Market briefing---Lane (medium)
Quarter earnings---Carmen (fast)
NYSE---Deb (fast)
>> welcome again to “world financial report.” i’m lane bajardi in new york. alcoa topped analyst estimates for second-quarter earnings earning 26 cents a share, two cents more than wall street expected. but despite that, it was the ninth straight quarter of lower earnings on weak demand and higher energy prices. carmen roberts is here to break down the numbers.
>> lane, it was, as you said, the lower earnings for the ninth quarter. these are the first second-quarter earnings from a dow component and important because analysts say they can be an indicator of other results. alcoa did better than analysts expected yet still reported a drop from a year ago. the maker of reynolds wrap is shedding businesses it doesn’t consider essential, and it’s shutting down costly operations as demand for high-margin product falls. alcoa has cut more than half of the more than 8,000 jobs it said it would eliminate for the year, but energy and benefit costs were substantially higher than a year ago. an argus research analyst was correct in predicting earnings would be better than expected says the problem for alcoa is falling demand.
>> one of the problem is its reliance on aviation. that was 8% or 9% of revenues before 9/11 hit. they ramped up by acquisitions and trying to conquer the market for aluminum. that’s fallen apart.
>> one thing that could benefit alcoa, canada’s alcan is making a $3.9 billion hostile bid for a french rival. if that goes through it would create a strong number-two player which analysts say could help firm up aluminum prices. alcoa’s c.e.o. says the company has not seen any signs of market improvement and will hold its conference call on july 28. as a note, the analyst does not own any shares of alcoa.
>> is it two cents or three cents they beat by?
>> the release the company put out said it earned 26 cents a share on net income and that it was―so, it was expected to earn 24, so that’s two cents better.
>> ok. carmen roberts. thank you. the board of a french aluminum maker has dismissed a rival bid from alcan. microsoft is making news in extended hours action. the world’s biggest software company will stop giving employees and managers stock options and trade options already granted as an expense on its income statements. they’ll give employees stocks starting in september. steve ballmer says the change will better align the interests with those of our shareholders, his quote there. they’re working on a way to for employees to realize value. if approved, it will implement the plan by the end of 2003. shares of dana corporation jumped as much as 43% following arvinmeritor’s bid. arvinmeritor would pay $2.2 billion in cash. the stock today climbed above the value of the offer. arvinmeritor says the combined companies will be able to make undercarriage and transmission systems for light trucks and commercial vehicles. dana’s board said it will review the offer. roadway investors hauled in big stock gains as shares rose 54% when yellow corporation agreed to buy them for $660 million in cash and stock . 966 million in cash and stock . the companies expect the combination will lead to savings of $45 million in two years and $125 million over five years. the other big deal of the day, e.m.c. looking to build up its software sales will acquire rival legato systems. bob bowdon follows that story all day and joins us with the details.
>> yes. e.m.c. agreeing to pay $1.3 billion in stock for legato systems offering 0.9 of its share for each legato share. e.m.c. chief executive joseph tucci said some e.m.c. and legato workers would be made redundant by the acquisition. the number of employees fired would be less than 150. the biggest competitors, i.b.m., sun microsystems, and hewlett-packard, the c.e.o. says would put some sale of legato at risk.
>> we believe certainly the growth there and possible revenue is at risk. on the other side, though, having the very sizable e.m.c. sales force also pushing this software more than make up for that shortfall.
>> the move to acquire legato was motivated by e.m.c.’s continued goal of increasing its presence in data management software. the legato acquisition will be e.m.c.’s 10th software acquisition since 2000. the chief executive, tucci’s plan is to increase the revenue from 22% from the first quarter to 30% by 2005. he also said this will allow e.m.c. to better compete against veritas software, the biggest independent maker of data storage software. legato shares today up almost 9% on the news trading at a 52-week high. e.m.c. shares were down over 4% on the day and shares of veritas software, the biggest competition in data storage software were down 1.5%. lane?
>> bob bowdon. stocks rose across the board led by computer-related shares on that e.m.c.-legato deal news and as lehman brothers recommended broadcam and other communications chipmakers. with m&a activity heating up, what companies stand to benefit from this flurry of activity? deborah kostroun is at the new york stock exchange with that part of our coverage. deb?
>> well, lane, the companies that are likely going to benefit going to be some of the financial companies. jim tiller is strategist at tiller weintraub advisors, and he’s saying the most obvious impact on the m&a activity will be the financials because they will pocket the fees an the financials make a majority of the s&p 500, about 20% of the s&p 500. he also says one of the reasons we are seeing this, a lot of the cheaper borrowing costs with interest rates so low and the price to borrow money certainly very low right now. those financials, some of the best performers in today’s session also year to date up 16% but in addition up 31% since the low on march 11. you can see how they’ve been climbing since that march 1 date. broker does he recalls also performing quite well and the semiconductors among some of the biggest gainers in today’s session after lehman brothers recommending broadcom and the semiconductor making a little turnaround with that philadelphia semiconductor index. retail also performing well in today’s session. in fact, we’ll hear more about many of the retail names next week when they report their advance retail sales on july 15. pharmaceuticals, a big downer, in fact, the biggest drag on the s&p 500. johnson & johnson sending a letter to doctors alerting them of cases of blood cotting related to one of its drugs.
>> transportation one of the stock groups our next guest favors. we’ll ask liz miller more about the yellow-roadway deal.
