Yahoo co-founder Jerry Yang resigns; had been under fire

SAN FRANCISCO  ―Yahoo Inc. co-founder Jerry Yang has quit the company he started in 1995, appeasing shareholders who had blasted the Internet pioneer for pursuing an ineffective personal vision and impeding investment deals that could have transformed the struggling company.

Yang’s abrupt departure comes two weeks after Yahoo appointed Scott Thompson its new CEO, with a mandate to return the once-leading Internet portal to the heights it enjoyed in the 1990s.

Wall Street views the exit of “Chief Yahoo” Yang as smoothing the way for a major infusion of cash from private equity, or a deal to sell off much of its 40 percent slice of China’s Alibaba, unlocking value for shareholders.

Shares of Yahoo gained 3 percent in after-hours trade.

“Everyone is going to assume this means a deal is more likely with the Asia counterparts,” Macquarie analyst Ben Schacter said. “The perception among shareholders was Jerry was more focused on trying to rebuild Yahoo than necessarily on maximizing near-term shareholder value.

“It certainly seems things are coming to a head as far as realizing the value of these assets.”

Yang, who is severing all formal ties with the company by resigning all positions including his seat on the board of directors, has come under fire for his handling of company affairs dating back to an aborted sale to Microsoft in 2008.

Yang’s exit comes roughly a month before dissident shareholders can nominate rival directors to Yahoo’s board.

Goldman fourth-quarter profit falls but beats estimates

NEW YORK ― Goldman Sachs Group Inc’s. fourth-quarter profit fell 56 percent as trading and investment banking revenue plunged, but the bank managed to beat analysts’ expectations, which had dropped considerably in recent weeks.

Wall Street’s biggest bank by assets earned $978 million, or $1.84 per share, down from $2.2 billion, or $3.79 per share, a year earlier.

Analysts on average had expected a profit of $1.24 per share, according to Thomson Reuters I/B/E/S.

Goldman shares were up 1.4 percent at $99 in premarket trading after it released the earnings report.

“Despite seasonal weakness and a difficult operating environment, Goldman is able to at least hold its head up,” said Gary Townsend, president of Hill-Townsend Capital.

During the quarter, stock and bond markets were hit by volatility stemming from the European debt crisis, leading clients to pull back on risk and delay acquisitions and stock and bond offerings. As a result, Goldman and rivals including JPMorgan Chase & Co. and Citigroup Inc experienced sharp declines in profitability from capital markets operations.

While Goldman’s revenue dropped 30 percent to $6 billion from $8.6 billion a year earlier, the bank took steps to reduce expenses and reported lower taxes than in the year-earlier period. Operating expenses declined 7 percent to $4.8 billion, while Goldman’s tax provision of $234 million was down 78 percent.

The expense reductions allowed Goldman to report a better profit than dour estimates released by analysts in the weeks leading up to its report.

In mid-December Barclays analyst Roger Freeman lowered his fourth-quarter profit estimate for Goldman to 75 cents per share, calling 2011 “another year to forget” for Wall Street.

December producer prices fall 0.1 percent, DOL report says

WASHINGTON ― Producer prices fell in December as companies paid less for gasoline and vegetables, although higher prices for light motor trucks pushed a measure of underlying inflation higher.

The Labor Department said on Wednesday its seasonally adjusted index for prices received by farms, factories and refineries fell 0.1 percent.

Economists polled by Reuters had expected wholesale prices to increase 0.1 percent.

Excluding volatile food and energy, core producer prices rose 0.3 percent last month, the biggest rise since July. That was above economists’ expectations for a 0.1 percent gain.

The data appears to send mixed messages about inflation pressures in the U.S. economy.

A drop in energy prices has encouraged Wall Street and the U.S. Federal Reserve to forecast inflation will cool in coming months. Energy costs for businesses fell 0.8 percent last month, with gasoline down 2.3 percent. Food prices fell 0.8 percent.

At the same time, higher core prices – if eventually passed on to consumers by businesses – might make the U.S. central bank more cautious about taking additional steps to help the still-struggling U.S. economy.

That said, about 30 percent of the gain in core prices were due to an increase in prices for light motor trucks, the Labor Department said.

Prices in auto sector have been affected in recent months by floods in Thailand that last year disrupted supply chains. Prices for light trucks rose 0.9 percent last month, the biggest rise since July.

Kraft to cut 1,600 jobs as it splits into two companies

NORTHFIELD, Ill. ― Kraft Foods Inc. said that splitting into two companies would lead it to cut about 1,600 jobs in North America this year and that its 2011 profit should be slightly higher than it had previously forecast.

Kraft also said its 2011 net revenue would be up by about 10 percent, as it ended the year with strong momentum around the world despite a tough operating environment. It expects to report 2011 operating earnings per share of at least $2.28, including a penny per share hit from currency in the fourth quarter.

Previously Kraft had forecast operating earnings per share of at least $2.27, excluding any potential currency impact in the fourth quarter.

Analysts, on average, had expected Kraft to earn $2.27 per share this year, according to Thomson Reuters I/B/E/S.

About 40 percent of the job cuts come from the company realigning its U.S. sales division, Kraft said. About 20 percent of the jobs being cut in the United States and Canada are currently open positions, the company said. The planned job cuts do not include any cuts at manufacturing facilities.

FDIC releases bank financial shock test proposal

WASHINGTON ― Bank regulators on Tuesday voted to release a proposal for how banks with more than $10 billion in assets should conduct stress tests annually to determine whether they can withstand a financial shock.

The tests are required by the 2010 Dodd-Frank financial oversight law, which has established stress tests as a key component of how regulators will gauge the health of the banking industry.

The largest U.S. banks are facing several regulatory tests of their operations.

The Federal Reserve, for instance, has to establish stress tests for bank holding companies with more than $50 billion in assets and the agency released a proposal for this requirement in December.

The Fed is also currently putting banks with more than $50 billion in assets through separate tests to gauge whether they have enough capital. The results of these tests are expected in March.

Regulators have said they will attempt to coordinate the different testing requirements as much as possible.

On Tuesday the board of the Federal Deposit Insurance Corp voted to 4 to 0 to approve the proposal for banks with more than $10 billion in assets. It will be out for 60 days for public comments.

“It’s an important forward looking mechanism for institutions to identify risks and act accordingly,” acting FDIC Chairman Martin Gruenberg said.

FDIC staff said it is not yet clear whether the first of these tests will be held in 2012 or 2013. The timing will depend on the comments received and when the Fed finalizes its December proposal for stress testing the largest banks.

The tests are intended to give banks and regulators a better idea of whether banks can weather a crisis and what steps they may have to take to strengthen their operations.

Under Tuesday’s proposal, regulators each year would provide banks with stress scenarios in November. The banks would run the tests and report back to regulators in January.

Ernst & Young names ex-Treasury official as CEO

NEW YORK ― Global audit and consulting firm Ernst & Young has named Mark Weinberger, a longtime Washington insider, as its next chairman and chief executive, a signal that connections in the U.S. capital may be growing in importance to a profession facing greater scrutiny.

A former lobbyist and assistant secretary of the U.S. Treasury under President George W. Bush, Weinberger will succeed Jim Turley, who announced previously that he would retire on June 30, 2013, Ernst & Young said in a statement on Tuesday.

Weinberger’s public policy experience is unusual for the head of a global audit firm, said Arvind Hickman, editor of the International Accounting Bulleting.

“I can’t think of too many global chiefs who have had a distinguished career in government. Normally they go the other way, from the profession into high positions in the public and private sectors,” he said.

Weinberger will be taking over at a crucial time for the audit profession, which is under scrutiny from regulators in the United States and Europe for auditors’ performance during the 2007-2009 financial crisis, when they failed to warn of problems at major banks that collapsed.

The main U.S. auditor watchdog, the Public Company Accounting Oversight Board, is considering whether to require audit firm rotation, a measure vehemently opposed by the audit industry, along with several other reforms. Rotation would force major companies to change auditors periodically. Many have the same accounting firms working for them for decades.

The European Union also is mulling proposals that could force the largest audit firms to split off their consulting businesses, as well as auditor rotation.

Wells Fargo reports higher fourth-quarters earnings

SAN FRANCISCO ― Wells Fargo & Co. reported higher fourth-quarter earnings as the bank set aside less money to cover bad loans.

The fourth-largest U.S. bank by assets said it earned 73 cents per share. The average estimate from analysts was 72 cents per share, according to Thomson Reuters I/B/E/S.

Net income applicable to common shareholders was $3.89 billion, compared with $3.2 billion, or 61 cents per share, a year earlier.

The San Francisco-based bank recorded a loan-loss provision of about $2 billion, which was down from about $3 billion a year earlier. For the seventh straight quarter the bank reversed reserves the bank had previously booked for bad loans.

The bank’s total loans increased about $9.5 billion from the end of September to $769.6 billion at the end of December. The loan growth mirrored a trend shown when JPMorgan Chase & Co (JPM.N) reported earnings on Friday.

Wells Fargo said it purchased 27 million shares of its common stock in the fourth quarter, plus an additional 6 million shares through a transaction that will settle in the first quarter of this year.

“I’m extremely pleased with Wells Fargo’s performance in 2011 – including strong deposit and loan growth, record cross-sell and record earnings,” CEO Jon Stumpf said in a statement.

Retailers in for steady, modest growth in 2012

NEW YORK/CHICAGO ― Hopefully, retailers liked 2011, because 2012 is looking like it will offer more of the same.

A consensus is emerging that the new year will again bring a slow but steady increase in business, after moderate growth last year that was capped by a holiday season that saw shoppers spend if stores gave out bargains.

“Consumers are doing everything they can in light of the current environment to be consumers,” Paul Hurley, founder and chief executive of Ideeli, a flash sales website. “We’re not seeing a deflationary spiral where people are putting off purchases.”

The National Retail Federation at the start of its annual convention in New York said U.S. retail sales should rise 3.4 percent this year, down from an increase of 4.7 percent in 2011, which came after weak sales in 2010.

“It’s realistic given the challenges that we face in the economy,” NRF Chief Executive Matthew Shay told Reuters in an interview, noting that improvements in consumer spending would continue to be “incremental” for the time being.

U.S. shoppers have been held back by modest growth in income and high unemployment, currently at 8.5 percent.

ShopperTrak, a data firm that makes sales projections based on foot traffic, expects sales to be “on par” with 2011 levels.

And Customer Growth Partners gave a preliminary forecast of 5 percent to 6 percent growth for 2012, including e-commerce. That compares with an expected 5.6 percent for the year that will end this month.

Last year, e-commerce sales rose 15 percent, according to comScore.

While unemployment remains high, consumer spending growth has outpaced overall economic growth because shoppers who spent freely during the housing boom in the early 2000s were forced to pay down debt during the recession. Also, consumers with jobs are now driving sales growth, said Craig Johnson, president of Customer Growth, a retail consulting firm.

Kennametal to buy UK welding tools maker for $351 million

LATROBE, Penn. ― Industrial tool maker Kennametal Inc. plans to buy privately held U.K.-based Deloro Stellite Group for 277 million euros ($351.03 million), its first acquisition in more than two years.

Kennametal will buy the maker of welding tools and alloys from private equity firm Duke Street Capital and expects the deal to add to its earnings in the fiscal year ending June 30, 2013.

Deloro Stellite, which had annual sales of 220 million euros in 2010, makes welding rods and electrodes, wear-resistant alloys and surface coatings. Its customers include Rolls-Royce, Ferrari, Alstom, General Electric and BAe Systems.

The London-based company, with facilities in the United States, Canada, Germany, Italy, India and China, was bought by Duke Street in 2006 for 175 million euros.

Kennametal said Deloro Stellite will strengthen its presence in existing end markets of oil and gas, power generation, transportation, and aerospace.

The U.S. manufacturer, valued at about $3.3 billion, plans to fund the acquisition through existing credit facilities and operating cash flow.

Its last acquisition was that of Tricon Metals and Services Inc in 2009 for $64.1 million.

24 million customer accounts hacked at Amazon’s Zappos

SEATTLE ― Online shoe retailer Zappos told customers this weekend that it has been the victim of a cyber attack affecting more than 24 million customer accounts in its database.

The popular retailer, which is owned by Amazon.com, said customers’ names, e-mail addresses, billing and shipping addresses, phone numbers and the last four digits of credit cards numbers and scrambled passwords were stolen.

But it said the hackers had not been able to access servers that held customers critical credit card and other payment data.

“We were recently the victim of a cyber attack by a criminal who gained access to parts of our internal network and systems through one of our servers in Kentucky,” Zappos CEO Tony Hsieh said in an email to staff which was posted on the company’s blog on Sunday.

“We are cooperating with law enforcement to undergo an exhaustive investigation,” he added.

Zappos said it was recommending that customers change their passwords including on any other website where they use the same or similar password.

The company, which is well known for its customer service, said due to the high volume of customer calls it is expecting it will temporarily switch off its phones and direct customers to contact via e-mail.