Interview: J P Morgan
>> economic reports to watch today, australia reports december trade figures at 11:30 a.m. in sydney. indonesia reveals imports and export numbers today. thailand reports january consumer prices this afternoon in bangkok and expect an index measureing economic activity. and the largest philippine mobile phone operator added customers. economists we surveyed estimate globe’s net income rose to $62 million in the three months to december. globe reports quarterly results today, so does japan’s sharp and chemoay opto electronics. metlife says the acquisition of citigroup’s travelers will boost earnings per share as much as 6% next year. for citigroup, the sale marks the end of the conglomerate combining insurance with commercial lending. marsh & mclennan agrees to pay $850 million to settle accusations it rigged bids and took kickbacks from insurers. the settlement is the largest ever secured by new york attorney general eliot spitzer. the agreement describes how bid-rigging by the world’s biggest insurance company raised costs for marsh clients. the settlement will be used to pay back marsh’s clients. spitzer is investigating aon, willis group and a.i.g. s.b.c. communications agrees to buy at&t for $16 billion in cash and stock, marking the end of a 130-year-old company that brought phones to american homes. at&t investors will receive $19.71 a share, including a special dividend. s.b.c. c.e.o. edward whitacre will be the c.e.o. a flurry of acquisitions on wall street, plus relief after the iraqi vote helped boost u.s. stocks, taking the s&p, dow and nasdaq all higher. the s&p 500 closing .8% higher. the dow jones ending higher .6% and the nasdaq rallying 1.3%. bloomberg’s julie hyman reports from the new york stock exchange.
>> stocks rallied on this last day of january and that really takes our losses down for the year a bit. we’ve been rallying more or less since last monday, a week ago. that’s cut down the loss for both the s&p and the dow to around 2.5% for the year to date. in today’s session, we had a number of factors that helped lift stocks. we also had fairly strong volume of 1.7 billion shares. looking at the different factors that helped stocks today, we are going to have a possible revision to gross domestic product for the fourth quarter because of an error made by canada in their statistics. that was relating to their trade numbers. g.d.p. could go higher by as much as .5%. the iraq election, of course, went over fairly somethingly, encouraging investors today. we had a lot of mergers and acquisitions activity, as well. that encouraged investors that corporations are seeing value in their competitors and that could be good for the market going forward. let’s not forget about earnings which are by and large coming in ahead of analysts’ estimates. looking at in ofme of the mergers and acquisitions today, citigroup rising after it agreed to sell its insurance business, life insurance business, to metlife. metlife will be the largest u.s. life insurer. the price of on that deal, $11.5 billion. and s.b.c. buying at&t for $16 billion. we saw s.b.c., acquirer in this case, gaining today, because we already had speculation in the market about this particular deal. also, exxon doing well in the session, out with record earnings in the fourth quarter, also for 2004, its profit, the second biggest ever for a u.s. company. so those shares gaining. also in today’s session, we had mattel doing well. its fourth-quarter profit up 33% on the strength of sales of barbie. i’m julie hyman, bloomberg news, at the new york stock exchange.
>> exxon-mobil’s fourth-quarter profit rising 27% to a record. the world’s largest publicly traded oil company benefitted from record oil prices and rising demand. net income climbed to $8.42 billion or $1.30 a share. chief executive officer raised full-year profit for the first time in several years. exxon saw total sales of $298 billion, exceeding the gross domestic product of economies like norway and taiwan. disney said first-quarter profits rose 5.1% because of strength at disney’s media networks. sales rose 1.4% to $8.67 billion. we’ll head to orlando, florida, where robert iger is with greg miles.
>> i’m here with bob iger, the president of disney. welcome.
>> thank you very much. welcome to walt disney world.
>> a quarter that beat expectations, espn, the sports channel, the sports network, major driver of the profits. talk a little bit more about what was behind espn’s growth this quarter?
>> some was the timing of distribution deals. but by and large, espn is doing extremely well, delivering great ratings so advertising is helping their bottom line. they’re managing costs well. they have a great distribution system. the deals are in place, distributors drive a lot of revenue. the quarter of largely driven by the strength of our media networks, led by espn.
>> let’s talk about abc media network, “lost” and “desperate housewives” doing well.
>> abc had a great quarter. they were number two in the number sweeps in adults 18 to 49, which is significant, as that drives advertising revenue. but because they sold a large percentage of their advertising in the up-front market , they couldn’t take as much advantage in the quarter just passed for the success of those ratings. they expect to do that in the current quarter we’re in and the rest of the year and basically they have ratings and they have inventory to sell and now the marketplace has to cooperate.
>> you told us you thought abc television network may be able to make a profit in fiscal 2005. are you any more certain you can hit that?
>> the environment has to cooperate. there is still a long time to go before the year ends and the advertising marketplace as to -- has to remain strong. if it does, i’m fairly certain abc can be profitable. if it doesn’t, it won’t be far off regardless.
>> where do you think you will hit profitable? as early as the second quarter, third quarter?
>> we’re not going to look at it on that basis as there are timing issues as to when program costs hit the books and they recognize revenue but it’s likely, as the advertising marketplace continues to progress, abc will be profitable this year.
>> let me return to espn. you’re negotiating with comcast for a new agreement, i believe, obviously, to provide sports programming. when do you hope to finalize that?
>> we’ve been negotiating with comcast with what we consider an omnibus deal for all of our services. they’re not nearing expiration so from a timing standpoint, there’s nothing urgent about this. we’re not going to comment specifically on when we expect to conclude the negotiations. but the talks are ongoing.
>> let’s get to a topic on everyone’s mind here in orlando. you stated clearly on bloomberg television that you’d like to be the next c.e.o. of walt disney. many people we speak to on wall street feel you’re the odds-on favorite to make it. are you as confident as they are?
>> i know i want the job and i’m confident i can do the job well but this is a decision the board will make and they’re going through a process that’s deliberate and thorough which it must be. i think the company will benefit from atprocess that’s unimpeachable in nature. i’m confident they’ll conduct a process that is mindful of all the issues that the board has to take into account and i’m not going to comment on my chances.
>> you indicated, you obviously had talked to members of the board about this, which is perfectly appropriate. i assume you have talked to all the members of the board about the situation?
>> i’m a member of the board so i have dialogue with them on a fairly regular basis but i don’t think it could be fair about the process itself or exactly how i’m engaged in it.
>> let’s look at the key challenges. whether you’re the c.e.o. or someone else is the c.e.o., what do you see as the key challenges facing the new c.e.o. over the next two or three years for disney? you’ve had 50%-plus profit growth in 2004, forecast by wall street of 14%-plus profit growth this year and next. what do you do to drive those results?
>> the good news here is that the company’s in great shape. we had great earnings growth in 2004. we certainly announced terrific earnings in the quarter just past. the earnings we announced today, there’s a fair amount of momentum. the good news is that all of our businesses are contributing so we don’t have major issues we have to deal with what that are considered emergency or impaired. the biggest issue for a company like ours is one, you have to maintain your creative spirit and creative health. the essence of this company is creativity and it’s the heart and soul of the company and we have to have a constant focus on that and be leaders in that regard. i think that will―we’ll stand tall and be in good position. the biggest issue is that we’re dealing in a world, thanks to technology, that is changing dramatically, particularly when it comes to consumer behavior and a company like ours needs to adopt new technology and adapt to new technology on an ongoing basis and that’s what we’re doing today. if there’s a challenge, it’s to continue to do that.
>> can you do it just with the theme parks? let’s say, with espn, which have been the main drivers in the past few years? isn’t it crucial to get abc television network going in a sustained basis? this year looks like you are turning it around with two new shows but don’t you need more new shows to hit those numbers?
>> abc is still a work in progress. there are still issues abc faces in terms of its turnaround. it’s not a complete turnaround, but is on its way and it’s a business that faces challenges because of the impact of technology. our goal is to have great creativity in all of our businesses, whether abc or consumer products, espn, the disney channel, the studio, obviously, extremely important in terms of our creative strength and direction.
>> if you were going to look at the number of additional hits or strong shows you need to sustain growth at the abc tv networks, what are we talking about? a bevy of six strong programs? eight, four?
>> i have never looked at it in terms of a specific number. three, which they have now, “lost” and “desperate housewives” and “extreme makeover, home edition” goes a long way in making the schedule healthy but they need a schedule that is balanced with strength on each night and those executives that run the businesses would be the first to admit this is an ongoing process and they’re not complacent with what they have today.
>> are you confident you can do it without pixar or a joint venture with pixar or someone like that to beef up animation?
>> our studio is hard at work developing its own three-d animation. all of the projects they have in development are three-d in nature. our confident our studio will deliver its own successful 3-d movies. pixar has been a great relationship for us. we have another movie to release. also, there’s a lot of value in making sequels to the movies that disney and pixar have released.
>> let me get one piece of criticism that has come across, the minority of investors on the street, bob iger has seen several years of losses at the abc networks, making you less qu
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welcome to “bloomberg live” from hong kong. i’m catherine yang. we have plenty in store for you on this edition of “bloomberg live.” in addition to breaking news and live market coverage, we’ve packed the next full hour with news makers. disney’s president bob iger will join us live from orlando, florida. we’ll ask him about disney’s executive succession and international expansion plans. then, the u.s. government agrees to extend the security probe into i.b.m.’s sale of its p.c. unit to china’s biggest computer maker, lenovo. we’ll talk to one of the republican congressman who triggered the investigation. later, australia’s central bank is expected to leave interest rates unchanged as the housing market cools. we’ll speak with the chief economist of australia’s largest home lender. u.s. stocks rose after a series of acquisitions by metlife and salomon smithc. communications. the nasdaq closed higher 1.3%. citigroup led financial stocks higher after it sold its travelers life and annuity unit to metlife for $11.5 billion. metlife will become the biggest seller of individual life insurance in the u.s. s.b.c. shares rose after it agreed to beat&t for $16 billion. at&t used to own s.b.c. the deal makes s.b.c. the biggest u.s. phone company by sales. and the bond market , two-year notes fell. also, separate reports on manufacturing and personal spending show the economy is expanding. the report comes two days before the fed is expected to raise rates by a quarter point to 2.5%. asian stocks rising in u.s. trading. shares of exporters, including sony and toyota gained after the u.s. government said it may have underestimated fourth-quarter economic growth. bank of new york indexes tracking asian stocks moved higher. nikkei futures point to a flat start for japanese stocks. the u.s. commerce department says fourth-quarter g.d.p. may have expanded half a percentage more than first reported. that would translate to 3.6% growth in the last three months of 2004. oil prices jumped in new york as traders speculate faster economic growth will boost fuel demand. speculation that opec may cut production also lifted oil. the group usually cuts output in the second quarter to prevent prices from dropping as demand weakens. opec meets in iran on march 16. the dollar runs a three-day winning streak against the euro in new york with its best monthly performance against the european currency in nearly four years. the dollar gained about 4% against the euro in january. the dollar also added 1% versus the japanese yen in january, as well. investors say rising u.s. interest rates are supporting the dollar. the federal reserve increased interest rates five straight times last year and is expected to raise its short-term lending rate again this week. australia’s central bank holds its first meeting of the year today at a time when consumer spending is slowing and building approvals are dropping. for more on this and a preview of the sydney market open, david tweed joins us live from sydney. good morning, david. what are economists expecting from the central bank to do about interest rates?
>> 18 out of the 19 economists surveyed by bloomberg expect the interest rate will be unchanged. the central bank is meeting today in sydney and will make its announcement at 9:30 a.m. tomorrow. there is growing expectation, however, that there may be an interest rate increase later in the year. there have been some signs of rekindling inflation. the consumer price index for the three months to the end of―to december 31, did, in fact, come out with a .8% increase. that was actually higher than expected so this is indeed an increasing expectation for a rise. today, actually, we we see that the australian dollar has risen against the u.s. dollar and that’s as the yield gap between the australian two-year bond has widened to about 2% against the similarly dated u.s. bond at a six-week high, as well.
>> and looking at the futures markets , the s&p 500 index pointing to a higher open, what are investors likely to focus on today?
>> we’ll probably see a follow through from the gains in the u.s., certainly following the seeming success of the iraqi election. we do see that the australian futures are higher even though there’s not a lot of australian company news out there today. but there could be some follow-on from some of the news we saw breaking yesterday afternoon. i’m thinking about the takeover offer of transurban, its offer to take over the hills motor group here in australia yesterday, sending both of the companies’ share prices soaring. transurban rose 22% and hills up 27%. also, keep your eye out on n.a.b., national australia bank, shares, after they forecast a rebound in profit in the second half of next year.
>> we’re also keeping an eye on south korean exports. they probably rose at their slowest pace in 17 months. economists we surveyed expect exports grew 14% in january after climbing 20% of the month before. a stronger currency is slowing shipments. the south korean won is asia’s best performing currency against the dollar over the past year and can make kirin goods more expensive to foreign markets . south korea reports january trade figures this morning in seoul. consumer prices probably rose at their fastest pace since january. fuel prices rose after freezing weather cut output from farms. economists we surveyed estimate south korea’s consumer price index rose .5% last month. we’ll have the c.p.i. numbers in about 20 minutes. in news outside the business world, the second phase of iraq’s election process begins following sunday’s national vote. ron madison has that story and more in world news.
>> an election official says the first phase of vote counting has wrapped up at iraq’s polling places. local centers will prepare tally sheets and send them to baghdad where they will be reviewed and compiled. an official says that process could take 10 days. iraqi interim prime minister iyad allawi is calling on iraqis to pull together now. in his first news conference since the elections, allawi called on the new government to work with sunni arabs to create a government and constitution. some sunni political parties boycotted the elections. u.s. opposition leaders say the bush administration needs to outline an exit strategy for iraq. u.s. senate minority leader harry reed says he hopes to hear what he called a real plan during the president’s state-of-the-union address last night.
>> on wednesday night, the president needs to spell out a real and understandable plan for the unfinished work ahead, defeat the growing insurgency, rebuild iraq, increase political participate by all parties, especially iraq’s moderates, and increase international involvement. but most of all, we need an exit strategy so that we know what victory is and how we can get there so that we know what we need to do and we know when the job is done.
>> reid warned against setting a deadline for withdrawing troops. he says that only empowers those who don’t want the u.s. in iraq. u.s. soldiers in iraq shoot and kill four inmates. a u.s. military spokesman says it happened during a riot that spread through a prison in the far south of the country. nearly 3,000 prisoners rioted after guards began a search for contraband there. no soldiers were hurt in the uprising. the camp houses 5,300 prisoners in efforts to contain an insurgency plaguing the country. that is the latest look at world news. i’ll have another update for you later in the show. back to you.
>> thanks, ron. after the break, we’ll take you live to disney world in orlando, florida, for our interview with walt disney president bob iger.
