(Reuters) – Moving ideas from sketches on napkins to factory floors is often the toughest stage for a startup entrepreneur. Flextronics International Ltd thinks it can help with that.

The contract manufacturer, which produces the Xbox game console for Microsoft Corp and smartphones for Google Inc, as well as networking equipment and other electronics gear, has upgraded its campus in Milpitas, California, with equipment aimed at creating product prototypes for customers in a hurry.

China has become the world’s factory floor over the past decade as incentives, low wages and entry into the World Trade Organization made it a highly efficient workshop for everything from shoes to electronics.

But Silicon Valley companies as small as startups and as large as Google are increasingly looking to local contract manufacturers for help with design and early production of new electronics products, experts say. This reflects a nascent trend of “reshoring” manufacturing operations to the United States.

Flextronics and rival contract manufacturers like Foxconn and Jabil Circuit Inc already offer customers “value-added” help designing their products, advice on what components to use and whom to buy them from, and other value-added services.

Singapore-based Flextronics said it spent $12 million on the Milpitas upgrade, with plans to spend another $20 million in coming months. The idea is to meet growing demand from companies in Silicon Valley that want to get products to market faster, site manager Zahid Hussain told Reuters this week.

“Technology is changing. Time to market is critical right now,” Hussain said. “We’re providing turnaround time. We’re providing end-to-end solutions.”

Flextronics’ campus includes labs with metal detectors, guards and strict security procedures to protect the confidentiality of clients whose engineers are designing new products and producing prototypes.

Inside are cutting-edge machines that “pick and place” components on circuitboards, as well as 3D printers and X-ray and testing gear that Flextronics can use to turn a proof of concept into a prototype product in 72 hours or less, Hussain said.

Last year, Google looked to a local contract manufacturer that its engineers could visit conveniently instead of an Asian manufacturer when it wanted to design and produce its Nexus Q home entertainment device fast.

The Flextronics facility and others like it can be particularly attractive to small Silicon Valley companies facing tight deadlines to produce their first products, said Thomas Dinges, an analyst at IHS.

“You’ve got all these companies coming out with new stuff that’s totally different, and they realize they need a couple hundred or a thousand units, and if they don’t hit that, their company is dead,” Dinges said. “I’m going to use someone who is local who I know has done this before.”

(Editing by Matthew Lewis)

(Reuters) – AllThingsD, the widely read technology blog run by Kara Swisher and Walt Mossberg, has begun discussions with owner News Corp about extending or ending their partnership, sources familiar with the situation told Reuters.

According to these sources, AllThingsD’s contract with News Corp expires at the end of the year. One of the sources said Swisher and Mossberg have to deliver a business plan by next week to Robert Thomson, the former Wall Street Journal managing editor who will helm News Corp’s publishing unit as CEO after it is spun off.

The fact that AllThingsD’s contract is up this year is well known, and sources said the website is receiving a lot of “inbound interest” from potential buyers parallel to its talks with News Corp.

Among the names mentioned as having reached out to AllThingsD were Conde Nast, where Swisher recently signed to work as a contributing writer for Vanity Fair, and Hearst.

Sources also speculated that former Yahoo and News Corp executive Ross Levinsohn might be looking at the website given his new role as Chief Executive of Guggenheim Digital Media, which comes complete with “significant capital to acquire and invest in new media companies.” The private equity shop already owns Billboard, Hollywood Reporter, and Adweek.

AllThingsD has reported that AOL expressed interest in acquiring it in the past, but said those talks “were preliminary at best.”

Calls to AllThingsD were referred to a News Corp representative who declined comment. A Conde Nast representative declined comment. Calls to Hearst were not immediately returned. Calls and emails to Ross Levinsohn were not returned.

While AllThingsD is recognized as the brainchild of Swisher and Mossberg, News Corp actually owns the website and its name. However, according to provisions in their contract, Swisher and Mossberg have approval authority over any sale, the first source said.

Technically, News Corp could retain the AllThingsD name in the event of a sale, forcing Swisher and Mossberg to start a new venture under a different brand name. But historically in these types of situations a deal is usually worked out to allow the founders to take the company name with them as part of a settlement.

Sources described the website and conference business combined as profitable. It has grown into a technology industry must-read, and features a popular conference division known for snagging A-list corporate executives for intimate interview sessions. Apple’s Steve Jobs, Facebook founder Mark Zuckerberg, Microsoft founder Bill Gates, and virtually every other major technology executive has spoken at the D Conference, as it is known.

Earlier this week, AllThingsD’s well-regarded media writer, Peter Kafka, led a media-centric conference for the website that included panels with Intel’s Erik Huggers, Live Nation CEO Michael Rapino, and Netflix’s programming boss Ted Sarandos, among others.

The website has two more conferences on the docket for this year: a mobile one that was postponed until April due to Hurricane Sandy, and the main D Conference in May.

Sources described the relationship between News Corp and AllThingsD as amicable but stressed.

“Like all partnership, there could be more cooperation between the two,” said one source. “There is tension between AllThingsD and the Wall Street Journal, for example.”

As a result of management changes, over the last few years the website has reported to numerous News Corp executives, among them Gordon Crovitz, Les Hinton, and now Lex Fenwick and Robert Thomson.

Should the two sides reach a deal on a new contract, AllThingsD would be included as part of the publishing unit in the News Corp split.

(Additional reporting by Jennifer Saba; Editing by David Gregorio)

(This story corrects the 10th paragraph to show source said website is profitable in combination with conference business, instead of website is profitable. Corrects spelling of Erik Huggers name in paragraph 11 to Erik, from Eric)

Startups are bringing creative features to the small screen in hopes of luring iPhone, Android users away from the default browser.

By Rachel Metz on February 7, 2013

When surfing the Web on a smartphone, most of us stick with the browser that came with our handset. That experience can be clunky, though, and a slew of mobile browsers are trying to break into a market dominated by Apple and Google.

It’s a struggle reminiscent of the “browser wars” of the ’90s, in which Netscape Navigator and Internet Explorer fought for dominance on desktop computers—and also of the more recent battle for market share among IE, Firefox, and Google’s Chrome browser on desktops and laptops.

Mobile browsers like Opera, Rockmelt, Dolphin, and the brand new Futureful are sparring with the built-in browsers on the iPhone, iPad, and Android-running smartphones and tablets, hoping to grab a percentage of the growing market for surfing the Web on these smaller screens.

The odds of success appear slim for most contenders. According to data from Net Applications’ NetMarketShare, Apple’s Safari browser captured nearly 61 percent of the mobile browser market in January, while Google’s Android browser had more than 21 percent. (Google recently started including its Chrome browser on high-end Android devices, but Chrome’s market percentage is still tiny, according to NetMarketShare.) Opera Software’s Opera Mini browser came in third with about 10 percent of the market.

But as the smartphone and tablet markets expand and people shift much of their online time from laptops and desktops to mobile devices, mobile browser makers see an irresistible opportunity to innovate and—just maybe—become the preferred pocket-sized gateway to the Web.

Mobile-browser companies are fond of saying that the market leaders have mainly just taken a desktop Web browser and plopped it onto a smaller screen, creating an experience that isn’t great for smartphones in particular and doesn’t take advantage of mobile devices’ touch screens.

“It’s really frustrating,” says Eric Vishria, cofounder and CEO of mobile browser Rockmelt. “They really haven’t pushed the limits given how important this software is.”

Rockmelt’s free iPhone and iPad app tries to make browsing faster and more convenient by opening up with a full screen filled with squares of content determined by your interests, which it gleans if you allow it to connect to your Twitter and Facebook profiles. You can swipe interesting-looking stories to the right to save them for later (you can read these offline, too), or swipe to the left to indicate that you don’t like a certain type of story. You can post reactions to Web pages by tapping tags like “want” or “WTF” and follow friends and websites within the browser to see what they’re reacting to. Rockmelt shows items you click on in your content feed in a simplified view that includes, generally, just one large image and text; to see the content as it appears at its source, you tap a little sunglasses icon in the URL bar.

Rockmelt also attempts to overcome network latency issues by preloading content on its servers and piping it down to users. Vishria declined to give exact figures but says that Rockmelt has hundreds of thousands of users (there are also 4.3 million users of its discontinued desktop browser).

And Rockmelt has a cheerleader that any browser company would envy: Marc Andreessen, cofounder of Netscape, who sits on its board. The venture capital firm he cofounded, Andreessen Horowitz, is one of the company’s investors.

This kind of support signals an opportunity for mobile browsers to succeed, says Jason Davis, an associate professor at the MIT Sloan School of Management who studies innovation and entrepreneurship.

MoboTap, the company that makes the free Dolphin Browser, is betting on that opportunity. Dolphin, for the iPhone, iPad, and Android smartphones and tablets, aims to stand out with mobile-friendly features like the ability to set up unique gestures that load specific websites. You do this by tapping a little dolphin icon at the bottom of the browser screen and drawing your symbol—I made a “J” to take me to the blog Jezebel. Users can also pay $1 for Dolphin Sonar, which lets you shake your phone to activate voice controls for searching, browsing, opening new tabs, and sharing Web pages.

Dolphin’s products seem to be doing well. Its apps have been downloaded more than 50 million times, and the browser has about 17 million active users, says Edith Yeung, who heads up Dolphin’s marketing. She also notes that the browser is being preloaded on smartphones in Japan and China through partnerships with wireless carriers and device makers, and that Dolphin is talking to others who are interested in making it the default browser on phones.

Still, for any mobile browser, just getting discovered is an issue. Apple’s and Google’s application stores are extremely crowded, and many consumers wouldn’t even think of going beyond the built-in browser on their device. Rockmelt’s and Dolphin’s user figures are tiny in comparison with the millions of iPhones and Android smartphones that are snapped up each quarter, every one of which comes preloaded with a browser. In the fourth quarter of 2012 alone, nearly 200 million of the 217 million smartphones shipped worldwide ran on Apple’s iOS or Google’s Android platform, according to Strategy Analytics.

“Most people are probably not even aware they can download a different browser,” says Andrei Hagiu, an associate professor at Harvard Business School who teaches a course on the Internet browser wars.

This isn’t keeping new mobile browsers from coming, though. A new entrant to the field is Finnish startup Futureful, whose free iPad browser is focused on predicting what you’ll want to check out online and bringing it to you rather than making you go find it yourself.

Like Dolphin and Rockmelt, Futureful emphasizes browsing without typing, though it, too, will let you type in a URL if you really want to. Users sign in with their Facebook or Twitter account, and Futureful builds an ever-changing profile based on your interests. The browser uses this information, along with data about what similar users like, to recommend content in little tags that float across the top of the screen. As you use it over time, it will get better at determining what you want to see, says cofounder Jarno Koponen, and users can also mark items they like to help Futureful learn faster.

Like Rockmelt, Futureful has a big-name investor: Janus Friis, cofounder of Internet telephony company Skype.

Could too many alternative mobile browsers be a bad thing? Hagiu thinks so if each browser requires website makers to optimize their sites differently. On the other hand, if mobile browser companies adhere to a common set of Web standards, such as HTML5, this is unlikely to be an issue.

Right now, four out of every five minutes devoted to media consumption on a smartphone are spent using apps, according to data from comScore, while just one minute is consumed by mobile Web surfing.

Eventually, the proportion is likely to change as websites are revamped for the smaller touch screens and as mobile gadgets become more powerful computers. For now, though, these minority mobile browsers have some time to experiment.

Besides raising cash, crowdfunding can be a way to test product ideas and build relationships with future customers.

By Jessica Leber on February 11, 2013

Ram Malasani, CEO and founder of the 22-person company Securifi, isn’t the typical newbie entrepreneur you’d expect to find on Kickstarter, a wildly popular website where people can pitch projects and receive small pledges of financial support from anyone (see “10 Breakthrough Technologies, 2012: Crowdfunding”). But with weeks still left to go on its campaign for the Almond+, a reimagined Wi-Fi router that can also control connected home systems like a thermostat or lighting, Securifi has raised more than $340,000—far more than the original goal.

Malasani’s company wasn’t exactly starving for funds. Almond+ is a sequel to Securifi’s first Almond product, a smartly designed router that has already sold tens of thousands of units on Amazon since it launched at the Consumer Electronics Show a year ago. Fund-raising is “definitely the secondary reason” for his company to use Kickstarter, he says.

The vast majority of the 85,000 projects launched on Kickstarter to date are the work of individuals with a dream—not established companies, much less ones that already have significant revenue, successful products, or venture capital funding.

But some startups and even larger companies are now looking to crowdfunding sites to serve other business functions, from market research and product design to customer relations and manufacturing negotiations.

“Crowdfunding is the ultimate form of consumer research,” says Scott Popma, an intellectual-property lawyer who advises companies about crowdfunding. “You are not just asking people’s opinions—you are getting opinions with their money.”

For Securifi, the campaign is helping it do early marketing and solicit high-quality feedback from enthusiasts while the product is still in development—far preferable to hearing criticism or getting a negative review after it is released. Right now, as a third-party seller on Amazon, Securifi can’t contact most people who have previously bought products to ask about their experience, or to promote future features or products. “We now know very few of our customers,” says Malasani. “We’re just removing the layer between ourselves and our customers.” They’ve already received more than 700 comments and messages.

Game companies with huge fan bases are among the largest businesses that have taken to the Kickstarter platform. Double Fine Productions, a decade-old independent studio that has won several awards, raised $3.3 million on the site from 88,000 backers last year, aiming not only to finance a new game but to “develop it in the public eye.”

For Days of Wonder, a maker of digital and board games, using Kickstarter was also not about the money. The campaign it launched in January was primarily meant to help determine whether its employees should devote months’ worth of resources to making an Android tablet app for their popular iPad game. Some customers had been requesting it, but in reality, few people have Android tablets yet.

The company set a goal of raising $190,000, a threshold it felt would establish sufficiently promising demand. The money itself was so beside the point that the company canceled the on-track campaign midway through. CEO Eric Hautemont realized that iPad owners and board-game fans were donating, so it wasn’t helping answer the primary question about Android demand.

This experience points to the challenges of using Kickstarter as a research platform. “We learned a lot,” Hautemont says. “We’re planning to relaunch it in March, focused on Android.”

For Kickstarter, which takes a small percentage of funds raised by successful projects, it could be good for business to attract companies that set larger funding goals or have more resources to promote their campaigns, especially if its early growth slows. But the company is also trying to maintain its credentials as a launch pad for garage inventors. Already, its guidelines limit technology projects to those that have some DIY, open-source, or hacker appeal.

Other crowdfunding platforms geared toward more established startups might not mind inviting even the largest companies to participate. Procter & Gamble and General Mills are working with the equity crowdfunding site CircleUp, a platform currently limited to accredited investors; the companies hope to keep a better eye on new ideas bubbling up from startups on the site and possibly buy from (or buy) them. The JOBS Act, a federal law passed last year, could soon allow CircleUp and other sites to open up to average individuals who want a stake in a business.

As the venture capital industry becomes more risk-averse (see “The Narrowing Ambitions of Venture Capital”), technology businesses could take to crowdfunding sites at even later stages. Crowdfunding is even changing the way some traditionally conservative technology companies approach product development.

Semiconductor startup Adapteva, a five-person company in an industry where it is usually hard to get funding, has not been able to raise more capital since its initial $1.5 million financing from a small strategic investor, even though it has already brought in more than $1 million by selling its powerful, high-end mobile chips to military customers. Now the tiny company hopes to bring its technology to a more mainstream market. But to do that, it needs enough money to place a manufacturing order large enough to bring down production costs.

Its recent Kickstarter campaign for Parallella, a “supercomputer for everyone,” initially met with skepticism from visitors to the site. “Chips are usually made by very big companies,” says founder and CEO Andreas Olofsson. “We were claiming performance numbers that were beyond anything these multibillion-dollar companies had done, and nobody had heard of us.”

But the campaign eventually took off after the veteran team posted more convincing demos and took the unconventional step of open-sourcing its hardware designs. The company raised nearly $900,000 and is now racing to deliver thousands of its $99 boards by May to its new backers, mostly developers who will help create applications for the product. Through the enthusiasts he’s met along the way, Olofsson has learned about applications for parallel computing he’d never even thought of. “Now we just have to make it work,” he says.

Hybrid materials made of cardiac cells and carbon nanotubes might patch damaged hearts and provide muscle for robots made of living tissues.

By Katherine Bourzac on February 11, 2013

The tissues of the heart are mechanically tough and electrically conductive, and they keep a strong, rhythmic beat—properties that are tough to mimic in the lab. But a new hybrid material that combines cell-friendly gel, strong, conductive carbon nanotubes, and living cardiac cells mimics natural heart tissue more successfully than previous attempts. Eventually the new material could be useful in both medical and robotic applications.

The bionic tissues, made by Ali Khademhosseini, a professor at the Harvard-MIT Division of Health Sciences and Technology in Cambridge, Massachusetts, could serve as muscles for biological machines—moving, programmable living tissues that take synthetic biology beyond single cells. A lot of the things that natural tissues and biological cells can do, such as sense and respond to their environment, are hard for engineers to achieve with the synthetic materials used in conventional robotics. Researchers hope that building machines from biological materials like heart tissue will expand what’s possible. The new tissues can swim untethered in water, swing back and forth, and perform other moves programmed by controlling their shape and thickness.

If these materials turn out to be safe for use in the human body, they might also be used to patch tissue damaged by heart attacks. Researchers engineering heart tissues in the lab often use polymers and gels to provide cardiac cells with an environment in which they will grow and behave as they do in the body. The resulting materials have two critical flaws, says Khademhosseini. They don’t match the electrical conductivity of heart tissue, nor are they as mechanically strong.

“When the heart beats, cells respond to that mechanical force and release chemicals that encourage growth,” says Thomas Webster, a chemical engineer at Northeastern University in Boston, who was not involved with the work. And if the patch is less conductive than the rest of the heart, electrical signals might experience delays. If a patch without just the right properties is placed on a patient’s heart, it might not grow properly, and it might not be able to beat in time with the rest of the heart, says Webster.

The Cambridge group solves this problem by adding carbon nanotubes to tissue-engineering gels. The result is a squishy gel with a tangle of strong, conductive carbon fibers embedded in it. Khademhosseini seeded cardiac cells on these gels and studied their properties. The bionic tissues were similar in elasticity to rat heart—much more elastic than previous lab-made materials. They also had much better conductivity. And the tissues were better at heart tissue’s main job, beating in synchrony. Khademhosseini exposed the bionic tissue to various chemicals and found that it was it was relatively resistant to damage—perhaps because the carbon nanotubes provide electrical links between cells that can maintain communication even when under stress. This work is described online in the journal ACS Nano.

Webster says before any medical applications can be considered, researchers will have to demonstrate that carbon nanotubes are not toxic—especially since they are not biodegradable and would be likely to stay in the body for a long time. He notes that even if the carbon materials themselves are safe, the manufacturing process for nanotubes might leave traces of toxic metal catalysts.

Khademhosseini says the first use for the materials may be in biological machines used to assess and restore toxic environments or repair buildings. Last year, researchers demonstrated free-swimming jellyfish-like robots and walking biological machines built from heart tissues and polymers. But without conductive materials, their applications are limited, says Rashid Bashir, a bioengineer at the University of Illinois at Urbana-Champaign, who made the walking robot. “If you can pattern the base material, you could make circuits inside,” he says.

Large companies have crunched numbers for years, using consumer-spending habits and other insights to steer customers toward products and target users. But now a group of startups are helping smaller businesses find cost-effective ways to use their data to serve customers and improve their bottom line.

Recently, Jetpac, a free iPad app that turns your friends’ photos into a customized travel magazine, wanted a way to find its users’ best images, said founder and chief technology officer Pete Warden. But instead of saddling its team with the project, Jetpac wanted to hire data experts to help. So they sponsored a contest on Kaggle, a platform for data science competitions. Within three weeks, the competition’s top three teams had more than 85 percent accuracy in finding the best photos, and Jetpac had a solution to its photo quality problem.

“It helped us speed up our development and get a better result much faster than if we’d done it as an internal project,” Warden said. “It was pretty crucial for our product and it made a massive change in terms of the satisfaction the users were reporting.”

While Kaggle mostly works with larger companies that have accumulated more data, it’s the smaller businesses that often don’t need – or can’t afford – a full-time data scientist, said Kaggle founder and CEO Anthony Goldbloom. While some small businesses might balk at the expense of data – and hiring an in-house data scientist is certainly costly – business owners said the price of online data tools was worthwhile. Warden of Jetpac said that, at $5,000, the Kaggle competition was “a bargain.”

Then there are the small businesses specializing in carving a niche out of handling big data. When the brand-building agency Powerhouse Factories grew tired of using Microsoft Excel to manage customer data, it turned in 2007 to Tableau, a business analytics firm that creates software to help customers understand their data. In a recent collaboration, Tableau helped Powerhouse Factories show a client data detailing problems with queuing in their checkout lines, said Michael Cristiani of the analytics and data visualization group at Powerhouse Factories. Powerhouse Factories also used Tableau to show a client how their Facebook messages were affecting sales and customer engagement.

As a business with about 50 employees, including about a half-dozen who use Tableau daily, Cristiani said Tableau’s software was appealing because it didn’t require their company or clients to have a big information technology infrastructure. “The world runs on data and analytics,” Cristiani said. And small businesses aren’t starving for data – they’ve already got it. “They’re starving for the insights,” he said.

Small companies don’t need a trained information technology specialist to run the software, said Elissa Fink, Tableau’s chief marketing officer. Cristiani boasts that Tableau released Powerhouse Factories from the perpetual back-and-forth with clients because the company works with its customers on Tableau servers.

Data is not just for tech companies. Chad Burns, owner of Farmstead Table, a farm-to-table restaurant outside Boston that opened in August, uses the online service Swipely to process credit card payments and track customer data, such as birthdays and anniversaries, favorite meals, restaurant spending and even the day and time they visit. “Say it’s one of our best customers and they come every Saturday night and they love the salmon dish,” Burns said. “If I get salmon in, I can send them a note and let them know I have their favorite dish.”

Data from Swipely helps the time-crunched restaurant owner target customers with the right messages and garner repeat business, Burns said. “I still cook every single day,” he said. “The Swipely system captures all the personal information, all the things that we don’t necessarily have time to capture ourselves.” It can also show merchants how their social media activity – and even the weather – affects daily sales.

Story to College, a startup that helps students write college application essays, uses a combination of student evaluations and the tried and true data analysis tool Google Analytics, which culls data from the company’s website, to measure the outcomes of its courses and online tools, said founder and chief executive Carol Barash. By tracking students on the Web site, Barash learned how frequently they clicked on its stress reduction resources. “They use those exercises a lot,” she said. “We watched where they were spending their time and it clued us in to where we should develop more content.”

Using data in your business takes patience, Barash said. “You don’t always get the quick answer,” she said. “The answers might not be obvious.” If a data point is surprising, she said, take time to consider what the data show and possible next steps. “If you take action too quickly,” Barash said, “it might not be the right action.”

(The author is a Reuters contributor)

(Editing by John Peabody, Ryan McCarthy and Brian Tracey)

(Reuters) – European leaders agreed on Friday to push for a free-trade pact with the United States, putting the onus on the White House to decide whether to try for a deal that would encompass half the world’s economic output.

Major exporters Germany and Britain won support from the rest of the European Union at a summit in Brussels to reach a deal with Washington that many leaders hope will help Europe pull out of its banking and debt crises.

In their final statement, leaders said the European Union gave “its support for a comprehensive trade agreement” with the United States.

“We need to move forward,” European Commission President Jose Manuel Barroso said at the end of the summit, referring to the United States.

“The Commission will push ahead to realize the full potential of an integrated transatlantic trade agreement,” said Barroso, who heads the EU executive responsible for negotiating the European Union’s trade agreements.

The EU leaders’ statement raises expectations that U.S. President Barack Obama may endorse the initiative next Tuesday in his annual State of the Union speech, which presidents traditionally use to lay out their priorities for the year.

Europe’s main business lobby, Business Europe, urged him to do just that in a letter released on Friday on behalf of 41 business federations, calling on Obama to give “a strong signal” and “political support” for the talks.

With economic growth elusive on both sides of the Atlantic, Obama and EU leaders tasked their trade chiefs in 2011 to look at whether it was feasible to agree a deal to further integrate the two blocs that already have low tariffs.

A U.S.-EU draft proposal drawn up by EU Trade Commissioner Karel De Gucht and U.S. Trade Representative Ron Kirk is essentially ready. De Gucht, who went to Washington this week, has given strong signals that there is enough common ground to go ahead with negotiations.

Talks could start in months, and while De Gucht was warned of difficult negotiations, both sides appear to want to agree on an accord quickly, possibly by the end of 2014.

“WITHIN REACH”

Following the collapse of global trade talks in 2008, both the United States and Europe have sought to tie up as many free-trade agreements as possible, and Brussels alone is negotiating with more than 80 countries.

Efforts to agree a U.S.-EU pact could spur the rest of the world to revive global talks for fear of being sidelined in the emerging shape of global commerce, Indonesia’s candidate to head the World Trade Organization told Reuters.

But U.S. officials, wary of getting bogged down in endless talks, have said they need a strong political commitment from the 27-nation European Union that Brussels is serious about opening up its markets before they can go ahead with talks.

German Chancellor Angela Merkel, with support from free-trade advocate Britain, has been eager for a deal for months.

“I wish for nothing more than a free-trade agreement with the United States,” Merkel said on January 29 in Berlin.

Diplomats say the time is right for a deal that was first talked about three decades ago but was considered too difficult because of worries from protectionists on both sides of the Atlantic, especially in the farming sector.

The European Union dropped its ban on some U.S. meat imports this week in a gesture aimed at starting talks, but countries such as France, and U.S. states such as Georgia, are reluctant to fully open up to foreign competition.

Still, a deal could increase Europe’s economic output by 65 billion euros ($88 billion) a year, according to the European Commission, benefiting industries from chemicals to automakers.

The United States too is dissatisfied with its meager economic growth since the global financial crisis of 2008/2009 and sees removing barriers to trade with the European Union as a way to unleash billions of dollars in transatlantic business.

In a speech on Saturday in Munich, U.S. Vice President Joe Biden said the economic benefits of a comprehensive trade agreement would be “almost boundless” if the two sides could muster the political will to resolve longstanding differences in regulations that have blocked farm and other exports.

Biden said: “This is within our reach.”

(Additional reporting by Doug Palmer in Washington; Editing by Jon Hemming)

(Reuters) – CIT Group Inc (CIT.N) had preliminary talks over the past year and a half to sell itself to banks, including Toronto-Dominion Bank (TD.N) and Wells Fargo & Co (WFC.N), but nothing came of the conversations, according to three people familiar with the specialty finance company.

Goldman Sachs (GS.N) bankers have had informal talks on behalf of CIT with a number of banks, but the Wall Street firm has not been formally retained as an adviser, according to two of the people. CIT Chief Executive Officer John Thain, who formerly worked at Goldman, is not under any immediate pressure to sell the company, the sources said.

Spokesmen from CIT and TD declined to comment on what they characterized as “speculation and rumors.” A Goldman Sachs spokesman and a Wells Fargo spokeswoman declined to comment.

While CIT does not have a sales process in place, selling itself could be a quick fix for some of its difficulties. The company has higher funding costs than its competitors do because it has fewer deposits, which makes it harder for CIT to offer competitive rates when it lends. But getting regulators to allow the company to fund more of its businesses with deposits has taken time, analysts said.

Deposit funding is crucial for CIT, which has an online bank with $9.6 billion in deposits. Before the financial crisis, it relied heavily on bond market borrowing to fund its assets, including railcar and airplane leases, loans to finance retailers’ inventories, and loans to small businesses.

But during the crisis, CIT lost access to that funding. It became a bank holding company in December 2008 just before it received $2.3 billion of bailout money, but the emergency funds were not enough, and it filed for bankruptcy in November 2009.

Since emerging from bankruptcy in December 2009, CIT has increased its reliance on deposit funding and has wiped out $30 billion of high-cost debt, reducing its funding costs, but analysts say the company still has work to do.

Since August 2009, CIT has been under a written agreement with the Federal Reserve Bank of New York that gives the regulator broad power over the company’s capital plans, corporate governance and risk management.

Last month, Thain said CIT did not have a timetable for when the New York Fed might lift its written agreement or provide guidance on its capital plan, but he did say that it could get approval to return amounts of capital to shareholders. CIT is seeking permission to return a “modest” amount.

If CIT sells itself, it could get out from under the New York Fed’s written agreement, enabling it to put excess capital to work and provide a higher return on equity to shareholders, analysts and bankers said.

Janney Capital Markets, for example, estimates that CIT has about $2 billion of excess equity capital that it could return to shareholders.

“It could take a while for all of the excess capital to be returned to shareholders, and a large bank that buys CIT might be able to extract that capital more quickly,” said Janney analyst Sameer Gokhale.

BARRIERS TO A SALE

Foreign banks, particularly Canadian or Japanese banks that have expressed interest in expanding in the United States, may be candidates to acquire CIT, the bankers said.

But analysts and bankers warned that there are a number of barriers to a sale of CIT, including finding a bank that wants all of the company’s businesses.

TD, for example, might be interested in CIT’s factoring business, which finances retailers’ inventories. But sources said the Canadian bank would be less interested in something like airplane leases, which require a good deal of capital.

Moreover, regulators are under pressure to reduce systemic risk and are unlikely to allow large acquisitions by financial institutions anytime soon.

“None of the major banks have a hall pass from the regulators that would encourage them to buy a company like this,” said Sterne, Agee & Leach analyst Henry Coffey.

One idea suggested by bankers would be for CIT to combine with auto lender Ally Financial, whose bank has about $50 billion of deposits.

CIT would gain more deposit funding, and government-owned Ally would have a broader array of assets. Right now, Ally has mainly car loans, leaving it poorly positioned for any slowdown in that sector.

Ally would probably not be able to do a deal until it resolves the bankruptcy of its Residential Capital LLC unit, which housed most of the company’s mortgage assets. That bankruptcy is expected to continue for months. Ally declined to comment.

Under Thain, CIT has been steadily working through its problems since emerging from bankruptcy.

In the fourth quarter, CIT posted its first profit in four quarters as its program to cut high-cost debt started to pay off.

CIT has also been building other businesses. In November, it said it had launched a maritime finance business to underwrite large ships, an area where it believes it has growth opportunities as lenders in the space pull back.

Last month, it said it had acquired $1.26 billion of commercial loans from U.S. Midwestern regional bank Flagstar Bancorp (FBC.N).

CIT’s stock price has jumped to nearly $42 as of Friday from around $32 when Thain took over.

Some analysts said that if the stock were to get to $55 or higher, a serious exploration of a sale would make better sense.

“Why would they quit now, just after all of that hard work?” Coffey said. “There would be no benefit selling today when you can wait a year or two and have a better bid.”

(Reporting By Jessica Toonkel and Dan Wilchins; Editing by Lisa Von Ahn)

(Reuters) – The U.S. economy likely expanded slightly in the fourth quarter as higher exports and a slump in oil imports narrowed the trade gap, suggesting a surprise drop in economic output reported last week was overstated.

America’s trade deficit shrank in December to its narrowest point in nearly three years in December, the Commerce Department said on Friday.

That suggests trade added to economic growth in the final three months of last year, rather than holding it back as the government said last week when it estimated gross domestic product fell at a 0.1 percent annual rate.

The GDP report had shocked economists, who had been looking for the economy to expand at a 1.1 percent pace.

“Trade data for December paint a reassuring and encouraging picture of the U.S. economy at the end of last year,” said Chris Williamson, chief economist at Markit.

A separate report from the Commerce Department showed wholesale inventories unexpectedly declined in December.

While the decline in inventories would subtract from GDP, economists said the drag was not big enough to offset the positive impact of December’s trade performance.

Taken together, the reports pointed to an economy that was still growing at the end of the year, and was poised to grow at a quicker pace in early 2013 as firms rebuild inventories to keep up with demand.

Macroeconomic Advisers, a forecasting firm, said the data pointed to a growth rate of 0.5 percent in the fourth quarter.

JPMorgan economist Michael Feroli said the decline in inventories helped lead him to boost his forecast for first quarter GDP growth to a 1.5 percent annual rate – a still-tepid pace that would reflect the hit most Americans took in January from higher taxes. Feroli and other economists expect growth to pick up as the year progresses.

Prices for U.S. stocks rose as investors were impressed by a batch of strong trade data, which included readings showing stronger exports and imports by China during January as well as the U.S. figures for December. Prices for U.S. government debt fell.

IMPORTS DECLINE

The U.S. report showed the country’s trade gap narrowed to $38.5 billion in December, which was a much smaller deficit than analysts polled by Reuters had expected.

U.S. exports increased $8.6 billion in December, boosted by sales of industrial supplies, including a $1.2 billion rise of non-monetary gold.

In a reflection of America’s current oil and natural gas boom, petroleum exports rose by nearly $1 billion to a record high level.

A fall in petroleum imports led overall purchases from abroad to decline $4.6 billion in December. Both the price per barrel and volume of imports fell, although those data are not adjusted for seasonal swings.

For the entire year, the country’s imports of crude oil fell to their lowest levels since 1997 in terms of volume.

For all of 2012, the U.S. trade gap fell by 3.5 percent to $540.4 billion as exports rose 4.4 percent. While trade was still a drag on the economy, rising exports made it less of a drag than in prior years.

While the overall deficit shrank last year, it grew with China, raising the hackles of U.S. manufacturers who feel Beijing gives its exporters an unfair edge by keeping its currency undervalued.

“Congress and the administration must take on currency manipulation,” said Scott Paul, president of the Alliance for American Manufacturing

But even the figures on China had a silver lining. While U.S. imports last year from China increased to a record high, so did America’s exports to the country.

America’s December trade deficit with China for goods, which was not seasonally adjusted, narrowed by $4.5 billion on a drop in imports.

(Reporting by Jason Lange; Editing by Neil Stempleman and Tim Ahmann)

(Reuters) – Guaranteed Rate, Inc, a home loan company, opened shop in 2000 in Chicago with a single office. Now it is one of the 20 biggest U.S. mortgage lenders, with more than 140 offices.

Most of that growth has come in the last two years and Chief Executive Victor Ciardelli said in an interview he is not planning to slow down.

“We’ve hired over a thousand people over the last year and we’re trying to hire a ton more,” Ciardelli said.

Guaranteed Rate is one of scores of independent mortgage lenders and community banks pushing up through the rubble of the housing collapse, as profits rise amid improving demand for home loans for new purchases or mortgage refinancing. They are winning business from banks such as Citigroup Inc (C.N) or Bank of America Corp (BAC.N) that have retrenched after the financial crisis.

The five biggest U.S. mortgage lenders controlled just 53.2 percent of the market last year, down from nearly two-thirds in 2010, Inside Mortgage Finance data shows. As small lenders grow, that share could shrink to 40 percent of the $1.8 trillion mortgage market by 2014, a recent FBR Capital Markets report forecast.

The rise of smaller lenders is a boon for consumers. Several smaller lenders said lower costs, low interest rates and their faster processing times allowed them to be more aggressive on pricing than the bigger banks.

“When the big guys get backed up, they have a tendency to raise their price, to slow down volume. And that gives other lenders an opportunity, because the consumer thinks, ‘Why would I pay an extra $100 a month,'” said Brian Hale, chief executive of Stearns Lending Inc.

Stearns, a home lender based in Santa Ana, California, saw originations increase 107 percent in 2012.

But the proliferation of lenders also comes with risks. While mortgage experts said underwriting standards are stricter now than in the years leading to the financial crisis, the rush into the sector raises the risk that regulators might not be able to police them effectively.

The Consumer Financial Protection Bureau, for example, has unveiled new rules for underwriting standards, but the bureau that was formed in 2011 as part of financial reforms has yet to prove itself.

“The CFPB is a very new agency that has been building out its examination force. They’ve been doing a very good job of that, but nevertheless a lot of the examiners are relatively new,” said Patricia McCoy, a financial-institutions law professor at the University of Connecticut and a former senior mortgage-market official at the CFPB.

A CFPB official said the agency was staffing up and would continue to grow until it is at full capacity.

Small lenders, some of which are backed by private equity and hedge fund money, are also aggressively taking advantage of federal guarantees to make home loans geared toward low-income borrowers – more so than the big banks. Such loans, which are insured by the Federal Housing Authority (FHA), require a down payment of as little as 3.5 percent of the purchase price, compared with the usual 20 percent.

The CFPB’s mortgage regulations specifically exempt the FHA, noted Guy Cecala, the publisher of Inside Mortgage Finance.

“There’s no question that the FHA has the loosest underwriting of any mortgage program in the industry right now, and that naturally brings some risk,” Cecala said. “The million-dollar question is, How much risk?”

Meanwhile, fast money looking for big returns is pouring into the sector.

“I get offers to be purchased by hedge funds and private equity all the time,” Guaranteed’s Ciardelli said.

To be sure, the increase in business for small lenders could be cut short as big banks ramp up. The two biggest players in the market now, Wells Fargo & Co (WFC.N) and JPMorgan Chase & Co (JPM.N), have been gaining market share in recent years. Others such as Citigroup and Bank of America pulled back from the market during the financial crisis, but have been hiring loan officers in an effort to regain lost share.

Moreover, mortgage rates have risen recently, which could ultimately cut into demand for home loans.

But for now, small lenders and experts said the ramp up by the large banks is not enough to make up for all of the business they shed.

“There is a real opportunity for well-capitalized community banks and independent mortgage bankers to take market share,” said Richard Bennion, director of residential lending at Seattle-based HomeStreet Bank.

BIG PROFITS

One reason for the rush into the market is enormous profits. The U.S. Federal Reserve last year said it was buying $40 billion of mortgages a month, which adds to demand for home loans and increases profits for banks that make loans and sell them to investors.

JPMorgan, for example, said earlier in January that margins from selling mortgage loans to investors were about 1.60 percentage points, more than double the historical level of about 0.65 percentage points.

Those kinds of margins give smaller competitors room to cut rates and still make money.

On its website at the end of January, Guaranteed Rate offered a $300,000, 30-year, fixed-rate home loan for 3.5 percent with up-front fees of $1,250. It claimed that compared favorably with three large banks – Wells Fargo, Citigroup and Bank of America – whose rates that day ranged from 3.625 percent to 3.75 percent for a similar mortgage, with fees starting at $3,200.

“The big banks are doing pretty well just turning on the lights and opening up the doors at their branch offices every day, so there’s no need to compete on pricing,” Inside Mortgage Finance’s Cecala said.

Citigroup spokesman Mark Rodgers said the bank continually seeks to ensure that its mortgage rates are competitive. Wells Fargo spokesman Tom Goyda said he is confident his bank’s pricing is competitive and noted that price is not a customer’s only consideration when shopping for a mortgage. Bank of America spokeswoman Kris Yamamoto said rates and fees depend on multiple variables and that the bank offered discounts to certain customers who maintain assets with the bank.

‘LENDER FOR THE MASSES’

While the FHA’s lending has gradually decreased since the crisis, it has been a source of opportunity for smaller lenders. The agency insured $213 billion of loans in fiscal 2012, compared with $218 billion in 2011 and $298 billion in 2010, according to its 2012 annual report to Congress.

Cecala said this puts the FHA at 13.5 percent of the lending market, within its stated target range of 10 to 15 percent, and down from over 25 percent in 2009, when FHA lending peaked.

More so than big banks, many independent lenders are relying on FHA loans to keep their origination volumes high.

“This recession hit a lot of people hard and (the FHA program) gave us the opportunity to support those folks in a situation that was difficult for them,” said Stanley Middleman, CEO of Freedom Mortgage Corp.

The Mount Laurel, New Jersey-based lender said about 35 percent of its $13 billion in mortgage origination for 2012 was FHA lending.

In contrast, JPMorgan’s total government lending, which includes FHA, as well as programs targeted at veterans and rural homeowners, made up less than 21 percent of its overall origination volume, a spokeswoman said.

A Wells Fargo spokesman said an estimate of FHA lending at 15 to 20 percent would be reasonable, but would not confirm an exact number.

At another lender, Sherman Oaks, California-based Prospect Mortgage, FHA lending accounted for over 25 percent of its $8.42 billion in loans in 2012, a company spokesman said.

“We like to think of ourselves as the lender for the masses, not the classes,” said Doug Long, Prospect’s president of retail lending.

(Reporting By Anna Sussman; Editing by Carrick Mollenkamp, Dan Wilchins, Paritosh Bansal and Andre Grenon)