Tag Archives: News event


Covering the sale of a business magazine


Bidders have been circling Forbes as the iconic business brand put itself up for sale. The value is now in the name since the company has been losing money.

Bloomberg had this story about potential bidders by Stefania Bianchi, George Smith Alexander and Zijing Wu:

Forbes Media LLC is drawing interest from acquirers including China’s Fosun International Ltd. (656) and Singapore’s Spice Global Investments Pvt, with final offers for the magazine publisher due today, people with knowledge of the matter said.

Germany’s Axel Springer SE, which publishes the Russian edition of Forbes magazine, is also interested in the business, two people said, asking not to be named discussing private information. Forbes, which is working with Deutsche Bank AG on the sale, is seeking as much as $400 million, people with knowledge of the matter said in November.

The sale of Forbes, famous for tracking the wealth of billionaires across the globe, follows years of dwindling profits as the rise of digital media ate into advertising at the magazine. During the sale process, Forbes executives have emphasized the brand as a masthead for events and conferences as well as real-estate developments, a way of extending beyond its roots in traditional media, two people said.

“Forbes used to just be a magazine, now it’s a worldwide business brand,” Ken Doctor, a media analyst with Outsell Inc., said in an interview. “How many people in their twenties and thirties are in emerging business markets — Asia, Africa, Latin America? That’s my sense of the great growth potential of the Forbes brand.”

Spice Global, whose businesses range from finance to health care and entertainment, is currently seeking partners from the Middle East, the U.S. and Singapore as it prepares its bid for Forbes, said two of the people. The company will keep a majority stake in Forbes even if it bids with a partner and may offer the Forbes family the opportunity to buy back shares in the company, one of the people said.

William Boston had this story in the Wall Street Journal about a potential bid for Forbes:

European newspaper publisher Axel Springer SE is bidding for Forbes magazine and wants a foothold in the U.S. digital-publishing market, but Chief Executive Mathias Döpfner is hesitating at the price of online assets.

Springer needs acquisitions to continue expanding its digital business but rarely pays a premium, Mr. Döpfner said in an interview. He described Springer’s approach as buying new-economy assets for old-economy prices.

“We are disciplined when it comes to price,” said Mr. Döpfner, who declined to discuss Forbes. “We will definitely not go hunting trophies in the U.S. seeking prestige.” He listed three criteria for pursuing targets: “a reasonable price, if we can become a market leader and if it fits with our core competencies.”

The company’s digital overhaul has accelerated over the past two years. It has reoriented its business and made more than two dozen acquisitions, mostly of small online companies. Mr. Döpfner described his strategy as getting back to the roots of the newspaper business: hard-hitting online news, financed by digital subscriptions, online advertising and digital classifieds.

Springer’s revenue from digital media rose to €1.1 billion in 2012 from €24 million in 2006. Operating profit on digital businesses rose to €243 million from €1 million during the same period. Digital businesses account for nearly 60% of Springer’s operating profit today, up from just 4% in 2008.

Springer is vying with several bidders, including two from Asia to buy Forbes Media LLC, people familiar with the situation said. The deadline for final bids was Monday evening in New York. The Forbes family wants to retain a minority stake and management control, according to a document reviewed by The Wall Street Journal. The family is seeking as much as $400 million for the company, a person familiar with the talks said. Forbes declined to comment.

Springer’s bid could be a good one for the Forbes brand. The Journal reported that Dopfner was one of the first to put content behind a paywall:

Mr. Döpfner also started charging subscriptions for the digital versions of the Bild Zeitung and Die Welt, becoming the first major German publisher to put online versions of flagship publications behind paywalls. Bild is Germany’s largest online news portal, reaching around 14 million unique users daily. Within six months, the company had more than 152,000 paying subscribers to Bild.de.

Mr. Döpfner’s moves have sparked criticism that he was abandoning journalism and selling the company DNA. He calls the claims “an insult to every journalist.”

Mr. Döpfner said content once again will be king. “That’s why it is interesting now to invest in content businesses that are still undervalued.” He described last year’s purchase of the Washington Post by Amazon.com Inc. AMZN -0.06% CEO Jeff Bezos as a watershed event that drew the battle lines between the traditional publishing industry and technology companies such as Amazon, Google Inc. GOOG -0.38% and Apple Inc. AAPL +1.79%

“The question is whether traditional content companies will win the game because they have learned how to use technology or whether the technology companies win because they learn how to create content,” Mr. Döpfner said. “That is the great game today.”

Forbes has tried a lot of experiments with contributor content and other native advertising. None of it has helped boost revenue, and some would argue it’s diluted the brand. It will be interesting to see the price and how the rest of the industry values the name.


Talking Biz News Today — Feb. 10, 2014


Monday’s top stories:

Wall Street Journal

Yahoo to partner with Yelp on local search, by Douglas MacMillan and Daisuke Wakabayashi


Toyota exit heralds end of Australia’s auto industry, by Charles Riley
AOL reverses 401(k) cuts, CEO apologizes, by Mark M. Meinero


Former Madoff aides get their day in court, by Joseph Ax
Barclays underlying annual profit drops to $8.5 billion, by Steve Slater

New York Times

Fight over minimum wage illustrates web of industry ties, by Eric Lipton
Barclays and regulators look at possible theft of customer data, by Jenny Anderson


Blockbuster is still a hit – south of the border, by Patricia Laya

Today in business journalism

CNBC ratings soar due to “Shark Tank”
Sale of Forbes is close
Missouri paper expanding Sunday business section
Has the business news pendulum swung?
AOL reverses 401(k) change

This date in business journalism history

2009: Minyanville launches redesigned site
2012: Tech journalist named Time editor at large

Business journalism birthdays

Feb. 10: Jim Cramer of CNBC


AOL reverses 401(k) change


In one of the biggest public relations gaffes so far this year, AOL Inc. Chief Executive Officer Tim Armstrong blamed rising benefits costs on health care and two babies. As the criticism mounted about the policy change, Armstrong reversed course and reinstated the benefits policy.

William Launder had this story in the Wall Street Journal.:

AOL Inc. AOL +0.28% ’s Chief Executive Tim Armstrong said Saturday the company would reverse a recent change to its employee 401(k) policy and he apologized for remarks used to explain the rationale for the initial change in the benefits policy.

The company had recently moved to a policy in which employees get an annual lump sum 401(k) contribution from AOL at the end of the year, rather than matching contributions each pay period.

Mr. Armstrong said in an email to staff on Saturday that AOL will reinstitute matching contributions from AOL for each pay period. “As we discussed the matter over several days, with management and employees, we have decided to change the policy back to a per-pay-period matching contribution.”

On Thursday, Mr. Armstrong had caused a stir with employees and on social media when he said that care for two staffers’ “distressed babies” in 2012 cost the company about $1 million each. He used that example to help explain the rationale for changing the 401(k) policy.

Mr. Armstrong was accused of using the infants as cover for the unpopular policy change and was criticized for singling out the two mothers.

Slate published a story by Deanna Fei, the mother of one of the babies Armstrong mentioned:

“Two things that happened in 2012,” Armstrong said. “We had two AOL-ers that had distressed babies that were born that we paid a million dollars each to make sure those babies were OK in general. And those are the things that add up into our benefits cost. So when we had the final decision about what benefits to cut because of the increased healthcare costs, we made the decision, and I made the decision, to basically change the 401(k) plan.”

Within hours, that quote was all over the Internet. On Friday, Armstrong’s logic was the subject of lengthy discussions on CNN, MSNBC, and other outlets. Mothers’ advocates scolded him for gross insensitivity. Lawyers debated whether he had violated his employees’ privacy. Health care experts noted that his accounting of these “million-dollar babies” seemed, at best, fuzzy.


I take issue with how he reduced my daughter to a “distressed baby” who cost the company too much money. How he blamed the saving of her life for his decision to scale back employee benefits. How he exposed the most searing experience of our lives, one that my husband and I still struggle to discuss with anyone but each other, for no other purpose than an absurd justification for corporate cost-cutting.

The New York Times story by Leslie Kaufman mentioned an incident earlier this year where Armstrong apologized after firing an employee for taking pictures of him:

But the commotion surrounding AOL’s benefits program was the second time in the last year that Mr. Armstrong has been forced to apologize for his actions or comments during internal meetings.

During a tense meeting in August with employees at AOL’s troubled Patch unit, a collection of local news sites, he fired an employee who was taking photographs of him during the meeting. He apologized four days later. AOL recently sold a majority stake in Patch to Hale Global, a turnaround firm.

In the current incident, Mr. Armstrong came under criticism for what numerous AOL employees thought were insensitive remarks while discussing the company’s increased medical costs. To make his point, he cited specific health care examples.

As Bloomberg pointed out in a story by Edmund Lee and Michelle Yun, the gaffe detracted from AOL’s earnings and outlook:

The latest incident overshadowed AOL’s fourth-quarter earnings, which were released Feb. 6. While the New York-based company exceeded analysts’ sales and profit estimates, the 401(k) uproar made it harder for Armstrong to tout the results. In his memo, he said the performance “validated our strategy and the work we have done on it.”

The Motley Fool’s Alex Planes says Armstrong “may be the worst CEO of the decade”:

Revenue has fallen almost 30%. Earnings per share have been cut in half. Free cash flow is two-thirds lower today than it was when Armstrong took the company public again.

What has AOL done under Armstrong’s leadership? Its three major moves were acquisitions. AOL bought Patch in 2009, TechCrunch in 2010, and Huffington Post in 2011.

When Tim Armstrong took the reins at AOL in 2009, it was a company largely dependent on subscriber revenue for its profitability. Tim Armstrong’s AOL today is still a company dependent on subscriber revenue for its profitability. Nothing Armstrong himself has done has changed that equation in the slightest, and it’s clear from the results over the duration of his tenure that this is a losing equation over the long run. Instead of blaming employees who get handed a bad medical break, maybe he should be taking a long, hard look in the mirror instead.

Armstrong’s apology may be too little too late. Instead of focusing on AOL’s better-than-expected performance, investors were treated to a public relations nightmare. Fei’s story in Slate is shockingly personal and the ordeal of her daughter’s birth is in stark contrast to AOL’s need to cut costs. The way the company handled this story is terrible. Reinstating the benefits might be the right thing to do, but somehow it feels like an afterthought.


Talking Biz News Today — Feb. 7, 2014


Friday’s top business stories


Consumer credit in U.S. rose more than forecast in December, by Katherine Peralta
Monthly U.S. jobs report: A story told by numbers, with a twist (or two), by Matthew C. Klein
U.S. payrolls rise less than forecast; jobless rate falls, by Shobhana Chandra


Moody’s cuts Puerto Rico to junk, by Steven C. Johnson

New York Times

McDonald’s chooses its moment in Vietnam, by Mike Ives
GoPro to go public, by David Gelles


How a quiet Boulder startup is finding ‘million-dollar Tweets’ for businesses, by Erin Griffith

Today in business journalism

Jewish business magazine is launched
Wharton to hold one-day workshop for business journalists
How the Wall Street Journal beats competitors on social media
Louisville biz paper’s redesign changes how it covers stories
Kneale among three leaving Fox Business
SAC insider convicted

This date in business journalism history

2008: Buffett corrects Dow Jones story by calling CNBC
2012: AP assistant biz editor leaving for Bloomberg Industries

Business journalism birthdays

Feb. 7: Rachel Silverman of The Wall Street Journal


SAC insider convicted


Many on Wall Street have been watching the trial of Matthew Martoma closely. The SAC Capital Advisors trader is looking at 10 years in prison for his conviction on insider trading charges, but most are still waiting to see what will happen to Steven Cohen, his boss.

The Wall Street Journal had this story by Christopher M. Matthews and John Carreyrou:

A jury found Mathew Martoma guilty of insider trading Thursday, handing prosecutors their eighth win against someone who worked at SAC Capital Advisors LP and possibly bolstering a related case against firm founder Steven A. Cohen.

Prosecutors have long pursued Mr. Cohen, who built one of the country’s most successful hedge funds over the past two decades and managed more than $15 billion at the firm’s peak. He has denied involvement in any wrongdoing and hasn’t been charged criminally, but he faces a civil allegation by the Securities and Exchange Commission that he failed to adequately supervise two senior employees at his firm.

Both of those men, Mr. Martoma and Michael Steinberg, have now been convicted on criminal charges. Mr. Martoma, 39 years old, was found guilty Thursday of taking part in what prosecutors say was one of the largest insider-trading schemes ever—illegal trades on two pharmaceutical companies that helped SAC and its traders book profits and avoid losses worth a total of $275 million.

Those dual convictions could hurt Mr. Cohen’s defense. The trades at the heart of Mr. Martoma’s case, for instance, are some of the same ones the SEC cites in its lawsuit against Mr. Cohen.

Alexandra Stevenson and Matthew Goldstein wrote for The New York Times that Cohen continues to conduct business despite the trials of his employees:

For Mr. Cohen, meanwhile, it is business as usual, albeit on a somewhat reduced scale. He is moving ahead with plans to convert his 22-year-old firm into a family office that will manage no outside money, just his $9 billion in personal wealth. The firm will still employ more than 800 people and maintain offices in several cities. At one point during Mr. Martoma’s trial, Mr. Cohen, a noted art collector, attended a New York Knicks basketball game at Madison Square Garden with the art dealer Larry Gagosian.

The case against Mr. Martoma was notable because it was the first time that Mr. Cohen was linked to questionable trades at his firm. The two men had a 20-minute phone conversation on July 20, 2008, the day before SAC began selling two drug stocks. For more than two years, federal prosecutors and agents with the Federal Bureau of Investigation pressed Mr. Martoma to cooperate and tell them what he and Mr. Cohen had discussed.

But with the conviction of Mr. Martoma, an investigation that lasted almost a decade of Mr. Cohen, 57, and his Stamford, Conn., hedge fund may have seen its last criminal prosecution.

When SAC was indicted last summer, federal prosecutors called the onetime $14 billion firm a breeding ground for inside trading activity and a “veritable magnet for market cheaters.” And federal authorities have said they are continuing to investigate accusations of insider trading in several other stocks SAC traded

Reporting on the trial for Reuters, Nate Raymod wrote that Martoma gave little reaction to the verdict:

Martoma gave no apparent reaction as the verdict was read. His wife, Rosemary, sat up in her seat in court as the verdict was read, with tears going down her face. They exited the court holding hands.

As news photographers snapped pictures, Martoma walked stone-faced out of the courthouse and into a waiting SUV with his wife and defense team. They did not speak to reporters.

“We are very disappointed and we plan to appeal,” Richard Strassberg, Martoma’s lawyer, said through a spokesman.

U.S. District Judge Paul Gardephe did not immediately set a sentencing date. Martoma, 39, could face a maximum 45 years in prison, although the highest sentence to date in an insider trading case is 12 years.

But Businessweek’s Sheelah Kolhatka raised several good points about why Martoma didn’t testify against SAC:

But after four weeks of trial, the testimony of two Alzheimer’s doctors and that of drug company executives, traders, compliance officers and academics, two days of jury deliberations, and now a unanimous verdict, a huge unanswered question lingers: Why didn’t Mathew Martoma flip?

Martoma was charged in November 2012 with insider trading in two drug stocks, Elan (PRGO) and Wyeth (PFE), in what the government described as the largest insider trading case in history, with $275 million in profits and avoided losses. Some of the trades at the heart of the case involved Martoma’s former boss, SAC founder Steven Cohen, who, the government alleged, sold off SAC’s position after a 20-minute phone conversation with Martoma that took place on July 20, 2008. No one knows what took place during that phone call, and it’s possible that no one ever will. Cohen himself has not been charged criminally. SAC Capital pled guilty to securities fraud in November. The U.S. Securities and Exchange Commission filed a civil charge against Cohen for failing to supervise his employees that has yet to be resolved.

Government investigators never expected the Martoma case to go to trial. The evidence against him was believed to be so strong, and the potential punishment so steep—up to 20 years in prison—that most observers believed Martoma, father of three young children, would do the rational thing and agree to cooperate in exchange for a reduced sentence. For whatever reason, he didn’t.

For Cohen, long known to be the true target of the government’s investigation, the verdict comes as both a further blow and a relief. Prosecutors managed to shut down his hedge fund, but he has so far avoided time behind bars. It’s Martoma who now awaits sentencing, while Cohen contemplates his future as the head of a multibillion dollar family office and a buyer of high priced art.

And isn’t that really the true injustice? The founder, head and culture-maker of the firm continues to avoid punishment, while those around him continue to fall.


Talking Biz News Today — Feb. 6, 2014


Thursday’s top stories:

New York Times

Russia’s economic malaise casts specter over games, by Steven Lee Myers
Times Co. reports digital subscriber increase, but ad declines continue, by Ravi Somaiya


News Corp reports lower revenue on soft ad sales, by Jennifer Saba
Jobs data improves, but weak exports may hurt growth, by Lucia Mutikani
SAC Capital’s Martoma found guilty of insider trading, by Nate Raymond

Business Insider

LinkedIn tanks after Q4 earnings report, by Jillian D’Onfro

The Washington Post

AOL chief cuts 401(k) benefits, blames Obamacare and two “distressed babies,” by Jia Lynn Yang


E-cigarettes: A $1.5 billion industry braces for FDA regulation, by Megan McArdle

Today in business journalism

Quartz tops 5 million visitors in January
The need for better local economic news
Stern named WSJ editor of strategic initiatives
Bloomberg’s Africa plan raises questions
Coca-Cola moves to enter homes

This date in business journalism history

2007: Biz journalism center started in South Africa
2012: Bloomberg Pursuits has arrived

Business journalism birthdays

Feb. 6: Henry Blodget of Business Insider


Coke Logo

Coca-Cola moves to enter homes


With the announcement that Coca-Cola Co. is buying a 10 percent stake in Green Mountain Coffee means that soon you’ll have the option of making your own single-serve Coke at home. The real question is what will happen to Coke’s global distribution network and its relationship with bottlers.

Michael J. de la Merced had this story in the New York Times:

Coca-Cola agreed on Wednesday to buy a 10 percent stake in Green Mountain Coffee Roasters, as it seeks to cement ties with the fast-growing coffee company.

Under the terms of the deal, Coke will buy about 16.7 million shares in Green Mountain for about $1.25 billion. The shares were priced at $74.98 each, representing the volume-weighted average price for the last 50 days.

In return, Green Mountain will be the official maker of the soda giant’s single-serve cold beverages, built on its popular Keurig pod-based system. Some of the proceeds from the investment will go toward expansion of its forthcoming Keurig Cold product.

Writing for the Wall Street Journal, Mike Esterl and Annie Gasparro:

The pact represents a major strategic shift for Atlanta-based Coke, which has relied on restaurant fountain systems and legions of bottlers to deliver its namesake cola to consumers since 1886.

It coincides with a nearly decade-long decline in U.S. soda consumption, a trend that puts pressure on Coke and rivals such as PepsiCo Inc. and Dr Pepper Snapple Group Inc. to find new ways to court drinkers.

In a conference call with reporters, Coke Chief Executive Muhtar Kent said the partnership represents “a real game-changing” innovation for the industry but that the company isn’t abandoning its traditional routes to market.

“This is not a zero-sum game,” he said, adding that Cokes bottlers will have “a very complementary role” in how the company’s products are marketed under the Keurig system.

Coke said it will make its global drink portfolio—which includes hundreds of other brands including Sprite, Fanta, Minute Maid and Powerade—available around the world through Green Mountain’s KeurigCold system. Green Mountain says the system should be available in fiscal 2015, which begins Sept. 28.

A Coke spokesman said the company has the option to increase its minority equity stake in Green Mountain to 16% during the first 36 months of the partnership.

Bloomberg reported in a story by Leslie Patton and Duane D. Stanford that while Keurig is working with Coca-Cola on developing the cold brew machine, Keurig may also partner with other beverage makers:

The companies are together working on the Keurig Cold single-cup beverage brewer that will be sold in Green Mountain’s fiscal 2015, which starts later this year. Green Mountain will make and sell Coca-Cola branded pods to go with the machine.

“This is what consumers told us they wanted,” Green Mountain CEO Brian Kelley said on the call. Coca-Cola cold-drink brands are “popular,” he said.

Still, Green Mountain will partner with other cold-beverage companies to sell single-serve pods that work in the Keurig Cold, he said. Kelley declined to discuss what other brands may be added and didn’t rule out PepsiCo Inc.

“We will have a number of partners and a number of brands on the system,” he said.

Jeff Dahncke, a spokesman for PepsiCo, declined to comment.

Kelley has been introducing new brewing machines and increasing advertising to get consumers to continue buying Keurig K-Cup packs. The Waterbury, Vermont-based company has been seeing more competition as grocery stores including Whole Foods Market Inc. begin selling private-label coffee pods.

The Reuters story by Lisa Baertlein and Phil Wahba:

“We’ll do deals with brands consumers love,” said Kelley, who added that Green Mountain has coffee deals with most major chains, including Starbucks (SBUX.O) and Dunkin’ Donuts

“We are really excited to start with Coca-Cola,” said Kelley, who came to Green Mountain from the world’s largest soda maker, where he was viewed as a product-savvy executive with expertise in product and supply chain management.

Green Mountain’s cold drink machine is scheduled to debut in fiscal 2015, which begins in October this year.

Coca-Cola CEO Muhtar Kent said on the call that the deal would give his company access to new business opportunities. He added that it would enhance Coca-Cola’s bottling system and that its bottlers would have a complimentary role.

“This gives Green Mountain a beverage partner with some hugely powerful global brands. For Coke, it gives them access to some really cool, new cutting-edge pod cold-beverage technology,” said John Sicher, editor and publisher of Beverage Digest.

Sicher said soda sales in the United States have been in decline since 2005, while growth in pod-based coffee brewing has boomed.

Coca-Cola has a lot to lose as global soda sales decline. The company has come under fire as many scientists have pointed to its products as a factor in the rise of obesity and some have even tried to ban large-sized sodas. It’s an interesting move into a new product area, signaling that Kent is willing to look at anything to keep his company on top.


Talking Biz News Today — Feb. 5, 2014


Wednesday’s top stories:

New York Times

CVS vows to quit selling tobacco products, by Stephanie Strom
Study of blood clot drug Pradaxa unnerved its maker, documents suggest, by Katie Thomas


SoftBank said to seek decision on T-Mobile bid in coming weeks, by Alex Sherman, Takashi Amano and Scott Moritz


Twitter is having trouble adding users, but learning to make money from them, by Joshua Brustein
Goal No. 1 for YouTube: Compete with TV, by Joshua Brustein


Green Mountain stock soars on Coke partnership, by James O’Toole


Pandora hits a sour note with 2014 outlook, by Maggie McGrath

Today in business journalism

DeMott, former Time biz writer, dies at 76
What has become of business journalism?
WSJ names news editor mobile content
Weissmann hired by Slate to write MoneyBox
Fox Business to shuffle daytime schedule
Microsoft goes with the cloud

This date in business journalism history

2008: Former Dow Jones board member settles with SEC
2013: Business columnist dies at 80

Business journalism birthdays

Feb. 5: Jeff Engel of Xconomy.com


Microsoft goes with the cloud


In selecting Satya Nadella to head Microsoft, the company’s board opted for a 22-year veteran and someone who has led its cloud computing efforts. Microsoft took six months in the search process, ultimately coming up with someone intimately familiar with the corporate bureaucracy.

The New York Times had this story by Nick Wingfield:

Microsoft on Tuesday announced that Satya Nadella was its next leader, betting on a longtime engineering executive to help the company keep better pace with changes in technology.

The selection of Mr. Nadella to replace Steven A. Ballmer, which was widely expected, was accompanied by news that Bill Gates, a company founder, had stepped down from his role as chairman and become a technology adviser to Mr. Nadella.


In Mr. Nadella, Microsoft’s directors selected both a company insider and an engineer, suggesting that they viewed technical skill and intimacy with Microsoft’s sprawling businesses as critical for its next leader. It has often been noted that Microsoft was more successful under the leadership of Mr. Gates, a programmer and its first chief executive, than it was under Mr. Ballmer, who had a background in sales. Mr. Ballmer, 57, said in August that he was stepping down.

The Economist story detailed how the appointment fits into Ballmer’s reorganization and emphasis on services over devices:

Two months before he said he would relinquish his job, Mr Ballmer unveiled a reorganisation of the giant firm’s business structures, accounting and management, declaring that Microsoft would henceforth be a “devices and services” company. Since then much of the talk about Microsoft—apart from gossip about who might succeed Mr Ballmer—has been about devices. Microsoft is buying Nokia’s ailing mobile-phone business, which is by far the biggest maker of smartphones that use Microsoft’s mobile operating system. The firm’s Surface tablet, despite encouraging results last quarter, has not sold well. Its Xbox entertainment console, however, has gone like hot cakes.

The appointment of Mr Nadella, a software engineer who has been at Microsoft for 22 years, is a reminder that services—especially the ones the firm sells to businesses—are every bit as important as consumer devices, and probably more so. Microsoft is not only battling Apple and makers of devices that run on Android, Google’s mobile operating system, as computing shifts from the personal computer to the smartphone and the tablet. The software giant is also fighting to retain business custom, as enterprise computing also becomes mobile and shifts from desktops and corporate data centres to cloud software and remote servers.

Under Mr Nadella’s leadership, the old “server and tools” division increased revenue by 9% in the year to June, to $20.3 billion (more than a quarter of total revenues), and operating income by 12.8%, to $8.2 billion, making it the best performing of the company’s big divisions. Mr Ballmer’s reorganisation makes comparisons since then difficult, but the new “commercial” segment saw revenue climb by 10% in the six months to December.

The Wall Street Journal story by John Kell and Shira Ovide said that Nadella would likely continue Microsoft’s current course, calling him a “safe choice”:

The appointment of Mr. Nadella, who is 46 years old and leads the Microsoft division that makes technology to run corporate computer servers and other back-end technology, is considered a safe choice. It comes after a lengthy search during which the company considered a long list of external and internal candidates.

Mr. Nadella, who will also join the company’s board, said his selection marked a “humbling day” and vowed to reinvigorate Microsoft’s role as a leader despite stiff competition in markets such as mobile devices and what the industry calls cloud services.

“Our industry does not respect tradition—it only respects innovation,” he said in a letter to employees. “The opportunity ahead will require us to reimagine a lot of what we have done in the past for a mobile and cloud-first world, and do new things.”

Little in Mr. Nadella’s public history at Microsoft, however, suggests he will break from the company’s pattern as a fast follower, rather than a trend setter.

“As Microsoft continues down the right lane of the highway at 55 mph with its new CEO in hand, the fear among many investors is that other tech vendors from social, enterprise, mobile, and the tablet segments continue to easily speed by the company in the left lane of innovation and growth,” wrote analysts at FBR Capital Markets.

The Bloomberg story, written by Dina Bass and Peter Burrows, led with the news of John Thompson taking over as chairman from Bill Gates:

With Microsoft Corp. (MSFT:US)’s appointment of John Thompson as chairman to replace co-founder Bill Gates, the world’s largest software maker is looking to the veteran technology executive as the main outside voice in its new leadership structure.

Thompson was the lead independent director heading the board’s search for a new chief executive officer, resulting in the appointment of Microsoft insider Satya Nadella to replace Steve Ballmer, the Redmond, Washington-based company said in a statement today. While the naming of Thompson and Nadella, who were already involved in Microsoft’s transition, signal continuity, it’s also the biggest break in the company’s history as the Gates-Ballmer duo who have been in charge for more than three decades step aside.

The former CEO of Symantec Corp. (SYMC:US), Thompson, 64, is stepping in at a crucial point as Microsoft remakes itself to better compete with rivals including Apple Inc. (AAPL:US) and Google Inc. (GOOG:US) In picking Thompson, the board is betting that he’ll be able to use his experience running a security-software company to help turn around Microsoft.

“Thompson’s going to be a major voice for the company,” James Staten, an analyst at Forrester Research, said in an interview. “They wouldn’t have made him chairman, if he didn’t have strong opinions about how to drive the company forward. And Satya is looking for strong partners on the board.”

Making changes at a company the size of Microsoft can seem nearly impossible. It’s hard to change the culture and shift directions. Nadella has a lot of work to do, particularly on the consumer side of the business. Whether he can innovate and keep investors happy will be critical to his success.


Talking Biz News Today — Feb. 4, 2014


Some of Tuesday’s top stories:

New York Times

Microsoft names new chief; Gates becomes adviser, by Nick Wingfield
Health care law may result in 2 million fewer full-time workers, by Annie Lowrey


U.S. factory orders data eases economic slowdown fears, by Lucia Mutikani

Wall Street Journal

RadioShack to close about 500 stores within months – sources, by Emily Glazer


Target to invest in chip-based credit cards, by Jose Pagliery
Deficit continues to drop sharply-CBO, by Jeanne Sahadi 


Emerging-market stocks extend worst start ever on economy, Elena Popina, Veronica Navarro Espinosa and Lyubov Pronina

Today in business journalism

Dow Jones CEO departure came after revenue slide
Weber of Reuters joining The Information as ME
Business Insider reporter joins Quartz
WSJ names Scheffler news editor of video
Las Vegas paper updates stock listings
Why Seeking Alpha is great for investors but uncomfortable for PR people

This date in business journalism history

2008: The Industry Standard is back
AOL negotiated to buy tech news site gdgt

Business journalism birthdays

Feb. 4: Kathy Kristof of Kiplinger’s Personal Finance and CBS MoneyWatch