In the days after U.S. Judge Colleen Kollar-Kotelly began her Microsoft (MSFT) hearings Mar. 18, things looked bleak for the nine states that had rejected a Justice Dept. settlement. She struck some of their strongest testimony regarding the software maker's alleged monopolistic behavior from the record as "hearsay", including claims by a Real Networks (RNWK) exec that Microsoft had pressured Gateway to exclude rivals' software from its computers. She added that more testimony could be stricken later if she concludes it's beyond the scope of the proceedings.
But Week Two found her in a more accommodating mood. Her criticisms of the states' sloppiness have abated. And she sounded more amenable to their arguments. A turning point may have come on Mar. 26 when Microsoft asked her to reject all testimony from makers of handheld devices, set-top boxes, and other gizmos not part of the original trial. Instead, she agreed to hear the testimony and told the court her remedies may well cover such new markets. After a five-year battle, a federal appeals court on Mar. 26 cleared the way for the Environmental Protection Agency to enforce strict curbs on smog and soot. The Clinton-era regs had been fought by industry and some states. They complained that the limits on ozone and particulate emissions from autos and plants could cost hundreds of millions of dollars. EPA Administrator Christine Todd Whitman says she'll move ahead with the law. But don't look for clear skies soon. Many states, especially in the Northeast, have yet to meet existing regs approved by Congress in 1990. While layoffs continue all over Wall Street, at least one firm has good news for some of its employees. Goldman Sachs (GS) boosted the number of executives on its management committee to 28, from 21, on Mar. 27. Many industry observers regard the promotions as the venerable investment bank's effort to anoint the next generation of top dogs.
The seven new members of the committee are managing directors promoted to positions across the firm's four divisions. At the same time, Goldman elevated the heads of its equities, fixed-income, and investment-banking divisions--Robert Steel, Lloyd Blankfein, and Robert Kaplan--to vice-chairmen to improve the coordination between its ever-sprawling business lines.
Although investment banking has slowed since Goldman went public in 1999, the firm's head count has nearly doubled, to 22,000. Home and automobile insurance costs are rising sharply. For example, through Mar. 26, Allstate (ALL), the nation's second-largest insurer, increased auto-insurance rates an average of 8.3% in 17 states.
Auto insurers are dealing with soaring medical and vehicle repair costs, among other ever-rising bills. Meanwhile, in just the first two months of this year, State Farm's homeowners' insurance premiums increased by $310 million, compared with $605 million for all of 2001. Other companies are following the trend, too, as higher repair costs and an increase in mold-related claims have sent premiums through the roof.
Nor is the worst over. Robert Hartwig, an economist at the Insurance Information Institute, expects rates to keep climbing for the rest of 2002. On Mar. 25, Houston's Pennzoil-Quaker State (PZL) agreed to sell out to Shell Oil, a division of oil industry giant Royal Dutch Petroleum (RD). The price: about $1.8 billion in cash plus $1.1 billion of assumed debt. Pennzoil, the nation's biggest maker of motor oil, also owns 2,150 Jiffy Lube oil-change centers. As well as complementing Shell's gas station business, the deal will strengthen Shell's lubricant and oil-products businesses. The internal revenue service is cracking down on the use of credit cards issued by offshore banks to dodge U.S. taxes. On Mar. 25, the agency said as many as two million people may be depositing funds in such tax havens as the Cayman Islands and failing to disclose the assets. Private experts say they are surprised at the high number of tax scofflaws estimated by the IRS: In 1999, only 117,000 taxpayers disclosed that they had foreign accounts. As a result of the new figures, the agency is stepping up efforts to collect information on such transactions from the credit-card companies. According to the IRS, MasterCard International alone reported 230,000 accounts in just four Caribbean countries. -- Continental Airlines (CAL) broke off a ticket alliance with America West (AWA).
-- Morgan Stanley Dean Witter's (MWD) first-quarter net income fell 17%, to $848 million.
-- The FCC will refund 85% of the payments by Nextwave's winning spectrum bidders. Genzyme (GENZ) shares fell 11%, to $43.14, on Mar. 27 after the Cambridge, Mass., biotech firm said it halved first-quarter shipments of Renagel to wholesalers. The move gives it more flexibility to react to future demand for the dialysis drug, Genzyme said, but it will also cut first-quarter profits by 33%, to $47 million.