Business News

Khodorkovsky epic trial drags on

2005-05-17T08:02:00.000-07:00

Yukos oil baron Mikhail Khodorkovsky was convicted on one count of fraud today, but was left waiting for a verdict on 10 other counts, as the court dragged out the controversial trial of Russia's onetime richest man.The court's verdict concerned the acquisition of a 44% stake in an agricultural institute by Khodorkovsky and business partner Platon Lebedev. Verdicts on the remaining counts had yet to be announced. For the second day in a row, the court adjourned its verdict hearing, meaning that the denouement of the 11-month trial, which has badly damaged Russia's image abroad and become a major political issue at home, was set to drag on.
The prosecution has asked for a maximum sentence of 10 years for Khodorkovsky, 41, and Lebedev, 46, who are charged under seven articles of the Russian criminal code. Both men deny all charges.The trial, the most prominent since the break-up of the Soviet Union in 1991, has stirred political passions and puts the spotlight on some contentious issues in Russia such as the privatisations of the 1990s, judicial reform and human rights.Khodorkovsky was arrested in October 2003 when he was Russia's wealthiest man and his Yukos oil group was considered in the West as Russia's best-run company.At the time of his arrest was also increasingly active in politics and it is this, many analysts believe, rather than alleged financial misbehaviour that made him a target of the Russian authorities.Following his arrest, Yukos was then hit by a $28 billion back tax bill, paid partly by the sale of the company's main production unit, Yuganskneftegas, which was subsequently acquired by Russian state-owned oil company Rosneft.

Staples' Earnings Surge

2005-05-17T07:58:00.000-07:00

Staples' (SPLS:Nasdaq - commentary - research) first-quarter earnings rose 27% from a year ago, beating estimates on improved profitability in its North American operations.
The office-supply chain earned $159.4 million, or 21 cents a share, in the quarter, compared with $125.7 million, or 17 cents a share, last year. Sales rose 13% from a year ago to $3.9 billion. Analysts were expecting earnings of 20 cents a share on sales of $3.83 billion.
The company reiterated its second-quarter guidance for an 18% rise in per-share earnings compared with a year ago, and said it's comfortable with existing analyst earnings estimates for the rest of 2005. Second-quarter revenue is expected to rise in the low double-digits, with North American retail comps rising in the low single-digits.
Staples said its overall first-quarter profit margin rose 60 basis points from a year ago to 6.4%, while its North American retail division saw a 40% improvement in a metric called business unit income. Inventory turns were 5.65 times in the first quarter, up 33 basis points from a year ago.
"We are reaping the rewards of our balanced approach to growth and profitability," the company said. "The continued strength of our North American businesses provides us with the flexibility to invest in the many ideas that will sustain our growth in the years to come."
The stock closed Monday at $20.54. The 52-week range is $15.99 to $22.59.

Khodorkovsky epic trial drags on

2005-05-17T07:56:00.000-07:00

Yukos oil baron Mikhail Khodorkovsky was convicted on one count of fraud today, but was left waiting for a verdict on 10 other counts, as the court dragged out the controversial trial of Russia's onetime richest man.
The court's verdict concerned the acquisition of a 44% stake in an agricultural institute by Khodorkovsky and business partner Platon Lebedev.
Verdicts on the remaining counts had yet to be announced. For the second day in a row, the court adjourned its verdict hearing, meaning that the denouement of the 11-month trial, which has badly damaged Russia's image abroad and become a major political issue at home, was set to drag on.
The prosecution has asked for a maximum sentence of 10 years for Khodorkovsky, 41, and Lebedev, 46, who are charged under seven articles of the Russian criminal code. Both men deny all charges.
The trial, the most prominent since the break-up of the Soviet Union in 1991, has stirred political passions and puts the spotlight on some contentious issues in Russia such as the privatisations of the 1990s, judicial reform and human rights.
Khodorkovsky was arrested in October 2003 when he was Russia's wealthiest man and his Yukos oil group was considered in the West as Russia's best-run company.
At the time of his arrest was also increasingly active in politics and it is this, many analysts believe, rather than alleged financial misbehaviour that made him a target of the Russian authorities.
Following his arrest, Yukos was then hit by a $28 billion back tax bill, paid partly by the sale of the company's main production unit, Yuganskneftegas, which was subsequently acquired by Russian state-owned oil company Rosneft.

Above Normal Hurricane Season May Impact Soy Rust Potential

2005-05-17T07:45:00.000-07:00

NOAA hurricane forecasters are predicting another above-normal hurricane season on the heels of last year's destructive and historic hurricane season.
"NOAA's prediction for the 2005 Atlantic hurricane season is for 12 to 15 tropical storms, with seven to nine becoming hurricanes, of which three to five could become major hurricanes," said retired Navy Vice Adm. Conrad C. Lautenbacher, Ph.D., undersecretary of commerce for oceans and atmosphere and NOAA administrator at a news conference Monday in Bay St. Louis, Miss. "Forecaster confidence that this will be an active hurricane season is very high."
The above-normal hurricane forecast could have an impact on soybean rust infestations along the Gulf Coast later this summer. So far, active soybean rust infestations have been found in extreme southern Georgia and Florida. Last year, Hurricane Ivan was blamed for bringing soybean rust spores from South America into and along the U.S. Gulf Coast.

S&P cuts Yell to BB on Transwestern acquisition

2005-05-17T07:38:00.000-07:00

LONDON, May 17 (Reuters) - Credit ratings agency Standard & Poor's on Tuesday cut its ratings on Yell Group Plc (YELL.L: Quote, Profile, Research) by one notch to BB after the phone directory publisher agreed to buy U.S.-based Transwestern for $1.58 billion in cash.
S&P credit analyst Anna Overton said the price Yell was paying was 16 times TransWestern's 2004 earnings before interest, taxes, depreciation and amortisation (EBITDA).
As a result of the acquisition, Yell's total debt to EBITDA ratio is expected to be close to five times, up from slightly more than three times, S&P said.
The ratings agency warned that Yell's capacity to reduce financial leverage was limited by its substantial equity dividend commitments.

IFM makes second play for PacHydro

2005-05-01T18:17:00.000-07:00

Industry Funds Management (IFM) has upped the anti on Spanish group Acciona outbidding its renewed offer for Pacific Hydro by 10c to $5 per share mid Friday.The new IFM bid followed a morning trading halt in Pacific Hydro shares and a $4.90 bid per share offer from Acciona.The battle for the remaining share of PacHydro, which is already 32 per cent owned by IFM, began late March when Acciona made a $4.50 per share bid for the group.IFM has always said that it would not accept Acciona’s bid for its share of the group and it was expected the industry funds giant would make a counter-bid for the company as soon as Acciona made its second bid.The independent directors of PacHydro initially recommended shareholders accept the Acciona bid of $4.90 until IFM outbid them at $5.00.“IFM has been a strong supporter of Pacific Hydro since investing in the Company in 1996. The revised offer is an excellent outcome for all shareholders,” PacHydro chairman Bernard Wheelahan said in a statement to the Australian Stock Exchange (ASX) Friday.IFM said it would not accept the $4.90 bid from Acciona because it failed to recognise the value to IFM investors of maintaining an ongoing interest in the company and its portfolio of long-term development projects.“Our revised offer demonstrates IFMs continued determination to secure control of Pacific Hydro and not to accept an inadequate price from any other bidder. IFM is committed to Pacific Hydro, its staff and its future,” IFM chairman Garry Weaven says.The revised offer values the company at $788 million, up from its initial offer’s valuation of $725 million, and IFM said its funding commitments were sufficient to fund the revised offer.The offer remains conditional on IFM receiving acceptances entitling the fund manager to more than 50 per cent of PacHydro’s shares.PacHydro closed up 8.6 per cent at $5.07 on Friday.

Russian moguls eye up Rover ruins

2005-05-01T18:11:00.000-07:00

The owner of Volga cars and the 'baby oligarch' behind TVR could be interested in Longbridge assets
The future of MG Rover could be decided in Russia following reports that administrators PricewaterhouseCoopers have received approaches from metals mogul Oleg Deripaska and Nikolai Smolenski, owner of sports carmaker TVR.
Mr Deripaska - a close friend of the Chelsea football club chairman Roman Abramovich - already owns Ruspromavto, maker of Volga cars, and is said to be keen to expand his business interests in Britain.
Yesterday's Mail on Sunday quoted Alexander Yushkevich, deputy chairman of Ruspromavto as saying Mr Deripaska, whose multi-billion dollar fortune is based on his acquisition of Russian Aluminium, was keeping a close eye on developments at Longbridge.
"MG Rover has some interesting models which in Russia are more popular, for example, than Fiats. Another attractive side of MG Rover is its strong engineering centre and state support."
But Ruspromavto said it needed answers to a series of questions, including who would ultimately bear the cost of MG Rover's liabilities, the size of its debts and whether the existing management and engineering teams would remain in place.
Yesterday's Observer said that Mr Smolenski, the son of banking tycoon Alexander Smolenski and dubbed the "baby oligarch", was interested in acquiring the company and manufacturing a full range of cars. Mr Smolenski bought TVR last July and there has been previous speculation that he could be interested in acquiring MG Rover's MGF sports car line to add to the TVR range.
The Iranian company Dastaan is also said to be considering its options over MG Rover, which has shed more than 5,000 jobs since it went into administration last month. A spokesman for the administrators yesterday declined to go into detail about specific bids, saying only that "we have had a number of expressions of interest from around the world".
One issue which will need to be settled is the issue of intellectual property rights (IPRs) over a number of models and engines. Shanghai Automotive Industry Corporation, which had been negotiating with MG Rover over a joint venture but which stepped back because of concerns about the UK carmaker's financial health, paid £67m for at least some MG Rover IPRs last year and it would be difficult for another carmaker to step in unless it could reach a deal with SAIC.
The Shanghai company, which has joint ventures in China with General Motors and Volkswagen, is keen to build up its own automotive technology base and has expressed interest in some of MG Rover's assets. There have been suggestions that the ad ministrators have been looking at the terms of the original MG Rover/SAIC deal but this is regarded as routine.
Efforts will continue this week to help ease the problems facing MG Rover dealers who are facing the burden of having to repay loans on unsold cars.
Capital Bank, part of HBOS, which acted as a financial intermediary between the carmaker and the dealers, paying MG Rover as soon as cars were assigned to the dealers and then collecting the cash later, is said to be adopting a sympathetic approach.

Cyprus, Malta and Latvia seek to join euro by 2008

2005-05-01T18:09:00.000-07:00

Cyprus and Malta, two former British colonies, set course at the weekend to adopt the euro by 2008 - days after Tony Blair ruled out UK membership until after 2010 at the very earliest.
The two island states and Latvia, which all joined the EU on May 1 last year, agreed to tough structural and economic reforms over the next two years as they joined the exchange rate mechanism - a prelude to full euro entry later this decade.
Ten new countries, including eight from eastern Europe, joined the EU a year ago and are expected to swell the eurozone to at least 22 members by 2010 if they meet the entry criteria.
These include a budget deficit of less than 3%, a debt-to-GDP ratio of 60% and inflation and interest rates close to those of the best performing economies in the eurozone. They must also keep their currencies within a plus or minus 15% band around a central parity rate against the euro.
Malta, which set its lira at a central rate of 0.429300 to the euro, promised to maintain this rate, while Latvia, which set its lats at 0.702804, said it would allow its currency to fluctuate by only plus or minus 1%. Cyprus, which set its pound at 0.585274, said it would observe the 15% plus or minus fluctuation.
All three said they would toughen their fiscal stance, cutting debt, containing wage growth and public spending, and would reduce inflation, which in Latvia's case is more than 6% against the eurozone's 2.1%.
Cypriot central bank governor Christodoulos Christodoulou told Reuters the authorities would raise the retirement age to improve the public finances while Malta said it could raise taxes and step up its privatisation programme. Latvia said it would act to cut its trade deficit and restrain domestic demand.

Wall St. Week Ahead: Stocks Eye Fed, Jobs

2005-05-01T18:05:00.000-07:00

NEW YORK (Reuters) - Investors are likely to remain slightly nervous this week with another rate increase expected from the Federal Reserve and the crucial April non-farm payrolls report on tap.
The Federal Open Market Committee will meet on Tuesday.
Wall Street's top investment banks expect the FOMC will bump short-term U.S. interest rates up another 25 basis points, which would bring the fed funds rate up to 3.00 percent from 2.75 percent, according to a Reuters poll of 20 primary dealers in U.S. government bonds.
``The Fed announcement (on interest rates) will actually be a no brainer. The key is whether they are going to drop the word 'measured,''' said Sandy Lincoln, managing director and chief portfolio strategist at Wayne Hummer Asset Management.
In its March statement, the FOMC once again used the term ``measured'' to describe its preferred pace of interest-rate increases. That sent a signal to financial markets that future rate hikes would be done in 25-basis-point increments, just as the Fed has done since it began tightening credit last June.
Any shift in language will reflect ``on both sustained growth and contained inflation,'' banking group HSBC said in a note to clients.
All 20 dealers polled by Reuters expect the FOMC to approve a quarter-percentage-point rate increase on Tuesday, while 19 of the 20 dealers expect another 25-basis-point rate hike at the FOMC's June 30 meeting.
On Friday, the U.S. government will release the monthly employment report for April. The forecast calls for April non-farm payrolls to rise by 170,000 jobs, according to economists polled by Reuters. In March, only 110,000 jobs were created.
The April U.S. unemployment rate is expected to hold steady at 5.2 percent.
Any disappointment in the week's economic numbers could trigger a sell-off in the stock market, analysts said.
``It (the market) could go a lot uglier very fast,'' said Peter Schiff, president of Euro Pacific Capital.
CHEAPER OIL OFFERS SOME RELIEF
At Friday's close, stocks were mixed for the week. The blue-chip Dow Jones industrial average rose 0.3 percent during the week, while the broad Standard & Poor's 500 Index advanced 0.4 percent, and the tech-driven Nasdaq Composite Index slipped 0.6 percent.
During the month of April, stocks hit new 2005 closing lows and ended the month with losses. The Dow fell 3 percent, the S&P 500 dropped 2 percent and the Nasdaq lost 4 percent.
Sliding oil prices on Friday touched off a late-day rally, pushing the Dow average up 122.14 points, or 1.21 percent, to close at 10,192.51. NYMEX June crude futures fell $2.05 on Friday to settle at $49.72, a 10-week low.
If oil prices continue their downhill run, that could soothe some investor jitters over the economy. Lower oil prices raise the prospects of improvement in corporate profits and stronger consumer spending.
ISM, MORE EARNINGS AND CAR SALES
Other key economic data will get scrutiny throughout the week as investors search for signs of whether the U.S economy is heading toward a slowdown, accompanied by an inflationary trend.
The Institute for Supply Management, or ISM, is due to come out with its April manufacturing index on Monday. The average forecast is 55 in April, down from 55.2 in March. HSBC cited high energy prices as one of the reasons for this soft trend.
On Wednesday, the ISM will release its non-manufacturing index that measures activity in the U.S. services sector. The forecast calls for a dip to 61.0 in April from 63.1 in March, according to economists polled by Reuters.
The earnings machine will keep cranking out the numbers, keeping investors and analysts on their toes for projections of slower growth in profits or revenues in the year's second half.
Among S&P 500 companies set to report results on Monday are: cosmetics giant Avon Products Inc.(AVP); Tyson Foods Inc.(TSN), the largest U.S. meat processor, and Electronic Data Systems Corp. (EDS), the second-largest U.S. technology services provider.
On Tuesday, corporate report cards are expected from Tyco International Ltd. (TYC), which makes products ranging from duct tape to fire-protection systems; Qwest Communications International Inc.(Q), the fourth-largest U.S. local telephone company; Marsh & McLennan Cos. Inc.(MMC), the world's largest insurance broker, and MetLife Inc.(MET), the largest U.S. life insurer.
Auto makers will report U.S. car and truck sales for April on Tuesday.
``The market is potentially at a point of inflection,'' said Jeffrey Saut, chief investment strategist at Raymond James Financial.
Saut said if economic data does not indicate sustained growth, the market could continue its bearish trend.
Indeed, U.S. investors have reasons to feel glum. On Friday, economic reports showed high gasoline prices and sluggish wages were hurting consumer sentiment.
Adding to the feel-bad factor was a slide in consumer and business morale across Europe with French unemployment rising and central bankers in Scandinavia and Switzerland expressing fears over high oil prices and poor job creation.
(Wall St Week Ahead runs weekly. Questions or comments on this column can be e-mailed to: arindam.nag(at)reuters.com) (Additional reporting by Pedro Nicolaci da Costa)

Morgan Stanley Board Backs Embattled Chief

2005-05-01T18:00:00.000-07:00

NEW YORK -- Morgan Stanley's board gave a vote of confidence for embattled Chief Executive Philip Purcell on Sunday, saying any "suggestions for management changes or a corporate reorganization beyond the proposed spinoff of its Discover Card business would not be in the best interest of shareholders."
However, the board approved eliminating a provision that required a supermajority vote to remove the chief executive.
The financial services company's board abruptly set up a meeting for Saturday to review concerns about Purcell.
Pressure on Purcell has steadily built over the past month as a group of shareholders and former executives launched a campaign to have him ousted due to the performance of the company and its lagging stock price.
The departure of a number of high-level executives _ including five of the 14 members of Morgan Stanley's executive committee _ also called into question Purcell's ability to lead the company. Investors fear that the crisis of confidence in Purcell would result in other Wall Street firms cherry-picking Morgan Stanley's top talent, further damaging the company's long-term prospects.
The dissident group earlier this month managed to convince major institutional investors, including most of the nation's major pension funds, to ask Morgan Stanley to review with them the company's long-term plans.
Morgan Stanley also said Sunday that directors approved several changes to strengthen its governance policies.
Morgan Stanley's board in recent days has talked to executives who left the company after a recent management shake-up and have at least indirectly communicated with some dissident alumni shareholders trying to force the ouster of Purcell, according to The Wall Street Journal. One director called the talks as more of a fact-finding mission
"We have thoroughly examined all of the issues surrounding leadership, structure and strategy and conclude that it is in the best interest of shareholders that we support management and not split up the company," Morgan Stanley said in a statement Sunday.
The company's directors voted Saturday to accelerate the planned de-staggering of the board. Beginning in 2006, the board will stand for election by shareholders each year.
A lead director position will be created, Morgan Stanley said, with the role expected to be filled "shortly."
The company also said it will name two additional outside directors, bringing the total number of members to 15.
The compensation committee's charter was broadened to include oversight of plans for management development and succession, Morgan Stanley said. And the board said it backed a company policy that directors shouldn't stand for election following their 72nd birthday.
And starting at its June meeting, the directors plan to begin rotating board committee chairs.

Buffett Says Gates Can Help Berkshire

2005-05-01T17:57:00.000-07:00

OMAHA, Neb. -- Investment wizard Warren Buffett said Sunday that adding fellow billionaire Bill Gates to the board of Berkshire Hathaway Inc. will help ensure Berkshire's success, even after Buffett is gone.
"With Bill you've got one of the best minds in the world. He's got a good business mind, and he is interested in things beyond business," said Buffett, the 74-year-old chairman and chief executive of Berkshire.
Gates, the 49-year-old founder and chairman of Microsoft Corp., the world's largest software company, and Buffett are both worth more than $40 billion each and are the two richest people in the world. They have been friends since 1991.
Buffett said Gates understands Berkshire's corporate culture, which includes making long-term investments and buying businesses to help them grow.
"You've got a person who wants very much to help during my life and beyond my life," Buffett said.
It is similar to making Gates a trustee of a will, Buffett said. "There's nothing more important to me than that Berkshire" continues as a strong company, Buffett said.
Buffett said he was reluctant to ask Gates to join Berkshire's board because Gates is busy and Berkshire will take some of his time.
"But he said 'yes,'" Buffett said.
Shareholders voted Gates onto Berkshire's board at the company's annual meeting on Saturday. He had been appointed to the board in December to fill the vacancy left by the July death of Buffett's wife, Susan.
One day after taking questions for nearly six hours at Berkshire's annual meeting, Buffett and Berkshire vice chairman Charlie Munger held a nearly three-hour news conference on subjects that ranged from investment strategies to the newspaper industry.
Asked about California Gov. Arnold Schwarzenegger's handling of that state's difficult financial situation, Buffett said Schwarzenegger was doing as well as could be expected after being dealt a tough hand.
Buffett had served as a financial adviser to the actor during Schwarzenegger's 2003 campaign.
"He has provided leadership," Buffett said. "He has given people the idea that California, which has tremendous economic potential, can realize more of that potential than they knew."
Munger, who lives in California, said the state is better off with Schwarzenegger as governor, but Schwarzenegger does have to deal with a fractious and difficult legislature.
Berkshire Hathaway, based in Omaha, is a holding company with stakes in many different companies.
Federal regulators are investigating a reinsurance transaction between insurance company American International Group Inc. and Berkshire subsidiary General Re that appeared to boost AIG's reserves when markets were uneasy about the company's outstanding liabilities.
At Berkshire's annual meeting on Saturday, Buffett expressed confidence AIG, telling his stockholders that it is a "great company."