RIM shares dive as fee changes catch market off guard

Shares of BlackBerry maker Research In Motion Ltd plunged more than 20 percent on Friday on fears that a new fee structure for its high-margin services segment could put pressure on the business that has set the company apart from its competitors.
It was the stock's biggest, single-day, percentage price drop since September 2008. But shares were still nearly 80 percent above the year's low, which was reached in September. They started to rally in November as investors began to bet that RIM's long-awaited new BlackBerry 10 phones, which will be unveiled in January, would turn the company around.
The services segment has long been RIM's most profitable and accounts for about a third of total revenue. Some analysts said there was a risk that the fee changes could endanger its service ecosystem and leave the Canadian company as just another handset maker.
The fee changes, which RIM announced on Thursday after market close, overshadowed stronger-than-expected quarterly results. The company said the new pricing structure would be introduced with the BlackBerry 10 launch, expected on January 30.
RIM said some subscribers would continue to pay for enhanced services such as advanced security. But under the new structure, some other services would account for less revenue, or even none at all.
Chief Executive Thorsten Heins tried to reassure investors in a television interview with CNBC on Friday, saying RIM's "service revenue isn't going away".
He added: "We're not stopping. We're not halting. We're transitioning."
Since taking over at RIM in January, Heins has focused on shrinking the company and getting it ready to introduce its new BB10 devices, which RIM says will help it claw back ground it has lost to competitors such as Apple Inc and Samsung Electronics.
But the new services pricing strategy came as a shock to markets, and some analysts cut their price targets on RIM stock.
RIM will not be able to sustain profitability by relying on its hardware business alone, said National Bank Financial analyst Kris Thompson, whom Thomson Reuters StarMine has rated the top RIM analyst based on the accuracy of his estimates of the company's earnings.
Thompson downgraded RIM's stock to "underperform" from "sector perform" and cut his price target to $10 from $15.
Forrester Research analyst Charles Golvin said the move was likely about stabilizing market share: "At the moment, they need to stem the bleeding."
He said the tiered pricing might line up better with RIM's subscriber base as it expands in emerging economies.
RIM's Nasdaq-listed shares closed down 22.7 percent at $10.91 on Friday. The stock fell 22.2 percent to C$10.86 on the Toronto Stock Exchange.
COUNTDOWN TO LAUNCH
The success of the BB10 will be crucial to the future of RIM, which on Thursday posted its first-ever decline in total subscribers. Heins said on CNBC that the company expected to ship millions of the new devices.
He cautioned that this will require heavy investment, which will reduce RIM's cash position in its fourth and first quarters from $2.9 billion in its fiscal third quarter. He said, however, it would not go below $2 billion.
Still, doubts remain about whether RIM can pull off the transformation. Needham analyst Charlie Wolf said the BB10 would have to look meaningfully superior to its competitors for RIM to stage a comeback.
Canaccord Genuity analyst Michael Walkley said it was highly unlikely that the market would support RIM's new mobile computing ecosystem, and he remained skeptical about the company's ability to survive on its own.
"We believe RIM will eventually need to sell the company," said Walkley, who cut his price target on RIM shares to $9 from $10.
Baird Equity Research analysts said BB10 faced a daunting uphill battle against products from Apple, as well as those using Google Inc's Android operating system, and, increasingly, phones with Microsoft Corp's Windows 8 operating system.
Baird maintained its "underperform" rating on the stock, while Paradigm Capital downgraded the shares to "hold" from "buy" on uncertainty around the services revenue model.
"RIM has gone from having one major aspect of uncertainty - BlackBerry 10 adoption - to two, given an uncertain floor on services revenue," William Blair analyst Anil Doradla said.
RIM will have to discount BB10 devices significantly to maintain demand, Bernstein analyst Pierre Ferragu said.
The BlackBerry, however, still offers the security features that helped it build its reputation with big business and government, a selling point with some key customers.
Credit Suisse maintained its "neutral" rating on the stock, but not because it expected BB10 to be a big success.
"Only the potential for an outright sale of the company or a breakup keeps us at a neutral," Credit Suisse analysts said.
Separately on Friday, ailing Finnish mobile phone maker Nokia said it had settled its patent dispute with RIM in return for payments.

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TSX ends flat as RIM buckles, gold miners bounce

Canada's main stock index ended little changed on Friday as gold miners gained on safe-haven buying amid U.S. budget uncertainty, while BlackBerry maker Research In Motion Ltd plunged more than 20 percent.
The index's materials sector, which includes miners, rose 0.4 percent. Even though the price of gold was near its lowest level in four months, the gold-mining sub-sector added 0.9 percent as investors fretted over stalled U.S. budget talks that could throw Canada's largest trading partner back into recession.
"As our tiptoes are over the (U.S.) fiscal cliff and we're looking over the abyss, the markets are upset obviously, and this is sort of putting a damper on the stocks," said John Ing, president of Maison Placements Canada.
"But we've had a mixed reaction in Canada, mainly because the resources have been much better, like gold for example, which is hedging into the uncertainty (around the budget talks)," he said, noting gold miners had been under pressure for the last two weeks.
Miner Barrick Gold Corp edged up 0.2 percent to C$33.29. Centerra Gold Inc jumped more than 3 percent to C$9.10.
Gold miners are playing catch-up after underperforming throughout the year and could rise further in 2013, said Gavin Graham, president at Graham Investment Strategy.
Shares of RIM dropped 22.2 percent to C$10.86 on fears that a new fee structure for its high-margin services segment could put pressure on the business that has set the company apart from its competitors.
The Toronto Stock Exchange's S&P/TSX composite index <.gsptse> fell 3.01 points, or 0.02 percent, to end at 12,385.70. It gained 0.7 percent for the week.
Efforts to avoid the looming U.S. "fiscal cliff" were thrown into disarray on Friday with finger-pointing lawmakers fleeing Washington for Christmas vacations even as the year-end deadline for action edged ever closer.
Graham said that until a deal is reached in the U.S. budget talks, investors will avoid economically sensitive Canadian stocks and those most closely tied to the U.S. economy: auto parts manufacturers, forestry companies and resource stocks generally.
"The resource sectors in Canada, which is half of the index, is going to be adversely affected, correctly or not," he said.
"Chinese demand is likely to pick up somewhat now with the new leadership there but people will be focused on the U.S. given that it is still by far the most important export market for Canada.

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First photos of BlackBerry 10 ‘N-Series’ QWERTY smartphone leak

As Research In Motion (RIMM) begins its attempt to mount a comeback for the ages in 2013, it will place its early hopes on two high-end smartphones. The first is the BlackBerry Z10, and we’ve already seen it in a number of leaks. The second is a QWERTY-equipped touchscreen phone similar to the current BlackBerry Bold 9900, and it has just been pictured for the first time in photos published by Chinese blog cnBeta.com. No additional information accompanied the photos, however earlier reports stated that the smartphone will include a 720 x 720-pixel display with a pixel density of 330 ppi. Another image of the BlackBerry 10-powered N-Series phone follows below.

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Fifth-gen iPad reportedly due in March along with Retina iPad mini

Rumors that a second-generation iPad mini with a Retina display is set to launch ahead of Apple’s typical annual schedule next year have been swirling, and now it appears Apple’s (AAPL) full-size iPad may be sticking to its new semiannual release schedule. According to a report from Japanese blog Makotakra that cites an anonymous “inside source,” Apple plans to launch a new thinner, lighter 9.7-inch iPad as soon as March 2013. The fourth iPad model was just released last month alongside the iPad mini, but March was also suggested in recent Retina iPad mini rumors. Makotakra states that the new iPad will adopt styling queues from the current iPad mini model, unifying the look of Apple’s larger tablet with the iPad mini and iPhone 5.

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Find room for God in fast-paced world, pope says on Christmas eve

Pope Benedict, leading the world's Roman Catholics into Christmas, on Monday urged people to find room for God in their fast-paced lives filled with the latest technological gadgets.
The 85-year-old pope, marking the eighth Christmas season of his pontificate, celebrated a solemn Christmas Eve mass in St Peter's Basilica, during which he appealed for a solution to the Arab-Israeli conflict and an end to the civil war in Syria.
At the mass for some 10,000 people in the basilica and broadcast to millions of others on television, the pope wove his homily around the theme of God's place in today's modern world.
"Do we have time and space for him? Do we not actually turn away God himself? We begin to do so when we have no time for him," said the pope, wearing gold and white vestments.
"The faster we can move, the more efficient our time-saving appliances become, the less time we have. And God? The question of God never seems urgent. Our time is already completely full," he said.
The leader of the world's some 1.2 billion Roman Catholics said societies had reached the point where many people's thinking processes did not leave any room even for the existence of God.
"Even if he seems to knock at the door of our thinking, he has to be explained away. If thinking is to be taken seriously, it must be structured in such a way that the 'God hypothesis' becomes superfluous," he said.
"There is no room for him. Not even in our feelings and desires is there any room for him. We want ourselves. We want what we can seize hold of, we want happiness that is within our reach, we want our plans and purposes to succeed. We are so 'full' of ourselves that there is no room left for God."
PEACE CANDLE
Bells inside and outside the basilica chimed when the pope said "Glory to God in the Highest," the words the gospels say the angels sang at the moment of Jesus' birth.
Earlier on Monday the pope appeared at the window of his apartments in the apostolic palace and lit a peace candle, as a larger-than-life nativity scene was unveiled in St Peter's Square below.
Reflecting on the gospel account of Jesus born in a stable because there was no room for Mary and Joseph in the inn, he said when people find no room for God in their lives, they will soon find no room for others.
"Let us ask the Lord that we may become vigilant for his presence, that we may hear how softly yet insistently he knocks at the door of our being and willing.
"Let us ask that we may make room for him within ourselves, that we may recognise him also in those through whom he speaks to us: children, the suffering, the abandoned, those who are excluded and the poor of this world," he said.
He asked for prayers for the people who "live and suffer" in the Holy Land today.
The pope called for peace among Israelis and Palestinians and for the people of Syria, Lebanon and Iraq and prayed that "Christians in those lands where our faith was born may be able to continue living there, that Christians and Muslims may build up their countries side-by-side in God's peace."
The Vatican is concerned about the exodus from the Middle East of Christians, many of whom leave because they fear for their safety. Christians now comprise five percent of the population of the region, down from 20 percent a century ago.
According to some estimates, the current population of 12 million Christians in the Middle East could halve by 2020 if security and birth rates continue to decline.
At noon (1100 GMT/6 AM ET) the pope will deliver his twice-yearly "Urbi et Orbi" (to the city and the world) blessing and message from the central balcony of St Peter's Basilica.

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Future of state estate taxes hangs on U.S. "fiscal cliff"

Falling off the "fiscal cliff" is a bad thing, right?
Not necessarily for some state governments that could begin collecting more in estate taxes on wealth left to heirs if the United States goes over the "cliff," allowing sharp tax increases and federal spending cuts to take effect in January.
In an example of federal and state tax law interaction that gets little notice on Capitol Hill, 30 states next year could collect $3 billion more in estate taxes if Congress and President Barack Obama do not act soon, estimated the Urban-Brookings Tax Policy Center, a Washington think tank.
The reason? The federal estate tax would return with a vengeance and so would a federal credit system that shares a portion of it with the 30 states. They had been getting their cut of this tax revenue stream until the early 2000s. That was when the credit system for payment of state estate tax went away due to tax cuts enacted under former President George W. Bush.
With the return of the credit system next year as part of the "cliff," states such as Florida, Colorado and Texas - which have not collected estate tax since 2004 - could resume doing so. California Governor Jerry Brown has already begun to add the anticipated estate tax revenue into his plans, including $45 million of it in his 2012-2013 revised budget.
Brown may or may not be jumping the gun.
CLOUDY CLIFF AHEAD
The outlook on the "fiscal cliff" coming up at year-end is uncertain. Democratic President Barack Obama has said he hopes for a last-minute deal to avert it. That would need to get done soon, with Congress just now coming back from its holiday break.
Chances of an agreement became more remote last week after Republicans in the U.S. House of Representatives fumbled their own legislative attempt to prevent the fiscal jolt that economists say could trigger a recession.
House Speaker John Boehner abruptly adjourned the chamber for the holidays after failing to gather the votes from within his own party to pass legislation he and other Republicans had drafted, after walking out of negotiations with Obama.
Weeks of inconclusive political drama over the "cliff" have focused largely on individual income tax rates and spending on federal programs such Medicare and Social Security, but many tax issues are also involved, including the estate tax.
At the moment, under laws signed a decade ago by Bush, the estate tax is applied to inherited assets at a rate of 35 percent after a $5 million exemption. That means a deceased person can pass on an inheritance of up to $5 million before any tax applies. Inherited wealth passed to a spouse or a federally recognized charity is generally not taxed.
Obama wants to raise the rate to 45 percent after a $3.5 million exemption. Republicans have called for complete repeal of the estate tax, which they call the "death tax," though Boehner earlier this month called for freezing the estate tax at its present level. It was difficult to determine what the Republicans want after last week's events in the House.
STATES STAND TO GAIN
If Congress and Obama do not act by December 31, numerous Bush-era tax laws will expire, including the one on estate taxes. That would mean the estate tax rate will shoot up next year to the pre-Bush levels of 55 percent after a $1 million exemption.
It would also mean that for the first time in years, a portion of that estate tax would go to the states, through the return of the credit system.
Under that old law, estates paying the tax could get a credit against their federal tax bill for state estate tax payments of up to 16 percent of the estate's value.
If the fiscal cliff were allowed to take hold unaltered by Washington, 30 states would again automatically begin getting their share of federal estate taxes. The state laws are generally written so the state estate tax amounts are calculated under a formula based on the amount of the federal credit.
This would help states that have struggled with lower tax revenues since the 2007-2009 financial crisis and resulting recession, according to research by the Pew Center on the States, though painful federal spending cut backs would also hurt the states.

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Stranded by winter storm? Tips for fliers

A massive winter storm is disrupting travel plans for tens of thousands of fliers trying to get home after Christmas. Snow, thunderstorms, sleet, tornados and high winds have grounded planes in the nation's midsection and are expected to slow operations on the East Coast.
Delays racked up from Dallas to Indianapolis to Chicago. By 3 p.m. EST Wednesday, more than 1,100 flights nationwide had been scrapped, according to flight tracking site FlightAware.com.
More cancelations are likely throughout the evening, with Washington, New York and Philadelphia expected to see the largest problems. For instance, wind gusts at New York's John F. Kennedy International Airport could exceed 50 mph Wednesday night, according to FlightAware.
Passengers are pretty much at the mercy of Mother Nature and the airlines. But there are a few things they can do to improve their odds of getting home quickly.
— If you miss your connection, the airlines will automatically rebook you on the next available flight. However, with flights at near capacity, the next open seat could be several days away. Two years ago, some Christmas fliers had to wait nearly a week to get home.
— If you're unhappy with your rebooked flight, get in line to speak to a customer service representative. But also, pick up the phone and call the airline directly, go onto the airline's website and even consider sending a Tweet.
— Consider buying a one-day pass to the airline lounge. It's a nice place to relax away from the crowd and there are usually free drinks and small snacks. But the real secret to the lounges is that the airline staffs them with some of its best — and friendliest — ticket agents. The lines inside will be much shorter and these agents are magically able to find empty seats where nobody else can. One-day passes typically cost $50 per person.

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Retailers pull stocks lower on poor holiday sales

For the stock market, this week hasn't been the most wonderful time of the year.
U.S. stocks fell Wednesday for the third trading day in a row. Disappointing holiday sales weighed heavy on retail companies, and the unwelcome "fiscal cliff" package of higher taxes and lower government spending loomed nearer.
The Dow Jones industrial average slipped 24.49 points to 13,114.59. The Standard & Poor's 500 index fell 6.83 to 1,419.83 and the Nasdaq composite lost 22.44 to 2,990.16.
Karyn Cavanaugh, market strategist with ING Investment Management in New York, wrote a note to clients Wednesday highlighting the less-than-merry retail sales.
"I hope that they're reading this from the mall," she said later, "because retail sales could use a boost."
The MasterCard Advisors SpendingPulse report found that sales of electronics, clothing, jewelry and home goods increased just 0.7 percent in the two months before Christmas compared with the same period last year.
That was well below the 3 to 4 percent that analysts had expected and the worst performance since 2008, when spending shrank during the depths of the Great Recession.
Major U.S. retailers including Abercrombie & Fitch, Sears Holdings, Urban Outfitters, Limited Brands, Nike and Gap were all down. Handbag maker Coach, a bellwether of the luxury market, plummeted $3.39 to $54.13. It lost nearly 6 percent of its value, more than any other company in the S&P 500.
Right behind it was online retailer Amazon.com, which helps analysts get a read on the entire retail market. It lost nearly 4 percent, falling $9.99 to $248.63.
Plodding retail sales are a concern because consumer spending accounts for roughly 70 percent of the U.S. economy. When shoppers pull back on spending, that can take a chunk out of company earnings, which in turn pushes down the stock market.
The retail numbers are also a sign that despite scattered hints of an improving economy, including a report Wednesday about rising home prices, many consumers remain uneasy about their prospects.
"Consumers just aren't confident," said Jeff Sica, president and chief investment officer of SICA Wealth Management in Morristown, N.J. "They don't feel a sense of security that they're going to be able to maintain their job or their income or their savings."
Sica pointed out that normally the market rises at this time of year — the so-called Santa Claus rally. Since 1969, stocks have risen an average of 1.6 percent over the last five days of December and the first two of January, according to The Stock Trader's Almanac.
This year, it seems, the retail sales and "fiscal cliff" have been too much of an overhang.
The "fiscal cliff" refers to lower government spending and higher taxes that will kick in Jan. 1, if Republicans and Democrats can't agree to a new budget by then.
The Senate is due in session Thursday, and President Barack Obama is expected to return early from his Christmas vacation in Hawaii, arriving back in Washington early Thursday. Still, congressional officials said Wednesday they knew of no significant strides toward a compromise over the long Christmas weekend, and no negotiations have been set.
It's not clear that the market would automatically rise if there is a deal, or automatically fall if there isn't. Except for the past three days, the market has risen more or less steadily since mid-November despite the lack of a "fiscal cliff" deal. That means many traders have been assuming that lawmakers would work out something before the deadline, so any positive effect from a compromise is already baked into stock prices.
While a compromise is still possible, some analysts said that what the market feared most wasn't the cliff, but the possibility that lawmakers would come up with only a stop-gap solution. That would probably mean they'd have to meet again in the new year to hammer out a permanent deal, dragging out the uncertainty.
"It's like ripping the Band-Aid off now versus later," Cavanaugh said. "The Band-Aid's got to come off. We've got to cut spending, we've got to pay down the debt."
The bright spot was a report from the Standard & Poor's/Case-Shiller national home price index, which said that home prices rose in most major U.S. cities in October compared with a year ago. However, prices fell in many cities compared to the month before.
The yield on the benchmark 10-year Treasury note edged down to 1.75 percent from 1.77 percent Monday, a sign that investors were taking money out of stocks and putting it into bonds.
It was the first trading day after the Christmas holiday. Trading volume was low, and European markets were still closed.
Just 2.3 billion shares were traded on the New York Stock Exchange. For the year so far, the average has been around 3.6 billion.

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Fees undermine fliers' ability to compare fares

For many passengers, air travel is only about finding the cheapest fare.
But as airlines offer a proliferating list of add-on services, from early boarding to premium seating and baggage fees, the ability to comparison-shop for the lowest total fare is eroding.
Global distribution systems that supply flight and fare data to travel agents and online ticketing services like Orbitz and Expedia, accounting for half of all U.S. airline tickets, complain that airlines won't provide fee information in a way that lets them make it handy for consumers trying to find the best deal.
"What other industry can you think of where a person buying a product doesn't know how much it's going to cost even after he's done at the checkout counter?" said Simon Gros, chairman of the Travel Technology Association, which represents the global distribution services and online travel industries.
The harder airlines make it for consumers to compare, "the greater opportunity you have to get to higher prices," said Kevin Mitchell, chairman of the Business Travel Coalition, whose members include corporate travel managers.
Now the Obama administration is wading into the issue. The Department of Transportation is considering whether to require airlines to provide fee information to everyone with whom they have agreements to sell their tickets. A decision originally scheduled for next month has been postponed to May, as regulators struggle with a deluge of information from airlines opposed to regulating fee information, and from the travel industry and consumer groups that support such a requirement.
Meanwhile, Spirit Airlines, Allegiant Air and Southwest Airlines — with backing from industry trade associations — are asking the Supreme Court to reverse an appeals court ruling forcing them to include taxes in their advertised fares. The appeals court upheld a Transportation Department rule that went in effect nearly a year ago that ended airlines' leeway to advertise a base airfare and show the taxes separately, often in smaller print. Airlines say the regulations violate their free-speech rights.
At the heart of the debate is a desire by airlines to move to a new marketing model in which customers don't buy tickets based on price alone. Instead, following the well-worn path of other consumer companies, airlines want to mine personal data about customers in order to sell them tailored services. You like to sit on the aisle and to ski, so how would you like to fly to Aspen with an aisle seat and a movie, no extra baggage charge for your skis, and have a hotel room and a pair of lift tickets waiting for you, all for one price? You're a frequent business traveler. How about priority boarding, extra legroom, Internet access and a rental car when you arrive?
"Technology is changing rapidly. We are going to be part of the change," said Sharon Pinkerton, vice president of Airlines for America, which represents most U.S. carriers. "We want to be able to offer our customers a product that's useful to them, that's customized to meet their needs, and we don't think (the Transportation Department) needs to step in."
If airlines have their way, passengers looking for ticket prices may have to reveal a lot more information about themselves, such as their age, marital status, gender, nationality, travel history and whether they're flying for business or leisure. The International Air Transport Association, whose 240 member airlines cover 84 percent of global airline traffic, adopted standards at a meeting earlier this month in Geneva for such information gathering by airlines as well as by travel agents and ticketing services that would relay the data to airlines and receive customized fares in return.
"Airlines want, and expect, their (ticket) distribution partners to offer passengers helpful contextual information to make well-informed purchase decisions, reducing the number of reservations made based primarily or exclusively on price," said a study commissioned by the association.
Consumer advocates question how airlines would safeguard the personal information they gather, and they worry that comparison shopping for the cheapest air fares will no longer be feasible.
"It's like going to a supermarket where before you get the price, they ask you to swipe your driver's license that shows them you live in a rich zip code, you drive a BMW, et cetera," Mitchell said. "All this personal information on you is going out to all these carriers with no controls over what they do with it, who sees it and so on."
The airline association said consumers who choose not to supply personal information would still be able to see fares and purchase tickets, though consumer advocates said those fares would probably be at the "rack rate" — the travel industry's term for full price, before any discounts.
It's up to individual airlines whether they price fares differently for travelers who don't provide personal information, said Perry Flint, a spokesman for the international airline association.
The stakes, of course, are enormous. Since 2000, U.S. airlines have lost money for more years than they've made profits. Fee revenue has made a big difference in their bottom lines. Globally, airlines raked in an estimated $36 billion this year in ancillary revenue, which includes baggage fees and other a la carte services as well as sales of frequent flyer points and commissions on hotel bookings, according to a study by Amadeus, a global distribution service, and the IdeaWorksCompany, a U.S. firm that helps airlines raise ancillary revenue. U.S. airlines reported collecting nearly $3.4 billion in baggage fees alone in 2011.
One expense airlines would like to eliminate is the $7 billion a year they pay global distribution systems to supply flight and fare information to travel agents and online booking agents like Expedia. Airlines want to deal more directly with online ticket sellers and travel agents, who dominate the lucrative business travel market. Justice Department officials have acknowledged an investigation is underway into possible anti-trust violations by distribution companies.
Airlines also have been cracking down on websites that help travelers manage their frequent flier accounts. The sites use travelers' frequent flier passwords to obtain balances and mileage expiration dates, and then display the information in a way that makes it easier for travelers to figure out when it makes more sense to buy a ticket or to use miles.
"What the airlines are trying to do right now is reinvent the wheel so they can hold all their information close to their chest," said Charles Leocha, founder of the Consumer Travel Alliance. "As we move forward in a world of IT, the ownership of passenger data is like gold to these people."
By withholding information like fee prices, he said, "we are forced to go see them, and then we are spoon-fed what they want to feed us."

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U.S. retailers scramble after lackluster holiday sales

The 2012 holiday season may have been the worst for retailers since the 2008 financial crisis, with sales growth far below expectations, forcing many to offer massive post-Christmas discounts in hopes of shedding excess inventory.
While chains like Wal-Mart Stores Inc and Gap Inc are thought to have done well, analysts expect much less from the likes of book seller Barnes & Noble Inc and department store chain J. C. Penney Co Inc.
Shares of retailers dropped sharply on Wednesday, helping drag broader indexes lower, as investors realized they were likely to be disappointed when companies start to report results in a few weeks' time.
"The broad brush was Christmas wasn't all that merry for retailers, and you have to ask what those margins look like if the top line didn't meet their expectations," said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group.
Growth was always expected to slow this season, though an improving employment picture and rising home values had helped mitigate the worst fears. But then Superstorm Sandy hit the East Coast in late October, mild weather blunted sales of winter clothing and rising concern about the "fiscal cliff" became more of a reality, dragging down already-pessimistic forecasts.
The latest sign of trouble came from MasterCard Advisors Spending Pulse, which reported holiday-related sales rose 0.7 percent from October 28 through December 24, compared with a 2 percent increase last year.
The preliminary estimate from SpendingPulse was in line with other estimates showing weak growth during the holiday season, when retailers can book about 30 percent of annual sales - and in many cases, half of their profit.
"It has been a very uneven industry performance, probably at least for the last year, and that certainly continued into the holiday season," said Michael Niemira, chief economist at the International Council of Shopping Centers, in an interview with Reuters Insider.
The latest holiday season could end up the weakest since 2008, during the last recession, when sales actually declined. The National Retail Federation had previously predicted 4.1 percent sales growth this year, versus a 5.6 percent increase a year earlier.
Markets reacted sharply to the gloomy outlook.
The S&P retail index closed down 1.7 percent, and 14 of the top 20 decliners in the broader S&P 500 were retailers or consumer brands.
INVENTORY CRUSH
To be sure, the actual percentage change in holiday sales can differ substantially, depending on which group is calculating the figure. SpendingPulse and the National Retail Federation, for example, look at different categories, which can cause some variation in their forecasts.
Regardless of how bad the figure is, one concern for retailers is that soft sales will mean an excess of inventory that will force some to slash prices.
The day after Christmas, retailers were using deep discounts to lure shoppers. Among other brands, Barnes & Noble offered 50 percent discounts in stores via email promotions on Wednesday, while Ann Inc had half-off at its Loft stores, and Macy's Inc's Bloomingdale's promoted discounts of up to 75 percent in some cases.
At a Target store in New York City's Harlem neighborhood, most shoppers seemed to be spending more on groceries, toys and small gifts than on gadgets or clothes.
Despite discounts of 50 percent, there were few takers for Jason Wu glass ornaments, Oscar de la Renta canvas totes and other designer goods launched under the mass merchant's tie-up with upscale chain Neiman Marcus.
Even in a good year, retailers would have offered discounts to lure customers, but some suggest a weak year has now forced their hands.
"Retailers are no longer chasing sales, they are chasing inventory management. That means the discounts that they would have liked to be at 50-60 (percent) off have climbed to 75 to even 80 (percent) off," said Marshal Cohen, chief industry analyst at The NPD Group.
This week's cold, snowy weather on the heels of a warm start to December could spur people to use the gift cards they received or their remaining discretionary income to buy everything from jackets to snow blowers, said Evan Gold, senior vice president of client services at Planalytics, which tracks weather for businesses including retailers.
In December, he said, "people are out spending anyway, weather can trigger what you purchase, not if you purchase, but what you purchase."
SANDY AND CLIFF
A variety of factors were thought to be at fault for the weak season, starting with Superstorm Sandy, which depressed sales in the U.S. Northeast in late October and early November.
Sales recovered in the second part of November, with early hours and promotions helping drive traffic during the "Black Friday" weekend after Thanksgiving, analysts said.
But there was a deep lull in early December as a winter storm in parts of the United States may have limited sales, said Michael McNamara, vice president of research and analysis at MasterCard SpendingPulse.
On top of that, there were fears that taxes will rise in the new year if Washington cannot negotiate a solution to the end-of-year "fiscal cliff" dilemma.
A recent Ipsos poll for Reuters found that only 17 percent of shoppers were spending less due to cliff fears, though analysts said the damage was still done.
"The government usually does not have a role in holidays but this year they did. They got right in the midst of it, the timing couldn't have been any worse," NPD's Cohen said.
BRIGHT SPOTS
One bright spot has been online sales, which continue to grow at a faster pace.
On Christmas Day, online sales jumped 22.4 percent, outpacing the 16.4 percent increase in 2011, according to IBM Digital Analytics Benchmark, which tracks more than 1 million e-commerce transactions a day from 500 U.S. retailers.
Whether online or off, some of the winning retailers were expected to be Wal-Mart, which attracted shoppers with early deals on the night of Thanksgiving and kept its focus on value, and apparel chains like the Gap, whose bright sweaters were successful, according to analysts.
Toys sold well, and hot items that were harder to find later in the season included certain Mattel Inc Barbie dolls and LeapFrog Enterprises Inc's LeapPad2 tablet computer, according to B. Riley Caris analyst Linda Bolton Weiser.
For retailers that have struggled, analysts said all hope was not lost. Many have fiscal quarters that end in January, so they still have time to benefit from a post-Christmas rebound. Because Christmas fell on a Tuesday, some said they could even see a boost this week from people who have extra time off.
"There's still a little bit more time to go until the holiday season is officially over," Morningstar analyst Peter Wahlstrom said.
Wal-Mart shares ended down 0.8 percent at $67.99 on Wednesday, while Macy's shares were down 1.1 percent at $37.11, Barnes & Noble shares were down 3.5 percent at $14.49, Amazon.com Inc shares ended 3.9 percent lower at $248.63, and Ann Inc shares lost 5.1 percent to close at $32.06.

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Catholic Church urges Irish to oppose abortion law

The head of Ireland's Catholic Church urged followers in his Christmas Day message to lobby against government plans to legalize abortion.
Ireland, the only EU member state that currently outlaws the procedure, is preparing legislation that would allow limited access to abortion after the European Court of Human Rights criticized the current regime.
The death last month of an Indian woman who was denied an abortion of her dying foetus and later died of blood poisoning has intensified the debate around abortion, which remains a hugely divisive subject in the predominantly Catholic country.
"I hope that everyone who believes that the right to life is fundamental will make their voice heard in a reasonable, but forthright, way to their representatives," Cardinal Sean Brady said in a Christmas message on Tuesday.
"No government has the right to remove that right from an innocent person."
Irish Prime Minister Enda Kenny, a regular Mass goer, is bringing in legislation that would allow a woman to have an abortion if her life was at risk from pregnancy.
The country's Supreme Court ruled in 1992 that abortion was permitted when a woman's life was at risk but successive governments have avoided legislating for it because it is so divisive.
The death of Savita Halappanavar, who repeatedly asked for an abortion while she was miscarrying in an Irish hospital, highlighted the lack of clarity in Irish law that leaves doctors in a legally risky position.
Halappanavar's death re-ignited the abortion debate and prompted large protests by groups both in favor of and against abortion.
Kenny and his conservative Fine Gael party have been criticized for tackling the abortion issue and some party members have indicated that they may not be able to back the law.
Relations between the Irish government and the once dominant Catholic Church are at an all-time low in the wake of years of clerical sex abuse scandals.
Kenny told parliament last year that the Vatican's handling of the scandals had been dominated by "elitism and narcissism" and accused it of trying to cover up the abuse. The speech prompted the Vatican to recall its ambassador, or nuncio, to Ireland.
Brady, who has faced calls this year to resign over accusations he failed to warn parents their children were being sexually abused, said in his Christmas message that he wanted relations with government to improve.
"My hope is that the year ahead will see the relationship between faith and public life in our country move beyond the sometimes negative, exaggerated caricatures of the past.

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Lawmakers play waiting game with 'fiscal cliff' deadline in sight

With only a week left before a deadline for the United States to go over a "fiscal cliff," lawmakers played a waiting game on Monday in the hope that someone will produce a plan to avoid harsh budget cuts and higher taxes for most Americans from New Year's Day.
Though Republicans and Democrats have spent the better part of a year describing a plunge off the cliff as a looming catastrophe, the nation's capital showed no outward signs of worry, let alone impending calamity.
The White House has set up shop in Hawaii, where President Barack Obama is vacationing.
The Capitol was deserted and the Treasury Department - which would have to do a lot of last-minute number-crunching with or without a deal - was closed.
So were all other federal government offices, with Obama having followed a tradition of declaring the Monday before a Tuesday Christmas a holiday for government employees, notwithstanding the approaching fiscal cliff.
Expectations for some 11th-hour rescue focused largely on Senate Minority Leader Mitch McConnell, a Republican, in part because he has performed the role of legislative wizard in previous stalemates.
But McConnell, who is up for re-election in 2014, was shunning the role this year, his spokesman saying that it was now up to the Democrats in the Senate to make the next move.
"We don't yet know what Senator Reid will bring to the floor. He is not negotiating with us and the president is out of town," said McConnell's spokesman, referring to Senate Majority Leader Harry Reid, a Democrat. "So I just don't know what they're going to do over there," he said.
Two-day-old tweets on leadership websites told the story insofar as it was visible to the public.
House Speaker John Boehner's referred everyone to McConnell. McConnell's tweet passed the responsibility along to Obama, saying it was a "moment that calls for presidential leadership."
Reid's tweet said: "There will be very serious consequences for millions of families if Congress fails to act" on the cliff.
The next session of the Senate is set for Thursday, but the issues presented by across-the-board tax hikes and indiscriminate reductions in government spending, were not on the calendar.
The House has nothing on its schedule for the week, but members have been told they could be called back at 48 hours notice, making a Thursday return a theoretical possibility.
However, aides to the Republican leaders in Congress said there were no talks with Democrats on Monday and none scheduled after negotiations fell off track last week when Boehner failed to persuade House Republicans to accept tax increases on incomes of more than $1 million a year.
"Nothing new, Merry Christmas," an aide to Boehner responded when asked if there was any movement on the fiscal cliff.
But a senior Obama administration official, speaking on condition of anonymity, said White House aides were talking with Senate Democratic staffers about the situation.
SCALED-BACK EXPECTATIONS
If there is some last-minute legislation, Republicans and Democrats agreed on Sunday news shows that it will not be any sort of "grand bargain" encompassing taxes and spending cuts, but most likely a short-term deal putting everything off for a few weeks or months, thereby risking a negative market reaction.
A limited agreement would still need bipartisan support, as Obama has said he would veto a bill that does not raise taxes on the wealthiest Americans.
On Monday, Texas Senator Kay Bailey Hutchison urged fellow Republicans to be flexible.
"We're now at a point where we're not going to get what we think is right for our economy and our country because we don't control government. So we've got to work within the system we have," she told MSNBC.
Two bills in Congress could conceivably form the basis for a last-minute stopgap measure.
Last spring, Republicans in the House passed a measure that would extend Bush-era tax cuts for everyone, reflecting the party's deep reluctance to increase taxes.
The Democratic-controlled Senate passed a bill in August, extending lower tax rates for everyone except the wealthiest Americans - a group defined at that point as households with a net income of $250,000 or above. Obama has since increased that to $400,000 a year, in an effort to win Republican support.
Analysts say Democrats might be able to get the backing of enough Republicans in both the House and Senate, especially if they are willing to raise the number to $500,000.
Under that scenario, lawmakers might also put off spending cuts of $109 billion that would take effect from January and agree to Republican demands for cuts in entitlement programs such as Medicare and Medicaid, the government-run health insurance plans for seniors and the poor.
However, with only a few work days left in Congress after Christmas, there is a good chance that no deal can be worked out and tax rates would then go up, at least briefly, until an agreement is reached in Washington.
"We may go off the cliff on January 1, but we would correct that very quickly thereafter," Democratic Representative John Yarmuth told MSNBC.
The prospects of the United States going over the fiscal cliff dampened enthusiasm on Wall Street for a "Santa rally" in the holiday season, when stocks traditionally rise.
The Dow Jones industrial average dropped 51.76 points, or 0.39 percent, in Monday's shortened holiday session.
Failure to work out tax rates in the coming days would cause chaos at the Internal Revenue Service, said analyst Chris Krueger of Guggenheim Securities.
"Next weekend is going to be a total, total debacle," he said. The IRS is unlikely to have enough time to revise its tables for withholding taxes.
"The withholding tables are sort of like an aircraft carrier, you can't turn the thing on a dime." he said.

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Venezuela's Chavez improving after surgery: officials

 Venezuelan President Hugo Chavez is improving after a cancer operation in Cuba and has started exercising, officials said on Monday, amid doubts over whether the former soldier is in good enough health to continue governing.
Vice President Nicolas Maduro said he had spoken by phone with Chavez, who was walking and doing exercises as part of his treatment.
"We've gotten the best present we could get this Christmas: a phone call from our commander president," Maduro said on state television.
Information Minister Ernesto Villegas said earlier in the day that Chavez had "shown a slight improvement in his condition," without providing details.
Chavez has not been heard from in two weeks following a fourth operation for an unspecified type of cancer in the pelvic region. The government has said he suffered post-operatory complications including unexpected bleeding and a lung infection, but offered few details about his actual condition.
His death, or even his resignation for health reasons, would upend the politics of the South American OPEC nation where his personalized brand of oil-financed socialism has made him a hero to the poor but a pariah to critics who call him a dictator.
His allies are now openly discussing the possibility that he may not be back in time to be sworn in for his third six-year term on the constitutionally mandated date of January 10.
Opposition leaders say a delay to his taking power would be another signal that Chavez is not in condition to govern and that fresh elections should be called to choose his replacement.
They believe they have a better shot against Maduro, Chavez's anointed successor, than against the charismatic president who for 14 years has been nearly invincible at the ballot box.
But a constitutional dispute over succession could lead to a messy transition toward a post-Chavez era.
Maduro has become the government's main figurehead in the president's absence. His speeches have mimicked Chavez's bombastic style that mixes historical references with acid insults of adversaries.
Opposition leader Henrique Capriles, who lost to Chavez in the October presidential vote, slammed Maduro in an interview published on Sunday for failing to seek dialogue with the opposition at a time of political uncertainty.
"Maduro is not the one that won the elections, nor is he the leader," Capriles told the local El Universal newspaper. "Because Chavez is absent, this is precisely the time that (Maduro) needs help from people (in the opposition camp)."
Chavez has vastly expanded presidential powers and built a near-cult following among millions of poor Venezuelans, who love his feisty language and social welfare projects.
The opposition is smarting from this month's governors elections in which Chavez allies won 20 of 23 states. They are trying to keep attention focused on day-to-day problems from rampant crime to power outages.

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Japan approves Novo's new combination insulin Ryzodeg

 Danish drugmaker Novo Nordisk said on Tuesday Japan's health regulator had approved its new combination insulin, that it plans to market as Ryzodeg, for the treatment of diabetes.
Ryzodeg is a combination of Novo's new ultra long-acting insulin degludec, or Tresiba, which Japan became the first country to approve in September, and its rapid-acting insulin Novorapid.
Tresiba, Novo's biggest new drug hope, had a setback in November when regulators in the United States, where Novo expects to generate the bulk of sales, said Tresiba has a higher heart safety risk than other diabetes treatments, raising fears that it may not be approved there.
Novo has also filed for approval of the drug in the European Union, Canada, Switzerland and other countries.
Tresiba and Ryzodeg are seen as strong new competitors in the long-acting, or basal, insulin market, which has long been dominated by Sanofi's Lantus. Competition is hotting up in the space, with Eli Lilly also having a promising new contender in development.
Novo has said previously that the exact timing for the launch of Ryzodeg would be decided after a price listing for Tresiba, which it plans to launch in Japan shortly after completion of price talks.

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UCB gets Japan clearance for two new drugs

Belgian pharmaceutical company UCB has secured two regulatory clearances in Japan, further cementing its worldwide shift to a new generation of drugs.
The company said in a statement on Tuesday that the Japanese Ministry of Health, Labour and Welfare had approved UCB's Neupro patch to treat Parkinson's disease and moderate-to-severe Restleg Legs Syndrome in adults.
Otsuka Pharmaceutical has the exclusive rights for developing and marketing Neupro in Japan, with UCB responsible in all other regions worldwide. Neupro is available in 35 countries.
In a separate statement on Tuesday, UCB said its drug Cimzia had been approved in Japan for treatment of rheumatoid arthritis in adults.
UCB is jointly developing the drug there with Astellas Pharma Inc, with UCB manufacturing it and Astellas managing distribution and sales. UCB said it would receive an unspecified milestone payment from Astellas.
Cimzia is currently being sold in over 30 countries, including the United States and in Europe.
UCB, a central nervous system and immunology specialist, is placing its hopes on three new drugs - Cimzia, Neupro and epilepsy treatment Vimpat - as previous blockbuster Keppra, also for epilepsy, faces patent expiries.

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Judge asks Hostess to mediate with union

Twinkies won't die that easily after all. Hostess Brands Inc. and its second largest union will go into mediation to try and resolve their differences, meaning the company won't go out of business just yet. The news came Monday after Hostess moved to liquidate and sell off its assets in bankruptcy court citing a crippling strike last week. The bankruptcy judge hearing the case said Monday that the parties haven't gone through the critical step of mediation and asked the lawyer for the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, which has been on strike since Nov. 9, to ask his client, who wasn't present, if the union would agree to participate. The judge noted that the bakery union, which represents about 30 percent of Hostess workers, went on strike after rejecting the company's latest contract offer, even though it never filed an objection to it. "Many people, myself included, have serious questions as to the logic behind this strike," said Judge Robert Drain, who heard the case in the U.S. Bankruptcy Court in the Southern District of New York in White Plains, N.Y. "Not to have gone through that step leaves a huge question mark in this case." Hostess and the union agreed to mediation talks, which are expected to begin the process on Tuesday. In an interview after the hearing on Monday, CEO Gregory Rayburn said that the two parties will have to agree to contract terms within 24 hours of the Tuesday since it is costing $1 million a day in overhead costs to wind down operations. But even if a contract agreement is reached, it is not clear if all 33 Hostess plants will go back to being operational. "We didn't think we had a runway, but the judge just created a 24-hour runway," for the two parties to come to an agreement, Rayburn said. Hostess, weighed down by debt, management turmoil, rising labor costs and the changing tastes of America, decided on Friday that it no longer could make it through a conventional Chapter 11 bankruptcy restructuring. Instead, the company, which is based in Irving, Texas, asked the court for permission to sell assets and go out of business. It's not the sequence of events that the maker of Twinkies, Ding Dongs and Ho Ho's envisioned when it filed for bankruptcy in January, its second Chapter 11 filing in less than a decade. The company, who said that it was saddled with costs related to its unionized workforce, had hoped to emerge with stronger financials. It brought on Rayburn as a restructuring expert and was working to renegotiate its contract with labor unions. But Rayburn wasn't able to reach a deal with the bakery union. The company, which had been contributing $100 million a year in pension costs for workers, offered workers a new contract that would've slashed that to $25 million a year, in addition to wage cuts and a 17 percent reduction in health benefits. But the bakery union decided to strike. By that time, the company had reached a contract agreement with its largest union, the International Brotherhood of Teamsters, which urged the bakery union to hold a secret ballot on whether to continue striking. Although many bakery workers decided to cross picket lines this week, Hostess said it wasn't enough to keep operations at normal levels. Rayburn said that Hostess was already operating on razor thin margins and that the strike was the final blow. The company's announcement on Friday that it would move to liquidate prompted people across the country to rush to stores and stock up on their favorite Hostess treats. Many businesses reported selling out of Twinkies within hours and the spongy yellow cakes turned up for sale online for hundreds of dollars. Even if Hostess goes out of business, its popular brands will likely find a second life after being snapped up by buyers. The company says several potential buyers have expressed interest in the brands. Although Hostess' sales have been declining in recent years, the company still does about $2.5 billion in business each year. Twinkies along brought in $68 million so far this year.

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Just Explain It: What is the Strategic Petroleum Reserve?

Eliminating America's dependency on foreign oil has been a policy goal for at least the last two U.S. Presidents. According to the International Energy Agency, by 2020, the U.S. will overtake Saudi Arabia as the world's number one oil producer. However, there's still some work to do. The United States Energy Information Administration reported that 45% of the petroleum consumed by the U.S. in 2011 was from foreign countries. Even though the country is well on its way to becoming self reliant, there's always a chance we could hit a major bump in the road. The good thing is we have protection. It's called the Strategic Petroleum Reserve or S.P.R. So here's how the S.P.R. works: The reserve was created after the 1973 energy crisis when an Arab oil embargo halted exports to the United States. As a result, fuel shortages caused disruptions in the U.S. economy. The reserves are located underground in four man-made salt domes in Texas and Louisiana. All four locations combined hold a total of 727 million barrels of oil. The inventory is currently at 695 million barrels. That's around 80 days of import protection. It's the largest emergency oil supply in the world -- it's worth about $63 billion. Only the President has the ability to tap the reserves in case of severe energy supply interruption. It's happened three times. Twice within the last decade. In 2005, President Bush ordered the emergency sale of 11 million barrels when Hurricane Katrina shutdown 25 percent of domestic production. In 2011, President Obama ordered the release of 30 million barrels to help offset disruptions caused by political upheaval in the Middle East. Following the release order, the reserve issues a notice of sale to solicit competitive offers. In the most recent sale involving the Obama administration, the offers resulted in contracts with 15 companies for delivery of 30.6 million barrels of oil. To put that in context, last year the U.S. consumed almost seven billion barrels of oil — that's 19 million per day -- or about 22% of the world's consumption. Related Link: Using the Strategic Petroleum Reserve Like a Spigot The release in 2011 had little effect on the price of gas at the pump. Consumers paid about 2% less for a week before the prices began to climb again. Related link: Just Explain It: Why Social Security is Running Out of Money Did you learn something? Do you have a topic you'd like explained? Give us your feedback in the comments below or on Twitter using #justexplainit.

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Apple to produce line of Macs in the US next year

Apple CEO Tim Cook says the company will move production of one of its existing lines of Mac computers from China to the United States next year. Industry watchers said the announcement is both a cunning public-relations move and a harbinger of more manufacturing jobs moving back to the U.S. as wages rise in China. Cook made the comments in part of an interview taped for NBC's "Rock Center," but aired Thursday morning on "Today" and posted on the network's website. In a separate interview with Bloomberg Businessweek, he said that the company will spend $100 million in 2013 to move production of the line to the U.S. from China. "This doesn't mean that Apple will do it ourselves, but we'll be working with people and we'll be investing our money," Cook told Bloomberg. That suggests the company could be helping one of its Taiwanese manufacturing partners, which run factories in China, to set up production lines in the U.S. devoted to Apple products. Research firm IHS iSuppli noted that both Foxconn Technology Group, which assembles iPhones, and Quanta Computer Inc., which does the same for MacBooks, already have small operations in the U.S. Apple representatives had no comment Thursday beyond Cook's remarks. Like most consumer electronics companies, Apple forges agreements with contract manufacturers to assemble its products overseas. However, the assembly accounts for a fraction of the cost of making a PC or smartphone. Most of the cost lies in buying chips, and many of those are made in the U.S., Cook noted in his interview with NBC. The company and Foxconn have faced significant criticism this year over working conditions at the Chinese facilities where Apple products are assembled. The attention prompted Foxconn to raise salaries. Cook didn't say which line of computers would be produced in the U.S. or where in the country they would be made. But he told Bloomberg that the production would include more than just final assembly. That suggests that machining of cases and printing of circuit boards could take place in the U.S. The simplest Macs to assemble are the Mac Pro and Mac Mini desktop computers. Since they lack the built-in screens of the MacBooks and iMacs, they would likely be easier to separate from the Asian display supply chain. Analyst Jeffrey Wu at IHS iSuppli said it's not uncommon for PC makers to build their bulkier products close to their customers to cut down on delivery times and shipping costs. Regardless, the U.S. manufacturing line is expected to represent just a tiny piece of Apple's overall production, with sales of iPhones and iPads now dwarfing those of its computers. Apple is latching on to a trend that could see many jobs move back to the U.S., said Hal Sirkin, a partner with The Boston Consulting Group. He noted that Lenovo Group, the Chinese company that's neck-and-neck with Hewlett-Packard Co. for the title of world's largest PC maker, announced in October that it will start making PCs and tablets in the U.S. Chinese wages are raising 15 to 20 percent per year, Sirkin said. U.S. wages are rising much more slowly, and the country is a cheap place to hire compared to other developed countries like Germany, France and Japan, he said. "Across a lot of industries, companies are rethinking their strategy of where the manufacturing takes place," Sirkin said. Carl Howe, an analyst with Yankee Group, likened Apple's move to Henry Ford's famous 1914 decision to double his workers' pay, helping to build a middle class that could afford to buy cars. But Cook's goal is probably more limited: to buy goodwill from U.S. consumers, Howe said. "Say it's State of the Union 2014. President Obama wants to talk about manufacturing. Who is he going to point to in the audience? Tim Cook, the guy who brought manufacturing back from China. And that scene is going replay over and over," Howe said. "And yeah, it may be only (public relations), but it's a lot of high-value PR." Cook said in his interview with NBC that companies like Apple chose to produce their products in places like China, not because of the lower costs associated with it, but because the manufacturing skills required just aren't present in the U.S. anymore. He added that the consumer electronics world has never really had a big production presence in the U.S. As a result, it's really more about starting production in the U.S. than bringing it back, he said. But for nearly three decades Apple made its computers in the U.S. It started outsourcing production in the mid-90s, first by selling some plants to contract manufacturers, then by hiring manufacturers overseas. It assembled iMacs in Elk Grove, Calif., until 2004. Some Macs already say they're "Assembled in USA." That's because Apple has for years performed final assembly of some units in the U.S. Those machines are usually the product of special orders placed at its online store. The last step of production may consist of mounting hard drives, memory chips and graphics cards into computer cases that are manufactured elsewhere. With Cook's announcement Thursday, the company is set to go much further in the amount of work done in the U.S. The news comes a day after Apple posted its worst stock drop in four years, erasing $35 billion in market capitalization. Apple's stock rose $8.45, or 1.6 percent, to close at $547.24 Thursday.

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US economy adds 146K jobs, rate falls to 7.7 pct.

The pace of U.S. hiring remained steady in November despite disruptions from Superstorm Sandy and employers' concerns about impending tax increases from the year-end "fiscal cliff." Companies added 146,000 jobs, and the unemployment rate fell to 7.7 percent — the lowest in nearly four years — from 7.9 percent in October. The rate declined mainly because more people stopped looking for work and weren't counted as unemployed. The government said Superstorm Sandy had only a minimal effect on the figures. The Labor Department's report Friday was a mixed one. But on balance, it suggested that the job market is gradually improving. November's job gains were roughly the same as the average monthly increase this year of about 150,000. Most economists are encouraged by the job growth because it's occurred even as companies have reduced investment in heavy machinery and other equipment. "The good news is not that the labor market is improving rapidly — it isn't — but that employment growth is holding up despite all the fears over the fiscal cliff," said Nigel Gault, an economist at IHS Global Insight. Still, Friday's report included some discouraging signs. Employers added 49,000 fewer jobs in October and September combined than the government had initially estimated. And economists noted that the unemployment rate would have risen if the number of people working or looking for work hadn't dropped by 350,000. The government asks about 60,000 households each month whether the adults have jobs and whether those who don't are looking for one. Those without a job who are looking for one are counted as unemployed. Those who aren't looking aren't counted as unemployed. A separate monthly survey seeks information from 140,000 companies and government agencies that together employ about one in three nonfarm workers in the United States. Many analysts thought Sandy would hold back job growth significantly in November because the storm forced restaurants, retailers and other businesses to close in late October and early November. It didn't. The government noted that as long as employees worked at least one day during a pay period — two weeks for most people — its survey would have counted them as employed. Yet there were signs that the storm disrupted economic activity in November. Construction employment dropped 20,000. And weather prevented 369,000 people from getting to work — the most for any month in nearly two years. These workers were still counted as employed. All told, 12 million people were unemployed in November, about 230,000 fewer than the previous month. That's still many more than the 7.6 million who were out of work when the recession officially began in December 2007. Investors appeared pleased with the report, though the market gave up some early gains. The Dow Jones industrial average was up 53 points in mid-day trading. The number of Americans who were working part time in November but wanted full-time work declined. And a measure of discouraged workers — those who wanted a job but hadn't searched for one in the past month — rose slightly. Those two groups, plus the 12 million unemployed, make up a broader measure that the government calls "underemployment." The underemployment rate fell to 14.4 percent in November from 14.6 percent in October. It's the lowest such rate since January 2009. Since July, the economy has added an average of 158,000 jobs a month. That's a modest pickup from an average of 146,000 in the first six months of the year. In November, retailers added 53,000 positions. Temporary-help companies added 18,000. Education and health care also gained 18,000. Auto manufacturers added nearly 10,000 jobs. Still, overall manufacturing jobs fell 7,000. That was pushed down by a loss of 12,000 jobs in food manufacturing that likely reflects the layoff of workers at Hostess. Paul Ashworth, an economist at Capital Economics, noted that hiring by private companies was actually better in October than the government first thought. The overall job figures were revised down for October because governments themselves cut about 38,000 more jobs than was first estimated. The U.S. economy grew at a solid 2.7 percent annual rate in the July-September quarter. But many economists say growth is slowing to a 1.5 percent rate in the October-December quarter, largely because of the storm and threat of the fiscal cliff. The storm held back consumer spending and income, which drive economic growth. Consumer spending declined in October, the government said. And work interruptions caused by Sandy reduced wages and salaries that month by about $18 billion at an annual rate. Still, many say economic growth could accelerate next year if the fiscal cliff is avoided. The economy is also expected to get a boost from efforts to rebuild in the Northeast after the storm.

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Just Explain It: Why the Fiscal Cliff May Trigger a Recession

Lawmakers in Washington appear to be making little to no progress in avoiding the impending so-called fiscal cliff. House Speaker John Boehner, R-Ohio, said Friday the negotiations are "almost nowhere." On Thursday Boehner rejected a proposal from the Obama administration saying that the Democrats need to "get serious about real spending cuts." President Obama's offer continues to call for higher taxes on the wealthy and an extension of the payroll tax cut. But Republicans say they will not agree to a plan that raises taxes. As the country continues to head toward the fiscal cliff, this Just Explain It helps to make sense of what it is. On December 31st, most of us would like to be thinking about a prosperous new year ahead…drinking bubbly and singing Auld Lang Syne with friends. But there's a chance we could be singing a different tune if President Obama and Congress don't agree on measures to avoid the fiscal cliff. First, let me explain what the fiscal cliff is. The fiscal cliff refers to the potentially disastrous situation the U-S faces at the end of this year. At midnight on December 31st, a number of laws are set to expire. If the President and the Republicans don't reach an agreement before then, Americans could face broad government spending cuts and tax increases on January 1st. The combined amount would total over 500 billion dollars. Those 500 billion dollars equal about three to four percent of the nation's entire gross domestic product. This is what's referred to as the fiscal cliff. If there isn't a resolution, here are the specifics of what will happen. Taxes would go up for almost every taxpayer and many businesses. The Bush-era tax cuts, which tax relief for middle and upper-class tax payers, would be a thing of the past. So would President Obama's payroll tax cut which added about a thousand dollars a year to the average worker's income. Government spending would be slashed. That means less money for most military, domestic and federal programs. $26 billion in emergency unemployment-compensation would be gone. Medicare payments to doctors would be reduced by $11 billion. Federal programs would take the biggest hit. They stand to lose a total of $65 billion. If the fiscal cliff isn't avoided, some investors will be hit hard. Those who receive qualified dividends could see the tax rate on those dividends go from 15% to almost 40% in 2013. Many business owners believe going over the fiscal cliff will cripple the economy, triggering a deep recession. They fear demand for their products or services will decrease because consumers will have less money to spend. It also means that they won't be able to afford new hires or expand their businesses. Since most Americans would be paying more in taxes, they'd be less inclined to make big purchases, like a home or a new car. None of this is set in stone, but that's part of the problem. Markets, businesses and people in general hate uncertainty. The fear of the unknown facing us at the beginning of next year is exactly why so many people are so worked up over the fiscal cliff. Did you learn something? Do you have a topic you'd like explained? Give us your feedback in the comments below or on twitter using #justexplainit.

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Legendary Indian sitarist, composer Ravi Shankar dead at 92

Sitarist and composer Ravi Shankar, who helped introduce the sitar to the Western world through his collaborations with The Beatles, died in Southern California on Tuesday, his family said. He was 92. Shankar, a three-time Grammy winner with legendary appearances at the 1967 Monterey Festival and at Woodstock, had been in fragile health for several years and last Thursday underwent surgery, his family said in a statement. "Although it is a time for sorrow and sadness, it is also a time for all of us to give thanks and to be grateful that we were able to have him as a part of our lives," the family said. "He will live forever in our hearts and in his music." In India, Prime Minister Manmohan Singh's office posted a Twitter message calling Shankar a "national treasure and global ambassador of India's cultural heritage." "An era has passed away with ... Ravi Shankar. The nation joins me to pay tributes to his unsurpassable genius, his art and his humility," the Indian premier added. Shankar had suffered from upper respiratory and heart issues over the past year and underwent heart-valve replacement surgery last week at a hospital in San Diego, south of Los Angeles. The surgery was successful but he was unable to recover. "Unfortunately, despite the best efforts of the surgeons and doctors taking care of him, his body was not able to withstand the strain of the surgery. We were at his side when he passed away," his wife Sukanya and daughter Anoushka said. Shankar lived in both India and the United States. He is also survived by his daughter, Grammy-winning singer Norah Jones, three grandchildren, and four great-grandchildren. Shankar performed his last concert with his daughter Anoushka on November 4 in Long Beach, California, the statement said. The night before he underwent surgery, he was nominated for a Grammy for his latest album "The Living Room Sessions, Part 1." 'NORWEGIAN WOOD' TO 'WEST MEETS EAST' His family said that memorial plans will be announced at a later date and requested that donations be made to the Ravi Shankar Foundation. Shankar is credited with popularizing Indian music through his work with violinist Yehudi Menuhin and The Beatles in the late 1960s, inspiring George Harrison to learn the sitar and the British band to record songs like "Norwegian Wood" (1965) and "Within You, Without You" (1967). His friendship with Harrison led him to appearances at the Monterey and Woodstock pop festivals in the late 1960s, and the 1972 Concert for Bangladesh, becoming one of the first Indian musicians to become a household name in the West. His influence in classical music, including on composer Philip Glass, was just as large. His work with Menuhin on their "West Meets East" albums in the 1960s and 1970s earned them a Grammy, and he wrote concertos for sitar and orchestra for both the London Symphony Orchestra and the New York Philharmonic. Shankar served as a member of the upper chamber of the Parliament of India, from 1986 to 1992, after being nominated by then Indian Prime Minister Rajiv Gandhi. A man of many talents, he also wrote the Oscar-nominated score for 1982 film "Gandhi," several books, and mounted theatrical productions. He also built an ashram-style home and music center in India where students could live and learn, and later the Ravi Shankar Center in Delhi in 2001, which hosts an annual music festival. Yet his first brush with the arts was through dance. Born Robindra Shankar in 1920 in India's holiest city, Varanasi, he spent his first few years in relative poverty before his eldest brother took the family to Paris. For about eight years, Shankar danced in his brother's Indian classical and folk dance troupe, which toured the world. But by the late 1930s he had turned his back on show business to learn the sitar and other classical Indian instruments. Shankar earned multiple honors in his long career, including an Order of the British Empire (OBE) from Britain's Queen Elizabeth for services to music, the Bharat Ratna, India's highest civilian award, and the French Legion d'Honneur.

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McAfee arrives in U.S. from Guatemala

Computer software pioneer John McAfee, who is wanted for questioning in Belize over the murder of a fellow American, arrived in Miami on Wednesday evening after he was deported by Guatemala, according to fellow passengers on an American Airlines flight. After landing, McAfee, 67, was escorted from the plane by airport security officers, passengers said. Shortly afterward, he tweeted, "I am in South Beach," referring to the popular tourist area on Miami Beach. "Some people felt uncomfortable that he was on our flight. ... We all knew the story," said Maria Claridge, 36, a South Florida photographer who was on the Silicon Valley entrepreneur's flight to Miami. McAfee, who was seated in the coach section and had a whole row to himself, was wearing a suit and was "very calm" during the flight, she added. "He looked very tired, he looked like a man who hadn't slept in days. I'd say he even looked depressed," said another passenger, Roberto Gilbert, a Guatemalan who lives in Miami. McAfee had been held for a week in Guatemala, where he surfaced after evading police in Belize for nearly a month following the killing of American Gregory Faull, his neighbor on the Caribbean island of Ambergris Caye. Police in Belize want to quiz McAfee as a "person of interest" in Faull's death, although the technology guru's lawyers blocked an attempt by Guatemala to send him back there. Authorities in Belize say he is not a prime suspect in the investigation. McAfee has denied any role in Faull's killing. The goateed McAfee has led the world's media on a game of online hide-and-seek in Belize and Guatemala since he fled after Faull's death, peppering the Internet with pithy quotes and colorful revelations about his unpredictable life. "I'm happy to be going home," McAfee, dressed in a black suit, told reporters shortly before his departure from Guatemala City airport on Wednesday afternoon. "I've been running through jungles and rivers and oceans and I think I need to rest for a while. And I've been in jail for seven days." Guatemala's immigration authorities had been holding McAfee since he was arrested last Wednesday for illegally entering the country with his 20-year-old Belizean girlfriend. The eccentric tech pioneer, who made his fortune from the anti-virus software bearing his name, has been chronicling life on the run in a blog, www.whoismcafee.com. He said he had no immediate plans after reaching Florida. "I'm just going to hang in Miami for a while. I like Miami," he told Reuters by telephone just before his plane left. "There is a great sushi place there and I really like sushi." BELIZE STILL WAITING Residents of the Belizean island of Ambergris Caye, where McAfee has lived for about four years, said McAfee and Faull, 52, had quarreled at times, including over McAfee's unruly dogs. McAfee says Belize authorities will kill him if he turns himself in for questioning. He has said he was being persecuted by Belize's ruling party for refusing to pay some $2 million in bribes. Belize's prime minister has rejected the allegations, calling McAfee paranoid and "bonkers. Belize police spokesman Raphael Martinez said the country still wanted to question McAfee about the Faull case. "He will be just under the goodwill of the United States of America. He is still a person of interest, but a U.S. national has been killed and he has been somewhat implicated in that murder. People want him to answer some questions," he said. Martinez noted that Belize's extradition treaty with the United States extended only to suspected criminals, a designation that did not currently apply to McAfee. "Right now, we don't have enough information to change his status from person of interest to suspect," he said. Residents and neighbors on Ambergris Caye said McAfee was unusual and at times unstable. He was seen to travel with armed bodyguards, sporting a pistol tucked into his belt. The predicament of McAfee, a former Lockheed systems consultant, is a far cry from his heyday in the late 1980s, when he started McAfee Associates. McAfee has no relationship now with the company, which was sold to Intel Corp. McAfee was previously charged in Belize with possession of illegal firearms, and police had raided his property on suspicions that he was running a lab to produce illegal synthetic narcotics. He said he had not taken drugs since 1983. "I took drugs constantly, 24 hours of the day. I took them for years and years. I was the worst drug abuser on the planet," he told Reuters before his arrest in Guatemala. "Then I finally went to Alcoholics Anonymous, and that was the end of it.

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Mick Jagger love letters fetch $300,000 at auction

A collection of love letters written by Rolling Stones frontman Mick Jagger to American singer Marsha Hunt, believed to be the inspiration for the band's hit single "Brown Sugar", sold at Sotheby's on Wednesday for 187,250 pounds ($301,000). The 10 letters, dating from the summer of 1969, had been expected to fetch 70-100,000 pounds, according to the auctioneer. "The passage of time has given these letters a place in our cultural history," Hunt said after the London sale. "1969 saw the ebbing of a crucial, revolutionary era, highly influenced by such artists as The Beatles, The Rolling Stones, James Brown and Bob Dylan. "Their inner thoughts should not be the property of only their families, but the public at large, to reveal who these influential artists were - not as commercial images, but their private selves." Hunt, with whom Jagger had his first child, Karis, told Britain's Guardian newspaper last month that she was selling the letters, written in July and August 1969, because she had been unable to pay her bills. "I'm broke," Hunt, who lives in France, told the newspaper. Jagger wrote them to Hunt while filming the Tony Richardson movie "Ned Kelly" in Australia. They showed a sensitive side of the then-young singer, who wrote about the poetry of Emily Dickinson, meeting author Christopher Isherwood and an unrealized multimedia project. Jagger's relationship with Hunt, who is African-American, was kept under wraps until 1972. Hunt has said she was the inspiration for Brown Sugar, which Jagger wrote while in Australia. The rock star also cites in the letters the disintegration of his relationship with singer Marianne Faithfull, whom he was also dating at the time, and the death of Rolling Stones' guitarist Brian Jones. There has been a surge in interest in the rock band this year, as Jagger and his three surviving bandmates celebrate the 50th anniversary of the Stones with a series of concerts, a photo book and a greatest hits album.

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Singer-songwriter Carole King to receive U.S. Gershwin prize

American singer-songwriter Carole King will be awarded the Library of Congress Gershwin Prize for Popular Song, the U.S. national library said on Thursday. The multiple Grammy Award winner co-wrote her first No. 1 hit at age 17 with then-husband Gerry Goffin and was the first female solo artist to sell more than 10 million copies of a single album, with her 1971 release "Tapestry." The prize honors individuals for lifetime achievement in popular music, the library said. It is named after songwriting brothers George and Ira Gershwin. King, now 70, topped the charts with the song "It's Too Late" in 1971, but is best known for her work performed by others, including "You've Got a Friend" by James Taylor and "(You Make Me Feel Like) A Natural Woman" by Aretha Franklin. "I was so pleased when the venerable Library of Congress began honoring writers of popular songs with the Gershwin Prize," King said in a statement. "I'm proud to be the fifth such honoree and the first woman among such distinguished company." King and Goffin wrote some the biggest hits of the 1960s before their nine-year marriage ended in 1968. They rose to prominence in 1960 writing "Will You Love Me Tomorrow" for the Shirelles. The duo also scored hits with "Take Good Care of My Baby," performed by Bobby Vee in 1961, "The Loco-Motion," performed by Little Eva in 1962 and "Pleasant Valley Sunday," performed by The Monkees in 1967, among others. New York-born King did not hit it big as a singer until 1971, when "Tapestry" topped the U.S. album charts for 15 weeks, then a record for a female solo artist. Past recipients of the award include Paul Simon, Stevie Wonder, Paul McCartney and songwriting tandem Burt Bacharach and Hal David.

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