Financial life in a big town

Officials in violence-wracked Bahrain began work Monday on proposed political reforms that include boosting the powers of parliament, but the steps were dismissed by an opposition leader as too little after more than eight months of clashes in the Gulf kingdom.

The package of changes would transfer some new powers to elected lawmakers, but leaves intact the sweeping controls of Sunni rulers. Bahrain’s majority Shiites began protests in February seeking more rights and demanding an end to the monarchy’s grip on the country’s affairs.

The reforms are likely to be approved, but they appear unlikely to ease a crisis that has left about 35 people dead and delivered a serious blow to the economy of the strategic island nation _ home to the U.S. Navy’s 5th Fleet.

The official Bahrain News Agency said the prime minister met with government officials to discuss the reform package. The final report will be submitted later for approval to Bahrain’s King Hamad bin Isa Al Khalifa.

The proposed reforms include allowing parliament to vet Cabinet ministers. They also call for a review of voting districts _ which Shiite leaders claim are gerrymandered to undercut Shiite political strength easy payday loans.

Shiite’s account for about 70 percent of Bahrain’s population, but say they have faced decades of discrimination such as being blocked from top political and security posts.

The main Shiite political party, Al Wefaq, walked out of national reconciliation talks in July. Months earlier, their 18 members in parliament had resigned en masse to protest crackdowns that included hundreds of arrests and Shiite workers purged from jobs.

The Wefaq leader, Sheik Ali Salman, scoffed at the proposed reforms as doing nothing to reduce the powers of the 200-year-old dynasty. He said the measures “keep Bahrain as a dictatorship, not a democratic state.”

“We can go and ask the people of Bahrain,” he told reporters. “Do they want a referendum to decide whether to have an elected government or not?”

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Sony Corp.’s movie studio has started a spat with theater owners, telling them in a recent letter that it will stop paying for disposable 3-D glasses in U.S. theaters next May. The decision could save it millions of dollars per movie, but consumers might have to pick up the tab.

Sony Pictures said in its letter that theaters could adopt a “guest ownership model” prevalent in Europe and Australia that charges patrons separately for the glasses, which they can re-use on future visits.

RealD Inc., one of the main suppliers of glasses, said a pair in Europe sells for about one euro, or around $1.36 at today’s exchange rate. Most patrons spend more than $3 on popcorn and sodas each, according to major theater chain Regal Entertainment Group, and the average 3-D movie already costs a few dollars more per ticket.

Some designer 3-D glasses cost more than $100 a pair.

The change would come ahead of the release of a couple of Sony’s own 3-D blockbusters next summer, “The Amazing Spider-Man” and “Men in Black III,” although some of Sony’s 3-D movies, including “Arthur Christmas,” come out before then.

Sony Pictures spokesman Steve Elzer said in a statement, “there are constructive ways to deal with the cost of 3-D glasses that will not adversely impact consumers, and can also help the environment.” He called on theater owners to come to the table to work out the issue.

Usually, such negotiations happen behind closed doors. In this case, Sony going public with its new policy didn’t sit well with theater owners. The nation’s largest cinema trade group, the National Association of Theatre Owners, said the unilateral policy change was “insensitive” to consumers in a weak economy.

Regal Entertainment Group on Wednesday threatened to cut the number of screens showing 3-D films if the move means it or its patrons will have to pay more.

“To the extent that Sony seeks to change the current model in a manner that shifts costs to exhibitors, we would be forced to evaluate this new economic model and program our screens accordingly,” said Regal CEO Amy Miles in a statement.

Theater association president John Fithian said Sony’s decision upends a six-year old practice of splitting the costs of the rollout of digital 3-D screens across the country high risk personal loans.

While movie studios have paid for 3-D glasses and the cost of digital projectors and equipment _ expecting to save on film printing costs in the future _ theaters have paid for 3-D add-on technology and labor costs.

The squabble comes amid changes in the movie business that have hurt studios’ profits. People are buying fewer DVDs and aren’t paying enough for Blu-ray discs, on-demand movie downloads, or online subscriptions to make up for the loss. Studios are trying to cut costs through layoffs and even smaller movie budgets.

Fithian said the belt-tightening shouldn’t result in passing the buck to theater owners or moviegoers. “It is nonsensical to say theater owners and our patrons should be paying for their mistakes in the home market,” he said.

It remains to be seen if other studios will follow Sony’s lead and stop paying for the glasses. Time Warner Inc.’s Warner Bros. said it was sticking with its arrangements with theaters for now.

“We are evaluating the situation,” said Chris Aronson, senior vice president of domestic distribution for News Corp.’s 20th Century Fox.

Representatives from Viacom Inc.’s Paramount, Comcast Corp.’s Universal and The Walt Disney Co. did not immediately respond to requests for comment.

One immediate result of the announced change was that RealD shares plunged $1.80, or 14.7 percent, to close at $10.42 in trading Wednesday. RealD supplies technology for about 90 percent of the 3-D screens in the U.S. and is a major supplier of the glasses, which made up about 40 percent of its revenue in the most recent quarter.

RealD spokesman Rick Heineman said the company is fine with any new model, including one in which consumers pay. He compared that system to buying headphones on an airplane. The core profit of the company comes through licensing its technology, he said.

Sony shares rose 12 cents to close at $19.34.

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Swiss bank UBS AG said Thursday it has discovered that unauthorized trading by one of its staff has caused an estimated loss of $2 billion, and warned it could result in a loss for the entire third quarter.

The announcement caused UBS shares to plummet 6.3 percent to 10.24 Swiss francs ($11.68) in early trading on the Zurich exchange.

The Zurich-based bank provided little information on the incident, saying it was still under investigation. But it said no customer money was affected.

“UBS has discovered a loss due to unauthorized trading by a trader in its investment bank,” it said.

“UBS’s current estimate of the loss on the trades is in the range of $2 billion,” the bank said. “It is possible that this could lead UBS to report a loss for the third quarter of 2011.”

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Global stocks fell Wednesday in a downbeat appraisal of a Franco-German summit that failed to persuade investors that a convincing fix to the eurozone’s spiraling debt crisis was imminent.

French President Nicolas Sarkozy and Germany Chancellor Angela Merkel called for greater economic and political unity among the 17 nations that share the euro.

But they failed to take the decisive actions the markets had hoped for, including committing to common eurobonds that would spread the risk for the sovereign debt or strengthening a new bailout fund.

The market reaction showed little confidence in the announcements, which came on the heels of weak growth in Germany, Europe’s largest economy.

“There was no talk about boosting the EFSF (European Financial Stability Facility) and not talk about eurobonds, all rather disappointing but not altogether surprising, given the political obstacles against them,” said Michael Hewson of CMC Markets. “The biggest worry remains the lack of economic growth in Europe.”

In Europe, Germany’s DAX was 1 percent lower at 5,931 while the CAC-40 in France rose a slight 0.05 percent to 3,232. Britain’s FTSE 100 of leading British shares was down 0.72 percent at 5,318.

Wall Street was poised for a fairly subdued opening later _ Dow futures were down 0.1 percent at 11,380 while the broader Standard & Poor’s 500 futures fell an equivalent rate to 1,192.

Compared to last week, when turmoil gripped financial markets in the aftermath of Standard & Poor’s downgrade of the U.S.’s credit rating and as Europe’s debt crisis threatened Italy and Spain, trading this week has been fairly subdued. Often, trading in the second half of August runs dry up until the U.S. return from the Labor Day weekend in early September.

In the currency markets, the most activity centered on the Swiss franc.

The Swiss franc was back in demand after the Swiss National Bank failed to peg the currency with the euro, as had been widely speculated upon in recent days. Instead, the bank decided to inject more of the Swiss currency into the money markets in its latest attempt to stem the export-sapping appreciation of the currency.

“The market was heavily anticipating something along the lines of a target or a foreign exchange floor, but ultimately the SNB simply expanded their current measures,” said Geoffrey Yu, an analyst at UBS.

By late morning London time, the euro was trading around 0.7 percent lower on the day at 1.1361 Swiss franc, while the dollar was 1.1 percent lower at 0.7873 franc.

Elsewhere, the euro was 0.3 percent firmer at $1.4427 while the dollar fell 0.3 percent to 76.55 yen.

Earlier in Asia, Japan’s benchmark Nikkei 225 index sank 0.6 percent to close at 9,057.26 as a strengthening yen dragged down the country’s vital export sector.

South Korea’s Kospi, which tumbled last week amid massive foreign selling, rose 0.7 percent to 1,892.67.

Mainland Chinese shares edged lower as investors fretted over possible monetary tightening measures and the debt problems among European countries using the euro common currency. The Shanghai Composite Index fell 0.3 percent to 2,601.26 while the Shenzhen Composite Index likewise slipped 0.3 percent to 1,163.87.

Hong Kong’s Hang Seng index rose 0.4 percent to 20,289.03, buoyed by Chinese Vice Premier Li Keqiang’s pledge to expand the role of Hong Kong as an offshore trading center for China’s yuan currency.

Oil prices rose further with the benchmark New York rate up $1.04 at $87.69 a barrel.

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Pamela Sampson in Bangkok contributed to this report.

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Internet radio station Pandora Media’s IPO struck the right chord with investors Wednesday despite the static in the overall stock market.

Pandora’s stock surged by as much 63 percent in their market debut before pulling back later in the session. The shares closed at $17.42, still a decent gain amid the market’s broader decline. It marked a 9 percent increase from Pandora’s initial public offering price of $16 and a nearly six-fold increase from what Pandora’s own board thought the stock was worth just six months ago.

The performance shows the recent market slump hasn’t dampened the enthusiasm investors have for new stock offerings from rapidly growing Internet services.

The excitement began to build after shares of professional networking site LinkedIn Corp. more than doubled on their first day of trading last month. Now it looks like the fervor could escalate into an outright mania as even bigger Internet companies such as online coupon seller Groupon Inc., Web game maker Zynga and the biggest star of all, Facebook, go public during the next year or so.

“Everyone seems to be getting gold-rush fever,” said analyst Phil Leigh of Inside Digital Media. “People are starting to believe they can find gold in every stream or around every hill, but that’s not the reality.”

Pandora CEO Joseph Kennedy said he won’t allow his 360-employee company to get caught up in the hysteria. “I am not jumping up and down right now,” Kennedy said in a Wednesday interview. “I just see this as another step toward building a great company.”

Kennedy, 51, owns 4.2 million Pandora shares, a stake now worth about $74 million.

The warm Wall Street reception for Pandora pegged the company’s market value at $2.8 billion. That’s already more than the $2 billion market value of AOL Inc., an Internet pioneer hailed as a next great media powerhouse at the height of the dot-com boom 11 years ago.

Around the same time, Pandora was just starting out as a music recommendation company then known as Savage Beast Technologies.

Pandora adopted its current name in 2005 when it morphed into a new type of radio station that streams music over the Internet. What makes Pandora different from broadcast radio is that it can employ computer formulas to learn each of its individual listeners’ tastes in order to create personalized song lists.

The concept has been a hit with music lovers, helping Pandora build an audience of 94 million registered users who mostly listen to the service on home and office computer and mobile phones. The company, based in Oakland, Calif., is now striking deals to supplant traditional radio stations in cars, just as satellite service Sirius XM Radio Inc. already has done.

Unlike the subscription-driven Sirius, Pandora gets about 85 percent of its revenue from advertising. The rest of its revenue comes from subscribers who pay $36 annually to hear higher-quality sound without commercial interruptions.

Pandora’s biggest problem so far has been that its revenue is not growing fast enough to cover the royalties that it pays to play music. Those rates go up as Pandora attracts more listeners.

Pandora has suffered an uninterrupted string of losses totaling $92 million in its short lifetime, including a $6.8 million loss during the first three months of its current fiscal year before accounting for dividends on preferred stock.

“Unless they can continue to increase their subscribers or offer new material, obviously their losses will continue to grow,” predicted Scott Sweet, managing partner of IPOboutique personal loans for people with bad credit.com.

But Pandora’s revenue is rising rapidly, more than doubling in its fiscal first quarter to $51 million. If it can maintain that growth pace, Pandora’s revenue for the fiscal year ending next January would be about $325 million.

That means Pandora’s market value stands at 8.5 times its projected revenue. By comparison, Sirius’ market value of $7.7 billion is about 2.5 times its anticipated revenue for this year.

Pandora also is facing potential competitive threats from some of technology’s most powerful companies. Apple Inc., Google Inc., and Amazon.com Inc. all are offering to store people’s personal music collections on remote computers so the songs can be played on any device with an Internet connection. It wouldn’t be a surprise if any of those three companies expanded their music offerings to include a music recommendation service similar to Pandora’s, said analyst Martin Pyykkonen of Wedge Partners.

“There isn’t a big barrier to entry in this market,” Pyykkonen said.

Similar worries dogged Netflix Inc.’s video subscription service when the company went public in 2002. Many analysts thought Netflix would eventually be crushed by video rental store chain Blockbuster Inc. or another larger company such as Amazon.com or Wal-Mart Stores Inc., which once ran a competing DVD-by-mail service.

Blockbuster went bankrupt, Wal-Mart retreated from DVD-by-mail services and Amazon still hasn’t come up with a way to counter Netflix. Anyone who bought $10,000 worth of Netflix’s stock at its IPO price and held on to it would have a paper gain of about $330,000 so far.

The skepticism about Pandora’s prospects may be one reason the company’s shares didn’t soar as high as LinkedIn’s did. LinkedIn stock more than doubled from its IPO price in its first day of trading on May 19 to close at $94.25. The shares have since fallen more than 20 percent, closing Wednesday at $74.62. That’s still well above the $45 IPO price.

There’s another possible reason Pandora’s shares didn’t rise as much: the company’s investment bankers were more aggressive about raising the IPO price. Two weeks ago, the IPO price had been set at $7 to $9 per share before strong demand drove it up. After expenses, Pandora expects to get $85.5 million from selling 6 million shares in the IPO. Company insiders told a combined 8.7 million shares to cash out $139 million for themselves.

The current value of Pandora’s stock looks even more impressive, given the company’s board appraised the shares value at $3.14 in early December last year, according to documents filed with the Securities and Exchange Commission.

Pandora’s IPO also came in a rockier stock market than LinkedIn’s did.

A rash of ugly reports on the economy has helped push stock indexes down for six straight weeks, its worst stretch since 2008. Since LinkedIn completed its IPO, the tech-driven Nasdaq composite index has fallen more than 6 percent.

Internet IPOs, though, could still look attractive to investors desperately looking for bright spots amid the gloom.

“Companies like Pandora are growing despite the slow-growing economy,” said Kathleen Smith, a principal at Renaissance Capital, an IPO investment adviser. “That’s why investors have turned to them.”

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German Chancellor Angela Merkel said Saturday that it’s important to avoid doing anything that could endanger the global economic upswing as Europe battles the debt crisis in Greece and beyond.

Merkel’s government is willing to grant Athens further aid but wants Greece’s private creditors to share the burden _ something the European Central Bank opposes. Still, the head of a group that represents German private-sector banks signaled readiness to discuss the proposal.

A strong recovery in Germany, Europe’s biggest economy, has yet to be dented by debt woes elsewhere in the 17-nation eurozone.

Asked in her weekly video podcast whether the crisis could endanger Germany’s upswing, Merkel replied “if we don’t act right, that could happen, but that’s exactly what we want to avoid.”

“That’s why we say that we cannot simply allow an uncontrolled bankruptcy by a country,” Merkel said, adding that Europe needs to see how it can help struggling countries improve their competitiveness and also allow them to reduce their debts. She didn’t mention Greece by name.

“We must do nothing that endangers the global upswing as a whole and would then put Germany in danger again,” she added.

Merkel recalled that the German economy contracted by nearly 5 percent in 2009 following the global financial crisis _ “there hadn’t been anything like it in decades, and anything like that absolutely has to be prevented from recurring.”

Merkel’s finance minister, Wolfgang Schaeuble, is pushing for Greece to get more rescue loans only if investors agree to get repaid seven years late on their Greek bonds. That would give the country more time to get a handle on its euro340 billion ($491 billion) in debt.

That demand is meant to rally support among the public and, particularly, lawmakers in Merkel’s center-right coalition _ some of them restless at the idea of giving Greece more money.

However, the ECB says Greece must not change the terms of its debt in ways that put it in official default.

Ratings agencies have said that a bond repayment that materially disadvantages bondholders would be considered a default. Germany has remained vague about key details, such as interest rates and any collateral provisions.

The general manager of the Association of German Banks gave Schaeuble’s proposal a cautious welcome, signaling that banks might be prepared to go along with it _ though he also stressed it is important “to see that we don’t endanger financial market stability.”

“The concept must be made more concrete,” Michael Kemmer said on Deutschlandfunk radio. At the moment, “several important details, are missing, so that we can’t say at the moment that this is suitable and we can participate.”

“In principle, it is something we can talk about,” he said _ though he stressed that any solution must be voluntary. Greece owes German banks some euro10 billion.

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Medtronic, the world’s largest medical device maker, says its fourth-quarter net income dropped 19 percent on expenses related to its recent layoffs.

The Minneapolis-based company earned $776 million, or 72 cents per share, down from $954 million, or 86 cents per share, a year ago. Excluding $198 million in restructuring and other costs, the company earned 90 cents per share.

Sales rose 2 percent to $4.3 billion from $4.2 billion.

Analysts polled by FactSet expected earnings of 93 cents per share for the quarter on sales of $4.29 billion.

Medtronic has struggled to maintain earnings growth amid sluggish sales of its two leading products: heart defibrillators and spinal implants. In February the company announced 2,000 layoffs to bolster its financial position.

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News Corp., the media conglomerate controlled by Rupert Murdoch, says its net income for latest quarter fell by 24 percent as the afterglow of its blockbuster movie “Avatar” faded even though its Fox broadcasting group got a boost from the Super Bowl.

Net income for the fiscal third quarter, which ended in March, fell to $639 million, or 24 cents per share, from $839 million, or 32 cents per share, a year earlier.

Adjusted to exclude the cost of settling a lawsuit at its publishing division, earnings came to 26 cents per share, short of the 27 cents expected by analysts polled by FactSet no fax payday loans.

Revenue fell 6 percent to $8.26 billion, also short of the $8.45 billion expected by analysts.

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China raised retail fuel prices for the second time this year after oil’s advance to a 30-month high undermined government efforts to cap costs and cool inflation in the world’s second-largest economy.

Prices will rise by as much as 5.8 percent today, with gasoline increasing by 500 yuan ($76) a metric ton and diesel by 400 yuan, the National Development and Reform Commission said in a statement yesterday.

Crude fell on concern higher prices will reduce demand in the world’s second-largest oil consumer, while shares of China’s biggest refiner gained. The fuel-price increase came two days after the Chinese central bank raised interest rates for the fourth time since October to tame inflation that exceeded the government’s target.

“China has reluctantly raised domestic gasoline and diesel prices to record highs,” said Gordon Kwan, head of regional energy search at Mirae Asset Securities in Hong Kong. “The move is like pulling teeth with the government amid the anti- inflation campaign.”

China last raised fuel tariffs by as much as 4.6 percent on Feb. 20, based on a mechanism introduced in December 2008 that allows adjustments when crude costs change more than 4 percent over 22 working days. Consumer prices rose at an annual 4.9 percent pace in February, surpassing the government’s target of 4 percent for 2011.

China Petroleum & Chemical Corp. (600028), the country’s largest refiner, gained 0.9 percent to HK$8.09 in Hong Kong trading at 11:11 a.m. local time. PetroChina Co. fell 0.5 percent to HK$12.16. The Hang Seng Index (HSI) declined 0 100% free credit score.1 percent.

‘Into a Corner’

Crude climbed to $108.83 a barrel in New York yesterday, the highest settlement since Sept. 22, 2008, on concerns that conflict in Africa and the Middle East may curtail supplies.

“As much as the government wants to not raise prices, events in the Middle East have forced China into a corner,” Ben Simpfendorfer, publisher of China Insider and former chief economist at Royal Bank of Scotland Group Plc, said by mobile phone. “It’s a minor setback” in the fight against inflation.

The benchmark retail price of gasoline will increase by 0.37 yuan a liter and that of diesel by 0.34 yuan, the NDRC said.

After the adjustment, gasoline in China will retail at $1.05 a liter on average, according to Bloomberg calculations based on prices set by the NDRC for the country’s provinces and regions. That compares with $2.17 a liter in the U.K. and 97 cents a liter in the U.S.

China will continue subsidizing industries including farming, fishing and public transport, the NDRC said yesterday.

“Global crude oil prices may remain high,” the country’s top economic planner said. “Adjusting fuel prices will help curb excessive use of oil and contribute to energy saving.”

Crude has advanced 29 percent in New York since Feb. 15, when unrest in North Africa and the Middle East spread to Libya, formerly Africa’s third-biggest oil producer. Futures fell 0.4 percent to $108.44 a barrel in electronic trading at 11:03 a.m. Singapore time.

–Winnie Zhu, Irene Shen, Wang Ying, John Duce, Chua Baizhen. With reporting by Margot Habiby in Dallas. Editors: Ryan Woo, Jane Lee.

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