Market briefing --- Bob (fast)
Tyco --- Allan (slow)
>> welcome back to “world financial report.” we had green arrows across the board with the dow up. s&p 500 up about.25%. and the nasdaq up about .5%. a check on u.s. treasuries. they fell. the 10-year note falling on the order of 5/32. the five-year fell 3/32, yield at 3.43% and the two-year unchanged, yield at 2.48%. in currency trading on the day we see the yen finishing at 109.68. and the euro.1.2011. it was about two years ago edward breen took over as the new chairman and c.e.o. of tyco, battered by scandal and a criminal trial of both its former chief executive and chief financial officers. our alan dods frank tells us how breen is now turning tyco around.
>> when the now disgraced c.e.o. dennises could loss can i ran tyco, he built the diversified company in health care, electronics and fire and security. he did it by spending $64 billion for hundreds of acquisitions while running up $23 billion in debt. now two years after taking over, tyco’s c.e.o. edward breen has lowered debt by $10 billion and is selling 60 business units. he’s gotten the stock up from $8.25 a share to around $32 a share.
>> it’s taken dramatic steps at changing management, changing their business strategy and their operating plan. and that’s led to significant free cash flow generation, debt reduction and obviously they’ve been able to calm and appease the capital markets . >> in it an interview with bloomberg news, breen said he expects to save $3 billion by 2006 by sharpening operations, including implementing the first company-wide purchasing system for commodities and travel services. breen now expects free cash flow this year of $4.7 billion for the world’s largest maker of electronic connectors, plastic hangers, industrial valves and security and fire systems.
>> what’s probably going to happen at the end of this year is the company will increase its dividend which will employ some of that cash. secondly, they could very well do a stock buyback.
>> fund manager bought around eight million shares in the months after breen took over. he still holds more than four million tyco shares after selling half his holdings once the stock had more than doubled.
>> people just didn’t know whether the company was a survivor. we’re at the point where we know they’re really very good businesses in the company.
>> breen says tyco is off the acquisition trail for now and in the face of profit margins being pressured by increased costs for commodities and energy breen is being conservative. for example, next year he’s budgeting for oil at $40 a barrel. bloomberg news, new york.
>> edward breen’s ded debt reduction plans has gone pay off in june, moody’s raised the long-term debt rating to the lowest investment grade. a week earlier standard & poor’s lifted its rating to bbb. two levels above junk status. tyco shares on the day on friday down 12 cents for a third of 1%. u.s. auto sales probably fell slightly in august as new incentives failed to attract briers and consumer spending fell faster than expected. automakers are set to report results next wednesday. auto sales this month will likely end at an annualized rate. it’s less than the 17.3 million rate last month and the 18.4 million analyzed rate for the same time last year.
>> there were weather issues. you still have some overhang with fuel prices, with the economy being considered maybe a little bit sluggish as far as the recovery goes at this point. so you really don’t have all the factors lined up just the way the industry would want them right now. i think that’s weighing on it a little bit.
>> goldman sachs auto analyst wrote in a report that he believes “weaker sales are the result of a consumer spending environment which has deteriorated more rapidly than expected.” auto makers are trying to lure customers with incentives and rebates. incentives rose 5% this month from july at general motors and chrysler and almost 1% at ford. ford still expects to post lower sales this month because labor day weekend falls entirely in september and there is a drop in demand after hurricane charley. chrysler chief executive officer said some early returns in august were slower than july but remains optimistic that august will be a decent month. a decline in august sales would be only the second year-over-year decline this year. a surge in home equitiy loans catapulted countrywide financial to the top spot among underwriters. countrywide grabbed about 17% of the market for these loans. the largest u.s. mortgage lender outpaced r.b.s. greenwitch, royal bank of scotland and morgan stanley in asset-backed securities underwriting. well, freddie mac has asked the boards to reconsider a rule that could force it to cut its profits. the rule would force companies to recognize losses in certain debt securities if officials failed to prove they will not be sold under values―until values rebound or they mature. the rule would also force fred irmac, the second biggest source of u.s. funds to cut the vam you’ve most of its portfolio of mortgage securities because of swings in interest rates. the financial accounting standards board says it is “ongoing discussions about the rule.” when we come back, we will get previews of next week’s market action in europe and the pacific rim.
