TIME stocks

Stocks Tumble Amid Fears of Mounting Global Crises

Markets React To Yesterday's Corporate Earnings Reports
Traders work on the floor of the New York Stock Exchange (NYSE) on July 25, 2014 in New York City. Spencer Platt—Getty Images

Major market indexes are down dramatically as the year’s final quarter begins

Stocks fell across the board Wednesday as the year’s final fiscal quarter opened to a market sell-off spurred by concerns over mounting global crises, including the first domestic case of Ebola, as well as the looming possibility of an interest rate hike.

The Dow Jones industrial average was down more than 200 points for much of the afternoon, and is off more than 2.8% over the past five days. The S&P 500 and Nasdaq were down 1.3% and 1.7%, respectively. Facebook (-3.74%) and Expedia (-3.41%) were among the stock falling on the tech-heavy Nasdaq index, with both companies’ shares down around 2.5% Wednesday afternoon.

Wednesday marked the first time since 2011 that all three major indices fell to start October, according to CNBC.

It was a volatile close to the third quarter for the stock market, as evidenced by the fact that the Dow fluctuated by at least 100 points in either direction for five days in a row last week. The S&P 500 and the Nasdaq indices are down 2.6% and 3.6% over the past five days, respectively.

The market’s recent tribulations have been driven by such global crises as the ongoing tensions between Russia and Ukraine, as well as the U.S.-led airstrikes against ISIS in Syria and, more recently, the widespread pro-democracy protests in Hong Kong. What’s more, investors have proven to be consistently nervous with regard to any news that could signal an earlier than expected move by the U.S. Federal Reserve to raise currently low interest rates. On Wednesday, the latest news to roil those investors came in the form of a positive report on U.S. manufacturing in September, which raised concerns that the Fed would opt for an earlier uptick to interest rates should more positive U.S. economic news follow. (The Fed, and the markets, will certainly have a close eye on the September jobs report when it is released this Friday.)

Meanwhile, Fortune reported earlier today on the effect the first confirmed domestic Ebola case, which was found in Dallas, has had on the markets. The S&P Airline Index fell almost 4% in the wake of news that the man found to have the deadly virus had recently flown on a commercial flight to the U.S. from Liberia. Of course, other companies saw their stocks improve with the news, including pharmaceutical firms with Ebola vaccines such as Tekmira Pharmaceuticals (+25.59%) and NewLink Genetics (+8.36%), whose stocks soared.

This article originally appeared on Fortune.com

TIME europe

France Revolts Against German Austerity With New Budget

French Finance Minister Michel Sapin listens during the presentation of France's 2015 draft budget on October 1, 2014 at the Economy Ministry in Paris.
French Finance Minister Michel Sapin listens during the presentation of France's 2015 draft budget on October 1, 2014 at the Economy Ministry in Paris. Eric Piermont—AFP/Getty Images

New figures put deficit sinner Paris on crash course with Berlin, Brussels

It’s a showdown that has been coming for a while.

The French government Wednesday set out new budget plans for the next three years, baldly stating that its deficit will be a lot wider over the period than it promised its Eurozone partners.

At a news conference in Paris, Finance Minister Michel Sapin said the gap between public revenue and spending would widen to 4.4% of gross domestic product this year from 4.3% last year due to an unexpected slowdown in growth. It will fall back to 4.3% of GDP next year, but only fall under the E.U.’s cap of 3% in 2017–two years later than currently planned.

The figures set the scene for heated discussions in Brussels with the rest of the Eurozone, as the currency bloc’s second-largest economy once again relies on its political clout to defy rules on borrowing that are supposed to be binding on all. (Incoming Eurocrat-in-chief Jean-Claude Juncker is already trying to limit the ability of the Pierre Moscovici, the new economic and financial affairs commissioner, to police those rules, the Financial Times reported Wednesday.)

But specifically, it sets up a fresh clash with Germany, whose insistence on sustainable public finances has stamped Eurozone policy since the Eurozone sovereign debt crisis exploded in Greece in 2010. France has already had to negotiate two extensions to an original agreement to bring the deficit down to 3% of GDP by 2014. Under the new plans, it will have a larger budget shortfall next year than either Greece or Portugal.

“We are committed to being serious about the budget, but we refuse austerity,” Sapin told a news conference in Paris Wednesday.

Sapin has attempted to mollify Berlin and Brussels by committing to €21 billion ($26.5 billion) of government spending cuts next year, and a total of €50 billion over the next three years. Government spending accounts for over 56% of GDP, the highest in the E.U., while its public debt, at over €2 trillion, is now expected to peak at over 96% of GDP. That’s up from only 64% in 2007.

But Sapin said it would be wrong to cut spending by more because it would weaken the economy further. Any further cuts would also be hugely unpopular with the disaffected left wing of President Francois Hollande’s Socialist Party, risking a revolt by backbench lawmakers. The Socialists already lost control of the upper house, or Senate, to the center-right opposition at elections last weekend, and Hollande’s current approval ratings, at 13%, are the lowest for any serving French president since World War II.

The French economy hasn’t grown since the end of last year, and survey data suggest it contracted in the third quarter as the fall-out from the Ukraine crisis hit business and consumer confidence across Europe.

The research firm Markit said elsewhere Wednesday thatthe Eurozone economy pretty much stagnated in September, revising down its purchasing managers’ index to 50.3 from an initial reading of 50.5.

However, the economy may get some support in the last three months of the year from one corner that has been a major bugbear for Paris in recent years–the foreign exchange markets. French officials have railed all year that the euro was too strong for the health of the Eurozone, but it has slid sharply against the dollar in the last month and hit another new two-year low of $1.26 Wednesday in response to the Markit survey.

This article originally appeared on Fortune.com

TIME Companies

Apple Pay May Be the Reason eBay Is Spinning Off PayPal

Ebay Inc. CEO John Donahoe Interview
John Donahoe, president and chief executive officer of eBay Inc., speaks during a Bloomberg Television interview in New York, U.S., on Tuesday, Feb. 18, 2014. Bloomberg via Getty Images

eBay’s mistake, say insiders, was partnering with Samsung on a fingerprint reader

This post is in partnership with Fortune, which offers the latest business and finance news. Read the article below originally published at Fortune.com.

By Philip Elmer-DeWitt

For eight months, eBay CEO John Donahoe resisted Carl Icahn’s repeated calls to spin off its PayPal subsidiary — telling Fortune‘s JP Mangalindan that the two companies were more valuable together than they would be apart.

What made him change his mind? Bank Innovation’s Ian Kar has a plausible backstory.

According to Kar, Donahoe’s mistake was throwing in with Samsung on a fingerprint scanning system that would compete with Apple’s TouchID. Talks between Apple and PayPal broke down (Apple “kicked them out the door,” says one of Kar’s sources), and when Apple Pay was unveiled last month — with wide financial industry support — Pay Pal had been cut out of the deal.

Suddenly, the company became more valuable as an acquisition by an Apple competitor — Google comes to mind — than as part of eBay.

When you put it in a timeline, it almost makes sense.

For the rest of the story, please go to Fortune.com.

TIME space

NASA Is 3D-Printing a Better Rocket

Rocket Injector
Test engineer Ryan Wall, left, and propulsion systems engineer Greg Barnett prepare a rocket injector made using the 3-D printing or additive manufacturing process for a hot-fire test at NASA's Marshall Space Flight Center. Emmett Given—MSFC/NASA

NASA and the U.S. Army are now using additive manufacturing to manufacture lighter, cheaper, and better-performing aircraft parts

Consider the injector. It’s a lowly little engine part about as big as a basketball, small compared to the more photographic components that surround it. Its job, however, is big. On a rocket, it shoots hydrogen gas and liquid oxygen into a combustion chamber to create the thrust needed to send that rocket into space. It also needs to endure the trip.

A conventional rocket engine injector may be comprised of a hundred different pieces, making it costly to assemble. On an object that costs several hundred thousand dollars per launch, and billions in development costs, any savings are welcome. It’s one reason why the cash-strapped National Aeronautics and Space Administration has been toying around with rocket parts made using an additive manufacturing process, better known as 3D printing.

In August, the agency test-fired a 3D-printed injector that withstood a record 20,000 pounds of thrust, which actually isn’t all that impressive. Paired with rocket boosters and the rest, the complete Space Launch System—a new heavy-lift vehicle that will power NASA’s deep-space missions starting in 2017—will create 9.2 million pounds of thrust at liftoff, the equivalent in horsepower of 208,000 Corvette engines revving up at once. What is impressive is the fact that the injector had just two parts and could produce 10 times as much thrust as any previously 3D-printed injector.

For NASA, additive manufacturing represents a way for the agency to stretch its technological capabilities and its $17 billion budget as it looks to build the next class of rocket engines to take its aircraft onto asteroids and to Mars. “The advances in the technology are finally getting to the point where we can see parts additively manufactured for demanding NASA applications,” says Dale Thomas, associate technical director at NASA’s Marshall Space Flight Center in Huntsville, Ala., where NASA has been trying out a variety of 3D-printed propulsion parts for more than a year. What the agency lacks, however, is the knowledge required to judge just how well 3D-printed engine parts will stand up during space flight. “We don’t understand the material properties really well and how they behave under stress,” Thomas says.

Enter the Integrated Product Team, a partnership formed in late May between the Marshall Center, the University of Alabama in Huntsville (as in “Go Chargers,” not “Roll Tide”), and the U.S. Army Aviation and Missile Research Development and Engineering Center, known as AMRDEC. The question at the central of the partnership: Is there a way to 3D-print material strong enough to insert into a working aircraft?

There is good reason to be uncertain about3D-printing parts that can be used in missiles topped with warheads or rockets ferrying astronauts. Which powdered metals will be easiest to print and strongest to deploy? What 3D-printing machines will work the best? The three groups believe that, by pooling their resources and trading notes, they will save time and taxpayer dollars developing additive manufacturing processes useful to the private sector, the military, and space exploration. They also believe they will manufacture higher-quality parts—lighter, stronger—than those created today through conventional machining techniques.

For the military, that means lighter missile components that can still handle vibrations during flight.

“You always want to save weight for an aviation platform. How do you save weight? Machine the part in a way to minimize frequency vibrations,” says James Lackey, acting director of AMRDEC in Huntsville. “Only through additive layering can you take advantage of what a mathematical formula tells you this design solution needs.”

Conventional machining can be thought of as subtractive manufacturing. You begin with a block of some material and gradually chop some off, a process that constrains the types of parts that can be designed. Additive manufacturing is different. Imagine instead a laser-centering machine that heats up and fuses together successive layers of powdered metals—inconel alloys, grades of steel, titanium, aluminum—to construct simpler rocket engine components. This is how NASA created the injector it test-fired a year ago.

“Those little boogers are incredibly complex,” Thomas says. “When you’re trying to manufacture them you throw away more than you use. With additive [we] can make an injector that in the past took about 15 to 20 pieces.”

Lackey and Thomas agree that the space agency’s foray into 3D printing is still in its earliest days. There is no working budget within AMRDEC or the Marshall Center for additive manufacturing experiments because both centers are still determining which 3D-printing technologies they need to invest in. Phillip Farrington, a professor of industrial and systems engineering and engineering management at the University of Alabama, says that whatever knowledge is gained through the Integrated Product Team could also be applied to streamlining manufacturing processes for automobiles, trains, and ships (a research project in which he’s currently engaged).

Right now, the work being done with additive manufacturing at the Marshall Space Flight Center shows the most promise, a reflection of the progress Thomas and his team are making in using the technology to not only manufacture injectors, but also valves, nozzles, and other parts necessary for propulsion in rocket engines.

“We’re seeing parts that can only be made using additive methods,” Thomas says. “We’re never going to get away from the traditional manufacturing process. But additive is going to have some real game-changing benefits.”

This article originally appeared on Fortune.com

TIME Companies

eBay to Spin Off PayPal

The eBay headquarters seen in San Jose, Calif., in 2011.
The eBay headquarters seen in San Jose, Calif., in 2011 David Paul Morris—Bloomberg/Getty Images

Activist investor Carl Icahn had pushed for the online marketplace to split

EBay has unveiled a plan to separate the company’s namesake company and its PayPal business, creating two independent publicly-traded companies next year — a separation that activist investor Carl Icahn called for earlier this year.

The move, which is expected to result in a tax-free spin off to be completed in the second half of 2015, will allow the separated businesses to focus more on their distinct core competencies: e-commerce and payments. EBay 6.68% said the businesses have mutually benefited as one company for “more than a decade,” but that a strategic review conducted by the company’s board showed that “keeping eBay and PayPal together beyond 2015 clearly become less advantageous to each business strategically and competitively.”

“The industry landscape is changing, and each business faces different competitive opportunities and challenges,” said eBay’s President and CEO John Donahoe. In aseparate statement, eBay said American Express 0.03% executive Dan Schulman would join PayPal as its new president effective immediately, and would become CEO of that business at the time of its spinoff.

Donahoe and Chief Financial Officer Bob Swan intend to lead the separation of the businesses though neither will have an executive management role at either of the new companies. They are expected to serve on one or both of the boards of directors, eBay said. Executives Devin Wenig (currently president of eBay Marketplaces) and Scott Schenkel (CFO of eBay Marketplaces) will become CEO and CFO, respectively, of the new eBay.

Earlier this year, Fortune’s JP Mangalindan spoke with eBay’s John Donahoe about Icahn and eBay’s stock price.

Icahn, who had called for a breakup at eBay in January of this year, ultimately conceded his fight after being given a board member. But as Fortune reported last month, if eBay were to go forward with a PayPal spinout in 2015, it would be considered an admission that Icahn had been right all along.

EBay’s move is lifting shares in premarket trading, raising the value of Icahn’s 2.5% stake in the company by nearly $130 million.

The eBay business is slightly larger, generating about $9.9 billion in revenue versus the $7.2 billion generated by PayPal. But the payments business is growing faster, reporting 19% revenue growth, better than eBay’s 10%. Segment margins are higher at eBay, while PayPal has a slightly larger active user count.

Earlier this year, Fortune’s JP Mangalindan spoke at length with eBay’s John Donahoe about Carl Icahn, eBay’s stock price and the outlook for the company.

This article originally appeared on Fortune.com

TIME Autos

Harley-Davidson Puts the Brakes on 105,000 Hogs

The Harley-Davidson logo is seen on the gas tank of a new motorcycle at Oakland Harley-Davidson on July 19, 2011 in Oakland, California. Motorcycle maker Harley-Davidson reported an unexpected rise in second quarter profits and their first U.S. sales increase sonce 2006 with earnings of $190.6 million, or 81 cents per share, compared to $71.2 million, or 30 cents per share, one year ago. (Photo by Justin Sullivan/Getty Images)
Justin Sullivan—Getty Images

The motorcycles have a problem with the clutch

Hog riders may need to take a look at their bikes, because the recall bug has bitten the motorcycle world in a big way.

Harley-Davidson announced this weekend that it is recalling more than 105,000 motorcycles for issues related to the clutch, plus 1,384 bikes for potential fuel tank issues.

There have been 19 reported crashes as a result of the clutch issue, though no deaths and only three minor injuries have resulted.

This isn’t the first time the American motorcycle brand has been hit by a recall this year. Harley recalled more than 66,000 bikes in July, citing possible problems with the front wheel.

Following the recall scandal that has plagued General Motors for much of this year, auto manufacturers are being extra cautious when it comes to recalls in an effort to avoid any allegations of not taking action fast enough.

This article originally appeared on Fortune.com

TIME deals

DreamWorks Animation Mulls Selling to a Japan Bank

Shrek Dreamworks

Studio’s board reportedly met last week to consider the $3.4 billion bid

DreamWorks Animation, the studio owned by film executive Jeffrey Katzenberg, may have unexpectedly found a buyer in Japan’s SoftBank.

SoftBank, the telecommunications company owned by billionaire Masayoshi Son, offered $32 per share for DreamWorks, a 43% premium to the stock’s closing price Friday, according to the Hollywood Reporter. The DreamWorks board held an emergency meeting last week to consider the $3.4 billion bid, though no official decision has yet to be made.

At this stage, SoftBank is only in talks with the animation company. The deal has not been formally considered by senior executives and at this point is unlikely to be finalized, sources told Bloomberg News.

DreamWorks CEO Katzenberg had previously looked for a buyer for the animation studio. His company has struggled at the box-office in recent years, losing money on such offerings as “Mr. Peabody & Sherman,” which required a $57 million write down. To try to cover losses on the film side, Katzenberg has invested heavily in the television business, including purchasing online video network Awesomeness TV.

SoftBank has significant financial stores to afford the purchase, especially after Alibaba Group went public on Sept. 19. The company holds more than 30% of Alibaba’s shares, which have a market value worth more than $70 billion.

The Japanese telecommunications company has been looking to expand in U.S. media and technology sectors. SoftBank failed to close the deal on its offer to buy T-Mobile US because of regulatory conflicts.

DreamWorks recent expansion into China could make the studio more valuable to SoftBank, especially given its close ties to Alibaba.

Katzenberg helped create Oriental DreamWorks in 2012 in partnership with two other Chinese media companies. The China-based studio produces local-language animation and will co-produce “Kung Fu Panda 3″ in partnership with U.S. DreamWorks.

Alibaba has invested in media assets, including China’s largest online video site Youku Tudou, and is developing a streaming service with California-based Lions Gate.

Katzenberg would likely stay on with DreamWorks. Hollywood Reporter says he would stay for five years to head the studio after an acquisition by SoftBank.

This article originally appeared on Fortune.com

TIME Companies

Activist Investor Starboard Wants Yahoo to Consider Deal With AOL

Yahoo's Headquarters In Sunnyvale, California
A sign is posted in front of the Yahoo! headquarters on May 23, 2014 in Sunnyvale, California. Justin Sullivan—Getty Images

A combination of the two companies could result in cost synergies of up to $1 billion, the investor argues

Starboard Value LP has called on Yahoo’s management to consider a potential combination with AOL Inc., a deal the activist investor said could result in cost synergies of up to $1 billion.

In a letter addressed to Yahoo CEO Marissa Mayer, Starboard — which disclosed a “significant ownership stake” — argues Yahoo is “deeply undervalued relative to the sum of its parts.” The investor, which generated some headlines recently for criticizing Olive Garden’s breadsticks strategy, said a combination of Yahoo and AOL 3.46% could reduce the cost overlaps in their display advertising businesses, and cut both companies’ overhead costs.

“Importantly, we believe the combined entity would be able to more successfully navigate the ongoing industry changes, such as the growth of programmatic advertising and migration to mobile,” Starboard said.

A Yahoo 3.31% representative wasn’t immediately available to comment on Starboard’s letter.

Mayer, ranked 16th on Fortune’s Most Powerful Women in Business list, is facing pressure in the wake of Alibaba’s 0.31% initial public offering last week. At least three analysts have downgraded the company’s stock this week, citing the absence of a turnaround at Yahoo’s core business and limited upside to owning a slice of Alibaba. Yahoo still owns about 400 million shares of Alibaba, a stake worth more than $35 billion before taxes, The Wall Street Journal has reported.

Starboard’s move is also turning up the heat on Mayer to perform. Fortune earlier this year asked an important question: “Will Marissa Mayer save Yahoo?” noting that while the company’s stock value has climbed under Mayer’s tenure, the strength has had little to do with her turnaround efforts. While Yahoo has announced some high-profile acquisitions (including the $1.1 billion deal to buy Tumblr) the company’s ad business remains challenged.

Starboard points out that even after Yahoo’s “ill-timed and tax-inefficient” sale of Alibaba stock, the company’s remaining stake in Alibaba “is currently worth more than the entire enterprise value of Yahoo.” When adding in the company’s stake in Yahoo Japan, those two minority interests are worth about $11 billion, or $11 per share more than the current enterprise value of the company.

The activist investor claims the “valuation gap” is due to the fact that investors expect Yahoo management to continue past practices, including acquisitions at “massive valuations with seemingly little to no regard for profitability and return on capital.” Another problem, according to Starboard, is monetizing its non-core minority equity stakes in a tax-inefficient manner.

“We believe that Yahoo’s core business is valuable. However, given some recent operational challenges, we would expect it to trade at the low end of industry multiples,” Starboard said.

This article originally appeared on Fortune.com

TIME Companies

BlackBerry Faces Steep Challenge as It Aims for Turnaround

The Blackberry Passport Blackberry

BlackBerry is hoping to improve its outlook with the launch of its 4.5-inch square-shaped Passport

BlackBerry Ltd. has had a busy week — it debuted a new smartphone called the Passport and reported a narrower quarterly loss. But do those rosy headlines suggest a turnaround is underway?

Not necessarily. The Canada-based company on Friday reported it recognized hardware revenue on about 2.1 million smartphones for the quarter ended Aug. 30, a tiny figure compared to the over 10 million smartphones Apple sold over the weekend after the debut of the iPhone 6 and iPhone 6 Plus. BlackBerry’s quarterly revenue plunged 42% to $916 million from the year-ago level.

And for those keeping score: back when Apple debuted its first iPhone in 2007, it took 74 days to ship its one millionth smartphone. BlackBerry managed to ship over 3 million devices in a quarter over roughly the same time period.

Of course, this reversal of fortunes isn’t a surprise. BlackBerry’s worldwide smartphone market share is under 1%, according to data from research firm International Data Corporation, far less than Apple’s hold on about 12% of the market. BlackBerry’s market share was a far more sturdy 13.6% just three years ago, signifying just how quickly things can turn sour for a smartphone maker when it falls out of favor.

BlackBerry is hoping to change all that with the launch of its 4.5-inch square-shaped Passport, touting the device’s larger screen and apps geared to professionals that have defected to other devices. As Fortune reported last month, BlackBerry is hoping government, finance and health care workers will find the device’s unorthodox dimensions ideal for their work.

The device is off to a fairly decent start, according to CNET, which reports 200,000 BlackBerry Passport smartphones have been ordered since launch.

Investors have bought into the BlackBerry turnaround story before, only to be burned later when reality set in. The company’s shares rose in the months leading up to the company’s launch of a new operating system, called BlackBerry 10, which was unveiled in 2013. Investors had placed a big bet that plan could work, sending BlackBerry’s [then known as Research in Motion] shares up 59% in the 12 months before issuing quarterly results in June. Disappointing sales of the Z10 phone resulted in shares tumbling some 28%.

This article originally appeared on Fortune.com

TIME Companies

Pimco Founder Bill Gross Quits Firm for Janus Capital

Morningstar Conference With Bill Gross Of PIMCO
Bill Gross, co-chief investment officer of Pacific Investment Management Co., speaks at the Morningstar Investment Conference in Chicago, Illinois, U.S., on Wednesday, June 8, 2011. Tim Boyle—Bloomberg/Getty Images

At Janus, Gross will manage the recently launched Global Unconstrained Bond fund and related strategies.

This post is in partnership with Fortune, which offers the latest business and finance news. Read the article below originally published at Fortune.com.

By Laura Lorenzetti

Bill Gross, who co-founded Pacific Investment Management, or Pimco, in 1971, will leave his own firm to join competitor Janus Capital.

Gross served as the firm’s chief investment officer and managed the Pimco Total Return fund — one of the world’s largest bond funds with more than $1.9 trillion in securities, according to the company’s website. The fund has not done well for years, though, and has been plagued by huge outflows.

“I look forward to returning my full focus to the fixed income markets and investing, giving up many of the complexities that go with managing a large, complicated organization,” Gross said in a statement.

At Janus JNS -2.71% , Gross will manage the recently launched Global Unconstrained Bond fund and related strategies. He will work in partnership with Myron Scholes and other members of the global asset allocation team.

For the rest of the story, please go to Fortune.com.

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