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Closing Bell: Phillips-Van Heusen


Sandra Morris, an Intel (INTC) vice-president who oversaw its conversion to e-business, is joining the team leading Eastman Kodak's (EK) charge into digital. On May 23, Morris, 50, became general manager of Kodak's digital imaging services group in San Francisco. She will head the Kodak EasyShare Gallery, formerly known as Ofoto. It has become the No. 1 online photo service, with some 20 million members who store over 1 billion images for free but pay extra for prints and other services.

Morris, whose 17 years at Intel included a stint as co-chief information officer, spearheaded a program that got clients to place nearly all orders online, saving the chipmaker hundreds of millions. At Kodak, she will oversee a fledgling service aimed at getting people who take photos with their cell phones to download the pics to the EasyShare Gallery and print them. Some analysts predict the number of images captured on cell phones will eventually exceed those taken by digital still cameras.

A decade after its debut, e-commerce is getting more profitable. Average operating profit margins for online retail by both traditional and Web-only merchants rose considerably last year, to 28%, from 21% in 2003, according to a survey of 137 retailers by the Forrester Research and Shop.org, the National Retail Federation's online unit. The reasons: economies of scale and better marketing. While sales growth is slowing as e-commerce reaches 7.7% of total retail sales this year, or $172 billion, the rate of decline is leveling off. The forecast 2005 sales growth rate of 22% is way down from 51% in 2003, but only slightly less than 24% in 2004.

Warren Buffett and his buddies at Berkshire Hathaway (BRK) have finally found a use for some of that $43 billion in cash they've been hoarding. On May 24, MidAmerican Energy Holdings -- in which Berkshire has an 80.5% stake -- announced it would buy PacifiCorp from Scottish Power (SPI) for $9.4 billion. Buffett also indicated he's sniffing around the energy sector for other opportunities. The acquisition, Buffett's largest since picking up General Re back in 1998, comes just weeks after the Oracle of Omaha lamented to shareholders at his annual confab in April about the lack of investment ideas. PacifiCorp's appeal is obvious: It not only has a stronghold in the fast-growing Western states but is also a low-cost energy producer.

There's turmoil at the two Palms. On May 16, David Nagel, chief executive officer of Palm operating system maker PalmSource (PSRC), resigned suddenly. A day later, palmOne (PLMO), maker of the Treo-branded smart phones and Tungsten and Zire handhelds, announced it's changing its name back to Palm Inc. later this year after agreeing to pay PalmSource $30 million over 3 1/2 years for sole rights to the moniker. The changes suggest PalmSource's board is looking for new blood to lead the company. PalmSource increasingly is falling behind rivals Microsoft (MSFT) and Symbian as well as Linux-based operating systems in the race to become the brains of mobile devices. PalmOne remains one of the last major backers of the Palm OS, but even executives there say they are not wedded to the operating system.

Genentech (DNA) reported on May 23 that Lucentis, its experimental drug for macular degeneration -- the leading cause of blindness in the aged -- improved or stabilized vision loss in 95% of patients in a clinical trial. It is the first time a drug has actually improved vision for this disease, and the news didn't go down well at Eyetech Pharmaceuticals (EYET), whose rival drug, Macugen, won Food & Drug Administration approval in December. Eyetech's stock plunged 46%, to $12.95, the day after the Lucentis news came out.

-- Gruner + Jahr is selling four magazines to Meredith (MDP) for $350 million.

-- Qwest Communications (Q) told shareholders it has dropped its efforts to acquire MCI (MCIP).

-- Guidant (GDT) said that 24,000 implanted defibrillators may be defective.

After Phillips-Van Heusen's (PVH) first-quarter earnings forecast beat expectations, the shirtmaker's shares rose 4.4%, to $30.28, on May 25. Strong sales of such PVH brands as Sean John, Chaps, and Arrow also moved the company to raise its outlook for the rest of the year.


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