For Jeff Immelt, General Electric's (GE) time has finally come. After years of telling investors to hang on for 2005, it's finally on the doorstep, and the 48-year-old GE chief is thrilled. In his annual earnings outlook on Dec. 14, Immelt predicted 10% revenue growth for the year and earnings are expected to soar by 13% to 17%. "GE is really the right business for where the world is today," he said.
Along with a stronger economy that should lift GE's long-suffering transportation and energy businesses, Immelt has beefed up GE's presence in such areas as commercial finance, health care, and entertainment. Since taking over from former Chief Jack Welch a few days before the September 11 attacks, Immelt has shaken up the $134 billion company with massive acquisitions and divestitures, as well as initiatives to get staffers more focused on innovation, globalization, and customer service. Shareholders certainly expected good news, having boosted the stock in the days prior to Immelt's presentation.
Adding another independent voice to its board, Berkshire Hathaway (BRK) directors elected Microsoft (MSFT) Chairman Bill Gates to join them. The Dec. 14 move may do little to stem criticism that Berkshire is too insular, since Gates is close with Chairman Warren Buffett. But all but four of Berkshire's 11 directors are now outsiders. The board position is Gates's third, besides seats at Microsoft and Bothell (Wash.) biotech company Icos (ICOS), which markets the erectile-dysfunction drug Cialis with Eli Lilly (LLY). An Icos investor, Gates joined that board in 1990 and as of Sept. 30, his investment arm Cascade Investment Counsel held 5.4 million Icos shares worth roughly $129.4 million.
On Dec. 15, Time Warner said it had a reached a settlement with the Justice Dept. related to accounting issues at its America Online unit, agreeing to pay $60 million in criminal penalties and $150 million into a shareholder restitution fund. In addition, Time Warner submitted a $300 million settlement proposal, in which it neither admits nor denies guilt, to the SEC. As part of the Justice deal, AOL accepted responsibility for the actions of its employees, signing off on a statement outlining a scheme to falsely inflate revenue at AOL advertiser PurchasePro.com. But the media giant isn't completely free of its legal woes. As part of the deal, it must help prosecutors as they continue to investigate whether to bring charges against individuals. Time Warner Chairman Richard D. Parsons signed off on the settlement on Dec. 13. In return, Justice will defer securities fraud charges against AOL and dismiss them in 24 months if the company cooperates fully. At least six AOL employees, who were not identified, were involved in questionable ad transactions in 2000 and 2001, court documents show. Time Warner investors still seemed skittish -- shares closed unchanged on Dec. 15 at 19.38, after rising 20% since Sept. 30.
As competition in the Internet search market heats up, so do efforts by search engines to stand out. On Dec. 14, Google (GOOG) announced a partnership with five libraries, including those at Harvard and Stanford, to digitally scan many of their books, making them searchable on Google. The process, expected to take several years, could be a long-term business opportunity for Google and publishers. Google expects to nestle relevant ads along with book content and then split revenues with publishers.
American Express (AXP) struck a deal with Citigroup (C) on Dec. 13 to issue high-end U.S. credit cards, uniting two powerful financial-services names. The co-branded cards will be available by the end of 2005. Citigroup is the largest U.S. credit-card issuer and the second issuer after MBNA to partner with AmEx. Banks have been free to issue AmEx- branded cards since an Oct. 4 U.S. Supreme Court ruling ended Visa International and MasterCard International bylaws banning the practice. Citibank will issue the cards and assume credit risk; AmEx will process transactions.
-- Wal-Mart (WMT) said it fired three top execs and four others for violating company rules.
-- Carl Icahn took large stakes in the Hollywood and Blockbuster video chains and is pressing for a merger.
Now that's a hot hand: Shares of Las Vegas Sands (LVS), owner of Venetian Casino Resort in Las Vegas, jumped 60% in first-day trading, to 46.50, making founder Sheldon Adelson's stake worth $14 billion. Sands has a casino license on the booming Chinese island of Macau.