DealBook: Growth in Global Disputes Brings Big Paychecks for Law Firms

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Ballmer Exit Brings Microsoft a Chance for Reinvention

Ballmer Through the Years: Moments of Steven A. Ballmer from conferences, commercials and interviews over the years that he was Microsoft’s chief executive.

SEATTLE — Steven A. Ballmer announced on Friday that he was leaving the top job at Microsoft, paving the way for a generational change at the once-dominant technology company and giving it an opportunity to reinvent itself for a world dominated by mobile devices, social media and other technologies that have eluded its influence.

A number of powerful executives have departed Microsoft over the years. While some current executives have recently risen to prominence, here is a look at some who had been mentioned previously as possible choices to take over the company.

Mr. Elop was the head of Microsoft's business division from 2008 until 2010, when he left to take the chief executive job at Nokia. In 2011, Nokia announced a smartphone alliance with Microsoft.

Mr. Johnson worked at Microsoft for 16 years, running the company's online services group and its Windows division. He left to become the chief executive of Juniper Networks in 2008. In July, Mr. Johnson announced his retirement from Juniper.

Mr. Maritz was effectively the No. 3 executive at the company when he left in 2000. He later became the chief executive of VMWare, but he stepped aside last year. Mr. Maritz is now the chief executive of Pivotal, a cloud-based start-up.

Mr. Raikes spent 27 years at Microsoft, the last eight running the company's business division. He left in 2008 to become the chief executive of the Bill & Melinda Gates Foundation.

Mr. Sinofsky was both widely admired and considered abrasive as the head of Windows, and his exit from the company last year is said to have come after a string of run-ins with Microsoft’s leaders. On Thursday, he announced that he had joined Andreessen Horowitz, the venture capital firm, as a board partner.

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But with no clear successor to Mr. Ballmer lined up and a jumble of businesses that will require the skills of a polymath to run, the company still faces huge obstacles to reclaiming its former glory.

While Microsoft in Mr. Ballmer’s reign as chief executive has yielded the spotlight to more glamorous companies like Apple, Google and Facebook, it still makes some of the biggest money-gushers in the technology business, including its Windows operating system for personal computers and Office applications like Word. Its profit last quarter was nearly $5 billion, compared with $3.2 billion for Google and $6.9 billion for Apple. Anyone who uses a PC to create a résumé or a term paper or to do online banking is more often than not doing so on a machine running Windows.

But the PC business, which Microsoft has ruled for decades, is under siege by mobile devices like tablets, an area that Microsoft has stumbled in, and that Mr. Ballmer famously underestimated. Analysts say the company needs to act quickly to right itself.

“The walls are falling now,” said George Colony, chief executive of Forrester Research, a research and advisory firm. “They may fall very quickly. There’s not much time for the board.”

Nonetheless, it has given itself a year to choose a successor, and Mr. Ballmer, 57, will stay on until then. The company declined requests for an interview with him.

Some analysts have suggested that Microsoft could use a seasoned turnaround artist in the mold of Lou Gerstner, who rescued I.B.M. from irrelevance in the 1990s. Current and former Microsoft executives said the company would more likely turn to someone with a technology pedigree. Some pundits have called for Bill Gates, Microsoft’s co-founder and chairman, to return to the company, in a nod to how Steven P. Jobs revitalized Apple.

But people who know him said Mr. Gates has no intention of doing that because of his full-time focus on philanthropy.

Others believe Microsoft is not governable in its current form. Ben Slivka, a 14-year employee of Microsoft who left in 1999, said the company should split up into five independent companies he calls “Baby Bills” devoted to Windows client software, Office applications, servers, Xbox and the Web.

“Give each of them (say) $5B for a rainy day, but not much more,” Mr. Slivka wrote in a post on Facebook after the news of Mr. Ballmer’s retirement. “You want them to be hungry. Return most of the cash hoard to shareholders.”

That Mr. Ballmer announced his plans without a successor in place is puzzling and led to speculation among current and former Microsoft executives that Mr. Gates might have been losing patience with his longtime friend, whom he first met when they were students at Harvard University in the 1970s. A spokesman for Mr. Gates said he was not available for interviews.

While the board, Mr. Ballmer and Microsoft gave no public indication that he was pushed out, the disappointing stock price may have been a factor in his departure. Over Mr. Ballmer’s 13-year tenure at Microsoft, the stock has lost 36 percent of its value, if the dividends that Microsoft pays out are excluded. Apple, meanwhile, was up nearly 2,000 percent over the same period. With the announcement of Mr. Ballmer’s departure on Friday, Microsoft’s stock rose more than 7 percent, closing at $34.75.

“Microsoft will have to go through a very hard and painful transition,” said Joachim Kempin, a former senior Microsoft executive, who has written a book critical of the company under Mr. Ballmer. “I’m not very confident the next guy will be able to immediately turn the ship around.”

This year, ValueAct, a hedge fund known for behind-the-scenes shareholder activism, began acquiring a small stake in Microsoft. Some analysts say they believe other shareholders might have been willing to join with the fund in efforts to lobby for management changes at the company. Two years ago, the investor David Einhorn said Mr. Ballmer was “stuck in the past” and called for him to go.

Mr. Ballmer provided plenty of fodder for such critics over the years with his dismissals of technologies that turned out to be game-changers. At a forum in Seattle in 2007, shortly after Mr. Jobs introduced the iPhone, Mr. Ballmer said there was “no chance that the iPhone is going to get any significant market share.”

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DealBook: Buyout Offer Brings China Into the Orbit of Club Med

Club MedThe Club Med Guilin is the company’s second resort location in China. The first is in Yabuli.

7:52 p.m. | Updated

Fewer “crazy signs.” More karaoke.

That could be the future for Club Med, the French resort operator, which said Monday that it had received a $700 million buyout offer led by its two largest shareholders, an investment unit of the French insurer AXA and a Chinese conglomerate called Fosun International.

The proposed deal gives a Chinese company an unusually visible role in the acquisition and development of a prominent Western brand, which was founded in 1950 by a Belgian water polo player and for years defined the packaged exoticism of beach vacations for Europeans and North Americans. Now, though, the ascent of the Chinese tourist is helping reshape the world’s idea of the ideal getaway.

Club Méditerranée has long been known for the blend of escapist fun and Frenchness in its vacation formula — including the staff’s frequent performance of synchronized, heavily gesticulated dance moves set to pop music.

With Chinese co-ownership, Club Med cannot help becoming a bit less French. It has been hit hard by the euro crisis, during which its name has been borrowed by economists as an epithet for the debt-ridden and austerity-ravaged countries of Southern Europe.

Club Med is looking to emerging markets, especially China, for new customers and new resorts, which it calls villages.

“We have to accelerate our growth in emerging markets, the largest of which is China,” Henri Giscard d’Estaing, chief executive of Club Med, said by telephone on Monday. “That takes time, and you need shareholder and management stability. The goal of this agreement is to provide that stability.”

Club Med ventured into China in 2010, opening a village at a ski resort called Yabuli, in the northeastern province of Heilongjiang. Since then Club Med has added a second Chinese village, in the southern city of Guilin, known for its unusual, tombstone-shaped peaks.

At Yabuli, which attracts mostly domestic visitors, Club Med has adapted its entertainment offerings to suit local tastes, adding karaoke evenings, for example. Mah-jongg tables have replaced the poker and bridge tables, or Scrabble boards, at other Club Med villages.

China overtook the United States two years ago as the world’s biggest source of foreign tourists. Mainland Chinese made 70 million overseas trips in 2011. That outpaced the 58.5 million overseas trips by Americans the same year. And last year, China for the first time became the biggest spender in global tourism. Outlays by Chinese traveling overseas reached $102 billion, up 40 percent from 2011, according to the United Nations World Tourism Organization. Germans and Americans ranked second and third, each spending about $84 billion on their foreign trips, the agency said.

Club Med, while sticking to the concept of all-inclusive packages, in which it was a pioneer, has gone through many changes, and owners, since it opened its first resort on the Spanish island of Mallorca in 1950. In the early years, the resorts were designed as prototypical New Age retreats, where the visitors mingled socially with the staff.

The offbeat atmosphere evolved with the times. The stereotypical Club Med customer of the 1960s and ’70s was satirized in “Les Bronzés,” a racy 1978 French film directed by Patrice Leconte, in which a group of European visitors to a Club Med village in Ivory Coast take turns hooking up.

In the 1990s, Club Med tried to attract budget travelers, but was unable to compete with low-fare airlines and the Internet. It also branched into sports clubs. Over the last decade, it has moved upmarket, closing dozens of resorts, revamping others and repositioning its marketing to appeal to families.

So far, though, Club Med remains heavily dependent on Europe, which is a reason it has booked annual losses for five of the last seven years. Revenue has not regained the level of 1.1 billion euros ($1.4 billion) reached in 2008.

Investors cheered the 17 euros a share French-Chinese buyout offer on Monday, sending Club Med’s stock up 22 percent, to 16.95 euros, in Paris trading. The offer is a 23 percent premium over Club Med’s closing price on Friday.

Central to Club Med’s strategy to win more Chinese customers was a deal in 2010 that first brought in Fosun, which is based in Shanghai, as a strategic investor. Fosun has bought further shares since 2010, so that it now owns 9.96 percent of the share capital and 16.48 percent of the voting rights of Club Med.

France still accounts for 600,000 annual visitors, half of Club Med’s total. But Mr. Giscard d’Estaing — son of the former French president Valéry Giscard d’Estaing — said the company hoped to attract 200,000 Chinese guests in 2015, up from 90,000 last year. By the end of 2015, Club Med aims to have five villages in Asia, including one, at an unspecified beach location, that it plans to open this year.

“Fosun is a group that believes the upscale holiday is an area where growth will be well above the average economic growth for China,” Mr. Giscard d’Estaing said.

Until recently, Chinese companies have tended to be cautious when it came to efforts to buy publicly traded companies, a wariness that stems in part from memories of a bid by the Chinese offshore oil company Cnooc for the United States oil producer Unocal in 2005.

That deal was effectively blocked by Congress. Instead, Chinese buyers have been aggressively pursuing privately held businesses, focusing mainly on European companies in machinery sectors like wind turbine component manufacturers.

The Fosun-backed offer for Club Med reflects the unusual relationship between the two companies. Many Western companies have expanded in China by setting up joint ventures with Chinese companies. Club Med chose a different route, allowing Fosun to buy a stake in the French parent company.

“It ensured full alignment of interests between the Chinese and foreign partners,” André Loesekrug-Pietri, the chairman and managing partner of a Brussels-based private equity fund, the A Capital China Outbound Fund, said by telephone.

Mr. Loesekrug-Pietri said he had approached Fosun and Club Med in March 2010 with a proposal for Fosun and A Capital each to buy stakes in Club Med. Club Med was looking for a partner in China, and Fosun was seeking a way to use its extensive real estate in China.

Mr. Giscard d’Estaing said that while Fosun would be increasing its stake, the deal would keep a majority of Club Med in the hands of French shareholders. Analysts said, however, that they would not be surprised if AXA bowed out eventually, allowing Fosun to take over full control.

The inclusion of a pillar of the French corporate establishment may have been aimed at smoothing over any concerns in France about a loss of control over one of the country’s best-known brands at a time when economic nationalism appears to be on the rise. For example, Arnaud Montebourg, the minister for industrial renewal, recently moved to block a possible takeover of a French online video site, Dailymotion, by Yahoo.

“The presence of AXA can have no other purpose than to reassure politicians like Montebourg that this will remain a French company,” said Jean-Jacques Manceau, the author of a 2010 book on Club Med, “Réinventer la Machine à Rêves” (“Reinventing the Dream Machine”).

Mr. Manceau said that to the increasingly wealthy customers that the company aims to attract, nationality might matter less. Karaoke aside, Chinese and French tourists are looking for a similar vacation experience.

“It’s true that we have different ways of amusing ourselves,” he said. “But the Club Med culture supersedes the individual cultures of any of the people who visit it.”

At Sony, Investor’s Challenge Brings Unwanted Suspense

Clockwise from top left, Suzanne Hanover/Columbia Pictures; Sony Pictures Animation/Columbia Pictures; Columbia Pictures; Kimberley French/TriStar PicturesSony's newest film include, clockwise from top left, “This Is the End,” a comedy with James Franco, Jonah Hill, Craig Robinson, Seth Rogen, Jay Baruchel and Danny McBride; “The Smurfs 2,” with the voices of Katy Perry and the late Jonathan Winters; “After Earth,” with Will Smith and his son, Jaden; and “Elysium,” starring Matt Damon.

NOWHERE is the opulence of Old Hollywood more palpable than on the Sony Pictures lot in Culver City. Arching just inside the front gate is an eight-story rainbow. This grand $1.6 million sculpture, a condition of a lot expansion, rose last year and became a symbolic link between past glories — “The Wizard of Oz” was filmed here — and current ones. Years of cutbacks have taken the shine off many studios, which now look like glorified factories. But Sony has preserved its lot as a perfect little movieland town: executive suites overflow with orchids, and cafes border a new park where employees sip lattes and stretch on the grass.

The mood extends beyond the walls of the 44 1/2-acre lot. Each year, Sony rents out the entire Ritz-Carlton Cancún Resort for an international press junket. Day after day, the studio flies in stars and hosts parties.

“What I love about Sony,” said Matthew Tolmach, a former executive at the studio and now a producer based on its lot, “is that they still love movies, and they are incredibly aggressive about making all kinds of them.” He added: “It’s why I want to live there.”

While competitors like Paramount, Disney and even Warner Brothers have gone through ferocious consolidation — all focusing more narrowly on blockbuster-style fantasies and superhero movies — Sony has been slower to give up the industry’s broad prerogatives. Its ambitions still stretch from R-rated romps to “The Amazing Spider-Man” to tiny foreign films to African-American comedies to Oscar-caliber dramas. That requires making a home not just for Mr. Tolmach but also for an extensive family of filmmakers and stars.

Sometimes it pays. Last year, Sony Pictures Entertainment generated about $4.4 billion in global ticket sales, the highest in its history, powered by nine No. 1 hits including “Skyfall,” “Men in Black 3” and “The Vow.” It had an Oscar contender, “Zero Dark Thirty,” started a new franchise, “Hotel Transylvania,” and revived an old one, “21 Jump Street.” It ended the year in first place in market share.

But in true Hollywood style, the Sony picture is not quite what it seems.

The truth is that Sony finds itself at a troubled crossroads. Its go-to stars — Adam Sandler and Will Smith — are now a generation older than the prime film-going audience. And its steep production and infrastructure costs burden Sony with one of Hollywood’s worst profit margins. Sony’s entertainment unit had an operating margin of 6.5 percent in its last fiscal year; the figures at Warner Brothers, Disney, Paramount and 20th Century Fox were all higher.

It is extremely hard to compare studios, analysts warn. Some make only movies, while others, like Sony, also make television shows. Financing arrangements and accounting vary. Sony does not divulge how much of its profit comes from movies and how much comes from its fast-growing television business.

In its last fiscal year, the studio reported operating income of $509 million, up 40 percent from a year before. That result looks fantastic until you consider that roughly 65 percent of the total, analysts estimate, came from a relatively small television arm that includes shows like “Wheel of Fortune” and “Breaking Bad” as well as overseas cable channels. Analysts complain that the giant movie side is holding back profitability.

The movie unit has also lost the man long seen as its protector inside Sony, the far-flung Japanese electronics behemoth. That man is Howard Stringer, who was Sony’s chief executive for seven years. Last year, he turned over the Sony helm to Kazuo Hirai. Mr. Stringer will retire as chairman next month.

But the truly startling plot twist came on Tuesday. Daniel S. Loeb, the activist hedge fund manager known for successfully engineering a shake-up at Yahoo, told Mr. Hirai in a letter that his Third Point investment fund had become Sony’s largest shareholder, with a 6.5 percent stake. With that announcement, Mr. Loeb proposed breathtaking changes at the company, including a spin-off of up to 20 percent of its studio and other entertainment holdings.

Overnight, Michael M. Lynton, the C.E.O. of both Sony Pictures and Sony Entertainment, and Amy Pascal, co-chairwoman of Sony Pictures, found themselves under a kind of weight rarely felt in Hollywood since the 1980s, when corporate raiders and high-yield bond peddlers like Saul Steinberg, the Bass brothers and Michael Milken delved into studios, looking for hidden value.

“The entertainment businesses are important contributors to Sony’s growth and are not for sale,” Sony asserted in response to Mr. Loeb. “We look forward to continuing constructive dialogue with our shareholders as we pursue our strategy.”

A spokeswoman for Mr. Lynton and Ms. Pascal said they had no comment. Several days before the disclosure of Mr. Loeb’s letter — in response to questions about the studio’s performance and its movie release lineup — Steve Elzer, a Sony spokesman, wrote in an e-mail, “We have been strong and steady not just for a year, but for longer than a decade.” He added, “We couldn’t be more confident in our slate this summer and through the year.”

Law School Dean's Eagerness to Innovate Brings Promotion

By Karen Sloan All Articles 

The National Law Journal

November 19, 2012

George Washington University Law School dean Paul Berman
Photo: Diego M. Radzinschi / NLJ

Paul Schiff Berman has been at the helm of the George Washington University Law School only since July 2011, but his willingness to experiment caught the eye of university leaders. Provost Steven Lerman announced on November 12 that Berman would leave the deanship at the start of 2013 to assume the newly created position of vice provost for online education and academic innovation. In that role, Berman will spearhead the university's "efforts to realize the great promise of online and hybrid education," Lerman said in announcing the move.

Berman came to George Washington after three years as dean at Arizona State University Sandra Day O'Connor College of Law. The National Law Journal spoke with him about his new job and his leadership of the law school. His answers have been edited for length.

NLJ: It's a little ironic that a law school dean will head an online education and academic innovation effort, given that law schools aren't exactly known to embrace technology or change. How did you end up in this position?

Berman: I am very interested in thinking about the future of legal education and education more generally. I believe that there is a tremendous amount that is good and strong at the core of the educational structure, but I also think there is a lot that needs to change to make our education models work in the 21st century. Legal academia is what I know, and so I have worked in both of my deanships to find places to innovate and try to transform some of the models for legal education. Increasingly, it is clear that innovation is necessary on a university level, and it is equally clear that -- while I don't think online will replace in-person universities -- our university can't avoid thinking about how to put educational models online.

NLJ: What do you think you did at the law school level that indicated to the university's higher-ups that you are the right man for this job?

Berman: In general, I demonstrated the ability to move ideas forward more quickly than is typical in the academy. Specifically, we created a degree program with the business school on the law and business of government contracting, which was designed as a business master's degree where executives would get half business content and half government contracts content. In the intellectual property arena, the law faculty has voted to create a master's degree for non-lawyers who want to learn about law but don't need the three years of a law degree.

My willingness to think about how legal education can reach people beyond those who plan to be lawyers made it clear that I was interested in expanding the scope of education, generally, to populations that have historically not been included in the educational model.

NLJ: Innovation is a bit of a buzzword. What will you actually be doing in your new job?

Berman: It's a little premature for me to say, precisely, what programs we're going to launch. This is the beginning of a process. Having said that, I think that the opportunities are wide open. There are a number of different types of online education models that are interesting. I think that one of [George Washington's] great strengths is the fact that it is a great convening entity for thought leadership and policy discussions. It's in D.C., so we have access to policymakers. I think that can be extended online to create more of a forum, in real time, for national and global public policy, think tank-type discussions that don't require everyone to come to D.C. Can we expand the model of the academic conference so it has an even broader scope and scale? That's one thing I'd love to explore.

NLJ: Eighteen months is a relatively short tenure as dean. What stamp do you think you will leave on the law school?

Berman: We put a lot in motion. From a programmatic point of view, we expanded our professional development training program for all first-year students. We created a one-on-one mentoring program, where every student gets assigned to an alumnus in practice. We launched the two programs for non-lawyers, which I mentioned earlier. I think we expanded the energy put into our alumni and development, and we recalibrated the law school's economic model to respond to the changing economics of law school and changing applicant pools, and so forth. I feel as if the law school is on quite a strong trajectory.

Jones Day Brings On Gide Loyrette Team as Firm Continues Europe Push

Jones Day has secured a boost for its Paris office with the hire of a five-strong Gide Loyrette Nouel finance team led by derivatives heavyweight Alban Caillemer du Ferrage.

Caillemer du Ferrage, who was head of derivatives and market infrastructure at Gide before joining Jones Day Monday, is considered one of the top derivatives advisers in the French legal market.

He specializes in regulatory, structuring and collateral issues relating to OTC derivatives and structured repos and advises on clearing, repository and disclosure matters. The derivatives specialist -- who is top-ranked for derivatives by Chambers and Partners -- is the International Swaps and Derivatives Association counsel for France has worked with clients including independent clearing house LCH Clearnet.

He is joined at Jones Day by of counsel Qian Hu, counsel Karole-Anne Sauvet, and associates Clement Saudo and Mathilde Nicand.

The team will work closely with lawyers in London led by banking and finance co-chair Edward Nalbantian, and the New York team led by Jayant Tambe, co-head of the firm's financial institutions, litigation and regulation practice.

Nalbantian commented: "With experience in matters related to both disputes and transactions, they provide a perspective that will be of immense value to all our clients whether financial institutions, funds or end-users."

The hires come amid an expansive period for Jones Day's European practice. Earlier this year, the U.S.-based giant grew its litigation and arbitration practice with the addition of Paris partner Jean-Pierre Harb from Baker & McKenzie.

Jones Day also earlier this year set up its third German office in Duesseldorf and confirmed plans to launch in Amsterdam in early 2013. The firm also expanded its City litigation practice in the summer with the hire of Christopher Braithwaite and Baiju Vasani from Simmons & Simmons and Crowell & Moring, respectively.