Ballmer Quits Microsoft Board - Dow Jones

Market Snapshot*

DJIA 16919.59 +80.85
Nasdaq
S&P 500 4527.51 +19.2
10-Year
30-Year 1981.61 +9.87
Euro
Nymex Crude 2.406% -5/32

Source: SIX Telekurs, ICAP plc 3.221% -15/32

Tuesday, August 19, 2014 $1.33215 -0.0041

Stocks 94.83 -1.64

U.S. stocks gained Tuesday following *preliminary values subject to adjustments
positive economic data and strong earn-
ings results from Home Depot Inc. and Tomorrow’s Headlines
TJX Cos. Stocks drifted higher through-
out the day, bolstered by data on the Ballmer Quits Microsoft Board
housing market and consumer prices. "It
is a quiet summer afternoon," said Former Microsoft Corp. Chief Executive Steve Ballmer, newly installed as
Darren Wolfberg, head of U.S. cash owner of the Los Angeles Clippers basketball team, is stepping down from the
equity trading at BNP Paribas, adding company’s board after 14 years.
that lower volume could be exaggerating
the move higher. “I think it would be impractical for me to continue to serve on the board, and it
is best for me to move off,” Mr. Ballmer said in a letter to Microsoft CEO Satya
Treasurys Nadella. Microsoft published the letter on its website Tuesday. “I see a combi-
nation of the Clippers, civic contribution, teaching and study taking a lot of
Treasury bonds prices pulled back on time,” he wrote.
Tuesday, as easing tensions in Ukraine
and upbeat U.S. housing data sapped Mr. Ballmer’s plans to step down as a director complete a dramatic handover
demand for safe-haven assets. of power at Microsoft. For the first time in the company’s 39-year history,
Consequently, investors lightened up on someone other than Mr. Ballmer and Bill Gates will be in charge of the com-
government bonds for a second straight pany. Mr. Gates also stepped down as Microsoft’s chairman in February,
session and piled into U.S. stocks, as when Mr. Nadella was named CEO. Mr. Gates remains a company director.
risk appetites improved.
Allergan Approaches Salix As Defensive Deal
Forex
Allergan Inc. has approached Salix Pharmaceuticals Ltd. and at least one
The dollar rose against the euro and yen other company about a potential acquisition, as the Botox maker seeks to
Tuesday after strong U.S. housing-starts fend off a $53 billion hostile takeover from Valeant Pharmaceuticals
data trumped a small gain in consumer International Inc., according to people familiar with the matter.
prices. The euro fell 0.3% to $1.3317,
falling to its lowest level since Nov. 7, It isn’t clear where any talks with Salix stand, but one of the people said
2013, before rebounding slightly to Allergan could strike a takeover deal with the company or another unknown
$1.3322. The dollar rose 0.2% versus the party as early as next month.
yen, to 102.79 yen, before sliding back to
102.67 yen. Salix, which has a market value of $8.8 billion, is in the process of merging
with a unit of an Italian company, Cosmo Pharmaceuticals SpA. The roughly
$2.6 billion tie-up would move the North Carolina company’s domicile abroad
— one of a slew of recent so-called inversion deals aimed at least in part at
lowering taxes.

continued on page 2

Tomorrow’s Calendar

7:00 a.m. 08/15 MBA Weekly Mortgage Applications Survey Market
Composite Index (previous 337.7), Cur Chg (previous -2.7%),
Purchase Index (S.A.) (previous 164.8), Cur Chg (previous -1%),
Refinance Index (previous 1322.2), Cur Chg (previous -4%)

10:30 a.m. 08/15 EIA Weekly Petroleum Status Report Crude Oil Stocks (pre-
vious 367.02M), (Net Change) (previous +1.4M), Gasoline Stocks
(previous 212.69M), (Net Change) (previous -1.16M), Distillate
Stocks (previous 122.5M), (Net Change) (previous -2.42M),
Refinery Usage (previous 91.6%), Total Products Supplied (previ-
ous 19.83M), (Net Change) (previous -0.51M)

2:00 p.m. Federal Open Market Committee meeting minutes published

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Tuesday, August 19, 2014 4 p.m. ET merce, as the Internet becomes an important source of
sales growth even for a chain that actually sells bricks and
Tomorrow’s Headlines mortar.

continued Home Depot continues to draw greater store traffic as well,
making it an anomaly in a retail industry where shopper vis-
If Allergan were to proceed with a takeover of Salix, it’s not its have fallen by 5% or more from a year earlier in every
clear whether Allergan would also buy Cosmo, or whether month for the past two years, according to data firm
such a deal would itself be an inversion. ShopperTrak.

Either way, signs that Allergan is getting close to launching At Home Depot, the total number of customer transactions
a large takeover of its own adds another layer of intrigue to increased by 4.2% to 409.7 million in the quarter ended Aug.
one of the year’s biggest and most colorful takeover dra- 3, as shoppers came in to make big-ticket purchases on
mas. Valeant and activist investor William Ackman, who appliances, windows and laminate flooring. They also spent
owns a big Allergan stake, have been pursuing a cash-and- heavily on home installation services on things like counter-
stock takeover of Allergan since April. In the face of tops and windows, where the average buyer spends $1,500.
Allergan’s opposition to a deal—which it considers under-
priced and too risky—Valeant and Mr. Ackman are trying to U.S. Housing Starts Surge in July
call a special meeting of Allergan shareholders in order to
remake the company’s board. Home construction surged in July, a sign that renewed
strength in the housing market could boost the economy in
Citigroup Considers Sale coming months.
of Japan Retail Unit
Housing starts climbed almost 16% last month to an annual
Citigroup Inc. is considering the sale of its retail-banking rate of 1.093 million units, the Commerce Department said
business in Japan, where the U.S. financial giant has had a Tuesday. That marked the highest level of construction
presence for decades as a leading Western bank, people since November, driven by a pronounced rise in new apart-
familiar with the matter said Tuesday. ments.

The New York company is considering a possible auction to Home construction rose 22% in the year through July, and
sell the retail business, they said. The move would leave a rise in applications for building permits last month sug-
Citigroup to focus on its remaining businesses in Japan: gests further gains this year. That could ease concerns at
corporate banking, investment banking and trading. the Federal Reserve of a weak housing sector weighing on
Japanese loan growth has remained weak recently, amid economic growth this year.
interest rates close to zero.
“With housing starts up 22% over the last year, the Fed’s
Citigroup, one of the world’s most sprawling global banks, concern about a “slow” recovery in the housing market
has been scaling back since the financial crisis, trying to looks misplaced to us,” Economist John Ryding of RDQ
become simpler and easier to handle. The bank suffered a Economics said in a note to clients.
setback earlier this year when the U.S. Federal Reserve
balked at Citigroup’s dividend and share-buyback plans, cit- But details within Tuesday’s report raised questions about
ing the difficulty the firm was having measuring how a whether the construction gains will be sustained. Last
stressful scenario would affect all of its global operations. month’s rise appeared to be due partly to a rebound in con-
struction in the South after rainy weather caused delays
The bank has also said it wants to home in on areas that earlier this summer. Such rebounds are typically temporary.
have “the highest growth potential” for consumer banking, Also, the bulk of the increase was due to surging apartment
eschewing some smaller cities and slower-growth countries. construction, a volatile category that can mask underlying
strength in the market.
Since Michael Corbat became chief executive of the bank
in late 2012, Citigroup has jettisoned its retail operations in Consumer Prices Rise 0.1% in July
countries including Honduras, Turkey, Romania, Uruguay
and Paraguay. This summer it agreed to sell its consumer- The slow growth in consumer prices in July could give
banking businesses in Greece and Spain. Federal Reserve officials some breathing room amid debate
over how long to keep short-term interest rates near zero.
Home Depot 2Q Sales
Up On Big-Ticket Items The consumer-price index, which measures how much
Americans pay for everything from rent to doctor’s visits,
Big-ticket items are driving big gains for Home Depot Inc. rose a seasonally adjusted 0.1% from a month earlier due
partly to a drop in energy costs, the Labor Department said
The do-it-yourself chain posted strong foot traffic and Tuesday. The index was also up 0.1% after excluding the
growth in sales of higher-end items in the most recent quar- more volatile food and energy categories.
ter, making the company one of only a handful of retailers
to raise its full-year profit forecast so far this quarter. The index rose 2.0% from a year earlier, compared to
June’s annual gain of 2.1%. Excluding food and energy, the
The gains came as Home Depot continues to plow invest- index rose 1.9% on the year, unchanged from June.
ment and advertising dollars into an unlikely bet on e-com-
continued on page 3

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Tuesday, August 19, 2014 4 p.m. ET The most recent settlement announced Tuesday includes a
requirement that Standard Chartered suspend U.S. dollar-
Tomorrow’s Headlines clearing in its New York branch for certain high-risk clients
of the bank’s Hong Kong branch until certain procedures
continued are improved.

With solid profit margins and little pressure on wages, Medtronic Tops Views,
“businesses are reluctant to raise prices given still-recover- Reaffirms Covidien Bid
ing demand,” said Stuart Hoffman, chief economist at PNC
Financial Services Group, in a research note Tuesday. Medtronic Inc. said Tuesday that it is “fully committed” to
completing its deal to buy Covidien PLC, which has come
The report offered no evidence of runaway prices that under scrutiny over a controversial tax tactic that has drawn
might reshape thinking on when the Fed should raise inter- criticism from U.S. government officials.
est rates in order to contain inflation. With the latest figures,
the central bank has “plenty of room” to keep rates low for The company also posted fiscal first-quarter results that
longer, said Mr. Hoffman. exceeded analysts’ expectations as the medical-devices
maker reaped strong revenue from its U.S. operations.
Wells Fargo To Boost Asset-
Management Business “Our growth was broad-based across businesses and
geographies,” Chairman and Chief Executive Omar Ishrak
Wells Fargo & Co. aims to double the size of its asset-man- said in a news release. “I was especially pleased that our
agement unit to $1 trillion over the next decade through innovation pipeline is delivering strong results, particularly
acquisitions and more aggressive sales to big investors, in the U.S., which had its highest revenue growth perform-
according to executives carrying out the plan. ance in five years.”

The San Francisco bank is ramping up its international The report comes as U.S. regulators look into deals such
sales force, setting higher goals in the U.S. and looking to as Medtronic’s $42.9 billion agreement to buy Covidien and
buy smaller asset managers to broaden its product offer- the plan’s inclusion of a tactic called inversion that would
ings, according to the executives. lighten the company’s tax burden. Under the agreement,
Medtronic would leave the U.S. and reincorporate in
The plan for the unit, made up of mutual funds and Ireland, where Covidien is based.
accounts for institutional investors, hasn’t been reported
before. Medtronic also reiterated its outlook for the year, citing its
confidence in the company’s strategies for innovation,
Wells Fargo, the fourth-largest U.S. bank by assets, is broadening its global footprint and focusing on value, while
pushing deeper into asset management as some other counting on a boost from Covidien.
parts of its business stagnate. Mortgages have slumped as
refinancing activity has dried up. The bank is largely Strong Police Presence in Ferguson
restricted from any major acquisition that could add to its
business and boost revenue since regulators have repeat- Tuesday morning brought calm to Ferguson, Mo., after
edly said they would reject big bank deals. another violent evening, repeating a pattern that has estab-
lished itself here over the past week.
In all, Wells Fargo’s revenue of $21.07 billion in the second
quarter was down 1.5% from the same period a year earli- Community members cleaned up, and police in patrol uni-
er. forms saturated the streets where police clashed with
demonstrators Monday night, deploying tear gas and stun
NY Watchdog Fines Standard grenades and making more than two dozen arrests.
Chartered $300M
The only major change to the landscape Tuesday was a
Standard Chartered PLC will pay a $300 million penalty to brand-new steel fence surrounding the burned-out QuikTrip
New York’s financial regulator and impose measures to cor- convenience store that has been at the center of protests
rect lapses in its anti-money-laundering procedures, the and was the site of confrontation with police Monday night.
New York State Department of Financial Services said
Tuesday, as part of a settlement with the British lender. Police confronted demonstrators after hours of peaceful
marching Monday night to protest the shooting death of an
The deal, which had been expected this week, reflects the unarmed teenager by an officer, but the clashes were less
second time the New York state regulator has penalized frequent and less severe than those over the weekend.
Standard Chartered in recent years. The bank in 2012 paid
$340 million to the office of Benjamin Lawsky, New York’s Missouri State Highway Patrol Capt. Ron Johnson, who
superintendent of financial services, to settle allegations it helps lead the security effort now in Ferguson, said at a 2
had improperly handled transactions for Iranian customers. a.m. press briefing Tuesday that most peaceful protesters
in the city should be applauded for their behavior. He then
The settlement announced Tuesday stems from the regula- asked for their help in restricting future demonstrations to
tor’s concerns that the bank failed to carry out promises to daylight hours to discourage criminals from infiltrating their
improve its systems after the 2012 agreement. ranks at night.

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Tuesday, August 19, 2014 4 p.m. ET Talking Points

Copyright Dow Jones & Co., Inc. Home Sizes Level Off

Tomorrow's News Today is made The two-year trend of big, new houses getting even bigger appears to have
available as a complimentary service peaked—at least for now—as more buyers seeking modest homes enter the
to Dow Jones News Service paying market.
subscribers. No further redistribution is
permitted without written permission The median size of a newly built home in the U.S. registered 2,478 square feet
from Dow Jones. Tomorrow’s News in the second quarter, unchanged from the first quarter but still close to the all-
Today is intended to provide factual time high of 2,491 set in last year’s third quarter, according to Commerce
information, but its accuracy cannot Department data released Tuesday.
be guaranteed. Dow Jones is not a
registered investment adviser, and Median new-home sizes generally have increased since 2012 as the market—
under no circumstances shall any of substantially diminished in the wake of the housing crash—has been dominated
the information provided be construed by better-heeled, move-up buyers with the capital and credit to buy larger houses.
as a buy or sell recommendation or
investment advice of any kind. Entry-level and first-time buyers, who tend to buy smaller homes, have largely
remained sidelined due to strict mortgage-qualification standards and tepid wage
Want to send a co-branded daily and job growth. The National Association of Home Builders forecasts that first-
version to your valued clients? time buyers will account for 16% of new-home sales this year, down from 25% to
28% between 2001 and 2007.
Dow Jones offers subscribing firms the
opportunity to co-brand Tomorrow's Yet executives at builders KB Home, PulteGroup Inc., D.R. Horton Inc. and
News Today for redistribution to their Century Communities Inc. report that they’re seeing early signs of entry-level
clients. If your firm is interested in buyers returning to the market as mortgage standards ease slightly and job
co-branding, please contact us at gains take hold. Sales of Pulte’s entry-level Centex homes, priced at an average
[email protected] or of $202,000, increased by 26% in the second quarter from a year earlier on a
1.800.223.2274. per-community basis, and by 29% in the first.

“The expectation will be, whenever we see an increase in first-time buyers, that
will put downward pressure on the trend” of new-home sizes, said Robert Dietz,
an economist with the home builders group. “Then it will be a question of
whether we’ll see some actual decreases in the median as the market mix [of
buyers] changes over the next two years.”

Other figures indicate that new-home sizes are nearing a peak. Mr. Dietz calcu-
lates home size on a four-quarter moving average, finding that the median for
the past four quarters is 2,478 square feet, essentially unchanged from 2,470 in
the four quarters ended in this year’s first. Meanwhile, Commerce data show that
the average size of a newly built home in the second quarter, which is more
volatile than the median, declined by 2.7% to 2,653 square feet from the all-time
high set in the first quarter of 2,727.

New Addition To Gamers’ World: Females

For years, Gamescom—one of the world’s biggest annual trade exhibitions for
digital gamers—has been a man’s world.

But games developers now are increasingly targeting a growing community of
female gamers, as a way of boosting an industry expected to generate sales of
$100 billion this year.

“We see a big and fast increase in female players, over all genres,” said Fredrik
Rundqvist, a games producer at Ubisoft S.A.’s Massive Entertainment studio,
which is just about to finish development of a Tom Clancy shooter title.

Female gamers, in fact, made up about 48% of the game-playing public in the
U.S. this year, according to a report recently published by the Entertainment
Software Association, a U.S. gaming industry trade group. That is up sharply
from 40% in 2010.

What’s more, women over 18 years old now represent a significantly larger por-
tion of the U.S. game-playing population than boys under 18, a demographic that
has traditionally been seen as a core target group for game companies. The
ESA based its findings on a study of 2,200 U.S. households.

continued on page 5

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Tuesday, August 19, 2014 4 p.m. ET Ubisoft ran into controversy earlier this year when it
scrapped the option to play as a female character in its
Talking Points coming Assassin’s Creed unity game, slated for release this
month. That caused a backlash in the gaming world, anoth-
continued er sign that women gamers could no longer be ignored.
Ubisoft, however, has introduced a female character—albeit
The growing number of female gamers largely comes down a non-playing one—a Templar warrior called Elise, into the
to a surge in so-called casual mobile gaming, a genre of game, and has told media that its future titles will feature
games boosted by the fast adoption of smartphones, indus- more diverse lead characters.
try observers say.
NFL Wants Half-time Performer To Pay
Mobile game developers like Anglo-Swedish King Digital
Entertainment PLC, Glu Mobile Inc., and Finland’s The National Football League doesn’t usually pay the act
Supercell Oy are actively targeting female audiences. King that performs at halftime during the Super Bowl. But in a
Digital’s “Candy Crush Saga” and Supercell’s “Hay Day” twist this year, the league has asked artists under consider-
are popular with women. “ Kim Kardashian: Hollywood,” ation for the high-profile gig to pay to play, according peo-
developed by San Francisco-based Glu Mobile Inc., puts its ple familiar with the matter.
largely female players in the high-heeled shoes of the reali-
ty-television star and has become a recent top seller on The NFL has narrowed down the list of potential performers
global app stores. for the 2015 Super Bowl to three candidates: Rihanna, Katy
Perry, and Coldplay, these people said. While notifying the
Another trend has also helped boost female gamers: cou- artists’ camps of their candidacy, league representatives
ples play. also asked at least some of the acts if they would be willing
to contribute a portion of their post-Super Bowl tour income
“We’ve done some studies on this and, interestingly, we to the league, or if they would make some other type of
notice that many couples seem to be playing games like financial contribution, in exchange for the halftime gig.
Assassin’s Creed together,” said Alain Corre, an executive
at French game publisher Ubisoft. The pay-to-play suggestion got a chilly reception from the
candidates’ representatives, these people said.
“So while a game like Ubisoft’s Assassin’s Creed is pre-
dominantly purchased by males, it isn’t necessarily played
[just] by guys,” he said.

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