Markets & Finance

Lufthansa Down on Possible Lawsuit


From Standard & Poor's European MarketScope

Germany

Software giant SAP was down €2.85 to €115.90, after the company denied it is in merger talks with Oracle following WirtschaftsWoche magazine's report that SAP's CEO Henning Kagermann said he would not "hang up" if Oracle's Larry Ellison called. Kagermann added that "independence is not an end in itself." The company said that the comments were in response to the question of whether he would listen to offers and that as CEO he must be open to any and all offers as part of his fiduciary responsibility to shareholders, according to AFX news. The company also said that it has no plans to pre-announce first quarter o 2005 results due April 21.

Lufthansa was down €0.23 to €10.83, after the Financial Times Deutschland reported that the airline may sue the Austrian government over an 80% increase in fees for security services this year.

Engineering company Siemens was down €1.68 to €60.72, after Russian Rail dropped its €30 billion project with suppliers including the company and Alcatel to improve the network because it required too much debt, Bloomberg reports. The plan had been announced on September 20.

DaimlerChrysler was down €0.85 to €31.21, after the Financial Times reported that the company's major shareholders Deutsche Bank (which owns 10.4%) and Kuwait (which owns 7.2%) were recently approached by private equity firms to sell their stakes to them in order to break-up the company. Due to political, financial, and operative reasons, Merck Finck believes such a move is highly unlikely to be successful and maintains a sell rating.

Britain

Music group EMI was up £0.05 to £2.53, after the company said it expects to report results slightly ahead of previous guidance and expects to report pre-tax profit of approximately £141 million, above previously indicated £138 million. The company said its recorded music division, EMI Music, expects to report a constant currency sales decline of approximately 7.5%, against previously indicated range of a decline of 8% to 9%. The company also noted that no further exceptional items are expected for the year ending March 31, 2005.

Drugmaker Astrazeneca up £0.37 to £22.79, after Credit Suisse First Boston said it sees a "trading buy" opportunity. The broker raised its target for the company to £24.00 from £22.50, retaining its buy recommendation. The broker said that, although the company does not have challenges to Nexium and Seroquel (which account for 20% of group sales between them), these are widely anticipated. The broker said a further reason the share price may react positively today is that the financial markets would have regarded the loss of Eli Lilly's Zyprexa patent and the subsequent availability of cheap generics of the product as a threat to Astrazeneca's Seroquel. The broker also sees the upcoming SAINT I study on the stroke drug Cerovive as an asymmetric catalyst offering considerable share price upside on a positive outcome, but little downside on a negative outcome. Meanwhile, the drugmaker's CEO Tom McKillop told the Daily Telegraph that if the U.S. threat about parallel imports become reality, the company will move its operations from the U.S. to China or India.

Barclays bank was down £0.13 to £5.58, as rumors of a bid for a blue-chip company refuse to go away, The Guardian reported. The bank, up 6 pence to £5.70 yesterday, was the name in the frame amid talk of a bid approach from Bank of America. Traders said the speculation had been sparked by news that the company had cancelled an investor roadshow in the US. However, a spokeswoman for the company explained that meetings had been postponed because of a change in diary commitments.

Steelmaker Corus was down £0.02 to £0.51, after Morgan Stanley noted that Reuters reported that it appears that European steel makers will not be able to push price increases through for second quarter contracts, at least not in Belgium, according to anindustry source. Morgan Stanley said Reuters also reported that the European steel markets appeared to be stabilising but that the pricing outlook was mixed, with sagging demand, high consumer stocks and imports pressuring prices. The broker forecasts price rollover in the second half of 2005, with prices falling €40 per tonne in the second half of 2005 and a further €70 per tonne, or 15%, in 2006. The broker retains its cautious view of the European steel sector, and an underweight rating on Corus, and said Arcelor is its top pick.

BP was down £0.10 to £5.31, after the Financial Times reported that Lord Browne, the company's chief executive, will visit Moscow next week for talks with President Vladimir Putin aimed at clarifying the murky rules for investors in Russia's lucrative oil sector. The meeting, the first between the two men since 2003, comes as foreign oil companies, particularly BP, face uncertainty about their prospects in the shifting sands of an industry increasingly dominated by the state. The company has waded more deeply into the industry than its competitors through its $7 billion deal with Russian groups to create TNK-BP in 2003. Planning for Lord Browne's trip began before

federal tax collectors last week hit TNK-BP with a $1 billion demand for back taxes. But the demand, which the 50-50 Anglo-Russian venture has pledged to challenge in court, is likely to be raised. BP's chief executive is also expected to quiz Mr Putin about Russia's willingness to share its oil with foreign groups.

France

Media and telecoms group Vivendi Universal was down €0.57 to €23.62, after brokerage Cheuvreux increased its target to €26.6 from €26.2 and remained a buyer of the stock, noting limited impact from International Financial Reporting Standards, and noting good momentum confirmed across the company's divisions. Separately, the company's fixed-line telecom unit Cegetel is reported to be in talks to combine its internet business with one or more rivals in a bid to reduce the number of national companies offering high speed connections.

IT consultancy Cap Gemini was down €1.08 to €24.72, after U.S. equities were punished by IBM's lower-than-expected first-quarter profit rise and a 9% slump in Apple, after its revenue forecast came in short of expectations. Tech news was compounded this morning by Samsung's worse-than-expected 52% drop in first-quarter profit. Other tech stocks that were trading lower included chipmaker STMicroelectronics which was down €0.49 to €11.80.

Steelmaker Arcelor was down €0.68 to €16.50, after the company said that production of galvanized steel sheet at its La Lamagona plant in Tuscany, Italy, stopped after a fire on Apr. 12. The company said production will restart on Apr. 16. Yesterday, shares fell after a report in the Wall Street Journal suggested that demand for steel in the US is starting to slow, with weakening prices prompting steelmakers to cut back production. However, JP Morgan remained confident in the sector, arguing the stocks offer good valuation support. The broker retained the company ThyssenKrupp as key sector picks.

France Telecom was down €0.45 to €22.82, after it emerged that the French unit of Sweden's Tele2 will launch a mobile telephony offering before the end of 2005. The announcement came after Tele2 and France Telecom's Orange unit signed a mobile virtual network operator agreement allowing Tele2 to offer a service inFrance using the existing Orange network.


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