DealBook: Inspired by Professor, Investor Makes Big Gift for Black Studies

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DealBook: Third Point Takes Aim at Sony in Investor Letter

DealBook: Activist Investor to Step Down From Yahoo Board

Steve Marcus/ReutersDaniel S. Loeb, founder of Third Point, at a conference in Las Vegas last year.

2:09 p.m. | Updated To add Third Point’s earnings from its investment in Yahoo and include Yahoo’s afternoon share price.

The activist investor Daniel S. Loeb is parting ways with Yahoo.

Mr. Loeb, whose campaign to change Yahoo culminated in the appointment last year of Marissa Mayer as the company’s chief executive, has submitted his resignation from the board, Yahoo said Monday.

Two other directors originally nominated by Mr. Loeb’s firm, Harry J. Wilson and Michael J. Wolf, are also stepping down. The resignations, effective July 31, will leave Yahoo with a seven-member board, the company said.

In addition, Yahoo has agreed to buy 40 million shares of its stock from Mr. Loeb’s firm, Third Point, at a price of $29.11 a share, the closing price on Friday. That will leave Third Point with about 20 million Yahoo shares, or less than 2 percent of the common stock outstanding.

Third Point, which initially disclosed a 5.15 percent stake in Yahoo in September 2011, more than doubled its investment in less than two years. It initially paid about $509 million for 40 million shares, which it sold on Monday for $1.16 billion.

Yahoo’s stock fell more than 4 percent in trading on Monday, dipping below $28 a share in afternoon trading.

The hiring of Ms. Mayer from Google last July was considered a coup for Yahoo, an aging technology company in need of a fresh direction. She has overseen a string of acquisitions since then, including the $1.1 billion deal for Tumblr in May.

“Since our board’s rigorous search led us to hire Marissa Mayer as C.E.O., Yahoo’s stock price has nearly doubled, delivering significant value for shareholders,” Mr. Loeb said in a statement.

Ms. Mayer’s appointment came after a hard-fought campaign by Mr. Loeb that led to the ouster of the previous chief executive, Scott Thompson, in May of last year.

Yahoo said Monday that Max Levchin, a co-founder of PayPal, would remain on the board. His appointment in December was supported by both Third Point and the board.

The share repurchase plan announced Monday is part of Yahoo’s previously announced plan to buy $1.9 billion of stock, the company said.

“Daniel Loeb had the vision to see Yahoo for its immense potential — the potential to return to greatness as a company and the potential to deliver significant shareholder value,” Ms. Mayer said in a statement. “While there’s still a lot of work ahead, they’ve given us a great foundation.”

Strategies: If You’re a Bond Investor, Beware of the Seesaw

THE Securities and Exchange Commission issues frequent bulletins about what it calls “investment frauds and scams” — a frightening taxonomy of plots and stratagems aimed at separating investors from their money.

The agency’s alerts range from warnings of Madoff-style Ponzi schemes to “pump and dump” operations intended to temporarily inflate a stock price. They also include cautionary notes about polite offers of assistance from predators posing as government regulators.

Lately, though, the S.E.C. has been giving a warning of a different sort. Bearing the general title “Interest Rate Risk,” this latest bulletin is a cry for understanding. It’s about bonds, and for most people, the subject is confounding.

The problem isn’t a new scam but a lack of knowledge about how bonds work, which can be dangerous in a time of rising interest rates. In its bulletin, the agency points out that investors need to understand that when rates rise, bond prices generally fall. This inverse relationship is a fact of life in the bond market. Like gravity in the physical world, it’s constant, powerful and important.

But outside trading floors, business schools, banks and brokerage firms, bond dynamics are fairly obscure, surveys find. That’s troubling in a time like this, said Lori Schock, director of the agency’s Office of Investor Education and Advocacy. “We’re not predicting what’s going to happen to interest rates or when,” she said, “but we do know that rates can’t go much lower. And we know that they can go a lot higher.”

If interest rates do go higher, most people don’t understand how that will affect bonds. A 2012 financial literacy survey by the Finra Investor Education Foundation asked this question: “If interest rates rise, what will typically happen to bond prices?” Prices will fall, but only 28 percent of adult Americans in the survey answered correctly. Finra ran the same survey in 2009 and got the same results.

The Finra survey found that financial literacy levels were generally very low. On its Web site, it offers a five-question quiz, with questions drawn from the survey — none requiring computations, just an understanding of basic concepts. Only 14 percent get them all right, it says. (The average number of correct answers is between 2 and 3.)

As far as bonds go, Ms. Schock said, one way to visualize the relationship of interest rates and prices is to think of what she calls “a teeter-totter.” She’s from Indiana. In Queens, where I come from, we call it a seesaw. Whatever you call it in your playground, imagine interest rates sitting on one side of a plank and bond prices clinging to the other. When one side rises, the other falls.

That’s just the way seesaws work, and it may be enough explanation. But suppose you want to go a little deeper: Why do interest rates and bond prices move like this?

Here’s one way to understand it: When you buy a fixed-rate bond, you are making a loan. In return, you get your money back, plus interest. When market interest rates rise, the bond drops in value. That’s because, under current conditions, anyone making the same loan will expect more interest than you’ve gotten. If you want to trade the old bond for a new one, the old one will have less value. And when something sold in the marketplace has less value, its price usually falls.

There are exceptions to every rule, of course. If the bond’s interest rate isn’t fixed, and instead readjusts as market rates change, the seesaw analogy doesn’t hold. And the prices of different kinds of bonds shift differently. But the seesaw captures the basic idea.

It’s important right now because interest rates have risen since the spring, and, therefore, prices have fallen. If you don’t understand the relationship between prices and rates (often called yields) you could hurt yourself “by reaching for yield, buying bonds that you think are going to pay you more interest, only to see rates go up further, so the value of your bonds will fall,” Ms. Schock said.

Many people are in danger of getting hurt this way. “We’re concerned that many people might mistakenly think that there’s safety in investing in bonds,” she said, “when there’s actually a fairly good chance of running into trouble with interest rate risk now.”

EVEN Treasury bonds are affected by interest rate risk, although the federal government backs these bonds and will pay all the principal and interest if you hold them to maturity. Such high-quality bonds are safe in many ways, especially in comparison with other assets.

Bond prices are generally less volatile than stock prices, and a major bond market decline is likely to be much less severe than a major fall in the stock market. Bonds can provide steady income and — whether held individually or in a mutual fund — can play an important role in a diversified portfolio, buffering against stock fluctuations.

But when market rates rise, you’ll run into a pricing problem if you need to sell a bond — or if you hold Treasuries in a mutual fund, where they are priced daily. All things equal, your mutual fund will fall in value as yields rise.

Interest rates on Treasuries — and a range of other bonds — have already risen sharply, and a broad consensus of market analysts says they are likely to rise further in the years ahead. Historically, rates are still relatively low, largely in response to the policies of the Federal Reserve. The Fed has been buying $85 billion of bonds a month, but is considering an end to those purchases.

Bond yields gyrated last week in response to congressional testimony by Ben S. Bernanke, the Fed chairman, who said Fed action was “by no means on a preset course.” If the economy strengthens, he said, the Fed will ease its bond-buying. That could result in higher interest rates.

If you hold your bonds until maturity — or keep them as a buffer — you may tolerate such swings. But it’s better if you understand what’s going on. Remember the seesaw: When yields rise, prices fall.

Strategies: If You’re a Bond Investor, Beware of the Seesaw

THE Securities and Exchange Commission issues frequent bulletins about what it calls “investment frauds and scams” — a frightening taxonomy of plots and stratagems aimed at separating investors from their money.

The agency’s alerts range from warnings of Madoff-style Ponzi schemes to “pump and dump” operations intended to temporarily inflate a stock price. They also include cautionary notes about polite offers of assistance from predators posing as government regulators.

Lately, though, the S.E.C. has been giving a warning of a different sort. Bearing the general title “Interest Rate Risk,” this latest bulletin is a cry for understanding. It’s about bonds, and for most people, the subject is confounding.

The problem isn’t a new scam but a lack of knowledge about how bonds work, which can be dangerous in a time of rising interest rates. In its bulletin, the agency points out that investors need to understand that when rates rise, bond prices generally fall. This inverse relationship is a fact of life in the bond market. Like gravity in the physical world, it’s constant, powerful and important.

But outside trading floors, business schools, banks and brokerage firms, bond dynamics are fairly obscure, surveys find. That’s troubling in a time like this, said Lori Schock, director of the agency’s Office of Investor Education and Advocacy. “We’re not predicting what’s going to happen to interest rates or when,” she said, “but we do know that rates can’t go much lower. And we know that they can go a lot higher.”

If interest rates do go higher, most people don’t understand how that will affect bonds. A 2012 financial literacy survey by the Finra Investor Education Foundation asked this question: “If interest rates rise, what will typically happen to bond prices?” Prices will fall, but only 28 percent of adult Americans in the survey answered correctly. Finra ran the same survey in 2009 and got the same results.

The Finra survey found that financial literacy levels were generally very low. On its Web site, it offers a five-question quiz, with questions drawn from the survey — none requiring computations, just an understanding of basic concepts. Only 14 percent get them all right, it says. (The average number of correct answers is between 2 and 3.)

As far as bonds go, Ms. Schock said, one way to visualize the relationship of interest rates and prices is to think of what she calls “a teeter-totter.” She’s from Indiana. In Queens, where I come from, we call it a seesaw. Whatever you call it in your playground, imagine interest rates sitting on one side of a plank and bond prices clinging to the other. When one side rises, the other falls.

That’s just the way seesaws work, and it may be enough explanation. But suppose you want to go a little deeper: Why do interest rates and bond prices move like this?

Here’s one way to understand it: When you buy a fixed-rate bond, you are making a loan. In return, you get your money back, plus interest. When market interest rates rise, the bond drops in value. That’s because, under current conditions, anyone making the same loan will expect more interest than you’ve gotten. If you want to trade the old bond for a new one, the old one will have less value. And when something sold in the marketplace has less value, its price usually falls.

There are exceptions to every rule, of course. If the bond’s interest rate isn’t fixed, and instead readjusts as market rates change, the seesaw analogy doesn’t hold. And the prices of different kinds of bonds shift differently. But the seesaw captures the basic idea.

It’s important right now because interest rates have risen since the spring, and, therefore, prices have fallen. If you don’t understand the relationship between prices and rates (often called yields) you could hurt yourself “by reaching for yield, buying bonds that you think are going to pay you more interest, only to see rates go up further, so the value of your bonds will fall,” Ms. Schock said.

Many people are in danger of getting hurt this way. “We’re concerned that many people might mistakenly think that there’s safety in investing in bonds,” she said, “when there’s actually a fairly good chance of running into trouble with interest rate risk now.”

EVEN Treasury bonds are affected by interest rate risk, although the federal government backs these bonds and will pay all the principal and interest if you hold them to maturity. Such high-quality bonds are safe in many ways, especially in comparison with other assets.

Bond prices are generally less volatile than stock prices, and a major bond market decline is likely to be much less severe than a major fall in the stock market. Bonds can provide steady income and — whether held individually or in a mutual fund — can play an important role in a diversified portfolio, buffering against stock fluctuations.

But when market rates rise, you’ll run into a pricing problem if you need to sell a bond — or if you hold Treasuries in a mutual fund, where they are priced daily. All things equal, your mutual fund will fall in value as yields rise.

Interest rates on Treasuries — and a range of other bonds — have already risen sharply, and a broad consensus of market analysts says they are likely to rise further in the years ahead. Historically, rates are still relatively low, largely in response to the policies of the Federal Reserve. The Fed has been buying $85 billion of bonds a month, but is considering an end to those purchases.

Bond yields gyrated last week in response to congressional testimony by Ben S. Bernanke, the Fed chairman, who said Fed action was “by no means on a preset course.” If the economy strengthens, he said, the Fed will ease its bond-buying. That could result in higher interest rates.

If you hold your bonds until maturity — or keep them as a buffer — you may tolerate such swings. But it’s better if you understand what’s going on. Remember the seesaw: When yields rise, prices fall.

DealBook: Activist Investor Calls for Breakup of Smithfield Foods

Keith Srakocic/Associated PressSmithfield’s brands include Smithfield, Eckrich, Farmland, Armour and others.

An activist hedge fund took aim at Smithfield Foods on Monday, arguing that the pork producer should consider splitting itself up despite its proposed $4.7 billion sale to a major Chinese meat processor.

The fund, Starboard Value, wrote in a letter to Smithfield’s board that it believed the company was worth much more separately. Starboard says it owns a 5.7 percent stake, making it one of the largest shareholders in the company.

Shares of Smithfield were up more than 2 percent in premarket trading on Monday, although they remained below the offer price from Shuanghui International.

The letter signals a potential fight over Smithfield, one of the country’s biggest producers of hogs. Last month, it agreed to sell itself to Shuanghui for $34 a share, in a bid to increase sales of American pork in China.

But Starboard has picked up an argument advanced against Smithfield over the years: that its vertically integrated operations, from raising hogs to slaughtering and processing them into bacon and ham and then selling the products, are worth more separate than combined.

“We believe there are numerous interested parties for each of the company’s operating divisions, and that a piece-by-piece sale of the company’s businesses could result in greater value to the company’s shareholders than the proposed merger,” the hedge fund wrote.

Starboard may be in for a tough fight. Smithfield’s management team, led by C. Larry Pope, has defended the logic of keeping the company whole, as have Shuanghui executives. Before announcing the deal with Shuanghui, Smithfield had been in talks with two other buyers as well.

One of Smithfield’s former biggest investors, the Continental Grain Company, had also called for a breakup of the company, but instead sold off virtually its entire stake this month, taking advantage of the higher share price since the Shuanghui deal was announced.

Starboard acknowledged that Smithfield’s deal with Shuanghui prevented it from seeking rival takeover bids. Instead, the hedge fund offered to look for and bring in potential bidders for Smithfield’s divisions.

In taking aim at Smithfield, Starboard is choosing one of its biggest targets yet. The activist hedge fund has made its name agitating against the likes of AOL.

DealBook: Sony Pondering Spinoff Proposal From a Big Investor

Kimimasa Mayama/European Pressphoto AgencyKazuo Hirai, chief of Sony, at a corporate strategy presentation in Tokyo on Wednesday.

TOKYO — Sony said on Wednesday that its board was considering a proposal from the hedge fund Third Point to spin off part of its entertainment business, but it emphasized that the discussions were preliminary and that it had not set a time to respond.

Sony, under pressure from Third Point, one of its top investors, to unlock more value from its lucrative entertainment divisions, also said it was on track to return its electronics business to profitability this year.

“We will engage in thorough discussions at the board level to decide on Sony’s response,” Kazuo Hirai, the chief executive, said in response to questions at a corporate strategy presentation. “It is an important matter that relates to Sony’s core businesses and management, so the board must hold ample discussions.”

Mr. Hirai said board members were already discussing the proposal, though some of them will be replaced after Sony’s annual investor meeting in June. He declined to say when Sony might respond or to give his views on the proposal, saying the matter was for the board to judge.

“We are still in early stages,” Mr. Hirai said. “But we intend to engage positively with our investors.”

Phil McCarten/ReutersDaniel S. Loeb of Third Point.

It is unclear whether Sony will seriously consider the proposal from Third Point’s manager, Daniel S. Loeb, who is pressing the company to spin off part of its entertainment arm, which includes one of the biggest film studios in Hollywood and one of the largest music labels in the world.

Corporations in Japan, including Sony, have a history of ignoring letters from shareholders calling for overhauls, a former top investor in Sony said.

Mr. Loeb’s hedge fund has acquired roughly a 6.5 percent stake in Sony, making it one of the biggest shareholders. In a letter that was made public, he has proposed that Sony use the money raised from a spinoff to reinvest in its ailing electronics business.

Mr. Hirai, who became chief executive in April 2012, emphasized that even without such a move, Sony was on track to bring its electronics business back into profitability this fiscal year, which runs through next March.

He said Sony still expected sales of 6 trillion yen ($58.3 billion) from electronics and an overall 5 percent operating profit margin, adding that the company hoped its televisions would turn a profit for the first time in a decade.

“The No. 1 mission assigned to me is to bring change to Sony and to revive our electronics business,” Mr. Hirai said. “We are on the offensive.”

DealBook: Despite Risks, Brazil Courts the Millisecond Investor

Yasuyoshi Chiba/Agence France-Presse — Getty ImagesThe stock exchange in São Paulo, Brazil, is the largest in South America.

SÃO PAULO, Brazil — At a time when the mere phrase “high-frequency trading” makes some investors queasy, Brazil’s stock exchange is putting out the digital welcome mat.

In recent years, the BM&F Bovespa stock exchange in São Paulo has taken steps to make its market more friendly to high-speed traders, even as many regulators around the world are casting an increasingly skeptical eye on the sector after a series of well-publicized market malfunctions in the United States.

Lawmakers in Canada, Australia and the European Union have been looking at imposing limits on such traders, whose investment time horizons are measured in milliseconds rather than months.

“Given the attention and the political discourse on the perceived dangers of H.F.T., exchanges are very reticent to be aggressive in promoting and attracting high-frequency trading,” said Andy Nybo, an analyst at the Tabb Group.

But in Brazil — as well as in other developing economies like Chile and Mexico — exchanges are actively courting high-speed traders without much resistance from their regulators. The appeal is that the traders can execute thousands of trades a second, resulting in big fees for the exchanges.

The BM&F Bovespa, which closed its open trading pits in 2009 in favor of electronic trading networks, is ramping up efforts to support computerized trading. Last month, the Brazil stock exchange introduced a new lightning-fast computer system, known as Puma, that allows high-speed traders to get in and out of trades more quickly. The exchange has offered these traders discounts since October 2010.

The BM&F Bovespa is “very open about what they are looking to do. They really have been aggressive in welcoming all types of strategies,” Mr. Nybo said.

The stocks on the Brazilian exchange are cumulatively worth $1.2 trillion, but the average daily trading volume on the exchange is only about $3.7 billion. In the United States, a single major stock like Apple can trade more than that each day.

The comparatively low volumes are in part a reflection of the relatively limited involvement of high-speed traders, who still only account for about 10.6 percent of all stock trades in Brazil. Although that is up from 8.5 percent in 2012, it is still a fraction of trading in other large global markets. In the United States, such firms dominate a majority of the trading, and in Europe, they are responsible for about 45 percent of the trading, according to Celent, a research and consulting firm.

The Brazilian exchange’s push seems like a risky gambit to many critics of the acceleration of American markets over the last decade. High-frequency traders have been accused of using technology to move share prices for their own advantage and to trick traditional investors. They have also taken some of the blame for market mishaps like the “flash crash” in May 2010, when stock indexes dropped nearly 10 percent in less than half an hour.

Wallace C. Turbeville, a senior fellow at Demos, a research group in New York, said most offers made by high-frequency trading firms were “illusory”: they exist not to be executed, but to measure, distort and exploit market sentiment, increasing volatility and costs for other investors.

Brazilian executives say they believe they have been able to avoid problems through strict regulation. They are also trying to keep at bay many of the other technological developments that have complicated American and European markets. Brazil has, for instance, banned dark pools, private venues where trades can be executed out of the public eye.

And unlike in the United States, which has 13 public stock exchanges, the BM&F Bovespa remains the only place to trade stocks in Brazil.

Cicero Vieira, the BM&F Bovespa’s chief operating officer, said a single trading environment meant computerized trading firms had fewer opportunities for arbitrage — simultaneously selling high in one place and buying low in another — which should keep high-frequency trading from growing past 20 percent or so of total volume.

“When it comes to H.F.T.’s, there is no such thing as zero risk,” Mr. Vieira said. “Our philosophy is to contain the impact of errors.”

Danielle Tierney, an analyst with the Aite Group, a financial advisory firm in Boston, said that Brazil’s tough regulations, including a prohibition on anonymous trading, and its less complicated market structure had helped prevent the problems that have drawn scrutiny in America.

“Risk controls can always fail, but compared to where we were in the U.S. in 2010, Brazil is much better prepared,” she said. She added that having a single stock exchange with low trading volume makes it easier to spot problems.

Brazil’s market regulator, the Comissão de Valores Mobiliários, has so far left regulations governing high-frequency trading to the exchange, but it says it is observing the segment closely.

For the BM&F Bovespa, the push to attract high-speed traders provides a way to keep out competitors. Direct Edge, a United States exchange with close ties to electronic trading desks, has applied to operate in Brazil, but approval is not expected before 2015. In the United States and Europe, upstart exchanges won market share by being more accommodating to speedy traders.

The BM&F Bovespa is also eager to get the benefits that electronic trading has brought to the United States. Several academic studies have suggested that the competition among the firms has led to smaller differences in the spread between the prices at which traders are willing to buy and sell stocks, making trading cheaper for slower investors.

“That will increase liquidity and reduce spreads and distortions,” Mr. Vieira said.

Brazil has been steadily making its systems more hospitable to high-frequency firms. In 2009, the exchange opened the door to more computerized traders by creating a data center that allowed firms to co-locate within a few feet of the exchange’s server, cutting down the delays associated with data traveling through fiber optic cables.

Chris Concannon, a partner at the New York-based electronic trading firm Virtu Financial, said that the exchange had worked “very hard at encouraging new participants into the market, both electronic and traditional.”

But the exchange ran into the limits of the speed of their own computer systems. The new Puma system cuts the time for order execution to around a single millisecond from 30 while increasing stability and capacity. The technology was developed together with America’s largest futures exchange, the Chicago Mercantile Exchange. The BM&F Bovespa and the CME own 5 percent stakes in each other. Ms. Tierney estimates that Puma cost at least $200 million and perhaps as much as $500 million.

The new technology has been available since 2011 to traders on Brazil’s derivatives markets, which BM&F Bovespa also operates, and is scheduled to include the bond market by early next year.

Mr. Concannon said that they had already noticed a “substantial improvement in the exchange performance with these upgrades.”

The eagerness of high-speed firms to enter Brazil points to their search for new markets as they experience difficulties in sustaining their profits in the highly competitive United States. Most of the high-speed trading activity has so far come from non-Brazilian firms like Virtu. Brazilian brokers have been winning some of this business and consequently welcoming the developments.

Yet, there are still those who sound caution on these initiatives. Felipe Santos, responsible for electronic trading at the São Paulo fund manager Equitas Investimentos, said that although high-frequency trading might make it easier for everyone to buy and sell stock in big companies, especially the largest ones, it had its limits.

“You cannot create volume out of thin air,” he said. “You need real investors, too.”

Dan Horch reported from São Paulo, Brazil, and Nathaniel Popper from New York.

DealBook: Glencore Shares Rise on Investor Optimism of Cost Savings

XstrataA thermal coal operation in Australia run by Xstrata.

4:34 p.m. | Updated
LONDON – Shares in Glencore Xstrata rose on their first day of trading on Friday, as investors banked on potential dividends and future cost savings from one of the largest deals in recent years.

After more than a year in the making, the commodities trader Glencore International has finally completed its $30 billion all-share takeover of the mining giant Xstrata.

On its first day of trading on Friday, the newly combined company’s stock price rose more than 4 percent. The firm’s shares will start trading in Hong Kong on Monday. The company has a market valuation of almost $70 billion.

In a presentation to investors, Glencore Xstrata’s new chief executive, Ivan Glasenberg, promised that the merger would result in cost savings. Mr. Glasenberg, the former head of Glencore, outmuscled his counterpart at Xstrata, Mick Davis, for the top job at the newly merged company following a shareholder revolt over the initial takeover bid.

After Qatar Holding, which owns a 12 percent stake in Xstrata, balked at Glencore’s original 2.8-share proposal, the commodities trader raised its offer to 3.05 of its own shares for each Xstrata share.

In response, Glencore also demanded that Mr. Glasenberg become chief executive earlier than had previously been envisioned.

Attention will now shift to how the combined company will streamline its operations and pare back on new investment because of falls in the global commodity markets.

Some analysts also have speculated the Glencore Xstrata may pursue further acquisitions to take advantage of depressed valuations of rivals.

Deutsche Bank, Goldman Sachs, JPMorgan Chase and Nomura Bank advised Xstrata on the deal, while Citigroup and Morgan Stanley advised Glencore. Lazard advised Qatar Holding.

Tom Wheeler, Telecom Investor, Is F.C.C. Nominee

WASHINGTON — Tom Wheeler, President Obama’s pick to be the next chairman of the Federal Communications Commission, knows all about the most advanced telecommunications systems — of the 19th century.

In his 2008 book “Mr. Lincoln’s T-Mails: How Abraham Lincoln Used the Telegraph to Win the Civil War,” Mr. Wheeler, an investor in start-up technology and communications companies, documents how Lincoln was an “early adopter” of what has been called “the Victorian Internet.”

Lincoln’s championing and advancement of popular uses of the telegraph are not unlike the challenges Mr. Wheeler is likely to face as chairman of the F.C.C., which is waging an intense battle to keep Internet service free of commercial roadblocks and widely available in its most affordable, up-to-date capabilities.

Mr. Wheeler’s qualifications for “one of the toughest jobs in Washington,” Mr. Obama said, include a long history “at the forefront of some of the very dramatic changes that we’ve seen in the way we communicate and how we live our lives.”

“He was one of the leaders of a company that helped create thousands of good, high-tech jobs,” Mr. Obama said, referring to Core Capital Partners, the Washington investment firm where Mr. Wheeler is a managing director. “He’s in charge of the group that advises the F.C.C. on the latest technology issues,” adding that “he’s helped give American consumers more choices and better products.”

Mr. Obama announced the nomination Wednesday in the State Dining Room at the White House. Mr. Wheeler would replace Julius Genachowski, who resigned in March after four years as chairman.

Mr. Obama also appointed Mignon Clyburn, a member of the commission, interim chairwoman, to oversee the agency until Mr. Wheeler is confirmed by the Senate, as is expected, and sworn in.

Several media groups had expressed hopes that the president would name a woman to the top post full time, something that has never happened in the commission’s 80 years.

Once he takes office, Mr. Wheeler, 67, will be under pressure not only to demonstrate that he understands rapidly changing technologies, but also to make clear that his previous work as a top lobbyist for the cellphone and cable television industries will not prejudice his F.C.C. decision-making.

Mr. Wheeler will have to confront several issues almost immediately upon Senate confirmation and being sworn in. The commission is preparing for a complicated auction next year of bands of spectrum — the electromagnetic airwaves over which television, radio and cellphone signals travel.

The auction depends on the F.C.C. convincing television broadcasters to either sell their licenses to use spectrum in exchange for some of the auction proceeds or to willingly move to another spot on the dial, so that the F.C.C. can package and sell contiguous bands of airwaves.

Mr. Wheeler and the commission will also have to decide the extent to which various companies will be eligible to bid for the bands of spectrum. Some consumer advocates say they believe that AT&T and Verizon already control too much of the wireless phone market — roughly 70 percent — and should not be allowed to lock up more spectrum.

The companies, some members of Congress and others, however, want the F.C.C. to maximize revenue from the spectrum auction — which would mean allowing AT&T and Verizon to buy as much as they want.

In 2011, Mr. Wheeler wrote admiringly on his personal blog, Mobile Musings, about the lobbying agility of the National Association of Broadcasters, which had worked to scuttle what looked like a sure-to-pass auction plan then before Congress.

“Suddenly, when a spectrum sale seemed a fait accompli as a payment on the debt, it vanished,” Mr. Wheeler wrote. “No one is talking about it, but these things don’t happen by accident.”

Mr. Wheeler served from 1992 to 2004 as the chief executive of the Cellular Telecommunications and Internet Association, the cellphone industry trade group, and from 1979 to 1984 was chief executive of the National Cable Television Association. That has led some telecommunications watchdog groups to worry that he might favor those businesses over consumers.

But Mr. Wheeler at times has voiced proregulatory sentiments. In another 2011 column, he said that the government could have used the proposed merger of AT&T and T-Mobile to assert more regulatory influence over the wireless industry.

Instead, he wrote, “the regulatory oversight of wireless carriers will continue to atrophy as the digital nature of the wireless business separates it from the legal nexus with traditional analog telecom regulation.”

The commission also is awaiting the outcome of a case before a federal appeals court that could decide whether the F.C.C. has the authority to make sure companies that offer broadband Internet access treat all users equally, rather than favoring some content over others.

That concept, known as open Internet or net neutrality, is a central pillar of Mr. Obama’s technology policy. When the F.C.C. approved its open Internet guidelines in 2011, Verizon sued to overturn them, almost before the ink was dry on the documents.

On Wednesday, Verizon congratulated Mr. Wheeler on his nomination and said it “looks forward to working with him and the commission to shape proconsumer and proinnovation policies in the communications marketplace.”

Technology Investor Is Reported Choice for F.C.C.

Mr. Wheeler, who more than a decade ago led two telecommunications industry trade groups, has prompted concern in recent weeks by some consumer advocacy groups who anticipated his nomination and said his background investing in and lobbying for cable and wireless companies troubled them. Many of them felt that the outgoing chairman, Julius Genachowski, refused to stand up to powerful telecommunications companies during his four-year tenure.

But Mr. Wheeler received cautious approval on Tuesday from Public Knowledge, one of Mr. Genachowski’s harshest critics. Officials at Public Knowledge pointed out that when Mr. Wheeler lobbied for the cable companies and the cellphone industry, those industries were either upstarts themselves or far less concentrated than they are today.

A White House official said that Mignon Clyburn, an F.C.C. commissioner since August 2009, will be appointed to serve as acting chairwoman until Mr. Wheeler is confirmed and sworn in. Prior to joining the F.C.C., Ms. Clyburn served for 11 years on the South Carolina Public Service Commission, including two as its chairwoman.

Mr. Wheeler currently is a managing director at Core Capital Partners, a Washington investment firm with $350 million under management. At Core Capital, he has helped to oversee the firm’s investments in an array of start-ups and small to midsize technology companies, including GoMobo, Twisted Pair Solutions and Jacked. He also is a member of the board of EarthLink, an Internet service provider that competes aggressively with Verizon and AT&T.

In columns on his Web site, www.mobilemusings.net, Mr. Wheeler has voiced strong opinions about some of the issues that he will find on his desk at the F.C.C.

He has strongly supported the voluntary incentive auctions that the F.C.C. has been planning. The agency is aiming to reclaim airwaves from television broadcasters and sell them to wireless phone companies for use in mobile broadband services.

In 2011, Mr. Wheeler criticized the broadcast industry for not moving more aggressively to use their airwaves for mobile digital television, or the broadcast of television signals to smartphones. At the same time, he said, broadcasters have been reluctant to let go of the part of the nation’s airwaves, or spectrum, that they do not fully use. The F.C.C., backed by Congress, is preparing to auction off many of those unused airwaves, potentially for billions of dollars.

“I’ve been mystified why broadcasters have declared jihad against the voluntary spectrum auction,” Mr. Wheeler wrote.

“Getting big dollars for an asset for which you paid nothing while still being able to run your traditional business over cable,” he added, “seems a pretty good business proposition – unless you really are serious about providing new and innovative services and need all that spectrum.”

Telecommunications industry watchers who have expressed misgivings about Mr. Wheeler’s work as a lobbyist point out that he oversaw the National Cable Television Association from 1979 to 1984. That could mean that he would look kindly on companies like Comcast, one of the largest cable and broadband service providers.

Free Press, an advocacy group that often opposes telecommunications industry proposals, said the F.C.C. needs as its chairman “someone who will use this powerful position to stand up to industry giants and protect the public interest.” “On paper, Tom Wheeler does not appear to be that person, having headed not one but two major trade associations,” the group said in a statement. “But he now has the opportunity to prove his critics wrong.”

In recent weeks, there has been a fair amount of jostling and lobbying around the chairman’s post. In March, Senator John D. Rockefeller IV, a West Virginia Democrat, sent a letter signed by 32 senators to Mr. Obama recommending Jessica Rosenworcel, the other sitting Democrat on the five-member commission and a former aide to Mr. Rockefeller, for the top job.

Three weeks later, a group of Washington technology policy advisers sent a letter to Mr. Obama saying that Mr. Wheeler should be the nominee. “He has consistently fought on the side of increasing competition,” the group wrote.