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Housing Woes Broaden


Countrywide Financial, (CFC) the largest U.S. mortgage lender, sent markets plunging on July 24 after blaming its earnings troubles on prime borrowers—people thought to have good credit—not just the subprime folks. More gloom came on July 25 when the National Association of Realtors reported an unexpected 3.8% drop in June sales of existing homes, with sales the weakest since 2002. The median price ticked up 0.3% from a year earlier, but economists see further declines.

Countrywide's woes, which led to a 33% fall in second-quarter profits, reflect the excesses of the housing boom. Many borrowers took out loans they couldn't afford, leaving them with little or no home equity. Now they can't refinance. CEO Angelo Mozilo had thought the mortgage business would recover in 2008. Now he doesn't see that happening until 2009.

See "Countrywide's Woes Deepen"

Ambitious Barclays (BCS) said July 23 that it would sell up to $18.5 billion in new shares to China Development Bank and Temasek Holdings, Singapore's investment arm. The pledges gave London's Barclays the oomph to boost its offer for Dutch bank ABN Amro (ABN) to about $93.5 billion. The higher sum, though, is still short of the $98 billion that a European consortium, led by Royal Bank of Scotland, is offering. Barclays hopes its rising share price will lift its bid above its rivals'.

See "Barclays Adds Asian Heft to ABN Bid"

Cerberus Capital Management has taken a shine to a new set of wheels. After agreeing to take over Chrysler (DCX), as well as General Motors (GM) finance arm, the contrarian investor firm said on July 23 that it would pay $6.6 billion for Greenwich (Conn.)-based United Rentals (URI), the world's largest rental outfit of material-moving machines and other industrial gear. Meantime, investment banks postponed a $12 billion debt offer to Cerberus' Chrysler takeover, though Cerberus says it still expects the deal will close on schedule.

Over protests of restaurants and some other businesses, the federal minimum wage rose 70 cents on July 24, to $5.85 an hour, the first minimum pay hike since 1997. The wage will increase at a rate of 70 cents a year until 2009, when it will hit $7.25. But the boost won't affect some workers at all: Two dozen states already have minimums higher than the new federal one.

It didn't take long for new CEO Peter Loescher to put his mark on Siemens. (SI) Less than a month after succeeding high-profile Klaus Kleinfeld, Loescher said on July 25 that the Munich industrial conglomerate would pay $7 billion for Dade Behring, a Deerfield (Ill.) medical diagnostics outfit, and sell its Siemens VDO auto parts unit to Germany's Continental for $15.8 billion.

Harry Potter and the Deathly Hallows became the fastest-selling book in history on its July 21 release date, with 8.3 million copies sold in 24 hours in the U.S. and 2.7 million more elsewhere. Book chain Borders (BGP) sold 1.2 million alone on the first day. With plot discussions already in full swing, it looks like the final installment in J.K. Rowling's hit series may well be the fastest-read book in history as well.

With high oil prices driving up demand for their services, two of the biggest offshore rig contractors decided it would be smarter to pair up than to continue battling one another. Transocean (RIG) said on July 23 it would pay nearly $18 billion for GlobalSantaFe (GSF). A sweetener for shareholders of the new Houston-based combine: a $15 billion special dividend.

See "Offshore Drillers Get Bigger

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Analysts saw signs earlier this year that Amazon.com's (AMZN) two-year investment binge was paying off. They didn't know the half of it. On July 24, the online retailer reported a surprising 257% jump in profits, to $78 million, on a stronger-than-expected 35% rise in sales, to $2.88 billion. Amazon shares rocketed 24% on July 25, to $86.18.

See "Amazon Blows 'Em Away Again"

In an attempt to sway the Federal Communications Commission, which is reviewing their proposed $4.7 billion merger, Sirius Satellite Radio (SIRI) and XM Satellite Radio (XMSR) unveiled on July 23 a consumer-friendly pricing plan. Should the two companies join forces, they would allow listeners to pay $6.99 to $16.99 a month, not just a single $12.95-a-month fee, for all their various channels.

Former wunderkind Marc Andreessen has hit pay dirt again. The co-founder of Netscape Communications on July 23 sold software writer Opsware, which he started in 1999 and chaired, to Hewlett-Packard (HPQ) for $1.6 billion. With a 9.1% stake in Opsware, Andreessen's interests are valued at about $138 million.

See "Hewlett-Packard Opts for Opsware"

Following a failed fling into fancier fashions, Wal-Mart Stores (WMT) disclosed on July 20 that chief apparel merchant Claire Watts had resigned. The discounter will base its new head of women's apparel, former Walmart.com merchant Dottie Mattison, in its expanding New York design office to better stay on trends.

IPhone, schmiPhone. On July 25, a day after talk of disappointing sales of the world's most famous mobile phone sent Apple (AAPL) shares down 9%, the company blew away Wall Street's rah-rah earnings estimates by posting record results. The big story: Sales of the once-beleaguered Mac, which soared 33% from the prior year, dwarfing PC industry growth of 12.5%. IPod sales, which grew a relatively measly 21%, nonetheless contributed to a jump in profit margins, to 36.9% from 30.3%. As usual, Apple left itself plenty of room to exceed expectations next quarter, predicting a sales increase of only 18% in the back-to-school quarter. As for iPhone sales, Apple didn't disclose a hard number, saying only that it sold about 270,000 iPhones in two frenzied days before the June 30 quarter ended. That was below most Wall Street projections. Sales of cell-phone partner AT&T (T) also were shy of some forecasts. But Apple says that by the end of the current quarter, on Sept. 30, it should sell 1 million iPhones. It took Apple nearly two years to hit the 1 million mark with the iPod.


Tim Cook's Reboot
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