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OCTOBER 30, 2006
Edited by Harry Maurer Options Watch They called him "brilliant" and "a visionary." But now terms such as "greedy" and "secretive" may stick. William McGuire, a physician who built UnitedHealth Group (UNH ) into a $70 billion health-care titan over the last 15 years, quit as chairman on Oct. 15 and said he'd step down as CEO by Dec. 1. His fall came after a law firm's probe faulted him for stock options that were "likely backdated" to maximize his gain. McGuire's options were worth an astounding $1.78 billion at one point; he'll get to keep around $1 billion worth after repricing them under his deal with UHC, according to The New York Times. New CEO Stephen Hemsley, McGuire's right-hand man, also may have reaped backdated grants and will now chop them down, too, but the report says he had "little or no role" in arranging them. Elsewhere, the latest executives to depart in the options scandal include KLA-Tencor (KLAC ) Chairman Kenneth Levy and Sapient CEO Jerry Greenberg on Oct. 17. See "Hard Times for UnitedHealth" and "The Ties UnitedHealth Care Failed to Disclose" Wal-Mart: Deeper Into China The largest retailer in the world, and the most populous nation: A natural fit, right? Wal-Mart (WMT ), its growth wilting at home, certainly sees it that way. On Oct. 16, The Wall Street Journal said the Bentonville (Ark.) behemoth would pony up $1 billion for a Taiwanese company, Trust-Mart, that has more than 100 stores on the mainland. That'll help Wal-Mart catch up with French rival Carrefour, with 200-plus outlets in China to Wal-Mart's 66. It could also set off a frenzy among other big retailers fearful of getting big boxed out. On the domestic front, Wal-Mart made less pleasant news: On Oct. 13 a Philadelphia jury said it must pay $78 million to Pennsylvania staffers who worked during breaks or off the clock. See "Wal-Mart shops for China's trust"   Liz's New Beau What does a Johnson & Johnson (JNJ ) guy know about fashion? Not much, maybe, but Liz Claiborne (LIZ ) hired one anyway, naming William McComb as its new CEO on Oct. 16. A Chicago Marriage Cementing its domination of the world's futures trading, the Chicago Mercantile Exchange agreed to buy its rival, the Chicago Board of Trade, in an $8 billion deal on Oct. 17. The duo will far surpass European markets, including Euronext, which the New York Stock Exchange is trying to grab. Customers fear that monopoly power will lead to higher fees, but the exchanges say deeper markets will bring better prices for traders. See "The Merc and the CBOT: Together At Last" A Fatter Gap Economists say sliding oil prices will shrink the trade deficit, but the numbers aren't showing up yet. The Commerce Dept. reported on Oct. 16 that the gap between U.S. imports and exports hit another high in August, $69.9 billion, sending the dollar tumbling. That topped the record of $68 billion set just the month before. Needless to say, the $22 billion gap with China didn't help. Analysts declared that the numbers reflect a slowing U.S. economy, and some scrambled to lower their estimated third-quarter GDP growth rate to under 2%. One Tech Titan Up, One Down It looks as if IBM (IBM ) CEO Sam Palmisano's strategy is finally clicking. Big Blue busted out of a sluggish period with strong sales growth and a huge spike in profits. Third-quarter revenues rose 5%, to $22.6 billion, and income from continuing operations leaped 47%, to $2.2 billion. Software and computer sales led the way, though the huge services business is still lagging. Yahoo! (YHOO ), on the other hand, said on Oct. 17 that it has begun rolling out a long-awaited new search advertising system, which may help next year. That news wasn't enough to offset a lousy third quarter in which profits fell 38%, to $159 million, and a bearish outlook for the current quarter. Yahoo's stock fell 5% on Oct. 18. See "Yahoo's Project Panama Back on Track" and "Wall Street Sweetens View on IBM" Margins Milestone? Those pesky margin-trading rules, in place since the crash of 1929, may get relaxed. The Financial Times reported on Oct. 16 that SEC agency staff has green-lighted a Big Board system that could lower margin requirements to as little as 15%, compared with the 25% to 50% standard set by the Fed. That would slash trading costs and make it easier for hedge funds and institutions to manage complex investment vehicles. A Nobel For Microcredit Little loans can change the world. That simple idea won Grameen Bank of Bangladesh and its founder, Muhammad Yunus, the Nobel Peace Prize on Oct. 13. Yunus' bank was founded in 1983 and helped invent the microcredit movement, the granting of small loans to poor people with no collateral. Microcredit is spreading fast across the developing world and is predicted to reach 100 million borrowers by the end of 2006. See "What the Nobel Means for Microcredit" Let's Pump Less Oil Fretting about falling prices, OPEC called an "emergency" meeting in Doha, Qatar, for Oct. 19. The cartel was expected to announce production cuts of about 1 million barrels per day, or 4% of its production. It remains to be seen how the cuts will be shared or whether they will be honored, so skeptical traders have kept the price of oil mostly below $60 per barrel. MetLife's Big Sale Going, going, gone for $5.4 billion -- the biggest U.S. real estate deal ever. New York insurer MetLife's (MET ) auction proved a bang-up success: It announced on Oct. 17 that it would sell its massive Stuyvesant Town and Peter Cooper Village development in Manhattan to Tishman Speyer Properties and BlackRock (BLK ). See "The World's Biggest Real Estate Deal" Clearing Ken Lay A federal judge on Oct. 17 wiped the slate clean for the late Kenneth Lay, voiding his conviction for fraud and conspiracy as chairman of Enron. Since Lay died before his appeal could be heard, the judge ruled that the verdict must be tossed. That stops the feds from trying to seize more than $43.5 million from his estate. Diet Of The Week You won't catch Mickey or Minnie strolling Main Street with a tofu burger -- but you won't be seeing their friends on boxes of icky-sweet cereal much longer, either. Walt Disney (DIS ) said on Oct. 16 that it's phasing out unhealthy food served in its parks and will cut back on the licensing of its characters to promote snacks laden with sugar, fat, or other empty calories. The Happiest Place on Earth will now offer up fruit juice with kids' meals and by 2007 will squelch artery-clogging trans fats in its foods. Carrots or applesauce, instead of french fries, will be sold as the standard side order with meals. Characters such as Lightning McQueen, from the Pixar movie Cars, won't be adorning packages of Kellogg's (K ) Pop Tarts and Keebler Chips Deluxe cookies after 2008 unless the products meet Disney specs. Still, there's no mention of banning the ads for junk food that crowd Disney channels ABC and Toon Disney. And no word yet on whether Winnie the Pooh will have to give up that pot of honey.
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