Yahoo! Ditching Chinese Email Service

Yahoo's Chinese arm is shutting down its email service later this year, highlighting the brand's diminishing profile in the country.

China Yahoo! said it would close its email service by August 19, a move that will leave it with just its web portal business.

Users of the service were told they must register with AliCloud, a unit of Chinese e-commerce giant Alibaba, to prevent emails and other information from being deleted when Yahoo's mail service stops.

China Yahoo! has been operated by Alibaba since 2005.

The US internet giant has come under criticism in the past over its business in China. In 2007, executives apologised after providing evidence that was subsequently used by the Chinese authorities used to convict government critics.

The company said it was legally obliged to divulge information about its users to the Chinese government - but said it was unaware it would be used to convict dissidents.

Alibaba public relations official Zhang Jianhua said the end of the mail service would affect millions of users, although he did not have a more precise figure.

"We are not sure how long we can provide the email service under Yahoo's current technological structure," he explained.

A China Yahoo! statement added: "We will offer several options to our users to make this transition as smooth as possible, and China Yahoo! users will have four months time to migrate their accounts."

It said the migration process had already begun.

Users of China's Twitter-like microblogs expressed anger at the news.

A post under the name "Lisa's paw" said: "How can they do this? All of sudden Yahoo mail can't be logged onto and everything was moved to AliCloud. Did you ask for users' opinions?"

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New Look Seeks Deal To Tackle £1bn Debt Pile

By Mark Kleinman, City Editor

New Look, the fashion retailer, has proposed a deal to tackle its £1.1bn debt pile as it seeks to exploit the flagging fortunes of high street rivals such as Marks & Spencer.

I have learnt that the company has held talks in recent days with the holders of £750m of payment-in-kind (PIK) debt, an expensive form of capital that accumulates interest until it pays out on maturity.

Under a deal proposed by New Look's management, led by the chairman, Alistair McGeorge, the company would repay roughly half of the outstanding PIK debt, and move the remaining £375m into a new borrowing facility. The terms of the remaining existing debt were amended last year and are not a priority for New Look, according to insiders.

The retailer is in talks with the leading PIK-holders which include funds such as Anchorage, Alchemy, Oakhill and Canyon about the deal, although an agreement has not yet been reached.

New Look's equity is controlled by Apax Partners and Permira, two private equity firms, with management, including the founder and commercial director Tom Singh, also holding a significant interest.

Insiders said that the negotiations were at a preliminary stage and that all options remained open to the company, including raising new equity.

New Look emerged as one of the UK high street winners over Christmas, and under Anders Kristiansen, its new chief executive, the company is targeting overseas expansion, including into China.

It registered a 3.7% rise in like-for-like sales in the 14 weeks to December 29 as it benefited from a move away from the heavy discounting seen the previous Christmas. Its performance contrasted with that of some key rivals, including Marks & Spencer, which suffered a 3.8% fall in like-for-like clothing sales.

Announcing the festive trading figures, Mr McGeorge said: "The Group has delivered an excellent result in a challenging trading environment, and this performance is a testament to the success of our recovery programme and the strength of our brand.

"Once again customers have been tactical in their shopping through December, delaying spending until later in the month and searching out best value, which New Look was well equipped to deliver. Additionally, our online sales have been very strong, up over 50% on last year.

"Looking ahead we expect the economic outlook to remain challenging, however, we are confident in our ability to maintain the positive momentum being generated from the improved value of our ranges, our store refurbishment programme and continued growth of our online offer."

New Look is one of Britain's biggest retailers of women's fashion, with about 600 stores in the UK, a number that may shrink in the coming years as sales increasingly shift online.

The company declined to comment on the negotiations with the PIK-holders.

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GSK Hit By 'Abuse' Claim By Consumer Watchdog

GlaxoSmithKline has been accused by the competition watchdog of paying off firms to delay the launch of cheap versions of its antidepressant treatment - in a move that denied the NHS "significant" cost savings.

The Office of Fair Trading (OFT) has alleged that GSK offered "substantial" payments to Alpharma, Generics and Norton Healthcare, to hold off from supplying rival medicines to its blockbuster Seroxat treatment.

GSK's rivals were attempting to supply a generic paroxetine product in competition to Seroxat, but it accused each of infringing its patents and to resolve the disputes, they effectively agreed to be paid off, according to the OFT.

The alleged actions by all the firms involved are a potential infringement of competition law, while GSK is also accused of abusing its dominant position in the market.

Ann Pope, senior director of services, infrastructure and public markets at the OFT, said: "The introduction of generic medicines can lead to strong competition on price, which can drive savings for the NHS, to the benefit of patients and, ultimately, taxpayers.

"It is therefore particularly important that the OFT fully investigates concerns that independent generic entry may have been delayed in this case."

The OFT said the firms will now be asked to respond to its allegations before deciding if competition law has been infringed.

Seroxat is one of the company's best-selling medicines, but has been hit by generic competition in recent years, with sales falling 14% in 2012 to £374m.

Sales of the drug fell by nearly a fifth in the final three months of last year alone and Brentford-based GSK has been embroiled in controversy before over its Seroxat treatment.

Also known as Paxil, GSK was fined $3bn (£2bn) in 2012 in the biggest healthcare fraud in US history after it admitted paying medics to prescribe the drug for children although it was not intended for under 18s, while it also pushed its Wellbutrin drug for uses for which it was not approved.

On Friday morning the company responded to the OFT claims and said: "GSK supports fair competition and we very strongly believe that we acted within the law, as the holder of valid patents for paroxetine, in entering the agreements under investigation.

"These arrangements resulted in other paroxetine products entering the market before GSK's patents had expired.

GSK added: "We have cooperated fully with the Office of Fair Trading in this investigation, which covers activities that happened between 2001 and 2004. The paroxetine supply agreements under investigation were terminated in 2004."

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New Round Of Fuel Price Cuts For Motorists

Petrol: The Pump Price Conundrum

Updated: 10:35pm UK, Wednesday 30 January 2013

By Ursula Errington, Business Correspondent

So, the OFT says motorists aren't being ripped off, that the price of petrol on our forecourts is fair and isn't the result of collusion or price-fixing.

Outraged motoring groups still aren't convinced.

The reality is, I don't think anyone knows how to work out the relationship between crude oil and pump price.

From the moment crude oil is pumped out of the ground to when we hand over our money at the till to pay for a topped-up tank, the price of the commodity has been influenced by multiple markets all subject to their own supply and demand idiosyncrasies.

I last worked in oil trading about a decade ago and back then the relationship between the price of Brent crude oil and pump prices was deemed to be pretty sketchy.

Assiduous analysts, whose job it was to structure financial instruments to hedge the bank's customers with exposure to fluctuations in the oil market, pored over oil prices and pump price data looking for a concrete correlation on which to base a safe hedging instrument.

Judging by the collective sighing, teeth-gnashing and head-in-hand gestures, it proved both time consuming and difficult.

Broadly a six-week time lag was identified between a movement in the crude oil price to a correlating adjustment in the pump prices back then but it was considered too statistically patchy to appeal to clients.

So why is it so difficult to find a relationship between the price of oil and the pump price drivers pay?

Firstly, pricing crude oil itself is pretty complicated. Before the black stuff is even out of the ground its anticipated value has been traded on the futures market for weeks, months or years before.

On any one day the oil price is set by taking a combination of a weighted average and straight average up to two months in the future, of all the trades over 600,000 barrels executed on the electronic trading platform the Intercontinental Exchange (ICE).

So it is fair to say that part of the oil price is set by traders who are speculating, who have no intention of allowing their futures contracts to mature and "go physical" (i.e. become related to an actual cargo of oil) but who are buying and selling futures contracts depending on their day-to-day view of the multiplicity of variables effecting the market.

This need not be considered a bad thing. Speculative traders aren't just plucking figures out of the air, they are working on the basis of fine-tuned mathematical models used to assist them in weighting all the factors in play - an outlandish speculative trade based on few decent indicators wouldn't be in their interest at all.

Crucially, these traders add a huge volume of trades to the market, which actually means that big distortions in one trader's view are evened out across the average when the price is set. 

Then there is the shipping market to get the stuff to shore. Highly volatile and as prone to geo-political influences as the commodity itself, shipping deals are opaque because they are over-the-counter and are often based on long-term trading relationships.

The economics of refining are also unhelpfully complex, predominantly because optimising refinery operations is tricky.

Refinery margins (the difference in price between the wholesale value of the products coming out of the refinery and the crude oil from which they were derived) have been surging for many companies of late because of a relative drop in the cost of crude oil and solid demand for products but unscheduled refinery outages, workers on strike, storage costs, changes in the quality of the crude itself - all these things will impact the margin within hours.

And then there's the cost of haulage and the variables at petrol station level, such as a franchise owner's credit rating, local forecourt wars and location.

All of that and we still have some of the cheapest fuel in Europe, according to the OFT.

But it's not over yet - the taxman must also have his share. In the 10 years from 2003 to 2012, prices at the pump increased from 76p per litre (ppl) to 136ppl for petrol and from 78ppl to 142ppl for diesel. Nearly 24ppl of that increase was because of tax and duty.

Is it any wonder then that trying to compare the price of crude oil and the pump price proves a largely fruitless task?

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Church Plans To Use Clout Over City Bonuses

The Church of England plans to use its £3bn voting clout to tackle excessive City bonuses as it seeks to reignite last year's "shareholder spring".

The Church, which holds a significant amount of its £8bn assets as shares in companies, said it will challenge the City's bonus entitlement culture by rejecting soaring director pay deals as the annual meeting season gets under way.

Its new policy is based on Christian principles, but the Church acknowledged there is "no direct biblical guidance" on executive remuneration.

James Featherby, chairman of the Church of England's Ethical Investment Advisory Group (EIAG), said: "We want to see lower annual bonuses and greater emphasis on rewarding executives who manage ethical, social and environmental issues well and so deliver enduring corporate success."

Last year's shareholder spring saw a number of controversial City pay deals voted down, with firms including Aviva, Prudential and Cookson feeling the wrath of investors.

The Church has big stakes in companies including Shell, Google, BP, GlaxoSmithKline and HSBC.

It only backed around a third of remuneration reports last year and has rejected pay packets at Lloyds, Barclays, Royal Bank of Scotland and HSBC for the past two years.

It declined to say if it will vote against bank pay plans again at this year's AGMs, which kick off next week with the Barclays shareholder meeting.

The Church said executive pay at FTSE 100 companies has generally lost touch with revenues, profits and shareholder returns.

It added that annual bonuses appear to be "regarded as an entitlement", which can spur 'short-termism'.

Instead it wants companies to clearly state the highest and lowest paid staff to reduce pay inequality.

The Church also called for an end to bonuses worth more than salary, except in extraordinary cases, while long-term incentives should cover five to seven-year time spans and be paid only in shares.

Its policy says: "In extreme circumstances excessive variable rewards may eat into shareholder returns, especially if a culture of entitlement or greed is fostered throughout the business.

"In egregious cases, public outrage at excess or business failings may risk a company's social licence to operate."

The EIAG oversees investments made by the Church Commissioners for England, the Church of England Pensions Board and the CBF Church of England Funds, which together hold more than £8bn of assets.

A major landlord, its property holdings include London's Hyde Park Estate. The Church's guidelines already ban investment in areas such as high-interest lending, gambling, alcohol and pornography.

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Osborne Issues Legal Challenge To EU Bank Tax

By Ed Conway, Economics Editor

George Osborne has launched an unprecedented legal challenge against European plans for a financial transactions tax.

The move, which will be seen as a further sign of fraying relations between the UK and the rest of the continent, is designed to force the European Commission to reconsider the levy on Europe-related financial activity.

The Chancellor revealed the details on the fringes of the International Monetary Fund meetings in Washington.

Mr Osborne told Sky News: "What I am against is the European Commission coming up with a financial transaction tax that damages Britain. I want to make it clear Britain doesn't want to be a part of that and doesn't want to be affected by a European financial transaction tax even if we're not directly part of it.

"And so we've mounted a legal challenge in the European Court of Justice - that is the correct way to handle these things - the challenge went in yesterday."

According to insiders, this is the first time the UK has challenged legislation of this kind. Under the Commission's current plans, there will be a small charge (0.1% for shares and bonds and 0.01% for derivatives) on all financial transactions within the 11 members of the European Union which have signed up to the tax.

This alone is forecast to knock 0.25% off economic growth according to the Commission's official assessment, although some economists fear this could be an understatement.

It is feared the EU tax plans will adversely affect banks in the UK

The Chancellor said the reason for the legal challenge was that the tax will also hit Britain itself in two ways: first because it will affect any euro-denominated transactions – many of which happen in London.

Second, the tax will apply to all transactions of banks with headquarters in the signed-up EU nations, even if they are in London or outside Europe.

Treasury insiders said the worry was that it could knock significant value off British pension funds and investments.

They characterised the legal challenge, which may take years to be heard, as an important insurance policy in the legislative battle to get the tax amended.

However, analysts said that the move marked a significant escalation in tension between the UK and the Commission.

Mats Persson of think tank Open Europe said: "The economic, legal and political implications of this move for future EU-UK relations are huge… Legally, it could set out the parameters for how a 'flexible Europe' involving different levels of participation in the EU – which Prime Minister David Cameron has said he champions – will be governed.

"Politically, it's a test of the extent to which the UK – as a non-eurozone member - can halt or change EU measures with a profound impact on its national interest. Therefore, it will be a key issue in the on-going debate about the UK's continued EU membership."

The Chancellor also defended Britain's economic reputation, which has been dealt a blow this week by comments by the IMF chief economist Olivier Blanchard that Mr Osborne is "playing with fire" with his fiscal policy.

The Fund is due to come to the UK next month to carry out its annual survey of the economy. It is expected to advise the Chancellor to slow the pace of his austerity program.

"When the IMF comes to town we will make it absolutely clear that what we're doing is both enhancing the credibility of the United Kingdom by dealing with our debts and deficits but also supporting the British economy,"  Mr Osborne said. 

"For example, through the new housing scheme - the help to buy scheme which I launched at the Budget, through the work we're doing on funding for lending, through the work we've done on tax, for instance to increase the personal allowance."

Asked about criticisms of the Help to Buy scheme, under which the Government will guarantee mortgages for homebuyers, Mr Osborne said: "We are at a period of real weakness in the housing market, so the risks of a housing bubble are pretty non-existent.

"The key thing is that this scheme is time limited and we've given the keys to it to the [Bank of England's] Financial Policy Committee so it can turn it off in the future."

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Virgin Active Eyes £2bn David Lloyd Merger

By Mark Kleinman, City Editor

Virgin Active is mulling a takeover bid for David Lloyd Leisure that would create a £2bn health and fitness empire, and entrench Sir Richard Branson as the industry's most important British stakeholder.

I have learnt that Virgin Active has been undertaking detailed work on the structure of a possible offer for David Lloyd, which has been put up for sale by its consortium of shareholders.

The Virgin-backed chain is now deliberating over whether to submit a formal offer for the tennis-based network of fitness clubs ahead of a new deadline, which is thought to have been set for next month.

If successfully completed, a deal would create a group of more than 200 venues in the UK, with many more in a host of overseas markets, including Belgium, Ireland and South Africa.

People close to the process said that Virgin Active did not participate in the initial round of bidding for David Lloyd earlier this month, and cautioned that it may yet decide not to make an offer at all.

David Lloyd's advisers at UBS, the investment bank, are said to be seeking a sale worth £900m, although some insiders suggested on Friday that a lower valuation was likely.

Virgin Active, which is chaired by the former Boots boss Richard Baker, would have little trouble financing a deal.

A controlling stake in the business was sold in 2011 to CVC Capital Partners, the buyout firm behind Formula One motor racing, in a deal thought to have valued the gyms chain at £900m.

According to unaudited results published last summer, Virgin Active recorded a profit of £127m in 2011, up 11% on the previous year.

The company is understood to have concluded that a takeover of David Lloyd, which made around £100m last year, would not raise significant competition concerns.

The health and fitness market remains reasonably fragmented, with other significant players including a diminished Fitness First, which now operates around 80 clubs following a financial restructuring that saw many sites sold or closed.

A number of other gym chains are also on the market, with several private equity firms looking at a combination of Pure Gym and the Gym Group at the value end of the sector.

Even if Virgin Active does decide to pursue an offer for David Lloyd, it will face stiff competition to secure a deal. Private equity firms including Blackstone and KSL Capital Partners, which owns the Belfry golf resort, are reported to have submitted offers.

David Lloyd is controlled by London & Regional, the vehicle of the property tycoons Ian and David Livingstone, and Caird Capital, a firm created by former HBOS bankers responsible for many of the bank's biggest corporate deals before it required a rescue in 2008.

Virgin declined to comment, while David Lloyd could not be reached for comment.

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Fitch Strips UK Of AAA Rating On Debt Outlook

Ratings agency Fitch has stripped the UK of its AAA rating, citing a "weaker economic and fiscal outlook".

The agency placed the UK on an AA+ rating, following Moody's downgrade of UK debt in February.

A Fitch statement said: "The downgrade of the UK's sovereign ratings primarily reflects a weaker economic and fiscal outlook and hence the upward revision to Fitch's medium-term projections for UK budget deficits and government debt."

The downgrade will place further pressure on the Government ahead of next week's first quarter GDP figures, which will reveal if Britain has managed to avoid an unprecedented triple-dip recession.

The agency now expects Government debt to peak at 101% of GDP in 2015-16, only declining gradually in 2017-18. That is worse than its previous forecast of debt peaking at 97% of GDP and declining in 2016-17.

Fitch, which waited until stock markets had closed before announcing the downgrade, had already warned that Government failure to stabilise debt below 100% of GDP and set it on a firm downward path would trigger a downgrade.

Chancellor George Osborne had pledged to retain the UK's AAA status

The statement said: "Despite the UK's strong fiscal financing flexibility underpinned by its own currency with reserve currency status and the long average maturity of public debt, the fiscal space to absorb further adverse economic and financial shocks is no longer consistent with an AAA rating."

Fitch slashed the UK's growth forecast to 0.8% this year, from its earlier expectation of 1.5%. Next year it expects the UK economy to grow by 1.8%, down from its previous 2% forecast.

Earlier this week, the International Monetary Fund also cut the UK's growth forecast growth from 1% to 0.7% this year and 2014's projection from 1.9% to 1.5%, noting the recovery was "progressing slowly".

IHS Global Insight economist Howard Archer said the downgrade was "no surprise" and is likely to have minimal market impact.

"Nevertheless, Fitch's move is another slap in the face for the government - particularly as the Chancellor (George Osborne) made keeping the AAA rating a key focus for the UK," he said.

Fellow ratings agency Standard & Poors held the UK's debt rating steady at AAA earlier this month, but warned over the economy's "negative outlook".

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Google And Microsoft Report Soaring Revenues

Tech firms Google and Microsoft have reported strong quarterly growth amid shifting strategies for both.

Google's core internet business net revenue grew 23% in the first quarter as profit climbed to $3.35bn (£2.2bn), despite a trend toward cheaper ads on smartphones and tablets.

"We had a very strong start to 2013, with $14bn (£9.1bn) in revenue, up 31% year-on-year," Google chief executive Larry Page said.

Shares of Google, which reached an all-time high of $844 (£550) in March, were up 2.5% to $784 (£512) at one point during trading on Friday.

Microsoft was revenue rise in the quarter by 18%, year-on-year

Meanwhile, Microsoft's strategy of selling more long-term software contracts to big business customers cushioned the blow from plummeting PC demand and also lacklustre demand for Windows 8.

Net income was $6.1bn (£4bn) for the fiscal third quarter, which ended in March, up 18% from $5.1bn (£3.3bn) the same period last year. Revenue was $20.5bn (£13.3bn), up 18% year-on-year.

Its shares were at one point up 3.68%, at $29.84 (£19.50), on Friday.

The boost comes as personal computer sales fell 14% in the first three months of the year, just as Microsoft tried to ramp up sales of the latest iteration of Windows.

But the company's ability to keep hold of big customers rescued its third-quarter results.

"Microsoft has successfully transitioned into an enterprise software company and these results show that," Fort Pitt Capital analyst Kim Caughey Forrest said.

"Because the strength of server and tools and the actual way they sell licences to business is making up for the missing PC sales."

Google's Android operating system is used on Samsung smartphones

In effect, Microsoft no longer relies on a new PC to make money from software - only 20% of the company's product revenue comes from computer makers paying fees to put Windows on their machines.

About 45% comes from multiyear agreements with customers - generally big companies - paying millions for three-year access to Windows and Office software.

The software giant is also working with manufacturers to produce a line of small touch-screen devices powered by Windows, apparently intended to compete with tablets like the iPad Mini and Amazon Kindle Fire.

Google has also stepped up its strategic shift, to mobile advertising spurred by its Android operating system leaping past Apple iPhone and iOS software to power some 70% of devices.

Google improved its cost-per-click (CPC), a critical metric that refers to the price advertisers pay the search giant, in the first quarter.

The CPC rate declined 4% year-on-year in the first quarter, following a 6% decline in the fourth quarter.

"It's classic Google. There's plenty of things to like and some things not to like," BGC Partners analyst Colin Gillis said.

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George Osborne Urged To Rethink Economic Plan

Lagarde's Support For Osborne

Updated: 4:29pm UK, Saturday 20 April 2013

By Ed Conway, Economics Editor

A few weeks ago, eagle-eyed Twitter users would have noticed a rather unusual tweet from one household name to another.

"Welcome to Twitter @George_Osborne," read the public message from @Lagarde, "see you in two weeks at the 2013 IMF/WB spring meetings in Washington, DC".

It was, it turns out, the only personal tweet that Christine Lagarde sent to any other finance minister in the run-up to this past week's Spring Meetings in Washington DC.

This is no coincidence. Lagarde and Osborne really are good friends. They talk regularly (and not just on Twitter); they have a genuinely warm personal and professional relationship.

Osborne was the first major finance minister to endorse Lagarde for her post as managing director of the International Monetary Fund and she, in turn, has always been steadfastly and publicly supportive of his economic policy.

Last summer, Lagarde made a personal appearance at the UK Treasury to unveil the Fund's annual assessment of the British economy, and endorsed the Osborne economic plan.    

She memorably said that when she tried to imagine what the public finances would have looked like without the Chancellor's austerity measures, "I shiver."

Even as the Fund's professional assessment of the UK economy's health turned negative, Lagarde's support for Osborne has remained unwavering.

Earlier this week in Washington, the IMF chief economist, Olivier Blanchard (who, like Lagarde, is French) said Osborne would have to reduce the pace of his spending cuts, adding that the Chancellor was "playing with fire".

The World Economic Outlook said, in black and white, that "greater near-term flexibility in the path of fiscal adjustment" was necessary in the UK – economese for "you need to consider plan B".

And yet when asked about Britain, Lagarde offered a far more equivocal verdict: there was "nothing new" in the Fund's assessment that the UK should be ready to change course if and when economic growth disappointed - though she conceded that "the growth numbers are not particularly good."

This difference in tone has been useful for the Chancellor. When asked in a press briefing about Blanchard's criticism, Osborne quoted Lagarde's comments at length, saying that the chief economist was "just one voice".

However, the reality, according to a range of Fund insiders, is quite the contrary. They point out that the institutional IMF view is far closer to Blanchard's opinion than Lagarde's. That it is Lagarde who is the outlier.

In fact, some Fund officials were privately aghast when they heard Lagarde claim in that press conference that there was "nothing new" in the Fund's position on the UK.

One told me that within the Fund some were muttering that Lagarde's good relationship with the Chancellor - and her consequent efforts to be diplomatic - were undermining the overall message: that Britain must change course.

However, if there were any doubt about the Fund's true position, it has now been laid to rest by Lagarde's deputy, David Lipton. In an interview with Sky News, he said, explicitly, that when it comes to Britain's budget, "the pace of consolidation ought to be reconsidered".

The precise numbers, he signalled, would have to wait until the Fund's official survey begins next month, but the verdict could hardly be clearer.

The intervention is particularly significant given who it has come from. Lipton is not a household name; he is not on Twitter. But not only is he Lagarde's deputy, he is the man who will take her place to unveil the ominous findings of the IMF assessment in London next month. It's enough to make George Osborne shiver.

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