Interview: U.S. Treasury Secretary---Snow, John---Politician / Govt Official
>> housing starts fell to a nine-month low in december. manufacturing in the philadelphia area expanded less than economists forecast this month. in our last hour, i spoke about the economy with treasury secretary john snow. i began with word that oil climbed back above $67 a barrel and asked him what drag that could have on economic growth.
>> it all depends on how long it lasts. these prices aren’t welcome. they’re most unwelcome. they act like a tax and higher taxes don’t help the economy and higher energy prices hurt the economy. but the effect, here, depends very much on whether this is a short-term phenomenon or longer term phenomenon. i certainly hope that we’ll see moderation and energy prices will come back down so people don’t build these prices into their long-term calculations.
>> you say you hope, but my question is, how realistic is that? we’ve been speaking to a lot of investors and energy analysts. one person i spoke with a day or so ago said he thought at these levels the iran situation is not even priced in, that if it deteriorates, what kind of fallout could we see on oil prices?
>> well, clearly, uncertainty in the middle east is a negative for energy prices. and as i’ve said, energy prices, rising energy prices, create headwinds for the economy. the fact of the matter is, nobody really knows, do they? where energy prices are going. but higher energy prices always invite supply-side adjustments that are beneficial and they invite demand-side conservation adjustments so there is a self correcting mechanism here at work when energy prices spike up. but it’s unwelcome and it causes short-term headwinds for the economy. no doubt about that.
>> let’s talk about some of that fallout on consumers as well as corporations, some of the inflation numbers seem to indicate a lot of companies out there do not have pricing power at a they have higher costs because of the energy situation. are you concerned corporations will have a hard time boosting earnings because they’re unable to boost prices?
>> remember, we start from a position here where profit margins are pretty good. and where corporate cash flows are good and corporate profitability is strong, is good. and that’s leading to very substantial corporate spending, corporate investment has been up, now, for the last 10 quarters. so, no, i don’t think this is going to have a dramatic effect on profitability or on margins or on capital spending outlook but clearly some firms, firms that are energy-intensive in their cost structures, will be hit and hit much more than the median firm.
>> let’s switch gears and talk overseas. last month you said you expected to see appreciation of the chinese currency by march 1. is that still your target date?
>> we don’t have a precise date in mind. what we want to see is continuous movement that takes that currency to a situation where it’s really being determined by market forces, by demand and supply. and we’re going to continue to urge our counterparts in china to do just that, to continue to move to greater flexibility but we don’t have a precise target in mind.
>> given that you’ve not yet seen the move you had been hoping for, based on everything you’ve said, what will it take for the u.s. to in fact say that china manipulates its currency, something that investors have been closely watching to see if in fact the u.s. will say?
>> the treasury department will be issuing a report here later in the spring on that subject. and that report is very much factual based, it’s a look at what’s happening. and it’s pretty clear that the chinese need to move to greater flexibility for their sake and for the sake of the global economy. and failure on their part to do so will, obviously, influence the determination we make in that report for the congress.
>> that was treasury secretary john snow. want to continue our focus on motorola, those earnings after the bell. headlines coming out from the conference call where the company said it will stop providing earnings per share guidance. we’ve heard that from a few companies in the past, motorola joining the list of companies that will not give investors and analysts guidance on the earnings per share, however, it will continue to provide guidance on sales. shares currently down 6.7% because sales for the fourth quarter came in short of estimates. from the conference call, we have motorola saying it failed to meet the revenue goal in the networks business. that was chief executive ed zander speaking on the conference call, bringing us updates on the company. in the meantime, heading into a break. al-jazeera has confirmed it’s osama bin laden who says another u.s. attack may be on the way. we’ll get an update straight ahead.
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Listen Market briefing --- Ellen (slow)
Motorola --- Brett (slow)
NYSE --- Deb (fast)
Nasdaq --- Robert (slow)
Pixar --- Bob (fast)
take a look at what the shares are doing, currently down 6.7% in extended trade. it is the world’s second biggest mobile phone maker coming in short on sales for the current quarter, shares falling. brett gehrig has a breakdown of the report.
>> motorola shipped 44.7 million handsets between september and december of last year, a little wider than analysts expected. revenue jumped 18% to $10.4 billion, short of analysts’ forecasts of $10.5 billion.
>> it was a demand problem, that is something to be worried about. however, we think it was more related to tightness across the supply chain. they did have component shortages and some of the popular phones they could not make fast enough in the quarter.
>> earnings per share in the quarter shot up 87% to $1.2 billion or 47 cents a share. on an operating basis, the company earned 35 cents a share, ahead of the consensus. motorola also told investors that first-quarter earnings per share and revenue should be in line with what analysts are expecting. new pink and blue models of the all metal razor are helping boost overall sales. the razor phone may have accounted for almost one of every four motorola phones sold in the quarter, according to one analyst with j.p. morganchase. the success of the half-inch thick razor inspired other phones that may sustain growth next quarter, the rounded pebble and thin candy-bar style sliver, to name two. sales of the razor have helped offset lower prices in emerging markets . motorola and nokia are tapping demand in india and china. motorola focused on sales of phones that cost $30 to $40 in those countries. both want to steal market share from smaller rivals. that strategy appears to be working. motorola’s share of the handset market in emerging markets and north asia each rose 4 percentage points during the quarter. motorola now holds the second biggest share of the european market . back to you.
>> thanks so much. other earnings out, as well, today, on this busy afternoon. let’s take a look at rambus. rambus came in with nine cents, if you include a pretax gain of $5.4 million. analysts were looking for eight cents. sales coming in ahead of expectations, $41.6 million. you see the shares currently up just over 2%. analysts were looking for closer to $40.5 million, so beating on the sales front, as well. rambus shares have surged, before today’s close, up 91% over the past year. the company involved in several legal disputes having do with patents, suing companies including samsung as well as micron. investors are optimistic about how those disputes may resolve. in the meantime, earnings out, as well, after the close from scientific-atlanta. the company that is being acquired by cisco. the company reported 44 cents a share, excluding items, for the second quarter, a penny more than analysts’ estimates. sales, however, did come in short. $495 million. analysts were expecting closer to $511 million. those shares currently down .5% in extended trade. stocks overall recovered from a two-day selloff. reports from pfizer, merrill lynch and advanced micro devices came in stronger than analysts were expecting. let’s look at how the benchmark averages closed today -- with markets rebounding, again, a lot of that had to do with the earnings report. let’s get more from deborah kostroun.
>> after a two-day slump in the s&p 500, markets rebounding. remember, the dow was down four straight days in a row and many traders say it was really a.m.d.’s earnings that helped ease a lot of concern today, especially about the outlook for technology and this was after we got disappointing earnings over the past few days from intel and yahoo. so it was a positive change in the mood today. also, many records in the session. you had the oil services index, energy index, the russell 2000 and the small cap index all hitting records, once again, in today’s session. the oil service stocks, individual stocks, hitting records, as well, after bank of america raising their 2007 estimates on all of the oil service companies so you saw lots of records. schlumberger at a record. they released earnings tomorrow and declared a two-for-one stock split and will increase their quarterly dividend by 19%. energy stocks doing well across the board as crude oil was at a four-month high. yesterday, we talked about gold. it tumbled $10, but today is back on the rebound in a big way. it was up $14.50 an ounce, the biggest gain since september 11, 2001, that helping all the gold stocks, as well, with gold, the commodity, rising to the highest price in 25 years. a lot of that came after that man identified as osama bin laden warned of more al qaeda attacks against the u.s. in that videotape so gold seen as a safe haven and that helping things out. the amex broker/dealer index coming in at a record after merrill lynch recorded a fourth-quarter profit that was better than expected. they also increase said their quarterly dividend to 25 cents from 20 cents a share. lehman brothers increasing its annual dividend for the 10th straight year and announced plans to buy back shares worth as much as $7.4 billion or up to 40 million shares. i’m deborah kostroun at the new york stock exchange for bloomberg news.
>> and at the nasdaq, it was chip stocks that helped to lead the rally there today. let’s get the details from robert gray.
>> technology stocks, optimism over profits in that group, helped the nasdaq snap a two-day losing streak, lifting the nasdaq composite by just about 1%, erasing most of wednesday’s decline. looking within technology, the semiconductors with their biggest rally in about six weeks, the s.o.x. touching its best level since january 27-2004, about two years ago. hardware, software and telecom stocks all moving higher. look within the semiconductors, lam research helping to buoy the group and offering some of the optimism to investors, beating both the average analyst estimate for earnings and for revenue, also rising on its forecast, getting several upgrades including bear stearns lifting it to outperform, although goldman sachs downgrading it to underperform. we also saw other chip equipment stocks rising including novellus rising for a second day on intel’s comments about raising capital expenditures. we saw brooks automation rising on a note from bear stearns, upgrading the stock, saying they’ll get more business from companies like lam research. and linear technology rising, upgraded to outperform at goldman sachs. ebay shares rose even though the company’s forecast was short of analysts’ estimates. they did beat on the average analyst estimate by two cents when they reported wednesday after the close. the stock did rise during the session. apple shares, though, fell on its disappointing outlook for the second quarter profit and revenue forecast. and other nasdaq movers, intel and yahoo falling for the second day following their disappointing forecasts in wednesday’s session. also google shares down some 6% over the past two days, the biggest slide since last february. at the nasdaq, i’m robert gray.
>> another story we’ve been following today is pixar. shares rallying on optimism the company may be bought by disney. the company is in talks for disney to buy some or all of pixar, according to a person briefed on the negotiations. bob bowden has been tracking the story and joins us now.
>> an all-time high today for pixar shares. the deal would mark a coup for disney c.e.o. bob iger who took the post in october and rehabilitated the company’s relationship with pixar. a takeover is not the only possible strategy for disney and pixar, though. the companies may settle on a smaller arrangement such as the extension on the agreement for disney to distribute pixar movies. is pixar a good fit for disney? we had this reaction, from director of research at oakbrook investments, who said this is a situation that both sides would be satisfied with. he said that without knowing for what price pixar would sell. a little history, pixar was formed in 1986 when steve jobs bought the computer graphics division of lucas film for $10 million. pixar’s present market cap, $7 billion, an increase in value of 700 times the original investment. checking pixar and disney shares, they both rallied. we should note, with pixar’s all-time high, that another steve jobs stock, apple computer hit an all-time high one week ago today. so which stock looks stronger? not much of a contest. if you look at the bloomberg terminal, you see the orange line is apple, and the white line is pixar. the green line is the doubling in value over one year. apple much more than doubling in value. pixar up more like 30% in one year. back to you.
>> interesting comparison. thanks so much. when we return after the break, getting the latest on the economy. my conversation with u.s. treasury secretary john snow, his thoughts on the chinese currency and oil prices.
