mack as chairman was widely expected.

Mr. Mack, 66, is one of Wall Street’s best-known figures. He worked at Morgan Stanley for years, rising from bond salesman to become the company’s president. After a long-running dispute with Morgan Stanley’s then-chief executive, Philip J. Purcell, he left the company in 2001.

He soon resurfaced at Credit Suisse, which named him chief executive of the Credit Suisse First Boston investment bank, and later co-chief executive of the parent company, the Credit Suisse Group.

At Credit Suisse, he lived up to his nickname “Mack the Knife,” drastically eliminating jobs and cutting costs. But the relationship, in the end, was ill-fated. At one point he proposed merging Credit Suisse First Boston with another investment bank. The Swiss bank’s board disagreed, and his contract lapsed in 2004.

In 2005, after an uprising at Morgan Stanley forced Mr. Purcell to step down, the board asked Mr. Mack to return as chief executive. He received a standing ovation when he walked into the trading floor on his first day.

Yet his record as Morgan Stanley’s leader was mixed. He made riskier bets after returning to the firm, giving it some of its former swagger, but he was unable to pull back in time in 2007 and 2008 as the New York bank sustained significant losses.

During the financial crisis, Morgan Stanley required $10 billion in emergency support from the federal government, as well as a $9 billion investment by the Japanese bank Mitsubishi UFJ Financial Group to survive. Mr. Mack, however, received credit for negotiating the Mitsubishi deal, persuading the Japanese bank to move ahead with the partnership despite the difficult environment. Morgan Stanley repaid the government bailout money in 2009.

Mr. Gorman has been running the day-to-day operations of Morgan Stanley since 2010. He has been trying to revive the company’s fortunes, reducing risk and rebuilding units that were injured during the credit crisis.

He has received credit from analysts for his efforts, but Morgan Stanley’s stock, like that of other financial companies, continues to languish. Its shares closed Thursday at $16.59, up $1.11, but down from the $29.60 when Mr. Gorman became chief at the start of 2010. When Mr. Mack took the helm in 2005, Morgan Stanley’s shares were trading above $43.

Morgan Stanley’s move to combine the chief executive and chairman roles is likely to raise eyebrows among corporate governance watchdogs. They typically encourage companies to have a nonexecutive chairman, which they say gives the board a more independent voice.

Article source: http://feeds.nytimes.com/click.phdo?i=560267ce063b087d1d12abfbb638413c

Filed Under: Business News Tagged With: , ,

DealBook: McGraw-Hill Explores Education Spinoff or Sale

August 17, 2011 by Leave a Comment

Standard Poor'sJustin Lane/European Pressphoto AgencyMcGraw-Hill may decide to focus on its financial information businesses like Standard Poor’s.

As part of its promise to review its holdings, McGraw-Hill retained an investment bank, Evercore Partners, in March to explore options for its education business, which has been a drag on the conglomerate’s highly profitable financial services division, people familiar with the matter told DealBook on Wednesday.

A spinoff of the division is more likely than a sale, said these people, who spoke on condition of anonymity. They cautioned that no final decisions have been made and that all options remain on the table.

Harold W. McGraw III, the company’s chairman and chief executive, has promised a major announcement in the second half of this year, and the company has hired a number of investment banks, including Morgan Stanley and Goldman Sachs, to assist with its review process.

Two activist investors, the hedge fund Jana Partners and the Ontario Teachers’ Pension Plan, recently bought a stake in McGraw-Hill, increasing the pressure on the company to do something. Jana Partners, which announced its stake this month, has met once with the company for about 40 minutes and plans to meet again next week, the people briefed on the matter said. So far, the conversation was cordial.

The Wall Street Journal earlier reported McGraw-Hill’s effort.

The pressure comes amid concerns that McGraw-Hill is moving too slow in its review, or that it may not take bold enough actions to prune its portfolio. The company’s other divisions, which include Standard Poor’s, have experienced double-digit growth in revenue and profit, while the education business has flagged.

McGraw-Hill is known for its education business, but it has suffered even more this year given state budget constraints and its impact on book purchases.

The education business and the financial services business at McGraw-Hill have different capital and operational requirements, and share few if any synergies, analysts have said. Some have noted that if the conglomerate were broken up through a spinoff, the company’s share price could soar by as much as 20 percent. The hiring of Evercore, however, indicates that the company was taking the review seriously before Jana Partners announced its stake alongside the Canadian pension plan.

With a market value of about $11.7 billion, McGraw-Hill is one of the biggest targets of activist investors so far this year. And with its rich history of publishing educational books that touch students from kindergarten to professional education, it may also be the best known. And though Mr. McGraw owns less than 4 percent of the company, McGraw-Hill has long been seen as a family business.

The company has made a few announcements already. In June, McGraw-Hill put its television stations on the block. In late 2009, the company sold BusinessWeek to Bloomberg for $5 million. Evercore advised McGraw-Hill on the sale.

Article source: http://feeds.nytimes.com/click.phdo?i=12bbf22c880a64782e4ef476fd3c3d7a

Filed Under: Business News Tagged With: , ,

Treasury Auctions for This Week

July 25, 2011 by Leave a Comment

The Treasury’s schedule of financing this week includes Monday’s regular weekly auction of new three- and six-month bills and an auction of four-week bills on Tuesday.

At the close of the New York cash market on Friday, the rate on the outstanding three-month bill was 0.04 percent. The rate on the six-month issue was 0.08 percent, and the rate on the four-week issue was 0.05 percent.

The following tax-exempt fixed-income issues are scheduled for pricing this week:

WEDNESDAY

Maryland, $596 million of general obligation bonds. Competitive.

San Diego Water Authority, $175.4 million of certificates of participation. Competitive.

ONE DAY DURING THE WEEK

Central Bradford, Pa., Progress Authority, $106.7 million of revenue bonds. RBC Capital Markets.

Cincinnati, $89 million of water system revenue and refinancing bonds. Morgan Stanley.

Columbus, Ohio, $289.5 million of various purpose general obligation bonds. Stifel Nicolaus.

Delaware Sustainable Energy Utility, $70 million of energy efficiency revenue bonds. Citigroup Global Markets.

Imperial, Calif., Irrigation District, $77 million of electric system refinancing revenue bonds. Goldman Sachs.

Maine Health and Higher Education Facilities Authority, $290 million of debt securities. Bank of America.

Maryland, $100 million of general obligation bonds. MT Securities.

Michigan, $50 million of debt securities. Bank of America.

North Dakota Public Finance Authority, $100.3 million of state revolving fund program bonds. Bank of America.

Parkrose, Ore., School District, $63 million of general obligation bonds. Seattle-Northwest Securities.

Pittsburgh, $95 million of general obligation bonds. Boenning Scattergood.

Texas Public Finance Authority, $287.9 million of general obligation refinancing bonds. Jefferies.

Texas, $136.5 million of unlimited tax school building bonds. Morgan Keegan.

Turlock, Calif., Irrigation District, $213.9 million of revenue refinancing bonds. Barclays Capital.

Article source: http://feeds.nytimes.com/click.phdo?i=10c446d9ce6ede0c838d00e9bd50aab7

Filed Under: Business News Tagged With: , ,

DealBook: Morgan Stanley Posts Loss That Hints at Recovery

July 22, 2011 by Leave a Comment

James P. Gorman, Morgan Stanley’s chief executive.Tomohiro Ohsumi/Bloomberg NewsJames P. Gorman, Morgan Stanley’s chief executive.

7:59 p.m. | Updated

At Morgan Stanley, even a loss can be a win.

Although the financial firm reported a second-quarter loss of $558 million on Thursday, three crucial divisions posted significant gains, a promising sign that the turnaround plan Morgan Stanley embarked on after the financial crisis was taking hold.

In its institutional securities business, which houses trading and banking, revenue rose almost 15 percent, to $5.19 billion. The division that houses global wealth management posted net revenue of $3.5 billion this quarter, compared with $3.1 billion a year ago, after letting go of poorly performing brokers and cutting costs. The firm’s asset management division’s revenue jumped $235 million, to $645 million.

But the gains failed to put the firm in the black for the quarter, largely because it was still paying for the decisions it made during the financial crisis to keep the firm alive.

In April, Morgan Stanley renegotiated its deal with the Japanese bank Mitsubishi UFJ Financial Group, which had provided it with a $9 billion cash infusion during the darkest hours of the financial crisis. This move, which converted Mitsubishi UFJ’s preferred stock into common stock, was seen as positive, but it came at a price, forcing the firm to take a one-time $1.7 billion charge.

The bank’s loss of 38 cents a share in this most recent quarter was hailed by analysts, who had expected the bank to lose 61 cents a share. The firm’s stock surged on the news, rising 11.4 percent, or $2.48, to close at $24.20. Before Thursday, the shares were down about 20 percent for the year.

Morgan Stanley reported total revenue of $9.3 billion in the second quarter, up 17 percent from a year ago. That gave the bank an important symbolic victory: it was the first time since 2008 that its quarterly revenue exceeded that of its rival Goldman Sachs. Earlier this week, Goldman reported a disappointing $7.3 billion in net revenue, its lowest figure since the financial crisis.

While Morgan Stanley’s results were encouraging, the bank was still “a work in progress,” said Michael Wong, an analyst with the financial research company Morningstar. “It’s too early for James Gorman to declare victory,” he said, referring to Morgan Stanley’s chief executive.

Morgan Stanley’s traders produced some stumbles, such as an interest-rate trade in June that reportedly lost the firm tens of millions of dollars. But gains from other trades offset those losses, and the firm’s overall trading revenue climbed 4 percent over year-ago levels, to $3.5 billion.

Morgan Stanley’s investment banking team, traditionally a strong suit, also improved, and was in on some of the quarter’s biggest deals, including the public offerings of LinkedIn, Groupon and Zynga. These deals helped push investment banking revenue to $1.5 billion, from $885 million a year ago. Underwriting revenue increased 57 percent in the period, to $940 million. Revenue from Morgan Stanley’s advisory division also improved, jumping 85 percent, to $533 million. That unit represented BJ’s Wholesale in its deal to sell itself to a group of private equity firms for $2.8 billion. It also worked with Capital One Financial, which bought ING’s American online banking group for $9 billion in June.

One of Mr. Gorman’s top priorities since becoming chief executive in January 2010 has been stabilizing the bank by beefing up its global wealth management and asset management groups, safer groups that fluctuate less with the ups and downs of the stock market. In January, he appointed Gregory J. Fleming to lead Morgan Stanley Smith Barney, the firm’s wealth management arm.

The bank also took steps this year to improve its asset management division, which is also run by Mr. Fleming, and which has historically been a sore spot for the firm. The division’s growth primarily stemmed from gains in the firm’s real estate investments and improvements to its core asset management business.

“This wasn’t about a bunch of trading gains,” said Ruth Porat, the firm’s chief financial officer, in an interview after Thursday’s earnings release. “We’ve been very focused on building up the client side and delivering content with a point of view.”

In Thursday’s conference call, analysts asked Mr. Gorman about elements of his long-term plan, including the firm’s capital reserves and the continuing integration of its Morgan Stanley Smith Barney brokerage division, which was formed in a joint venture with Citigroup in 2009.

“These are unquestionably challenging markets, but our focus is and must be on methodical and resolute forward progress with an ever-increasing eye on those things which we do control,” Mr. Gorman said.

Article source: http://feeds.nytimes.com/click.phdo?i=d763727b88c28db3fad7bdb7ad618c90

Filed Under: Business News Tagged With: , ,
« Previous Page
Next Page »