The resilience of the largest U.S. financial firms when tested against a recession more severe than the last one shows regulators have succeeded in pushing banks to build fortress-like balance sheets.
The Fed yesterday said 15 of 19 banks would be able to maintain capital levels above a regulatory minimum in an
As more details emerge about the massive $26 billion foreclosure settlement between the five biggest mortgage lenders and the states’ attorneys general, a growing number of borrowers are realizing that the deal will do little, if anything, to help them out.
Proponents of the settlement deal tout that roughly 1 million homeowners who owe more on their homes than their homes are worth are expected to have their mortgage balances lowered through principal reductions and another 750,000 would be able to refinance into loans with lower interest rates.
Foreclosure Fiasco
Rage grows over mortgage deal BofA to slash mortgage balances by $100,000 or more ‘How we’re losing our multi-million dollar home’ Foreclosures made up one in four home sales Uncle Sam wants you to rent out its foreclosed homes
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However, that’s only a fraction of the 11 million homeowners who are currently underwater on their homes, according to CoreLogic. And it’s also a mere sliver of the 3.5 million people who lost their homes to foreclosure over the past four years.
"The impact [of this settlement] will be small," said Mark Zandi, chief economist for Moody’s Analytics. "It’s not a home run; it’s a single."
Principal reductions will also only apply to certain borrowers who have mortgages still held by the five major lenders: Bank of America (, Fortune 500), CitiBank (, Fortune 500), Wells Fargo (, Fortune 500), J.P. Morgan Chase (, Fortune 500) and Ally Financial.
Borrowers who have a mortgage held by Fannie Mae (, Fortune 500) or Freddie Mac () — roughly half the market — are out of luck. Loans insured by the Federal Housing Administration are also ineligible.
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"If it’s offered to one group, it should be offered for all," said Stacy Ovendale from Seattle, who says her home has lost nearly 50% of its value. "When my mortgage was written up, I had to take whatever program was available to me at the time, which happened to be FHA. … It’s so frustrating because my loan is with Bank of America but since it’s FHA, my mortgage is current and I have chosen to be responsible, there is nothing they can offer me in the way of principal reduction."
Edward DeMarco, the director of the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, said he won’t allow the agencies to reduce borrowers’ loan balances because it is unfair to taxpayers and works no better than other foreclosure prevention methods, such as lowering interest rates, extending loan terms or delaying payments.
To Cat Gouldman, who lives in the D.C. area, it’s a raw deal. Like her mortgage, most loans are not retained by the original lenders. They’re sold to Fannie or Freddie best payday advance. Borrowers aren’t given a choice when their loans are sold.
Britney Spears’ home for sale — half off!
In fact, the mortgage Gouldman and her husband took out changed hands several times. First, it was sold to Wells Fargo, then to IndyMac and then it was taken over by Fannie. Her home has lost about half of its value, she said, and she’s upset that she won’t be able to get the same principal relief that other borrowers will receive.
"This is not the right message for the federal government to send out," she said. "Do homeowners walk into banks asking if their loan is backed by Fannie Mae? I don’t think so."
"I think it’s a travesty," said Derek Buckingham of Everett, Wash., who has a Freddie loan. "The government appears to still have no accountability for the problems they helped incentivize the banks to create."
Some borrowers may qualify for much larger reductions than others, as well.
Bank of America, for example, said it will slash mortgage balances by an average of $100,000 or more for roughly 200,000 homeowners. The goal, according to BofA, is to reduce the amount owed on the home to 100% match the current market value. Meanwhile, the other four major mortgage lenders, CitiBank, Wells Fargo, JPMorgan Chase and Ally Financial, are expected to reduce qualified borrowers’ principal to between 115% and 125% of the value of their homes — an amount that the Department of Housing and Urban Development said should average about $20,000.
For the homeowners who bought responsibly and made their payments faithfully, the real inequity comes in the fact that their tax dollars are paying for government-funded programs to prevent foreclosures while irresponsible borrowers accrue the benefits like the ones offered in the settlement.
8 multimillion-dollar foreclosures
"So, these people who are underwater get a break from the banks, and other hard working folks like us get screwed?" wrote Karthik Subramanian, of Aurora, Ill., in an email.
"What I think is unfair, is that people who didn’t overleverage their homes, who paid their mortgages on time, who didn’t borrow more than they could afford, even if the bank said they could afford more, the people who had good common sense and have done the right thing, are left with all of this business loaded on their backs," wrote Jamie Smith of Sonoita, Ariz.
That said, every homeowner could benefit from such bailouts if they help to turn around the ailing housing market, where home price declines and slow sales continue to threaten the fragile economic recovery. The settlement, however, may not help enough borrowers to do even that, said Moody’s Zandi.
Signs bearing a skull and crossbones dot the banks of a reservoir and canal near this town on the U.S.-Mexico border, but the fishermen standing in the reeds nearby ignore them, casually reeling in fish that are contaminated with toxic chemicals and banned for human consumption.
Some do it to quell their hunger, others to make some cash by selling the carp, catfish and gar in nearby neighborhoods.
“It’s a great little lake,” says Joe Garcia, 43, among those fishing here one day recently, where a carp with the highest levels of toxic PCB chemicals ever tested in a fish was caught years ago. He says he throws back his catch but a lot of others here can’t afford to pass up the meal.
The reservoir is one of thousands of sites along the U.S.-Mexico border where industry, pesticide use and population growth left hazards in past decades that still await solutions. Donna is among the worst _earning a place on the Environmental Protection Agency’s priority list _ and illustrates how slowly the government cleanup process moves and how those struggling for subsistence in poor areas like this sometimes do not wait.
Four years after the site made the priority list, the EPA plans to begin soon extensive sampling of the water, sediment and fish that could become the foundation for a cleanup plan.
But with limited funds and an elaborate process, the effort could take years, leaving authorities to educate a population that is often more concerned with daily survival than warnings of potential problems. Donna reservoir is surrounded by fields of swaying sugarcane and green leafy rows of celery. Workers who toil in migrant agriculture live in sparse neighborhoods of trailer homes and campers that border the canal. Some stubbornly believe they can cook the chemicals out of the fish, state environmental officials say.
“They just don’t tend to pay attention to that (sign),” said Juan Salazar, 41, who became so frustrated by the fishermen crossing his yard to reach the water that he erected a small fence.
“There are too many low-income families here that may make a living selling this stuff.”
State and federal officials have repeatedly gone door-to-door to warn residents since PCB contamination was discovered in 1993. Twice federal authorities used electric charges to kill more than 35,000 fish in the reservoir and the 6 1/2-mile canal that brings water from the Rio Grande. But the fish _ at least 22 species, including tilapia and largemouth bass _ repopulate.
Every day, people are drawn to the tranquil scene, where birds feed along the shores and fish constantly break the surface. Officials believe many area residents fish there to supplement their diet. But in the fatty tissue of the fish are polychlorinated biphenyls or PCBs, an industrial residue apparently emanating from something dumped in the canal years ago. Officials say it could be a submerged piece of machinery but haven’t been able to find it.
PCBs, typically found as oily liquids in electrical equipment, have been banned in the U.S. since 1979 after causing cancer in animal testing. Researchers believe the chemicals can lead to lower birth weights, suppress the immune system and increase the risk of cancer.
A carp caught in the Donna canal 19 years ago contained more than 1,500 times the limit of PCBs believed safe, the highest such reading ever. Members of the family who ate it had elevated PCB levels in their blood. Readings taken since then in the lake have been lower but still in the hazardous range.
However, the health impact on those eating Donna reservoir fish is unknown because no health survey has been conducted. A 2010 study by Texas Department of State Health Services estimated nearly 4,000 people living within a one-mile radius.
The EPA is planning a community meeting in late March to begin the process that could lead to a cleanup plan. One of the best-known PCB cleanup efforts _ on a much larger scale _ continues in New York’s Hudson River more than 27 years after it made the priority list. Tons of sediment have been dredged from the riverbed.
Though nearly a dozen people were interviewed near the reservoir for this story, only one admitted to eating the fish he caught, but he then declined to speak further _ there is a $500 fine for taking the fish, but not if you throw them back.
Officials said some men in the area tend to shrug off the danger but women have been more receptive. Rafael Casanova, EPA project manager, said a pregnant woman he talked to during a local canvas told him she had bought lake fish from someone selling it in the neighborhood.
When he described the health danger, “She was very impressed by that,” he said. “I felt good about that one.”
The shopping carts at Ross Dress for Less have long, skinny poles on them so they don’t easily fit through the door — and don’t face the risk of never finding their way back inside.
It’s one of a number of ways that the California-based off-price retailer, which is making its St. Louis area debut, tries to shave off costs.
So when the company officials boast about “no frills” stores, they mean it. The stores, which are similar in concept to T.J. Maxx and Marshalls, also have centralized checkouts and simple displays.
Ross says it’s able to offer 20 to 60 percent off department store prices because of making those choices as well as by negotiating with manufacturers and buying opportunistically.
The retailer’s first stores in the St. Louis market have gone into the former Linens ‘n Things locations in Chesterfield and Fairview Heights. The stores had a soft opening on Friday.
Fred Shuey, the company’s vice president for the Midwest region, said Ross is very excited about coming to St. Louis and sees a lot of room for expansion here.
“This is two of many” for the St. Louis region, he said at a breakfast for fashion bloggers.
So how many?
“A lot,” he said vaguely, smiling.
Most Ross Dress stores are in the West and the South. But the company is now making inroads to the Midwest, starting with 12 stores that opened last fall in Chicago, one of its first new markets in about a decade, Shuey said.
“When you look at a map, we’re in the form a smiley face – from Seattle to Princeton, New Jersey,” he said. “Now we’re going to fill in the rest of that smiley face.”
Ross is one of a number of discount-oriented retailers that have been growing at a time when many other retailers have been in hibernation or closing stores.
It has added more than 200 stores in the last few years and is now up to more than 1,040 locations, making it the largest off-priced store in the country.
Here’s a couple of other interesting factoids I picked up at the breakfast and during a store tour:
– Ross stores get merchandise deliveries five days a week. So they have a “treasure hunt” feel to them.
– Each store usually starts out the same in terms of the merchandise mix. But after about 60 days, they will begin altering the balance to cater to what has done well in that particular store.
– Only about 75 Ross stores have fine jewelry. Neither of the local stores do, but they do have costume jewelry.
– Women make up about 80 to 85 percent of its shoppers. So not surprisingly, the men’s section is fairly small.
CRESTWOOD COURT MAKEOVER
A bowling alley, a new movie theater, and restaurants could fill the space currently occupied by the mostly-vacant Crestwood Court.
The property’s owner, Centrum Properties, met with Crestwood city officials this week to chat about its redevelopment plans to turn the shopping center into an entertainment-based destination.
Petree Eastman, Crestwood’s city administrator, said the new tenants aren’t set in stone yet, but Centrum officials told the city that they are close to signing a couple of deals.
“It will not look or feel like the old Crestwood mall,” Eastman said. “I think parts of it will be razed to give it a fresh face-lift. I think they want to have more of a pedestrian outdoor component. But until they sign their various renters, we can’t know what it will look like definitively.”
She said Centrum folks indicated they hoped to bring a redevelopment plan with more details before the city at a board meeting the last week of March.
Of course, the mall already has an AMC movie theater. But it sounds like the movie theater being proposed as part of the redevelopment plans would be more upscale and modern.
DEALS SITE BACK UP
The St. Louis Daily Deals website – stlouisdailydeals.com – was indeed put back up on Thursday as its operators had promised.
“We are sad to close our website and thank you for your support of St. Louis Daily Deals,” the site says in bold letters.
It goes on to recommend that consumers print out any unused coupons in their account. But it doesn’t say anything about whether or not those vouchers will be redeemable since many vendors have said they will not honor them until St. Louis Daily Deals pays them what is owed to them.
The daily deal site recently shut down amid financial difficulties, leaving consumers and merchants in the lurch. The operators have pledged to settle up all of its accounts, but hasn’t given a timeline for doing so.
So we’ll have to wait and see if they follow through on their promise.
A storm of criticism in China over share listing plans by a company that sells tonics made with bear bile is highlighting the increasingly affluent country’s changing attitudes toward the environment and wildlife.
Reports Friday said dozens of well-known entertainers, writers and other celebrities signed a petition to the China Securities Regulatory Commission urging it to withhold approval for the initial public offering by Guizhentang, a Chinese medicines maker. The company is awaiting approval for a share listing in Shenzhen.
Hundreds of thousands of comments on “weibo,” the Chinese version of Twitter, blasted the company for extracting bile from bears.
Animal rights groups contend the practice of bear bile farming is cruel because the animals are confined to small cages and milked of bile through catheters inserted into fistulas, or permanent wounds, in their gall bladders.
They say that antibiotics used to counter chronic infections from the practice, and other contaminants in the bile, also pose a hazard to human health.
A photo on the front page of the state-run newspaper China Business News on Friday showed a satirical photo montage of a caged bear, its muzzle bloodied, with a picture of the head of the China Association of Traditional Chinese Medicines, Fang Shuting, quoted as saying that bears are “very comfortable” while the bile is extracted.
News reports cited Fang as saying China has 68 licensed bear farms and more than 10,000 bears farmed for their bile, which can cost up to 4,000 yuan ($635) a kilogram.
A spokesman for Guizhentang, who gave his surname as “Xu,” refused comment.
“It is not the right time for an interview now. We will let you know when we want to do an interview,” Xu said.
Officials at the CSRC said they could not comment on an IPO plan under consideration.
Animal rights are gaining increasing attention in China, with public figures like basketball star Yao Ming and actor Jackie Chan speaking out against eating shark fins and other customs that many view as cruel or a threat to endangered species.
The change reflects both a growing awareness of the need to protect the environment and wildlife and also increasing affluence among many ordinary Chinese who now keep pets, travel overseas and have changing attitudes toward traditions they may not have questioned in the past.
In recent years, for example, animal protection groups have staged mass releases of cats and dogs caged for shipment to restaurants and markets, where they are slaughtered for dishes considered to be delicacies or especially nourishing.
The petition to the stock watchdog from more than 70 celebrities and environmental protection groups seeks to block the IPO and urges the use of synthetic substitutes for bear bile, which is a digestive substance made in the liver and stored in the gall bladder.
The main active ingredient in the bile is ursodeoxycholic acid, or UDCA, which is thought to act as an anti-inflammatory and is used to treat gall stones and liver ailments. It is mainly taken from the Asiatic Black Bear, a protected but not endangered species in China.
Chinese media reports cited Fang as defending Guizhentang’s bile collecting practices in a news conference in Beijing, after visiting its facilities in southeast China’s Fujian province.
“Collecting bile is like turning on a tap. It’s painless, natural and simple. I didn’t see bears suffering in the process,” Caijing magazine quoted Fang as saying.
“After the bile is extracted, bears can still drink milk and honey and have fun in the farm.”
Fang argued that bear farms helped to protect wild bears by discouraging poaching, and that China must preserve its unique, ancient medicinal practices. Animal rights groups contend that poaching continues because buyers view wild bear bile as more potent.
Farmed bears live about four or five years, while those in the wild live up to 30, according to the Animals Asia Foundation, which has been working to close down bear farms and rescue the animals.
Spain’s three top banks said Tuesday they will set aside an additional euro6.1 billion ($8 billion) to meet a new government demand for all banks to boost their buffers against troubled real estate assets.
Banco Santander, Europe’s biggest bank by market capitalization, said it would make allowance for an extra euro2.3 billion ($3 billion) buffer to meet the government requirement. It said the amount will be partially covered through anticipated capital gains, including euro900 million ($1.2 billion) from the sale of Banco Santander Colombia.
Banco Santander SA said in a statement the new reserve comes on top of euro1.8 billion ($2.4 billion) charged against the bank’s 2011 financial results.
Spain last week ordered banks to raise euro50 billion ($65.6 billion) to protect themselves against troubled real estate assets from a domestic construction boom that went bust business cards.
The country’s second bank, Banco Bilbao Vizcaya Argentaria SA, said it would be setting aside euro1.4 billion ($1.8 billion) to boost its cover of toxic assets. BBVA said it would be able to absorb the total sum in 2012 thanks to its strong results.
CaixaBank SA, Spain’s No. 3 bank, will designate euro2.4 billion ($3.2 billion) in additional reserves.
Spanish banks have about euro175 billion ($229.5 billion) in troubled holdings. The bank reform require institutions to increase provisions for troubled assets from 30 percent to up to 80 percent of book value, creating the incentive for them to sell them off.
During her four years at Missouri State University, Rachel Kuenzler gravitated steadily toward the transition from college student to the full-time job that would signal her official entry into adulthood.
Her diligence paid off when, a week following graduation, Kuenzler found work.
And in a corporate environment - where colleagues the age of her parents outnumber twenty-somethings - Kuenzler was confronted with a dilemma that was left unaddressed by her college professors.
“I thought they wouldn’t take me seriously,” said Kuenzler, 25, an associate software engineer at MasterCard International operations center in O’Fallon, Mo.
The gap between neophytes and experienced employees has been around as long as people have been reporting to places of work.
Last year, MasterCard addressed with a “reverse mentoring” program that asks younger employees to, in effect, take older workers under their wings.
Peer-to-peer coaching is not unusual in corporate or even small business settings. But in most cases the programs call on seasoned employees to impart the wisdom of experience to younger colleagues.
MasterCard, in a concerted effort to retain and promote its younger workers, provided them with an opportunity to share their thoughts and observations on the workplace environment.
The coaching program at MasterCard may be reversed, but the strategy remains the same, said Rik Nemanick, an adjunct instructor at Washington University and a principal with The Leadership Effect, a St. Louis business consultancy. He has developed and facilitated coaching programs at Anheuser-Busch, Monsanto and other area corporations.
Mentoring programs help firms identify and develop existing talent, accelerate professional growth, nurture company loyalty and retain valuable employees, Nemanick said in a recent presentation to the St. Louis chapter of the Human Resource Management Association.
“When talented individuals reach the juncture when they might leave, it’s good that they have someone they can go to - someone they trust to discuss the situation,” he said.
At Monsanto, experienced technology division employees have tutored younger workers since 2003. The program began with 30 matches. This year, there are 70 selected from a pool of 150 applications.
“It has become part of the developmental culture within the organization,” Monsanto executive Maggie Morris told the human resources organization.
The reverse mentoring at MasterCard matched Kuenzler with Keith Martin, a 46-year-old team leader who joined MasterCard 20 years ago. The program placed 18 younger mentors with 11 supervisors.
Kuenzler saw the two-way conversation as an avenue to help Martin, and by extension other MasterCard supervisors, understand the conditions young employees seek in order to advance themselves along with the interests of the company.
“Younger employees like more openness, they are tech savvy and they don’t necessarily want to always be in meetings,” said senior human resources business partner Wanda Davega.
For example, Kuenzler and Generation Y prefer open work spaces that encourage collaboration.
Whereas Martin is admittedly more inclined to hole up in a cubicle.
Martin wasn’t exactly venturing into foreign territory when his monthly lunch meetings with Kuenzler began about a year ago - he has a daughter slightly older than his mentor.
But their meetings highlighted to him the difference between being a parent and being a colleague or supervisor.
He learned that the young people now moving into the workforce have little interest in easing into the corporate whirlwind.
“They like to move at a quick pace and effect change,” Martin said. “They basically want to jump right into the fire. They don’t want to hold back or want to hear, ‘Why don’t you wait three months to find your way around.’”
Nemanick traces the roots of the mentoring movement to a commitment to furthering the careers of minority employees at large and small businesses alike.
As the success of the programs became evident, many companies made the initiatives available to all workers.
In light of a Millennial Branding survey that this month revealed that young, recent hires comprise only 7 percent of the workforce at Fortune 500 companies, the opportunity to learn from a mentor is especially attractive to young people.
“It shrinks the big organizations,” Nemanick pointed out. “It crosses boundaries that (employees) wouldn’t normally cross.”
Its success in O’Fallon prompted MasterCard to offer reverse mentoring to employees at its global headquarters in Purchase, N.Y.
Eighteen months into her first job, Kuenzler already has a sense that her monthly meetings with Martin are making a difference.
She recently learned of plans to open her workspace by removing the wall of the over-sized cubicle she shares with several other young employees.
More important, to Kuenzler, are the chats with Martin that have brought about the removal of a more symbolic wall.
“Being able to share our thoughts with supervisors, getting their take and seeing that they are taking notes and listening, I’m already seeing a difference,” she said.
It’s been three months since MF Global became the eighth-largest bankruptcy in U.S. history. Did anyone see this coming?
Well, a few people had some idea, and a congressional subcommittee heard from them on Capitol Hill Thursday.
Michael Roseman, MF Global’s former chief risk officer, warned early of the dangers in the firm’s massive bets on troubled European debt. He clashed with ex-CEO Jon Corzine over the strategy before being replaced early last year by Michael Stockman, who also appeared at the hearing.
"I discussed my concerns about the positions and the risk scenarios with Mr. Corzine and others," Roseman told the subcommittee. "However, the risk scenarios I presented were challenged as being implausible."
Under questioning, Roseman said he believed his views on risk "certainly played a factor" in the firm’s decision to dismiss him.
MF Global () filed for bankruptcy on Halloween following a frantic week in which executives including Corzine, the former CEO and an ex-governor and senator from New Jersey, attempted to offload assets and sell the business.
The firm had come under intense pressure in the previous days after its $6.3 billion investment in European debt came to public notice. Trading partners called for increased margin payments and clients took their business elsewhere, leaving the firm scrambling for cash to meet its obligations.
"It almost looks like that they took Mr. Roseman out and replaced Mr. Roseman with a ‘yes man,’" Rep. Stephen Fincher said.
Stockman responded that he had initially signed off on the European bets, but later raised concerns and recommended bringing the firm’s risk down in July of last year.
Corzine, for his part, has acknowledged pushing the aggressive European strategy after arriving at MF Global in 2010, anxious to take it to the ranks of Wall Street’s elite.
The investments themselves didn’t actually lose money, as Corzine noted in Congressional testimony in December. None of the bonds MF Global held came from countries that have defaulted and all were set to mature before 2013. But Europe’s precarious finances and the massive leverage MF Global took on spooked investors and ultimately helped doom the firm need a personal loan with bad credit.
While an examination of MF Global’s risk management may have been the main focus of Thursday’s hearing, for the firm’s former customers, the bigger question is what happened to their money.
Customer funds at futures brokers like MF Global are supposed to be protected even in the event of a bankruptcy. In MF Global’s case, however, staffers were unable to account for roughly $1.2 billion in customer money that is now suspected to have been unlawfully appropriated for the firm’s own purposes.
Ratings agencies under fire: Others facing scrutiny Thursday were rating agencies Moody’s and Standard & Poor’s, which waited until just days before MF Global’s bankruptcy to flag its European exposure even though the firm had disclosed it back in May.
By the time the rating agencies acted, the bets were already sparking concern among MF Global’s trading partners. The downgrades then sharply acclerated the firm’s downward spiral.
"[T]he abruptness of the downgrades and the suddenness of MF Global’s collapse raise questions about why the credit rating agencies did not consider MF Global’s exposure to European sovereign debt until late October," the House committee said in a memo last week.
Also appearing Thursday was James Gellert, head of the smaller ratings agency Rapid Ratings International, which maintained a grim outlook on MF Global long before its larger counterparts did. Gellert noted in his testimony that MF Global’s business model had been deteriorating for several years prior to its failure, and that the new risks in the European strategy only made its situation more precarious.
"Had MF Global offered a lower risk foundation, MF Global might have been able to withstand the failure of the new business strategy," Gellert said. "As it was, Mr. Corzine inherited an unhealthy company and made it worse by some high-stakes gambles."
PC sales didn’t have a happy holiday sales season, but you wouldn’t know it from the strong earnings posted by Microsoft and Intel.
The PC is struggling — last quarter, shipments fell 6% from the year-ago period, according to research firm Gartner — as tablets and smartphones grab market share.
But both computing giants reported earnings that beat Wall Street estimates. They chalked up softness in PC sales not to obsolescence, but to a worldwide hard drive shortage caused by massive floods in Thailand in November.
The good news on earnings boosted shares of both companies early Friday. Microsoft’s stock rose 2.6% in premarket trading, while shares of Intel edged up 0.7%.
Microsoft earned a record 78 cents per share on record sales of $20.89 billion for the second quarter of its fiscal year.
Despite the strong overall showing, Microsoft (, Fortune 500) felt the pain of the lackluster PC market in its Windows division. Its sales fell 6% over the year to $4.74 billion.
"It’s difficult to say with any sort of certainty" whether PC sales will pick back up when the hard drive supply recovers, said Lisa Nelson, Microsoft’s investor relations director. "But the market should benefit from it."
On a conference call after the earnings release, Microsoft executives said the hard drive shortage will affect sales at least through the current quarter.
The call also revealed that netbooks — essentially small, low-powered laptops — now represent just 2% of the PC market. A year ago, they comprised 8%.
Executives dodged most questions about the upcoming, tablet-optimized Windows 8. The company revealed at a trade show earlier this month that a beta version will be released in late February.
Strength in Microsoft’s other sectors made up for PC weakness.
The Microsoft unit with the strongest sales remains the business software division, which includes Microsoft Office and other software. The sector accounted for $6.28 billion of the company’s revenue, though it gained only 3% over the year.
Office 2010 has sold more than 200 million licenses in the 18 months since its launch easy payday loans.
Gaming systems were also a bright spot, as Microsoft’s "entertainment and devices" sales jumped 15% over the year to $4.24 billion. To date, Microsoft has sold about 66 million Xbox 360 consoles and 18 million sensors for its motion-controlled Kinect system.
Nelson said Xbox now commands 46% of market share for gaming consoles.
But Microsoft said on the conference call that the overall console market "is softer than previously expected."
The "server and tools" area also did well, posting a sales increase of 11% to $4.77 billion. That’s the seventh consecutive quarter of double-digit growth, Nelson said.
Intel beats the street: Intel beat Wall Street estimates with fourth-quarter earnings of 68 cents on sales of $13.9 billion — in line with its own downgraded forecast.
Intel (, Fortune 500) sharply cut its sales forecast last month because of the hard drive shortage. Left without that supply, PC makers scaled back their inventories — which meant they were buying fewer semiconductors from Intel.
But sales at Intel’s "PC client group" were strong, rising 17% over the year to $9 billion. Growth in emerging markets was the main driver.
CEO Paul Otellini cited ultrabooks as one of the company’s biggest opportunities for growth in a press release. Ultrabooks are extremely light-weight notebook PCs that have long battery life and almost as much power as a full-sized laptop.
At the Consumer Electronics Show in Las Vegas earlier this month, Intel showcased several upcoming ultrabooks that will run on its "Ivy Bridge" 22-nanometer chips.
In other tech earnings news on Thursday, Google (, Fortune 500) announced profit and sales that rose from year-ago results but badly missed Wall Street’s forecasts. IBM (, Fortune 500) posted earnings that topped estimates.
Spain’s Parliament approved the new conservative government’s first austerity measures Wednesday, which aim to rein in the country’s swollen deficit with euro8.9 billion ($11.5 billion) in spending cuts.
The measures, which also include income and property tax hikes, were approved by 197 deputies in the 350-seat lower house, where the ruling Popular Party has an absolute majority of 185 seats after a landslide election win in November.
Finance Minister Cristobal Montoro said the measures were severe but necessary, owing to what he called the mismanagement of the economy by the former Socialist government.
“The economy is stopped, we’re on the verge of a recession and the accounts are unbalanced as a consequence, among other things, of the deplorable decisions taken by the former government, which only made the situation worse,” Montoro told lawmakers.
Spain is battling to avert being dragged further into a debt crisis that has already forced Greece, Ireland and Portugal to seek financial bailouts.
In 2010, Spain began to emerge from a near two-year recession triggered by the collapse of a property and construction bubble that had fueled growth for nearly a decade. The country now has a 21.5 percent unemployment rate _ the highest in the eurozone _ and Economy Minister Luis de Guindos said recently the economy would slide back into recession early this year with the last quarter of 2011 and the first of 2012 both registering negative growth.
Montoro accused the former Socialist government of deliberately hiding figures that showed that Spain’s deficit for 2011 would be 8 percent of national income, and not 6 percent as the Socialists had claimed easy to get unsecured personal loans. He said the deviation represented an estimated euro20 billion ($25.4 billion) “black hole.”
However, Prime Minister Mariano Rajoy has acknowledged that the deficit of regional governments, most of which are run by his own conservative party, was responsible for 75 percent of the deviation.
Other measures in the austerity package include a freeze on civil servants’ salaries and on practically all government hiring. Pensions, however, are to be increased by 1 percent, the only area of spending to rise. Taxes on income and property will also be raised but only for two years.
Treasury Minister Cristobal Montoro said the tax increases will be progressive, with the wealthiest paying more and that the impact on lower-income earners will be minimal.
The government projects that the tax increases will bring in euro6.2 billion ($7.9 billion) on top of the euro8.9 billion saved on the spending cuts.
The package was part of an extension of the 2011 budget because the last government did not pass one for 2012. More austerity measures are expected when the government presents its 2012 budget by the end of March.