Late Edition July 31 2008 at 02:59 PM Chi-Chu Tschang and Harry Maurer
Exxon Sets Another Record
Some sectors of the economy are hurting badly, but not the oil majors. Case in point: Exxon Mobil, which posted a profit of $11.68 billion, the richest quarter ever achieved by a corporation. Of course, the previous record, $11.66 billion, was also owned by Exxon, and was rung up in the last quarter of 2007.
And believe it or not, Exxon's number disappointed Wall Street, which had expected $12.1 billion in profits. The stock fell 2% on the news and was down about 3% by midafternoon.
Source: CNNMoney.com
More Evidence of a Recession
The Commerce Dept. issued revised figures showing that the economy shrank at an annual rate of 0.2% in last year's fourth quarter. It had previously estimated growth at a 0.6% rate. The main reason for the downward revision was that consumer spending proved much weaker than it first appeared. The report also said the economy expanded at a 1.9% rate from April through June, less than forecast. Meanwhile, the Labor Dept. said that initial jobless claims leaped unexpectedly by 44,000 last week, though some of that jump is attributable to special factors.
Source: Bloomberg
Red Ink at GMAC
Both the slumping auto industry and the housing crisis hit the finance arm of General Motors, which reported a $2.48 billion loss in the second quarter. GMAC is now 49% owned by the car company and 51% by private equity giant Cerberus, which also owns Chrysler. GMAC lost $717 million on auto leases and $1.86 billion through its subprime-mortgage unit, Residential Capital.
Source: CNNMoney.com
Motorola Surprises the Street
Look who actually made money: Long-troubled cell-phone maker Motorola turned a profit of $4 million in the second quarter, up from a $28 million loss in the same quarter last year. Analysts had predicted the company would lose in the range of $100 million. Investors jumped into the stock, which was up nearly 15% in midafternoon trading. The company also announced that the spinoff of its handset unit would come in the third quarter of 2009.
Source: MarketWatch
Bristol-Myers Wants Imclone
Consolidation in the pharma sector continues apace. Bristol-Myers Squibb offered $60 a share, or about $4.5 billion, for the 83% of biotech Imclone it doesn't already own. That's a 29% premium over the closing price on Wednesday. Imclone makes the cancer treatment Erbitux. Its stock promptly shot to $65, indicating Wall Street thinks a higher offer is in the cards.
Source: Wall Street Journal
Bush Signs Housing Bill
President George W. Bush signed into law a sweeping rescue package designed to shore up the housing market from its worst slump since the Great Depression and stabilize mortgage giants Fannie Mae and Freddie Mac. The new law launches a $300 billion government initiative to refinance troubled mortgages and boosts oversight of the two mortgage giants. It also expands a line of U.S. Treasury credit for the companies and gives the government the option to take equity stakes if they ran into trouble.
Source: Reuters
Starbucks Sees Better Days Ahead
Starbucks posted a loss for its third quarter after spending $168 million to close 600 stores and pay severance to fired baristas. But shares of the coffee chain jumped 4% in after-hours trading as the company forecast relief down the road from its current slump. Starbucks reported a loss of $6.7 million, or 1 cent per share, compared to a profit of $158.3 million, or 21 cents per share, a year earlier.
Source: CNNMoney
Amgen Ordered to Change Drug Label
The Food and Drug Administration has ordered Amgen to change the labels for its flagship anemia drugs, a move that could further restrict their use in treating patients with cancer. Sales of Aranesp and Procrit have already plummeted in the last year due to studies suggesting that their use to treat the anemia caused by chemotherapy could actually make cancer worse or shorten lives.
Source: New York Times
United Sues Pilots' Union
United Airlines has sued its pilots' union and four pilots, asking them to stop slowdowns that United says forced the carrier to cancel hundreds of flights. United says a rise in sick leave and pilots' refusal to accept voluntary back-up assignments cost the carrier about $8 million in revenue and $3.9 million in operating profit.
Source: Financial Times
Chrysler in Talks with Fiat, Tata
Chrysler is in talks with Fiat to lease U.S. production capacity and share retail distribution, allowing the Italian automaker to return to the U.S. market for the first time in 25 years. The No. 3 U.S. automaker has also been negotiating with India's Tata Motors about selling its Jeep Wrangler SUV in India and possibly other Asian markets.
Source: Reuters
Apple's Cash Conundrum
If there is one complaint about Apple, it's the company's refusal to do anything with the $20.8 billion in cash and short-term investments it has socked away. The cash just sits there, earning little more than the average savings account. Analysts predict the company's hoard could surge to nearly $30 billion over the next year, passing Microsoft, which has $23.7 billion in cash.
Source: BusinessWeek
Google Plans Venture-Capital Arm
Google has hired William Maris, a 33-year-old former entrepreneur who has worked as an investor, to help set up a venture-capital arm. David Drummond, Google's senior vice president of corporate development and chief legal officer, will lead the group but how it will be structured and what sort of investments it is likely to target remain unclear.
Source: Wall Street Journal
Disney Posts a 7% Profit Gain
Walt Disney keeps defying economic gravity. It reported earnings of nearly $1.3 billion for the third fiscal quarter ended June 28, up 7% from a year earlier, although investors had expressed nervousness about the effect of the deteriorating economy on Disney's parks and television businesses. This included an accounting gain related to the acquisition of Disney Stores in North America and the sale of Movies.com.
Source: Los Angeles Times
Conversation of the Day: This Bud's for China
"Just stop and think of the infinite potential in the Chinese market.40 billion liters of beer!"
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