DealBook: Long Battle for Dell Ends in Victory for Founder

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Einhorn Scores Legal Victory Versus Apple in Cash Scuffle

U.S. District Judge Richard Sullivan in Manhattan granted a motion by Einhorn's Greenlight Capital for a preliminary injunction stopping a vote on that proposal, scheduled for the company's February 27 stockholders' meeting.

The decision could hand Einhorn more leverage as he pursues his pitch for Apple to issue what he has called the "iPref": preferred stock with a perpetual dividend that he contends would reward investors and help boost the company's share price.

Greenlight sued Apple on February 7 as part of a broader pitch to unlock more of its $137 billion in cash. The hedge fund manager has lobbied Apple to issue preferred stock with a perpetual 4 percent dividend, and on Thursday made a direct appeal to shareholders on a teleconference.

Apple Chief Executive Tim Cook last week dismissed the lawsuit as a "silly sideshow."

The lawsuit itself challenged a measure called Proposal No. 2 that Apple put forward, which would eliminate its power to issue preferred shares without a shareholder vote.

At issue is Apple's "bundling" of that measure with two other unrelated matters into a single proxy proposal.

Greenlight said it supported two of the proposed amendments, but not the one on preferred shares.

In his ruling, Sullivan said Greenlight and another investor who also sued Apple "are likely to succeed on the merits and face irreparable harm if the vote on Proposal No. 2 is permitted to proceed."

"We are disappointed with the court's ruling. Proposal No. 2 is part of our efforts to further enhance corporate governance and serve our shareholders' best interests," Apple spokesman Steve Dowling said. "Unfortunately, due to today's decision, shareholders will not be able to vote on Proposal No. 2 at our annual meeting next week."

A spokesman for Greenlight called the ruling a "significant win for all Apple shareholders and for good corporate governance."

But not all shareholders were happy. California pension fund Calpers, a major Apple investor and public supporter of Apple's proposal, said implementation of "majority voting and shareholder approval for the issuance of new stock - preferred or otherwise - is worth waiting for."

"We encourage Apple to reintroduce these measures as soon as is practical so that all investors can be heard," Anne Simpson, Calpers' director of global governance, said in a statement.

BUNDLES

The ruling could be a warning for other companies when issuing proxy proposals, said James Cox, a professor at Duke University School of Law.

"It's going to make managers reluctant to bundle things together, because you're never going to know when you send them out if there's an Einhorn out there," he said.

The lawsuit was centered on a narrow issue of whether Apple violated U.S. Securities and Exchange Commission rules by "bundling" the preferred shares item with two other unrelated matters into one proxy proposal.

Greenlight's lawyers contended the SEC rules were intended to protect shareholders from being forced to vote for a proxy proposal involving materially different issues that the investors might not entirely support.

Apple had argued Proposal No. 2, which only dealt with amendments to its charter, constitute a single matter and wasn't bundled. Sullivan called the company's arguments "unavailing."

"Given the language and purpose of the rules, it is plain to the Court that Proposal No. 2 impermissibly bundles 'separate matters' for shareholder consideration," Sullivan wrote.

Judge Sullivan also found that Greenlight would be irreparably harmed without the injunction, since it would be forced to vote against its own interests. Denying Greenlight's motion would prevent it and other investors from exercising their rights to a fair vote, Sullivan said.

Sullivan separately declined to block a vote from going forward on a separate proxy proposal, Proposal No. 4, which sought an advisory "say on pay" vote on Apple executives' compensation.

The proposal had been challenged by investor Brian Gralnick of Pennsylvania, who contends Apple did not disclose enough details about how it made its compensation decisions.

Sullivan rejected that argument, saying Apple's disclosures were "plainly sufficient under SEC rules."

Arnold Gershon, a lawyer for Gralnick at Barrack, Rodos & Bacine, said he was "very pleased" with Sullivan's decision to the extent it enjoined the Proposal No. 2 vote, though said he would have to decide what to do next with regard to the say-on-pay proposal.

Sullivan directed the parties to submit a joint letter by March 1 outlining the next contemplated steps in this case.

Apple shares closed up 1.1 percent at $450.81 on Friday.

The case is Greenlight Capital LP, et al., v. Apple Inc., U.S. District Court, Southern District of New York, 13-900.

(Reporting by Nate Raymond in New York; Additional reporting by Poornima Gupta in San Francisco; Editing by Martha Graybow, Gary Hill, Leslie Adler, Carol Bishopric and Lisa Shumaker)

A Victory for Google as F.T.C. Takes No Formal Steps

By allowing Google to continue to present search results that highlight its own services, the F.T.C. decision could enable Google to further strengthen its already dominant position on the Internet.

It also enables Google to avoid a costly and lengthy legal war of attrition like the antitrust battle that Microsoft waged in the 1990s. That fight took an enormous toll on Microsoft and opened the door for competitors like Google to become the technology sector’s new leaders. Now, a weakened Microsoft was among those most vocal in complaining that Google was unfairly abusing a monopolistic position to thwart its rivals.

Google, which attracts 70 percent of all search queries in the United States, has used its search business, which generates billions of dollars in profit annually from advertising, to expand into businesses that include maps, restaurant reviews and travel bookings. Competitors worry that the F.T.C.’s decision will allow Google to continue to make inroads at their expense.

The decision sets up a potential conflict with European officials, who are working with Google to resolve similar concerns about the way the company operates its search engine in Europe, where it is even more dominant than in the United States.

Web search has become vital to the success of many businesses. Being ranked higher in search results can mean a great deal more traffic and revenue; being ranked lower can hurt both. Google has long claimed that it uses a neutral algorithm for search queries, something that competitors disputed.

But Jon Leibowitz, chairman of the F.T.C., said that “While not everything Google did was beneficial, on balance we did not believe that the evidence supported an F.T.C. challenge to this aspect of Google’s business under American law.”

The five-member commission voted unanimously to close its investigation without bringing charges, although some staff members argued vigorously that Google should face sanctions for using online search results to draw consumer traffic to its own services. The F.T.C. said it had found that Google’s practices improved its search results for the benefit of users and that “any negative impact on actual or perceived competitors was incidental to that purpose.”

Google did agree to make some minor changes to its search practices related to search advertising. The F.T.C. said those commitments were enforceable if the company violated them, but the agreement avoided a formal consent decree or litigation, weapons that the F.T.C. had available.

One F.T.C. commissioner, J. Thomas Rosch, said in a partial dissent that the commission would not be able to hold Google to its promises in any meaningful way, as it might do through a contempt proceeding or a fine.

Competitors said the war was not over. Fairsearch.org, a group of Google rivals including Microsoft, said Thursday’s action left the F.T.C. “without a major role in the final resolution to the investigations of Google’s anticompetitive practices by state attorneys general and the European Commission. The F.T.C.’s inaction on the core question of search bias will only embolden Google to act more aggressively to misuse its monopoly power to harm other innovators.”

In a less-watched part of the investigation, which will have a less direct impact on consumers, the commission found that Google had misused its broad patents on cellphone technology, and it ordered Google to make that technology available to rivals. That order may benefit phone manufacturers that use either Google’s Android operating system or competing systems. Some F.T.C. officials said that in the long run, the sanctions could be a bigger victory for consumers, encouraging the development of more innovative devices.

But the broadest impact of the F.T.C.’s action is to present more competitive challenges to companies that do specialty searches, for things like travel or shopping. Consumers will continue to see what has now become familiar on Google — the presence of results that link to Google’s other businesses. When a consumer searches for “airfare to Los Angeles,” for example, the most prominent results are generated by Google’s own travel business, rather than by the likes of Expedia, Priceline or Kayak.

On the company’s Web site, David Drummond, a senior vice president at Google and its chief legal officer, wrote, “The conclusion is clear: Google’s services are good for users and good for competition.”

Mr. Leibowitz, the F.T.C. chairman, called Google’s lifting of content from other Web sites “the most troubling of its business practices related to search and search advertising.” The company agreed to stop taking its rivals’ content, particularly reviews of things like restaurants or consumer products, for use in its own specialized search results.

Yelp, a consumer review site, complained that Google took parts of its reviews and placed them in its own results. When competitors objected, Google threatened to remove them entirely from results, something Mr. Leibowitz said “is clearly problematic and potentially harmful to competition because it might harm incentives to innovate.”

Google also agreed to stop contractual restrictions that prevented small businesses from advertising on competing search platforms.

Last year, some F.T.C. staff members pushed hard in reports to the commission that the company’s actions constituted “unfair methods of competition,” an area that, like that of antitrust, is policed by the F.T.C. But the trade commission faced a struggle in proving malicious intent — that Google changes its search algorithm to purposely harm competitors and favor itself.

Antitrust lawyers say anticompetitive behavior cannot be proved simply by showing that a change in the algorithm affects other Web sites and causes sites to show up lower in results, even though studies have shown that users rarely look beyond the first page of search results.

Raw Data: Big Carriers Win an E.U. Victory on Landline Charges

Neelie Kroes, the European commissioner for telecommunications, signaled the new era July 12 when she announced that further cuts in wholesale access charges, a basic type of regulated fee that operators receive from rivals, would discourage network investment and thwart the commission’s goal of creating a superfast broadband grid by 2020.

The decision by Ms. Kroes, a Dutch policy maker who served as the European Union’s competition commissioner from 2004 to 2010, drew praise from big operators and criticism from smaller carriers, most of which lack national coverage of their own and must lease access to a former monopoly’s landlines to deliver their services to customers.

Besides giving operators more pricing power over their older copper networks, Ms. Kroes said she might permit them to ban competitors temporarily from the new, faster fiber networks that are crucial to fulfilling the commission’s broadband aspirations. The announcement was an about-face in European policy.

Ms. Kroes’s predecessor, Viviane Reding, who is now the European justice commissioner, had sued Deutsche Telekom over its decision to ban competitors from its new fiber grid, which uses a technology called V.D.S.L.

Ms. Kroes, an economist and member of the Dutch free-market People’s Party for Freedom and Democracy, has taken a softer tone with Deutsche Telekom, France Télécom, Telefónica and Telecom Italia than Ms. Reding, a Luxembourg conservative who in 2007 pushed through the first European retail price controls on mobile roaming charges.

Whether the new incentives translate into new networks is up for debate.

The European Union is far from its goal of wiring the 27-nation bloc with superfast broadband. Currently, half of E.U. residents have access to broadband with download speeds of at least 30 megabits per second. The goal by 2020 is 100 percent. Only 2 percent of E.U. households have access to the broadband speeds of 100 megabits per second. The commission’s goal is to cover half the E.U. population.

“These recommendations will encourage operators to invest, strengthen competition across all networks and allow alternative operators to compete on more than just price,” Ms. Kroes said in announcing the policy change.

Large operators, which have been lobbying for the concessions, cheered the change of direction in Brussels. “This will facilitate planning investments in next-generation networks,” said Luigi Gambardella, the chairman of the European Network Operators’ Association, the Brussels group that represents large operators.

The European Competitive Telecommunications Association, which represents smaller operators, said the decision would do the opposite. With the former monopolies allowed to extract large profits from old copper networks, carriers will have little incentive to build, they argued.

As a safeguard, Ms. Kroes said she would draft guidelines to discourage dominant operators from controlling access to landline networks to the disadvantage of rivals and consumers. But her recommendations require approval by E.U. countries and could be watered down.

The European Consumers’ Organization said it was surveying its members before responding. The same Brussels group criticized Ms. Kroes, saying she had set the initial retail price cap on mobile data roaming too high. The cap, which took effect July 1, is 70 euro cents, or 85 U.S. cents, per megabyte, a multiple of domestic rates.

For E.U. consumers, the new approach may usher in an era of rising prices, as operators ban competitors from the fastest networks and derive greater profits from old copper landlines. At least that is how telecommunications investors judged it. They bid up shares of European carriers 3.5 percent, on average, the day after the announcement.

Raw Data: Big Carriers Win an E.U. Victory on Landline Charges

Neelie Kroes, the European commissioner for telecommunications, signaled the new era July 12 when she announced that further cuts in wholesale access charges, a basic type of regulated fee that operators receive from rivals, would discourage network investment and thwart the commission’s goal of creating a superfast broadband grid by 2020.

The decision by Ms. Kroes, a Dutch policy maker who served as the European Union’s competition commissioner from 2004 to 2010, drew praise from big operators and criticism from smaller carriers, most of which lack national coverage of their own and must lease access to a former monopoly’s landlines to deliver their services to customers.

Besides giving operators more pricing power over their older copper networks, Ms. Kroes said she might permit them to ban competitors temporarily from the new, faster fiber networks that are crucial to fulfilling the commission’s broadband aspirations. The announcement was an about-face in European policy.

Ms. Kroes’s predecessor, Viviane Reding, who is now the European justice commissioner, had sued Deutsche Telekom over its decision to ban competitors from its new fiber grid, which uses a technology called V.D.S.L.

Ms. Kroes, an economist and member of the Dutch free-market People’s Party for Freedom and Democracy, has taken a softer tone with Deutsche Telekom, France Télécom, Telefónica and Telecom Italia than Ms. Reding, a Luxembourg conservative who in 2007 pushed through the first European retail price controls on mobile roaming charges.

Whether the new incentives translate into new networks is up for debate.

The European Union is far from its goal of wiring the 27-nation bloc with superfast broadband. Currently, half of E.U. residents have access to broadband with download speeds of at least 30 megabits per second. The goal by 2020 is 100 percent. Only 2 percent of E.U. households have access to the broadband speeds of 100 megabits per second. The commission’s goal is to cover half the E.U. population.

“These recommendations will encourage operators to invest, strengthen competition across all networks and allow alternative operators to compete on more than just price,” Ms. Kroes said in announcing the policy change.

Large operators, which have been lobbying for the concessions, cheered the change of direction in Brussels. “This will facilitate planning investments in next-generation networks,” said Luigi Gambardella, the chairman of the European Network Operators’ Association, the Brussels group that represents large operators.

The European Competitive Telecommunications Association, which represents smaller operators, said the decision would do the opposite. With the former monopolies allowed to extract large profits from old copper networks, carriers will have little incentive to build, they argued.

As a safeguard, Ms. Kroes said she would draft guidelines to discourage dominant operators from controlling access to landline networks to the disadvantage of rivals and consumers. But her recommendations require approval by E.U. countries and could be watered down.

The European Consumers’ Organization said it was surveying its members before responding. The same Brussels group criticized Ms. Kroes, saying she had set the initial retail price cap on mobile data roaming too high. The cap, which took effect July 1, is 70 euro cents, or 85 U.S. cents, per megabyte, a multiple of domestic rates.

For E.U. consumers, the new approach may usher in an era of rising prices, as operators ban competitors from the fastest networks and derive greater profits from old copper landlines. At least that is how telecommunications investors judged it. They bid up shares of European carriers 3.5 percent, on average, the day after the announcement.

Raw Data: Big Carriers Win an E.U. Victory on Land Line Charges

BERLIN — The era of steadily declining phone bills in Europe, which began with deregulation of the industry in 1998, may have drawn to a close this month, with the European Commission’s decision to give the biggest operators greater leverage over what they can charge competitors for access to their land line networks.

Neelie Kroes, the European commissioner for telecommunications, signaled the new era July 12 when she announced that further cuts in wholesale access charges, a basic type of regulated fee that operators receive from rivals, would discourage network investment and thwart the commission’s goal of creating a superfast broadband grid by 2020.

The decision by Ms. Kroes, a Dutch policy maker who served as the European Union’s competition commissioner from 2004 to 2010, drew praise from big operators and criticism from smaller carriers, most of which lack national coverage of their own and must lease access to a former monopoly’s land lines to deliver their services to customers.

Besides giving operators more pricing power over their older copper networks, Ms. Kroes said she might permit them to bar competitors temporarily from the new, faster fiber networks that are key to fulfilling the commission’s broadband aspirations. The announcement was an about-face in European policy.

Ms. Kroes’s predecessor, Viviane Reding, who is now the European justice commissioner, had sued Deutsche Telekom over its decision to bar competitors from its new fiber grid, which uses a technology called VDSL.

Ms. Kroes, an economist and member of the Dutch free-market People’s Party for Freedom and Democracy, has taken a softer tone with Deutsche Telekom, France Télécom, Telefónica and Telecom Italia than Ms. Reding, a Luxembourg conservative who in 2007 pushed through the first European retail price controls on mobile roaming charges.

Whether the new incentives translate into new networks is up for debate.

The European Union is far from its goal of wiring the 27-nation bloc with superfast broadband. Currently, half of E.U. residents have access to broadband with download speeds of at least 30 megabits per second. The goal by 2020 is 100 percent. Only 2 percent of E.U. households have access to the broadband speeds of 100 megabits per second. The commission’s goal is to cover half the E.U. population.

“These recommendations will encourage operators to invest, strengthen competition across all networks and allow alternative operators to compete on more than just price,” Ms. Kroes said in announcing the policy change.

Large operators, which have been lobbying for the concessions, cheered the change of direction in Brussels. “This will facilitate planning investments in next-generation networks,” said Luigi Gambardella, the chairman of the European Network Operators’ Association, the Brussels group that represents large operators.

The European Competitive Telecommunications Association, which represents smaller operators, said the decision would do the opposite. With the former monopolies allowed to extract large profits from old copper networks, carriers will have little incentive to build, they argued.

As a safeguard, Ms. Kroes said she would draft guidelines to discourage dominant operators from controlling access to land line networks to the disadvantage of rivals and consumers. But her recommendations require approval by E.U. countries and could be watered down.

The European Consumers’ Organization said it was surveying its members before formulating a response. The same Brussels group criticized Ms. Kroes, saying she had set the initial retail price cap on mobile data roaming too high. The cap, which took effect July 1, is 70 euro cents, or 85 cents, per megabyte, a multiple of domestic rates.

For E.U. consumers, the new approach may usher in an era of rising prices, as operators bar competitors from the fastest networks and derive greater profits from old copper land lines. At least that is how telecommunications investors judged it. They bid up shares of European carriers 3.5 percent, on average, the day after the announcement.