Magazine

Shakeup At Siemens


Investors love Siemens (SI) CEO Klaus Kleinfeld for finally putting the Munich engineering and electronics conglomerate on course to rival General Electric (GE) in profitability. His thanks? On Apr. 25, under pressure from the company's supervisory board, Kleinfeld said he won't seek an extension to his contract, which expires on Sept. 30. This came six days after Chairman Heinrich von Pierer also said he would quit.

Kleinfeld, who held the top job for only two years, was undone by a probe into whether executives of the company illegally bribed foreign officials to win contracts. Kleinfeld wasn't personally implicated, but his overseers, including Deutsche Bank (DB) CEO Josef Ackermann, want outside leaders who can't be accused of faulty oversight. Kleinfeld's de facto resignation before a successor was named leaves a leadership vacuum—and angers investors who thought Siemens was getting its act together.

See "Siemens' Boss Steps Down"

Many experts figured Toyota (TM) would overtake General Motors (GM) this year, but few thought it would happen so fast. In the first quarter, Toyota sold 2.35 million vehicles globally, to GM's 2.26 million. If Toyota stays on top, it will mark the first time in 76 years that anyone has outsold GM.

See "Toyota: A Carmaker Wired to Win"

Drugmakers with frail pipelines are still looking to bulk up, so Anglo-Swedish giant AstraZeneca (AZN) said it would buy biotech MedImmune (MEDI) for $15.2 billion cash. If the deal flies, Astra would pick up a therapy for preventing a serious respiratory infection in children and a flu vaccine inhaled in a nasal spray, plus a pipeline loaded with vaccines and cancer drugs. Despite the high price, analysts generally saw it as a smart buy.

See "MedImmune: A Booster Shot for Astra http://www.businessweek.com"

On Apr. 24 the SEC brought options backdating charges against former Apple (AAPL) General Counsel Nancy Heinen and former CFO Fred Anderson but said it would take no action against the company. While CEO Steve Jobs seems to be in the clear, at least for now, he did get slammed by Anderson, who settled with the SEC and issued a press release saying Jobs played a role in the improper accounting of one large 2001 grant, which Apple denies.

See "Parting Shots at Apple's Jobs"

Ignoring rising energy prices and a slumping housing market, the stock market surged on Apr. 25, pushing the Dow Jones industrial average up 136 points to close just over the 13,000 mark for the first time. Investors seemed especially enthused by strong overseas earnings from the index's component companies.

See "Down Climbs Above 13,000"

Scorching—how else to describe a Chinese economy that incinerated forecasts with an 11.1% growth rate in the first quarter, announced on Apr. 19? China, the fourth-biggest economy, is on track to overtake Germany as No. 3 in the next year or so. Of course, China might overheat, so Beijing is probably going to have to raise rates once or twice before the year is out. That could douse the white-hot domestic stock markets.

See "Why Taming the China Dragon Is Tricky"

On Apr. 23, ABN Amro (ABN) agreed to be taken over by Barclays (BCS) for $91 billion. Two days later a higher bid put the deal for the Dutch bank in danger. A consortium headed by Royal Bank of Scotland (RBS) offered around $98 billion, and analysts say if a war gets under way, the price could go at least 15% higher.

See "Can the Scots Spoil Barclays' ABN Deal?"

The feds chalked up another win in their string of corporate criminal prosecutions. On Apr. 19 jurors convicted former Qwest Communications (Q) CEO Joseph Nacchio on 19 of 42 counts of insider trading. Prosecutors said he began dumping shares in 2001 after learning Qwest faced revenue shortfalls. His attorney has said he'll appeal.

See "Nacchio's 'Defense-Lite' Strategy Backfires"

IBM (IBM) makes tons of money, and its revenues are growing handsomely again, but the stock has been bouncing between $70 and $100 since late 2002. To goose interest, the company on Apr. 24 announced a 33% hike in its dividend and authorized $15 billion in additional funds to buy back stock—as much as 10% of outstanding shares. Investors cried huzzah, pushing the price up 3.28, to 98.49, that day.

Internet phone carrier Vonage (VG) caught a break on Apr. 24 when a U.S. Court of Appeals stayed a trial judge's injunction that would have barred the company from signing new customers. Its battered stock surged nearly 30% after the decision. Vonage had been ordered to pay $58 million and halt recruitment as punishment for infringing on Verizon (VZ) patents. Its appeal is set to be heard on June 25.

See "Vonage: Away from the Edge, for Now"

Morgan Stanley (MS) has been down this road before: In 2004 it paid $54 million to settle claims that pay and promotion practices at its investment bank were biased against women. On Apr. 24 the firm agreed to cough up at least $46 million to settle a sex-bias class action brought by current and former female brokers. The lawsuit alleged that men were favored in the way accounts were passed out at retail branches. Now, instead of branch managers handing out the most-lucrative accounts to their pals, Morgan Stanley has agreed to set up an automated system. Some 2,700 female financial advisers will share in the payout.

It's only one-tenth of what the feds wanted, but it's an impressive sum nevertheless. HealthSouth (HLS) founder Richard Scrushy, while not admitting wrongdoing, agreed on Apr. 23 to pay $81 million to settle a lawsuit in which the SEC accused him of orchestrating a $2.6 billion accounting fraud at the Birmingham (Ala.) company. Scrushy, 54, agreed to pay a $3.5 million fine and to forfeit $77.5 million in gains from his years at HealthSouth, although he will receive credit for $71.5 million he has already forked over in related lawsuits. Scrushy lawyers warn that their client, who has incurred more than $30 million in legal bills, may not be able to come up with all the cash he owes. And Scrushy hasn't finished his long walk though the legal system: Although he was acquitted of criminal charges in the accounting fraud, a jury last June convicted him of bribing then-Alabama Governor Don Siegelman in exchange for a seat on the state's hospital regulatory board. Scrushy says he plans to appeal.


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