Wall Street Prepares to Take Sharp Pay Cut

JANUARY 9, 2012   THE WALL STREET JOURNAL

By LIZ RAPPAPORT And COLIN BARR

A dismal year means Wall Street is about to take a big hit to its wallet.

As banks prepare to report fourth-quarter results and make final bonus decisions for 2011, total compensation is likely to be the lowest since 2008, when the financial crisis destroyed some firms and left many survivors on government life support.

While still lofty compared to the rest of the U.S., pay for some Wall Street workers will be the lowest in years, at a time when critics have been lashing out at what they deem excessive finance-industry compensation.

At Goldman Sachs Group Inc., many of the roughly 400 partners can expect to see their 2011 pay cut at least in half from 2010, according to people familiar with the situation. Pay for some employees in the New York company's fixed-income trading business will shrink by 60%, with some workers getting no bonus, these people said.

Morgan Stanley is expected to shrink bonuses for some investment bankers and traders by 30% to 40% from 2010, said people familiar with the matter.

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Pay worries have been mounting up and down Wall Street for months amid lower trading revenue, languid deal-making, new regulations and anxiety about the global economy. Other pressures include weak financial-company stock prices and sour public sentiment that culminated in the Occupy Wall Street encampment in New York.

J.P. Morgan Chase & Co., one of the biggest banks, is set to report earnings Friday, followed next week by Goldman and other major banking firms.

For most of 2011, Wall Street executives offered few specifics about how the lackluster year would affect compensation, especially the large portion that will be paid out as bonuses in the coming weeks.

Each quarter the banks set aside a percentage of revenue for benefit costs. Through the first three quarters of 2011, total compensation and benefit costs at 34 publicly traded financial firms tracked by The Wall Street Journal were on pace for a record-high $172 billion. The calculation is based on the companies' reported results and projections by analysts.

But industry observers expect that when all is said and done for the year, many firms will adjust their benefit costs sharply downward, partly to appease shareholders frustrated by soft profits.

If the companies apply the same ratio for 2011 as 2010, overall compensation and benefits for last year would be $159 billion for the 34 companies tracked by the Journal, the smallest total since 2008.

At Goldman, average compensation per employee would fall 10.7% to $385,000 for 2011 from $431,000 in 2010 if the New York company keeps its payout rate steady in the fourth quarter. In 2007, Goldman employees received an average of $661,000 each, and people throughout the firm are bracing for disappointment.

Analysts who follow Goldman expect the securities firm's revenue to fall 23% for 2011 compared with 2010, according to a survey by FactSet Research Systems Inc.

For the typical Goldman partner, pay for 2011, including base salary and bonus, is likely to range from $3 million to $6.5 million, according to people familiar with the matter. In better years, payouts have been at least twice as high, these people said.

On Friday, Sanford C. Bernstein analyst Brad Hintz said he expects Goldman to earn just 77 cents a share for the fourth quarter, down from his previous estimate of $3.15 a share. "We do not expect a robust recovery in 2012," Mr. Hintz wrote.

More ominously, executives at some financial firms foresee longer-term changes as a result of economic and regulatory shifts that will limit profitability.

"Companies definitely have to realize the party as they know it is over," said Rose Marie Orens, a senior partner at Compensation Advisory Partners, a New York firm that works with compensation committees at public-company boards.

In many cases, pay cuts on Wall Street will come mostly at the top because that is where the largest bonuses are paid. Before the crisis, financial firms competed aggressively to attract and keep up-and-coming talent to groom for the future.

As a result of the looming cuts, though, some midlevel employees at investment banks might make more than their managing-director or executive bosses this year, said people familiar with the matter.

Wall Street has always reined in pay when times are tough, but competition for star traders and investment bankers discouraged firms from making big overall changes. In the wake of the financial crisis, some firms shrank bonuses and increased base salaries to bend to political pressure. Regulators argued that heavy reliance on bonuses encouraged excessive risk-taking.

A broader reckoning is under way now amid widespread cost-cutting. In the second half of 2011, two dozen major global banks and securities firms made plans for a total of 103,000 job cuts.

For many Wall Street executives and staff, the new pay structures and cuts in company perks already have hampered their lifestyles. Instead of large cash payouts each year, bankers now are getting more and more of their own companies' shares. Some cash-strapped employees have sold second homes or gotten loans from their companies to pay bills, said people familiar with the matter.

For now, companies are still using larger chunks of their revenue for employee pay. The Journal's analysis projects that 36% of revenue will go toward compensation and benefits in 2011, up from 33% in 2010.

The analysis assumes that the banks, securities firms, asset managers, exchange operators and other companies for the fourth quarter will hold steady the percentage of revenue used for compensation as in the first three quarters.

They don't always do this, however: In each of the past two years, Goldman has reduced its pay ratio in the fourth quarter, holding down compensation and boosting profits.

One bright spot this year could be bonuses given out in stock. The stock-price slide that battered most financial firms in 2011, wiping out $295 billion in market capitalization from the 34 companies in the Journal's analysis, means that stock-based bonuses about to be doled out will be cheap compared with previous years. That could mean a big windfall down the road for employees if financial firms' stocks climb.

—Aaron Lucchetti contributed to this article.

Write to Liz Rappaport at liz.rappaport@wsj.com

Apple Could Create Its Own TV Reality

JANUARY 13, 2012   THE WALL STREET JOURNAL

By ROLFE WINKLER

Would it be called iTV? Perhaps the iPanel?

The TV prototype in Apple's skunk works has many wondering if the tech giant will upend yet another major market. Excitement over such a device increased when Walter Isaacson's recent biography quoted Apple's late Chief Executive Steve Jobs saying he wanted "to create an integrated television set" and that he had "finally cracked" the issue of simplifying the user interface.

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Apple hasn't spoken of such a device, and while it is known to exist, its precise form is a mystery. For curious investors, it is useful to study Apple's past forays into other new markets. It overcame doubts to remake music with the iPod, telephony with the iPhone and computing with the iPad.

TV may prove trickier. Yet there are opportunities for Apple to innovate. Besides smart design, a defining feature of Apple's three blockbuster devices is simplicity. With a TV, Apple could streamline complicated on-screen menus and multiple remote-controls.

Apple wouldn't be first to market. About 24% of the 253 million TVs sold in 2011 were Internet-connectable. Yet only a fifth of those buying such sets actually connect them to the Web and keep them so, reckons IHS iSuppli's Tom Morrod. That is perhaps because many don't feature Wi-Fi, which reduces wire clutter. Apple's wireless technology could address this.

Changing media-consumption habits also may help. Evidence of TV viewers cutting their cable cord in favor of Internet-delivered video is emerging. Deloitte's latest annual survey of watching habits found 9% of respondents had cut the cord and another 11% were thinking about it. Apple might naturally cater to this small but growing segment. Indeed, the iTunes Store—boasting 225 million active users as of July—could give it a leg up.

Just as Apple faced off with Nokia when it launched the iPhone, with TVs it would face powerful rivals like Samsung Electronics, LG Electronics and Sharp. As this week's Consumer Electronics Show demonstrated, these companies aren't short of ideas either. Apple's smartphone carved out a niche as a premium-priced device. But Mr. Morrod notes that existing TV makers capably serve high-end customers already. Sharp has TVs that set a new standard for ultrahigh-resolution. And Samsung this week unveiled technology for navigating TVs via voice and gesture.

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The logo outside an Apple store in California in October.

Selling TVs also is a low-growth, low-margin business. IHS iSuppli expects TV shipments to be flat in 2012, as they were last year. And profits are thin even for Samsung and LG, which make their own components and enjoy huge scale. Bernstein Research analyst Toni Sacconaghi estimates their TV operating-profit margins are in the low- to mid-single digits, while Apple's iPhone commands 45%.

Perhaps the biggest challenge would be securing great video content to set an Apple TV apart from others. Some is available online free (like Hulu), by subscription (Netflix), or available for purchase through iTunes, but much of the best is available only to cable subscribers. Content owners that benefit from high affiliate fees paid by cable companies aren't necessarily keen to risk that revenue by letting Apple sell their content on a timely basis.

Apple had an easier go of it with its iPod, as piracy already had hammered music profits when the device arrived. Labels had little choice but to sell content via iTunes, desperate as they were to stabilize their business.

But don't forget Apple's huge cash pile, which it could use to secure TV content. More broadly, it is worth recalling that before the iPhone launch, many couldn't fathom why Apple wanted to enter such a low-margin, cutthroat business. It did so to transform it and, thereby, change the economics. Marry that track record with the TV's possibilities, and fewer will bet against Apple's chances this time around.

Write to Rolfe Winkler at rolfe.winkler@wsj.com

Nokia Outdesigns Apple

January 10, 2012   The Daily Beast

Dan Lyons

There was a time, not so very long ago, when Microsoft was a top seller of smartphone software. And Nokia, the Finnish electronics company, was the top seller of mobile devices. Then both of them got blindsided by Apple’s introduction of the iPhone in 2007. At first they just laughed. Who would buy that crazy overpriced phone from Apple that doesn’t even have a keyboard? Lots of people, it turns out. Which is why Nokia has seen the market share of its Symbian smartphone platform collapse to 19 percent today from 63 percent in 2007, according to IDC, a market researcher. Microsoft once had 13 percent share but now has only 2 percent, IDC says, making its presence almost negligible.

But now, working together, these companies are trying to plot a comeback, and based on the phone they introduced at the Consumer Electronics Show on Monday, they might actually stand a chance.

The sleek new Nokia Lumia 900 (PDF) has a 4.3-inch screen, an 8-megapixel camera, and runs on AT&T’s speedy new 4G LTE network. The phone “represents a new dawn for Nokia in the U.S.,” said Chris Weber, president of Nokia Americas, in a press release.

Nokia also released a YouTube video showing off the new phone.

The Lumia 900 runs the latest version of Microsoft’s mobile phone software, which is called Windows Phone 7.5 (code-name: Mango). This is a stunning piece of software that is radically different from what you get on an Apple iPhone or any of the Android phones. Instead of a bunch of same-sized icons, Microsoft uses big, bright-colored tiles. They can be moved around and customized. Some are “dynamic,” meaning they display information that is constantly updated when, for example, one of your friends posts something on Facebook.

Microsoft and Nokia struck a major partnership deal last February, with Nokia committing to make Windows Phone its primary mobile operating software. Previously Nokia had developed its own operating software. The deal was helped along by the fact that Nokia’s CEO, Stephen Elop, is a former Microsoft executive.

I recently I spent some time with the Lumia 900’s little brother, the Lumia 800, which has been a hot seller in Europe but hasn’t come to the U.S. yet. That phone also runs the Mango operating system and it’s a gorgeous device, with an elegant shell beautifully crafted from a single piece of polycarbonate plastic. The operating software is smooth and fast. In many ways the Lumia 800 was the nicest phone I’ve ever used. It makes the iPhone seem old and outdated, and makes Android phones seem big and clunky.

I usually have a bunch of different cell phones at any given time. I set them up so they all ring whenever someone calls my mobile number. Then I try not to think about it and just see which phone I tend to pick up when they all ring, and which phone I grab to toss in my pocket when I go out. Over and over again, the Lumia 800 was the one I picked up.

The Lumia 900 picks up from there. It’s bigger than the Lumia 800, which has a 3.7-inch screen. But it has the same sleek European modernist design feel.

Indeed, when it comes to design the new Nokia flagship devices have arguably leapfrogged past Apple, the company known for its cutting-edge design. It’s hard to predict whether the new Noka Windows phones will catch on in America. Apple and Android are so well entrenched that some pundits think whatever Microsoft and Nokia are doing will be too little too late. Not surprisingly, the folks at Nokia beg to differ. “I still believe that great products that are perceived as modern can change things very quickly,” says Marko Ahtisaari, the head of design at Nokia. “This is a long race that we are starting.”

As he puts it, the mobile phone market today is about where the automotive industry was in the 1890s, when standards had not emerged and people hadn’t even decided that a steering wheel was the best way to control a car.

Ahtisaari says the user interface of the iPhone “is becoming more dated as we speak. People think the iOS interface is the new generic and nothing will ever be better, but I disagree with that.”

Since joining Nokia in 2009, Ahtisaari has been trying to craft a new design language. “We share this focus on refining, taking away complexity, removing anything unnecessary, doing fewer things but better,” he says.

While pundits and customers in the U.S. focus on high-end devices, Ahtisaari says the bigger and more interesting opportunity lies at the other end of the market. “The big story is in Asia and Africa, it’s the next billion people and how we bring them online,” he says. “The line between smartphones and feature phones is becoming completely blurred. I’m as excited about making a breakthrough in a 10-euro phone as I am about a 1,000-euro phone. The next billion people coming online, that’s the real story.”

Indeed, the mobile market is so big that there may be room for everyone. I recently had lunch with a guy who works in the mobile space, and I asked him which platform he thought would win—Apple, Android or Windows. “All of them,” he said. The folks at Nokia and Microsoft are surely hoping that’s the case. With the new Lumia phones, they’ve made about as strong an effort as could be imagined.

Fewer Property Deals Being Done in Hong Kong

JANUARY 4, 2012   THE WALL STREET JOURNAL

By POLLY HUI

HONG KONG—With the market volatile and mortgage rates rising, the number of property transactions in Hong Kong fell to a five-year low in 2011, the city's largest real-estate agency said Wednesday.

Property prices were up through the first 10 months of the year, though with a decline in the latest months, and analysts warned if external factors such as the euro-zone debt crisis continue to worsen, prices could turn down more steeply than during the 2008 financial crisis.

The number of property sales in 2011 was down 33% from a year earlier, to108,814, according to Centaline Property Agency, the lowest total since 2006, when 99,087 transactions were recorded. Property prices rose 11% in the first ten months of 2011, government statistics show, although they fell 4% between July and October.

"This is an unusual and unhealthy phenomenon. Despite the sharp fall in transaction volume, prices aren't really dropping," said Wong Leung-sing, associate director of Centaline's research department.

Mr. Wong said the development was mainly a result of measures imposed by the government to curb speculation, including a tax introduced in November 2010 on sales of properties within two years of purchase. With speculators mostly out of the market, owner-occupiers were reluctant to sell, holding down supply and so supporting prices.

But "if there is a triggering event such as a further deterioration of the euro-zone debt woes, owner-occupiers may start selling, resulting in a sudden fall in prices that could be much sharper than in 2008," he said.

Hong Kong property prices fell about 12% in the six months after September 2008, when the global financial crisis hit the territory. But prices gradually picked up in 2009.

Government statistics released Wednesday showed sharp declines in the number and value of residential property transactions in December. At 4,301 units, the number was down 54% from a year earlier and 10% from November. Value, at 25.7 billion Hong Kong dollars (US$3.3 billion), was down 36% from a year earlier and 28% from November.

The decline in transactions over recent months comes as mortgage rates rise, albeit from a low base of less than 1% for some adjustable-rate loans. The price increases in early 2011 came on the back of a 24% surge in 2010, as abundant liquidity and persistent low interest rates buoyed the market.

Slowing Inflation Cheers Fed

DECEMBER 27, 2011   THE WALL STREET JOURNAL

By JON HILSENRATH

U.S. inflation is slowing after a surge early in the year.

This is good news for Americans, as it means the money in their pockets goes further. It also is welcome at the Federal Reserve, which has been counting on an inflation slowdown. It gives the Fed some maneuvering room in 2012 if central-bank officials want to take steps to bolster economic growth.

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The slowdown has been apparent for months in some commodities. The price of copper is down 21% from a year earlier. Cotton is down 45%. Natural-gas prices continue to fall, and crude oil has retreated from peaks hit in April, though not as sharply as other commodities.

Now, more broadly, the Commerce Department's measure of consumer prices for November, released Friday, stood 2.5% above year-ago levels in November, down from year-over-year increases of 2.7% in October and 2.9% in September. A less volatile measure excluding food and energy, watched closely by the Fed, rose 1.7% from a year earlier.

Another closely tracked measure, the Labor Department's consumer-price index, has risen at a 0.8% annual rate in the past three months.

Inflation appears to be leveling off in 4Q2011 as November's rate came in at 2.5%, compared to October's 2.7% year-over-year rate. Kelly Evans , David Reilly and Steven Russolillo discuss the impact on the U.S. economy. Photo: AFP/Getty Images

Some business executives are reluctant to make too much of the trend after being stung by sharply higher input prices earlier in 2011. Deere & Co., the agricultural-equipment maker, warned last month that even though raw-materials costs are down from earlier peaks, they would be $500 million higher in 2012 than this year because of the commodity-price surge early in 2011. That amounts to about 2% of its sales but it did little to dent its profit amid strong global demand for farm products.

"There is some evidence that there could be a slight abatement to some of those [raw-materials] costs," Kurt Darrow, chief executive of La-Z-Boy Inc., the furniture manufacturer, told analysts earlier this month. "But no matter what the abatement may be, it's still going to be significantly higher than last year."

In November, 29% of manufacturing purchasing managers surveyed by the Institute for Supply Management said the prices they paid for materials were going down, while 19% said they were going up. That is a big turnabout. In April, 72% said input costs were going up and 1% said they were falling.

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Bloomberg News

A shopper passing a Gap store in New York last week. Inflation at the consumer level is slowing, just as prices of some commodities have fallen.

Meanwhile, increases in labor costs remain muted. Hourly wages of private-sector U.S. workers were up 1.8% in November from a year earlier, before adjusting for inflation. And in the third quarter, overall labor costs for each unit of output produced by businesses outside farming—a measure that reflects both wages costs and productivity gains—were only 0.4% above year-earlier levels.

Some economic forecasters see U.S. inflation cooling further in the coming year. Economists at J.P. Morgan project that the consumer-price index will rise just 1.2% in 2012, with Bruce Kasman, the firm's chief economist, saying the global economic slowdown is a big factor. Officials in emerging markets, spooked by soaring inflation in their own economies earlier this year, raised interest rates and took other steps to slow growth. Those policies seem to be biting. Mr. Kasman expects emerging-market economies to grow 4.7% in 2012, a sharp slowdown from 5.7% in 2011 and 7.3% in 2010. Because countries like China, Brazil and India are such big consumers of commodities, this slowdown will put downward pressure on inflation everywhere, Mr. Kasman said.

Federal Reserve officials are watching the inflation slowdown with relief. Critics have said the central bank has sowed the seeds of inflation by keeping short-term interest rates down and printing money to buy long-term bonds. Fed Chairman Ben Bernanke and other officials have been predicting inflation would come down because they believed the run-up in commodity prices was temporary.

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• Fed Policy Delivers a Tonic for Stocks

Even some of the Fed's most outspoken inflation hawks indicate they aren't too worried. "I expect that companies who pushed through prices rather aggressively in 2011 will likely effect rollbacks in 2012, mitigating the headline price pressures we experienced this year," Richard Fisher, president of the Federal Reserve Bank of Dallas, said in a speech earlier this month. In the statement issued after its Dec. 13 meeting, the Fed's policy committee said it "anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee's…mandate"—that is, below 2% in the view of most Fed officials.

The Fed has been considering new steps to spur growth. Two ideas are on the table: commit to keep short-term interest rates near zero for even longer than through mid-2013, and restart a bond-buying program aimed at driving already-low long-term interest rates lower. Before taking either step, though, Fed officials would want to have some comfort that they wouldn't be creating undesired inflation.

"This inflation news would open the door for Fed action if the unemployment rate is drifting higher in the first half of the year," said Mr. Kasman.

The first step now looks more likely. Both steps also depend on how the economy performs. If growth picks up and unemployment retreats, officials could decide bond-buying is unnecessary.

Waning inflation seems to be contributing to improving household spirits. University of Michigan surveys of consumer confidence have been on an uptrend since September, and consumers' inflation expectations have been retreating. In May, households surveyed by the University of Michigan expected inflation in the year ahead of 4.1%. In December, the expectation for year-ahead inflation had retreated to 3.1%, the smallest expected increase in a year.

Inflation is retreating as a concern in bond markets, too. Yields on inflation-sensitive 10-year Treasury notes have fallen from 3.7% in February to about 2%. In the market for Treasury Inflation Protected Securities, where investors make bets on future inflation, expected inflation in five years has fallen to about 2.2% from near 3% in April.

Write to Jon Hilsenrath at jon.hilsenrath@wsj.com

各擁題材，筆電代工廠2012重拾動力

2012/01/01 12:04   工商時報

記者詹子嫻

【時報-台北電】筆電產業2011年持續籠罩在平板搶市的陰霾，導致代工業者成長力道受阻，但縱觀2012年，筆電代工廠在各擁題材下，2012年可望重拾成長動力，其中緯創、仁寶分別獲惠普、聯想青睞，和碩搶下蘋果iPad3訂單，廣達及英業達則持續布局伺服器業務。

2011年仁寶因主要客戶宏碁營運落底，導致下修年度筆電出貨目標至4,000～4,200萬台，但仁寶與聯想合資設廠，聯想已將部分筆電、AIO訂單保留給仁寶，戴爾部分也從商用筆電機種延伸到消費機種，加上三星首度釋出筆電代工訂單，也花落仁寶，分散客戶策略將在2012年發酵。仁寶預估，2012年筆電出貨量將成長2成。

而和碩雖打入蘋果iPhone供應鏈，但大舉投資設備，卻因初期訂單不多，2011年前3季每股仍虧損0.38元，不過市場傳出，和碩已爭取到蘋果iPad 3組裝訂單，可望隨訂單規模擴大，走出先前「毒蘋果」陰霾，後續有機會再延伸到Macbook。另外也從仁寶手上搶下東芝大量筆電訂單，法人預估，和碩2012年筆電出貨量將成長3成。

另外，廣達及英業達積極布局伺服器代工，具雲端運算題材。由於2012年企業建立私有雲系統意願增溫，伺服器市場需求不減，日前好萊塢視覺特效公司R＆H來台投資，其中特效雲端中心將由廣達及中華電協助建置，加上Google即將來台設立資料中心，廣達有機會爭取部分訂單。廣達預估，2012年非筆電營收占比可望超過3成，筆電出貨年增率約5～10％。

緯創部分，主要爭取到惠普來自偉創力的轉單，在TV部分除既有客戶索尼外，據傳也拿下聯想電視「樂TV」訂單，法人預估2012年緯創NB出貨量可望成長1成。

Beijing Launches Its Own GPS Rival

DECEMBER 28, 2011 THE WALL STREET JOURNAL

By JEREMY PAGE
BEIJING—China has begun operating a homegrown satellite-navigation service that is designed to provide an alternative to the U.S. Global Positioning System and, according to defense experts, could help the Chinese military identify, track and strike U.S. ships in the region in the event of armed conflict.

The Beidou Navigation Satellite System started providing initial positioning, navigation and timing services to China and its "surrounding areas" on Tuesday, Ran Chengqi, a spokesman for the system, told a news conference.

WSJ's Jeremy Page has details of a new GPS system launched by China this week. The new system, featuring 10 satellites as guidance, is expected to aid in military tracking. AP Photo/Xinhua, Qian Xian'an

He said China had so far launched 10 satellites for the Beidou system, including one this month, and planned to put six more in orbit in 2012 to enhance the system's accuracy and expand its service to cover most of the Asian-Pacific region.
China began building an experimental precursor to Beidou in 2000 with the goal of creating its own global system—called Compass—with 35 satellites, by 2020. The only other operational global system apart from GPS is Russia's Glonass, although the European Union's Galileo system is set to be completed by 2020.

Beidou, like GPS, will provide free civilian services—for both Chinese and foreign users—that can be used in conjunction with commercially developed applications to help navigate private cars, monitor commercial trucks and ships and assist during natural disasters. It has the added advantage of supporting SMS messages.

The system is designed partly to give Chinese companies a larger share of the satellite-navigation-system market in China, which is currently dominated by GPS and which the state-run Xinhua news agency said was valued at 50 billion yuan ($7.9 billion) by May 2011, compared with four billion yuan in 2003.

Mr. Ran didn't mention potential military applications at the news conference, according to a transcript on the website of the information office of China's State Council, or cabinet.
But the system will also give the Chinese military an alternative to GPS, which was developed by the Pentagon and is still controlled by the U.S. government. The U.S. could, in theory, disable or deny access to the system by others in the event of a conflict, although it says it never has done so in the past. GPS is thought to be widely used by the Chinese military, according to defense experts.
Beidou isn't believed to be as accurate as the U.S. GPS. Nonetheless, it could be used in conjunction with Yaogan remote-sensing satellites and older imaging satellites to support tactical military operations, according to a paper by Eric Hagt and Matthew Durnin published in the Journal of Strategic Studies in October.

"Although China still has a long way to go before it has continuous real-time tactical coverage, even of a regional maritime environment, it now has frequent and dependable coverage of stationary targets and at least a basic ability to identify, track and target vessels at sea," they wrote. "Based purely on capabilities, with a space-based reconnaissance system as the backbone, China is clearly acquiring greater ability not only to defend against intruding aircraft carriers but to project force as well."
China's Ministry of Defense didn't immediately respond to a request to comment. Beidou—which is the Mandarin term for the Big Dipper constellation—is run by China Aerospace Science & Technology Corp., one of the main state-owned contractors for the Chinese space program, which is largely controlled by the Chinese military.

Military experts see Beidou as part of China's efforts over the past 15 years to develop capabilities designed to deny or hinder U.S. naval access to waters around its shores in case Washington tries to intervene in a conflict—over Taiwan, for example, which Beijing sees as a rebel province.
The South China Sea is another potential flashpoint as tensions have been rising this year between China and neighboring countries that also claim territorial waters there. Beijing has repeatedly accused the U.S. of meddling in the issue and has warned it to cease surveillance operations in the area.

This year, China has passed several milestones in developing military technology that could be used in these areas: It conducted the first test flight of a stealth fighter prototype in January and began sea trials of its first aircraft carrier in August.
China also confirmed for the first time that it was developing an antiship ballistic missile that the Pentagon says may already be basically operational and eventually capable of hitting a moving aircraft carrier up to 1,700 miles, or 2,700 kilometers, from China's shores.

Beidou could be used in conjunction with other satellites, drones and related technology to help track U.S. ships, position its own submarines and other vessels, and guide antiship ballistic missiles toward their targets, according to military experts.

It also gives China a significant tactical advantage over neighbors with which it has territorial disputes, including India, which is developing its own regional satellite navigation system but doesn't expect to complete it for several years.
China still lags behind the U.S in terms of how long, and how accurately, it can monitor any part of the globe from space: GPS, which was launched for civilian use in 1995, now consists of 30 satellites and can be accurate to within less than 10 meters, or 33 feet, although the U.S. military has access to more precise readings.

Mr. Ran said Beidou was accurate to within 25 meters and would reduce that to 10 meters by the end of next year. The Chinese military may also have access to more accurate data, but because China has fewer satellites, it can't monitor the same spot for as long as the U.S.A preliminary version of the system's Interface Control Document, which allows foreign and Chinese entities access to its basic technical data, was made available on the system's website, beidou.gov.cn, from Tuesday, he said.
China's plans to develop a satellite positioning system are thought to date back to 1983 when then-President Ronald Reagan announced plans to build space-based missile-defense systems in what became known as his "Star Wars" speech.

Beijing's plans gained momentum after its military leaders noted the importance of GPS for U.S. forces during the first Gulf War in 1991. Five years later, Chinese military commanders were frustrated when they couldn't locate two carrier groups that the U.S. deployed near Taiwan after China fired missiles into the sea off the island's coast in a failed attempt to influence the outcome of an election there, according to several defense analysts.

China launched the first two satellites of an experimental system called Beidou-1 in 2000 and made it available to civilians in 2004, but the service wasn't popular as its associated devices used to access the system—called terminals—were relatively large and much more expensive than GPS ones.
The system has been used, however, to coordinate the movement of Chinese troops, to help border guards patrol in remote areas, and to track fishing vessels in the South China Sea, according to Chinese state media.

In 2007, China launched the first satellite of its second-generation system, called Beidou-2, which is thought to use cheaper terminals and, unlike its predecessor, doesn't require a ground station.
Mr. Ran said Beidou is already being used by more than 100,000 clients in China and has been used to help track government vehicles in the southern province of Guangdong, and to assist disaster-relief work after an earthquake in the western province of Sichuan in 2008.

He said it was compatible with the world's other major global satellite navigation systems, and encouraged Chinese and foreign enterprises to help develop terminals that could use the Chinese network.

Write to Jeremy Page at jeremy.page@wsj.com