Monday, February 11, 2008

Sovereign's update a shocker

(Fin24) - Yet again we have a trading update that conceals as much as it purports to reveal, this time from chicken producer Sovereign Food Investments.


Bluntly, it says that HEPS for the year to February are expected to be 35%-45% less than last year.


Now, last year HEPS were 207c. If we take the midpoint of the expected decline, or 40%, which is usually what companies really expect, though they understandably give a margin for error, 60% of 207c is 124c. But in the six months to August, HEPS were up from 82c to 102c,  and the second half of the year is usually seasonally the better.


In fact, in the six months to February 2007, HEPS were 124c, 60% of the total. If the first-half momentum had been sustained, as there was every reason to expect from the interim report published last September, which talked of stronger pricing and higher volumes being expected in the second half, we could have looked for  second-half HEPS of 154c, instead of the actual implicit 24c.
 

SocGen launches rights issue at deep discount

(Reuters) - Societe Generale (SOGN.PA: Quote, Profile, Research) launched a 5.5 billion euros ($7.97 billion) capital increase on Monday to plug holes in its balance sheet following a rogue trading scandal.

The one-for-four rights issue at 47.50 euros per share offers a discount of 38.9 percent to Friday's closing price.

"The price is very low. The feedback from the market cannot have been very encouraging. As they can't miss this deal they decided to strike very low," said Landsbanki Kepler banking analyst Pierre Flabbee.

Fund managers contacted by Reuters last week had been looking for a discount of up to 30 percent.

The bank's shares fell 3 percent to 75.40 euros by 1156 GMT with France's benchmark CAC 40 index .FCHI down 0.5 percent.

SocGen revealed plans to tap investors on January 24 when it stunned the financial world with 4.9 billion euros of rogue trading losses blamed on a single trader.
 

Random House to sell books by the chapter online: report

(Reuters) - Random House Publishing Group, the world's largest book publisher, is planning to test selling individual chapters of a popular book to gauge reader demand, according to a report in the Wall Street Journal.
 

Yang's $2 Blackjack Limit, EBay Failure Leave Yahoo Unprepared

(Bloomberg) -- Fourteen years after publishing his first guide to the Internet from a Stanford University trailer, Jerry Yang isn't ready to see his creation absorbed by the world's largest software company.

Yahoo! Inc.'s 39-year-old co-founder survived the dot-com bust and weathered failed efforts to challenge EBay Inc. in online auctions and Google Inc. in Web searches. He and the board plan to reject Microsoft Corp.'s $44.6 billion bid today, a person familiar with the decision said, leaving Yang to battle to keep his Sunnyvale, California-based company independent.

While the offer lifted Yang's net worth by more than a half-billion dollars, money means little to Yang, former executives say. He spent his career building the most-visited U.S. Web site. Yang took his first crack at being chief executive officer in June, aiming to reclaim the company's dominance on the Internet.

``It's his baby,'' said Steve Mitgang, a Yahoo senior vice president who left last year to run Web TV company Veoh Networks Inc. in San Diego. ``He wants to win, and he wants to fight to win.''

The board spent a week reviewing the $31-per-share offer before deciding it was too low, said the person, who declined to be identified because the discussions aren't public. Yahoo wants at least $40, the Wall Street Journal reported this weekend.

Yahoo spokeswoman Diana Wong said over the weekend the company doesn't comment on rumors or speculation. Microsoft spokesman Bill Cox declined to comment.

In rejecting the offer, Yang confronts Microsoft CEO Steve Ballmer and Yahoo investors whose stock tumbled by half in the past two years. Redmond, Washington-based Microsoft's $31-a- share offer on Feb. 1 was 62 percent higher than Yahoo's price before.

`Uncouth' Name

In an e-mail to his 14,000 employees last week, Yang said Yahoo was weighing its options. Analysts including Gartner Inc.'s Andrew Frank in New York said alternatives like linking up with Google or News Corp. won't work. Investors like Firsthand Capital Management's Kevin Landis said Microsoft made a ``fair offer.''

Born in Taiwan, Yang was brought to the U.S. when he was 10. He worked in the Stanford library to help fund his undergraduate education.

Yang and David Filo cooked up what became Yahoo in 1994 as graduate students. ``Jerry and David's Guide to the World Wide Web,'' used to keep track of their interests on the Internet, became a popular Web page in Silicon Valley. By the end of 1994, the site got more than 1 million hits a day.

Venture capital firm Sequoia Capital invested $2 million to help the duo build Yahoo, a name they picked because of its definition: ``rude, unsophisticated, uncouth.''

``He cares deeply about the thing he created in that trailer with Filo,'' said Rob Solomon, who worked at Yahoo for six years and is now CEO of the travel site SideStep Inc. in Santa Clara, California. ``They thought they could build a really big, new type of company, and they did.''

Too Rich

Yang wasn't available to comment, said spokeswoman Tracy Schmaler. Filo, responsible for the technical aspects of Yahoo's biggest sites, also wasn't available.

After Yahoo's initial public offering in 1996, sales jumped from $20 million to more than $1 billion in 2000 as advertisers rushed to tap the Internet's popularity. Yang and Filo were each worth more than $4 billion, according to Forbes magazine.

Wealth didn't turn Yang into a big spender, said John Cecil, a former Yahoo salesman. At a Las Vegas conference in 1998, the two were playing blackjack with Yahoo employees. Yang refused to bet more than $2 a hand, Cecil said.

``He said, `It's too rich for my blood,''' said Cecil, now president of the online ad company Innovate Media in Costa Mesa, California.

EBay Wins

Three years of surging sales lifted Yahoo's value past $100 billion, then the technology market crashed, wiping out 97 percent of Yahoo's worth. While the collapse sent Pets.com Inc. and Webvan Group Inc. into bankruptcy, Yahoo survived and began growing again in 2002.

Bigger competitors were emerging, crimping Yahoo's ability to expand beyond selling banner ads on Web pages. San Jose, California-based EBay became the dominant auction site. Google's search engine was pulling ad spending to a business that Yahoo lacked.

Solomon, 41, who ran the auction business, told Yang that Yahoo would be better suited investing elsewhere.

``The auction wars were won, and he didn't want to give up,'' Solomon said. ``That's not him being obstinate. It's him pushing us to come back with creative solutions and being tough.'' Yahoo closed the auction site last year.
 

Ford May Cut 9,000 More U.S. Plant Jobs, Person Says

 (Bloomberg) -- Ford Motor Co., the world's third- largest automaker, may eliminate as many as 9,000 more U.S. factory jobs through its latest buyout offers, a person with direct knowledge of the situation said.

The cuts would be in addition to the 33,600 union workers who left through buyouts and early retirements in 2006 and 2007, when Ford lost a combined $15.3 billion. Further reductions may help Ford restore profit by speeding the hiring of new workers who would be paid about half as much as current employees.

``These are realistic numbers,'' said Harley Shaiken, a labor professor at the University of California at Berkeley. ``Workers are reassessing their options. It is a very tough choice.''

Ford doesn't have an estimate of how many workers will accept the buyouts, proposed to a first group of workers last month, the person said. The Dearborn, Michigan-based automaker won't limit the number who leave if more than the target range of 8,000 to 9,000 opt for the offers, the person said.

Marcey Evans, a Ford spokeswoman, declined to comment. Roger Kerson, a spokesman for the United Auto Workers union, didn't return telephone messages. The Detroit Free Press reported Feb. 9 that Ford had an internal target of 8,000, citing people familiar with the objective. That reduction would represent more than 12 percent of the carmaker's North American factory workers.

Ford's employment fell to 64,000 at the end of last year at North American plants from 99,500 two years earlier. That decline includes the 33,600 UAW-represented jobs shed through the buyout and retirement offers.

New Contract

Ford and the UAW in November agreed on a contract that permits the company to pay lower wages for new hires while keeping open five factories targeted for closure. Under the four-year agreement, Ford can pay up to 20 percent of its U.S. factory workers the reduced wage.

Under the accord, Ford's hourly costs for new workers will be $26 to $31, or about half the $60 expense for a current UAW member's wages and benefits.

Before any new, lower-paid workers can be hired, Ford must resolve the fate of workers at closed factories and at its Automotive Components Holdings unit. Automotive Components includes factories Ford took back from former parts subsidiary Visteon Corp. Most of those plants are being closed or sold, and some of the UAW-represented employees may go to Ford plants.

UAW workers at Automotive Components are eligible for buyouts. The outcome of the buyout program will determine how many of those employees are reassigned to Ford factories.

Ford has about 54,000 UAW-represented employees, with about 12,000 eligible to retire.

Savings

UAW President Ron Gettelfinger last month estimated that new contracts at Ford, General Motors Corp. and Chrysler LLC will save the automakers ``somewhere in the neighborhood'' of $1,000 per vehicle. Buyouts of higher paid workers will help Ford increase the number of new hires at lower wage levels.

Ford hopes to reach the 9,000 target through offers pending at four closed U.S. plants that will be broadened to other U.S. factories next week.

Workers at St. Louis; Edison, New Jersey; Norfolk, Virginia; and Atlanta began considering buyouts Jan. 22 and have a ``buyout window'' running through Feb. 28, Ford said Jan. 24 when it released 2007 year-end earnings. Workers from that group who accept buyouts are to leave the company by March 1.

Workers at those sites are being offered buyouts or relocation to other Ford plants. Workers who don't accept either choice will be placed on a ``no-pay, no-benefit leave,'' Ford's Evans said. That leave would last as long as their employment with Ford, she said.
 

U.S. Stock Futures Rise; Europe Little Changed, Asia Retreats

(Bloomberg) -- U.S. stock-index futures rose as higher metal prices lifted mining companies and technology shares advanced on speculation Yahoo! Inc. will seek a higher takeover bid from Microsoft Corp.

Stocks in Europe pared earlier declines and were little changed as GlaxoSmithKline Plc climbed following UBS AG's recommendation to buy the world's second-largest drugmaker. Asian shares fell, led by Kookmin Bank and Commonwealth Bank of Australia.

Barrick Gold Corp. and Newmont Mining Corp., the world's biggest gold producers, climbed as bullion advanced. Yahoo, the most-visited U.S. Web site, increased after a person familiar with the situation said the company's board will reject Microsoft's $31-a-share offer. Merrill Lynch & Co. rallied on a Citigroup Inc. analyst report that the third-largest securities firm may double annual earnings in coming years.

Standard & Poor's 500 Index futures expiring in March added 4.1, or 0.3 percent, to 1,334.4 at 8:34 a.m. in New York. Dow Jones Industrial Average futures increased 35 to 12,212. Nasdaq- 100 futures gained 12 to 1,788.5. Europe's Dow Jones Stoxx 600 Index rose 0.01 to 315.51 after falling as much as 1.1 percent. The MSCI Asia Pacific Index fell 1.59, or 1.1 percent, to 139.24.

``The market is slowly bottoming out,'' said Claudio Meiger, a fund manager at Basel, Switzerland-based Bank Cial Schweiz, where he helps oversee about $100 million. ``Long-term investors may start building positions now. The major technology stocks are rather cheap.''

Shares in the S&P 500 Information Technology Index trade at an average 21.9 times reported earnings, according to Bloomberg data. That's near a five-year low touched on Aug. 4, 2006.

Yahoo Bid

Yahoo advanced 17 cents to $29.37. The Internet company that has failed to crack Google Inc.'s dominance of Web search plans to reject a bid from Microsoft, said a person familiar with the situation who declined to be identified because the discussions aren't public.

Yahoo wants at least $40, the Wall Street Journal reported Feb. 9. Yahoo spokeswoman Diana Wong said the company doesn't comment on rumors or speculation. Microsoft spokesman Bill Cox declined to comment.

Barrick, Newmont

Barrick Gold added 48 cents to $50.58 in Germany. Newmont gained 8 cents to $51.37. Gold rose in London as interest-rate cuts feed through to higher commodity prices, increasing demand for precious metals as a hedge against inflation. Platinum advanced to a record, silver climbed to a 27-year high and palladium reached the highest since September 2001.

Merrill Lynch gained 66 cents to $52.85. Citigroup analysts said they expect John Thain will be a ``very hands-on'' chief executive officer. Thain took over in December for Stan O'Neal, who was ousted after delivering a $2.24 billion third-quarter loss. Merrill can double annual earnings to over $10 billion in the next ``few years,'' the analysts said.

Motorola Inc. added 18 cents to $11.44 in Germany after the Wall Street Journal said the biggest U.S. mobile-phone maker and Nortel Networks Corp. may combine their wireless infrastructure units in the latest response to sluggish growth in the telecom- equipment industry. Nortel spokesman Jay Barta declined to comment when contacted by Bloomberg News. An e-mailed message to Motorola representative Kelly Harder wasn't immediately returned. Nortel rose 10 cents to $11.17.