HP announces robust profits
February 20, 2008
On February nineteenth, the world’s largest personal computer maker Hewlett-Packard announced robust profits in its first fiscal quarter. This latest report from the company led to the stock prices soaring sky high in the after-hours after trading. The profit they which they announced in the sales and earnings were much higher than the estimates and all the predicted gains. This again proves that the company is gaining a lot of market share when compared to many of its credible rivals and that its move to cut cost is paying off.
Hewlett-Packard also published its expected revenue and gain guidance for the second quarter as well as the complete fiscal year. After the announcement was made the shares of the company (HPQ, Fortune 500) went as high as 6 percent in the after hours trading session.
When the first quarter of the company came to an end in the month of January, the net returns leaped 13 percent to reach $28.5 billlion which was more than what the forecast had been. The expected revenue in the first quarter according to the valuation of Thomson One Analytics was only $27.6 billion. The PC giant was able to earn $2.1billion more, which is 80 cents per share, than the previous year. The growth that happened in this period was of the magnitude of 38 percent. HP also reported profits of 86 cents per share if various one-time items were excluded. This was also well ahead of the expected 81 cents per share.
On nineteenth HP also issued the expected sales for the second quarter. They said that it was going to be in the range of $27.7 billion to $27.9 billion. This again was higher than the predicted estimate of $27.4 billion. And as for the full year also HP said that company’s expected revenue is going to be more than the predicted returns of $111.7 billion. Company officials said that they are expecting a full year return of $113.5 billion to $114 billion.
According to the company almost 70 percent of its first quarter revenue came from places outside the United States of America. They said that revenue that came from newly emerged markets like Russia, India, China and Brazil had grown by 35 percent from last year. The large amount of international exposure the company got was a huge bonus for the company considering the present economic scenario in USA now. The company believes that being able to reach the global position it is in now was a huge advantage.
The branch in the company which saw maximum gains was the Personal Systems Group. This branch which deals with notebooks and desktops for both commercial as well personal uses saw an increase in sales of 24 percent. The HP’s service division also saw in increase in sales of 11 percent from last year. The latest report will help the company in getting a lead in the PC market. The profits the company made will be more than enough to make sure that the company remains immune to any troubles that might happen as a result of the economic turbulences.
BP oil refinery should be fined more
February 19, 2008
On February 18th, the attorneys representing the people who were victims of the BP Texas City oil refinery explosion in the year 2005 argued that the oil company got away with a very small fine. They claim that the company must be actually giving billions instead of the meager $50 million it has proposed in a plea agreement. The estimate, the attorneys feel the company could be fined, for the hardships the victims of the explosion had to suffer is $3.2 billion.
They however said that the fine should never have been just $50 million but at least $400 million. The fines that were proposed were incorporated in the court documents that were filed by the victim’s lawyers in the week before. This was done on the request of a federal judge who is currently contemplating on whether or not to agree to a plea deal from the BP oil giant.
The current agreement has in it the provisions which propose that the BP oil refinery plead guilty for the violation of the Clean Air Act. It also says that the company will have to pay $50 million as a fine for the criminal manner of the explosion. The explosion had taken the lives of 15 people and had caused injury to more than 170 people. The agreement also says that the company would also be in probation for the next three years.
Earlier this month the plant manager of the oil refinery, Keith Casey, had formally registered the guilty plea as a representative of the entire company. The guilty plea that was made was in accordance with the agreement BP had come in the month of October last year where they had said that they will pay $373 million as a settlement fees. The fee was to settle the various civil and criminal charges that were piled up against them.
However the attorneys who are representing the victims has now asked the U.S. District Judge Lee Rosenthal to rebuff this deal saying that the compensation fee that was imposed on the oil giant was too low. They also claim that the deal which they had come to did not take care of the need for an autonomous monitor who would be able to report whether the company was taking enough measures to meet the safety obligations. The attorneys were also of the opinion that the prosecutors had not consulted the victims while the deal was being formulated.
The BP oil refinery and the prosecutors were, however, of the view that the deal was the harshest punishment they could get and hence were defending the deal. They feel that the procedure that was undertaken was the harshest there was in analyzing the criminal nature of the explosion. BP also said that the company has already paid in excess of $1.6 billion as compensation to more than 2000 victims after the unfortunate incident took place. They say that they have settled almost half of the 4000 lawsuits that were filed after the explosion.
Motorola sued by RIM
February 19, 2008
On February 18th, the Research in Motion let out the news that it was taking legal action against the Motorola Company for breaking and violating many Intellectual Property Rights. RIM, the smart phone maker based in Ontario, says that Motorola violated many patent licensing agreements. RIM said that they are suing the company mainly for the patents which were used for wireless devices like RIM’s Blackberry e-mail devices and Motorola’s Razr smart phones.
RIM officials said that the company, based in Waterloo in Ontario, is now asking a court in Dallas to pronounce that Motorola is indeed violating the commitments it had made earlier to license the necessary patents to its competitors on a reasonable and fair basis.
Research in Motion, in a court filing that was made on the 16th of February said that Motorola is breaching as many as nine RIM patents and that the company is not performing according to the agreement it had made in 2003. RIM is claiming that Motorola is now refusing to discuss fair terms for extending the agreement beyond the date of January 2008. The interesting thing about the court filing is that it came just one day after Motorola had filed a different suit against the Canadian company saying that it had violated some of Motorola’s patents.
Over the years both companies have competed against each other and collaborated together to bring out new technologies in the field of wireless communication. Both Research In Motion and Motorola have been accredited for coming up with many innovative ideas in the same field. But even while the competition was going on Motorola was the better of the two companies in terms of voice communication, while Research In Motion was focusing its energies to come out with better technologies in the area of Data Communication.
The money that will be involved in the lawsuit will be huge as both the companies are multi-billion dollar companies which have global standing. As a result of the success of Pearl and Blackberry smart phones Research In Motion has now become one of Canada’s leading and valuable wireless communication companies. The suit which was filed by RIM in a U.S. District Court in the district of Texas, says in it that the Motorola Company is seeking to undermine a long standing standards-setting practice in an effort to damage the public image of RIM, which over the years has proved to be a successful rival and competitor.
Responding to the suit that has been filed against them the Motorola spokesperson said on Monday that the company has not yet examined the complaint. But she said that the company strongly believes that all the claims that have been made do not hold any water and that Motorola will be going to defend itself vigorously. When asked about the 2003 agreement she said that since the agreement has expired this January and since both the companies were not able to reach on a mutually suitable agreement, Motorola was not able to extend the agreement.
Small businesses benefits from SEC’s change in rule
February 15, 2008
The change that has been made to rule 144 by the Securities and Exchange Commission is going to help the small companies in negotiating their private investment deals in a better way. It is predicted that the change will facilitate for a huge amount of small-cap stock being liquidized in the week. The change that has been made is that the holding-time for investors has been shortened as well as restricting the securities from one year to six months. The change will come into effect from the 15th of February. The change however might provide for a massive small-cap sell-off as well, if the investors decide to get rid of their stocks.
The change which has been brought about in rule 144 of the SEC, is to make sure that the undersized publicly owned companies in the competition are able to raise enough capital by making the lockdown period shorter during which time the investors from outside have no option but to hold on to their individual shares. Usually these small companies raise the required capital through the policy often known as “private investment in public equity” (PIPE) deals. Such deals usually involve the selling of huge chunks of stock to the outside investors at a discounted rate. These outside investors are then required to hold on to these shares during the time known as the holding-period. There are various holding-period rules they have to abide by before they are able to sell off their shares. Now that the holding period has been shortened, as per the new change in the rule of the SEC, the companies will be able to negotiate more private investment deals. The rule 144 being retroactive will make all those restricted securities which were issued between the periods of February 15 to August 15th of year 2007 be eligible for trade immediately.
The market experts are expecting the changes in rule to encourage the investors to follow private investment agreements more vehemently. They believe that the revision in rules could not have come at a better time because of the ongoing credit crunch situation due to which many small businesses are suffering. They believe that if the securities are liquidized in six months instead of one year it would attract more people to invest in such stocks. The change would also help these small companies to negotiate better terms as well during the sale of stocks. The outside investors who would have earlier required a discount of ten percent for a PIPE deal may now agree on a five percent discount because of the reduced holding period. This is because there will be a change in perspective of the investors when they find that the holding period is only half of what it used to be earlier. The investors would now even consider investing larger amounts into these small businesses.
However these revisions might also ignite a massive sell-off by the current private stock holders. This is because once the change comes into effect billions of dollars become saleable and the investors might try to make full use of this. However this volatility is expected to be a short lived one and that it will level off in some time.
Lenders stop foreclosure proceedings temporarily
February 14, 2008
On Tuesday the nation’s six main mortgage lenders joined together to agree on a temporary stop on the ongoing foreclosure proceedings. The effort has been taken by the banks in an effort to calm the current crisis that has risen in the state because of these forced sales of homes. The temporarily freeze on foreclosures are to help those homeowners who have really fallen behind in their payback installments. The program which was launched on Tuesday has provisions which would entail the delinquent home owners, against whom legal steps of foreclosure have been taken, to get a reprimand of another 30 days. This period has been given so that the lenders as well as the people who borrowed the money will have some time to work out some repayment options.
The program has been named as Project Lifeline and this is not just for those borrowers who have taken Adjustable rate mortgages. The number of defaults on loans has been highest for these kinds of loans, and the general numbers of delinquencies on loans have also increased dramatically in the last few years. Project Lifeline has been created so that the families who are facing the risk of foreclosure will have some more time to figure a way out of the mess. Steps for modifications in the loan policies are another step the lenders might consider very shortly. However the lenders made it clear that Project Lifeline is not just for those people who have taken a sub prime loan but also for those people who have taken any kind of home mortgage loan.
Citigroup, Countrywide, Bank of America, JPMorgan Chase, Washington Mutual and the Wells Fargo are the six banks that have so far joined together to make the program a success and to help the suffering homeowners. The project has received the backing of the Jackson treasury and the foreclosure prevention coalition backed by the government, Hope Now.
The officials who are engaged in the implementation of the project said that this is not going to save each and every home owner as there will be still many out there who will not any action even now, and many others who will just walk away from the program. But they remained optimistic that at least those people who are facing the risk of an immediate foreclosure might be able to benefit from this plan.
The homeowners who are behind by 3 months in the repayment of their mortgages will get a letter from the lender asking the homeowner to call back. Once the homeowners do that they will be asked if they want to continue living in their home and if they want to they will be given financial counseling. The modifications in the loan are not granted at this time. Once the borrowers submit their current information regarding their wages and debts the lender makes the final decision on whether or not to freeze the foreclosure temporarily. The modifications are made only after the lender carefully studies the details that have been submitted by the borrower and confirms that the loan can be repaid by the person.
News of Buffet’s helping gesture welcomed with glee
February 14, 2008
On Tuesday this week the people welcomed the news that Warren Buffet has lend a helping hand to those bond insurers who are suffering. News that also created reasonable amount of joy was that the major lenders of the country have declared that a plan has been formulated by them which are designed to help the homeowners stay clear of a foreclosure.
The news prompted the Dow Jones industrial Average (INDU) to gain around 133 points which is almost 1.1 percent increase. The Standard 7 Poor’s 500 (SPX) index also gained 0.7 percent. However the NASDAQ composite did not change much after reporting some increase early in the day. The future trades in the market are most likely to be affected by the information of retail sale of January before trade starts each day.
The stocks in most indices went up through most of the session and the Dow was ahead with one point up at 225 points. However because of the decrease in the stock price of the tech sector and the commodities the market was not able to sustain the gains it had achieved. As the treasury prices took a fall the corresponding yields went up. The value of dollar was in a mixed state against the main currencies of the world. Another field which took a fall was the oil and the gold sectors.
Wall Street however welcomed the news that the Berkshire Hathaway chairman and CEO Warren Buffet has lent a helping hand to the bond insurers and those people who are facing foreclosures as they might get some help from the money lenders. The news greatly helped in relieving the tension about the current economic outlook. The good thing about such a move is that even if it does not really help the people it does give the people a hope that the issue can be contained and it helps in getting the environment back to a state of calm.
Buffet has put forward an offer to insure almost $800 billion in tax-exempt bonds. He had made the offer to the three main bond insurers in the country, MBIA (MBI), Ambac Financial (ABK) and the FGIC. But the responses from these companies have not been all that favorable. When Buffet admitted that one of the companies have rejected the offer completely, two others have not responded as of yet. One of the companies that rejected the offer is Ambac.
The move from the financial giant was speculated to be a move which proved that major fallout in the economic sector can be avoided if the proper precautions were taken. This is a further reassurance for those people who were planning to invest in any field. But the critics however felt that the move from Buffet was just going to benefit his own Berkshire Hathway and not the bond insurers. What the outcome of this offer is going to be has to be waited and seen.
Countrywide Financial to broaden its mortgage workout scope
February 14, 2008
On February 2008 the Countrywide Financial announced that it is going to broaden its current programs to give a helping hand to the borrowers handle their mortgage payments. The move is the same for all people regardless of the type of sub prime loan they have or whether they have fallen short on repayments.
Countrywide Financial is the country’s largest lender of mortgages and home loan providers. They are determined to reduce the number of delinquencies that are happening yearly on its books. This they plan to achieve by bringing into action many new loan terms, making long-term repayment plans and other such actions which will make it easier for the borrowers. Company officials last month said that they helped almost 81,000 borrowers who are facing trouble repaying their mortgage payments that were manageable in the year 2007. The policies that are being offered by the company has changed considerably since the last few months after it was targeted by many forced sale prevention advocates on the charge that Countrywide was the company that was the least responsive to the worries that were faced by the borrowers.
Only months ago had the Countrywide started a program to provide help to those people who had taken a sub prime Adjustable Mortgage (ARM). This new measure that the Countrywide Financial along with Association of Community Organizations for Reform Now (ACORN) adds the borrowers of fixed rate loans also into the previous category.
Countrywide’s managing director for loan administration in a call conference said that they are very eager to help all those people who are facing difficulty with mortgage regardless of whether the mortgage is of fixed rate type or adjustable rates.
Countrywide has till date not specified as to how many borrowers the plan is going to help. As per the statistics of the trade group, the Mortgage Bankers Association, the number of fixed rate borrowers comes to almost half of the total number of people who have taken sub prime loans in the country. The number of people who default on a Sub prime fixed rate loan is placed at about 12.2 percent according to the Mortgage bankers Association. But this is very low as compared to the delinquency rate that is recorded by borrowers of sub prime arms, which is almost 18.8 percent. Out of the 9 million loans that are serviced by the Countrywide almost 735,000 falls into the category of sub prime loans.
Previously the foreclosure prevention efforts were primarily centered on the ARM borrowers who were facing the risk because of resetting interest rates. This happens because such loans will have relatively low interest rates for two or three years and after that the percentage points will be reset to a higher figure after that.
The new plan does not leave behind the ARM borrowers. The people who are having hybrid adjustable rate mortgage are given the option of going for a refinance or to have their first interest rate frozen for the next five years.
Microsoft determined to get Yahoo
February 13, 2008
After the internet company Yahoo rejected the $45 billion takeover bid the industry giant Microsoft is all determined to get it under its belt. Now there is all possibility of witnessing a drawn out battle by Microsoft to unseat Yahoo’s board.
On the rejection of the takeover bid, Yahoo officials said that the entire management of the company had unanimously decided after careful evaluation of the bid that it undervalued the brand substantially. They said that the online demand and growth prospects of the company along with its recent investments in the internet advertising sector have not been taken into account at all. Now that the company has chosen to defy Microsoft’s offer it has set the scene for a battle of the giants in the Silicon Valley. Now the entire world’s eyes are set on Microsoft to see what their move is going to be. Will they increase their offer and bid again or will they choose to play it tough by trying to install their choice of directors in the Yahoo board. From reliable sources it was found that the initial letter that was sent by Microsoft to Yahoo said that they had the option of doing this the hard way or the easy way. From recent developments we are led to believe that Yahoo is ready to play hardball with the computer tycoon and ready to take the challenge on.
However the Yahoo officials are almost certain that the chances of them remaining independent are very slight and this is obvious from some of their recent remarks. Yahoo through various such remarks and statements have left the options open for further negotiations with Microsoft.
The offer of $31 per share made by Microsoft was at a premium of 62% to Yahoo’s stock price, but it is rumored that Yahoo was adamant on getting at least $40 per share. All the on going processes have led to an increase in Yahoo’s share price.
The sudden move by Microsoft to take over Yahoo is believed by many to become a credible opponent for the Google Company. They want to compete with Google, who with their advanced search technology was able to build a dominant position in the international market for online advertising. Microsoft is eying this advertising sector as the money that is being spent in this field is predicted to increase by two thirds to almost $75 billion by the end of 2 years.
It is rumored that Microsoft, chaired by Bill Gates, would start selecting candidates to stand for Yahoo’s board. Since the last date for nomination of names into the board is 13th of March the final result of whether or not a takeover should take place would depend solely on the votes by the Yahoo investors. But since this is a disruptive process it might end up in the resignation of some of the key staff in Yahoo. So Microsoft will have to think over any of its decisions with utmost precaution.
ISM fuel recession causes equities to tumble
February 11, 2008
The ongoing slide of the European and US markets continue to slide even further as it was seen on Tuesday, the 5th of February. The US stock market went down again as more proof of an economic slowdown was seen from both parties of the Atlantic. However, the biggest revelation was shot by the US institute for Supply and management’s non-manufacturing business activity index that went on to fall to a mere 41.9 per cent from last year’s closing of 54.4 per cent. This was the largest ever monthly slide to have taken place and also happens to be the lowest stage since the October of 2001. It is the foremost time that the index was under the 50 mark since March 2003. The only thing that it indicates is that there is a contraction occurring. The results of various researches that were conducted were termed as disastrous.
As the slide increased in Wall Street during the after noon session, credit spreads took a sharp widening. This was to make sure that the support for the government was maintained. One thing that held to its ground was the dollar as it did not lose it value. However, gold and oil were two things that lost a lot of ground.
Due to oil losing value, the ISM was weakened very badly and this ultimately resulted in the stocks tracking a severe blow. It also resulted in the credit market performing badly today. Many are of the opinion that the organization Federal Reserve was not able to prevent the recession, because it did not take enough aggressive timely policies. While some are of the opinion that Fed rate decreasing is not the answer to get out of this tight situation. It also means that one cannot stop the slaughter of trust in the actual economy.
Many analysts warned and said that the report with which ISM came up with was not in accordance to the other indicators in January. The ISM indices have fallen this badly and rapidly only after the massive shock or incident which shook the world badly, the 9/11 mishap for example. Anyhow, the silver lining is that usually that the ISM has usually rebound back in the month that followed the month in which the prices fell sharply. Unsatisfactory services section and retail sales information in the Euro zone instigated similar delay fears and increased rumor that the ECB would be forced to alleviate its hawkish take on the interest rates.
The US credit spreads enlarged sharply as the stock markets went down. The Markit iTraxx Crossover index acts an extremely vigilant indicator of risk appetite in Europe, hyped to 504bp from 471bp. The Markit CDX index, which keeps an eye on the US investment-grade bond risk, jumped to 117bp from 109bp.
The flight out of equities provoked strong refuge for people to buy government bonds. The outcome of the 10-year US Treasury dipped to 8bp at 3.56 per cent, whereas the 2-year production stood to be 14bp lower at 1.92 per cent.
Tyco International Inc. reports fall in earnings
February 8, 2008
On the fifth of February, the representatives of the diversified manufacturer Tyco International Inc. said that on Monday, it’s fiscal first quarter of a year earnings have fallen by 54 percent from the previous years. Same time a year ago, which also included its health care and electronics business which is no more a part of the company, the company’s earnings were a figure 54 percent higher than the present figure. Although the earnings have fallen by such a big figure the adjusted profits of the company was enough to top the Wall Street expectations by a reasonably wide margin.
The part of the company which is engaged in making security and fire protection products, has earned a remarkable figure of $363 million, which is almost 73 cents per share that was purchased. This was in the quarter that ended on the 28th of December. Anyhow, the figure becomes less remarkable when we come to know that the earnings of the same company in the quarter one year ago were $793 million, or almost $1.57 per share that was purchased. Excluding these items the company Tyco earned 49 cents per share from continuing operations in the 2006 period.
Earlier in the previous year in the month of July two segments of the Tyco Company spun off and began working as two separate independent entities. They are the Tyco Electronics and the Tyco health care business Covidien ltd.
The interesting thing to note now is that the revenue which the international company had pre announced in the month of January came to a total of $4.87 billion. This was very much against the analyst’s approximate estimate of $4.75 billion and this was very much more than the previous year’s sales which were only$4.37. So essentially, this year’s revenue had increased by an amazing figure of 12 percent.
According to the analysts who studied the growth of the company, its growth can be attributed to the strength it has acquired in its flow control and ADT worldwide businesses. The other factor which can also be held responsible is the lower corporate expenses.
On Tuesday this week, the shares of the company fell 94 points to touch $40.22 when trade opened on the day. But on the other hand, Tyco’s largest as well as most well known division, the ADT security monitoring business, had a 7 percent jump in its revenues this year. This was mainly due to the double digit growth in the Asian and Latin American countries.
After all the hue and cry the shares of the company’s share created the Tyco International Inc. has again ascertained that its 2008 profit prediction will be what it had said itself. This is including the raise the company had made only one month before which was of the range of almost $2.60 to $2.70 per share. But this prediction is excluding the separation and restructuring charges that were borne by the company as a part of the spin off of the 2 divisions of the company.
Countrywide To Slash Jobs
September 10, 2007
Countrywide Financial, the US’s biggest mortgage lender, is to make substantial job cuts, amounting to up to one fifth of its current workforce.
Countrywide had been one of the worst hit lenders by the ongoing sub-prime disaster, which continues to haunt banks throughout the US and indeed across the world.
The job cuts, to extend to around 12,000, are set to reflect significant losses from rising defaults and the current negative US housing market which has seen the company share price fall by half in recent months.
Official projections from Countrywide forecast a decrease in new mortgages by up to 25% through 2008 on 2007, after what has already been a bad year for mortgages and mortgage lenders.
As interest rates have risen, the widespread practice of over-lending to the sub-prime sector has left many banks and lenders across the world struggling for liquidity. With cash tied up in mortgages that homeowners can’t afford to repay, banks have learned the tough lessons of over exposure to risk.
With repossessions and foreclosures dramatically up at present, buyers are even keener to stay away from the over-supplied US housing market in favour of renting accommodation, amidst fears that the economy as a whole is continuing to perform below par.
House price inflation has almost completely ground to a halt over the last few years, reflecting the extent of imbalance within the housing market and encapsulating the degree of difficulty faced by those exposed to the sub-prime
With the number of new home buyer enquiries falling constantly, and top banks forced to borrow money or sell assets to fund daily cash flow, the situation has led to a sharp fall in investor confidence with an undoubted knock-on effect on the wider economy.
Countrywide Financial have already cut 1,400 jobs as a result of recent events, signifying a marked reduction in staff and labour costs.
US Tax Proposal Rejected By Business
August 22, 2007
Proposals for wide ranging tax reform in the US, which would prevent businesses moving funds between countries has been dismissed by business this week.
The proposed reforms would stop companies with foreign subsidiaries from moving funds out of the US tax free through provisions of favourable international treaties.
However, business leaders have criticised the measures, claiming that to introduce any more rigorous provisions would be to the detriment of commerce both domestically and on an international level, whilst turning away potential corporate investors from the US.
The House of Representatives has already passed a measure to the Senate, which would tax this kind of movement of funds at 30%, generating substantial revenue for the US coffers as a legitimate anti-avoidance measure if it passes through the Senate.
The proposals will be debated in the Senate next month, where Senators will argue and discuss the merits of such a bill. However, many analysts are predicting that the bill could come under fire in the largely Republican Senate.
The measures have been criticised by business leaders, who have widely argued that should the proposals become law, they would undermine investor confidence in the US economy.
Additionally, rather than being seen as an underhand practice, experts site the movement of funds through other countries as a ‘legitimate practice’, taking advantage of international treaties to which the US has agreed in order to minimise tax liability and gain a competitive edge over other similar scale businesses.
While these companies are not breaking the law, Congress has argued that it would be a good way to clamp down on the apparent loophole, whilst raising more funds for the public treasury.
The bill has passed through Congress and is scheduled for attention in the Senate next month, before it can become law.
Halliburton comes under scrutiny for announced move to Dubai
March 12, 2007
Halliburton (NYSE: HAL), the US oil services firm that was headed by US Vice President Dick Cheney for the last half of the 1990s, has announced that it will move its world headquarters from Houston, Texas, to the Persian Gulf state of Dubai.
The news of the move has touched off criticism from some politicians and speculation that the move has to do with official questions in the US about its no-bid contracts in Iraq. House of Representatives member Henry Waxman, chairman of the House Oversight and Government Reform Committee, could call hearings to look into the implications of the move, according to an aide to Mr. Waxman.
Halliburton says that the move is an effort to take better advantage of business opportunities in the Middle East. It said the company would retain its business registration in the United States, but it plans on listing on a Middle Eastern stock exchange once its move is made.
The company’s chief executive said that it sees greater opportunity in the eastern hemisphere, as opposed to the western hemisphere. But its KBR engineering and military services division, which Halliburton is currently in process of splitting off, has been the target of several investigations into its billing practices in Iraq, where it is the Pentagon’s biggest contractor. KBR has been paid over $20 billion dollars so far for its work in Iraq since the war there began.
Drivers given go-ahead to sue FedEx for discrimination
March 6, 2007
The Massachusetts Commission Against Discrimination has ruled that four Arab-American drivers for FedEx (NYSE: FDX), all practicing Muslims, can sue their employer for discrimination after the four charged that their supervisors harassed them by calling them “terrorists” and asking them if they were sending money to Osama bin Laden. One of the men said that besides the verbal harassment, his supervisor had thrown packages at him. When the driver complained about changes to his route, he claims the supervisor asked him not to get angry and blow up his car.
FedEx had argued that the four men, who worked for the delivery company’s ground package unit, were independent contractors and not employees and were therefore not protected by Massachusetts anti-discrimination laws. The Commission rejected that contention, which allows the suit charging that the unit and two of its supervisors engaged in a “pattern of racial, ethnic and religious discrimination”.
FedEx would not comment on the specifics of the ongoing case, but said that one of the supervisors named in the lawsuit has since left the company’s employ while the other still works for the company. A spokesman did say that FedEx “doesn’t tolerate” violations of its anti-discrimination policies and that those employees who do violate them are disciplined appropriately. In a similar case in 2006 in California, a jury awarded $61 million to two drivers who complained of similar harassment over a two-year period.
Bill to require shareholder vote on executive compensation introduced
March 2, 2007
Barney Frank, a member of the United States House of Representatives and chairman of the House financial services committee, has introduced a bill that would make require public companies to let shareholders vote on pay for company executives. The votes, which would be non-binding and advisory only, would be included with annual proxies sent to shareholders.
The bill comes as companies are getting ready for their annual meetings and at a time when executive compensation has become an issue with the public and likely will be on shareholders’ minds. Pensions funds and unions have been advocating for such advisory votes as a way of allowing shareholders to express their opinions about whether pay for top executives is appropriate to performance of their duties.
Critics of Mr. Frank’s bill say that an attempt to give shareholders any kind of say over executive compensation should wait until some indication of how new rules issued last year by the Securities and Exchange Commission affect executive pay packages. The rules require companies to disclose a single figure summary of executives’ compensation as well as a “narrative” that explains how compensation committees decided what to pay the executives. Mr. Frank has called the SEC rules a step in the right direction, but that he thinks the required disclosure is not enough.
$1.5 billion in damages assessed against Microsoft
February 23, 2007
A federal jury ruled on Thursday that Microsoft (NASDAQ: MSFT) must pay $1.5 billion to Alcatel-Lucent SA (Euronext: ALU; NYSE: ALU; TYO: 6687) for violation of two patents that concern coverting audio into digital MP3 files on personal computers. Lucent Technologies, which was acquired by Alcatel last year, filed 15 patent claims against two other computer companies, Gateway Inc. (NYSE: GTW) and Dell Inc. (NASDAQ: DELL; SEHK: 4331) in 2003. In April of that year, Microsoft added itself to the list of defendants because it claimed the patents were closely related to its Windows operating system. Two of those claims were ultimately thrown out and six separate trials were set to try the remaining claims, which touch areas such as speech and video coding and the Windows user interface.
An attorney for Microsoft said that Thursday’s verdict was “completely unsupported by the law or the facts”. In the trial, Microsoft said that Alcatel-Lucent’s patents do not govern its MP3 encoding and decoding tools and that it licenses its MP3 technology from German company Fraunhofer-Gelleschaft. Further, it said that the damage award was “outrageous” considering the fact that its licensing fees to the German company was only $16 million. The damages were calculated, according to Microsoft, by multiplying the sales volumes of Windows by PC sales prices globally since May 2003.
US Supreme Court limits punitive damage awards in tobacco case
February 21, 2007
The United States Supreme Court has handed down a ruling that puts new constitutional limits on some damage awards. The 5 to 4 ruling set aside a punitive damages award in an Oregon case against tobacco company Philip Morris, a division of Altria (NYSE: MO) that awarded $79.5 million in punitive damages to the widow of a man who died of lung cancer after many years as a smoker.
The court ruled that the Oregon Supreme Court was wrong to let the jury in that case punish the tobacco company for harm to all smokers in Oregon. The decision said that jurors may only award punitive damages for harm to the person filing the lawsuit, but not for the harm to other victims not party to the suit.
Robin Conrad, senior vice president of the US Chamber of Commerce’s litigation unit in Washington, said that the ruling is a “big win” for business. However, the court did not extend its ruling to the issue of the size of punitive damage awards. According to one punitive damages expert, business would have liked more specific guidelines from the court as to acceptable amounts of punitive damages that may be awarded in similar cases. However, it is traditional for the Supreme Court to limit its rulings to the case at hand.
Still, the ruling will benefit the tobacco companies as well as pharmaceuticals companies such as Merck (NYSE: MRK), which is currently looking at over 27,000 suits involving its Vioxx painkiller, which was withdrawn from the market after being implicated in an increased risk of heart damage.
Ebay resists proposed reporting rules
February 20, 2007
Ebay (NASDAQ: EBAY) says that the administration of US President George W. Bush is trying to force it to inform on sellers who use its online auction site. The company said that they are willing to co-operate in individual Internal Revenue Service (IRS) investigations, but that it is not their place to report on seller’s income from the site. That, they say, is the individual seller’s responsibility. Ebay has more than 200 million registered users, and says that around 4.3 million of those users rely on the site for a significant part of their yearly income.
The plan reportedly would force Ebay and other online auctioneers to report American sellers who complete more than 100 transactions worth at least $5,000 each year to the IRS. The new rules are planned to be implemented from 1 January 2008. Besides putting it in the position of go-between for the government, Ebay says that the plan is unfair because it does not target online classified advertisement sites like Craiglist.
The online auctioneer is actively lobbying in Washington and will not only challenge the Treasury Department’s authority to require reporting of some of its users activity but will also challenge the legality of the proposed rules, saying that while they offer “auction-like” transactions, they are not in reality auctions because they have a fixed ending time. At least one member of the US House of Representatives has said he would work with Ebay to oppose the proposed rules.
US 30-year bond sale huge success
February 10, 2006
The US Treasury’s sale of 30-year long bonds in the US on Thursday, the first in over four years, was met with great success.
The U.S. Treasury received bids for 2.05 times the $14 billion in new 30-year bonds being offered for sale. Indirect bidders, which are an indication of demand from foreign investors and “real” money fund managers, amounted to a very strong 65.4 percent of the bids.
US dollar advances
February 6, 2006
The US dollar was up on Monday amid expectations that US interest rates will rise further in the foreseeable future. The greenback gained 0.5 percent in relation to the euro, to $1.1971. It was up 0.9 percent to $1.7467 against sterling, a one-month high. However, the dollar held steady in relation to the yen at ¥118.90.
Analysts at Goldman Sachs repeated the view that US interest rates will hit 5 percent and raised its estimate of first quarter growth of the gross domestic product to 4.5 percent, from a previous estimate of 3.5 percent GDP growth. Other estimates of interest rate hikes see the rates going even higher. Brown Brothers Harriman said that it believes interest rates will reach a level somewhere between 5 and 5.5 percent. These conditions are expected to support the dollar.
However, Citigroup feels that the dollar has gone about as high as it will go, citing rising Treasury yields, a slowing housing market in the US, and the impending announcement of a new record high US trade deficit as being dollar-negative.