Higher operating costs weigh on Imagination Tech

LONDON (Reuters) - Profit growth at Imagination Technologies has been dampened by higher research costs, overshadowing a 90 percent jump in shipments of chips containing its graphics technology used in products like Apple's iPad.

Shares in the British company reversed early gains and were trading 4 percent lower as analysts said the operating expenses had weighed on earnings.

Imagination, which counts both Apple and Intel as shareholders, said the rise in operating expenses to 43.8 million pounds in the first half from 31.4 million a year ago was down to increasing research costs and recruiting more staff.

It said it expected the rate of operating expense growth to slow in the second half and in the next year.

Analysts at UBS said the higher expenses had offset a solid revenue performance.

"While Imagination highlights that the speed of increase (in operating expenses) is short term and in response to a growing customer base, it poses a significant headwind to the profit growth expected," they said on Wednesday.

Imagination, whose shares were trading at 429 pence by 6:41 a.m. ET, posted adjusted pretax profit of 16.8 million pounds ($27 million) on revenue of 71.4 million, up 27 percent and beating analysts' expectations of 68 million.

Some 237 million chips containing its technology were shipped in the six months through October, it said, putting the group on track to reach 500 million chips for the full year and 1 billion annually by 2016.

KEY MARKETS

Imagination licenses its technology to customers like Apple for the iPhone and MediaTek for lower-end smartphones.

Chief Executive Hossein Yassaie said on average 1.5 million smartphones, tablets and other devices were rolling off production lines carrying the company's graphics and video technology every day.

"Overall we are hitting the key markets from high end to low end," he said in an interview.

Some analysts have fretted that Imagination faces growing competition from chipmakers like Qualcomm, Broadcom and Intel using their own graphics technology, and from a more aggressive push into graphics by ARM Holdings.

Yassaie responded to concerns that Intel was increasingly favoring its own graphics technology rather than licensing it from Imagination, speculation that analysts say was triggered by some leaked Intel slides in the United States.

"We have very strong current and ongoing relationship with Intel and we expect significant volume ramp-up with them over years to come," he said.

Imagination also wants to grow its microprocessor business and is battling U.S. mobile chipmaker CEVA to buy the operating business of MIPS Technologies.

CEVA said on Tuesday it would pay $90 million for MIPS' microprocessor operating business, trumping Imagination's offer for a second time.

Yassaie had no update on Imagination's next move but said the group would continue its processor drive with or without MIPS. "Right now we are in process of working through the acquisition," he said. ($1 = 0.6210 British pounds)

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Delta expects 2013 profit growth, plans returns to shareholders

(Reuters) - Delta Air Lines  said on Wednesday that it expected profit growth in 2013 and would introduce a plan to return cash to shareholders.

Chief Executive Officer Richard Anderson said during the carrier's investor meeting webcast that Delta, the No. 2 U.S. airline behind United Continental Holdings Inc , expected a profit of $1.6 billion for this year. He said 2013 would bring a "solid improvement" over 2012.

Delta said it expected fourth-quarter earnings of $200 million to $250 million, excluding items, despite disruptions caused by superstorm Sandy. The storm barreled through the U.S. Northeast in late October and led airlines to cancel thousands of flights as major New York area airports shut down.

The carrier said it expected to announce a capital deployment strategy next year, with the program starting in January 2014.

U.S. carriers have merged, stopped flying unprofitable routes and raised ticket prices to recover in recent years. Airlines have also created new revenue streams with baggage and food fees, moves that have helped deliver profits in the face of volatile fuel prices.

Delta supports industry consolidation, Anderson said, predicting that AMR Corp's American Airlines and US Airways Group Inc will reach a deal soon. The two airlines are in talks on a potential merger.

Delta, which acquired Northwest Airlines in 2008, has cut costs while positioning itself for growth. Just on Tuesday, it announced the purchase of a 49 percent stake in British carrier Virgin Atlantic and a joint venture that will give it expanded access at London's Heathrow Airport.

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Costco profit jumps despite light membership fee growth

(Reuters) - Costco Wholesale Corp's  quarterly earnings beat Wall Street estimates, but the largest U.S. warehouse club chain collected less in membership fees than some analysts anticipated.

Shares of Costco were up 0.8 percent at $99.11 in morning Nasdaq trading after a slight decline earlier in the session.

Members pay up to $110 per year to shop at Costco's cavernous stores and website, where they can buy everything from carrots to kayaks. The fee revenue pads Costco's bottom line and allows it to offer low prices and take in thin profit margins on items it sells.

Membership fee revenue rose 14.3 percent to $511 million in the first quarter ended on November 25, Costco said. The Issaquah, Washington-based chain raised fees for most U.S. and Canadian members by 10 percent on November 1, 2011.

The fee increase seems to have had little to no impact on renewal rates, Chief Financial Officer Richard Galanti said during a conference call.

Still, the increase in membership fee revenue was not as great as some had anticipated, and growth declined from a rise of about 18 percent in the preceding quarter.

BMO Capital Markets analyst Karen Short said she had expected membership fee revenue of $534 million, while Sanford Bernstein analyst Colin McGranahan said the $511 million in fees was $4 million shy of his forecast.

Costco said it had earned $416 million, or 95 cents per share, in the quarter, up 30 percent from $320 million, or 73 cents per share, a year earlier.

Analysts on average were expecting a profit of 93 cents per share, according to Thomson Reuters I/B/E/S.

"While results were solid and clean in absolute terms, we believe this was largely line with expectations and unlikely to meaningfully move the stock," said McGranahan, who rates Costco at "underperform."

Lower-than-expected interest expenses and taxes helped boost earnings per share, said Short, who has an "outperform" rating on the shares.

Sales excluding membership fees rose 9.5 percent to $23.2 billion, just below the figure Costco gave last month, when it said quarterly sales rose 10 percent to $23.21 billion.

Sales at stores open at least a year rose 7 percent, including the effects of higher fuel prices. Excluding the impact of fuel and foreign currencies, Costco recorded 6 percent same-store sales growth.

Costco said it planned to open a new warehouse store in South Korea before the end of 2012. It operates 621 warehouses, including 448 in the United States and Puerto Rico, 85 in Canada, 32 in Mexico, and 23 in Britain. For all of fiscal 2013, it plans to open up to 30 new stores.

On November 28, Costco announced a $7 special dividend, set to be paid later this month.

The special dividend amounted to roughly $3 billion, the largest payout so far from any company ahead of a likely increase in the U.S. dividend tax. The chain will use proceeds from a $3.5 billion debt offering to pay for the dividend.

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Nasdaq to buy Thomson Reuters PR, IR units for $390 million

(Reuters) - Nasdaq OMX Group Inc said on Wednesday it agreed to buy Thomson Reuters  Corp's investor relations, public relations and multimedia services units for $390 million, as the exchange operator builds businesses that do not depend on trading.

The all-cash deal will add to Nasdaq's earnings within 12 months of closing, excluding transaction-related costs, the company said.

Nasdaq is looking to sell additional services to the companies that list on its exchanges as a way to draw more revenue from its corporate customers. It already gets more than 70 percent of its revenue from businesses that do not depend on transactions.

The Thomson Reuters units that Nasdaq is buying help companies communicate with investors and media and create and distribute video presentations.

Nasdaq already provides some of these services, but the acquisition will broaden its offerings and make them more global, bringing 7,000 new clients in more than 60 countries.

The units Nasdaq is acquiring generated $233 million of revenue in the 12 months ended September 30. That figure represents about 2 percent of Thomson Reuters' revenue in that period, but more than 7 percent of Nasdaq's revenue.

Nasdaq said it is funding the deal with available cash - the company had $438 million of cash and equivalents on its books at September 30 - and through its $750 million line of credit.

Nasdaq considered buying back shares but decided this deal would offer a higher return to shareholders, Chief Executive Robert Greifeld said on a conference call.

The deal is expected to close in the first half of 2013. Nasdaq has made a binding offer for the units but will not enter a definitive agreement until both companies talk to relevant unions and works councils.

Thomson Reuters has been trying to accelerate growth in the wake of the financial crisis after customers in banking and finance laid off tens of thousands of employees to cut costs.

As part of that effort, it is rejiggering assets in its portfolio.

The units the company is selling "didn't really integrate across the entire platform," said Drew McReynolds, an equity analyst covering telecom and media companies at RBC Capital Markets in Toronto.

Earlier this year, Thomson Reuters sold its healthcare business to private equity firm Veritas Capital for $1.25 billion in cash.

But Thomson Reuters is also buying assets where they help its main businesses. In July, it said it was buying foreign exchange platform FX Alliance Inc for $625 million.

Reuters is a unit of Thomson Reuters.

Bank of America Merrill Lynch and Barclays Capital advised Nasdaq on the deal. JPMorgan advised Thomson Reuters.

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Data: New (physical) book chronicles the virtual

NEW YORK (AP) — We question. We research. We catalog. We quantify. We aggregate, calculate, communicate, analyze, extrapolate and conclude. And eventually, if we're fortunate and thoughtful, we understand. These are the contours of the society that has taken shape in the past generation with the rise of an unstoppable, invisible force that changes human lives in ways from the microscopic to the gargantuan: data, a word that was barely used beyond small circles before World War II but now governs the day for many of us from the moment we awaken to the extinguishing of the final late-evening light bulb. This is the playing field of "The Human Face of Big Data," by Rick Smolan ("A Day in the Life of America") and Jennifer Erwitt, an enormous volume the size of a flat-screen computer monitor that chronicles, through a splash of photos and eye-opening essays and graphics, the rise of the information society. The book itself ($50, Against All Odds Productions) is a curious, wonderful beast — a solid slab that captures a virtual universe. Weighing in at nearly five pounds (a companion iPad app is available), it is being delivered Tuesday by the publisher to what it calls some of the world's most influential people, including the CEOs of Yahoo and Starbucks and Amazon, Oprah Winfrey and New York Mayor Michael Bloomberg. The goal, say those behind the project, is to "ignite a conversation about an extraordinary knowledge revolution." You would think that capturing such a sprawling — and, one might easily conclude, inherently nonvisual — societal change would be difficult in a coffee-table book. You'd be wrong. This is one of those rare animals that captures its era in the most distinct of ways. It's the kind of thing you'd put in a time capsule for your children today to show them, long after you're gone, what the world was like at the beginning of their lives. The obvious is here, of course — the crimefighting, the moneymaking, the advertising, the breathtaking medical advances, the dark pathways of data nefariousness. But there are more unexpected tales as well. Among the pools the book dips into: —How data can provide utterly unexpected results: In Singapore, a project designed to look at why people couldn't get a taxi during a rainstorm came back with a surprising dividend — the cabs, fearful of accidents and the financial impact they cause even for drivers who may not be at fault, were just pulling over when it started to pour. Now they're changing policies to counteract that problem. —How global connectivity can beget entirely new forms of storytelling: The Johnny Cash Project invites people worldwide to share their visual representations of the iconic musician, and each submission is combined with others to create a music video that keeps changing based on the images that people are sending in. —How crowdsourcing is changing science: "Technology grants us the ability to harness wisdom from anywhere for specific projects, encouraging scientists to cooperate more, seek other points of view and share their achievements quickly — "the beginning of a democratization of discovery," writes science journalist Gareth Cook. —How machines are now communicating among themselves (though no sign yet of Skynet from the "Terminator" movies): "Humans will no longer be the center of the data solar system, with all of the billions of devices orbiting around us, but will rather become just another player, another node, in an increasingly autonomous data universe," writes technological thinker Esther Dyson. Brave new world? Of course. Yet it's easy to be unsettled by all of this. Hackers lurk everywhere; organizations like WikiLeaks are — depending on your politics — irresponsibly revealing secrets or responsibly liberating information. And anytime the notions of biology and technology meld, it's difficult not to summon images of the part-human, part cybernetic Borg from "Star Trek." In the face of so many preconceptions, what makes "The Human Face of Big Data" so engaging, so important, is its balanced tone. This is not a screed, in either direction. Technology is not greeted only as a marvel to be worshipped, nor is it cast as only a villain whose bits and bytes can blight our inherent humanity. The notion of making sense of information, of unpacking what the changes that data has wrought will mean to all of us, is the underpinning of the book. That's as it should be: As information's pathways and archives develop at breakneck speeds, we must race, too, to develop a vocabulary to describe and critique its rise. Passionate, critical thinking about a subject is still the sole purview of humanity — at least for now. "The history of mankind has always been influenced by a shortage of knowledge," technology and business writer Michael S. Malone says in one essay. "Now the opposite — an information surplus — may soon define our lives." The question, of course, runs even deeper. There is information, there is knowledge and there is wisdom. And no matter how many strong numbers we humans have at our disposal, if we can't understand the important differences between those three categories, the odds are good that we're on a path not toward 1, but toward 0. Save to the cloud and fire up the iPad tonight, sure — but do it with open eyes and probing mind. "Not everything that can be counted counts," warns a saying that Albert Einstein loved, "and not everything that counts can be counted."

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Pope gets more than half million Twitter followers

VATICAN CITY (Reuters) - Even though he hasn't sent a single tweet yet, Pope Benedict had more than half a million Twitter followers in eight languages on Tuesday, the day after the Vatican unveiled his handle: @Pontifex. They included people ranging from the simple Roman Catholic faithful to a Jewish head of state. "Your holiness, welcome to Twitter. Our relations with the Vatican are at their best & can form a basis to further peace everywhere," tweeted Israeli President Shimon Peres, who at 89 is four years older than Benedict. The Vatican said on Monday that Benedict will start tweeting on mostly spiritual topics from December 12. The pope actually has eight linked Twitter accounts. @Pontifex, the main account, is in English. The other seven have a suffix at the end for the different language versions. For example, the German version is @Pontifex_de, and the Arabic version is @Pontifex_ar. On Tuesday afternoon, the English version had the most followers, with nearly 400,000. The next largest was Spanish, with some 93,000. The lowest number of followers was the Arabic, with about 3,500. Benedict's native German had about 10,000. But the pope, leader of some 1.2 billion Roman Catholics, won't be following anyone but himself, the Vatican said. A look at his official Twitter page on Tuesday showed that he is "following" seven people but they are merely versions of his own Twitter account in different languages. The first papal tweets will be answers to questions sent to #askpontifex. The tweets will be going out in Spanish, English, Italian, Portuguese, German, Polish, Arabic and French. Other languages will be added in the future. The tweets will come primarily from the contents of his weekly general audience, Sunday blessings and homilies on major Church holidays. They will also include reaction to major world events, such as natural disasters. He will push the button on his first tweet himself on December 12 but in the future most of the tweets will be written by aides, and he will sign off on them. The Vatican, whose website has been taken down by hackers in the past, said it has taken precautions to make sure the pope's certified account is not hacked. Only one computer in the Vatican's Secretariat of State will be used for the tweets. The pope's Twitter page is designed in yellow and white - the colors of the Vatican - and his picture over the backdrop of a St Peter's Square packed with pilgrims. The page may change during different liturgical seasons of the year and when the pope is away from the Vatican on trips.

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Nokia Siemens to close German services unit: sources

FRANKFURT/HELSINKI (Reuters) - Nokia Siemens Networks' (NSN) German services unit faces closure and 1,000 jobs are at risk as Nokia and Siemens shake up the joint venture, two sources said. One of the people familiar with the situation said the closure would be effective by the end of 2013 and will be announced on Wednesday during a meeting at which workers will be told a crucial contract with Deutsche Telekom will not be extended. The Mobile telecoms equipment joint venture is cutting costs and plans to shed a quarter of its staff and sell product lines to focus on mobile broadband. The program is expected to yield about 1 billion euros ($1.31 billion) in cost savings by the end of next year. The telecoms equipment market is going through tough times with stiff competition from Chinese peers Huawei and ZTE as the major telecoms operators postpone investments, faced with shrinking markets due to the weak economy. France's Alcatel-Lucent has also said it will cut costs and jobs to survive stiff competition and weak demand. NSN Services Gmbh, which generates under 100 million euros in annual sales and employs about 1,000 people, provides network operations and management services and also includes Vodafone among its customers. Deutsche Telekom sold the unit to NSN five years ago, when the two companies also agreed on a 300 million euro services contract that now will not be renewed, according to the sources. NSN, which declined to comment, has said such services, often provided on older overhead cable networks, are not considered core operations, and it exited a similar business in Brazil earlier this year. Verdi union representative Mike Doeding said that a meeting to update workers about next year's plans was scheduled for Wednesday, adding he had no idea about what message to expect from management. "If they are to close the unit it would be an outrage," Doeding said. Deutsche Telekom referred requests for comment to NSN. On Monday, NSN said it was selling its optical fiber unit to Marlin Equity Partners, resulting in the transfer of up to 1,900 employees, mainly in Germany and Portugal. NSN had 60,600 employees at the end of the third quarter. ($1 = 0.7650 euros)

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