Market briefing --- Mate (slow)
NYSE --- Deb (fast)
U.S. Food services --- Allan (slow)
welcome to “world financial report.” i am matt nesto. four of the seven largest cable tv operators are going to report earnings this week. the world’s largest, comcast, expected to report a net income of 10 cents a share compared with a loss of a penny a year ago. sales expected to climb 9%, helped by sales of high-speed internet access. sales of more profitable high-speed internet services are expected to help comcast boost second-quarter revenue after the company dropped a takeover bid for disney in april. merrill lynch analyst says comcast’s web access service is its fastest growing and most profitable unit, accounting for 15% of total sales and she expects the broadband sales to rise 35% on the quarter. she rates the company, comcast, a buy. comcast is competing with phone companies such as verizon and s.b.c. to sell slower digital subscriber line connections at lower prices and analysts say comcast customers are willing to pay more for higher speed web access. comcast high speed service is $16 more and twice as fast as s.b.c.’s phone-based connection. still, not every consumer chooses speed. shares of comcast and other cable providers down 14% this year on concern that competition is mounting from phone companies.
>> we think the relatively strong numbers out of comcast and other cable operators will change the sentiment for the space and we expect to see the stock move after the q-2 result.
>> in may, comcast chief executive told investors his company doesn’t need disney to increase profits and his company can offer new services and improve profits. some analysts say comcast may have to expand discounts to attract the 84% of cable customers who don’t have high-speed access. we’ll preview time warner earnings with federated investment global media analyst angela corel coming up later in the program. the numbers, a big story today because they were up for the first time in three. the dow above 1000, 1.25% higher, the s&p and the nasdaq higher today. volume returned, too. check it out, 1.6 billion shares on the nyse. it was a rebound day on wall street, turning around two days of losses into a big gain and bounce off the bottom. deborah kostroun with a wrap.
>> the s&p 500 and dow jones industrial average both posting their biggest gains in about seven weeks after seeing the lows from yesterday in the s&p 500. and kind of a couple of things that helped the market rebound. we had a couple of things going on―consumer confidence surging to its best level in two years. not only consumer confidence, but we also had earnings reports coming in better than expected, especially from verizon. you can add pulte to that list, as well, on the better-than-expected earnings. telecom, the best performer in the s&p 500. also for the month, as well as this quarter. and the telecom names, verizon, second biggest gainer in the dow jones industrial average after their earnings did better than expected. also, consumer confidence leading retail in today’s session. retail, the biggest gainer in the s&p for the day today and retail performing quite well. that was on the fact that consumer confidence at its best level in a couple of years. we had so much concern about retail, especially as the june retails declined 1.1%. looks like july, we are possibly in kind of a rebound mode and so that helping out retail. homebuilders getting a lift mainly as new home sales fell less than forecast. also pulte homes increased their forecast. a.i.g., the biggest gainer in the dow, not a lot of news there. chubb released earnings after the close of trading and said second-quarter profit climbed 41% as premiums and incomes rose.
>> we’re getting headlines crossing from peoplesoft in the news an awful lot lately from the approach by oracle. here’s the numbers. 14 cents per share, that met expectations. the revenue at $647 million. another headline is that the company is seeing its licensing revenue at $130 million. peoplesoft’s second-quarter licensing revenue at $130, total revenue at $647 million. reaction in the marketplace today showing the shares trading down by 40 cents, closing at $17.32 today, about a 2% to 3% decline. that said, other news today, four former executives of a u.s. subsidiary of royal ahold are being charged with securities and conspiracy fraud in connection with a plot to inflate revenues by more than $800 million. federal prosecutors in new york made public the indictment of two former top executives of u.s. food service, a subsidiary of ahold, the second largest food wholesaler in the states. prosecutors say two other former officials pleaded guilty in the last two business days. joining us now is allan dodds frank who was at that press conference and he has details. allan?
>> the fraud that involved the former top executive of u.s. food services involved falsifying by hundreds of millions of dollars the promotional fees allegedly received by the company from food manufacturers.
>> the case against the u.s. food executives boils down to an earnings management scheme through which the defendants and others falsely inflated u.s. foods’ earnings by hundreds of millions of dollars through an artificial reduction of u.s. foods’ cost of sales.
>> prosecutors said the scheme added $800 million to the earnings of netherland’s ahold. the 2000 through 2002 u.s. food service contacted―accounted for substantial earnings for royal ahold. royal ahold stock lost $6 billion in market cap. michael resnick, former chief financial officer of u.s. food service, and mark kaiser, former executive vice president for sales, were indicted for conspiracy, securities fraud and making false statements to the s.e.c.
>> according to our complaint, the defendants manipulated income, accelerated income and in some instances simply made it up. when questioned about the income, they lied.
>> prosecutors say that the former executives lied to auditors and to the parent company, royal ahold, about the scheme. pleading guilty earlier were timothy lee, former executive vice president for purchases at u.s. food services and william carter. peter marion, an outside supplier to the company, was indicted on 13 counts in connection with an insider trading scheme, charging he illegally made more than $360,000 after being tipped by lee that the columbia, maryland-based u.s. food services would be acquired by ahold in april of 2000.
>> accounting fraud, inside trading, filing false statements, obstruction of justice, conspiracy. this is a litany of criminal charges which have seemingly become an accepted business plan for much of corporate america.
>> the two former executives who pled guilty are cooperating with prosecutors and the investigation is continuing.
>> i want to update folks as i mentioned peoplesoft shares were trading lower. they have pulled back to unchanged now. that one tick down 40 cents or so has proven to be a rogue trade. it is now up a couple of pennies from its close after reporting second-quarter report that -- profit that matched and revenue just under expectations. profit at time warner expected to rise to 15 cents a share. we’ll speak with an analyst about time warner next.
