Wednesday, January 16, 2008

U.S. Stocks Fall on Intel Forecast, Extending Global Tumble

(Bloomberg) -- U.S. stocks declined after Intel Corp.'s sales forecast stoked concern over technology profits and deepened a decline in global markets that's wiped out $2.58 trillion in value this year.

Intel, the world's largest computer-chip maker, dropped the most in five years in Nasdaq Stock Market trading after saying first-quarter sales will be as much as 6.9 percent below analysts' estimates. Exxon Mobil Corp. and Chevron Corp. led energy shares lower on the New York Stock Exchange as oil prices retreated below $90 a barrel for the first time in four weeks.

The Standard & Poor's 500 Index lost 12.7, or 0.9 percent, to 1,368.25 at 11:04 a.m. in New York, below its Aug. 16 trading low. The Dow Jones Industrial Average slipped 75.43, or 0.6 percent, to 12,425.68. The Nasdaq Composite Index sank 47.9, or 2 percent, to 2,369.69. Asia's regional benchmark fell to its lowest since August, while European shares slid to a 16-month low. Indexes in Russia, Japan and Hong Kong all dropped by more than 3 percent.

``It's obviously treacherous out there, and Intel did no favors with their earnings announcement,'' said Kurt Brunner, who helps manage $1.5 billion at Swarthmore Group Inc. in Philadelphia. ``There's not a whole lot of places to hide, and the consumer looks weak right now.''

The S&P 500 has dropped 6.8 percent so far this year, while the Dow average is down 6.3 percent and the Nasdaq Composite has lost 11 percent. Technology shares, which helped lead the market higher last year, have retreated 12 percent as a group in 2008 for the worst performance among 10 industries.

Losses were limited today as JPMorgan Chase & Co. and Wells Fargo & Co. posted results that topped analysts' estimates and Oracle Corp. agreed to buy BEA Systems. Four stocks retreated for every three that rose on the NYSE.

Consumer prices rose at a slower pace in December, signaling inflation may decelerate after rising in 2007 by the most in 17 years.

Intel Forecast

Intel tumbled $2.86, or 13 percent, to $19.83. First- quarter sales will rise to as little as $9.4 billion, the chipmaker said yesterday after the close of trading, less than the $10.1 billion estimate of analysts surveyed by Bloomberg. Lehman Brothers slashed its price estimate on the stock by 23 percent to $23.

Advanced Micro Devices Inc., the second-largest maker of computer processors, lost 16 cents to $5.96.

Apple Inc. dropped $10.23 to $158.81. The shares slumped for a second day after new products failed to impress investors yesterday.

Oil fell below $90 a barrel for the first time in four weeks in New York after a Energy Department report showed supplies rose more than expected.

Oil Drops

Exxon, the largest U.S. oil company, declined $2.79 to $86.23. Chevron Corp., the second-biggest, lost $2.74 to $85.53. ConocoPhillips, the second-largest U.S. refiner, retreated $2.66 to $77.95.

Ambac Financial Group Inc. plunged $6.05, or 29 percent, to $15.09. The second-largest bond insurer will slash its dividend 67 percent and raise more than $1 billion in new capital to preserve its AAA credit rating. Ambac and rival MBIA Inc. are under scrutiny by ratings companies and regulators after their guarantees on collateralized debt obligations and bonds linked to subprime mortgages began plunging in value.

Oracle Corp., the world's third-biggest software maker, slid 4 cents to $21.27 after agreeing to buy BEA Systems Inc. for $8.5 billion. Oracle will buy the San Jose, California-based software maker for $19.38 a share in cash, 24 percent above yesterday's closing price. Oracle capitulated to BEA's board's demands for a higher price after BEA rejected a $17 bid in October. BEA added $2.97 to $18.55.
 

Ambac Will Cut Dividend, Raise $1 Billion in Capital

(Bloomberg) -- Ambac Financial Group Inc. ousted its chief executive officer, slashed the dividend 67 percent and will raise more than $1 billion to preserve its AAA credit rating after announcing the biggest-ever writedowns by a bond insurer.

The New York-based company fell as much as 28 percent on the New York Stock Exchange, extending a 76 percent decline in the past 12 months. Ambac will report a loss after reducing the value of securities it guarantees by $3.5 billion, according to a statement today.

Chairman and CEO Robert Genader, 60, will leave after presiding over the company's first ever losses and a decline in shares that wiped out $7.8 billion in market value. Ambac's writedowns, which exceeded those announced last week by larger rival MBIA Inc., failed to convince investors that the worst is over. Ambac and MBIA remain under scrutiny by ratings companies and regulators after their guarantees of bonds linked to subprime mortgages began plunging in value.

``The perception is that their underwriting standards were insufficient and they weren't on top of their business,'' Janet Tavakoli, president of Tavakoli Structured Finance in Chicago, said in an interview. ``This announcement still just says `We're a black box. Deal with it'.''

Ambac, which put its AAA stamp on $556 billion of securities, probably will end up needing more capital because the credit quality of the debt it guarantees will decline, Tavakoli said. Standard & Poor's yesterday changed the way it reviews subprime securities to increase its assumptions for losses, indicating it may further lower credit ratings.

Shares Fall

Board member and former Citigroup Inc. executive Michael Callen, 67, will become chairman and interim CEO, Ambac said.

The reduction in the quarterly dividend to 7 cents from 21 cents reverses a commitment made just three weeks ago to retain the payout. Ambac said it will report a net loss of $32.83 a share for the quarter, equating to more than $3 billion based on the company's 101 million shares outstanding.

Ambac declined $5.79 to $15.35 at 10:35 a.m. in New York after earlier falling as low as $15.12. MBIA dropped $1.91, or 12 percent, to $14.14.

``It's one thing to have a plan and another to have a plan that is credible and will be a long-term fix,'' said Donald Light, an analyst with Boston-based consulting firm Celent. ``Is this just a down payment in what's going to be a series of payments of uncertain length?''

`Clock Ticking'

Ambac is under pressure to come up with enough capital to satisfy Fitch Ratings, which threatened to cut the company's AAA rating unless it raised $1 billion. The bond insurers are under scrutiny from Fitch, Moody's Investors Service and S&P to increase their capital after a slide in credit ratings of the debt they guarantee.

The loss of the AAA stamp of Ambac, MBIA, FGIC Corp. and other insurers would throw into doubt the ratings of $2.4 trillion of municipal and structured finance debt that the companies guarantee. It would also cripple their ability to keep underwriting new bonds.

``The clock is ticking for all these companies,'' Robert Haines, an analyst with New York-based bond research firm CreditSights Inc., said in an interview before the announcement.

The infusion of capital, which may include the sale of shares and convertible stock, will satisfy Fitch, Ambac said in the statement today. Ambac said it may also reinsure more of its bonds or sell debt securities to shore up capital.
 

Airbus posts record 2007 orders

(Reuters) - Airbus confirmed 2007 as a record year for planemakers on Wednesday by posting orders for 1,341 aircraft while boosting cost savings aimed at catching archrival Boeing Co.

Boeing took top spot with 1,413 orders and has suffered less from a weakened dollar than Airbus, which has launched its Power8 cost-savings drive in response.

"These are enormous numbers; it was a staggering year. Now it becomes a question of how we manage the backlog," Airbus chief Tom Enders told journalists.

"Power8 delivered cost savings very considerably ahead of schedule in 2007. The official version is more than 300 million euros; I can tell you it is close to 500 million," he said.

The planemaker aims to cut 10,000 jobs and sell plants to lower its costs. It said it had achieved 30 percent of its planned reduction in overhead positions in 2007, or 3,000 jobs, equally split between Airbus and its suppliers.

Yet despite the reductions achieved mainly through attrition, Airbus still needs to hire production workers and skilled engineers to deliver ambitious new projects.

The overall Airbus headcount of around 55,000 fell slightly in 2007, Chief Operating Officer Fabice Bregier said.
 

Tiger: 'Blatant profiteering'

(Fin24) - The Competition Commission - on Wednesday slammed the bread price increases, saying the "blatant profiteering is an insult to the nation".


Bread maker Tiger Brands (TBS) on Monday implemented price increases on its Albany bread brand - soon after the Competition Commission hit it with a R99m fine for admitting a role in bread price-fixing cartel.


"This blatant profiteering is an insult to the nation, particularly the poor. It demonstrates that either the collusion is continuing or the cartel members are acting to maintain the artificially high margins they achieved by acting unlawfully," said Shan Ramburuth, Competition Commissioner.


The Commission has requested an explanation.


Tiger Brands is the only company that has implemented price hikes. Its peers Pioneer Foods, Premier Foods and Foodcorp, which are also implicated in the bread cartel scandal, are expected to follow suit.


"Should evidence show that the collusive behaviour is continuing we are able to withdraw the immunity we've granted to other players. We are also prosecuting the remaining cartel members, Pioneer and Foodcorp. Perhaps most shockingly, we have received new allegations of other anti-competitive behaviour by these parties, which we are vigorously pursuing," said Ramburuth.


Tiger Brands has denied that prices increases were implemented to plug the gap on the R99m, but has cited higher wheat prices.


Wheat prices - which make about 20% of bread input - nearly doubled in the past year to trade around 3 000 rand per ton as the world's wheat inventories shrunk due to threats of crop failure in the world's top wheat exporters.