The troubled Wall Street bank, which reportedly is set to take a $4 billion write down in the third quarter, is desperate to raise capital. The Wall Street Journal says it's shopping around its investment management business, which includes Neuberger Berman. During the second quarter, the business reported net revenue of $800 million, down from $1 billion a year earlier. Its assets under management were $277 billion. Though these results were hardly spectacular, they stood in contrast to the Capital Markets business, which reported negative revenue of $2.4 billion.
Selling the asset management business would bring in between $8 billion and $10 billion, according to analysts cited by the Journal. Lehman's market capitalization now stands at about $10.4 billion thanks to the 77% decline in the stock price this year.
"Any change in the unit's ownership structure would be bittersweet for Lehman," according to the Journal. "The division has been a strong performer ever since Lehman bought it in 2003, holding up well despite the mortgage crisis. While a sale would give Lehman a cash infusion, the investment bank would lose a steady source of revenue."
Lehman acquired Neuberger for $2.6 billion in 2003, and some unhappy Neuberger executives are eager to dump their shares, the paper said.
Not all investors, however, believe that all hope is lost. Lehman's shares rose Friday on a report that billionaire George Soros boosted his stake in the company.
If the sale goes through, there is no way that Lehman will be able to remain independent.
As he prepares to accept the Democratic presidential nomination, Barack Obama's allies in organized labor are worried that he is becoming too friendly with Wall Street types such as former Treasury Secretary and current Citigroup, Inc. (NYSE: C) senior executive Robert Rubin.
According to Bloomberg News, a recent presentation by Richard Trumka of the AFL-CIO argued that unfettered global traded and inadequate government regulation resulted in lost manufacturing jobs. "It will do us little good if, when the next Democrat moves into the White House, Wall Street takes command of our country's economic policy," Bloomberg quotes Trumka's presentation as saying. The story adds that there is no doubt that Trumka is taking a shot at Rubin.
Trumka is unapologetic. The AFL-CIO already is flexing its political muscle and began looking at candidates for cabinet posts including the Treasury and Energy Departments along with the Federal Reserve. Obama's advisors deny that Rubin or anyone else has any particular sway over his economic policies. But there definitely is a tilt toward the center going on.
Anyone looking for a reason to buy Walt Disney Co. (NYSE: DIS) shares now has three: The Jonas Brothers.
Kevin, Joe and Nick Jonas are in the words of Portfolio.com "poised to become a nine figure franchise" for the media company.
The biggest band few over the age of 15 care about recently released "A Little Bit Longer", their second for Disney's Hollywood Records. It immediately went platinum and then quickly became the most-downloaded album on iTunes, according to the magazine. Then there is the sold out tour, the book commemorating the sold-out tour and the 3D movie of said tour.
If that's not milking the franchise, I don't know what is.
The Jonas boys, who took in $12 million last year, also are wholesome enough to allay the concerns of parents worried about the recent R-rated behavior of Disney teen queen Miley Cyrus. She apparently is dating one of the Jonas boys, each of whom wears purity rings symbolizing their commitment to sexual abstinence. I know the Portfolio article specifies the identity of the brother but I have decided I have more important things to do than remember it.
Anyone like me who scoffs at the Jonas' bland of sweet inoffensive pop should remember that they are not the target audience. My niece Danielle, 12, is that audience. She thinks the Jonas' are the best thing since sliced bread -- make that bread itself. She has pictures of the Jonas' in her room including one she drew herself. Danielle is even trying to learn the guitar.
The Jonas Brothers. who play their own instruments, show no signs of slowing. For some handy Jonas figures check this out. Disney will continue to profit from their success as it tries to duplicate it many times over.
Lowe's Cos. (NYSE: LOW) shares are little changed after the second-largest home improvement retailer reported better-than-expected second quarter earnings. They still should be avoided.
Earnings fell 7.9% to $938 million, or 64 cents a share. Sales rose 2.4% to $14.5 billion, up from $14.2 billion in the second quarter of 2007. The results surpassed the 56-profit and $14.12 billion in revenue expected by Wall Street. Nonetheless, the company continues to face a tough slowdown and gave disappointing third quarter guidance.
"We are encouraged by our results and our continued market share gains, but the macro economic factors pressuring consumers and the ongoing challenges and uncertainty of the financial markets suggest a cautious sales forecast for the balance of fiscal 2008 is prudent," said Chief Executive Robert A. NIblock in the earnings release.
Lowe's opened 23 new stores in the last quarter and expects to open 38 new stores during the current one. Is now really the right time to be adding so many new stores? There is a housing crisis, right? Square footage is expected to grow by 10%. The company is spending $34 million opening new locations.
Moreover, comparable same-store sales are expected to drop 5% to 7%, which Bloomberg says is less than what some analysts forecast. Earnings per share will be 27 to 31 cents in the quarter versus 43 cents a year earlier. Analysts had expected 33 cents. Profit for the year is seen at $1.48 to $1.56. Wall Street consensus is for $1.50.
For now, investors would be wise to avoid Lowe's and Home Depot Inc. (NYSE: HD), which reports tomorrow, until the housing market rebounds. That won't be until next year at the earliest.
In a move that underscores how badly things are going on Wall Street, Merrill Lynch & Co. (NYSE: MER) has announced a freeze on new hires through the end of the year.
The freeze, which excludes retail brokers, extends to previously budgeted posts as well as replacement hires, according to Bloomberg News, which broke the story. Any exceptions to the policy need to be approved by a member of the management committee.
Merrill Chief Executive John Thain clearly is looking to save money; racking up $19 billion in losses will do that to a person. Though Thain has vowed to maintain the firm's dividend, options traders are betting that he will break his promise, according to a separate Bloomberg account. Heck, anyone who can read a balance sheet has reached the same conclusion.
Thain has already eliminated 4,200 jobs this year, which he says will result in more than $900 million in annual savings, Bloomberg notes, adding that "Merrill slashed compensation and benefits, the firm's biggest expenses, by 20 percent this year to about $7.7 billion. Reducing headcount by attrition may be a cheaper way of cutting costs than mass layoffs."
Merrill has what investors like to call a "credibility problem," which is not getting resolved anytime soon. Holders of the stock, including one of my relatives who ignored my advice to dump it months ago, are in for a tough slog.
Headhunters of the world be prepared, your email in-boxes are about to overflow.
Earlier this month, the Wall Street Journal reported that the world's largest retailer had warned employees that a Democratic president would back the Employee Free Choice Act, a law that would make it easier for unions to organize workers, which the company opposes. The paper now is saying that the union groups have asked the Federal Election Commission to investigate the matter, which they claim violates federal law.
Of course, this is a brilliant public relations move by the unions. First of all, the FEC is as toothless as some Wal-Mart greeters. Even if the FEC finds that Wal-Mart broke the law, the worst that the company will get is a slap -- make that a tickle -- on the wrist. That may not even happen until well into an Obama administration, which brings up my next point.
Why is Wal-Mart set to pick a fight with the Democrats? Don't the folks in Bentonville read the political tea leaves? Odds are pretty good that the country will go Blue in a big way. Maybe the company is worried that the good times reflected in today's results won't last.
Back in the good 'ol days of say 2004, Gannett Co. (NYSE: GCI) was one of the few newspaper publishers Wall Street liked. Part of the reason was that many of the papers were in smaller cities such as Wilmington, Delaware, and Poughkeepsie, NY, where competition was not as great for advertisers. These days the publisher of USA Today is up the creek with the rest of the industry.
With its shares down more than 50% this year, it should come as no surprise that Gannett is joining the ranks of publishers that are laying off staff. According to a memo leaked to the unofficial Gannett blog, about 1,000 positions will be eliminated across Gannett's Community Publishing Division. Six hundred of those employees will lose their jobs, the memo says.
"Several GCI papers have already made recent job cuts, but at a higher rate: 5%," the blog says. "The division's dailies do not include USA Today, suggesting that any further reductions at Gannett's flagship could be on top of the 1,000 jobs eliminated."
Gannett investors -- who must be the few, the proud like The Marines -- must have been expecting the move. Shares of the publisher have soared 10% in the past month. About the only relief they are going to get is through a takeover by private equity companies. The publicly traded media companies have no interest in buying into an industry whose best days are behind it.
Net income rose to $575.2 million, or $1.32 per share. Revenue soared 17% to $7.74 billion. Analysts had expected profit of $1.36 per share on revenue of $7.23 billion. Shares of the largest farm equipment maker had their biggest drop in two decades, according to Bloomberg.
What's killing Deere is rising raw material costs. The company's overall business is doing fine. Agricultural sales rose 35% in the quarter. Not surprisingly Commercial and Consumer revenue fell 1% and Construction and Forestry declined 7%.
Is it the thrill of victory to hear the sound of one hand clapping?
Advertisers who paid big bucks for Olympics sponsorships are wondering the same thing. According to the WallStreet Journal, companies are angry that access to the Olympic Green, which is the main focal point of most games, has been "strictly limited" to people with hard-to-get tickets to the venues.
"A small line of people stood outside the The Coca-Cola Company (NYSE: KO) exhibit, where dry ice and the sound of gurgling soda pop drifted out," the paper said. "Meanwhile, a giant restaurant erected by McDonald's Corporation (NYSE: MCD) at the end of the Green has been far from packed."
This, of course, could be a huge disaster for the International Olympic Committee, which counts on corporate funding to fund the games. This could also hurt television advertising by General Electric Company (NYSE: GE)'s NBC Universal division, because televised shots of half-empty stadiums may make whatever sporting event they are showing seem lame.
Overall, though, the games are attracting huge audiences worldwide because of compelling stories such as swimmer Michael Phelps' quest for Olympic immortality. It will be interesting to see if the viewership trails off once the swimming competition ends.
Advertisers are going to take note of this for when the IOC comes calling for the London games in 2012.
Shares of Thomson Reuters are trading up even though the financial information company reported disappointing earnings. The stock is rallying following an earlier sell-off. Revenue was $3.13 billion, a 73% rise but short of the $3.32 billion analysts surveyed by Bloomberg News expected. The results benefited from the merger. Earnings were $172 million, or 22 cents per share, down from $375 million, or 58 cents per share a year earlier.
Chief Executive Tom Glocer told reporters that financial services markets "are likely to remain challenging through at least the end of the year." That means that big clients are going to be asking for big discounts. Bloomberg, my former employer and the company's biggest rival, has usually been able to resist this temptation.
Ever wonder what the geniuses who work at fast food restaurants do when they want to amuse themselves? How about take a bubble bath in the nude in the kitchen sink, video tape it and post it on YouTube? Welcome to Burger King's (NYSE: BKC) public relations nightmare.
It seems that this caper was the bright idea of a Burger King employee who goes by the name "Mr. Unstable." With his tattoos and punk rock hairdo circa 1985, the moniker suits him well. From what I could gather from the low-quality sound on the video, Mr. Unstable wanted to get clean for his birthday. Amazingly, none of the employees at the restaurant thought this was unusual enough to tell the manager.
In fact, they told the manager that everything was cleaned up while the video camera was rolling. I guess she was too dumb to realize something was up. The employees involved were fired. Let's hope the remainder got IQ tests.
The video made the rounds of the internet and came to the attention of the county health commissioner, who was, of course, horrified.
When a local TV station contacted Burger King about this incident, a company flack emailed the following statement:
"Burger King Corp. was just notified of this incident and is cooperating fully with the health department. We have sanitized the sink and have disposed of all other kitchen tools and utensils that were used during the incident. . . . We have also taken appropriate corrective action on the employees that were involved in this video. Additionally, the remaining staff at this restaurant is being retrained in health and sanitation procedures."
They also might add training to avoid hiring employees who call themselves "Mr. Unstable."
Shares of TJX Cos. (NYSE: TJX) fell in early trading after the discount retailer reported earnings that failed to impress Wall Street and gave guidance that fell short of expectations. The shares may still be worth adding to your portfolio.
Like Wal-Mart Stores Inc. (NYSE: WMT), TJX is benefiting from cash-strapped consumers eager to snap up the latest bargains. TJX, parent of TJ Maxx, is up 28% this year, outperforming Wal-Mart, which has gained more than 24%. The Massachusetts company currently trades at a forward price-to-earnings ratio of 15, below the Wal-Mart's ratio of 16. Wall Street analysts consider both stocks a buy.
Another thing in TJX's favor were the results in the quarter, which were spectacular. The company's net income tripled to $200.2 million, or 45 cents a share, a penny under Wall Street expectations. Revenue rose 7% to $4.6 billion, and consolidated comparable store sales increased 4% over last year.
The company expects to earn 59 to 62 cents in the third quarter on growth in same-store sales of 2% to 3%. Fourth quarter earnings are expected to be 79 to 81 cents. Analysts had forecast 62 cents and 79 cents for the respective quarters.
"In a very challenging retail environment, we delivered strong sales, merchandise margins and profit increases on top of very strong operating results last year," said Carol Meyerowitz, the company's chief executive officer, in the earninigs release.
Want more proof of the awfulness of the housing market? According to Zillow, one-third of U.S. homeowners who bought in the last five years now owe more on their mortgages than their properties are worth.
Among the findings:
Second quarter home prices fell 9.9% from a year earlier resulting in 29% of homeowners getting negative equity;
Forty-five percent of homeowners who bought at the peak of the market in 2006 are underwater;
Overall, U.S. home values in the second quarter posted the largest year-over-year decline in the past 12 years;
The median U.S. home value has not been this low since the fourth quarter of 2004;
Nationwide, nearly one in four (23.7%) homes sold during the past year sold for a loss while nearly 15% of sales were foreclosures.
These figures are unbelievable. They underscore that the housing market is nowhere near a bottom. The effects of the downturn will be felt for years to come since the biggest asset of many Americans is their home. You have to pity people who are trying to move closer to their jobs because of high gas prices. They are screwed no matter what they do.
"For homeowners who need to sell, this is a gravely serious situation," Zillow's Stan Humphries said in an interview with Bloomberg. "It can also be harmful to communities where the number of unsold homes adds more to inventory and puts downward pressure on prices."
The housing market won't improve until the huge amount of unsold inventory is cleared out, including "spec homes" being put up by builders in the hopes of luring buyers. Things are going to remain ugly for a while.
This post is one in a series on prominent company nicknames. See all 25, and share your thoughts and memories about Fiat below in the comments.
Sometime in the 1970s, some wag dubbed the Fiat Fix It Again Tony, because at the time the Italian cars were awful -- they were built with cheap Russian steel that rusted easily. Their reputation among American consumers has never recovered.
"Modern Fiats are actually pretty respectable thanks to modernization of materials and manufacturing processes, unfortunately most Americans still think of the old phrase 'Fix It Again Tony' because Fiat has not sold cars in North America since 1982, and therefore that is the last Fiat anyone there has usually seen," according to the Urban Dictionary.
Maybe Fiat's absence from the U.S. market is not a bad thing. Writing in BusinessWeek, Helen Walters described the Fiat Punto as being riddled with design flaws, including one that is a safety hazard. "As it happens, I'm not in the market to buy a car," she writes. "But if I was then the Punto wouldn't make it anywhere on the list."
Looks like the old Fiat joke is not going away anytime soon.
As Joe Lazzaro posted earlier, economists expect the bad times to continue through next year, according to a survey by Bloomberg News.
Here are the low lights:
The economy will grow at an average 0.7% from July through December, half the gain in the first six months of the year;
Household spending, which has grown every quarter since 1992, is projected to stall as the impact of the tax rebates fades;
The jobless rate, now at 5.7 percent, will reach a five-year high of 6 percent in early 2009.
The question is how is this going to play politically.
Will the Democrats use this data to push for a second stimulus bill? Will growing political tensions between Russia and Georgia push up oil prices higher and make matters even worse for consumers? What about the Fed? Will it have to begin raising interest rates? When will the housing market hit bottom?
Only the most cockeyed of optimists can see a light at the end of this tunnel.