- Google goes for growth. Encouraged by a stronger economy and uplifting third-quarter profits, Google (GOOG) said it is gearing up for expansion. “While there is a lot of uncertainty about the pace of economic recovery, we believe the worst of the recession is behind us and now feel confident about investing heavily in our future,” said CEO Eric Schmidt. The Internet search company said on Thursday that third-quarter revenue rose 7% over last year’s same period, to $5.94 billion, as Internet advertising business brightened. Net income jumped 27% to $1.6 billion from a year ago. Google shares rose in after-hours trading. (read Google’s Q3 earnings call transcript)
- U.S. calls on China to loosen up. The U.S. Treasury took a fresh swipe at China’s currency policy, saying in a semiannual report released Thursday that, “Both the rigidity of the renminbi and the reacceleration of reserve accumulation are serious concerns which should be corrected to help ensure a stronger, more balanced global economy consistent with the G-20 framework.” Treasury, which stopped short of accusing China of manipulating its currency, said it continues to believe the renminbi is “undervalued.” The G-20 framework calls for sustaining global growth and smoothing trade and investment flows.
- Music merger in antitrust showdown. Ticketmaster Entertainment Inc. (TKTM) and Live Nation (LYV) are facing intense antitrust scrutiny for their proposed merger, announced in February, and may be forced to make concessions to complete the deal, sources say. The outcome could have potential repercussions for other high-profile deals such as Comcast’s (CMCSA) proposal to take a majority stake in General Electric’s (GE) NBC Universal. Ticketmaster and Live Nation, which have a combined stock-market value of $1.3B, had planned to close the deal by the end of this year. But the U.S. Justice Department may not rule before late November or 2010. The deal marks the first high-profile merger to come up for antitrust review during the Obama administration, which has vowed to take a tough antitrust stance.
- Ken’s annus horribilis. Embattled Bank of America (BAC) CEO Ken Lewis, already facing a slew of woes, now must forfeit his entire bonus and salary for 2009. U.S. pay czar Kenneth Feinberg said Lewis should pay back the $1M he has already received and give up the rest of his $1.5M pay for 2009. Lewis is bowing to Feinberg’s demand, saying it’s “not in the best interest of Bank of America for him to get involved in a dispute with the paymaster.” However, Lewis – who is leaving this year – will be able to keep his retirement pay, currently worth between $69.3M and $120M.
- Telephone partnership loosing connection? Nokia (NOK), the world’s largest phone maker, has raised questions about its commitment to Nokia Siemens Networks, after carving more than $1B off the value of its telephone-network venture with Siemens AG (SI) on Thursday, essentially wiping out all of the JV’s goodwill. Some say the writedown may be in preparation for a sale. The partnership saw its market share fall to 20% in Q2 from 26% a year earlier, while rival Ericsson (ERIC) is out in front with 32%. Nokia Siemens posted losses of more than €1.6B in the previous two years.
- U.S. will hold world back – Soros. Billionaire investor George Soros says the U.S. will be a drag on world growth, and that the U.S. dollar ought to be falling against the Chinese yuan to allow the U.S. to contain its current-account deficit. Soros said Thursday that the world’s current “currency arrangements” are fraught with danger and that the world needs global regulation.
- CVC derails Express deal. CVC Capital Partners slammed the brakes on plans to buy Britain’s bus and rail company, National Express, for $1.3B. The buyout firm provided no reason, saying only that it and Spain’s Cosmen family, the transport company’s biggest investor, won’t press ahead. London’s Takeover Panel said today was the “put up or shut up” deadline to make a firm offer or walk away for at least six months. National Express, which will now explore a stock sale, saw its shares plunge as much as 33% in London trading.
- Historic pay package lives on. Lazard CEO Bruce Wasserstein, who died this week, was notorious for his blockbuster hostile takeovers. Now, he is achieving fresh notoriety for the enormous pay he commanded. Some 4.4M restricted stock units he held – worth $188M at today’s prices – will be vested due to his death. The payout makes the legendary CEO one of history’s most richly compensated investment bankers, at a time when Wall Street chieftains are under fire for taking outsized pay packages. Wasserstein’s 2008 pay package was worth $20.4 million, most of it in restricted stock.
- … while Goldman plays it down. As the Wall Street bonus controversy blazes on, Goldman plunked a smaller chunk of revenue into its compensation pool. But employees need not cinch their belts: they are still on track to pocket an average of $630,000 each – rivaling record bonuses in 2007. Goldman has already set aside some $16.7B for bonuses this year, and looks headed toward the $20B mark. The firm may be hoping its recent show of austerity will quiet critics, but numbers like these make that unlikely.
- Manufacturing continues to fuel U.S. growth. Manufacturing gains are catalyzing U.S. economic growth, today’s latest September Industrial production numbers is expected to show. Economists expect industrial production to climb for a third consecutive month, with output at factories, mines and utilities up 0.2% following increases of 0.8% and 1% in August and July. However, another report may show that consumer sentiment has moderated following the highest level it has seen in more than a year (see today’s economic calendar below).
- Mixed messages from industry. New York State manfacturing took a big turn for the better, with the NY Fed’s Empire State Manufacturing Survey jumping to 34.57 vs. 18.88 last month and 19 expected – the highest level in 5 years. Employment index jumped to 10.4 from -8.3 last month. New orders surged to 30.8 from 19.8. Meanwhile, in Philadelphia the recovery was less apparent, with the Philly Fed’s Business Outlook survey dropping to 11.5 vs. 14.1 last month and consensus of 12. Employment index -6.8 vs. -14.3 last month. New orders moved up to 6.2 from 3.3. Shipments were 3.3 vs. 8.2. Inventories fell to -31.8 vs. -18.1.
- Job losses moderate. Weekly jobless claims fell to the lowest level since early January, dropping to 514,000 from 524K last week, just short of the 515K economists predicted. Continuing claims fell by 75K to 5.991M from 6.067M.
Earnings: Fri. Before Open
- Bank of America (BAC): Q3 EPS of -$0.26 misses by $0.05. Revenue of $26.04B (+32.7%) vs. $27.61B. Adds $2.1B to credit loss reserves. “Obviously, credit costs remain high, and that is our major financial challenge going forward. However, we are heartened by early positive signs, such as the leveling of delinquencies among our credit card customers.” (PR)
- GE (GE): Q3 EPS of $0.27 beats by $0.07. Revenue of $37.8B (-20%) vs. $40.03B. CEO Jeff Immelt on GE Capital: “While it remains a tough environment for GE Capital, we are seeing signs of stabilization. Every segment at GE Capital was profitable with the exception of Real Estate, which is experiencing a tough environment but where we believe the risks are well understood and manageable.” (PR)
- First Horizon National (FHN): Q3 EPS of -$0.24 beats by $0.08. Revenue of $495M (-6.4%) vs. $504M. (PR)
- Halliburton (HAL): Q3 EPS of $0.31 beats by $0.05. Revenue of $3.59B vs. $3.42B. “Overall market dynamics remained difficult in North America… Although I am more confident in our view of the international markets than I was last quarter, project deferrals together with pricing pressure, driven by our customers’ desire to reduce input costs, cause us to continue to expect a softer near-term margin outlook for international markets.” (PR)
- Mattel (MAT): Q3 EPS of $0.63 in-line. Revenue of $1.79B (-8.2%) in-line. “”As expected, revenues continue to be challenging this year due to the overall economic environment, retailers tightly managing inventory, foreign exchange rates and the lack of entertainment-inspired toy lines.” (PR)
Earnings: Thur. After Close
- Advanced Micro Devices (AMD): Q3 EPS of -$0.26 beats by $0.16. Revenue of $1.4B (-22%) vs. $1.26B. Sees Q4 product revenue up modestly. Shares -3.7% AH. (PR)
- Google (GOOG): Q3 EPS of $5.89 beats by $0.47. Revenue of $4.38B (+7%) vs. $4.24B. Paid clicks +14%; cost per click -6%. “While there is a lot of uncertainty about the pace of economic recovery, we believe the worst of the recession is behind us and now feel confident about investing heavily in our future.” Shares +3.6% premarket. (PR)
- IBM (IBM): Q3 EPS of $2.40 beats by $0.02. Revenue of $23.6B (-7%) vs. $23.4B. Raises full-year EPS guidance to at least $9.85 from $9.70, vs. $9.78. “We saw improved revenue trends in our business and share gains in software and hardware.” Remains “well ahead of pace” for 2010 roadmap of $10-$11/share. Shares -3.9% AH. (PR)
- People’s Bank (PBCT): Q3 EPS of $0.08 in-line. Net interest income of $145M (-9%). Shares -1.5% AH. (PR)
- Tempur-Pedic International (TPX): Q3 EPS of $0.34 beats by $0.08. Revenue of $224M (-11%) vs. $196M. Shares +12.7% AH. (PR)
Asian markets were mixed Friday. European stocks have added modest gains, while futures are flat as investors await another batch of big-name Q3 earnings reports.
- Asia: Nikkei +0.18% to 10,258. Hang Seng -0.31% to 21,930. Shanghai -0.11% to 2,977. BSE +0.74% to 17,323.
- Europe at midday: London +0.4%. Paris +0.2%. Frankfurt +0.5%.
- Futures at 7:00: Dow -0.1% at 9957. S&P -0.1% to 1089. Nasdaq flat. Crude -0.5% to $77.65. Gold -0.1% to $1,050. 30-year bond +0.11% to 118-29. 10-year +0.07%. Euro -0.1% vs. dollar. Yen -0.5%. Pound +0.2%.
Friday’s Economic Calendar
- 4:00 PM Elizabeth Warren: Restoring 8:45 Bair: Regulatory reform
9:00 International Capital Flows
9:15 Industrial Production
9:55 Reuters/UofM Consumer Sentiment
10:10 Fed’s Fisher: Globalization and monetary policy
12:00 PM Lawrence Summers: U.S. economic outlook & gov’t plans
trust in the financial system
- Notable pre-market earnings: AOS, BAC, FHN, GE, GPC, HAL, MAT, MTG