Facing activist pressure, AIG chief to step down

NEW YORK - Insurance giant American International Group announced Thursday that chief executive Peter Hancock will step down following a steep fourth-quarter loss and under pressure from activist investors.

Hancock, who was named chief executive in September 2014, alluded to the discord with shareholders in a statement. Activists Carl Icahn and John Paulson have called for AIG to be broken up.

"I believe this is the right decision to make for the company and all its stakeholders," said Hancock, who plans to remain chief executive until a successor is named.

"Without wholehearted shareholder support for my continued leadership, a protracted period of uncertainty could undermine the progress we have made and damage the interests of our policyholders, employees, regulators, debt holders, and shareholders."

AIG reported a loss of $3.0 billion in the fourth quarter following a hefty charge to build reserves for future losses.

The US government saved AIG from failure at the height of the 2008 financial crisis with a controversial $182 billion bailout that was later repaid in full by the insurer under Hancock's leadership.

Hancock had opposed Icahn and Paulson's efforts to break the company up, instead unveiling a cost-cutting and restructuring plan. However, the CEO was unable to win support from activists.

Icahn endorsed Thursday's developments, saying on Twitter "we fully support the actions taken today by the board of AIG."

Shares of AIG rose 1.9 percent to $64.63 in pre-market trading.

source: news.abs-cbn.com

Apple hits record high but leaves some investors in dust

SAN FRANCISCO - Apple shares cruised to a record-high close Monday, helping catapult the S&P 500 stock index over the $20 trillion mark in what amounts to a victory for plain-vanilla mutual funds over a bevy of hedge fund managers who recently backed away from the iPhone maker.

The largest component of the S&P 500 and a core holding on Wall Street, Apple's stock climbed 0.9 percent to end at $133.29, above its record high close of $133.00 hit on Feb. 23, 2015 and giving it a market value of about $699 billion.

Its increase helped balloon the S&P 500's market capitalization on Monday beyond $20 trillion for the first time.

While mutual funds have largely bet on Apple in recent months, some big names missed out on all or part of its recent acceleration.

Hedge fund manager Dan Loeb's Third Point LLC cut its stake in Apple by 26 percent to 1.9 million shares in the fourth quarter, according to regulatory filings, while George Soros and Carl Icahn also shed their Apple shares last year.

In contrast, the number of mutual funds reporting they became Apple shareholders in recent quarterly filings has jumped by 187 percent to 287, while the number of mutual funds liquidating their Apple holdings dropped by 26 percent to 151, according to Morningstar.

Among the big names who backed the stock, Warren Buffett's Berkshire Hathaway last August said it had increased its stake in Apple by 55 percent to 15 million shares, now worth $2 billion. David Einhorn's hedge fund Greenlight Capital in January said it still likes Apple.

Apple has climbed 50 percent from lows in the first half of last year and is up 15 percent so far in 2017. It was still short of its all-time intraday high of $134.54, set on April 28, 2015.

Monday's gain came after Goldman Sachs analyst Simona Jankowski raised her price target for Apple to $150. She said she is more confident that an upcoming 10th anniversary iPhone will feature augmented-reality technology, which could help boost demand in a saturated smartphone market.

Many investors are betting that Apple will mark the iPhone's 10th anniversary with a dramatically improved model. They also believe that strong sales of the iPhone 6S two years ago have left a larger-than-normal base of customers ready to upgrade.

The Cupertino, California company reported strong December-quarter results on Jan. 31, and although it gave a cautious outlook for the current quarter, Wall Street expects revenue to grow this year after sinking nearly 8 percent in fiscal 2016.

In 1998, when the S&P 500 closed above $10 trillion for the first time, Apple accounted for just under 0.06 percent of the index. It now accounts for about 3.5 percent of the S&P 500, according to S&P Dow Jones Indices.

The 721 days that have passed since Apple's previous record-high close represent the largest gap between such milestones since the iPhone's launch in 2007.

source: news.abs-cbn.com

Is Apple worth $1.3 trillion? Icahn thinks so

Activist investor and major Apple Inc shareholder Carl Icahn said the iPhone maker's stock should be trading at $216, far above its record high of $124.92 hit on Wednesday.

At $216 per share, Apple - already the world's most valuable company - would be worth about $1.3 trillion, or about the size of South Korea's gross domestic product.

The company is valued at just over $700 billion currently.

Icahn said Apple should be trading at 20 times earnings per share, which taken together with net cash of $22 per share works out to $216 per share.

"This is why we continue to own approximately 53 million shares worth $6.5 billion, and why we have not sold a single share," Icahn said in a letter to his Twitter followers.

"Also, to the extent Apple introduces a TV in FY 2016 or FY 2017, we believe this 20X multiple is conservative," he wrote.

Icahn, one of Apple's top 10 investors, has long urged the company to buy back more shares and raise its dividend.

He said in October that Apple shares could double in value and urged the board to buy back more shares using its cash pile. At the time, the shares were trading at $100.

"...We look forward to the capital return program update in April, anticipating it will include a large increase to share repurchases," Icahn wrote.

Apple had cash reserves of about $178 billion as of Dec. 27, enough to buy IBM or the equivalent of $556 for every American.

Apple said last April it would return more than $130 billion to shareholders by the end of 2015.

According to StarMine's intrinsic valuation model, Apple should be trading at $140.90. That implies a compounded annual earnings growth rate of 9.9 percent over the next 10 years.

Apple shares closed 2.3 percent higher at $124.88 on the Nasdaq on Wednesday. Up to Tuesday's close, the stock had gained more than 22 percent since Oct. 9.

source: www.abs-cbnnews.com

EBay dismisses proposal to spin off Paypal

Carl Icahn has taken a stake in eBay Inc and is proposing a spin-off of the its fast-growing PayPal division, but the e-commerce giant rebuffed the overture, setting the stage for a potential battle with the activist investor.

EBay, which bought PayPal for $1.5 billion in 2002 and has considered hiving off the multibillion-dollar payments service, argued on Wednesday that the business would lose synergies with the overall e-commerce business as an independent unit.

"First, eBay accelerates PayPal's success. Second, eBay data makes PayPal smarter. And third, eBay funds PayPal's growth," Chief Executive John Donahoe told analysts on a post-results conference call.

Some analysts, however, said that operating as a separate entity would encourage other online retailers to adopt the service and help retain key executives, with a spinoff that could unlock the value of a service that grew 19 percent during the holiday quarter.

Shares of eBay, which also reported earnings per share a penny above Wall Street expectations, jumped as much as 12 percent. The stock was up 7 percent at $54.41 after hours.

Donahoe said he had heard Icahn out but rejected his proposal. He added that the company intended to step up investments to safeguard the market position of the thriving payments service, which may exert pressure on margins.

Donahoe told Reuters in an interview on Wednesday that his company started seeking advice from its financial adviser, Goldman Sachs, five days ago, following Icahn's letter to eBay.

Icahn's proposal comes as the billionaire investor is urging Apple Inc to share more of its $146 billion cash pile with shareholders. The activist is demanding Apple do an additional $50 billion in share buybacks, which the company is advising shareholders to reject.

Icahn did not respond to requests for comment.

"I expect it to be a battle," BGC Partners analyst Colin Gillis said, citing eBay's longstanding opposition to a PayPal spinoff. "One of the reasons for that is because for commerce and payments, you need to remove as much friction from those two systems as possible. If you separate it out, you put more friction between" them.

PayPal started life as an independent company, founded in the late 1990s by technology entrepreneurs including venture capital investor Peter Thiel.

ECOMMERCE SUPREMACY

PayPal battled with eBay for supremacy in the then-emerging online payments market. But soon after it went public in 2002, eBay acquired PayPal for $1.5 billion. Today, its growth outpaces the rest of the company and it accounts for a large chunk of eBay's overall stock market value.

The unit has been a key driver of eBay's share value, as the company struggles to compete with larger rival Amazon.com Inc.

Analysts have estimated that PayPal, which already yields 40 percent of the company's revenue, may account for as much as half of the corporation's market value, which now stands at about $70 billion.

Icahn is known for decades of strong-arm tactics including proxy fights against major corporations. This month, he bought shares and derivatives giving him a 0.8 percent economic interest in eBay, and also nominated two of his employees to the eBay board. Those employees were not identified.

"Our directors have deep experience in the technology and financial services sectors, and a track record of value creation. This is the standard by which all future candidates will be assessed," Donahoe said on the call.

The eBay board includes prominent Silicon Valley venture capitalist Marc Andreessen, Ford Motor Co F.N Executive Chairman William Ford Jr., and eBay founder Pierre Omidyar.

Donahoe, who spoke briefly to Icahn last week, told Reuters that he did not know Icahn's nominees and that the activist investor had not put forth any other proposals.

Revenue at eBay's PayPal division rose 19 percent during the holiday quarter, fueled by the growing use of mobile phones to shop. PayPal's total payments volume, a gauge of how much it is used to complete a transaction, rose 25 percent to $180 billion worth of transactions.

Companywide, revenue rose 13.5 percent to $4.53 billion for the quarter ended Dec. 31.

For 2014, eBay forecast revenue of between $18 billion and $18.5 billion, while analysts expected a forecast of $18.5 billion, according to Thomson Reuters I/B/E/S.

Net income for the fourth quarter was $850 million, or 65 cents a share, up from $751 million, or 57 cents a share, a year earlier. Excluding some items, eBay earned 81 cents per share, a penny better than expected.

On Wednesday, the company also said it had authorized an additional $5 billion in stock buybacks.

source: www.abs-cbnnews.com