Banks and Buffett to the Rescue
It's called "Project Lifeline," but how much of a lifeline will it be? On Feb. 12, Treasury Secretary Henry Paulson and six big banks unveiled a plan to "pause" the foreclosure process for 30 days to let selected homeowners work out new terms. The program wouldn't be limited to subprime loans but would help only a fraction of those facing foreclosure. Meanwhile, Warren Buffett tossed his own lifeline to three leading bond insurers, offering to reinsure $800 billion in muni bonds. That could enable them to keep their coveted AAA ratings. Hardly anyone expects MBIA (MBI), Ambac (ABK), and FGIC to go for it, however, since that would leave them covering only mortgage bonds—and probably sink them.
See "Behind Buffett's Bond Gambit"
Yahoo! Plays Hard to Get
It may look a tad dysfunctional, but Microsoft's (MSFT) courting of Yahoo (YHOO) has entered the phase when the pursued professes indifference. Yahoo told its would-be swain on Feb. 11 that its unsolicited bid—valued at $42 billion on Feb. 13—"substantially undervalues" the company. Microsoft fired back that its offer is "full and fair." Neither company is walking away for now, though The Wall Street Journal said on Feb. 13 that Yahoo and News Corp. (NWS) are talking. Microsoft may still raise its bid and plead its case to shareholders.
See "Yahoo's High-Stake's No Thanks"
The Primary Watch
After sweeping the GOP "Potomac Primary" in Maryland, Virginia, and Washington, D.C., on Feb. 12, Senator John McCain joked that he was "fired up and ready to go," stealing a line from Senator Barack Obama, who also swept his party's Potomac contests. McCain may be signaling that he figures he'll face Obama in November. But Senator Hillary Clinton, still very close to Obama in the delegate count, is far from giving up: She's staking her campaign on big-state votes in Ohio, Texas, and Pennsylvania.
Will They Spend It?
Now that Congress has passed a stimulus plan, the big question is what Americans will do with their checks from Uncle Sam. In a survey by American Century Investments, only 27% said they would spend the rebate right away, while the rest figure to sock the money into savings, invest it, or use it to pay down debt. But take that with a grain of salt. In a Gallup survey from 2001, just 17% of respondents said they would spend rebates the IRS sent out that year. Economists later discovered that households actually spent between 50% and 70% of the money. (Salon.com)
Soul of a New Laptop
With laptop computer sales rapidly overtaking desktops and mobile phones morphing into computers, the Portable Era is truly upon us. The world's top tech companies are racing to produce the best designs, packed with the most cutting-edge technologies, at the right price. Last month, Apple's MacBook Air debuted as the world's thinnest notebook. Now the journey of Lenovo's svelte and feature-laden ThinkPad X300 provides a behind-the-scenes look at the long slog it takes to produce the ultimate mobile computer.
SocGen Raises Cash
Shares for sale—cheap. That's the come-on from Société Générale (SCGLY), which on Feb. 11 announced an $8 billion capital increase to help it recover from getting whacked by a rogue trader. The bank will sell shares at a generous 39% discount to offset losses of $7.1 billion on trades by Jérôme Kerviel and $3.8 billion on U.S. subprime and real-estate investments. And in a new wrinkle, the rogue may have had a fellow rogue, an employee at a SocGen-affiliated brokerage who may have helped Kerviel carry out and cover up unauthorized trades.
See "SocGen Sinks on Stock Issue, Writedown"
Now Start Writing!
Hollywood is scrambling to get TV cameras rolling in the wake of the Feb. 13 settlement of the eight-week writers strike. The deal, which gives writers a piece of the action for shows that are downloaded or streamed online, comes too late for most programs to complete the season—though some, like ABC's (DIS) Boston Legal, which had shot 14 of its 22 episodes, may finish their runs. To beef up ad revenues, the end of the season could be pushed back to June.
More Detroit Buyouts
The bad news: General Motors (GM) on Feb. 12 reported a loss of $39 billion for 2007, a record for the company. The good news: It was almost all due to a paper loss of unused tax credits. GM also announced a sweetened buyout and early retirement offer to all its 74,000 U.S. hourly workers in a move to replace some with younger, cheaper employees. Ford (F), meantime, is looking to cut 9,000 hourly workers on top of the 32,800 it bought out last year—and as many white-collar staff as will take a package.
See "Elusive Profits Punish GM"
Lord of the Lawsuits
Shifting the battle from Middle Earth to a Los Angeles courtroom, a British charity that manages the estate of Lord of the Rings author J.R.R. Tolkien sued New Line Cinema on Feb. 11. The suit alleges that New Line bilked the Tolkien Trust out of its 7.5% chunk of the film trilogy's gross profits. The trust, the latest in a line of Lord of the Rings challengers that included director Peter Jackson (he has settled) and producer Saul Zaentz, seeks $150 million in compensatory damages. It also wants the right to stop New Line from making The Hobbit, a prequel the Time Warner (TWX) unit has said it will produce with MGM. New Line declined to comment.
Prison for Lerach
Class-action kingpin William Lerach will be disbarred and put behind bars. On Feb. 11 a federal judge ordered the longtime nemesis of corporations to serve two years in prison. Lerach, 61, pleaded guilty to participating in a scheme to pay kickbacks to people recruited by his former law firm to serve as plaintiffs in shareholder lawsuits. He will also pay an $8 million fine. Others from law firm Milberg Weiss have pleaded guilty or are facing charges in connection with the scheme.
With their stocks sagging near five-year lows, Wendy's International (WEN) and New York Times Co. (NYT) have proxy wars on their hands. Nelson Peltz wants to swallow Wendy's outright with a proposal to expand the board to 15 members. He already controls three seats and would appoint five more members. Over at the Times Co., two hedge funds with a combined interest of 10% in the struggling company will fight for the seats not controlled by the Sulzbergers.
The Spielberg Factor
It's the first major political fallout prior to the Summer Olympics in China, but it no doubt won't be the last. Steven Spielberg, whose storied list of movies include the 1993 Holocaust film Schindler's List, said on Feb. 12 that he's leaving the post of artistic adviser to the Beijing Olympics because the People's Republic isn't doing enough to pressure its ally Sudan to end the humanitarian crisis in Darfur. Spielberg was to have helped stage the opening and closing ceremonies. His move may give human rights groups new ammo in their drive to persuade corporate sponsors to withdraw.
See "China: Spielberg's Olympic-Sized Snub"
Flying in Formation
Talk of big U.S. airline mergers has swirled for years. Now the rubber is finally meeting the runway. Delta (DAL) and Northwest (NWA) are expected to announce in coming weeks a marriage that would create the nation's largest carrier. If that happens, United (UAUA) and Continental (CAL) would likely team up, and American could be counted on to grab a regional player like Alaska (ALK) or Frontier (FRNT). What's driving these deals? Most immediately, $90 oil, but an equally big threat is the new bilateral treaty called Open Skies, which gives U.S. and European carriers greater freedom to fly transatlantic routes.
Iffy Numbers from AIG
Insurance giant American International Group (AIG) still can't count straight. Three years after a major accounting scandal, the firm's auditor, PricewaterhouseCoopers, says it has found a "material weakness" in AIG's estimate of its exposure to securities backed by subprime-mortgage debt. That led AIG on Feb. 11 to boost its November writedown on subprime by $3.6 billion. Last fall, AIG officials said its exposure to subprime losses was minimal. The new disclosure puts pressure on CEO Martin Sullivan, who got his job after the last accounting mess.
See "Investors Slam AIG Over Swaps"
Freescale's New CEO
It's a shining example of a deal gone wrong from the recent crop of LBOs. Freescale Semiconductor (FSL), spun off from Motorola (MOT) and taken private in late 2006 for $17.5 billion by Blackstone Group (BX) and others, has struggled ever since. On Feb. 8 it announced that CEO Michel Mayer is quitting. He'll be replaced by Richard Beyer, now head of chipmaker Intersil (ISIL).
See "Q&A with Freescale's New CEO"
ExxonMobil vs. Chávez
"Bandits." "Imperialist thieves." So blustered Venezuelan President Hugo Chávez after ExxonMobil (XOM) obtained court orders on Feb. 7 freezing $12 billion in overseas assets belonging to Venezuela's state oil monopoly. But the tempestuous former paratrooper is unlikely to carry out his threat to stop shipments to the U.S., which takes two-thirds of Venezuela's oil exports, because the only major refineries capable of handling the sulfurous crude are stateside. He did suspend an unrevealed amount of oil sales to Exxon. Last July, Petróleos de Venezuela expropriated two ExxonMobil oil ventures, and the oil giant went to arbitration. The asset freeze is aimed at making sure Venezuela forks over compensation.
See "Chavez's Big Oil Bluff"
China's Winter Woes
What can put a chill into the mainland's economy? Snow, that's what. A Lehman Brothers (LEH) report estimates that gross domestic product growth in the first quarter could come in as much as two percentage points short of forecasts because of freak storms that caused transportation snarl-ups and losses in agriculture and livestock. Industry may take another hit later in the year: In a bid to clean up the air, Beijing is mulling a two-month holiday for factories timed to the summer Olympics. (Lehman Brothers)