Microsoft Gets Xbox One And Surface Boost

Global software giant Microsoft has reported better-than-expected results for the fourth quarter - on the back of booming Xbox One game consoles and tablet sales.

It made a profit of £3.94bn in the three months to the end of December, up nearly 3% on same period in 2012.

The Washington-based company sold 3.9 million Xbox One consoles to retailers and doubled revenue from its line of Surface tablets, compared to the third quarter.

Revenue rose in the fourth quarter by 14% to $24.52bn (£14.76bn).

The firm has also had a solid 12 months on the stock market, with its share price rising around 30% over the previous year.

Outgoing CEO Steve Ballmer said its devices and consumer segment had a "great holiday quarter."

Microsoft launched its Surface tablet last year

Surface tablet revenue rose to $893m (£537m) in the quarter, up 123% from Q3.

The company benefited from a US summer price cut to its first-generation models, unveiled the Surface 2 and expanded the number of places it is sold at retail.

"There's better hardware, the software continues to improve and there's better market perception," Microsoft's general manager of investor relations Chris Suh said.

However, analysts continue to question the company's new focus on manufacturing hardware on top of its mainstay software business.

The Surface division still need to reach manufacturing scale that would make it profitable and knock Apple off its iPad perch.

And the Xbox One, which launched late last year to rival Sony's PlayStation 4, is yet to maximise returns from game sales.

Market watchers are also concerned about the company's purchase in the current quarter of struggling Finnish firm Nokia's phone segment, in a deal valued around £4.7bn.

Xbox One has gone head-to-head against Sony amid Nintendo Wii's woes

On Thursday, Nokia revealed that its smartphone sales plummeted 29% in the December quarter, even though it released new Lumia models.

Microsoft has also continued to weather to storm of declining PC sales, once its main revenue source.

PC sales between October and December are estimated to have fallen globally by 6.5%, but Microsoft said revenue from its flagship operating system fell just 3%.

However it did not give figures for the split between Windows 7 or its troubled Windows 8.1 operating system.

Overall, revenue from its devices and consumer segment grew 13% to $11.91bn (£7.18bn), while business service revenue from server and cloud computing grew 10% to $12.67bn (£7.64bn).

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Nestlé Chair Warns Over UK Exit From Europe

By Mark Kleinman, City Editor, in Davos

The consumer goods giant Nestle would be forced to re-evaluate the extent of its presence in the UK if Britain decided to leave the European Union, its chairman has told Sky News.

In an interview during the World Economic Forum in Davos, Peter Brabeck-Letmathe said the company was committed to its business in the UK but that he could not envisage a separation from its biggest trading partner being in the country's interest.

Nestle, which makes Nespresso coffee capsules and Kit-Kat chocolate bars, employs approximately 8,000 people in the UK and accounts for exports worth roughly £400m. Its other brands include Nescafe, Smarties and Yorkie.

"From a purely economic point of view, I can't see that the withdrawal of the UK [from the EU] would be favourable for any UK industries," Mr Brabeck-Letmathe, an Austrian, said.

"It would isolate the UK economically. Every company would be forced to re-evaluate the implications of investing in the UK. It would no doubt have an impact on its ability to supply European markets."

The warning, ahead of a likely referendum on Britain's EU membership in 2017, echoes the views of many of the multinational business leaders gathered in Davos.

Prime Minister David Cameron told Sky News on Thursday that he did not believe the Government's stance on EU membership was jeopardising inward investment, saying that companies had been "voting with their feet".

He said: "The argument I make with these business leaders is that the best thing for Britain would be to secure our place within a reformed European Union.

"Simply saying 'let's hope this issue goes away, let's hope that Europe sorts itself out', without doing anything, won't work.

"We need to get in there, change Europe, make it work better, make it more competitive, make it more flexible - help make Britain more comfortable with its membership, have that referendum and then settle this issue."

Mr Brabeck-Letmathe, who also chairs the parent company of Formula One motor racing, said the EU and its single currency had been "an incredible success".

"The EU is full of failures and weaknesses like any large institution, but its achievements are greater. We have to work to strengthen the internal market."

He suggested that the trading bloc's governing mechanisms required reforms such as shrinking the number of EU Commissioners.

"The current system is not an efficient way to run it," he said.

In addition to his corporate roles, Mr Brabeck-Letmathe has also been a leading advocate of water stewardship in large companies, and unveiled new measures this week aimed at improving global water sustainability.

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Non-EU Banks Slip Through Bonus Cap Loophole

By Mark Kleinman, City Editor in Davos

Major global banks such as Morgan Stanley and Nomura are benefiting from a loophole in new European pay rules that could leave British rivals at a big disadvantage.

Sky News understands that banks based outside the European Union (EU) are able to approve bigger bonuses for employees of their subsidiaries in the trading bloc without recourse to external shareholders.

That means Wall Street and Asian banks can instantly consent to variable pay for senior staff worth double the level of their salaries, the maximum permissible under the new EU cap.

However, Barclays, HSBC and other British banks will have to put the same measure to their annual investor meetings. Without approval, they will not be able to award bonuses worth more than 100% of salaries in any one year.

UK banks such as Barclays may be left at a disadvantage over bonuses

Sources said that banks including Bank of America Merrill Lynch and Goldman Sachs had formally discussed the issue at their group remuneration committees "to ensure appropriate corporate governance". Both had already given approval for the 200% cap, they added.

In practice, the UK banks will not be disadvantaged if shareholders back motions at this year's AGMs allowing them to pay bonuses at the higher level.

However, the fact that international rivals have already been able to give staff certainty about their pay from this year onwards was proving to be a valuable recruitment tool, bankers say.

Sky News has revealed in recent weeks the details of plans by Barclays, Goldman, HSBC and Morgan Stanley to raise base salaries through monthly or quarterly allowances for senior staff.

George Osborne, the Chancellor, is aware of the loophole benefiting non-EU banks, aides said on Friday.

Mr Osborne is fighting the ratio cap in the courts, and one senior Treasury official said that while the Government is confident that it has "a decent legal case", recent defeats to Brussels had left it only mildly optimistic about emerging victorious.

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High Street Chain Bathstore Groomed For Sale

By Mark Kleinman, City Editor

Another prominent UK high street chain is poised to change hands with the sale of Bathstore, the specialist bathrooms retailer.

Sky News understands that Endless, the investment fund which acquired Bathstore in May 2012, has decided to explore a sale of the company, which operates more than 150 shops across the country.

Rothschild, the investment bank, has been appointed to sound out interest from potential buyers.

Plumbing firm Wolseley acquired Bathstore for £15m

Bathstore was acquired for just £15m from Wolseley, the FTSE-100 plumbing group, which had been struggling to satisfy the City with its financial performance and had decided that the retailer was a non-core asset.

Watford-based Bathstore made a profit of £6.5m on sales of £95m in 2011, a reasonable result at a time when the UK economy was relatively weak.

In a statement, a spokesman for Endless said: "We are pleased with the performance of Bathstore since we made our investment in May 2012.

"There has been encouraging inbound interest in the business and we continue to work with management to support its growth."

It is thought unlikely that Endless will pursue a stock market listing for Bathstore, and will instead opt for a private sale of the business.

However, that will make Bathstore a relative rarity as the owners of thousands of high street shops examine flotations in an effort to take advantage of strong equity markets and a rebounding economy.

Fat Face, House of Fraser, Pets At Home and Poundland are among the private equity-backed retailers looking to go public this year.

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Energy Boss Attacks Price Comparison Websites

The boss of Co-operative Energy has accused price comparison websites of misleading customers and pushing up energy bills.

Group General Manager Ramsay Dunning has called on the likes of uSwitch, MoneySupermarket.com and Energy Helpline to disclose how much they charged in commission each time a business or household moves supplier.

Sky News Business Presenter Joel Hills said it was his understanding the rate of commission could be as much as £60 per account switched.

In a speech at a conference held by Cornwall Energy, Mr Dunning said that far from improving competition, price comparison websites were a negative influence.

He added: "It's time all the advertising costs and fat profits were returned to hard pressed households.

"There is a lot of money spent through the comparison websites - because they charge companies likes us and the Big Six and independents a rate of commission.

"If that rate was a lot lower, or non-existent, the bills to customers would be lower, because our costs would be lower."

Co-operative Energy uses price comparison websites and says it has gained 60,000 customers in the nine months through to the end of last year.

Mr Dunning refused to say how much his company paid the websites in commission, claiming the contracts were commercially confidential, but called for full disclosure.

According to the Department of Energy and Climate Change, almost five million gas and electricity accounts switched in the year through to the end of September 2013.

Ofgem, the regulator, said price comparison websites play an "important role" in the energy market, but admitted it does not know how much they charge in commission.

A spokesperson said: "Ofgem runs a code of practice for these sites and we are reviewing it to ensure that its objectives are in line with our reforms for a simpler, clearer, fairer energy market. We will be consulting on this in spring.

"The code of practice protects consumers in a number of ways. For example switching sites have to state which suppliers they earn commission from.

"They also have to make sure that they do not rank tariffs in accordance with which suppliers from which they are earning commission."

Adam Scorer, director of Consumer Futures, said price comparison websites are popular but there were issues of trust and transparency with their services.

He said: "Consumers should not automatically assume that a price comparison website will save them money on their purchase. In our research this was only true in 21% of cases.

"Without price comparison websites millions of people would be on higher tariffs than they are now."

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Royal Mail Rides The Online Parcel Wave

The newly-privatised Royal Mail has revealed a rise in pacel delivery revenue of 8% in the nine months to December 29.

The spike in like-for-like earnings comes as the shift to online purchases continues.

The company said the figures were boosted by strong demand over Christmas.

Despite parcel volumes remaining flat, price delivery changes pushed revenue upwards.

Meanwhile, revenue for its letter delivery service was down 3% in the same period - blamed on the rise of email and social media.

Royal Mail said the trading performance was in line with expectations it has confidence it will deliver results consistent with key value targets for the full year.

The postal firm's part-flotation last October by the Government was fiercely opposed by unions and Labour.

The Government still has a 30% stake but was widely criticised for potentially short-changing the taxpayer on the flotation price.

Shares in the firm closed at 588p on Thursday, up 78% from the 330p per share price.

The company is now valued at £5.9bn.

More follows...

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Man Utd Out Of Football's Top Three Rich List

Manchester United has been relegated from the top three in a global rich list of football teams.

The English club has been squeezed out by success at Real Madrid, Barcelona and Bayern Munich.

The list, compiled by 'Big Four' accountancy firm Deloitte, is based revenues accrued during the 2012-13 season.

For the ninth year Real Madrid headed the list, with revenues of €518.9m (£424m). The Spanish team has now broken a record previously held by Man Utd.

Placed in fourth with revenues of €423.8m (£346m), Man Utd is ranked one spot above French champions Paris Saint Germain, who are now backed by the financial might of the Qatar Investment Authority.

Details of Man Utd's fall in the rankings came the club's calamitous season on the field took another turn for the worse as they dropped out of the Capital One Cup with defeat to Sunderland in the semi-finals on Wednesday night.

According to Deloitte, the world's 20 richest clubs saw a combined revenue rise of 8% last season to €5.4bn (£4.4bn).

Bayern Munich saw the largest revenue rise, of 17% to €431.2m (£352m), compared to the previous year.

Liverpool, despite increasing its revenue by 9% in 2012-13, still fell out of the top 10 to 12th spot.

Liverpool had been in the top 10 rankings throughout the 21st century.

The list has been compiled annually by the sport business group of the accountancy firm since 1999-97.

It said all clubs in the top 30 of the list now have annual revenues above €100m. In the first year of rankings only Man Utd had that honour.

Market watchers are now waiting to see what, if any, impact the list and Wednesday night's loss to Sunderland may have.

Earlier this month, it was reported that the value of the club had seen a drop of around £250m on the New York Stock Exchange since Moyes took over as manager.

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Morgan Stanley Joins Race To Beat EU Pay Cap

By Mark Kleinman, City Editor

Morgan Stanley is to join the ranks of global banks offering substantial pay rises to London-based staff ahead of the imposition of new European remuneration rules.

Sky News understands that the Wall Street bank is finalising proposals to offer senior employees at its Canary Wharf base cash payments that will enable it to continue paying large bonuses.

Insiders said that Morgan Stanley was likely to operate a similar scheme to that planned by rival Goldman Sachs, which will involve eligible staff being handed big increases to their annual salaries.

The awards may involve lump sums paid out at the end of the financial year, according to a person briefed on Morgan Stanley's deliberations.

The news about Morgan Stanley, which employs thousands of people in the UK, is significant because it underlines the extent to which major banks are seeking to negate the impact of the European Union measures.

Sky News understands that Citi and Deutsche Bank are also working on similar incremental payments for senior staff.

The move to retain key employees is likely to mean significantly increasing the 113 employees designated as "code staff" by Morgan Stanley in 2012. Code staff are those who are deemed by regulators to hold senior responsibilities.

Last week, Sky News revealed that Goldman is to hand substantial rises in fixed pay to hundreds of London-based staff.

The shift from variable to fixed pay, about which staff will be informed shortly, will in some cases be worth hundreds of thousands of pounds, although the sums are not expected to impact the total amounts that Goldman's top risk-takers in London will earn.

Under the new pay framework imposed by Brussels, the bank will only be able to pay double the level of salaries in variable pay to London-based staff in any given year.

The new European Union rules will restrict the amount that banks operating within the trading bloc can pay to their staff as a proportion of their basic pay.

From this year, banks will be allowed to pay up to 100% of salaries as bonuses, or double that sum with the approval of the company's shareholders.

Barclays and HSBC are among the other banks which have devised methods for enhancing the remuneration of key staff as they seek to avoid a defection to rivals who are less hindered by the EU ratio cap.

A Morgan Stanley spokesman declined to comment.

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Help To Buy Scheme: Under 40s Rush To Apply

Nearly half of would-be homeowners under the age of 40 are planning to apply for Help To Buy assistance this year, a new study suggests.

According to research by Experian, 39% of those aged between 20 and 40 hope to apply for the Government initiative in 2014.

The report said the average deposit saved by them is £9,590.

There has been a flurry of applications in recent months.

In November, figures showed in the first month of the scheme's launch more than 2,000 people had put in offers on homes and applied for a Help to Buy mortgage - and by early January that had topped 6,000.

Under the scheme, which came into effect at the beginning of October, people can buy homes of up to £600,000 with a deposit of just 5% as the Government guarantees up to 20% of the mortgage.

The report warned that 26% have saved less than £5,000 - the minimum deposit required to take part in the scheme.

The research also indicated that many have burdensome credit outstanding that may hamper applications.

The study said the average credit owed is around £4,600, which increases with age, so that the average 40-year-old owes £5,240.

Regionally, the East Midlands has the highest credit owed (£5,800), with the South East the lowest (£3,940). Some 5% owed more than £15,000 to creditors.

But with lenders increasingly reliant on database checks for loan risk assessment, many of those wishing to become homeowners are unaware of the process.

The report said 40% are not listed as living at their current address, which will adversely affect credit ratings.

It said: "Those living in the East Midlands, Yorkshire and London proved the least likely to have their names on the electoral roll."

"Ensure everything is accurate and up-to-date. Simple issues like incorrect address details, linked accounts they may have forgotten about and not being on the electoral roll can hamper attempts to access a mortgage.

"Buyers should also play close attention to things like outstanding accounts that should be marked as settled."

Prime Minister David Cameron said he hoped 2014 would see "thousands more realise their dream of home ownership".

However, the significant take-up of the loans will further fuel fears of a housing bubble.

The scheme's expansion this year means two-thirds of the entire UK mortgage market will offer products under Help to Buy, bringing home ownership to a growing number of people.

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Lloyds Co-Op Deal Denounced By Lord Levene

A peer has alleged "bad faith" after a bid he was leading to buy hundreds of Lloyds bank branches lost out to the rival Co-operative Group.

Giving evidence to MPs at Westminster, Lord Levene, who chaired NBNK Investments which had been seeking to create a new 'challenger' bank, said the bidding process had been unfair.

And he accused Lloyds of "unattractive commercial practice".

Lord Levene also claimed he was told in a confidential meeting with the then-Governor of the Bank of England, Mervyn King, that it would be a "political decision".

Lord Levene claimed the bidding process for the Lloyds branches was unfair

The hearing formed part of the Treasury Select Committee's inquiry into the collapse of the Co-op's acquisition of 632 Lloyds branches.

Lord Levene appeared alongside Gary Hoffman, the former chief executive of NBNK.

Speaking about the thwarted NBNK bid, Lord Levene told MPs: "It's a matter of great regret to me this didn't happen.

"I think it was a good idea but life goes on and you have to get on with it."

But when asked by committee chairman Andrew Tyrie if the bidding process was fair he said: "No."

Under further close questioning by Mr Tyrie, he was asked if he was alleging bad faith.

He replied: "Yes."

In evidence to MPs, Lord Levene said during the bidding process he was told to look at the reference to financial services in the Coalition agreement, which said one of the goals was "to promote the interests of mutuals".

Lord Levene said: "With the benefit of hindsight there seems to have been a view that if the creation of a new challenger bank was created by a mutual it would be another tick in the box for the goals set out.

"I have no problem with that provided it's done by fair means rather than than foul.

"In our view they chose to concentrate on all the positive aspects of the Co-Op, and none of the positive aspects of our bid."

He said later: "It was like a penny dropped, and we suddenly started to realise where this was coming from."

Lord Levene also accused Lloyds of "unattractive commercial practice", and said  the evidence it had given to the Treasury committee was "at best disingenuous".

Lord Levene repeated his claim that the bid by NBNK had been "financially superior".

The peer told MPs he had personally lost £60,000 as a result of the failed bid. Investors collectively lost £30m.

Mr Hoffman said: "The great tragedy out of all of this is that it's been to the detriment of the mutual sector, and that's a great tragedy.

"The other great tragedy is we don't have a challenger bank."

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