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JANUARY 8, 2007
Edited by Harry Maurer What Happened To Santa? Retailers are going into damage-control mode as the holiday numbers come in. Same-store sales at major retail chains inched up 1.7% in the week ending Dec. 23, compared with a year earlier, according to a survey that the International Council of Shopping Centers released on Dec. 27. MasterCard (MA ) estimated that retail sales from the day after Thanksgiving to Dec. 24 rose by 3% over the same period last year. Still, merchants have some cause for cheer. Gift cards, which don't count as sales until they're cashed in, could give a lift to post-holiday revenue, aided by sharp price cuts. More important, real wages for low- and middle-income workers finally are showing signs of rising after three years of stagnation. That trend, if it continues, would be good news for Wal-Mart (WMT ) and other discount chains, which have struggled along with their customers. See "A Ho-Hum Holiday for Retailers" Auto Titan Tête-à-Tête The car industry is ending 2006 the way it spent most of the year: obsessing about hookups between leading players. The Dec. 20 hush-hush meeting in Japan between new Ford (F ) CEO Alan Mulally and Toyota (TM ) Chairman Fujio Cho sparked brief excitement on Wall Street about a possible alliance. Ford would benefit from close contact with its rival's ultra-efficient production system and hybrid technology. Toyota could gain political cover as it prepares to surpass General Motors (GM ) as the world's largest automaker next year. Both companies say high-level meetings are an industry fixture. And analysts doubt a long-term tieup is on the table. See "And Now: Ford and Toyota?"   About-Face On CEO Pay As companies get set to disclose new details on executive pay, the SEC issued an 11th-hour rule change on reporting stock options. In a Dec. 22 notice, the commission instructs companies to spread the value of options grants to executives over several years as the options vest, rather than reporting the grand total in the year they were awarded, as the SEC ruled in July. The switch prevents reporting anomalies resulting from large, one-time grants and is more in line with accounting standards, the commission says. Investors fret it could keep them in the dark about which bosses are bagging the most dough. Options Watch Is Steve Jobs worried? That's the question following reports that the Apple (AAPL ) CEO has retained outside legal counsel because of the investigation into options backdating. A Dec. 26 report in The Recorder, a California legal journal, says federal prosecutors are looking at possibly falsified options awards documents uncovered as part of an internal probe. Two former execs, ex-general counsel Nancy Heinen and ex-CFO and director Fred Anderson, have also hired counsel. An Apple spokesman declined to comment, but the company is expected to file long-delayed quarterly and annual reports with the SEC by yearend. See "Apple's Options Woes Deepen " Look Out, Cable Guys Big telecom outfits just won a big victory. Imposing a rule that will benefit the likes of AT&T (T ) and Verizon (VZ ), the FCC voted on Dec. 20 to bar local governments from "unreasonably refusing" to grant TV franchises to new competitors. The 3-2 party-line decision would in many cases force municipalities to accept or reject a proposal from a new carrier within 90 days and strikes down local requirements that telcos say had favored incumbent cable providers. If Congress lets it stand, the rule will make it easier for the Baby Bells to move into the boob tube biz. Shell Says Uncle In Russia, whatever Gazprom wants, Gazprom tends to get—including a 50%-plus-one-share stake in the $20 billion Sakhalin II oil-and-gas project. Royal Dutch Shell (RDSH ), which had 55%, and its Japanese partners, Mitsui (MITSY ) and Mitsubishi, each sold the state-controlled gas giant half of their shares for a lowball price of $7.45 billion. A Shell spokesman termed the Dec. 21 settlement "acceptable." Bristol-Myers' Babysitters This deal probably went down like castor oil, but on Dec. 21, Bristol-Myers Squibb (BMY ) said it would pay $499 million to settle investigations by the Justice Dept. and Massachusetts regulators into its marketing practices. It's the biggest such payment to date in a wide-ranging inquiry into pharmaceutical pricing and sales. Besides ponying up the fine, the drugmaker will allow the feds to monitor its regulatory compliance and training practices. That "corporate integrity agreement" comes in addition to a Justice monitor who keeps tabs on operations as the result of an earlier settlement. BMS continues to be nagged by several state investigations and a class action. Branson: He's No Yank Virgin America's takeoff was delayed on Dec. 27 as the Transportation Dept. ruled that the carrier wasn't under control of U.S. citizens, as required by law. The ruling said Sir Richard Branson's Virgin Group would have "pervasive involvement," citing interlocking financial agreements and Virgin Group's ability to influence the airline's board. Domestic carriers fought to shoot down Virgin America's application. The airline says it'll take another crack at demonstrating its U.S. bona fides. A Bidding War In India It's only India's fourth-largest mobile telco, but in just three days, from Dec. 20 to 23, Hutchison Essar's projected price tag jumped from $14 billion to $17 billion. Hong Kong's Hutchison Whampoa now owns 67%, with Indian conglomerate Essar holding the balance. The callers include the second-largest Indian telco, Reliance Communications, a clutch of private equity players, British giant Vodafone (VOD ), and Egypt's Orascom. Every now and then, even Essar makes noises about wanting to buy out its partner. See "Vodafone and India's Vast Potential" In Memoriam Frank Stanton, who along with his boss, William Paley, built CBS (CBS ) into the preeminent network of the early days of television, died on Dec. 24. A President's Passing Remember those WIN buttons? President Gerald Ford, who died on Dec. 26 at age 93, unveiled them with the rallying cry "Whip Inflation Now" back in 1974—a reminder that the Watergate scandal was not the only crisis Richard Nixon left Ford when he resigned. Ford also inherited high inflation and a stagnant economy. In a speech that fall, the former Michigan congressman declared inflation "public enemy No. 1" and asked Treasury Secretary William Simon and top economic adviser Alan Greenspan to help tame the beast. Ford's policies squeezed inflation from 11% to 5%, but higher joblessness (from 5.6% to 7.7% in 1976) cost him politically. Democratic challenger Jimmy Carter coined the term "misery index" (unemployment plus inflation), and it stuck. Ford may have whipped inflation, but he couldn't whip Carter. Ford later served as a director at Citigroup (C ) and an advisory director at American Express (AXP ), among other boards.
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