By Soyoung Kim and Greg Roumeliotis and Jessica Toonkel

NEW YORK | Fri Sep 6, 2013 6:20pm

(Reuters) – Johnson & Johnson has launched a sale process for its Ortho Clinical Diagnostics unit, which makes blood screening equipment and laboratory blood tests and could fetch around $5 billion, three people familiar with the matter said on Friday.

J&J has asked JPMorgan Chase & Co to run the sale and is preparing to send detailed financial information in coming weeks to potential buyers, including some of the world’s largest private equity firms and a number of healthcare companies, the people said.

Early estimates suggest the unit’s earnings before interest, tax, depreciation and amortization are between $400 million and $500 million, suggesting a possible valuation of roughly $5 billion, the people said.

The unit, whose tests are considered older and less profitable than modern molecular diagnostics that examine gene mutations for signs of disease, has annual sales of about $2 billion.

The people asked not to be identified discussing details of the process. J&J declined to comment, while a JPMorgan spokeswoman had no immediate comment.

Healthcare conglomerate J&J said in January it would explore strategic alternatives for the unit and cautioned that the process could take anywhere from about 12 to 24 months.

Industrial and healthcare conglomerates General Electric and Danaher Corp. are likely to take a serious look at bidding for the J&J business, said one of the sources and another who had heard about the sales process.

GE declined to comment. A call to Danaher was not immediately returned.

J&J’s decision to divest the division comes as drugmakers are shedding businesses and cutting costs due to overseas price controls and pressure on payments from insurers and the government. Pfizer Inc, for instance, just spun off its animal health products business, and Abbott Laboratories split off its branded drugs unit early this year.

Ortho Clinical Diagnostics, whose revenue growth has been relatively flat, is No. 5 in the clinical diagnostics market, as measured in sales. Typically, J&J’s businesses rank first or second in their respective markets.

Clinical diagnostics are less attractive than molecular diagnostics, which could see strong revenue growth in coming years as examination of genes helps doctors steer patients to appropriate treatments.

But some analysts, including Les Funtleyder of Poliwogg, have said private equity buyers might be interested in the stable cash flow the J&J unit could provide.

(Reporting by Soyoung Kim, Greg Roumeliotis, Jessica Toonkel and Ransdell Pierson in New York; Editing by Gerald E. McCormick, Bernard Orr)

A real-time MRI system can help surgeons perform faster and safer brain operations.

By Susan Young

A new system for visualizing the brain during surgery is helping neurosurgeons more accurately diagnose and treat patients and is even allowing them to perform some procedures that until now have been extremely difficult or even impossible.

Neurosurgeons can use the imaging technology during surgeries that require small objects—biopsy needles, implants, or tubes to deliver drugs—to be placed at precise locations in the brain. The system provides live magnetic resonance images (MRI) that allow surgeons to monitor their progress during the operation.

Typically, neurosurgeons use an MRI before a surgery to plan the trajectory of the operation, based on the brain’s position relative to a guidance frame that’s screwed onto the patient’s skull, says Robert Gross, a neurosurgeon at Emory University. But the brain can shift before the actual surgery takes place, he says, rendering that MRI inaccurate. To check on what’s happening inside a patient’s skull, doctors have to stop the surgery and perhaps even move the patient out of the operating room.

To address these issues, researchers have been developing new neurosurgical guidance systems that can work with the strong magnets and electronic signals used by MRI scanners. The medical-device company Medtronic, for example, offers a real-time MRI imaging system for neurosurgery. But Gross says the most useful system on the market is offered by MRI interventions, a medical device company based in Memphis, Tennessee.

If it can cleverly blend hardware and software in new ways, reach new markets, and take advantage of Nokia’s patent portfolio, Microsoft’s billions could be well spent.

By David Talbot

Nokia might have gotten the better of Microsoft this week in selling its once-dominant handset business to Microsoft and entering into a broad patent agreement in a deal worth $7.1 billion. Microsoft’s stock price took a big hit. And no wonder: given the declining state of Nokia’s business, the deal seemed like a desperate attempt to prop up the largest manufacturer of phones that run Windows before it went under or switched to Google’s Android system.

But there are at least four ways Microsoft might come up a winner in the long run. With than 4 percent of the global market for smartphone operating systems, Microsoft has little more to lose and a lot, potentially, to gain as it tries to claw market share from Android and Apple.

Here’s how Microsoft could benefit significantly.

1. Skype, the dominant voice-over-Internet service owned by Microsoft, could become more powerful. Microsoft can now push Skype across its Xbox gaming/TV console, Nokia devices, Surface tablets, all PCs, and Android and Apple phones. That’s more of the world than Apple or Google can address with their FaceTime or Hangouts chat services. Skype is being steadily integrated more deeply into Windows; it will be preinstalled in Windows 8.1 on the desktop. It could become a way for Microsoft to compete with conventional cellular carriers on voice and messaging, where there’s money to be made.

More generally, Microsoft might now be able to do something that Apple or Google haven’t or can’t: integrate mobile devices and desktops into a more seamless experience. Google is limited in this regard because it doesn’t control PCs, although it is doing things like putting Google Now, the company’s intelligent personal assistant, into its main website. Apple has required users to use iTunes, and more recently iCloud, to sync up their phones with their laptops, but perhaps Microsoft can use Skype and other apps as the basis of a simpler and more compelling multi-device experience.

2. Leaving aside the patents that Microsoft acquired, Nokia retains ownership of some of the most valuable and fundamental patents—known as “utility patents” in the wireless industry. While Microsoft didn’t buy those, it did license all of them for 10 years, giving it a free reign that rival phone makers won’t necessarily have.

Over the last two decades or so, Nokia spent more than $55 billion on R&D and made acquisitions that gave it a war chest of 30,000 patents. Many of these cover fundamental operations and ones for wireless standards like GSM. One of Nokia’s most valuable patents is one describing a “method for mapping, translating, and dynamically reconciling data.” This is now fundamental to syncing calendars on different devices. And now that it is free of its handset business, Nokia can focus more on monetizing this fundamental IP—in court, if necessary. Nokia will no longer have to worry about countersuits alleging infringements by technologies in its phones, since it will no longer be making or selling any. And if Nokia does decide to go for the jugular, Microsoft’s neck will be protected.

Nokia has shown aggressiveness before. In a 2009 suit against Apple, Nokia claimed that the iPhone maker had violated 46 Nokia patents, on everything from wireless standards to touch-screen controls. Apple agreed to settle two years ago. Nokia gets more than $600 million every year in patent-related revenue.

Nokia’s announcement included this clue: the company plans to “expand its industry-leading technology licensing program, spanning technologies that enable mobility today and tomorrow.”

3. Microsoft may gain a deeper store of research knowledge to draw from. Nokia spent lavishly on R&D—including more than $5 billion last year alone—and had 27,551 R&D employees at the end of 2012. It’s true that the value of their collective output is dubious: Nokia R&D failed to produce technologies that could dent the dominance of Apple and Samsung in the smartphone business.

Oskar Sodergren, a Nokia spokesman, says that while the Nokia Research Center stays with Nokia, all R&D staff related to mobile products and smartphones will all transfer to Microsoft. Presumably, these are the people who gave us things like “Morph Concept” technologies—in which a phone or watch can be made flexible and transparent, with built-in solar-power recharging and integrated sensors.

A Microsoft research spokeswoman, Chrissy Vaughn, says the company was not elaborating on how the research units might merge. But Steve Ballmer, Microsoft’s outgoing CEO, said in a press call yesterday that “Finland will become the hub and the center for our phone R&D.” The two companies have said that all of Nokia’s 4,700 Finnish employees who now work in devices and services will become Microsoft employees.

4. The smartphone business is still ramping up quickly, which means there remains a lot of opportunity, especially in international markets that are far from saturated. Nokia sells more than 200 million phones annually—and most of them are not in Europe or North America. Although Microsoft will have to compete with legions of low-cost manufacturers, it might be able to use Nokia’s international manufacturing and distribution to its advantage—assuming, of course, that it can do something truly novel on the phones themselves.

By Lee Chyen Yee

(Reuters) – Chinese telecom carriers China Unicom Hong Kong Ltd (0762.HK) and China Telecom Corp Ltd (0728.HK) will carry AppleInc’s (AAPL.O) newest iPhone models within days of their launch in Beijing next week as the U.S. technology giant tries to regain lost ground in its second-biggest market by releasing the phones faster.

Apple said earlier this week it was holding a satellite event in Beijing on September 11, the day after it is expected to unveil its latest iPhones in the United States. The September 11 event is the first time Apple will launch in China at almost the same time as in the United States, underscoring the importance of the Chinese smartphone market, the biggest in the world.

“There used to be a wait of a few months before Apple launches their latest products in China, but nowadays, China is too important a market for Apple and so it will be the first batch of markets to start selling the low and high-end iPhones next week,” said a source at one of the telecom carriers, who declined to be identified as he was not authorized to speak to the media.

The high-end version is being called the iPhone 5S and the low-end version is the 5C.

China Unicom and China Telecom, the mainland’s second and third-biggest mobile carriers respectively with a combined 266 million subscribers, are Apple’s carrier partners in China, the world’s biggest mobile phone market with more than 1 billion users.

China Mobile Ltd (0941.HK) is the only carrier without an iPhone contract, although it has been rumored in the market Apple and China Mobile may soon come to an agreement.

Apple’s high-end 5S model may support a 4G technology called TD-LTE, which could pave the way for an agreement with China Mobile, which has more than double the subscribers of China Unicom and Telecom combined.

Officials with all three carriers declined to comment.

Days after the launch in Beijing, both of Apple’s current Chinese carriers will accept pre-orders. It will take about a week for them to deliver the new iPhones to their customers, the source said.

News of the iPhone debuts leaked on Sina Corp’s (SINA.O) Weibo microblog, which briefly carried a pre-order advertisement for the latest models on China Telecom’s verified page in Beijing. The post was quickly taken down, although word had already spread among bloggers, many of whom posted screenshots of the announcement.

“Have you prepared your cash to welcome the iPhone 5S and 5C? I’m looking forward to it,” said a Sina microblogger.

Over the past few quarters, Apple’s China market share has dwindled due to stiff competition from global rivals like Samsung Electronics Co Ltd (005930.KS) and domestic players selling phones that cost a fraction of the iPhone.

Its second-quarter market share slipped to 5 percent and was ranked No.7, trailing Samsung, Lenovo Group Ltd (0992.HK), Yulong Computer, ZTE Corp (0763.HK) (000063.SZ), Huawei Technologies Co Ltd HWT.UL and Xiaomi, according to research firm Canalys. Apple’s iPhones had a market share of 8 percent, making it the No.5 vendor, in the first quarter, Canalys said.

“It’s a very good direction that Apple is launching its latest model so soon in China when its brand attraction is on the decline,” said Nicole Peng, an analyst at Canalys. “It is a sign that they value the Chinese consumers.”

In another sign that its Chinese sales were faltering, Apple’s greater China revenue for its fiscal quarter ending June plunged 43 percent from the previous period and 14 percent from the same quarter last year to around $5 billion.

(Reporting by Lee Chyen Yee in SINGAPORE; Additional reporting by Paul Carsten in BEIJING; Editing by Matt Driskill)

By Eric Pfanner

TAIPEI — Fresh from poaching a top Google executive to lead its global expansion plans, the Chinese smartphone maker Xiaomi on Thursday announced another jaw-dropper: a 3-D television with a 47-inch screen, capable of hooking up to Internet, all for less than $500.

Published August 30, 2013

By Benjamin Pimentel

Published August 30, 2013

A startup that makes 3-D glasses stands out, in part, by including Steve Mann on its team.

(Reuters) – Top investors in Vodafone Group (VOD.L) are set to clash over what the company should do with perhaps as much as $130 billion in proceeds from the sale of its stake in Verizon Wireless, which is expected to be announced imminently.

Vodafone shareholders contacted by Reuters as talks continued between the British firm and Verizon Communications (VZ.N) were split between those wanting to see the cash returned as dividends and those wanting the firm to invest it.

Verizon is close to buying the 45 percent stake in the joint venture Verizon Wireless from Vodafone, according to sources.

While some investors relish the idea of a special dividend and buyback spree, others say Vodafone is selling its best asset and must reinvest much of the proceeds in the company’s future to avoid reliance on low-growth European markets.

Vodafone’s 12-month dividend yield stands at 5.5 percent compared with an average of 5.1 percent for its European and UK peer group, according to Thomson Reuters data.

A lucrative sale of its Verizon stake would free up cash to invest in new infrastructure or to acquire smaller players to diversify and offset a squeeze on revenues in the mobile phone market, where competition is strong and prices are declining.

“You only want a deal done if they are going to do something with it,” said a fund manager at one of Vodafone’s 10 largest shareholders, who declined to be named.

“The worst-case scenario is that Vodafone takes the money and just hands it all back to shareholders. Then you are left with a weird company that isn’t really doing anything.”

CHANGING TACK

Vodafone has increasingly diversified from its “pure play” mobile strategy in the last 18 months, buying British fixed-line operator Cable & Wireless Worldwide for $1.6 billion last year and German cable operator Kabel Deutschland for $10 billion in June, its largest deal for six years.

It is also building a 1 billion euro fiber-optic network in Spain with France’s Orange (ORAN.PA). Analysts have said fixed-line assets in Spain such as ONO or Italian broadband specialist Fastweb, which is owned by Swisscom (SCMN.VX), could be next on its shopping list.

Investors said Vodafone needed to make quick progress on this strategic shift or run the risk of becoming commercially obsolete in a market where many peers are selling packages that combine cable or satellite television, fixed-line services, broadband Internet and mobile phone deals.

“The problem for Vodafone is that they have no infrastructure to be able to offer this quad play … Pure mobile phone operators are struggling; they have to keep cutting their prices to stay in line with players who can fall back on rising revenues from broadband,” the top 10 investor said.

DEBT REPAYMENT

Even some of the company’s debtholders, who typically call for conservative use of sale proceeds to pay down debt, suggest some acquisitions might be beneficial for the long-term financial stability of the firm.

Vodafone’s net debt is twice its 2013 earnings, according to Thomson Reuters data, in line with the industry median. Its debt is rated A- by ratings agencies Fitch and S&P.

“From a bondholder’s perspective, we’d always prefer actions that boost creditworthiness,” said Matt Eagan, co-manager of the $22 billion Loomis Sayles Bond Fund and a Vodafone bondholder.

“That would could come from debt reduction in the case of Vodafone. However, I’m not opposed to acquisitions to the extent they boost the firm’s business position. Consolidation in this industry has generally been positive from a credit standpoint.”

But a second of Vodafone’s 10 largest shareholders said he thought investors would want most of the proceeds from a stake sale returned to them as a condition of approving any proposal.

His sentiments echoed those of a third investor among Vodafone’s 30 largest shareholders, who said he feared the firm was already too far behind rivals who have the infrastructure in place to offer the combined packages, and the chances of overpaying for assets to catch up with them was too high.

Assuming Vodafone receives $116-132 billion of proceeds from the sale, analysts at Citi said on Friday it could distribute $40 billion in cash and Verizon common stock valued at around $26-34 billion to shareholders. That would equate to a cash distribution of 52 pence a share.

The analysts expect Vodafone to pay around $5 billion in tax, keep $15 billion to reduce debt and retain $30-38 billion in deferred proceeds.

That plan could prove unpopular among some investors.

“We would want as much cash back as possible. I appreciate they have to invest in the core of what will be left post the Verizon disposal, but I think a lot of people once they have their money back will look to exit the equity.”

“Look at this another way: people who dispose of assets tend to drive their share price up. People who acquire assets, tend to drive their share price down,” the investor said.

However, Vodafone should have enough money to appease both camps, a third fund manager at a top 10 shareholder said.

“Any (acquisition) by Vodafone is going to be in the low-single-digit billions, which in the context of $110 or $120 billion of proceeds, it’s a small proportion … you can give at least half of the cash back, have a bit of a war chest and strengthen your balance sheet,” the investor said.

(Additional reporting by Paul Sandle; Editing by Will Waterman)

By Dunstan Prial

Published August 30, 2013