Market briefing --- Bob (fast)
IBM --- Su (fast)
March & Mclennan --- Allan (slow)
NYSE --- June (slow)
welcome to “world financial report.” i’m bob bowden. i.b.m. reports a boost to third-quarter earnings that exceeds analysts’ estimates despite taking a previously unannounced charge to settle a pension despite. shares of i.b.m. rallied ahead of the news but this number is the after hours trading, up $1.41 to $87.33, since the close of regular trading. su keenan tells us investors had been waiting to hear whether i.b.m. is gaining in market share against rivals and she joins me with more.
>> analysts expected i.b.m.’s earnings per share to rise 12% to $1.14 a share. not counting the pension-related expense, i.b.m. exceeded the estimate by three cents a share. ex-items, third-quarter earnings came in at $1.17 a share, revenue increased by 9%, roughly in line with estimates. $23.4 billion. looking at the 11-cent-a-share charge to settle the pension claim, net income rose to $1.8 billion or $1.06 a share, compared to $1.02 a share in the same period a year earlier. i.b.m.’s chief financial officer saying north and south america and asia have been ahead of europe in terms of capital spending. the company said hardware sales were up 12%, software gained by 5% and it says its operating systems business is down 2%. chief executive sam palmisano took advantage of missteps by hewlett-packard to boost sales of servers and computers that run company databases. the company’s gross margins widened to 36.9% from 36.3%. adam friedman says, that the out look for year’s end is good.
>> all the surveys we look at show positive spending by corporations and the consumer has been more up and down this year and i.b.m. should benefit that and in q-4, when businesses usually spend a good deal of their budgets, i.b.m. is well positioned if for that.
>> some analysts are concerned that i.b.m.’s bookings in the services division would disappoint. i.b.m. has focused on turning the services division around after sales started plunging a few years ago. as a result, i.b.m. service sales have been growing faster than its competitors. i.b.m. severer market shares have risen in the 15th quarter in a row while hewlett-packard’s and sun’s have lost.
>> i think i.b.m. will continue to gain a pint or so a share per year over the next couple of years. they seem to have probably the most comprehensive serveer architecture, the biggest software install base critical needs so i think in the high-end server business, they’ll perform exceptionally well.
>> the stock is down more than 7% year to date but shares are rising after hours. back to you, bob.
>> thank you very much. we have breaking news from citigroup. the company says it will buy assets from abn amro, in particular, acquiring the securities clearing units in eight markets , also the direct custody units for abn amro. it will add to earnings in the first year and also citigroup sees adding $240 billion of assets under purchased unit from abn amro. we’ll have more when available. moving on, texas instruments delivered better-than-expected earnings.% the world’s largest maker of digital signal processors used in cell phones earned 32 cents a share, five cents ahead of analysts’ estimates and up 28% from last year. t.i. benefited from a lower tax rate and cost cuts. sales came in at more than $3.2 billion, topping wall street forecasts. texas instruments also discussed its outlook, saying fourth-quarter profits will be 24 to 28 cents a share. analysts were looking for 27 cents, the midpoint of the range below the forecast. at the same time, t.i. lowered its revenue forecast, sales projected to come in at $2.96 to $3.2 billion. that appears to be the low end of estimates. the stock just open for trading right now. last trade, we see $21.90, up 5% in extended hours after this news emerged on the earnings. fallout from the investigation into the insurance industry by new york attorney general eliot spitzer continues. lawyers for shareholders began filing lawsuits against marsh & mclennan, world’s largest insurance broker. more insurance companies say they will no longer accept contingent commissions and the investigation continues to widen. allan dodds frank has been following the story and joins me on set with more on the insurance and marsh & mclennan story, in particular.
>> bob, since last thursday when eliot spitzer filed the suit against marsh & mclennan, some of the biggest insurance companies in the world have been scrambling to respond to what could be the attorney general’s biggest investigation yet. so far, ace, a.i.g., and marsh & mclennan have renounced contingent commissions. the referral fees paid by other insurance companies for business, sometimes called placement service agreements. spitzer said the contingent commissions had become a widespread corrupt practice in the insurance industry.
>> clearly there will be significant headline risk on the carrier and brokerage side for some time because as the attorney general indicated, this is only day one of the investigation.
>> spitzer said that marsh & mclennan collected about $800 million in contingent commissions in 2003 when the company’s net income was around $1.5 billion. marsh & mclennan’s c.e.o., jeffrey greenberg, scheduled a conference call today, but postponed it to allow the company to file its revised earnings outlook with the securities and exchange commission. while on friday, jeffrey’s 79-year-old father, maurice hank greenberg, chairman and c.e.o. of a.i.g., said the company was giving up contingent commissions. hank greenberg said a.i.g. in 2002 and 2003 asked the new york department of insurance for guidance about a placement service agreement to entered into with marsh inc. today, the spokesman for the new york department of insurance said that hank greenberg’s comments missed the points. he said they did ask for advice about the placement service agreements, but did not ask guidance on bid rigging and contract drating. an a.i.g. spokesman had no immediate comment about barry’s remarks. so far, neither a.i.g. nor the new york insurance department has released any documents pertaining to the issue. the stock at the close was down 12%.
>> noting there, allan, down 24% friday, 16% friday and 12% today.
>> down $25 and change now.
>> thank you, allan dodds frank. back to wall street, the benchmark stock indexes finished higher on monday. let’s get to the numbers with the dow up about .25%, at 9956, pushing back towards the 10,000 mark -- stocks rallied as oil declined though gains were limited by disappointing earnings. we bring in julie hyman from the big board for in more.
>> the dow and s&p continuing a two-day rally in the session, both indices closing near the highs of the session. really, there were two elements at work in today’s session. first of all, we had the declining price of oil, which really created a broad-based rally just shortly after the market opened. after we opened lower, oil then turned lower and stocks rebounded. so we saw a broad-based rally, commercial services stocks doing well, software stocks, retailers as well as pharmaceutical stocks all leading the rally that we saw today. also we had a couple of particular pieces of news within the drug industry. first of all, pfizer coming out and saying it plans to study the benefits and risks of celebrex, its painkiller in the same class of drugs as merck’s vioxx which was pulled from the market in late september. johnson & johnson saying it got positive study results for remicade arthritis treatment. on the flip side, we had energy stocks declining with the price of oil in today’s session. this is one of the few sources of weakness in terms of industry groups today. in terms of earnings today, 3m disappointing investors with its third-quarter profit and sales and also with its fourth-quarter and full-year forecasts. that limited the gains we saw in the dow. also, lexmark, the printer company, saying that price cutting will hurt profit this quarter. this even after third-quarter profit was up 50%. so those shares hit today. finally, the toymakers today, hasbro and mattel both reported that sales fell in the third quarter. at mattel, they were hurt in particular as sales dropped of barbie. i’m julie hyman, bloomberg news at the new york stock exchange.
>> when we return, all insurance all the time. will eliot spitzer sue other brokers besides marsh & mclennan more on the widening insurance story when we return.
