Reuter site - In Facebook IPO, bankers seek prestige over fees

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In Facebook IPO, bankers seek prestige over fees

Fri, Jan 27 17:15 PM EST

By Lauren Tara LaCapra

(Reuters) - Facebook's initial public offering is likely to set a new standard for how low investment banks are willing to go on advisory fees to win big business.

The world's largest online social network is expected to tap public markets for $10 billion in the coming months in an offering that will value the company at up to $100 billion, according to sources familiar with the planned IPO. It will be one of the biggest U.S. market debuts ever, and a prized trophy for the investment bankers seeking to win lead advisory roles.

That has set up a fierce competition on Wall Street, particularly between the presumed front-runners Morgan Stanley and Goldman Sachs Group Inc, which may offer their underwriting services for as little as 1 percent of gross proceeds, bankers and industry observers said.

That would be far less than the 7 percent fee that smaller deals typically fetch, or the 2 or 3 percent that large deals tend to command.

"The Facebook IPO will be iconic," said James Montgomery, chief executive of San Francisco-based investment bank Montgomery & Co, which advises tech companies on mergers, acquisitions and private placements.

Facebook can easily negotiate a 1 percent fee for the entire group of investment banks that will peddle its shares, Montgomery said, "much to the chagrin of the underwriters."

Such a low fee is practically unheard of for investment banking deals, apart from the offerings of bailed-out companies General Motors Co, American International Group Inc and Ally Financial Inc, which sold shares held by the U.S. government in the aftermath of the financial crisis.

But Facebook has several advantages that will allow the company to haggle for a lower fee: it will be an easy sell as hoards of investors are keen to jump on the social media trend, and even a 1 percent fee would reap $100 million in revenue for investment banks, sending a lead advisor to the coveted No. 1 spot on IPO league tables.

"There's no other IPO like this," said Lee Simmons, a tech specialist at Dun & Bradstreet. "It's kind of the 800-pound gorilla for the tech sector."

The Wall Street Journal reported that Facebook plans to file IPO documents with U.S. securities regulators as early as Wednesday, and is close to picking Morgan Stanley as the lead underwriter.

The typical IPO that raises less than $500 million incurs a 7 percent fee -- what's known as "the 7 percent solution." But as IPOs grow in size, the fee percentage shrinks.

Investment banks usually earn fees of 4 percent to 5 percent on IPOs of more than $1 billion, but deals from Silicon Valley tend to carry a premium. U.S. tech IPOs of at least $1 billion carried an average fee of 5.8 percent from 2000 to 2012, on average, according to Thomson Reuters data.

In the case of Facebook -- whose T-shirt-wearing, 27-year-old chief executive, Mark Zuckerberg, is said to appreciate status updates more than stock brokers -- it's unlikely advisors will be able to command the standard rate.

"These Valley types think this whole process could be automated and they don't have to pay 7 percent to these flashy, French-cufflink-wearing Wall Street types," said Eric Jackson, founder and managing member of Ironfire Capital, a technology-focused hedge fund, who has interacted professionally with executives at Facebook and other social-media companies.

PRICING DILEMMA

Facebook's offering will be the largest ever IPO from Silicon Valley, as well as the largest global high-tech IPO since the dot-com bubble burst. The most recent U.S. social-media IPO, Zynga Inc, raised just one-tenth of the proceeds Facebook is hoping for.

Winning a lead advisory role on Facebook has become a make-or-break contest for tech bankers such as Goldman's George Lee, Morgan Stanley's Michael Grimes and Credit Suisse's Bill Brady.

Morgan Stanley and Goldman Sachs have been in communication with Facebook for months and already offered pitches to its executives in hopes of becoming lead adviser, according to sources briefed on the meetings.

Wall Street is now waiting to hear who will win the coveted "lead left" title, referring to where the top underwriter's name will appear on the IPO prospectus.

"Facebook is one of the most well-known brands around the globe," said George Papaioannou, a business professor at Hofstra University who has studied underwriting competition among investment banks. "The underwriters will have to do very little convincing to investors, and that gives Facebook a huge negotiating advantage."

Investment banking fees are not usually the primary concern for IPO candidates, who must nail down the right offering price and sell shares to the right mix of investors, Papaioannou said.

If the offering price is too high, the company and its underwriters risk burning IPO investors. If the bar is set too low, the stock issuer risks leaving money on the table. And if the mix is not right -- with more short-term traders than long-term investors -- a stock can become highly volatile in the days and weeks following its debut on an exchange.

Zynga, which makes some of the most popular online games that are played on Facebook, is a prime example. Co-managed by Goldman and Morgan Stanley, the IPO was priced at $10 a share in mid-December. IPO investors watched the stock fall 5 percent on the first day of trading. Zynga was quoted at $9.72 on Friday.

Similarly, online coupon-deals site Groupon Inc priced its IPO at $20 a share on November 4, but its shares fell as much as 26 percent in the first two weeks of trading. The stock was trading at $19.78 on Friday. Goldman, Morgan Stanley and Credit Suisse were co-managers of the IPO.

HANDLE WITH CARE

The other edge of the IPO sword can cut just as sharply for hot tech stocks.

LinkedIn Corp, which raised $353 million last May in an IPO priced at $45 a share, watched the stock soar as high as $122.70 on the first day of trading. LinkedIn shares have drifted down to the low $70 range, but the price range to date indicates that the company could have raised another $440 million to $1 billion in extra money if the IPO were priced more aggressively. Morgan Stanley was in the lead left position.

A sharp fluctuation in price soon after Facebook's IPO "would really embarrass Facebook and the underwriters," given the recent history of social-media IPOs, said Papaioannou

The Zynga, Groupon and LinkedIn deals garnered fees of 3 to 5 percent.

To be sure, the banks that are vying for a lead position on Facebook's IPO will have to do more than lowball on price. They will also have to convince the Palo Alto, California-based company that the deal will go off without a hitch.

As Facebook's size and influence have grown in recent years, its actions -- whether changes to privacy policies on its popular networking site, or its interactions with Wall Street bankers -- have come under intense public scrutiny.

Goldman's handling of a private sale of $1.5 billion worth of Facebook shares to wealthy clients last year stirred enough controversy that the bank was forced to limit the offering to non-U.S. investors.

That misstep may have cost Goldman some goodwill with Facebook, industry observers said. And, as a company that makes money from a broad base of users, it also forces Facebook to consider whether its IPO will give unfair advantages to well-heeled investors.

"Two reasons I think Morgan Stanley will get the lead: one, they have a great retail distribution platform with the Smith Barney franchise and, two, I don't think Facebook is overly happy with Goldman Sachs," said Jeff Sica, president and CEO of SICA Wealth Management, who has bought shares of Facebook in private, pre-IPO markets for clients.

Morgan Stanley was the top bookrunner for global high-tech IPOs last year, with $2.2 billion in global proceeds and 10.9 percent market share. It also led the pack in U.S. high-tech IPOs, according to Thomson Reuters data. Goldman Sachs was the runner up with $1.9 billion in global fees and 9.2 percent market share, and ranked No. 3 in U.S. high-tech IPOs behind JPMorgan Chase & Co.

A less measurable but equally important factor in obtaining the lead IPO position is whether bankers can connect with decision-makers at Facebook on a personal level.

"It's really going to be the banker that understands and is sensitive to Zuckerberg and the executive team's needs," said Dun & Bradstreet's Simmons. "Whoever does that successfully will get the bragging rights, the proverbial brass ring of tech IPOs."

(Reporting By Lauren Tara LaCapra, editing by Tiffany Wu)

Reuter site - Former Groupon sales reps countersue over tactics

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Former Groupon sales reps countersue over tactics

Fri, Jan 27 19:05 PM EST

By Jonathan Stempel

(Reuters) - Former Groupon Inc sales representatives sued by that company after leaving for Google Inc have filed a countersuit, claiming their former employer is pursuing "sham" litigation to keep them from joining rivals.

Groupon, which runs the world's largest online coupon website, had accused Nikki Dorough, Brian Hanna and Michael Nolan of taking confidential trade secrets when they moved to the world's largest Internet search company. Google launched its own daily deals business early last year.

The workers maintained that Groupon, by filing its complaint on October 21, was trying to illegally stifle competition and bully workers, as it prepared to "cash in" through its upcoming, eagerly awaited initial public offering.

"In its stop-at-nothing strategy to take itself public and further enrich its founders, Groupon has crossed the line," the workers said. "The message is clear: don't leave Groupon and if you do, don't attempt to use any of the skills and experience you may have developed while working for us."

The workers said they are in their mid-20s and decided independently of each other to join Google in the fall. Their countersuit was filed on Wednesday in the Cook County Circuit Court in Illinois, where Groupon had originally sued.

Julie Mossler, a Groupon spokeswoman, said: "We believe these counterclaims have no merit and we remain confident of our case."

Groupon went public in the first week of November in an offering that valued the Chicago-based company at $12.8 billion.

It was the largest IPO for a U.S. Internet company since Google went public in 2004 and followed Groupon's having spurned in 2010 a roughly $6 billion takeover by that company.

According to Groupon, the workers violated a clause in their employment agreements that barred them from working for a direct competitor for two years after leaving.

The workers believe that clause is unenforceable and unnecessary as none had access to confidential, sensitive or proprietary information.

They also contended that Groupon is using them as a "prop," having served a subpoena to Google not simply for information to help its case, but also to "obtain intelligence on a burgeoning competitor" in an effort to preserve market share.

"These are young people who are industrious, entrepreneurial and trying to earn a living, and Groupon is trying to prevent them from doing that," Steven Molo, a lawyer for the workers, said in a telephone interview. "The law does not allow it."

Dorough, Hanna and Nolan seek compensatory damages for interference with their current work, plus punitive damages. They also want their non-compete clauses to be voided.

According to industry tracker Yipit, Google's daily deals business, Google Offers, had $3.5 million of gross billings in November, while Groupon had $154 million.

Sierra Lovelace, a Google Offers spokeswoman, declined to comment on the lawsuit, noting that Google is not named as a defendant. Google is based in Mountain View, California.

Groupon shares closed up 2.6 percent on Friday, rising 51 cents to $20.04 on the Nasdaq. The company went public at $20 per share.

The case is Groupon Inc v. Hanna et al, Cook County Circuit Court, No. 11CH36731.

(Reporting By Jonathan Stempel; editing by Gary Hill and Andre Grenon)

Reuter site - Toyota finds way to avoid using rare earth: report

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Toyota finds way to avoid using rare earth: report

Mon, Jan 23 04:11 AM EST

TOKYO (Reuters) - Toyota Motor Corp has developed a way to make hybrid and electric vehicles without the use of expensive rare earth metals, in which China has a near-monopoly, Japan's Kyodo News reported.

Toyota, the world's top producer of fuel-saving hybrid cars such as the Prius, could bring the technology to market in two years if the price of rare earths does not come down, Kyodo said, citing a source familiar with the matter.

A Toyota spokeswoman said the company continues to research ways to reduce rare earth usage and has no time frame yet for commercialization.

Rare earth metals like neodymium and dysprosium are used in the powerful magnets in motors that power hybrid and electric cars, and demand is expected to surge as more of the environmentally friendly cars hit the market.

China produces more than 95 percent of the world's rare earth metals. Its efforts to limit exports, citing resource depletion and environmental degradation, have alarmed its customers and trading partners and have sent prices soaring.

Japan accounts for a third of global rare earth demand and is aiming to cut consumption, providing subsidies for recycling and investing in new ways to limit their use.

(Reporting by Chang-Ran Kim and Risa Maeda; Editing by Kim Coghill)

Reuter site - BlackBerry maker's CEOs hand reins to insider

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BlackBerry maker's CEOs hand reins to insider

Mon, Jan 23 07:51 AM EST

By Alastair Sharp

WATERLOO, Ontario (Reuters) - Research In Motion's Mike Lazaridis and Jim Balsillie have bowed to investor pressure and resigned as co-CEOs, handing the top job to an insider with four years at the struggling BlackBerry maker.

Thorsten Heins, a former Siemens AG executive who has risen steadily through RIM's upper management ranks since joining the Canadian company in late 2007, took over as CEO on Saturday, RIM said on Sunday.

The shift ends the two-decade long partnership of Lazaridis and Balsillie atop a once-pioneering technology company that now struggles against Apple and Google.

With RIM's share price plummeting to eight-year lows, a flurry of speculation that RIM was up for sale has enveloped the company in recent months. But investors have pointed to the domineering presence of Lazaridis and Balsillie as one reason a sale would prove difficult.

Activist investors have clamored in recent months for a new, "transformational" leader who could revitalize RIM's product line and resuscitate its once cutting-edge image. It remains to be seen whether RIM has found such a leader in Heins, analysts said.

"It's the first positive thing that they have done in months," said Charter Equity analyst Ed Snyder, even as he expressed caution over the choice of Heins, a longtime lieutenant of Lazaridis and Balsillie. "My feeling is that it's a figure-head change."

Michael Urlocker, an analyst with GMP Securities, questioned whether Heins had the right background for the job that faces him. "I am not sure that an engineer as new CEO really gets to the central issues faced by RIM," he said.

Lazaridis and Balsillie also gave up their shared role as chairman of RIM's board. Barbara Stymiest, an independent board member who once headed the Toronto Stock Exchange, will take over in that capacity.

The pair, who together built Lazaridis' 1985 start-up into a global business with $20 billion in sales last year, have weathered a storm of criticism in recent years as Apple's iPhone and the army of devices powered by Google's innovative Android system eclipsed their email-focused BlackBerry.

"There comes a time in the growth of every successful company when the founders recognize the need to pass the baton to new leadership. Jim and I went to the board and told them that we thought that time was now," Lazaridis said in a hastily arranged interview at RIM's Waterloo headquarters, flanked by Balsillie and Heins and with Stymiest joining via telephone.

DEPICTED AS ORDERLY TRANSITION

The executives were keen to paint the shuffle as an orderly transition on a succession plan mapped out at least a year ago, and not a retreat in the face of a plummeting share price, shrinking U.S. market share and criticism of their products.

Both Lazaridis and Balsillie - two of RIM's three largest shareholders with more than 5 percent each - will remain board members, with Lazaridis keeping a particularly active role as vice-chair and head of a newly created innovation committee.

Lazaridis said he plans to buy an additional $50 million of RIM shares on the open market.

In the group interview announcing the change, Heins said his most immediate concern is to sell RIM's current lineup of BlackBerry 7 touchscreen devices, deliver on a promised software upgrade for its PlayBook tablet computer by February, and rally RIM's troops to launch the next-generation BlackBerry 10 phones later this year.

"Their problems are deep-rooted, and it's going to take time," Snyder said.

In the longer term, Heins, previously one of RIM's chief operating officers, said he would push for more rigorous product development and place greater emphasis on executing on the company's marketing and development plans.

"We need to get a bit more disciplined in our own processes," he said in a YouTube video posted by RIM. "We are a great, innovative but sometimes we innovate too much while we are building a product." (https://www.youtube.com/watch?v=QUFwhpcrCTw)

Heins said RIM, which suffered a damaging outage of much of its network last year, has embarked on a global search for a chief marketing officer to improve advertising and other communication with consumers. Consumers now account for the majority of RIM's sales even though the BlackBerry built its reputation as a business tool.

For RIM critics, the focus on customers may seem long overdue. The company seemed blindsided by Apple's introduction of the iPhone in 2007 and was also slow to launch a competitor to the iPad. When its PlayBook tablet finally hit the market last spring, it was not equipped with RIM's trademark email service. The reviews were scathing, sales were anemic and the company has been forced to offer steep discounts.

Heins said it would be wrong of RIM to focus on licensing its software or integrated email package, a strategy that many analysts and investors have thought the company might pursue. Even so, the new CEO said the company would certainly be open to discussions of that nature.

Neither Lazaridis nor Basillie detailed any future plans outside RIM, with Lazaridis particularly eager to point out his still-active role as a confidante to the new CEO.

Both have other interests outside of RIM. Lazaridis donated hundreds of millions of dollars to set up an independent theoretical physics institute and also a quantum computing institute attached to his alma mater, the University of Waterloo. Balsillie heads a think-tank in international governance and long dreamed of owning a National Hockey League franchise.

(Reporting by Alastair Sharp; Additional reporting by Edwin Chan in Los Angeles; Editing by Frank McGurty and Janet Guttsman)

Reuter site - U.S. shuts Megaupload.com, hackers retaliate

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U.S. shuts Megaupload.com, hackers retaliate

Fri, Jan 20 10:33 AM EST

By Jeremy Pelofsky and Jim Finkle

(Reuters) - The U.S. government shut down the Megaupload.com content sharing website, charging its founders and several employees with massive copyright infringement, the latest skirmish in a high-profile battle against piracy of movies and music.

The Department of Justice announced the indictment and arrests of four company executives in New Zealand on Friday as debate over online piracy reaches fever pitch in Washington where lawmakers are trying to craft tougher legislation.

The movie and music industries want Congress to crack down on Internet piracy and content theft, but major Internet companies like Google and Facebook have complained that current drafts of the legislation would lead to censorship.

A Justice Department official said the timing of the arrests was not related to the battle in Congress.

New Zealand police on Friday raided a mansion in Auckland and arrested Megaupload founder Kim Dotcom, also known as Kim Schmitz, 37, a German national with New Zealand residency.

About 70 police, some armed, raided 10 properties and also arrested the website's chief marketing officer, Finn Batato, 38, chief technical officer and co-founder Mathias Ortmann, 40, both also from Germany, and Dutch national Bram van der Kolk, 29, who is also a New Zealand resident.

New Zealand police seized millions of dollars worth of assets, which included luxury cars such as a Rolls Royce Phantom Drophead Coupe, from the group, dubbed the "Mega Conspiracy" by prosecutors. They also seized more than NZ$10 million ($8 million) from financial institutions.

"The FBI contacted New Zealand Police in early 2011 with a request to assist with their investigation into the Mega Conspiracy," said Detective Inspector Grant Wormald from the Organised & Financial Crime Agency New Zealand.

"All the accused have been indicted in the United States. We will continue to work with the U.S. authorities to assist with the extradition proceedings," Wormald said in a statement.

The men appeared briefly in an Auckland court on Friday and were remanded in custody until Monday for a bail hearing.

"We have nothing to hide," Kim Dotcom said from the dock after his lawyer opposed media cameras in the court, reported New Zealand media.

HACKERS RETALIATE

Vocal critics of the U.S. Stop Online Piracy Act, or SOPA, and Protect IP Act (PIPA), quickly showed their opposition to the shutdown of Megaupload.com, with hackers attacking the public websites of the Justice Department, the world's largest music company Universal Music, and the two big trade groups that represent the music and film industries.

"The government takes down Megaupload? 15 minutes later Anonymous takes down government & record label sites," a member of Anonymous said via Twitter.

Representatives with the Justice Department and Recording Industry Association of America declined comment on the attacks. Officials with Universal Music could not immediately be reached.

Motion Picture Association of America spokesman Howard Gantman said his group was working with law enforcement to identify the attackers.

The Mega Conspiracy group was accused of engaging in a scheme that took more than $500 million away from copyright holders and generated over $175 million in proceeds from subscriptions and advertising, according to the indictment unsealed on Thursday.

"In exchange for payment, the Mega Conspiracy provides fast reproduction and distribution of infringing copies of copyrighted works from its servers located around the world," the indictment said.

U.S. Justice Department officials said that the estimate of $500 million in economic harm to copyright holders was on the low end and likely significantly more.

The allegations included copyright infringement as well as conspiracy to commit copyright infringement, conspiracy to commit money laundering and conspiracy to commit racketeering.

RACKETEERING, MONEY LAUNDERING

If convicted, the maximum penalties are 20 years for conspiracy to commit racketeering and to commit money laundering and five years for each count of copyright infringement and five years for conspiracy to commit copyright infringement.

The companies charged, Megaupload Ltd and Vestor Ltd, were both registered in Hong Kong and owned either in large part or solely by Dotcom. A lawyer who has previously worked with Megaupload was not immediately available for comment.

Megaupload has boasted of having more than 150 million registered users and 50 million daily visitors, according to the indictment. At one point, it was estimated to be the 13th most frequently visited website on the Internet.

Users could upload material to the company's sites which then would create a link that could be distributed. The sites, which included video, music and pornography, did not provide search capabilities but rather relied on others to publish the links, the indictment said.

Users could purchase memberships to the site to obtain faster upload and download services, the primary source of revenue. Material that was not regularly downloaded was deleted and financial incentives were offered for popular content, according to the charges.

The web page with the link to the copyrighted material would include advertisements, another source of revenue.

If copyright holders complained about a specific link to the website, prosecutors said that Megaupload.com would remove that link but scores of others existed to the same material, according to prosecutors.

Other material found uploaded included child pornography and terrorism propaganda videos, according to the indictment. The U.S. government's investigation began in March 2010.

(Reporting by Jeremy Pelofsky and Jim Finkle in WASHINGTON; Additional reporting by Diane Bartz and Yinka Adegoke, and Mantik Kusjanto in Wellington.; Editing by Gary Hill, Phil Berlowitz, Michael Perry and Mark Bendeich)

Reuter site - Rick Perry to drop presidential campaign: report

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Rick Perry to drop presidential campaign: report

Thu, Jan 19 09:40 AM EST

WASHINGTON (Reuters) - Texas Governor Rick Perry was poised to drop his run for the Republican presidential nomination later on Thursday, CNN reported, and he scheduled a news conference in South Carolina for 11 a.m. EST.

Perry entered the race in August and briefly was at the front of the pack of Republican candidates, but a series of gaffes and controversial statements during the campaign undermined his standing in polls. CNN cited two unnamed sources in saying Perry would drop his candidacy later on Thursday.

Perry's reported decision comes ahead of Saturday's Republican primary in South Carolina. Perry's poll numbers remain low in that conservative Southern state where he had hoped to revive his campaign.

Perry had roared past former Massachusetts governor Mitt Romney to take the lead in polls of the Republican candidates after entering the race.

His conservative views and support from the grassroots Tea Party movement had seemed to position him as a top contender in the race for the Republican nomination to take on Democratic President Barack Obama in the November 6 election.

But Perry, who had never previously lost an election, foundered after several poor debate performances in which he was hammered by his rivals over his immigration policies and for ordering that young girls in Texas be vaccinated for a sexually transmitted virus.

He was ridiculed after a major debate stumble in November when he could not remember one of the three government agencies that he had repeatedly said he would eliminate if elected president.

Turkey condemned as "unfounded and inappropriate" on Tuesday comments by Perry this week that the country, a close U.S. ally, is ruled by Islamic terrorists and questioning whether it should remain in the NATO alliance.

(Reporting By Will Dunham)

Reuter site - Asian firms may eye RIM platform; Samsung denies interest

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Asian firms may eye RIM platform; Samsung denies interest

Wed, Jan 18 00:51 AM EST

By Alastair Sharp and Miyoung Kim

TORONTO/SEOUL (Reuters) - Research In Motion is not on Samsung Electronics Co's immediate shopping list, but the ailing Blackberry maker may still be attractive to Asian smartphone makers looking to compete against Google's Android, the world's fastest growing mobile platform.

Samsung said on Wednesday it has no interest in buying RIM or licensing its operating system, refuting a tech blog report that Canada-based RIM was looking to sell itself to the South Korean technology giant.

Shares of RIM, which has long been the subject of takeover speculation with its stock valuation lingering at multi-year lows, jumped more than 10 percent on the blog report, but fell back after Samsung's denial.

Product delays and profit warnings have eroded confidence in RIM, once at the cutting edge of smartphone technology for business users, and its management.

But RIM, still valued at above $9 billion, may hold enough allure to interest Asian vendors like LG Electronics Inc, HTC and ZTE, which don't have their own platform, said a source at a major Asian handset maker.

"As we don't have our own platform, it's (RIM) an attractive option to look into and we're flexible about anything," said the source, who has direct knowledge of the matter, but who declined to be named as he is not authorized to talk to the media.

Samsung has its own platform called bada and is seeking to boost its presence by merging it with a platform backed by chipmaker Intel.

"We haven't considered acquiring the firm and are not interested in (buying RIM)," said Samsung spokesman James Chung, adding that Samsung had not been approached by the Canadian firm for a takeover and was not interested in licensing RIM's mobile platform.

The Boy Genius Report website cited an unidentified source as saying RIM co-Chief Executive Jim Balsillie was meeting with companies interested in either licensing its software or buying a part or all of RIM, with Samsung leading the pack.

After Samsung's denial, Nasdaq-listed RIM shares tumbled 5.3 percent to $16.55 in extended trading, after closing up 8 percent at a 6-week high of $17.47. The stock rose as much as 11.1 percent.

LICENSING DEAL?

Samsung may not be interested in buying RIM outright, but some analysts say that adding BlackBerry software may be a good fit with its strategy of bolstering software capability and adding corporate subscribers.

"We see RIM licensing BlackBerry 10 and charging $10 per device," Jefferies analyst Peter Misek said in a note, referring to RIM's operating system.

"Samsung and HTC would do this to gain access to RIM's subscriber base, diversify away from sole dependence on Android and create more enterprise exposure. BlackBerry 10 is effectively an Android derivative and, therefore, many bridges are possible."

Samsung has traditionally focused on growing its business from within and has no track record of major deals in recent years. In 2008, it withdrew a $5.9 billion unsolicited bid for flash memory card maker SanDisk due to the U.S. firm's deepening losses and uncertain outlook.

But it has since become more flexible on M&A as the hardware-focused firm seeks to boost its software capabilities to counter Apple and Google.

"It'd be helpful for Samsung or HTC to license BlackBerry OS so they can gain access to the corporate space," said Vincent Chen, an analyst at Yuanta Securities.

Shares in Samsung slid 1.1 percent in Seoul on Wednesday, underperforming the main KOSPI share index, which slipped 0.3 percent.

Jefferies' Misek said RIM could announce a deal within three months, and the appointment of a new chairperson could speed up the process. A spokesman for RIM declined to comment on the blog report.

Balsillie and fellow co-CEO Mike Lazaridis also share a role as board chairman, but, after pressure from investors, a committee made up of the rest of RIM's board is due to report this month on possible changes to the unusual structure.

RIM already turned down takeover overtures from Amazon.com Inc and other potential buyers because it prefers to fix its problems on its own, people with knowledge of the situation told Reuters recently.

RIM's shares have jumped nearly 40 percent since December 21, when Reuters reported such interest, but the stock is still down almost 75 percent from a year ago.

(Additional reporting by Clare Jim in TAIPEI; Editing by Frank McGurty, David Chance and Ian Geoghegan)

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Reuter site - Hulu challenges cable with first original drama

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Hulu challenges cable with first original drama

Sun, Jan 15 16:05 PM EST

By Yinka Adegoke

(Reuters) - Hulu, the popular online video service, has taken another step to becoming a full-fledged alternative to cable television by commissioning its first scripted original TV show to go live next month.

The new political documentary-style drama "Battleground" is set in Wisconsin and executive-produced by JD Walsh, Hagai Shaham and Marc Webb. It follows Hulu's first original documentary series Morgan Spurlock's "A Day In The Life."

The majority of Hulu's programming to date has been licensed from its parent companies, News Corp, Walt Disney Co and Comcast Corp's NBC Universal, as well as other program makers.

Andy Forsell, Hulu's programming executive, said Spurlock's show had been a success based on data it collected on its audience, but he declined to reveal the program's view counts.

Spurlock's series is being followed up with a second season and being joined by another six-episode documentary series called "Up to Speed" by Richard Linklater, who is perhaps best known for movies "Dazed and Confused" and "School of Rock".

The challenge for Hulu is to ensure it can generate a return on investment in expensive content like scripted drama, which is typically more costly than producing a documentary or reality show.

"We can make the economics work, I've got a budget for originals but there's not the same pressure as a traditional network since we don't have worry about filling airtime," Forsell said.

The original shows will be available on Hulu's free Web service rather than just to its paying Hulu Plus subscribers as the start-up increases its user base and builds its reputation for original programming. But Hulu Chief Executive Jason Kilar said the dual revenue model of advertising and subscription fees is key to Hulu's future.

"At scale, our model allows us to profitably pay content owners approximately 50 percent more in content licensing fees per subscriber when compared to other similarly priced online subscription services," Kilar said in a blog post on Friday.

PAYING SUBSCRIBERS

Hulu said on Friday it had more than 1.5 million paying subscribers at the end of 2011, and revenue grew 60 percent to $420 million.

Early last year, Kilar forecast that Hulu would generate around $500 million in revenue during 2011. The revenue miss was indirectly blamed on a "soft advertising market" in the second half of the year.

Like other Web companies trying to bring more TV shows and movies online, Hulu is in a race with rival Netflix Inc to buy and develop more content to add to and maintain its subscriber base.

Kilar said the company will spend around $500 million on content in 2012 covering new content acquisition, re-licensing existing content on the service and originals. It is an increase from the $375 million it said it spent last year.

Netflix, which has some 23 million U.S. subscribers, said last March it had secured exclusive rights to the 26-episode television series "House of Cards" a political thriller starring Kevin Spacey and directed by David Fincher.

It was reported last year that Netflix would spend around $100 million to produce the show.

Services like Netflix are increasingly being recognized as direct competition or replacements for premium cable channels such as Time Warner Inc's HBO and CBS Corp's Showtime.

(Reporting By Yinka Adegoke, editing by Maureen Bavdek)

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