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Closing Bell: Chiron


Time Warner (TWX) CEO Richard Parsons hasn't given up trying to convince Wall Street that the merger with America Online is a winner. But lately his musings about a possible AOL (TWX) spin-off have sparked buzz that he's about to dump the unit. Not so, say insiders. Parsons himself told AOL employees that "AOL is for keeps."

BusinessWeek has learned that Parsons has now committed to loosening the purse strings so that AOL can make acquisitions to bolster its Web presence and attract online ad dollars. The move came during a recent visit by Parsons to AOL headquarters in Dulles, Va., when execs complained they failed to get the O.K. to buy About.com, which the New York Times Co. (NYT) purchased in February.

If necessary, Parsons added, he would consider a spin-off to give AOL its own equity to acquire new properties. Analysts speculate that AOL could buy sites such as CNET, iVillage (IVIL), or InfoUSA (IUSA). With or without a spin-off, Parsons is putting his money where his mouth is.

The accounting shakeup ushered in by the 2002 Sarbanes-Oxley Act may not be over. A massive Securities & Exchange Commission study of off-balance-sheet transactions, released on June 15, found that corporate balance sheets failed to show $535 billion in employee retirement obligations and $1.25 trillion in cash obligations for leases. The study "reinforced for us that there's a lot that can be done for the sake of investors," says SEC Chief Accountant Donald Nicolaisen. But complaints are rising about SarbOx. Nicolaisen says compliance is onerous partly because companies have resorted to off-balance-sheet deals and other schemes to mask earnings ups and downs. The solution, he says, is to require companies to disclose and explain the real volatility of their businesses. But given the departure of SEC Chairman William Donaldson, it's not clear how much traction the report will get.

Selling Ford Motor's (F) Hertz car rental unit is CEO Bill Ford Jr.'s latest step to build up the carmaker's balance sheet. Analysts say the initial public offering, followed by sale of Ford's remaining stake, could raise a total of $6 billion. Last month, Ford finalized a deal to take back 24 factories from Visteon (VC), the automotive-parts business that it spun off in 2000. Although costly, the pact removed nagging uncertainties about Ford's Visteon liabilities. Wall Street expects Ford on July 19 to report profits of roughly $240 million, down 80% from a year earlier. Bill Ford's toughest act will be reversing the company's steep slide in U.S. market share.

The government has finally moved against Bristol-Myers Squibb (BMY). On June 15, the U.S. Attorney in New Jersey charged the drugmaker with securities fraud. The complaint stems from $2.5 billion in revenue restatements Bristol had to make after acknowledging it artificially boosted sales by enticing wholesalers to buy more drugs than they needed. But Bristol struck a deal to avoid prosecution. As part of the pact, Bristol will pay an additional $300 million to shareholders. The government also unsealed indictments against two former Bristol executives, Frederick Schiff and Richard Lane, on securities fraud. An attorney for Lane said he is innocent, while an attorney for Schiff says his client denies any wrongdoing.

Sales of high-end TVs and other digital products led Best Buy (BBY) to an 85% increase in fiscal first-quarter earnings. Also driving profits: a doubling of revenue from higher-margin services, such as the retailer's Geek Squad in-home computer troubleshooters, and strong demand that allowed Best Buy and rivals to avoid deep discounting. The question now: Will retailers resist the urge to start slashing prices once again when the crucial holiday season rolls around?

-- Blackstone Group will acquire Wyndham International (WBR) for $3.2 billion.

-- News Corp. (NWS) will buy back $3 billion of its shares.

-- JPMorgan Chase (JPM) will settle the Enron class action for $2.2 billion.

Shares of Chiron (CHIR) dipped 6.5% on June 15, to $35.47, after the company said it wouldn't be able to produce as many doses of flu vaccine as it had hoped to for the upcoming season. As a result, the Emeryville (Calif.) company slashed its annual earnings forecast.


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