Oil futures retreated from a new overnight record above $103 as the dollar gained strength and Turkish forces withdrew from northern Iraq, removing two of the reasons underpinning crude's dramatic 19 percent rise from earlier this month.
But many analysts believe the declines may be temporary, and that oil is poised to rise above $103.76 a barrel. That's the price many believe to be oil's all-time high on an inflation-adjusted basis, set in early 1980 during the Iranian hostage crisis.
Gasoline and diesel prices, meanwhile, continued to soar. Gas prices rose 0.3 cent overnight to a national average of $3.164 a gallon, creeping closer to last May's record of $3.227 a gallon, according to AAA and the Oil Price Information Service. Diesel prices jumped 1.5 cents to a new record national average of $3.642 a gallon.
While most Americans fuel their cars with gasoline, most of the products they buy are transported by trucks, trains and ships that burn diesel. While gas prices are unlikely to rise as high as $4 a gallon, diesel may well pass that psychologically important level this spring, boosting prices of nectarines, computers, clothing and virtually every other consumer product, said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service in Wall, N.J.
"It's everything that gets shipped," Kloza said of diesel fuel's impact on the economy. "That is the one that is much scarier."
Gas and diesel prices are following crude oil, which spiked to a new record of $103.05 overnight. In midday trading on the New York Mercantile Exchange, light, sweet crude for April delivery fell 44 cents to $102.15 a barrel.
The dollar rose against the euro Friday, reversing one of the factors that has attracted huge flows of investment capital to the oil market. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the dollar is falling. That logic tends to reverse itself when the dollar weakens.
Also giving investors reason to sell was Turkey's decision to withdraw its forces from northern Iraq, which they invaded earlier this week in search of Kurdish rebels. Turkish attacks on Kurds in northern Iraq -- and the concern that Kurds would retaliate by cutting off oil supplies -- have helped propel oil to new records in recent months.
Traders also continue to fret over OPEC, which meets next week to consider production levels. The prospect that the Organization of Petroleum Exporting Countries might cut production levels has helped fuel oil's recent rise. But with prices holding above $100, most analysts now expect OPEC to hold production steady.
Despite oil's modest retreat Friday, many analysts believe the investment flows that have pushed prices higher this year are not about to dry up.
"We've just got a huge, huge speculative drive going on here," said Jim Ritterbusch, president of Ritterbusch and Associates, an energy consultancy in Galena, Ill. "The fresh buying brings in new buying."
Many analysts believe the underlying fundamentals of oil supply and demand do not justify such high prices. Some predict speculative investing could push oil prices as high as $120, while others argue prices have formed a bubble, and could crash back to the $70 range.
Other energy futures also fell Friday. In other Nymex trading, March heating oil fell 0.35 cent to $2.8421 a gallon while March gasoline futures fell 1.57 cents to $2.48 a gallon. April natural gas futures fell 8.8 cents to $9.355 per 1,000 cubic feet.
In London, Brent crude futures fell 52 cents to $100.38 a barrel on the ICE Futures exchange
Friday, February 29, 2008
Monday, February 25, 2008
NEWS AT A GLANCE
Visa readies largest U.S. IPO
Visa International said it expects to earn up to $18.76 billion in its long-awaited initial public offering, making it the largest U.S. IPO on record. The previous record was AT&T Wireless in 2000, at $10.6 billion. In a filing with the Securities and Exchange Commission, Visa said it would sell 447.2 million shares, including 406.6 million to the public, at between $37 to $42 a share. Visa will trade under the ticker symbol "V" on the New York Stock Exchange. The SEC filing also show that Visa beat rivals MasterCard and American Express last year in terms of number of transactions and dollar amount.
Electronic Arts bids on 'Grand Theft Auto' maker
Video-game maker Electronic Arts offered $2 billion to acquire Take-Two Interactive Software, the maker of top-selling game "Grand Theft Auto." Take-Two rejected the offer over the weekend, and Electronic Arts moved yesterday to push the takeover bid through shareholders. The $26-a-share offer is 64 percent higher than the closing price before the bid. EA's move follows Vivendi's pending purchase of rival Activision, but comes before Take-Two's release of expected blockbuster "Grand Theft Auto IV." Still "the price is more than fair," said Wedbush Morgan Securities analyst Michael Pachter. "I'm quite confused why Take-Two would reject it."
Adobe takes on PC-Internet divide
Adobe Systems is releasing its AIR software development system today, providing a way for programmers to create hybrid Internet-based applications that run on PC desktops when a computer is offline. Some companies have already developed AIR versions of their online services; eBay is offering eBay Desktop, for example, which allows auctions management offline. Adobe is facing off against Google, Microsoft, and others to blur the line between the PC desktop, smart phone, and Web browser. "This is a battle for the hearts and minds of people who are building things," said Adobe chief technology officer Kevin Lynch.
Tackle the ice, but hold the salt
Rock salt is plentiful and cheap, and cities have used it to de-ice roads since World War II. But several states and municipalities are looking to overthrow the salt regime, which is also harmful to roads, cars, and vegetation. Akron and other Ohio towns use a goo derived from sugar beets to de-ice roads, and New Jersey uses a rum derivative. And in Colorado, self-described "obsessive-compulsive" lab rat Steve Bytnar has developed a proprietary white liquid that is used in the Denver area. These goos and liquids cost more up front, but their proponents argue that they work better and save money over the long run.
BAD DAY FOR: Sweet 16, as the number of 16-year-olds with a driver's license fell to 29.8 percent in 2006, from 43.8 percent in 1998, amid higher insurance rates, more restrictive laws, and a shift to more costly private driving schools. Parents are also more willing now to chauffeur their driving-age children around.
NOTED: Gas prices have risen 16 cents over the past two weeks, to an average of $3.10 a gallon, according to the Lundberg Survey. That's about 75 cents higher than a year ago. The rising prices mirror the price of crude oil. Trilby Lundberg, the survey's publisher, dismissed as "absurd" the idea that the Organization of Petroleum Exporting States would raise output soon. "They are certainly loving these prices,"
Visa International said it expects to earn up to $18.76 billion in its long-awaited initial public offering, making it the largest U.S. IPO on record. The previous record was AT&T Wireless in 2000, at $10.6 billion. In a filing with the Securities and Exchange Commission, Visa said it would sell 447.2 million shares, including 406.6 million to the public, at between $37 to $42 a share. Visa will trade under the ticker symbol "V" on the New York Stock Exchange. The SEC filing also show that Visa beat rivals MasterCard and American Express last year in terms of number of transactions and dollar amount.
Electronic Arts bids on 'Grand Theft Auto' maker
Video-game maker Electronic Arts offered $2 billion to acquire Take-Two Interactive Software, the maker of top-selling game "Grand Theft Auto." Take-Two rejected the offer over the weekend, and Electronic Arts moved yesterday to push the takeover bid through shareholders. The $26-a-share offer is 64 percent higher than the closing price before the bid. EA's move follows Vivendi's pending purchase of rival Activision, but comes before Take-Two's release of expected blockbuster "Grand Theft Auto IV." Still "the price is more than fair," said Wedbush Morgan Securities analyst Michael Pachter. "I'm quite confused why Take-Two would reject it."
Adobe takes on PC-Internet divide
Adobe Systems is releasing its AIR software development system today, providing a way for programmers to create hybrid Internet-based applications that run on PC desktops when a computer is offline. Some companies have already developed AIR versions of their online services; eBay is offering eBay Desktop, for example, which allows auctions management offline. Adobe is facing off against Google, Microsoft, and others to blur the line between the PC desktop, smart phone, and Web browser. "This is a battle for the hearts and minds of people who are building things," said Adobe chief technology officer Kevin Lynch.
Tackle the ice, but hold the salt
Rock salt is plentiful and cheap, and cities have used it to de-ice roads since World War II. But several states and municipalities are looking to overthrow the salt regime, which is also harmful to roads, cars, and vegetation. Akron and other Ohio towns use a goo derived from sugar beets to de-ice roads, and New Jersey uses a rum derivative. And in Colorado, self-described "obsessive-compulsive" lab rat Steve Bytnar has developed a proprietary white liquid that is used in the Denver area. These goos and liquids cost more up front, but their proponents argue that they work better and save money over the long run.
BAD DAY FOR: Sweet 16, as the number of 16-year-olds with a driver's license fell to 29.8 percent in 2006, from 43.8 percent in 1998, amid higher insurance rates, more restrictive laws, and a shift to more costly private driving schools. Parents are also more willing now to chauffeur their driving-age children around.
NOTED: Gas prices have risen 16 cents over the past two weeks, to an average of $3.10 a gallon, according to the Lundberg Survey. That's about 75 cents higher than a year ago. The rising prices mirror the price of crude oil. Trilby Lundberg, the survey's publisher, dismissed as "absurd" the idea that the Organization of Petroleum Exporting States would raise output soon. "They are certainly loving these prices,"
Saturday, February 23, 2008
Internet Stocks Could Suffer If The Buck Strengthens
The weakness of the U.S. dollar in 2007 provided a nice boost to the top-line growth rates for Google (GOOG), Amazon.com (AMZN), eBay (EBAY) and, to a lesser degree, Yahoo (YHOO). So what happens if the buck starts to strengthen?
In an interesting piece this morning, Lehman’s Douglas Anmuth takes a look at what would happen to the financial results of the major Internet companies if the dollar turned around and strengthened against the other major currencies. A 10% appreciation in the greenback, Anmuth calculates, would chop revenue growth by 7% at Google, 6% at eBay and Amazon, and 3% at Yahoo.
In 2007, Anmuth notes, the dollar fell 9% against the Euro and the British pound, while holding steady against the yen. He notes that eBay, which recently has generated about 51% of revenue overseas, reported 29% growth in 2007, but would have grown just 24% on a currency-neutral basis. Amazon, likewise, grew 39%, but would have grown 34.9% in a constant currency world. Google’s growth rate would have dropped to 51%, from 56%; Yahoo would have grown 7%, not 8%.
Anmuth also notes that the Internet companies are building up substantial cash balances overseas that can’t easily be deployed for buying back stock, paying dividends or other capital allocation moves. At the end of 2007, he notes, Amazon had $1.2 billion - 37% of its cash - in foreign denominated marketable securities. And he says eBay at the end of Q3 had $3.7 billion of its $4.4 billion in cash invested overseas.
Anmuth’s conclusion: “While currency movements can clearly be unpredictable, given weakness in the U.S. dollar in 2007 there may be greater risk to the downside on a reported basis for Internet companies - specifically Google, eBay and Amazon - should the U.S. dollar stabilize or recover beyond what is embedded in current estimates.”
In an interesting piece this morning, Lehman’s Douglas Anmuth takes a look at what would happen to the financial results of the major Internet companies if the dollar turned around and strengthened against the other major currencies. A 10% appreciation in the greenback, Anmuth calculates, would chop revenue growth by 7% at Google, 6% at eBay and Amazon, and 3% at Yahoo.
In 2007, Anmuth notes, the dollar fell 9% against the Euro and the British pound, while holding steady against the yen. He notes that eBay, which recently has generated about 51% of revenue overseas, reported 29% growth in 2007, but would have grown just 24% on a currency-neutral basis. Amazon, likewise, grew 39%, but would have grown 34.9% in a constant currency world. Google’s growth rate would have dropped to 51%, from 56%; Yahoo would have grown 7%, not 8%.
Anmuth also notes that the Internet companies are building up substantial cash balances overseas that can’t easily be deployed for buying back stock, paying dividends or other capital allocation moves. At the end of 2007, he notes, Amazon had $1.2 billion - 37% of its cash - in foreign denominated marketable securities. And he says eBay at the end of Q3 had $3.7 billion of its $4.4 billion in cash invested overseas.
Anmuth’s conclusion: “While currency movements can clearly be unpredictable, given weakness in the U.S. dollar in 2007 there may be greater risk to the downside on a reported basis for Internet companies - specifically Google, eBay and Amazon - should the U.S. dollar stabilize or recover beyond what is embedded in current estimates.”
Thursday, February 21, 2008
Oil $100
Oil prices held near $100 a barrel Thursday after hitting a record overnight as investors poured more cash into crude and other commodities as a hedge against inflation.
Oil futures on Wednesday pushed briefly past $101 a barrel after the U.S. Federal Reserve lowered its forecast for U.S. economic growth this year, convincing energy investors that the central bank will slash interest rates further.
"Investors are going into commodities for a safe haven, because they think commodities may perform better than equities and also may be hedges against inflation," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
Lower interest rates can help the economy but tend to weaken the dollar, encouraging investors to shift funds into hard assets like gold or oil as a safeguard against inflation. After oil rallied above $100 a barrel, precious metals such as gold and silver also hit records.
The possible rate cut is also viewed as hopeful of bolstering a flagging U.S. economy, which would assuage fears of weakening crude demand.
"We are expecting the U.S. Federal Reserve will cut interest rates further," said David Moore, a commodity strategist with the Commonwealth Bank of Australia in Sydney. "That will help mitigate against the risks of U.S. recession, and would likely be supportive for the oil price."
The March light, sweet crude oil contract, which expired Wednesday, rose overnight as high as $101.32 a barrel, a new trading record. It settled at a record close of $100.74 a barrel.
On Thursday, light, sweet crude for April delivery added 43 cents to $100.13 a barrel in Asian electronic trading on the New York Mercantile Exchange by midafternoon in Singapore. It was unchanged Wednesday at $99.70 a barrel.
Analysts said the rise this week in oil prices was not based on supply and demand fundamentals and that they expected increasing price volatility.
"We are in the spring season, when worldwide demand is typically lower and inventories are building. Yet we see a strengthening of oil," Shum said. "It's really a divergence."
Prices have surged on geopolitical factors such as the possibility that the Organization of Petroleum Exporting Countries may cut its output at a March 5 meeting.
"What that all means is that investors could move out of oil as quickly as they moved in and so this situation could be unstable and pricing could drop as fast as it has gained," he said.
Weighing on prices Thursday were expectations that the U.S. Department of Energy would report later in the day that U.S. crude inventories rose in the seven days to Feb. 15 for the sixth straight week in a row.
"The general expectation is that you'll see another increase in U.S. crude oil inventories," Moore said. "If there was an increase that would just take a bit of the edge off oil prices."
Crude oil inventories were expected to rise 2.9 million barrels, according to a Dow Jones Newswires survey of analysts' estimates.
Gasoline inventories were seen growing 1 million barrels while stocks of distillates, which include heating oil and diesel fuel, were expected to fall 1.5 million barrels.
Heating oil futures rose 0.33 cent to $2.7579 a gallon while gasoline prices added 0.53 cent to $2.5905 a gallon. Natural gas futures rose 0.5 cent to $8.97 per 1,000 cubic feet.
Brent crude added 36 cents to $98.78 a barrel on the ICE Futures exchange in London.
Associated Press business writer Thomas Hogue contributed to this story from Bangkok, Thailand.
Oil futures on Wednesday pushed briefly past $101 a barrel after the U.S. Federal Reserve lowered its forecast for U.S. economic growth this year, convincing energy investors that the central bank will slash interest rates further.
"Investors are going into commodities for a safe haven, because they think commodities may perform better than equities and also may be hedges against inflation," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
Lower interest rates can help the economy but tend to weaken the dollar, encouraging investors to shift funds into hard assets like gold or oil as a safeguard against inflation. After oil rallied above $100 a barrel, precious metals such as gold and silver also hit records.
The possible rate cut is also viewed as hopeful of bolstering a flagging U.S. economy, which would assuage fears of weakening crude demand.
"We are expecting the U.S. Federal Reserve will cut interest rates further," said David Moore, a commodity strategist with the Commonwealth Bank of Australia in Sydney. "That will help mitigate against the risks of U.S. recession, and would likely be supportive for the oil price."
The March light, sweet crude oil contract, which expired Wednesday, rose overnight as high as $101.32 a barrel, a new trading record. It settled at a record close of $100.74 a barrel.
On Thursday, light, sweet crude for April delivery added 43 cents to $100.13 a barrel in Asian electronic trading on the New York Mercantile Exchange by midafternoon in Singapore. It was unchanged Wednesday at $99.70 a barrel.
Analysts said the rise this week in oil prices was not based on supply and demand fundamentals and that they expected increasing price volatility.
"We are in the spring season, when worldwide demand is typically lower and inventories are building. Yet we see a strengthening of oil," Shum said. "It's really a divergence."
Prices have surged on geopolitical factors such as the possibility that the Organization of Petroleum Exporting Countries may cut its output at a March 5 meeting.
"What that all means is that investors could move out of oil as quickly as they moved in and so this situation could be unstable and pricing could drop as fast as it has gained," he said.
Weighing on prices Thursday were expectations that the U.S. Department of Energy would report later in the day that U.S. crude inventories rose in the seven days to Feb. 15 for the sixth straight week in a row.
"The general expectation is that you'll see another increase in U.S. crude oil inventories," Moore said. "If there was an increase that would just take a bit of the edge off oil prices."
Crude oil inventories were expected to rise 2.9 million barrels, according to a Dow Jones Newswires survey of analysts' estimates.
Gasoline inventories were seen growing 1 million barrels while stocks of distillates, which include heating oil and diesel fuel, were expected to fall 1.5 million barrels.
Heating oil futures rose 0.33 cent to $2.7579 a gallon while gasoline prices added 0.53 cent to $2.5905 a gallon. Natural gas futures rose 0.5 cent to $8.97 per 1,000 cubic feet.
Brent crude added 36 cents to $98.78 a barrel on the ICE Futures exchange in London.
Associated Press business writer Thomas Hogue contributed to this story from Bangkok, Thailand.
Wednesday, February 20, 2008
Delta-Northwest Combination Deal
An impasse among pilot negotiators over blending seniority lists put a $20 billion deal to combine Delta Air Lines Inc. and Northwest Airlines Corp. in "serious jeopardy" as the boards of the two companies prepared to meet Wednesday, two people close to talks told The Associated Press.
The people said the pilots unions have agreed on a comprehensive joint contract, but they are unable to agree to how seniority for the 12,000 pilots would work under a combined carrier. The people asked not to be named because of the sensitive stage of the talks.
They said late Tuesday that the pilot talks were expected to continue Wednesday, but if no agreement is reached, a deal on a combination of the two airlines would be in real trouble.
The boards of both companies were expected to vote on a combination agreement Wednesday if a pilot deal is in place by then. Otherwise, they were expected to just get an update on the merger talks, three people close to the talks said.
One of the officials close to the talks said Northwest's board might only meet by teleconference or, if things fall apart, not meet at all.
A Delta spokeswoman declined to comment on consolidation issues involving Delta. Delta has previously said it was considering a possible consolidation transaction, but it has not commented beyond that.
Talk of airline consolidation has heightened in recent months amid persistently high fuel prices, which are eating away at the industry's bottom line.
A combination of Atlanta-based Delta and Eagan, Minn.-based Northwest would create the world's largest airline in terms of traffic. That's before any divestitures regulators might require them to make if they combine.
There also has been speculation about a possible combination of Chicago-based UAL Corp.'s United Airlines and Houston-based Continental Airlines Inc., which would be a bigger airline than Delta-Northwest in terms of traffic.
The clock is ticking to get any deals accomplished quickly, some observers say. That's because industry observers believe a combination has a better chance of surmounting the considerable political and regulatory hurdles under the current administration than under President Bush's successor.
Delta and Northwest don't need a labor agreement between their pilots unions before announcing a combination, but having one in place now could help them speed up the integration of the two carriers down the line.
One of the people close to the talks said Tuesday night that a small group of Northwest seniority list pilot negotiators want thousands of young Delta pilots to go to the bottom of the combined seniority list as part of agreeing to a deal on seniority. The person said that was a major hang-up.
A spokesman for the Northwest pilots union, Greg Rizzuto, did not immediately return a call and a page to his cell phone seeking comment.
The pilots from both companies have agreed to a significant equity stake for the pilots, including raises for some, one of the people close to the talks said. However, a second person close to the talks said it was not clear that the equity issue had been resolved.
Much of the terms of how the combined carriers would operate had been resolved as of Tuesday, two people close to the talks said. The combined carrier would be based in Atlanta, would be called Delta and Delta's chief executive, Richard Anderson, would be head of the new company, the people said.
It remained unclear what role Northwest's CEO, Doug Steenland, would play in the combined carrier, the people said. A combined Delta-Northwest would maintain a substantial presence in Minneapolis and there would be no furloughs for front-line U.S. employees, the people said. The two airlines have roughly 85,000 total employees.
The people said the pilots unions have agreed on a comprehensive joint contract, but they are unable to agree to how seniority for the 12,000 pilots would work under a combined carrier. The people asked not to be named because of the sensitive stage of the talks.
They said late Tuesday that the pilot talks were expected to continue Wednesday, but if no agreement is reached, a deal on a combination of the two airlines would be in real trouble.
The boards of both companies were expected to vote on a combination agreement Wednesday if a pilot deal is in place by then. Otherwise, they were expected to just get an update on the merger talks, three people close to the talks said.
One of the officials close to the talks said Northwest's board might only meet by teleconference or, if things fall apart, not meet at all.
A Delta spokeswoman declined to comment on consolidation issues involving Delta. Delta has previously said it was considering a possible consolidation transaction, but it has not commented beyond that.
Talk of airline consolidation has heightened in recent months amid persistently high fuel prices, which are eating away at the industry's bottom line.
A combination of Atlanta-based Delta and Eagan, Minn.-based Northwest would create the world's largest airline in terms of traffic. That's before any divestitures regulators might require them to make if they combine.
There also has been speculation about a possible combination of Chicago-based UAL Corp.'s United Airlines and Houston-based Continental Airlines Inc., which would be a bigger airline than Delta-Northwest in terms of traffic.
The clock is ticking to get any deals accomplished quickly, some observers say. That's because industry observers believe a combination has a better chance of surmounting the considerable political and regulatory hurdles under the current administration than under President Bush's successor.
Delta and Northwest don't need a labor agreement between their pilots unions before announcing a combination, but having one in place now could help them speed up the integration of the two carriers down the line.
One of the people close to the talks said Tuesday night that a small group of Northwest seniority list pilot negotiators want thousands of young Delta pilots to go to the bottom of the combined seniority list as part of agreeing to a deal on seniority. The person said that was a major hang-up.
A spokesman for the Northwest pilots union, Greg Rizzuto, did not immediately return a call and a page to his cell phone seeking comment.
The pilots from both companies have agreed to a significant equity stake for the pilots, including raises for some, one of the people close to the talks said. However, a second person close to the talks said it was not clear that the equity issue had been resolved.
Much of the terms of how the combined carriers would operate had been resolved as of Tuesday, two people close to the talks said. The combined carrier would be based in Atlanta, would be called Delta and Delta's chief executive, Richard Anderson, would be head of the new company, the people said.
It remained unclear what role Northwest's CEO, Doug Steenland, would play in the combined carrier, the people said. A combined Delta-Northwest would maintain a substantial presence in Minneapolis and there would be no furloughs for front-line U.S. employees, the people said. The two airlines have roughly 85,000 total employees.
Tuesday, February 19, 2008
Wal-Mart beats estimates
Stock index futures pointed to a higher market open on Tuesday after Wal-Mart Stores Inc (NYSE:WMT - News) reported quarterly results that topped analysts' expectations.
The airline sector could get a boost on merger talk. The New York Times reported Delta Air Lines (NYSE:DAL - News) moved closer on Monday to a deal to buy Northwest Airlines Corp (NYSE:NWA - News), according to people involved in the talks.
Cost-conscious consumers looking for discounted prices helped Wal-Mart, the world's largest retailer, beat Wall Street forecasts.
"Any time the world's largest retailer shows better-than-expected earnings, it shows the consumer is not completely dead," said Edward Bretschger, director of equity sales and trading at Calyon Securities in New York. "Any signs of life really bode well for the economy and market in general. Wal-Mart is the ultimate litmus test for the consumer."
Another multibillion dollar write-down by a major global investment bank failed to halt the gain in U.S. stock futures. Credit Suisse (VTX:CSGN.VX - News) revealed it has written $2.85 billion off the value of its asset-backed investments and found pricing errors on its books.
U.S.-listed shares of Credit Suisse (NYSE:CS - News) were down 5.9 percent to $47.89.
S&P 500 futures (SPc1) rose 10.70 points, above fair value, a mathematical formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract.
Dow Jones industrial average futures (DJc1) rose 111 points, and Nasdaq 100 (NDc1) futures added 20.25 points.
The National Association of Home Builders reports the February reading of its housing market index at 1 p.m. (1 p.m. EST). Economists forecast the gauge held steady at 19 for a second month. In December, the index hit a lifetime low at 18.
On Friday, the Dow Jones industrial average (DJI:^DJI - News) was down 28.77 points, or 0.23 percent, at 12,348.21. The Standard & Poor's 500 Index (^SPX - News) was up 1.13 points, or 0.08 percent, at 1,349.99. The Nasdaq Composite Index (Nasdaq:^IXIC - News) was down 10.74 points, or 0.46 percent, at 2,321.80.
The airline sector could get a boost on merger talk. The New York Times reported Delta Air Lines (NYSE:DAL - News) moved closer on Monday to a deal to buy Northwest Airlines Corp (NYSE:NWA - News), according to people involved in the talks.
Cost-conscious consumers looking for discounted prices helped Wal-Mart, the world's largest retailer, beat Wall Street forecasts.
"Any time the world's largest retailer shows better-than-expected earnings, it shows the consumer is not completely dead," said Edward Bretschger, director of equity sales and trading at Calyon Securities in New York. "Any signs of life really bode well for the economy and market in general. Wal-Mart is the ultimate litmus test for the consumer."
Another multibillion dollar write-down by a major global investment bank failed to halt the gain in U.S. stock futures. Credit Suisse (VTX:CSGN.VX - News) revealed it has written $2.85 billion off the value of its asset-backed investments and found pricing errors on its books.
U.S.-listed shares of Credit Suisse (NYSE:CS - News) were down 5.9 percent to $47.89.
S&P 500 futures (SPc1) rose 10.70 points, above fair value, a mathematical formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract.
Dow Jones industrial average futures (DJc1) rose 111 points, and Nasdaq 100 (NDc1) futures added 20.25 points.
The National Association of Home Builders reports the February reading of its housing market index at 1 p.m. (1 p.m. EST). Economists forecast the gauge held steady at 19 for a second month. In December, the index hit a lifetime low at 18.
On Friday, the Dow Jones industrial average (DJI:^DJI - News) was down 28.77 points, or 0.23 percent, at 12,348.21. The Standard & Poor's 500 Index (^SPX - News) was up 1.13 points, or 0.08 percent, at 1,349.99. The Nasdaq Composite Index (Nasdaq:^IXIC - News) was down 10.74 points, or 0.46 percent, at 2,321.80.
Monday, February 18, 2008
Oil Prices Steady
Oil Is Steady After Talk of OPEC Cuts
Oil price were steady Monday in Asia, rising slightly after further hints that OPEC may cut production if global supplies continue to rise amid forecasts for slower growth in demand.
The Organization of Petroleum Exporting Countries has trimmed its demand forecasts for this year by 100,000 barrels a day, but it has also hinted it may cut production if global supplies of crude continue to rise, according to Dow Jones Newswires.
Several reports in recent days, though, have suggested that global economic conditions may not be deteriorating as quickly as feared. The U.S. Federal Reserve said Friday that industrial production in the world's largest economy rose last month in line with expectations. On the other hand, the Energy Department, the International Energy Agency and now OPEC have all cut demand forecasts.
Light, sweet crude for March delivery rose 23 cents to $95.73 a barrel in Asian electronic trading on the New York Mercantile Exchange by midday in Singapore.
The Nymex crude contract rose 4 cents Friday to settle at $95.50 a barrel after alternating frequently between positive and negative territory. Oil prices have risen more than $8 in little more than a week.
On Sunday, Venezuelan President Hugo Chavez soothed American motorists, saying that Venezuela is not preparing to cut off oil shipments to the United States.
The socialist leader rattled oil markets when he threatened a week ago to halt shipments to the United States in retaliation for Exxon Mobil Corp.'s success in convincing courts in the U.S. and Europe to freeze Venezuelan assets.
"We don't have plans to stop sending oil to the United States," Chavez said Sunday during a visit to heavy-oil projects in Venezuela's petroleum-rich Orinoco River basin that were nationalized last year.
But he added that Venezuela could cut off supplies to the United States if Washington "attacks Venezuela or tries to harm us." Chavez has repeatedly warned against a possible U.S. invasion to seize control of Venezuela's immense oil reserves. U.S. officials have denied any such plan exists.
The United States relies on Venezuela for about 10 percent of its oil imports.
Chavez's administration is locked in a legal battle with Irving, Texas-based Exxon Mobil over compensation for the nationalization of one of four heavy-oil projects in the Orinoco River basin.
Exxon Mobil, the world's largest publicly traded oil company, is seeking to freeze billions of dollars in Venezuelan assets in the United States and Europe to guarantee a payoff if it wins a decision by an international arbitration panel.
Last month, a British court injunction ordered the temporary freezing of up to $12 billion in assets of state-run Petroleos de Venezuela SA, or PDVSA.
Brent crude for April delivery rose 26 cents to $94.89 a barrel on the ICE Futures exchange in London.
Heating oil futures rose 0.81 cent to $2.655 a gallon while gasoline prices gained 0.59 cent to $2.4997 a gallon. Natural gas futures rose 15.1 cents to $8.811 per 1,000 cubic feet.
Oil price were steady Monday in Asia, rising slightly after further hints that OPEC may cut production if global supplies continue to rise amid forecasts for slower growth in demand.
The Organization of Petroleum Exporting Countries has trimmed its demand forecasts for this year by 100,000 barrels a day, but it has also hinted it may cut production if global supplies of crude continue to rise, according to Dow Jones Newswires.
Several reports in recent days, though, have suggested that global economic conditions may not be deteriorating as quickly as feared. The U.S. Federal Reserve said Friday that industrial production in the world's largest economy rose last month in line with expectations. On the other hand, the Energy Department, the International Energy Agency and now OPEC have all cut demand forecasts.
Light, sweet crude for March delivery rose 23 cents to $95.73 a barrel in Asian electronic trading on the New York Mercantile Exchange by midday in Singapore.
The Nymex crude contract rose 4 cents Friday to settle at $95.50 a barrel after alternating frequently between positive and negative territory. Oil prices have risen more than $8 in little more than a week.
On Sunday, Venezuelan President Hugo Chavez soothed American motorists, saying that Venezuela is not preparing to cut off oil shipments to the United States.
The socialist leader rattled oil markets when he threatened a week ago to halt shipments to the United States in retaliation for Exxon Mobil Corp.'s success in convincing courts in the U.S. and Europe to freeze Venezuelan assets.
"We don't have plans to stop sending oil to the United States," Chavez said Sunday during a visit to heavy-oil projects in Venezuela's petroleum-rich Orinoco River basin that were nationalized last year.
But he added that Venezuela could cut off supplies to the United States if Washington "attacks Venezuela or tries to harm us." Chavez has repeatedly warned against a possible U.S. invasion to seize control of Venezuela's immense oil reserves. U.S. officials have denied any such plan exists.
The United States relies on Venezuela for about 10 percent of its oil imports.
Chavez's administration is locked in a legal battle with Irving, Texas-based Exxon Mobil over compensation for the nationalization of one of four heavy-oil projects in the Orinoco River basin.
Exxon Mobil, the world's largest publicly traded oil company, is seeking to freeze billions of dollars in Venezuelan assets in the United States and Europe to guarantee a payoff if it wins a decision by an international arbitration panel.
Last month, a British court injunction ordered the temporary freezing of up to $12 billion in assets of state-run Petroleos de Venezuela SA, or PDVSA.
Brent crude for April delivery rose 26 cents to $94.89 a barrel on the ICE Futures exchange in London.
Heating oil futures rose 0.81 cent to $2.655 a gallon while gasoline prices gained 0.59 cent to $2.4997 a gallon. Natural gas futures rose 15.1 cents to $8.811 per 1,000 cubic feet.
Saturday, February 16, 2008
A Down Market Has Its Upsides for Young People
By Anya Kamenetz
Sometimes what seems like bad news can be turned into good.
All the recent talk about the faltering economy certainly seems to fall into the bad-news category. Housing prices had the biggest decline ever, the U.S. and international stock markets had some very dark days, 17,000 U.S. jobs unexpectedly "disappeared," and many experts feel that we're heading into a recession.
But there's reason for young people to look on the bright side. In fact, beginning your financial life during an economic correction or downturn can be a preferable thing in many ways. Here are a few of the positives:
1.) We won't expect to get rich quick.
Economic dramas shape an entire generation's beliefs about the nature of the economy and the risks involved. Just ask your grandmother, who experienced the Depression and is probably still saving rubber bands.
If you're in your 20s or early 30s, your living memory consists of a nearly unprecedented runup in stock market values -- the tech bubble of the 1990s. Bubbles by definition get people excited about making lots of money, fast. Thanks to the Internet, millions of people were able for the first time to pick, follow, and trade stocks for themselves. Unfortunately, the common outcome could be summed up by the title of film critic David Denby's book: "American Sucker." An affluent, well-connected New Yorker with ties to top stock analysts, Denby lost over one million dollars gambling on tech stocks.
Investors like Denby, who try to get rich quick by picking individual stocks, exemplify what is known in the investment world as "dumb money."
It's nearly impossible for you and me to beat the market consistently. And commissions, as well as trading and research costs, tend to eat up your returns if you try. It's a great lesson to learn by example -- not by experience.
You can also learn some lessons from the downturn of the housing market. In the past decade, it became much more common for first-time homebuyers to borrow big and hope to flip within a few years for huge appreciation -- 50 percent and up. But if you buy a house these days, you'd better love that city and that neighborhood, not buy more than you can afford, and be prepared to hold onto it for a long, long time.
2.) We'll get real about consumption.
Think about this: Consumer spending increased every year for the past 16 years. That's the longest buying binge Americans have ever gone on.
This spending increase was largely fueled by the runup in house prices, which allowed home-owning Americans to borrow against the cost of their homes. Consumer credit also expanded markedly over the past decade and a half.
For those of us in our 20s, this may mean that our parents borrowed against their home to send us to college or to pay for vacations or other luxuries while we were growing up. It also means that credit cards have always been there to fill the gap when we wanted a pair of shoes or a restaurant meal. Young people have been spending 16 percent more than they earn in recent years -- not a sustainable situation.
Well, now the credit market is tightening. As long as house prices are falling, not rising, home-equity loans will be harder to get. And in the general atmosphere of a recession, out-of-control spending tends to slow down as everybody tightens their belts. For example, this past holiday shopping season was the weakest in five years.
But did it really hurt your celebration with friends and family if the presents were a little less lavish?
3.) We'll buy on the cheap.
The current scary economic environment should not cause you to stuff your money under a mattress. The stock market may not be the best way to make a fast buck, but it is still the best long-term investment for your money; market returns average 7 percent to 10 percent over the long term (although your mileage may vary based on investment costs.)
And the "long term" means decades, not a few years.
Even with the recession in 2001-02, stock prices never really corrected to historical norms, which means they may still have a ways to fall. According to David Leonhardt of "The New York Times," the stock market is currently "overvalued" by 10 percent, relative to historical norms. And in a recession, the market sometimes plunges more than it should because of the mood of the investors, rather than because of underlying economic indicators.
That's bad news for people who are retiring now or in the near future. Your grandfather might have had a million dollars if he cashed out last year, and only $800,000 today. But it's good news for the average 25-year-old. You have most of your stock-buying ahead of you. You'll ideally be putting 10 percent to 15 percent of your salary each year into a retirement savings account that's invested in stocks. If stock prices go from "overvalued" to "undervalued", you're essentially buying in at a discount -- and you have plenty of time to see your investments appreciate.
As for the housing market, some are predicting prices will sink 25 percent to 30 percent in the next few years. At best, prices could remain flat while they catch up with rents. (Before the bubble, the monthly costs to rent a home were roughly comparable with the monthly costs to carry a mortgage. These days, in New York City at least, the same apartment that rents for $2,500 may sell for $650,000 -- $3,800 a month after a 10 percent down payment.)
So my advice (which I'm following myself) to would-be homebuyers is to watch and wait and keep your eye out for a bargain. Make a lowball offer and, again, you'll leave plenty of room for appreciation.
The next few years are going to be a real economic education for us all. In my next column, I'll talk about the two cardinal rules for the cautious slowdown investor: hold down costs and diversify.
Thursday, February 14, 2008
Oil Falls
Oil prices dropped Friday after rising more than $2 a barrel in the previous session as new U.S. trade deficit figures spurred hopes that the U.S. economy might escape a serious downturn.
The U.S. Commerce Department said Thursday the trade deficit fell in December and for 2007 as a whole -- an indication the U.S. is exporting more goods. This led investors to think U.S. energy demand would not be as weak as feared.
U.S. Federal Reserve Chairman Ben Bernanke's suggestion that the central bank is prepared to again cut interest rates also helped boost light, sweet crude to settle at $95.46 a barrel Thursday, an increase of $2.19 on the New York Mercantile Exchange.
That was its highest close since Jan. 9. The contract has risen in 4 of the past 5 sessions, adding more than $6 in a little over a week.
On Friday, the March contract lost 36 cents to $95.10 a barrel in Asian electronic trading by midafternoon in Singapore.
Bernanke said the Fed is ready to act again in response to deteriorating economic conditions. Interest rate cuts support oil prices because they tend to weaken the dollar. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.
Energy investors were also buying after a federal judge's decision Wednesday to confirm an earlier ruling freezing $300 million in a bank account owned by the Venezuelan state oil company.
Exxon Mobil is challenging Venezuela's nationalization of an oil project. A British court's earlier decision to temporarily freeze up to $12 billion in Venezuelan oil assets drew threats from President Hugo Chavez to cut off all oil sales to the U.S.
Weighing on oil prices were forecasts this week from the Energy Department and the International Energy Agency, an energy policy adviser to the industrialized world, that call for slower demand growth this year due to weakening economies.
Heating oil futures dropped 1.08 cents to $2.6558 a gallon while gasoline prices declined 0.83 cent to $2.4678 a gallon.
Natural gas futures lost 0.7 cents to $8.765 per 1,000 cubic feet.
Brent crude futures fell 38 cents to $94.78 a barrel on the ICE Futures exchange in London.
The U.S. Commerce Department said Thursday the trade deficit fell in December and for 2007 as a whole -- an indication the U.S. is exporting more goods. This led investors to think U.S. energy demand would not be as weak as feared.
U.S. Federal Reserve Chairman Ben Bernanke's suggestion that the central bank is prepared to again cut interest rates also helped boost light, sweet crude to settle at $95.46 a barrel Thursday, an increase of $2.19 on the New York Mercantile Exchange.
That was its highest close since Jan. 9. The contract has risen in 4 of the past 5 sessions, adding more than $6 in a little over a week.
On Friday, the March contract lost 36 cents to $95.10 a barrel in Asian electronic trading by midafternoon in Singapore.
Bernanke said the Fed is ready to act again in response to deteriorating economic conditions. Interest rate cuts support oil prices because they tend to weaken the dollar. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.
Energy investors were also buying after a federal judge's decision Wednesday to confirm an earlier ruling freezing $300 million in a bank account owned by the Venezuelan state oil company.
Exxon Mobil is challenging Venezuela's nationalization of an oil project. A British court's earlier decision to temporarily freeze up to $12 billion in Venezuelan oil assets drew threats from President Hugo Chavez to cut off all oil sales to the U.S.
Weighing on oil prices were forecasts this week from the Energy Department and the International Energy Agency, an energy policy adviser to the industrialized world, that call for slower demand growth this year due to weakening economies.
Heating oil futures dropped 1.08 cents to $2.6558 a gallon while gasoline prices declined 0.83 cent to $2.4678 a gallon.
Natural gas futures lost 0.7 cents to $8.765 per 1,000 cubic feet.
Brent crude futures fell 38 cents to $94.78 a barrel on the ICE Futures exchange in London.
Tuesday, February 12, 2008
Stocks Rise After Buffett Offer of Aid to Bond Insurers Eases Some Credit Concerns
Wall Street finished mostly higher Tuesday after billionaire investor Warren Buffett offered to help out troubled bond insurers, easing some of the market's concerns about further deterioration in the credit markets. The Dow Jones industrials rose more than 130 points.
In an interview on CNBC, Buffett said his Berkshire Hathaway Inc. holding company has offered a second level of insurance on up to $800 billion in municipal bonds. The reinsurance offer is for bond insurers Ambac Financial Group Inc., MBIA Inc. and Financial Guaranty Insurance Co., known as FGIC.
Word of the offer gave some investors relief although Buffett said a deal would only back municipal bonds, and not the risky and complicated financial instruments that many see as more likely to have problems. Still, further assurances on the soundness of municipal bonds could help shore up Wall Street's confidence and reinforce the differences in quality among various levels of debt.
Russell Croft, portfolio manager at Croft Leominster Investment Management in Baltimore, said Buffett's move gives the market a bit of needed confidence.
"It's a good thing to see," he said. He also agreed with Buffett's assessment that stocks are mostly fairly valued. "We could definitely test some more lows going forward but there was a pretty good drop-off there again and I think people are trying to take advantage of it to get some quality stocks at cheaper prices."
The Dow rose 133.40, or 1.09 percent, to 12,373.41. The blue chip index was up more than 200 points earlier in the session. The Standard & Poor's 500 index advanced 9.73, or 0.73 percent, to 1,348.86.
However, the Nasdaq composite index edged down 0.02, or less than 0.01 percent, to 2,320.04.
Tech stocks fell in the last hour of trading amid uncertainty about Microsoft Corp.'s bid to acquire Yahoo Inc. -- an overture that could eventually go hostile. In addition, Research In Motion Ltd. fell after its Blackberry e-mail system had an outage.
Bond prices fell Tuesday after Buffett's announcement. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.67 percent from 3.63 percent late Monday.
The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude fell 81 cents to settle at $92.78 a barrel on the New York Mercantile Exchange.
Buffett's overture to the big bond insurers reassured investors. Buffett said one firm rejected his offer and he is still waiting to hear from the other two.
Bond insurers write policies that promise to cover payments to bondholders if the entity that issued the bonds defaults. Reinsurance provides a second level of insurance on those bonds.
My Opinion
Investors should be careful not to read too much into the market's advance recent readings on U.S. retail spending show that Americans are hurting financially.
"Stock markets will have good days in bear markets,"
Investors also appeared pleased Tuesday by a government plan called Project Lifeline involving the six largest mortgage lenders to help at-risk borrowers with all types of mortgages retain their homes.
And adding to investors' upbeat mood, Credit Suisse Group sharply reduced its estimate of how much exposure it has to subprime mortgage debt. Switzerland's second largest bank said its debt tied to subprime mortgages, those given to borrowers with poor credit, fell to 1.6 billion francs ($1.45 billion) from 3.9 billion francs at the end of September. Its fourth-quarter net profit fell 72 percent because of write-downs. The company's U.S.-traded shares rose $1.11 to $51.94.
General Motors Corp. fell 52 cents to $26.60 after announcing a fresh round of buyouts to all 74,000 of its U.S. hourly workers represented by the United Auto Workers. The company also reported losses of $38.7 billion in 2007, the largest annual loss for an automotive company.
Yahoo fell 30 cents to $29.57 after the search engine's board rejected Microsoft's $44.6 billion bid. That raised speculation that Microsoft -- whose shares rose 13 cents to $28.34 -- might take its offer directly to shareholders.
Meanwhile, Research In Motion shares fell $2.97, or 3.1 percent, to $91.50 after the company acknowledged that its network service was widely disrupted Monday.
Advancing issues outnumbered decliners by 3 to 2 on the New York Stock Exchange, where consolidated volume came to 3.92 billion shares from 3.51 billion.
The Russell 2000 index of smaller companies rose 5.73, or 0.82 percent, to 705.48.
Overseas, Japan's Nikkei stock average inched up 0.04 percent and Hong Kong's Hang Seng index advanced 1.35 percent. Britain's FTSE 100 rose 3.54 percent and Germany's DAX index rose 3.33 percent. France's CAC-40 closed up 3.37 percent.
In an interview on CNBC, Buffett said his Berkshire Hathaway Inc. holding company has offered a second level of insurance on up to $800 billion in municipal bonds. The reinsurance offer is for bond insurers Ambac Financial Group Inc., MBIA Inc. and Financial Guaranty Insurance Co., known as FGIC.
Word of the offer gave some investors relief although Buffett said a deal would only back municipal bonds, and not the risky and complicated financial instruments that many see as more likely to have problems. Still, further assurances on the soundness of municipal bonds could help shore up Wall Street's confidence and reinforce the differences in quality among various levels of debt.
Russell Croft, portfolio manager at Croft Leominster Investment Management in Baltimore, said Buffett's move gives the market a bit of needed confidence.
"It's a good thing to see," he said. He also agreed with Buffett's assessment that stocks are mostly fairly valued. "We could definitely test some more lows going forward but there was a pretty good drop-off there again and I think people are trying to take advantage of it to get some quality stocks at cheaper prices."
The Dow rose 133.40, or 1.09 percent, to 12,373.41. The blue chip index was up more than 200 points earlier in the session. The Standard & Poor's 500 index advanced 9.73, or 0.73 percent, to 1,348.86.
However, the Nasdaq composite index edged down 0.02, or less than 0.01 percent, to 2,320.04.
Tech stocks fell in the last hour of trading amid uncertainty about Microsoft Corp.'s bid to acquire Yahoo Inc. -- an overture that could eventually go hostile. In addition, Research In Motion Ltd. fell after its Blackberry e-mail system had an outage.
Bond prices fell Tuesday after Buffett's announcement. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.67 percent from 3.63 percent late Monday.
The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude fell 81 cents to settle at $92.78 a barrel on the New York Mercantile Exchange.
Buffett's overture to the big bond insurers reassured investors. Buffett said one firm rejected his offer and he is still waiting to hear from the other two.
Bond insurers write policies that promise to cover payments to bondholders if the entity that issued the bonds defaults. Reinsurance provides a second level of insurance on those bonds.
My Opinion
Investors should be careful not to read too much into the market's advance recent readings on U.S. retail spending show that Americans are hurting financially.
"Stock markets will have good days in bear markets,"
Investors also appeared pleased Tuesday by a government plan called Project Lifeline involving the six largest mortgage lenders to help at-risk borrowers with all types of mortgages retain their homes.
And adding to investors' upbeat mood, Credit Suisse Group sharply reduced its estimate of how much exposure it has to subprime mortgage debt. Switzerland's second largest bank said its debt tied to subprime mortgages, those given to borrowers with poor credit, fell to 1.6 billion francs ($1.45 billion) from 3.9 billion francs at the end of September. Its fourth-quarter net profit fell 72 percent because of write-downs. The company's U.S.-traded shares rose $1.11 to $51.94.
General Motors Corp. fell 52 cents to $26.60 after announcing a fresh round of buyouts to all 74,000 of its U.S. hourly workers represented by the United Auto Workers. The company also reported losses of $38.7 billion in 2007, the largest annual loss for an automotive company.
Yahoo fell 30 cents to $29.57 after the search engine's board rejected Microsoft's $44.6 billion bid. That raised speculation that Microsoft -- whose shares rose 13 cents to $28.34 -- might take its offer directly to shareholders.
Meanwhile, Research In Motion shares fell $2.97, or 3.1 percent, to $91.50 after the company acknowledged that its network service was widely disrupted Monday.
Advancing issues outnumbered decliners by 3 to 2 on the New York Stock Exchange, where consolidated volume came to 3.92 billion shares from 3.51 billion.
The Russell 2000 index of smaller companies rose 5.73, or 0.82 percent, to 705.48.
Overseas, Japan's Nikkei stock average inched up 0.04 percent and Hong Kong's Hang Seng index advanced 1.35 percent. Britain's FTSE 100 rose 3.54 percent and Germany's DAX index rose 3.33 percent. France's CAC-40 closed up 3.37 percent.
Saturday, February 9, 2008
Yahoo Board to Spurn $44B Microsoft Bid
Yahoo Inc.'s board will reject Microsoft Corp.'s $44.6 billion takeover bid after concluding the unsolicited offer undervalues the slumping Internet pioneer, a person familiar with the situation said Saturday.
The decision could provoke a showdown between two of the world's most prominent technology companies with Internet search leader Google Inc. looming in the background. Leery of Microsoft expanding its turf on the Internet, Google already has offered to help Yahoo avert a takeover and urged antitrust regulators to take a hard look at the proposed deal.
If the world's largest software maker wants Yahoo badly enough, Microsoft could try to override Yahoo's board by taking its offer -- originally valued at $31 per share -- directly to the shareholders. Pursuing that risky route probably will require Microsoft to attempt to oust Yahoo's current 10-member board.
Alternatively, Microsoft could sweeten its bid. Many analysts believe Microsoft is prepared to offer as much as $35 per share for Yahoo, which still boasts one of the Internet's largest audiences and most powerful advertising vehicles despite a prolonged slump that has hammered its stock.
Yahoo's board reached the decision after exploring a wide variety of alternatives during the past week, according to the person who spoke to The Associated Press. The person didn't want to be identified because the reasons for Yahoo's rebuff won't be officially spelled out until Monday morning.
Microsoft and Yahoo declined to comment Saturday on the decision, first reported by The Wall Street Journal on its Web site.
Yahoo's board concluded Microsoft's offer is inadequate even though the company couldn't find any other potential bidders willing to offer a higher price.
Without other suitors on the horizon, Yahoo has had little choice but to turn a cold shoulder toward Microsoft if the board hopes to fulfill its responsibility to fetch the highest price possible for the company, said technology investment banker Ken Marlin.
"You would expect Yahoo's board to reject Microsoft at first," Marlin said. "If they didn't, they would be accused of malfeasance."
But by spurning Microsoft, Yahoo risks further alienating shareholders already upset about management missteps that have led to five consecutive quarters of declining profits.
The downturn caused Yahoo's stock price to plummet by more than 40 percent, erasing about $20 billion in shareholder wealth, in the three months leading up to Microsoft's bid.
Seizing on an opportunity to expand its clout on the Internet, Microsoft dangled a takeover offer that was 62 percent above Yahoo's stock price of just $19.18 when the bid was announced Feb. 1. Yahoo shares ended the past week at $29.20.
Led by company co-founder and board member Jerry Yang, Yahoo now will be under intense pressure to lay out a strategy that will prevent its stock price from collapsing again. What's more, Yang and the rest of the management team must convince Wall Street that they can boost Yahoo's market value beyond Microsoft's offer.
Yahoo's shares traded at $31 as recently as November, but have eroded steadily amid concerns about the slowing economy and frustration with the slow pace of a turnaround that Yang promised last June when he replaced former movie studio mogul Terry Semel as Yahoo's chief executive officer.
This isn't the first time that Yahoo has spurned Microsoft. The Redmond, Wash.-based company offered $40 per share to buy Yahoo a year ago only to be shooed away by Semel, according to a person familiar with the matter. The person didn't want to be identified because that bid was never made public.
Yahoo now may want that Microsoft to raise its price to at least $40 per share again. That would force Microsoft to raise its current offer by about $12 billion -- a high price that might alarm its own shareholders.
Microsoft's stock price already has slid 12 percent since the company announced its Yahoo bid, reflecting concerns about the deal bogging down amid potential management distractions, sagging employee morale and other headaches that frequently arise when two big companies are combined.
Although it isn't involved directly in the deal, Google is the main reason Yahoo is being pursued by Microsoft.
Yahoo has struggled largely because it hasn't been able to target online ads as effectively as Google.
Microsoft believes Yahoo's brand, engineers, audience and services will provide the company with valuable weapons in its so far unsuccessful attempt to narrow Google's huge lead in the lucrative Internet search and advertising markets.
As it examined ways to thwart Microsoft, Yahoo considered an advertising partnership with Google -- an alliance long favored by analysts who believe it would boost the profits of both companies. It was unclear Saturday if Yahoo's plans for boosting its stock price include a Google partnership, which would probably face antitrust issues.
A Microsoft takeover of Yahoo would also be scrutinized by antitrust regulators in the United States and Europe. The antitrust uncertainties could be cited as one of the reasons that Yahoo's board decided to spurn Microsoft.
The decision could provoke a showdown between two of the world's most prominent technology companies with Internet search leader Google Inc. looming in the background. Leery of Microsoft expanding its turf on the Internet, Google already has offered to help Yahoo avert a takeover and urged antitrust regulators to take a hard look at the proposed deal.
If the world's largest software maker wants Yahoo badly enough, Microsoft could try to override Yahoo's board by taking its offer -- originally valued at $31 per share -- directly to the shareholders. Pursuing that risky route probably will require Microsoft to attempt to oust Yahoo's current 10-member board.
Alternatively, Microsoft could sweeten its bid. Many analysts believe Microsoft is prepared to offer as much as $35 per share for Yahoo, which still boasts one of the Internet's largest audiences and most powerful advertising vehicles despite a prolonged slump that has hammered its stock.
Yahoo's board reached the decision after exploring a wide variety of alternatives during the past week, according to the person who spoke to The Associated Press. The person didn't want to be identified because the reasons for Yahoo's rebuff won't be officially spelled out until Monday morning.
Microsoft and Yahoo declined to comment Saturday on the decision, first reported by The Wall Street Journal on its Web site.
Yahoo's board concluded Microsoft's offer is inadequate even though the company couldn't find any other potential bidders willing to offer a higher price.
Without other suitors on the horizon, Yahoo has had little choice but to turn a cold shoulder toward Microsoft if the board hopes to fulfill its responsibility to fetch the highest price possible for the company, said technology investment banker Ken Marlin.
"You would expect Yahoo's board to reject Microsoft at first," Marlin said. "If they didn't, they would be accused of malfeasance."
But by spurning Microsoft, Yahoo risks further alienating shareholders already upset about management missteps that have led to five consecutive quarters of declining profits.
The downturn caused Yahoo's stock price to plummet by more than 40 percent, erasing about $20 billion in shareholder wealth, in the three months leading up to Microsoft's bid.
Seizing on an opportunity to expand its clout on the Internet, Microsoft dangled a takeover offer that was 62 percent above Yahoo's stock price of just $19.18 when the bid was announced Feb. 1. Yahoo shares ended the past week at $29.20.
Led by company co-founder and board member Jerry Yang, Yahoo now will be under intense pressure to lay out a strategy that will prevent its stock price from collapsing again. What's more, Yang and the rest of the management team must convince Wall Street that they can boost Yahoo's market value beyond Microsoft's offer.
Yahoo's shares traded at $31 as recently as November, but have eroded steadily amid concerns about the slowing economy and frustration with the slow pace of a turnaround that Yang promised last June when he replaced former movie studio mogul Terry Semel as Yahoo's chief executive officer.
This isn't the first time that Yahoo has spurned Microsoft. The Redmond, Wash.-based company offered $40 per share to buy Yahoo a year ago only to be shooed away by Semel, according to a person familiar with the matter. The person didn't want to be identified because that bid was never made public.
Yahoo now may want that Microsoft to raise its price to at least $40 per share again. That would force Microsoft to raise its current offer by about $12 billion -- a high price that might alarm its own shareholders.
Microsoft's stock price already has slid 12 percent since the company announced its Yahoo bid, reflecting concerns about the deal bogging down amid potential management distractions, sagging employee morale and other headaches that frequently arise when two big companies are combined.
Although it isn't involved directly in the deal, Google is the main reason Yahoo is being pursued by Microsoft.
Yahoo has struggled largely because it hasn't been able to target online ads as effectively as Google.
Microsoft believes Yahoo's brand, engineers, audience and services will provide the company with valuable weapons in its so far unsuccessful attempt to narrow Google's huge lead in the lucrative Internet search and advertising markets.
As it examined ways to thwart Microsoft, Yahoo considered an advertising partnership with Google -- an alliance long favored by analysts who believe it would boost the profits of both companies. It was unclear Saturday if Yahoo's plans for boosting its stock price include a Google partnership, which would probably face antitrust issues.
A Microsoft takeover of Yahoo would also be scrutinized by antitrust regulators in the United States and Europe. The antitrust uncertainties could be cited as one of the reasons that Yahoo's board decided to spurn Microsoft.
Friday, February 8, 2008
Facebook and Vodafone
Facebook Links Up With Vodafone on Mobile Platform
Vodafone is the first operator to use the Facebook for Mobile Operators platform and has started services in the U.K. and Germany, said Jed Stremel, Facebook's director of mobile division. Vodafone will soon expand the program to Greece, Italy, Spain, Ireland and Portugal.
The platform involves giving operators a set of technical specifications intended to resolve some of frustrating hang-ups when using Facebook on a mobile phone rather than a PC, such as smoothing out login problems and opening up other features, Stremel said.
The move by Facebook, which ranks next to MySpace as one of the most popular social networking sites, is intended to grow its user base, which the company estimates at 64 million users. So far, the company says it has 6 million users of Facebook Mobile, an unsupported mobile version of the Web site that will now get full support, Stremel said.
At the moment the mobile site does not have any advertising. Stremel would not reveal the financial details of Facebook's deal with Vodafone, although he said operators will be able to generate revenue from data services as their subscribers access Facebook.
The long-term hope for social networking sites is rich online advertising revenue. Facebook, which has an exclusive deal with Microsoft to place ads on the site, also did not say when it would put advertising on the mobile site.
The company is hoping to lure more operators by the simplicity with which they can enable Facebook, Stremel said.
Facebook has created special Web pages with instructions on how operators can set up their systems, he said. The instructions, for example, let operators add system settings that will let their subscribers send MMS (Multimedia Messaging Service) with photos or video to their Facebook profiles, Stremel said.
The platform also includes other specifications designed to stop abuse of Facebook, such as spamming, Stremel said. When someone sends their first MMS with a photo to their profile, the user is sent back a confirmation message with a code or a link. That confirmation then links that person's phone with their Facebook account, Stremel said.
Vodafone is the first operator to use the Facebook for Mobile Operators platform and has started services in the U.K. and Germany, said Jed Stremel, Facebook's director of mobile division. Vodafone will soon expand the program to Greece, Italy, Spain, Ireland and Portugal.
The platform involves giving operators a set of technical specifications intended to resolve some of frustrating hang-ups when using Facebook on a mobile phone rather than a PC, such as smoothing out login problems and opening up other features, Stremel said.
The move by Facebook, which ranks next to MySpace as one of the most popular social networking sites, is intended to grow its user base, which the company estimates at 64 million users. So far, the company says it has 6 million users of Facebook Mobile, an unsupported mobile version of the Web site that will now get full support, Stremel said.
At the moment the mobile site does not have any advertising. Stremel would not reveal the financial details of Facebook's deal with Vodafone, although he said operators will be able to generate revenue from data services as their subscribers access Facebook.
The long-term hope for social networking sites is rich online advertising revenue. Facebook, which has an exclusive deal with Microsoft to place ads on the site, also did not say when it would put advertising on the mobile site.
The company is hoping to lure more operators by the simplicity with which they can enable Facebook, Stremel said.
Facebook has created special Web pages with instructions on how operators can set up their systems, he said. The instructions, for example, let operators add system settings that will let their subscribers send MMS (Multimedia Messaging Service) with photos or video to their Facebook profiles, Stremel said.
The platform also includes other specifications designed to stop abuse of Facebook, such as spamming, Stremel said. When someone sends their first MMS with a photo to their profile, the user is sent back a confirmation message with a code or a link. That confirmation then links that person's phone with their Facebook account, Stremel said.
Dow, S&P 500 drop,Nasdaq up
The Dow and the S&P 500 dropped on Friday as concerns about the outlook of bond insurers weighed on financial shares, but bargain hunting in the technology sector pulled the Nasdaq into positive territory.
Shares of JPMorgan Chase & Co (NYSE:JPM - News) dropped 1.7 percent, and led the Dow's losers, while credit card and travel services company American Express Co (NYSE:AXP - News) slid 2 percent.
The drag from financial shares was driven in part by investor unease about the outlook for bond insurers after Moody's Investors Services cut its "AAA" ratings for bond insurer XL Capital Assurance, a unit of Security Capital Assurance (NYSE:SCA - News).
Comments from a Federal Reserve official saying a recession might not be avoidable were another headwind for stocks.
The Dow Jones industrial average (DJI:^DJI - News) was down 67.06 points, or 0.55 percent, at 12,179.94. The Standard & Poor's 500 Index (^SPX - News) was down 6.00 points, or 0.45 percent, at 1,330.91. The Nasdaq Composite Index (Nasdaq:^IXIC - News) was up 3.59 points, or 0.16 percent, at 2,296.62.
Investors fear that downgrades of bond insurers could further harm the banking sector and stunt the global economy as financial institutions take a hit from subsequent write-downs of their assets.
JPMorgan shares fell to $44.23 on the New York Stock Exchange, while shares of American Express dropped to $45.55.
Shares of MBIA Inc (NYSE:MBI - News), the world's largest bond insurer, slipped by 0.4 percent to $14.12.
The company on Thursday sold $1 billion of shares to raise capital it hopes will help it avoid a rating downgrade. The sale was at a discount to MBIA's closing price.
On the Nasdaq, Apple Inc (NasdaqGS:AAPL - News) provided the biggest lift to the index, with a gain of 1.7 percent to $123.24. Tech stocks recently have taken a beating as investors worried about business spending, making some stocks attractively priced.
as attractive valuations lured investors to seek bargains.
San Francisco Federal Reserve Bank President Janet Yellen, speaking in Honolulu, indicated on Thursday a willingness to cut U.S. interest rates further, but she said she was not confident a recession can be avoided this year.
Shares of JPMorgan Chase & Co (NYSE:JPM - News) dropped 1.7 percent, and led the Dow's losers, while credit card and travel services company American Express Co (NYSE:AXP - News) slid 2 percent.
The drag from financial shares was driven in part by investor unease about the outlook for bond insurers after Moody's Investors Services cut its "AAA" ratings for bond insurer XL Capital Assurance, a unit of Security Capital Assurance (NYSE:SCA - News).
Comments from a Federal Reserve official saying a recession might not be avoidable were another headwind for stocks.
The Dow Jones industrial average (DJI:^DJI - News) was down 67.06 points, or 0.55 percent, at 12,179.94. The Standard & Poor's 500 Index (^SPX - News) was down 6.00 points, or 0.45 percent, at 1,330.91. The Nasdaq Composite Index (Nasdaq:^IXIC - News) was up 3.59 points, or 0.16 percent, at 2,296.62.
Investors fear that downgrades of bond insurers could further harm the banking sector and stunt the global economy as financial institutions take a hit from subsequent write-downs of their assets.
JPMorgan shares fell to $44.23 on the New York Stock Exchange, while shares of American Express dropped to $45.55.
Shares of MBIA Inc (NYSE:MBI - News), the world's largest bond insurer, slipped by 0.4 percent to $14.12.
The company on Thursday sold $1 billion of shares to raise capital it hopes will help it avoid a rating downgrade. The sale was at a discount to MBIA's closing price.
On the Nasdaq, Apple Inc (NasdaqGS:AAPL - News) provided the biggest lift to the index, with a gain of 1.7 percent to $123.24. Tech stocks recently have taken a beating as investors worried about business spending, making some stocks attractively priced.
as attractive valuations lured investors to seek bargains.
San Francisco Federal Reserve Bank President Janet Yellen, speaking in Honolulu, indicated on Thursday a willingness to cut U.S. interest rates further, but she said she was not confident a recession can be avoided this year.
Friday Market slips at open
Stocks opened lower on Friday after a Federal Reserve official said a recession might not be avoidable and fresh concerns arose about the outlook for bond insurers.
The Dow Jones industrial average (DJI:^DJI - News) was down 39.10 points, or 0.32 percent, at 12,207.90. The Standard & Poor's 500 Index (^SPX - News) was down 5.16 points, or 0.39 percent, at 1,331.75. The Nasdaq Composite Index (Nasdaq:^IXIC - News) was down 3.29 points, or 0.14 percent, at 2,289.74.
This Is a Report By Tarek El Hewehi.
The Dow Jones industrial average (DJI:^DJI - News) was down 39.10 points, or 0.32 percent, at 12,207.90. The Standard & Poor's 500 Index (^SPX - News) was down 5.16 points, or 0.39 percent, at 1,331.75. The Nasdaq Composite Index (Nasdaq:^IXIC - News) was down 3.29 points, or 0.14 percent, at 2,289.74.
This Is a Report By Tarek El Hewehi.
Thursday, February 7, 2008
YRC Worldwide to Close Service Centers
YRC Worldwide Inc., the nation's largest less-than-truckload carrier, said two of its subsidiaries will close a combined 27 service centers and take $10 million in charges related to the move, according to a Securities and Exchange Commission filing Thursday.
YRC's USF Holland unit will close six service centers located in Albany, Ga., Jackson, Miss., Lumberton, N.C., Little Rock, Ark., Mobile, Ala., and Metter, Ga.
The company's USF Reddaway division will close 21 service centers located in Louisiana, New Mexico, Oklahoma and Texas. Both divisions are units of USF Corp., which YRC purchased in May 2005. But last month it took a $782 million write-down on the value of the two companies, citing various operating issues and overall slumping demand
Service will still be available to these areas through other branches of its North American Transportation division.
The Feb. 22 closures are a "significant component" of a previously announced $50 million profit improvement plan for the regional transportation unit, YRC said.
YRC expects to take a $5 million charge for lease terminations and another $5 million charge for employee severance. The majority of these charges are expected be taken in the first quarter of 2008.
The Holland closings will affect 300 workers and the Reddaway closings will affect an additional 800, said Michael Smid, president and chief executive of YRC North American Transportation, which oversees the two subsidiaries.
Smid said the centers were among the least efficient of the two companies
"We feel both of those carriers are better off a little smaller, but much more capable," Smid told The Associated Press.
Smid said the company would work with customers who use the centers to either ship their freight through other YRC-owned carriers in their area or use other YRC network points if they want to stay with Holland or Reddaway.
Stifel, Nicolaus & Co. Inc. analyst David G. Ross applauded the move
We believe this is a step in the right direction for the regional companies that were once solid operators in their respective legacy territories but were stretched too thin (after being acquired by YRC Worldwide) when trying to expand into other regions and/or integrate another lesser carrier into their network," Ross said.
"When these two carriers expanded coverage, pricing became more difficult, less disciplined, and yields and margins suffered, as a result."
The company may close other centers as it continues to examine its regional business, he added.
"These shutdowns should be good for the less-than-truckload industry, as it removes a poor pricer from some Southern and Southwestern regional markets," Ross said
He maintained his "Hold" rating on the stock, saying he sees "evidence that the recovery plan is working."
Less-than-truckload, or LTL carriers, usually fill their trucks with freight from a variety of sources and might re-sort and redistribute it at a company terminal along their route.
Shares of YRC retreated from a surge after the announcement to close up 11 cents to $17.57 Thursday.
YRC's USF Holland unit will close six service centers located in Albany, Ga., Jackson, Miss., Lumberton, N.C., Little Rock, Ark., Mobile, Ala., and Metter, Ga.
The company's USF Reddaway division will close 21 service centers located in Louisiana, New Mexico, Oklahoma and Texas. Both divisions are units of USF Corp., which YRC purchased in May 2005. But last month it took a $782 million write-down on the value of the two companies, citing various operating issues and overall slumping demand
Service will still be available to these areas through other branches of its North American Transportation division.
The Feb. 22 closures are a "significant component" of a previously announced $50 million profit improvement plan for the regional transportation unit, YRC said.
YRC expects to take a $5 million charge for lease terminations and another $5 million charge for employee severance. The majority of these charges are expected be taken in the first quarter of 2008.
The Holland closings will affect 300 workers and the Reddaway closings will affect an additional 800, said Michael Smid, president and chief executive of YRC North American Transportation, which oversees the two subsidiaries.
Smid said the centers were among the least efficient of the two companies
"We feel both of those carriers are better off a little smaller, but much more capable," Smid told The Associated Press.
Smid said the company would work with customers who use the centers to either ship their freight through other YRC-owned carriers in their area or use other YRC network points if they want to stay with Holland or Reddaway.
Stifel, Nicolaus & Co. Inc. analyst David G. Ross applauded the move
We believe this is a step in the right direction for the regional companies that were once solid operators in their respective legacy territories but were stretched too thin (after being acquired by YRC Worldwide) when trying to expand into other regions and/or integrate another lesser carrier into their network," Ross said.
"When these two carriers expanded coverage, pricing became more difficult, less disciplined, and yields and margins suffered, as a result."
The company may close other centers as it continues to examine its regional business, he added.
"These shutdowns should be good for the less-than-truckload industry, as it removes a poor pricer from some Southern and Southwestern regional markets," Ross said
He maintained his "Hold" rating on the stock, saying he sees "evidence that the recovery plan is working."
Less-than-truckload, or LTL carriers, usually fill their trucks with freight from a variety of sources and might re-sort and redistribute it at a company terminal along their route.
Shares of YRC retreated from a surge after the announcement to close up 11 cents to $17.57 Thursday.
Stocks Finish Higher After Fitful Day
Wall Street finished moderately higher in fitful trading Thursday as investors, still nervous about the economy, decided to buy back into a stock market pummeled by three straight days of losses.
With the market having largely priced in the possibility of a recession, many believe there are plenty of valuable stocks at cheap prices. Before Thursday, the Dow Jones industrial average had fallen this week by 543 points, or 4.26 percent, giving up all of last week's sharp gains.
Though the market ended up rising Thursday, trading was extremely fickle due to a batch of gloomy data that included declining January sales at major retailers, a drop in December sales of pending homes, and a disappointing outlook from Internet networking supplier Cisco Systems Inc. The major indexes seesawed throughout the day.
"We're kind of trying to create a silk purse out of a sow's ear here," said Hugh Johnson, chief investment officer of Johnson Illington Advisors. "The earnings are lousy, the economic numbers are lousy."
The Dow rose 46.90, or 0.38 percent, to 12,247.00 after trading down about 80 points and up about 130. The index remains more than 13 percent below its record close on Oct. 9, 2007 of 14,164.53.
Broader stock indicators also recovered some ground. The Standard & Poor's 500 index rose 10.46, or 0.79 percent, to 1,336.91. The technology-heavy Nasdaq composite index rose 14.28, or 0.63 percent, to 2,293.03.
Government bonds fell. The 10-year Treasury note's yield, which moves opposite its price, rose to 3.76 percent from 3.60 percent late Wednesday.
Investors may have been encouraged to buy back into stocks due to a rise in the dollar, whose decline over the past several months has contributed to worries about inflation and a possible drop in foreign interest in U.S. investments.
Peter Cardillo, chief market economist at Avalon Partners, said the dollar's advance followed remarks by European Central Bank chief Jean-Claude Trichet that the United States and Europe remain economically intertwined. This suggested to investors that strength in other countries can help stabilize the United States during its rough patch. Fears of a global economic slowdown have been weighing on stocks around the world.
As expected on Thursday, the Bank of England lowered its key interest rate by a quarter percentage point to 5.25 percent, its second cut in three months, while the European Central Bank left its key rate unchanged at 4 percent.
Another argument for bargain hunting Thursday was that the recent spate of negative economic data raises the likelihood of the Federal Reserve lowering interest rates again to spur growth. Atlanta Fed President Dennis Lockhart said Thursday the Fed's "focus, religiously, is on the general economy, the real economy."
Moreover, the stock market often portends economic declines, rather than the other way around.
"Stocks do worse during times of slow growth than they do during recession," said Brian Gendreau, investment strategist for ING Investment Management. "If we're in a shallow and short recession, for all anyone knows, we might be halfway through."
The market's indecisive movements throughout the day show, however, that it has not moved past the many worries swirling about personal spending, the crumpling housing market and deteriorating conditions in consumer credit.
Late Wednesday, Internet networking supplier Cisco Systems Inc. issued a 10 percent sales growth forecast for its current quarter that fell well below the 15 percent Wall Street projected. But Cisco finished up 30 cents at $23.38, after some investors saw the stock was undervalued.
And in a counterintuitive move, retail stocks -- also regarded as cheap right now -- rose even after the nation's retailers logged their worst January in about 40 years. Wal-Mart Stores Inc. reported a 0.5 percent rise in January same-store sales, or sales at stores open for at least a year, while Target Corp., Gap Inc., Limited Brands Inc. and AnnTaylor Stores Corp. each said their sales fell.
Not all news about retailing was bad -- J.C. Penney Co. raised its earnings forecast for the last three months of 2007. Its stock jumped $3.72, or 8.5 percent, to $47.44.
But on top of the mostly weak retail reports, the Labor Department reported that jobless claims fell last week by 22,000, a smaller decline than many economists predicted, and the National Association of Realtors said pending sales of existing homes fell 1.5 percent in December.
Light, sweet crude oil rose 97 cents to settle at $88.11 a barrel on the New York Mercantile Exchange. Gold prices also climbed.
Oil prices had been gradually declining, so it's possible a slower economy is keeping inflation from accelerating. Still, many market participants are anxious about how much longer the Fed can continue to lower interest rates given relatively high food and energy costs.
The Russell 2000 index of smaller companies rose 10.29, or 1.49 percent, to 702.78.
Advancing issues outnumbered declining shares by nearly 2 to 1 on the New York Stock Exchange, where consolidated volume came to 4.44 billion shares, down from 3.89 billion on Wednesday.
Overseas, many Asian markets were closed for a holiday, but Japan's stock market was open and its Nikkei average rose 0.82 percent. In Europe, Britain's FTSE 100 fell 2.58 percent, Germany's DAX index fell 1.66 percent, and France's CAC-40 fell 1.92 percent.
With the market having largely priced in the possibility of a recession, many believe there are plenty of valuable stocks at cheap prices. Before Thursday, the Dow Jones industrial average had fallen this week by 543 points, or 4.26 percent, giving up all of last week's sharp gains.
Though the market ended up rising Thursday, trading was extremely fickle due to a batch of gloomy data that included declining January sales at major retailers, a drop in December sales of pending homes, and a disappointing outlook from Internet networking supplier Cisco Systems Inc. The major indexes seesawed throughout the day.
"We're kind of trying to create a silk purse out of a sow's ear here," said Hugh Johnson, chief investment officer of Johnson Illington Advisors. "The earnings are lousy, the economic numbers are lousy."
The Dow rose 46.90, or 0.38 percent, to 12,247.00 after trading down about 80 points and up about 130. The index remains more than 13 percent below its record close on Oct. 9, 2007 of 14,164.53.
Broader stock indicators also recovered some ground. The Standard & Poor's 500 index rose 10.46, or 0.79 percent, to 1,336.91. The technology-heavy Nasdaq composite index rose 14.28, or 0.63 percent, to 2,293.03.
Government bonds fell. The 10-year Treasury note's yield, which moves opposite its price, rose to 3.76 percent from 3.60 percent late Wednesday.
Investors may have been encouraged to buy back into stocks due to a rise in the dollar, whose decline over the past several months has contributed to worries about inflation and a possible drop in foreign interest in U.S. investments.
Peter Cardillo, chief market economist at Avalon Partners, said the dollar's advance followed remarks by European Central Bank chief Jean-Claude Trichet that the United States and Europe remain economically intertwined. This suggested to investors that strength in other countries can help stabilize the United States during its rough patch. Fears of a global economic slowdown have been weighing on stocks around the world.
As expected on Thursday, the Bank of England lowered its key interest rate by a quarter percentage point to 5.25 percent, its second cut in three months, while the European Central Bank left its key rate unchanged at 4 percent.
Another argument for bargain hunting Thursday was that the recent spate of negative economic data raises the likelihood of the Federal Reserve lowering interest rates again to spur growth. Atlanta Fed President Dennis Lockhart said Thursday the Fed's "focus, religiously, is on the general economy, the real economy."
Moreover, the stock market often portends economic declines, rather than the other way around.
"Stocks do worse during times of slow growth than they do during recession," said Brian Gendreau, investment strategist for ING Investment Management. "If we're in a shallow and short recession, for all anyone knows, we might be halfway through."
The market's indecisive movements throughout the day show, however, that it has not moved past the many worries swirling about personal spending, the crumpling housing market and deteriorating conditions in consumer credit.
Late Wednesday, Internet networking supplier Cisco Systems Inc. issued a 10 percent sales growth forecast for its current quarter that fell well below the 15 percent Wall Street projected. But Cisco finished up 30 cents at $23.38, after some investors saw the stock was undervalued.
And in a counterintuitive move, retail stocks -- also regarded as cheap right now -- rose even after the nation's retailers logged their worst January in about 40 years. Wal-Mart Stores Inc. reported a 0.5 percent rise in January same-store sales, or sales at stores open for at least a year, while Target Corp., Gap Inc., Limited Brands Inc. and AnnTaylor Stores Corp. each said their sales fell.
Not all news about retailing was bad -- J.C. Penney Co. raised its earnings forecast for the last three months of 2007. Its stock jumped $3.72, or 8.5 percent, to $47.44.
But on top of the mostly weak retail reports, the Labor Department reported that jobless claims fell last week by 22,000, a smaller decline than many economists predicted, and the National Association of Realtors said pending sales of existing homes fell 1.5 percent in December.
Light, sweet crude oil rose 97 cents to settle at $88.11 a barrel on the New York Mercantile Exchange. Gold prices also climbed.
Oil prices had been gradually declining, so it's possible a slower economy is keeping inflation from accelerating. Still, many market participants are anxious about how much longer the Fed can continue to lower interest rates given relatively high food and energy costs.
The Russell 2000 index of smaller companies rose 10.29, or 1.49 percent, to 702.78.
Advancing issues outnumbered declining shares by nearly 2 to 1 on the New York Stock Exchange, where consolidated volume came to 4.44 billion shares, down from 3.89 billion on Wednesday.
Overseas, many Asian markets were closed for a holiday, but Japan's stock market was open and its Nikkei average rose 0.82 percent. In Europe, Britain's FTSE 100 fell 2.58 percent, Germany's DAX index fell 1.66 percent, and France's CAC-40 fell 1.92 percent.
Tuesday, February 5, 2008
Microsoft-Yahoo Deal Likely To Go Through
Yahoo Inc.'s (YHOO) stock was coasting just below Microsoft Corp.'s (MSFT) $31-a-share offer price Tuesday morning as more analysts said they believe the marriage will likely be consummated - even as they cautioned investors to be ready for surprises.
Yahoo has yet to respond to Microsoft's $44.6 billion bear-hug bid to acquire the Internet giant, a move which has prompted rival Google Inc. (GOOG) to publicly voice its opposition to the proposed merger.
On Tuesday, Yahoo was downgraded from buy to neutral by Banc of America Securities. It was the third such downgrade since Microsoft announced its offer on Friday, following similar moves by Susquehanna Financial Group and Soleil Securities Group.
The downgrades came after Yahoo's stock zoomed up more than 50% following the bid - which put the stock in range of several analysts' price targets.
In their reports, many analysts predict that the deal will likely happen and that, for now, investors would be wise to stick close to Microsoft's offer price, which they describe as generous.
"Given the significant premium above the Jan. 31, 2008, stock price, we believe shareholders would be apt to take advantage of this offer," analyst Brian Pitz of Banc of America Securities wrote in a note to clients.
Crawford Del Prete of International Data Corp. said he thinks the deal will eventually happen.
"But I think, given that it's hostile, it will take some time for Yahoo to sort through its options," he said in an email. "However, in the end I expect that they will conclude that this is the best option for shareholders, given the price that was offered and the absence of other suitors."
Still, there could be surprises.
Pitz pointed to reported negotiations between Yahoo and Google on a possible deal to outsource Yahoo's search ads to its rival as a way of blocking the Microsoft bid.
Microsoft's bid could also go higher and, contrary to the view of some observers, another potential buyer could emerge, he said.
"While it's difficult to raise debt in the current market environment, we believe a rival bid from a private-equity consortium is also possible," Pitz said.
Analyst Mark Mahaney of Citigroup, who raised his target price for Yahoo to $31 a share from $22, cited the two scenarios in a research note, but didn't give them as much as weight as other potential outcomes.
He said the $45 billion price tag and "the strategic value of Yahoo to Microsoft make the likelihood of a successful competing bidder very low."
An outsourcing deal with Google would be more likely and could be a viable strategy that could appease Yahoo's shareholders, he said.
But Mahaney gave more credence to another possibility: That Yahoo will reject Microsoft's offer, prompting the Redmond, Wash.-giant to bid higher, with the two giants eventually coming to an agreement.
"The deal makes significant strategic sense for Microsoft," he said. "Our review of bid histories in the software space makes us think this is the most likely outcome."
Mahaney cited another software giant, Oracle Corp. (ORCL), which has been on a buying spree over the past several years. In two prominent unsolicited bids - for PeopleSoft Corp. and, more recently, BEA Systems Inc. (BEAS) - the company ended up raising its offer price.
Many analysts still believe the proposed merger between Microsoft and Yahoo would meet stiff regulatory challenges in the U.S. and Europe.
But given Google's dominant position in online advertising, some of them believe Microsoft would clear this hurdle.
"We estimate that Microsoft and Yahoo today account for, at most, 30% of total U.S. online advertising, with their combined market share less in Europe," Mahaney said. "Thus, while we would expect substantial regulatory review, we assign this outcome only a 10% probability
Yahoo has yet to respond to Microsoft's $44.6 billion bear-hug bid to acquire the Internet giant, a move which has prompted rival Google Inc. (GOOG) to publicly voice its opposition to the proposed merger.
On Tuesday, Yahoo was downgraded from buy to neutral by Banc of America Securities. It was the third such downgrade since Microsoft announced its offer on Friday, following similar moves by Susquehanna Financial Group and Soleil Securities Group.
The downgrades came after Yahoo's stock zoomed up more than 50% following the bid - which put the stock in range of several analysts' price targets.
In their reports, many analysts predict that the deal will likely happen and that, for now, investors would be wise to stick close to Microsoft's offer price, which they describe as generous.
"Given the significant premium above the Jan. 31, 2008, stock price, we believe shareholders would be apt to take advantage of this offer," analyst Brian Pitz of Banc of America Securities wrote in a note to clients.
Crawford Del Prete of International Data Corp. said he thinks the deal will eventually happen.
"But I think, given that it's hostile, it will take some time for Yahoo to sort through its options," he said in an email. "However, in the end I expect that they will conclude that this is the best option for shareholders, given the price that was offered and the absence of other suitors."
Still, there could be surprises.
Pitz pointed to reported negotiations between Yahoo and Google on a possible deal to outsource Yahoo's search ads to its rival as a way of blocking the Microsoft bid.
Microsoft's bid could also go higher and, contrary to the view of some observers, another potential buyer could emerge, he said.
"While it's difficult to raise debt in the current market environment, we believe a rival bid from a private-equity consortium is also possible," Pitz said.
Analyst Mark Mahaney of Citigroup, who raised his target price for Yahoo to $31 a share from $22, cited the two scenarios in a research note, but didn't give them as much as weight as other potential outcomes.
He said the $45 billion price tag and "the strategic value of Yahoo to Microsoft make the likelihood of a successful competing bidder very low."
An outsourcing deal with Google would be more likely and could be a viable strategy that could appease Yahoo's shareholders, he said.
But Mahaney gave more credence to another possibility: That Yahoo will reject Microsoft's offer, prompting the Redmond, Wash.-giant to bid higher, with the two giants eventually coming to an agreement.
"The deal makes significant strategic sense for Microsoft," he said. "Our review of bid histories in the software space makes us think this is the most likely outcome."
Mahaney cited another software giant, Oracle Corp. (ORCL), which has been on a buying spree over the past several years. In two prominent unsolicited bids - for PeopleSoft Corp. and, more recently, BEA Systems Inc. (BEAS) - the company ended up raising its offer price.
Many analysts still believe the proposed merger between Microsoft and Yahoo would meet stiff regulatory challenges in the U.S. and Europe.
But given Google's dominant position in online advertising, some of them believe Microsoft would clear this hurdle.
"We estimate that Microsoft and Yahoo today account for, at most, 30% of total U.S. online advertising, with their combined market share less in Europe," Mahaney said. "Thus, while we would expect substantial regulatory review, we assign this outcome only a 10% probability
Microsoft vs.Google
EVEN AS GOOGLE (GOOG: 506.80, +11.37, +2.29%) publicly lambastes Microsoft's (MSFT: 29.07, -1.12, -3.70%) proposed acquisition of Yahoo (YHOO: 28.98, -0.35, -1.19%), the search leader's stock is cratering, closing below $500 for the first time since August. But given the arduous challenge of making any giant acquisition work, especially one as fraught with potential delays and pitfalls as this one, Google's managers may be secretly licking their chops. Assuming the deal gets done — and that's a big if — Google's two largest competitors will be hindered by years of complicated integration. If anyone should be up in arms, it's probably shareholders in Microsoft.
"Google has to put up a stink just because that's their role in this situation," says Roger Kay, president of Endpoint Technologies Associates, a market intelligence firm. "But if I were in the boardroom at Google I would say something like, 'Let's act really upset about this deal but then let it slip through our fingers and have it go through.'"
Kay points out that the average for large integrations is two years, and this one is more complicated than most. Yahoo is based in Silicon Valley; Microsoft (already hardly beloved by the Yahoos) sits up in Redmond, Wash. The cultures are different. The engineering and marketing teams need to be sorted and assimilated. Yahoo operates on a lot of open source software. Microsoft, of course, runs on Windows. Just making the back ends of the two operations work together will be a tough technical challenge in and of itself.
"This is going to take project management on a scale that the Microsoft guys have never done before, and that is a formidable obstacle," Kay says. "And even if they're successful it's going to take a lot of energy and they will be somewhat distracted. That could give Google an opening."
Citigroup analyst Mark Mahaney pointed to that Friday after the proposed merger was announced. "This deal would be a material negative for Google if it were to change user behavior, which would then lead to a shift in ad spending," the analyst wrote. "But we don't think a Microsoft/Yahoo! combination would change user behavior at all. And we could see a scenario by which Google would actually gain more market share due to industry uncertainty over the integration of the deal."
Then there's the unknown of when this shotgun marriage will be consummated. Canaccord Adams analyst Peter Misek wrote Monday that if the deal gets done, competitive gains vs. Google aren't likely to start to emerge until 2009 at the earliest. Throw in the probability of antitrust reviews here and in Europe, and a closing could be pushed out even further. Bank of America Securities downgraded Yahoo to Neutral (Hold, essentially) from Buy Tuesday, saying that "the acquisition could face significant regulatory hurdles in the U.S. and particularly in the E.U., which could delay the acquisition from closing for quite some time."
Microsoft's big problem is that it needs to convert its piles of cash into capital for sustainable businesses that are going to make huge bucks a decade from now. But it's hard to see how throwing billions of dollars at Yahoo serves that end. Microsoft is a sprawling company with five businesses, and all of them are subservient to the company's lifeblood: Windows and Office. The online division isn't just an also-ran to Google and Yahoo; it's the only part of the company that loses money.
Meanwhile, Yahoo's been flailing about for years, losing share to Google and missing out on Web 2.0 innovations like social networking. True, it's the world's biggest destination on the Internet, but still...it's a portal. How 1990s. How quaint. No company is better than Microsoft at spinning a strategic vision, even if the quality of its software and hardware products too often falls short of its rhetoric. But to hear Chief Executive Steve Ballmer extol the opportunities and virtues of the deal, it's clear he's been drinking his own Kool-Aid.
"Google has to put up a stink just because that's their role in this situation," says Roger Kay, president of Endpoint Technologies Associates, a market intelligence firm. "But if I were in the boardroom at Google I would say something like, 'Let's act really upset about this deal but then let it slip through our fingers and have it go through.'"
Kay points out that the average for large integrations is two years, and this one is more complicated than most. Yahoo is based in Silicon Valley; Microsoft (already hardly beloved by the Yahoos) sits up in Redmond, Wash. The cultures are different. The engineering and marketing teams need to be sorted and assimilated. Yahoo operates on a lot of open source software. Microsoft, of course, runs on Windows. Just making the back ends of the two operations work together will be a tough technical challenge in and of itself.
"This is going to take project management on a scale that the Microsoft guys have never done before, and that is a formidable obstacle," Kay says. "And even if they're successful it's going to take a lot of energy and they will be somewhat distracted. That could give Google an opening."
Citigroup analyst Mark Mahaney pointed to that Friday after the proposed merger was announced. "This deal would be a material negative for Google if it were to change user behavior, which would then lead to a shift in ad spending," the analyst wrote. "But we don't think a Microsoft/Yahoo! combination would change user behavior at all. And we could see a scenario by which Google would actually gain more market share due to industry uncertainty over the integration of the deal."
Then there's the unknown of when this shotgun marriage will be consummated. Canaccord Adams analyst Peter Misek wrote Monday that if the deal gets done, competitive gains vs. Google aren't likely to start to emerge until 2009 at the earliest. Throw in the probability of antitrust reviews here and in Europe, and a closing could be pushed out even further. Bank of America Securities downgraded Yahoo to Neutral (Hold, essentially) from Buy Tuesday, saying that "the acquisition could face significant regulatory hurdles in the U.S. and particularly in the E.U., which could delay the acquisition from closing for quite some time."
Microsoft's big problem is that it needs to convert its piles of cash into capital for sustainable businesses that are going to make huge bucks a decade from now. But it's hard to see how throwing billions of dollars at Yahoo serves that end. Microsoft is a sprawling company with five businesses, and all of them are subservient to the company's lifeblood: Windows and Office. The online division isn't just an also-ran to Google and Yahoo; it's the only part of the company that loses money.
Meanwhile, Yahoo's been flailing about for years, losing share to Google and missing out on Web 2.0 innovations like social networking. True, it's the world's biggest destination on the Internet, but still...it's a portal. How 1990s. How quaint. No company is better than Microsoft at spinning a strategic vision, even if the quality of its software and hardware products too often falls short of its rhetoric. But to hear Chief Executive Steve Ballmer extol the opportunities and virtues of the deal, it's clear he's been drinking his own Kool-Aid.
NEWS AT A GLANCE
Toyota profits rise, growth slows
Toyota, locked in a race to overtake GM as the world's top automaker by sales, reported a 7.5 percent rise in quarterly profits, to $4.3 billion, but warned of slowing growth. The quarter's profit was Toyota's largest ever for a third quarter, but the percentage gain was the smallest in a year. Looking ahead, Toyota said that increased sales from China, Russia, and other emerging markets would only partly make up for slowing U.S. demand and the strengthening yen. "Cars sold in India and China are cheap and have smaller profit margins," said Yuuki Sakurai at Fukoku Mutual Life Insurance in Tokyo.
BP misses target, raises dividend
Oil giant BP, Europe's second largest company, reported a 53 percent rise in fourth-quarter profits, to $4.4 billion, which fell short of analysts' expectations. Refining outages and rising costs dragged BP's full-year profit down 5.5 percent, but oil output rose for the first time since 2005, as new fields in Angola, Trinidad, and the Gulf of Mexico came online, and the firm raised its dividend by 31 percent. BP shares rose in London early today. "The numbers are disappointing," said analyst Peter Hitchens at Seymour Pierce, "but I think that is more than made up for by the fact that we have got a step change in the dividend."
United adds bag-check fee
United Airlines said it is adding a $25 fee to check a second piece of luggage on domestic flights, becoming the first large carrier to charge for the service. United Milage Plus frequent fliers with at least "premium" status won't be charged, nor will passengers on most international flights. The fee, attributed to rising fuel costs, applies on flights leaving May 5 and beyond. Analysts say other airlines will likely follow suit. (Bloomberg) "Everybody is chiseling away at everything that you thought you deserve," said Bestfares-dot-com CEO Tom Parsons. "But people shouldn't be upset because we still want to fly coast to coast for $199."
Green habits, not greenbacks
A growing number of consumers are looking to cut back on their "carbon footprint," and that means buying less. But by trying to reduce their greenhouse gas emissions -- and lower their expenses as they weather the hangover at the end of the cheap-credit binge -- green consumers might also be hampering efforts to fend off an economic slowdown. The new frugality could render ineffective the stimulus package wending its way through Congress, for example, which relies on free spending. "You know there's a shift, when drinking tap water is cooler than drinking Pellegrino or Evian," says trend forecaster Faith Popcorn.
The subprime drawing board
Plans to fix our mortgage mess "are like belly buttons," says David Weidner in "Everybody's got one, and they're all pretty much useless." But some recent plans have emerged that could "have positive effects for everyone." The Center for American Progress, apparently "hell-bent on appeasing everyone," wants the government to extend interest-only loans to troubled homeowners and buy and sell existing subprime debt. More promising, Punk Zeigel analyst Richard Bove would offer 1 percent subsidized loans to many subprime borrowers, at a "reasonable" taxpayer cost of $150 billion. Either way, "it won't be pretty," but doing nothing would be uglier still.
Paradise isn't easy
Retiring overseas may sound attractive, says Jeff Opdyke in but it "can have its logistical headaches." Because most countries have lower costs of living, retiring baby boomers assume they can move abroad to "stretch their nest egg." Before pulling up anchor, though, make sure you figure out banking, health care, and housing. The Internet makes banking easier, and Social Security checks will be sent almost anywhere. But dealing with local banks and real estate laws can be tricky. And while some countries will "lure" you with retiree tax incentives, remember, the IRS taxes your income "no matter where it's earned in the world."
GOOD DAY FOR: Trees, after the White House scaled back the number of printed copies of its four volume, 2,000-page-plus 2009 budget, saving an estimated 20 tons of paper, 480 trees, and $1 million over five years. The reduced paper count stems from a decision to charge the public, congressional offices, and the media for copies of the budget.
BAD DAY FOR: Looking into the future, after Singapore-based securites-broker-turned-astrologer Tony Tan is predicting that the Chinese Year of the Rat will be characterized by losses. Tan successfully predicted that the Year of the Pig last year would see "peak performances" in Asian stocks. "Just like a rat, investors will have to be nimble" this lunar year, which begins Feb. 7, Tan says.
NOTED: Last Sunday's Giants-Patriots matchup was the most-viewed Super Bowl ever, and the second-largest TV event in U.S. history. According to Neilsen Media Research, an average of 97.5 million viewers watched the game, second only to the "MASH" series finale, which drew 106 million. Fox, which aired the game, charged $2.7 million for 30-second commercial spots. TiVO said more people watched the commercials than the game.
Toyota, locked in a race to overtake GM as the world's top automaker by sales, reported a 7.5 percent rise in quarterly profits, to $4.3 billion, but warned of slowing growth. The quarter's profit was Toyota's largest ever for a third quarter, but the percentage gain was the smallest in a year. Looking ahead, Toyota said that increased sales from China, Russia, and other emerging markets would only partly make up for slowing U.S. demand and the strengthening yen. "Cars sold in India and China are cheap and have smaller profit margins," said Yuuki Sakurai at Fukoku Mutual Life Insurance in Tokyo.
BP misses target, raises dividend
Oil giant BP, Europe's second largest company, reported a 53 percent rise in fourth-quarter profits, to $4.4 billion, which fell short of analysts' expectations. Refining outages and rising costs dragged BP's full-year profit down 5.5 percent, but oil output rose for the first time since 2005, as new fields in Angola, Trinidad, and the Gulf of Mexico came online, and the firm raised its dividend by 31 percent. BP shares rose in London early today. "The numbers are disappointing," said analyst Peter Hitchens at Seymour Pierce, "but I think that is more than made up for by the fact that we have got a step change in the dividend."
United adds bag-check fee
United Airlines said it is adding a $25 fee to check a second piece of luggage on domestic flights, becoming the first large carrier to charge for the service. United Milage Plus frequent fliers with at least "premium" status won't be charged, nor will passengers on most international flights. The fee, attributed to rising fuel costs, applies on flights leaving May 5 and beyond. Analysts say other airlines will likely follow suit. (Bloomberg) "Everybody is chiseling away at everything that you thought you deserve," said Bestfares-dot-com CEO Tom Parsons. "But people shouldn't be upset because we still want to fly coast to coast for $199."
Green habits, not greenbacks
A growing number of consumers are looking to cut back on their "carbon footprint," and that means buying less. But by trying to reduce their greenhouse gas emissions -- and lower their expenses as they weather the hangover at the end of the cheap-credit binge -- green consumers might also be hampering efforts to fend off an economic slowdown. The new frugality could render ineffective the stimulus package wending its way through Congress, for example, which relies on free spending. "You know there's a shift, when drinking tap water is cooler than drinking Pellegrino or Evian," says trend forecaster Faith Popcorn.
The subprime drawing board
Plans to fix our mortgage mess "are like belly buttons," says David Weidner in "Everybody's got one, and they're all pretty much useless." But some recent plans have emerged that could "have positive effects for everyone." The Center for American Progress, apparently "hell-bent on appeasing everyone," wants the government to extend interest-only loans to troubled homeowners and buy and sell existing subprime debt. More promising, Punk Zeigel analyst Richard Bove would offer 1 percent subsidized loans to many subprime borrowers, at a "reasonable" taxpayer cost of $150 billion. Either way, "it won't be pretty," but doing nothing would be uglier still.
Paradise isn't easy
Retiring overseas may sound attractive, says Jeff Opdyke in but it "can have its logistical headaches." Because most countries have lower costs of living, retiring baby boomers assume they can move abroad to "stretch their nest egg." Before pulling up anchor, though, make sure you figure out banking, health care, and housing. The Internet makes banking easier, and Social Security checks will be sent almost anywhere. But dealing with local banks and real estate laws can be tricky. And while some countries will "lure" you with retiree tax incentives, remember, the IRS taxes your income "no matter where it's earned in the world."
GOOD DAY FOR: Trees, after the White House scaled back the number of printed copies of its four volume, 2,000-page-plus 2009 budget, saving an estimated 20 tons of paper, 480 trees, and $1 million over five years. The reduced paper count stems from a decision to charge the public, congressional offices, and the media for copies of the budget.
BAD DAY FOR: Looking into the future, after Singapore-based securites-broker-turned-astrologer Tony Tan is predicting that the Chinese Year of the Rat will be characterized by losses. Tan successfully predicted that the Year of the Pig last year would see "peak performances" in Asian stocks. "Just like a rat, investors will have to be nimble" this lunar year, which begins Feb. 7, Tan says.
NOTED: Last Sunday's Giants-Patriots matchup was the most-viewed Super Bowl ever, and the second-largest TV event in U.S. history. According to Neilsen Media Research, an average of 97.5 million viewers watched the game, second only to the "MASH" series finale, which drew 106 million. Fox, which aired the game, charged $2.7 million for 30-second commercial spots. TiVO said more people watched the commercials than the game.
Monday, February 4, 2008
United to charge $25 for second checked bag
Starting next spring, United Airlines will begin charging certain domestic passengers for more than one piece of checked-in luggage to help offset the soaring cost of jet fuel, the No. 2 U.S. carrier said Monday.
The move by the operating subsidiary of UAL Corp. (UAUA:38.66, -2.48, -6.0%) is the first taken among the so-called legacy carriers including Northwest Airlines (NWA:17.85, -2.14, -10.7%) , Delta Air Lines (DAL:17.60, -0.93, -5.0%) and Continental Airlines (CAL:27.85, -1.40, -4.8%) , but it's bound to be imitated as a way to defray expenses without alienating fare-conscious travelers.
"They are the first, but they certainly won't be the last," said airline consultant Terry Trippler of Trippler Associates. For the airlines, each bag is additional weight and thus represents fuel expense.
"The airlines are looking for every possible revenue source they can find and still cut fares without cutting wages, because right now they can't go any lower," Trippler said.
Airlines across the industry have struggled to deal with soaring jet fuel prices while remaining competitive. Chicago-based United said the new policy is expected to generate $100 million in annual cost savings and new revenue.
In the quarter ended Dec. 31, UAL Corp. said fuel costs increased $359 million, or 25%, from a year earlier.
For domestic passengers who do not have status in a Mileage Plus or Star Alliance, a second piece of checked luggage will cost them $25, effective May 5. There will be no charge for their first bag.
United will now also charge a flat rate for all customers checking in up to four additional bags at $100 each. Previously, the airline charged in a range of $85 to $125 a bag.
Some smaller airlines already have been charging passengers for checking in more than one piece of luggage, while at least one low-cost carrier, Spirit Airlines, charges $10 each for the first two bags.
United said that, based on research into passengers' habits, it determined that only one in four check in more than one bag. By charging the 25% of people who check in more than one bag, the airline said it can bring down the weight of the airplane and help keep fares in check.
UAL's shares slipped 4.9% at last check to $39.15, in line with weakness
The move by the operating subsidiary of UAL Corp. (UAUA:38.66, -2.48, -6.0%) is the first taken among the so-called legacy carriers including Northwest Airlines (NWA:17.85, -2.14, -10.7%) , Delta Air Lines (DAL:17.60, -0.93, -5.0%) and Continental Airlines (CAL:27.85, -1.40, -4.8%) , but it's bound to be imitated as a way to defray expenses without alienating fare-conscious travelers.
"They are the first, but they certainly won't be the last," said airline consultant Terry Trippler of Trippler Associates. For the airlines, each bag is additional weight and thus represents fuel expense.
"The airlines are looking for every possible revenue source they can find and still cut fares without cutting wages, because right now they can't go any lower," Trippler said.
Airlines across the industry have struggled to deal with soaring jet fuel prices while remaining competitive. Chicago-based United said the new policy is expected to generate $100 million in annual cost savings and new revenue.
In the quarter ended Dec. 31, UAL Corp. said fuel costs increased $359 million, or 25%, from a year earlier.
For domestic passengers who do not have status in a Mileage Plus or Star Alliance, a second piece of checked luggage will cost them $25, effective May 5. There will be no charge for their first bag.
United will now also charge a flat rate for all customers checking in up to four additional bags at $100 each. Previously, the airline charged in a range of $85 to $125 a bag.
Some smaller airlines already have been charging passengers for checking in more than one piece of luggage, while at least one low-cost carrier, Spirit Airlines, charges $10 each for the first two bags.
United said that, based on research into passengers' habits, it determined that only one in four check in more than one bag. By charging the 25% of people who check in more than one bag, the airline said it can bring down the weight of the airplane and help keep fares in check.
UAL's shares slipped 4.9% at last check to $39.15, in line with weakness
The Microsoft-Yahoo deal's bad numbers
Most of the analysis of Microsoft's $45 billion hostile offer for Yahoo has focused on technology and the role Yahoo could play in the Microsoft-Google wars. Today, though, let's look at what almost everyone has overlooked: the numbers. More specifically, we'll look at the way that one of Wall Street's biggest hitters, Joe Rosenberg, looks at the proposed deal.
Rosenberg, chief investment strategist at Loews Corp. (LTR), the giant conglomerate, is one of the most influential voices on Wall Street. In fact, his criticism of Microsoft in a Barron's interview two years ago, in which he criticized the firm's use of capital and suggested a $50 billion stock buyback, was a big factor in sparking the $40 billion buyback program that Microsoft (MSFT) launched in the fall of 2006.
So Rosenberg's opinion matters. And he thinks Microsoft's offer for Yahoo (YHOO) is nuts. "This is like a person who's completely lost his mind," Rosenberg told me in an interview. "It's absurd. They're not going to earn anything like a reasonable rate of return on their investment in Yahoo. It just doesn't make sense."
"This deal would do more harm to Microsoft shareholders than any of its competitors can do to it," Rosenberg said. "The company has lost sight of its principal focus, which is to produce value for shareholders."
“This deal would do more harm to Microsoft shareholders than any of its competitors can do to it.” Joe Rosenberg
Before we proceed, two disclosures. First, Rosenberg told me that Loews owns Microsoft stock. Second, Loews is one of my biggest individual holdings, which means I have money riding on Rosenberg's investment acumen.
Back to the main event. Until the Yahoo bid surfaced, Rosenberg was predicting that Microsoft would earn almost $2 a share in its current fiscal year, rising steadily to more than $4 a share in four years. (A major element in his thinking: Microsoft's sales to "developing markets" such as China, India and Eastern Europe will soar.) So at $32 - its price before news of the Yahoo offer drove its stock down sharply Friday - Microsoft looked cheap to Rosenberg. Now, he fears, Microsoft may be making the same mistake as other companies that did large, failed high-tech takeovers.
No, he's not talking about the 2000 deal that combined America Online with my employer Time Warner (TWX), which many people have cited as a cautionary tale for Microsoft-Yahoo.
Wrongly, in Rosenberg's opinion (and mine). How so? Because America Online's purchase of Time Warner turned out great for AOL shareholders, whose stock fell far less than other Internet issues when the bubble popped. The deal was disastrous for the sellers - the old Time Warner's stockholders - because the value of their shares was eviscerated.
The real parallels to Microsoft-Yahoo, says Rosenberg, citing his 47 years on Wall Street, are two largely-forgotten disasters: Xerox' $1 billion purchase of Scientific Data Systems in 1969 and AT&T's (T) $7.5 billion purchase of NCR in 1991. In both cases, the acquiring company paid top dollar for firms whose products and technology rapidly became obsolete.
Rosenberg doesn't pretend to be a tech maven, but he says it's clear that the market - which sent Yahoo's stock down 45% from October through last Thursday - is saying something negative about Yahoo's businesses and prospects. Microsoft, Rosenberg says, would be well-advised to listen.
Should Microsoft buy Yahoo, Rosenberg says, he, like other folks looking at this deal, expects Microsoft and Google to engage in price wars in the search and advertising businesses. But Rosenberg carries that thought one level further. Such a price war would hurt Yahoo's already-anemic profit margins, Rosenberg says, making a Microsoft purchase even more problematic.
Microsoft's future free cash flow per share would be substantially higher if it buys back its own shares, he said, rather than buying Yahoo by issuing about $23 billion of new stock and spending a net $15 billion or so in cash. (That cash number takes into account the approximately $8 billion of cash and marketable securities that Yahoo owns.)
Rosenberg says he's not trying to hurt Microsoft, he's trying to help. "They don't realize that by criticizing this deal, I'm trying to do them a favor," he says. And, of course, to do Loews a favor, too
Rosenberg, chief investment strategist at Loews Corp. (LTR), the giant conglomerate, is one of the most influential voices on Wall Street. In fact, his criticism of Microsoft in a Barron's interview two years ago, in which he criticized the firm's use of capital and suggested a $50 billion stock buyback, was a big factor in sparking the $40 billion buyback program that Microsoft (MSFT) launched in the fall of 2006.
So Rosenberg's opinion matters. And he thinks Microsoft's offer for Yahoo (YHOO) is nuts. "This is like a person who's completely lost his mind," Rosenberg told me in an interview. "It's absurd. They're not going to earn anything like a reasonable rate of return on their investment in Yahoo. It just doesn't make sense."
"This deal would do more harm to Microsoft shareholders than any of its competitors can do to it," Rosenberg said. "The company has lost sight of its principal focus, which is to produce value for shareholders."
“This deal would do more harm to Microsoft shareholders than any of its competitors can do to it.” Joe Rosenberg
Before we proceed, two disclosures. First, Rosenberg told me that Loews owns Microsoft stock. Second, Loews is one of my biggest individual holdings, which means I have money riding on Rosenberg's investment acumen.
Back to the main event. Until the Yahoo bid surfaced, Rosenberg was predicting that Microsoft would earn almost $2 a share in its current fiscal year, rising steadily to more than $4 a share in four years. (A major element in his thinking: Microsoft's sales to "developing markets" such as China, India and Eastern Europe will soar.) So at $32 - its price before news of the Yahoo offer drove its stock down sharply Friday - Microsoft looked cheap to Rosenberg. Now, he fears, Microsoft may be making the same mistake as other companies that did large, failed high-tech takeovers.
No, he's not talking about the 2000 deal that combined America Online with my employer Time Warner (TWX), which many people have cited as a cautionary tale for Microsoft-Yahoo.
Wrongly, in Rosenberg's opinion (and mine). How so? Because America Online's purchase of Time Warner turned out great for AOL shareholders, whose stock fell far less than other Internet issues when the bubble popped. The deal was disastrous for the sellers - the old Time Warner's stockholders - because the value of their shares was eviscerated.
The real parallels to Microsoft-Yahoo, says Rosenberg, citing his 47 years on Wall Street, are two largely-forgotten disasters: Xerox' $1 billion purchase of Scientific Data Systems in 1969 and AT&T's (T) $7.5 billion purchase of NCR in 1991. In both cases, the acquiring company paid top dollar for firms whose products and technology rapidly became obsolete.
Rosenberg doesn't pretend to be a tech maven, but he says it's clear that the market - which sent Yahoo's stock down 45% from October through last Thursday - is saying something negative about Yahoo's businesses and prospects. Microsoft, Rosenberg says, would be well-advised to listen.
Should Microsoft buy Yahoo, Rosenberg says, he, like other folks looking at this deal, expects Microsoft and Google to engage in price wars in the search and advertising businesses. But Rosenberg carries that thought one level further. Such a price war would hurt Yahoo's already-anemic profit margins, Rosenberg says, making a Microsoft purchase even more problematic.
Microsoft's future free cash flow per share would be substantially higher if it buys back its own shares, he said, rather than buying Yahoo by issuing about $23 billion of new stock and spending a net $15 billion or so in cash. (That cash number takes into account the approximately $8 billion of cash and marketable securities that Yahoo owns.)
Rosenberg says he's not trying to hurt Microsoft, he's trying to help. "They don't realize that by criticizing this deal, I'm trying to do them a favor," he says. And, of course, to do Loews a favor, too
Oil Prices Fall Below $89 a Barrel
Oil prices seesawed Monday as gains in global stock markets failed to cancel out worries of a possible U.S. recession that would stunt oil demand.
European stock markets rose again, following last week's rise on Wall Street.
By the afternoon in Europe, London's FTSE index was up 0.5 percent, the CAC-40 in Paris gained 0.7 percent and Frankfurt's DAX was 1.2 percent higher.
Asian stock markets also climbed Monday. China's benchmark Shanghai Composite Index rose 8.1 percent, Hong Kong's Hang Seng index jumped 3.8 percent and Japan's Nikkei 225 index rose 2.7 percent.
Energy investors often view stocks as a proxy for economic growth, and in some recent sessions, movements in the oil market have closely followed that of global equities.
But Monday investors appeared to remain focused on weak economic data in the U.S. that pushed oil futures down nearly $3 a barrel at the end of last week.
"The high volatility in equities at a time when the oil markets are lacking a clear fundamental picture, has led to a greater oil-to-equity correlation in recent weeks," said Olivier Jakob of Petromatrix in Switzerland.
Light, sweet crude for March delivery was down 13 cents to $88.83 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe. Earlier Monday, the contract rose as high as $89.39 but also was as low as $88.07.
In London, Brent crude futures rose 1 cent to $89.45 a barrel on the ICE Futures exchange.
The Nymex contract dropped $2.79 to settle at that level Friday after the U.S. Labor Department reported that employers cut 17,000 jobs last month, the first reduction in more than four years and a sign that the economy continues to weaken.
Construction spending also fell by a record amount, according to the Commerce Department, reflecting a sharp pullback in residential building.
Responding to recent oil price declines, the Organization of Petroleum Exporting Countries said Friday it will maintain current oil output levels due to concerns that a weakening global economy will result in softer demand.
However, looking ahead to the next meeting in March, Qatar's Abdullah bin Hamad Al Attiyah said "all the possibilities are there" -- shorthand for a possible cut in production, if the U.S. economy weakens enough to cut into demand.
Other issues affecting the market were an attack by Turkish troops on Kurdish rebel targets in northern Iraq and a battle between gunmen and government troops near a petroleum-pumping station in Nigeria's lawless southern oil region.
Neither incident appeared to have disrupted oil flows, but analysts said both were causes for concern.
Heating oil futures rose 0.06 cent to $2.4495 a gallon while gasoline prices fell 0.02 cent to $2.2832 a gallon and Natural gas futures lost 7.9 cents to $7.661 per 1,000 cubic feet.
European stock markets rose again, following last week's rise on Wall Street.
By the afternoon in Europe, London's FTSE index was up 0.5 percent, the CAC-40 in Paris gained 0.7 percent and Frankfurt's DAX was 1.2 percent higher.
Asian stock markets also climbed Monday. China's benchmark Shanghai Composite Index rose 8.1 percent, Hong Kong's Hang Seng index jumped 3.8 percent and Japan's Nikkei 225 index rose 2.7 percent.
Energy investors often view stocks as a proxy for economic growth, and in some recent sessions, movements in the oil market have closely followed that of global equities.
But Monday investors appeared to remain focused on weak economic data in the U.S. that pushed oil futures down nearly $3 a barrel at the end of last week.
"The high volatility in equities at a time when the oil markets are lacking a clear fundamental picture, has led to a greater oil-to-equity correlation in recent weeks," said Olivier Jakob of Petromatrix in Switzerland.
Light, sweet crude for March delivery was down 13 cents to $88.83 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe. Earlier Monday, the contract rose as high as $89.39 but also was as low as $88.07.
In London, Brent crude futures rose 1 cent to $89.45 a barrel on the ICE Futures exchange.
The Nymex contract dropped $2.79 to settle at that level Friday after the U.S. Labor Department reported that employers cut 17,000 jobs last month, the first reduction in more than four years and a sign that the economy continues to weaken.
Construction spending also fell by a record amount, according to the Commerce Department, reflecting a sharp pullback in residential building.
Responding to recent oil price declines, the Organization of Petroleum Exporting Countries said Friday it will maintain current oil output levels due to concerns that a weakening global economy will result in softer demand.
However, looking ahead to the next meeting in March, Qatar's Abdullah bin Hamad Al Attiyah said "all the possibilities are there" -- shorthand for a possible cut in production, if the U.S. economy weakens enough to cut into demand.
Other issues affecting the market were an attack by Turkish troops on Kurdish rebel targets in northern Iraq and a battle between gunmen and government troops near a petroleum-pumping station in Nigeria's lawless southern oil region.
Neither incident appeared to have disrupted oil flows, but analysts said both were causes for concern.
Heating oil futures rose 0.06 cent to $2.4495 a gallon while gasoline prices fell 0.02 cent to $2.2832 a gallon and Natural gas futures lost 7.9 cents to $7.661 per 1,000 cubic feet.
Sunday, February 3, 2008
Wall St. awaits another rally
This week, Wall Street hopes economic, earnings data keeps rally going
The stock market has been on the upswing, but few investors are relaxing just yet. This week's data on housing, retailers and labor costs will give Wall Street an idea of whether the economy is weakening or inflation is accelerating - or both.
Wall Street had a case of the winter blues in January, and understandably. With banks reporting huge losses, uncertainty brewing about whether the economy is in recession, and Americans struggling to keep up with their debt payments, there was nowhere to go but down. The Standard & Poor's 500 index recorded its worst January since 1990.
But the stock market has bounced back - last week, the Dow Jones industrial average jumped 4.39 percent, the Standard & Poor's 500 index added 3.75 percent, and the Nasdaq composite index rose 4.87 percent.
The Dow remains 10 percent below the record close of 14,164.53 it reached on Oct. 9, but has recovered nearly 10 percent from the 15-month lows it hit in January.
There were many factors that helped buoy the market last week. The Federal Reserve met the market's hopes for another big rate cut by slashing key rates a half-point. Banks and regulators indicated they are working to help out the distressed companies that insure mortgage-backed bonds. And Microsoft Corp.'s (MSFT, Fortune 500) bid for the struggling Internet provider Yahoo Inc. (YHOO, Fortune 500) reassured Wall Street that although the credit markets are tight, deals are being pitched.
Recent government reports have not painted a rosy picture of the economy, but they haven't indicated the nation is in the midst of a deep recession, either.
The Labor Department's employment report last week showed a net job loss in January for the first time in four years, but a report from the Institute for Supply Management said the manufacturing sector expanded. The Commerce Department said personal spending is growing at the weakest pace in more than a year, but it also reported a solid gain in orders of big-ticket, durable goods.
The markets are angling for more rate cuts to stoke the economy, but what could tie the Fed's hands is inflation. High food, energy and healthcare costs are a reason consumers - particularly homeowners with tough-to-pay mortgages - are cutting back on discretionary spending. Those high prices may also be the only reason readings on personal spending are in positive territory.
The Commerce Department's index last week for personal consumption expenditures, a gauge of inflation, rose 0.2 percent in December from November levels. This week, the Labor Department reports on productivity and labor costs; the market is expecting labor costs to decline, and could be disappointed if they end up being higher.
"The worst of all possible worlds is stagflation," said Janna Sampson, director of portfolio management at Oakbrook Investments. Stagflation happens when the economy weakens at the same time prices are rising. It's a problem that can't be solved with rate moves; rate cuts spur inflation but boost growth, while hikes control inflation but also dampen growth.
This week, economists surveyed by Thomson/IFR are preparing for more signs that the economy is still growing, but very slowly because of a weak consumer.
They expect the Commerce Department's December factory orders index on Monday to tick up and the Institute for Supply Management's Tuesday report on January service sector growth to show a slight slowdown. They also expect the weekly ICSC-UBS chain store sales index on Tuesday to post a decline.
Meanwhile, the National Association of Realtors will release on Thursday its index on pending sales of existing homes, and economists predict a modest increase. And that same day, retailers are releasing their sales results for January.
Investors will also be paying close attention to speeches from Fed officials for insight into their thoughts on the economy and inflation, and whether the central bank is leaning toward lowering rates again when it meets March 18. Atlanta Fed President Dennis Lockhart, Richmond Fed President Jeffrey Lacker, Fed Governor Randall Kroszner, Philadelphia Fed President Charles Plosser and San Francisco Fed President Janet Yellen are all making public appearances this week.
The bulk of the earnings season is over, but there are some big names left to release their quarterly results. Companies reporting this week include media names such as News Corp. (NWS, Fortune 500), Walt Disney (DIS, Fortune 500) and Time Warner Inc. (TWX, Fortune 500); food sellers like Wendy's International Inc. (WEN) and Yum Brands Inc. (YUM, Fortune 500); and the homebuilder D.R. Horton (DHI, Fortune 500).
The stock market has been on the upswing, but few investors are relaxing just yet. This week's data on housing, retailers and labor costs will give Wall Street an idea of whether the economy is weakening or inflation is accelerating - or both.
Wall Street had a case of the winter blues in January, and understandably. With banks reporting huge losses, uncertainty brewing about whether the economy is in recession, and Americans struggling to keep up with their debt payments, there was nowhere to go but down. The Standard & Poor's 500 index recorded its worst January since 1990.
But the stock market has bounced back - last week, the Dow Jones industrial average jumped 4.39 percent, the Standard & Poor's 500 index added 3.75 percent, and the Nasdaq composite index rose 4.87 percent.
The Dow remains 10 percent below the record close of 14,164.53 it reached on Oct. 9, but has recovered nearly 10 percent from the 15-month lows it hit in January.
There were many factors that helped buoy the market last week. The Federal Reserve met the market's hopes for another big rate cut by slashing key rates a half-point. Banks and regulators indicated they are working to help out the distressed companies that insure mortgage-backed bonds. And Microsoft Corp.'s (MSFT, Fortune 500) bid for the struggling Internet provider Yahoo Inc. (YHOO, Fortune 500) reassured Wall Street that although the credit markets are tight, deals are being pitched.
Recent government reports have not painted a rosy picture of the economy, but they haven't indicated the nation is in the midst of a deep recession, either.
The Labor Department's employment report last week showed a net job loss in January for the first time in four years, but a report from the Institute for Supply Management said the manufacturing sector expanded. The Commerce Department said personal spending is growing at the weakest pace in more than a year, but it also reported a solid gain in orders of big-ticket, durable goods.
The markets are angling for more rate cuts to stoke the economy, but what could tie the Fed's hands is inflation. High food, energy and healthcare costs are a reason consumers - particularly homeowners with tough-to-pay mortgages - are cutting back on discretionary spending. Those high prices may also be the only reason readings on personal spending are in positive territory.
The Commerce Department's index last week for personal consumption expenditures, a gauge of inflation, rose 0.2 percent in December from November levels. This week, the Labor Department reports on productivity and labor costs; the market is expecting labor costs to decline, and could be disappointed if they end up being higher.
"The worst of all possible worlds is stagflation," said Janna Sampson, director of portfolio management at Oakbrook Investments. Stagflation happens when the economy weakens at the same time prices are rising. It's a problem that can't be solved with rate moves; rate cuts spur inflation but boost growth, while hikes control inflation but also dampen growth.
This week, economists surveyed by Thomson/IFR are preparing for more signs that the economy is still growing, but very slowly because of a weak consumer.
They expect the Commerce Department's December factory orders index on Monday to tick up and the Institute for Supply Management's Tuesday report on January service sector growth to show a slight slowdown. They also expect the weekly ICSC-UBS chain store sales index on Tuesday to post a decline.
Meanwhile, the National Association of Realtors will release on Thursday its index on pending sales of existing homes, and economists predict a modest increase. And that same day, retailers are releasing their sales results for January.
Investors will also be paying close attention to speeches from Fed officials for insight into their thoughts on the economy and inflation, and whether the central bank is leaning toward lowering rates again when it meets March 18. Atlanta Fed President Dennis Lockhart, Richmond Fed President Jeffrey Lacker, Fed Governor Randall Kroszner, Philadelphia Fed President Charles Plosser and San Francisco Fed President Janet Yellen are all making public appearances this week.
The bulk of the earnings season is over, but there are some big names left to release their quarterly results. Companies reporting this week include media names such as News Corp. (NWS, Fortune 500), Walt Disney (DIS, Fortune 500) and Time Warner Inc. (TWX, Fortune 500); food sellers like Wendy's International Inc. (WEN) and Yum Brands Inc. (YUM, Fortune 500); and the homebuilder D.R. Horton (DHI, Fortune 500).
STOCKS TO WATCH
Yum Brands Inc. (YUM:35.24, +1.08, +3.2%) is expected to report fourth-quarter earnings of 42 cents a share, according to analysts polled by Thomson Financial.
News Corp. (NWS:20.01, +0.62, +3.2%) is forecast to post earnings of 27 cents a share in the fiscal second quarter.
Humana Inc. (HUM:81.84, +2.32, +2.9%) is likely to report earnings of $1.32 a share in the fourth quarter.
Clorox Co. (CLX:63.09, +1.75, +2.9%) is estimated to report fiscal second-quarter earnings of 54 cents a share.
Equifax Inc. (EFX:37.00, -0.09, -0.2%) is likely to post earnings of 57 cents a share in the fourth quarter.
Manitowoc Co. (MTW:39.17, +1.14, +3.0%) is forecast to post earnings of 68 cents a share in the fourth quarter.
Computer Sciences Corp. (CSC:42.14, -0.18, -0.4%) is forecast to report earnings of $1 a share in the fiscal third quarter.
Post Properties Inc. (PPS:42.62, +0.35, +0.8%) is expected to post earnings of 9 cents a share in the fourth quarter.
BE Aerospace Inc. (BEAV:41.84, +3.23, +8.4%) is projected to report fourth-quarter earnings of 44 cents a share.
Anadarko Petroleum Corp. (APC:60.04, +1.56, +2.7%) is estimated to post earnings of 77 cents a share in the fourth quarter.
Wendy's International Inc. (WEN:25.18, +0.78, +3.2%) is expected to report earnings of 23 cents a share in the fourth quarter.
Principal Financial Group (PFG:61.21, +1.60, +2.7%) is likely to report earnings of $1.01 a share in the fourth quarter.
Lincoln National Corp. (LNC:56.09, +1.90, +3.5%) is likely to post earnings of $1.36 a share in the fourth quarter.
PartnerRe Ltd. (PRE:79.48, +0.20, +0.3%) is estimated to post fourth-quarter earnings of $3.19 a share.
Savvis Inc. (SVVS:22.62, +2.42, +12.0%) is forecast to post earnings of 2 cents a share in the fourth quarter.
After Friday's closing bell, The Wall Street Journal reported on its Web site that the House Judiciary Committee will convene a hearing on Feb. 8 to examine Microsoft Corp.'s (MSFT:30.45, -2.15, -6.6%) proposed takeover of Yahoo Inc. (YHOO:28.38, +9.20, +48.0%) . The hearing will consider what the impact on competition of a potential tie-up between the two Internet giants would be, the newspaper said.
Watch list
Concerned by reports of Chinese military hacking into Pentagon computers, four House lawmakers are asking the Treasury Department for information related to its review of the acquisition of 3Com Corp. (COMS:4.05, -0.08, -1.9%) by a Chinese company and its U.S. partner. In September, 3Com said it agreed to sell itself for $2.2 billion to Huawei Technologies Co., the largest networking company in China, and Bain Capital Partners LLC. The lawmakers want to know "the extent and nature" of Huawei's ties to the Chinese People's Liberation Army and if such ties constitute a threat to U.S. national security.
CSK Auto Corp. (CAO:8.98, +3.03, +50.9%) confirmed that it has received an unsolicited proposal from O'Reilly Automotive Inc. to acquire all of the outstanding shares of CSK Auto but O'Reilly Automotive Inc. (ORLY:30.62, +1.19, +4.0%) has declined to sign a confidentiality agreement which precludes access to non-public information. CSK Auto said it plans to proceed with the process to enhance shareholder value as planned.
Dollar Thrifty Automotive Group Inc. (DTG:26.02, +1.64, +6.7%) lowered its adjusted earnings-per-share estimate for 2007 to a range of 90 cents to 95 cents from $1.75 to $1.85 previously. In GAAP terms, it expects earnings to be flat or post a loss of 5 cents a share. The car rental company cited weaker industry demand in the travel market, excess fleet capacity in the industry, and a weakening used car market for its more bearish outlook. The company also said it is suspending its share buyback program.
Liz Claiborne Inc. (LIZ:22.71, +0.82, +3.8%) has finished the strategic review of 13 of the 16 brands it placed under review and plans to conclude evaluation of the other three brands, Ellen Tracy, Kensie, and Mac & Jac, by the end of the first quarter, the company said Friday. It also said it will sell most of the assets and liabilities of Prana to Prana Living LLC, a company formed by Prana's management team and Steelpoint Capital Partners for $36.5 million in cash. The company will pay out $18.4 million to Prana founders in connection with the purchase of Prana in 2005 and record the amount as a charge in first quarter earnings.
Motorola Inc. (MOT: 12.69, +1.19, +10.4%) confirmed it received a notice from Carl Icahn to nominate four directors to the company's board. The notice, Motorola said, indicated that Icahn affiliates beneficially hold about 5% of Motorola's outstanding shares, or about 114.3 million shares. Separately, The Wall Street Journal said the company's CEO Greg Brown is assuming direct oversight of the company's handset unit after pushing aside division head Stu Reed.
Walt Disney Co. (DIS:30.66, +0.82, +2.8%) said it signed new five-year contracts for both its Chief Executive Robert Iger and Chief Financial Officer Thomas Staggs. The new contracts expire on Jan. 31, 2013, for Iger, and on April 1, 2013, for Staggs.
News Corp. (NWS:20.01, +0.62, +3.2%) is forecast to post earnings of 27 cents a share in the fiscal second quarter.
Humana Inc. (HUM:81.84, +2.32, +2.9%) is likely to report earnings of $1.32 a share in the fourth quarter.
Clorox Co. (CLX:63.09, +1.75, +2.9%) is estimated to report fiscal second-quarter earnings of 54 cents a share.
Equifax Inc. (EFX:37.00, -0.09, -0.2%) is likely to post earnings of 57 cents a share in the fourth quarter.
Manitowoc Co. (MTW:39.17, +1.14, +3.0%) is forecast to post earnings of 68 cents a share in the fourth quarter.
Computer Sciences Corp. (CSC:42.14, -0.18, -0.4%) is forecast to report earnings of $1 a share in the fiscal third quarter.
Post Properties Inc. (PPS:42.62, +0.35, +0.8%) is expected to post earnings of 9 cents a share in the fourth quarter.
BE Aerospace Inc. (BEAV:41.84, +3.23, +8.4%) is projected to report fourth-quarter earnings of 44 cents a share.
Anadarko Petroleum Corp. (APC:60.04, +1.56, +2.7%) is estimated to post earnings of 77 cents a share in the fourth quarter.
Wendy's International Inc. (WEN:25.18, +0.78, +3.2%) is expected to report earnings of 23 cents a share in the fourth quarter.
Principal Financial Group (PFG:61.21, +1.60, +2.7%) is likely to report earnings of $1.01 a share in the fourth quarter.
Lincoln National Corp. (LNC:56.09, +1.90, +3.5%) is likely to post earnings of $1.36 a share in the fourth quarter.
PartnerRe Ltd. (PRE:79.48, +0.20, +0.3%) is estimated to post fourth-quarter earnings of $3.19 a share.
Savvis Inc. (SVVS:22.62, +2.42, +12.0%) is forecast to post earnings of 2 cents a share in the fourth quarter.
After Friday's closing bell, The Wall Street Journal reported on its Web site that the House Judiciary Committee will convene a hearing on Feb. 8 to examine Microsoft Corp.'s (MSFT:30.45, -2.15, -6.6%) proposed takeover of Yahoo Inc. (YHOO:28.38, +9.20, +48.0%) . The hearing will consider what the impact on competition of a potential tie-up between the two Internet giants would be, the newspaper said.
Watch list
Concerned by reports of Chinese military hacking into Pentagon computers, four House lawmakers are asking the Treasury Department for information related to its review of the acquisition of 3Com Corp. (COMS:4.05, -0.08, -1.9%) by a Chinese company and its U.S. partner. In September, 3Com said it agreed to sell itself for $2.2 billion to Huawei Technologies Co., the largest networking company in China, and Bain Capital Partners LLC. The lawmakers want to know "the extent and nature" of Huawei's ties to the Chinese People's Liberation Army and if such ties constitute a threat to U.S. national security.
CSK Auto Corp. (CAO:8.98, +3.03, +50.9%) confirmed that it has received an unsolicited proposal from O'Reilly Automotive Inc. to acquire all of the outstanding shares of CSK Auto but O'Reilly Automotive Inc. (ORLY:30.62, +1.19, +4.0%) has declined to sign a confidentiality agreement which precludes access to non-public information. CSK Auto said it plans to proceed with the process to enhance shareholder value as planned.
Dollar Thrifty Automotive Group Inc. (DTG:26.02, +1.64, +6.7%) lowered its adjusted earnings-per-share estimate for 2007 to a range of 90 cents to 95 cents from $1.75 to $1.85 previously. In GAAP terms, it expects earnings to be flat or post a loss of 5 cents a share. The car rental company cited weaker industry demand in the travel market, excess fleet capacity in the industry, and a weakening used car market for its more bearish outlook. The company also said it is suspending its share buyback program.
Liz Claiborne Inc. (LIZ:22.71, +0.82, +3.8%) has finished the strategic review of 13 of the 16 brands it placed under review and plans to conclude evaluation of the other three brands, Ellen Tracy, Kensie, and Mac & Jac, by the end of the first quarter, the company said Friday. It also said it will sell most of the assets and liabilities of Prana to Prana Living LLC, a company formed by Prana's management team and Steelpoint Capital Partners for $36.5 million in cash. The company will pay out $18.4 million to Prana founders in connection with the purchase of Prana in 2005 and record the amount as a charge in first quarter earnings.
Motorola Inc. (MOT: 12.69, +1.19, +10.4%) confirmed it received a notice from Carl Icahn to nominate four directors to the company's board. The notice, Motorola said, indicated that Icahn affiliates beneficially hold about 5% of Motorola's outstanding shares, or about 114.3 million shares. Separately, The Wall Street Journal said the company's CEO Greg Brown is assuming direct oversight of the company's handset unit after pushing aside division head Stu Reed.
Walt Disney Co. (DIS:30.66, +0.82, +2.8%) said it signed new five-year contracts for both its Chief Executive Robert Iger and Chief Financial Officer Thomas Staggs. The new contracts expire on Jan. 31, 2013, for Iger, and on April 1, 2013, for Staggs.
Microsoft finds new antitrust scrutiny
In a statement released shortly after the bid was made public, Sen. Herb Kohl, chairman of the Senate Antitrust Subcommittee, said, "We will need to scrutinize the deal carefully to insure that it will not cause any harm to the competitiveness of what has been a vibrant high tech marketplace, nor negatively impact the privacy rights of Internet users."
In addition, the Associated Press quoted a Justice Department spokeswoman as saying the agency will look into the competitive consequences of combining the companies, which together own about 32% of the U.S. search market. A department spokeswoman didn't immediately respond to a request for comment.
Such scrutiny is to be expected for any large deal involving Microsoft (MSFT:30.45, -2.15, -6.6%) , said Mark Ostrau, an antitrust attorney with Fenwick & West LLP in Mountain View, Calif.
Microsoft settled a Justice Department antitrust case in 2002, and remains under supervision in a Washington court as part of a related consent decree.
Earlier this month the European Commission announced the launch of two fresh probes into the company's competitive behavior, focusing on its Office and Internet browser software.
"Any time I'm asked to analyze a potential deal for a client with Microsoft, and handicap the level of [antitrust] review, I always say, 'You have to add the Microsoft factor'," Ostrau said. "Just about anything Microsoft does gets a close eye, and not without reason."
Microsoft's Windows software provides the digital framework for most PCs sold in the world, while its Office software dominates its respective market. That raises questions about any of Yahoo's extensive technology that could be pulled into either system and shut out competitors, Ostrau said.
Microsoft's bid for Yahoo (YHOO:28.38, +9.20, +48.0%) is widely seen as an effort to bolster competition with mutual rival Google Inc. in the online search and advertising markets. Google (GOOG:515.90, -48.40, -8.6%) has faced its own antitrust scrutiny over its pending acquisition of online advertising company DoubleClick, both here and in Europe.
"As in our recent examination of the Google-DoubleClick deal, we will need to investigate how this combination affects consumers, advertisers and businesses who increasingly use the Internet," Kohl said in his statement.
Ostrau speculated that should Microsoft succeed in buying Yahoo, the matter could get pulled into the consent decree that has Microsoft regularly reporting to a court on its competitive behavior. The decree was recently extended to November 2009, thanks to the efforts of a group of states led by New York.
However Jay Himes, the antitrust chief at the New York Attorney General's Office, said, "The consent decree and the Microsoft offer to buy Yahoo are entirely separate."
Edward Henneberry, co-chair of law firm Heller Ehrman LLP's European Practice Group with a focus on antitrust, said a combination of Microsoft and Yahoo could actually be presented by the companies as a boon for competition in the online advertising market, because it's currently dominated by Google.
"The case for them is they need the sufficient scale to compete with Google, and that'll be good for competition," Henneberry said. "This is going to get reviewed by agencies in the U.S. and Europe, and no one's thinking it won't be, but I wouldn't put any great note on that."
One of the complaints raised about the Google and DoubleClick merger was the large aggregation of user data that would be housed under one roof, theoretically making it more vulnerable to misuse. Such user data is collected by Internet firms to better target advertising.
Jeff Chester, executive director of the Center for Digital Democracy, which has opposed the Google and DoubleClick merger on privacy grounds, objected to Microsoft's bid for Yahoo.
A written statement from Chester said, "In an online era dominated by digital behemoths, consumers will be more vulnerable to having their personal information become the property of the GoogleClicks and Microhoos."
In addition, the Associated Press quoted a Justice Department spokeswoman as saying the agency will look into the competitive consequences of combining the companies, which together own about 32% of the U.S. search market. A department spokeswoman didn't immediately respond to a request for comment.
Such scrutiny is to be expected for any large deal involving Microsoft (MSFT:30.45, -2.15, -6.6%) , said Mark Ostrau, an antitrust attorney with Fenwick & West LLP in Mountain View, Calif.
Microsoft settled a Justice Department antitrust case in 2002, and remains under supervision in a Washington court as part of a related consent decree.
Earlier this month the European Commission announced the launch of two fresh probes into the company's competitive behavior, focusing on its Office and Internet browser software.
"Any time I'm asked to analyze a potential deal for a client with Microsoft, and handicap the level of [antitrust] review, I always say, 'You have to add the Microsoft factor'," Ostrau said. "Just about anything Microsoft does gets a close eye, and not without reason."
Microsoft's Windows software provides the digital framework for most PCs sold in the world, while its Office software dominates its respective market. That raises questions about any of Yahoo's extensive technology that could be pulled into either system and shut out competitors, Ostrau said.
Microsoft's bid for Yahoo (YHOO:28.38, +9.20, +48.0%) is widely seen as an effort to bolster competition with mutual rival Google Inc. in the online search and advertising markets. Google (GOOG:515.90, -48.40, -8.6%) has faced its own antitrust scrutiny over its pending acquisition of online advertising company DoubleClick, both here and in Europe.
"As in our recent examination of the Google-DoubleClick deal, we will need to investigate how this combination affects consumers, advertisers and businesses who increasingly use the Internet," Kohl said in his statement.
Ostrau speculated that should Microsoft succeed in buying Yahoo, the matter could get pulled into the consent decree that has Microsoft regularly reporting to a court on its competitive behavior. The decree was recently extended to November 2009, thanks to the efforts of a group of states led by New York.
However Jay Himes, the antitrust chief at the New York Attorney General's Office, said, "The consent decree and the Microsoft offer to buy Yahoo are entirely separate."
Edward Henneberry, co-chair of law firm Heller Ehrman LLP's European Practice Group with a focus on antitrust, said a combination of Microsoft and Yahoo could actually be presented by the companies as a boon for competition in the online advertising market, because it's currently dominated by Google.
"The case for them is they need the sufficient scale to compete with Google, and that'll be good for competition," Henneberry said. "This is going to get reviewed by agencies in the U.S. and Europe, and no one's thinking it won't be, but I wouldn't put any great note on that."
One of the complaints raised about the Google and DoubleClick merger was the large aggregation of user data that would be housed under one roof, theoretically making it more vulnerable to misuse. Such user data is collected by Internet firms to better target advertising.
Jeff Chester, executive director of the Center for Digital Democracy, which has opposed the Google and DoubleClick merger on privacy grounds, objected to Microsoft's bid for Yahoo.
A written statement from Chester said, "In an online era dominated by digital behemoths, consumers will be more vulnerable to having their personal information become the property of the GoogleClicks and Microhoos."
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