It looks as if the economy can rejoice, or at least relax: Santa did show up this year, albeit a bit late. Shoppers started the crucial holiday season with a decent Black Friday weekend, then went AWOL for much of December, only hitting the malls in force as Christmas loomed. Final numbers won't be available until mid-January and early estimates vary, with MasterCard's SpendingPulse service predicting an 8.7% boost over 2004 but other analysts pegging it as low as 3%. ComScore Networks figures e-tail sales will jump 24%. It all adds up to respectable, not spectacular, gains.
One reason Americans played the waiting game is that they held out for last-minute markdowns. They're also spending bigger bucks on gift cards, whose sales aren't recorded until they're redeemed. That makes for an added burden on retailers, which have to craft a spiffy new strategy for Phase Two: the last week of the year.
When rates on two-year Treasuries rose above those of 10-year notes on Dec. 27, the dreaded "inverted yield curve" scared the Street, driving the Dow down 105 points. That's because the anomaly of short-term rates going higher than longer-term ones has preceded the last five recessions. But many economists, including a noted one named Alan Greenspan, think spooky yield curves may not mean what they used to.
See "A Better Spread to Watch"
It's a curiosity of the battle over Guidant (GDT): The more damaged the medical device maker appears, the better it is for suitor Johnson & Johnson (JNJ). On Dec. 23, a Guidant filing revealed that fourth-quarter earnings would be sicklier than Wall Street expected. Four days later, Guidant disclosed it had gotten a warning letter from the FDA about problems at one of its plants. The news sent shares down 3.4%, to around $65, close to J&J's offer of $63. The market evidently suspects that Boston Scientific (BSX), which has bid $72 per share, won't swing a deal. Shareholders will vote on the J&J offer on Jan. 31.
This could be the end of MSNBC as we know it. A decade after Microsoft (MSFT) and NBC co-created the cable news service, General Electric's (GE) NBC Universal unit announced on Dec. 23 that it's buying majority control from its partner. MSNBC runs third in the cable news race, behind Fox News (NWS) and CNN, a (TWX)nd is neck and neck with CNN Headline News. NBC executives say that GE CEO Jeff Immelt has often compared MSNBC unfavorably to Fox's hard-edged cable channel and will press it to forge more of an identity. The deal marks Microsoft's second exit from the news business in a year. It sold e-zine Slate to Washington Post Co. (WPO) in late 2004.
An Oakland (Calif.) jury found that Wal-Mart (WMT) has been naughty, not nice, handing the world's biggest retailer another lump of PR coal at the height of the Christmas season. The jury on Dec. 22 ordered Wal-Mart to pay $172 million to thousands of California workers who claim they were denied lunch breaks in violation of a 2001 state law. A spokeswoman says Wal-Mart, which has class actions pending against it in some 40 states, plans to appeal.
Albertson's (ABS) probably wasn't in a mood to enjoy its holiday dinner, either. On Dec. 22 the Boise (Idaho) supermarket and drug giant said it had ended talks on a complicated deal that might have given different parts of the company to private investment house Cerberus Capital Management, real estate investment trust Kimco Realty (KIM), and retailers Supervalu (SVU) and CVS (CVS). Albertson's says it's still talking with "several parties" interested in acquiring "underperforming assets." Investors knocked the stock down 9% by Dec. 28.
The caribou don't have to look for greener pastures just yet. President George W. Bush's five-year effort to tap black gold in the Arctic National Wildlife Refuge went down to defeat once again on Dec. 21, as moderate Senate Republicans joined Democrats to yank the measure from a bill to fund the Pentagon and hurricane relief. Senator Ted Stevens (R-Alaska), resplendent in an Incredible Hulk power tie, vowed a new effort in 2006 -- and revenge upon senators who blocked the quest he has pursued since 1980. But with Bush's political capital much depleted and tough midterm elections looming, the GOP may think twice about taking on the enviros.
The European Union shook a big stick at Microsoft on Dec. 22, threatening $2.4 million a day in fines for failing to comply with sanctions imposed in a 2004 decision that the software kingpin violated competition law. That ruling called for Microsoft to share technical data, but a monitor calls its released documentation "fundamentally flawed." Microsoft General Counsel Brad Smith says that the company wants to meet the EU's demands and that "every time we make a change, we find that the commission moves the goalpost." Microsoft has until Jan. 25 to reply and show compliance.
Latest high-profile manager to undergo the perp walk: Joe Nacchio. The former Qwest (Q) CEO, who maintains his innocence, was indicted by a federal grand jury on 42 counts of allegedly unloading stock in 2001 when he knew of his company's parlous finances. He appeared in a Denver court in handcuffs and was freed on $2 million bond. The indictment had been expected since March, when the SEC sued him and six other former Qwest executives. Some ex-Qwesties have already pled guilty to criminal charges, but insider trading is famously tough to prove in court.
See "The Case Against Qwest's Nacchio"
It's nice to be popular, and outsourcing and tech service firms seem to be the belles of the ball. SunGard sold last March for $11.3 billion. Computer Sciences (CSC) nearly went for $12 billion in November before the deal fell through. The latest to get asked to dance, according to The New York Times, is Affiliated Computer Services (ACS), a Dallas outsourcer with $4.3 billion in sales. Who's doing the asking? Private equity firms, continuing their record 2005 leveraged-buyout rampage. The Times says Texas Pacific Group, Bain Capital, and Blackstone Group propose to buy ACS for about $8 billion.
The water was already plenty hot for Ken Lay and Jeff Skilling, and it just went up about 20 degrees. On Dec. 28, Richard Causey, ex-chief accountant of Enron, pleaded guilty in federal court in Houston to felony securities fraud. He faces five to seven years in jail and agreed to pay a $1.25 million fine. Causey presumably will testify at former Chairman Lay and former President Skilling's trial, now scheduled to start on Jan. 30. That has to worry defense lawyers, since Causey and fellow plea bargainer Andrew Fastow may be capable of unraveling for a jury the complex shenanigans that allegedly brought Enron low. But the deal could complicate life for the prosecution, too. The explosion of publicity about Causey's plea could fortify the defense's demand for a change of venue on the grounds that jurors in Houston can't judge the case dispassionately.