In Business This Week
Edited by Monica Roman
HEADLINER
Carly Fiorina: Carly's Caveat
Hewlett-Packard (HPQ
) CEO Carly Fiorina saved the day--or did she? On Aug. 27, Fiorina announced HP had met analysts' earnings expectations for the first quarter that provided a real measure of how its integration of Compaq Computer is proceeding.
For the three months ended July 31, the tech giant reported a net loss of $2 billion, or 67 cents per share. That matched consensus estimates when restructuring and other charges were excluded. Still, revenue for the quarter fell $300 million short of projections, to $16.5 billion, as weak corporate spending and stiff competition pummeled margins in HP's PC, server, and storage businesses. Fiorina says HP is relying on cost-cutting and strength in its printer business to get through a rocky period.
The crystal ball remains murky on when a rebound will occur, she says, adding: "I think it is clear that it's not going to happen in the second half of '02." The news prompted analysts to cut revenue targets for next year as some continue to question the merits of the merger.
By Cliff Edwards
For Sale: Enron's Assets
Is it farewell at last for Enron? In an effort to appease creditors--owed at least $40 billion--the bankrupt Houston energy trader has opened bidding on a dozen of its most valuable businesses. But in a market glutted with energy properties, getting a good price for such assets as utility Portland General Electric and natural-gas pipeline Transwestern could be tough.
Enron previously estimated that its core assets were worth $8.5 billion to $10 billion. The company has reserved the right not to sell any assets "if we don't think the bids reflect full value," says a spokesman. It might then reorganize around the core businesses, with creditors getting a stake in the new company. A final decision on the bids is expected in December. Expect a legal skirmish if Enron and its creditors can't agree on the specifics of "fair value."
A Super System for Nasdaq?
Nasdaq investors will soon enjoy a sharp improvement --even if tech stock prices don't go up. On Aug. 28, the Securities & Exchange Commission approved Nasdaq's new SuperMontage trading system. To be launched in October, SuperMontage will let professional traders see how many shares are bid or offered at several price points, not just at the best price. The system will also mean that "limit orders" to buy or sell at a set price will have a better chance of being executed at the specified level. Still to be seen: Whether the new system will let Nasdaq grab back volume lost to new electronic trading systems.
Big Steel's Latest Big Setback
Chalk up another loss for Big Steel. The U.S. International Trade Commission voted 4 to 1 on Aug. 27 against slapping duties on imports of cold-rolled sheet steel, a high-end product used in vehicles and appliances. The setback came five days after the Commerce Dept. exempted a slew of steel imports from across-the-board tariffs that President Bush had imposed in March to aid failing U.S. steelmakers. The ITC rejected sheet-steel duties because the March tariffs have allowed U.S. producers to charge so much that they can no longer claim financial harm from imports.
A New Option for Cendant
Yet another company is yielding to investor outrage over options. On Aug. 28, real estate and travel giant Cendant announced that it would expense stock options beginning in 2003. As a result, New York-based Cendant expects to move from issuing stock options to employees to issuing restricted stock. At the same time, Chairman and Chief Executive Officer Henry Silverman's compensation for 2002 will fall by more than 50%, to about $15 million. While Silverman has long argued against expensing stock options, he said the company made the move "to be responsive to the requests of our shareholders."
HealthSouth Is in a Lot of Pain
Healthsouth's (NT
) financial condition took a turn for the worse on Aug. 27. Shares of the $4.3 billion Birmingham (Ala.) operator of rehab hospitals plunged 44% as it announced that changes in Medicare payments would cut up to $175 million annually in pretax profits. To help offset the drop, the company plans to spin off its surgery centers. Still, HealthSouth can't forecast earnings for this year or next, as it doesn't fully understand the government's new rules for reimbursing Medicare's elderly and disabled beneficiaries. Such uncertainty surprised investors, who had been assured by the company that it had the coming Medicare changes under control.
Et Cetera...
-- New York and San Francisco are the U.S. finalists for the 2012 Summer Olympics.
-- Canadian telecom company Nortel (NT
) will cut 7,000 jobs to offset falling sales.
-- Louis Camilleri will succeed Geoffrey Bible as chairman of Philip Morris (MO
) on Sept. 1.
CLOSING BELL
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Copyright 2002, by The McGraw-Hill Companies Inc. All rights reserved.
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