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2008/07/22

Wachovia's Roller-Coaster Ride

BusinessWeek Executive Summary Newletter
BusinessWeek Executive Summary
Your update of the most important business news from dozens of respected news sources, selected by the editors of BusinessWeek.

Late Edition July 22 2008 at 03:20 PM Edited by Chi-Chu Tschang and Harry Maurer

Wachovia's Roller-Coaster Ride

The bank's stock plunged, then rose again after the company first reported a bigger-than-expected loss and then said it wouldn't sell new shares. For the second quarter, Wachovia lost $8.86 billion, or $1.27 per share on an adjusted basis, while analysts had forecast a 71 cent-per-share loss. The bank took $6.1 billion in writedowns, pared the dividend, and added $5.6 billion to loan-loss reserves, mostly because of the poor housing market.

That sent investors fleeing, but after CEO Robert Steel said the bank would not try to raise money through a share offering, it bounced back and rose more than 19% in midafternoon trading.

Source: MarketWatch.com

An airline flies higher

Another company reporting a big loss and watching its stock soar: UAL, parent of United Airlines, which bled $2.73 billion in red ink in the second quarter. UAL said it would cut 5.500 hourly employees on top of the 1,500 salaried staff it had already said it would let go. It also signed a credit-card accord with JPMorgan Chase that will free up nearly $1 billion in cash. At around 3 p.m., the stock was up more than 56%.

Source: Bloomberg

Apple forecasts a bumpy quarter

Apple's shares tumbled 10% on July 21 after the company said its current quarter earnings would be well below Wall Street estimates. Despite dour predictions for the coming quarter, Apple posted third-quarter earnings that were above its own target and those of Wall Street, leaving some analysts to believe Apple had predicted extremely conservatively only to then beat their own numbers. Declining consumer spending has knocked profits of many U.S. companies, and earlier reports from Google and Microsoft have unnerved investors. In contrast, Apple posted record computer sales -- widely seen as proof that many buyers of iPhones and iPods also buy the company's mainstay products.

Source: Reuters, BusinessWeek

Vodafone scales back sales predictions

Vodafone Group, the world's largest mobile-phone company, scaled back its sales forecast after slowing economic growth hurt revenue from phone calls. The company said sales may be 'around the bottom' of the range of $79.7 billion to $81.6 billion, up from $71.1 billion over the same period last year. During early trading in London, Vodafone's share price dropped as much as 13%, the most in at least 20 years.

Source: Bloomberg

Paulson: Housing correction in 'months'

Treasury Secretary Henry Paulson told BusinessWeek editors on July 21 that he thinks it will take months, not years, to work through "the largest part of the housing correction." Paulson said that while some of the excesses in housing will take "more than months" to be washed away, "the more reasonable question is: How long will it take to work through the largest part of the housing correction?" He also said that once home prices stabilize, the housing sector could begin contributing to economic growth "well before we're through all the issues in housing."

Source: BusinessWeek

Ford offers to buy out hourly workers

Ford will extend buyout offers to hourly workers at more than a dozen plants in Michigan and Ohio as it tries to trim its workforce to match a declining U.S. market share. Ford, which reported a $2.7 billion loss in 2007 and has abandoned the goal of returning to profitability by 2009, previously had extended buyout offers at plants in Kentucky and Ohio due to the declining demand for large pickup trucks and SUVs.

Source: Reuters

GM joins forces with utilities over electric car

Three dozen electric utilities and General Motors have agreed to collaborate over a plug-in electric car that is expected to hit the streets in about two years. The partnership is the first major effort by the two industries on an electric vehicle and includes some of the biggest names in the power sector spanning nearly 40 U.S. states.

Source: Wall Street Journal

U.S. Fed focuses on inflation

As the dust settles on the latest round of financial turmoil, the U.S. Federal Reserve now appears to be focused on inflation rather than economic growth. According to the minutes at the June 30 policy meeting, the Fed in effect switched gears. "With increased upside risks to inflation and inflation expectations, members believed that the next change in the stance of policy could well be an increase in the funds rate," the minutes said

Source: Financial Times

TiVo teams up with Amazon

TiVo, the Silicon Valley company that introduced millions to the idea of skipping television commercials, is trying to crack a decades-old media dream. On July 22, the company introduced a "product purchase" feature in partnership with the Internet retailer Amazon.com.

Source: New York Times

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