Top 10 Stories, June 5-9
1. Judge orders Microsoft breakup. Bill Gates’ worst nightmare came true last week as U.S. District Judge Thomas Penfield Jackson ordered Microsoft to be split into two companies and imposed several restrictions on the company’s practices that would take effect in 90 days. The landmark antitrust ruling Wednesday came after a two-year court fight and sent shudders through the business world as it could result in the first federally ordered corporate breakup since that of AT&T; in 1984. The aggressive tone of Jackson’s ruling was matched by Microsoft Chairman Gates’ adamant stance that the company had done no wrong--a stance he stated when Jackson first ruled in November that the company had abused its monopoly power in personal computer operating systems to foster a new monopoly in the Internet browser market. As the dust settled from news of the ruling, talks of settlement appeared. On Friday, Microsoft Chief Executive Steve Ballmer welcomed the Justice Department’s offer to “engage in meaningful settlement negotiations” during the appeals process.
2. Victory for gay-rights advocates. Corporate benefits for gay employees moved further into the mainstream as the highly unionized auto industry signed on. The nation’s Big Three auto makers--General Motors, Ford and DaimlerChrysler’s U.S. unit--said they will begin offering medical, dental and other health-care benefits Aug. 1 to the same-sex partners of 465,000 U.S. employees, many of whom are members of the United Auto Workers union. The companies noted that they expect no more than 1% of their work forces to seek the new benefits.
3. A tame week for stocks. Tech stocks cooled off last week from their sizzling pace the week before. Following a record 19% advance the week before, the tech-heavy Nasdaq composite index posted only a modest gain while the “old-economy” Dow Jones industrials were under pressure. A slowdown in sales at McDonald’s and a tame inflation report helped bring the Dow Jones industrial average down on Friday, to close at 10,614.06, down 180.70 for the week. Concerns over banking profits and Procter & Gamble’s earnings warning also put a damper on the Dow. Nasdaq closed at 3,874.84, up 49.28 on the day and up 61.46 for the week. The dollar ended the week 1.1% lower against the yen and weakened against the euro after the European Central Bank raised key short-term interest rates by a half-percentage point.
4. Job creation slows. California’s job creation juggernaut ran into a few bumps, as the state’s unemployment rate edged back up to 5% in May from 4.8% in April, a signal that the state’s robust economic expansion may be losing some steam. Still, the state’s job market appears to have more momentum than that of the rest of the nation: Private-sector employers in California added 17,700 workers in May even as the nation as a whole lost 116,000 private-sector jobs.
5. A slap at “slamming.” Consumer groups slammed a record fine against WorldCom as inadequate but applauded regulators for forging an agreement designed to protect phone customers from having their long-distance services switched without their consent. The company formerly known as MCI WorldCom agreed to pay $3.5 million to settle thousands of complaints of the practice known as “slamming.” WorldCom had a powerful incentive to appease regulators on the slamming issue: It still needs Federal Communications Commission approval to expand its long-distance empire with the acquisition of Sprint.
6. AT&T; reverses rate increase. AT&T; Corp. abruptly pulled the plug on a new round of rate increases, bowing to bad publicity and pressure from the Federal Communications Commission. But the company said it’s still reviewing adjustments to its rate plans that would raise prices for some callers. An AT&T; plan to hike per-minute charges as it eliminated minimum monthly fees came in under the radar May 31, the same day that the FCC said long-distance companies would be lowering bills for customers. As the plan came to light, consumers howled and FCC Chairman William Kennard vowed to enforce AT&T;’s promise of consumer savings.
7. Big cable TV merger approved. AT&T; Corp. moved closer toward becoming the nation’s largest cable TV company as the FCC cleared its purchase of MediaOne Group Inc., the final regulatory action necessary. As expected, the approval is contingent on “significant” sales of cable assets to meet federal ownership restrictions. The options the FCC outlined weren’t significant enough for consumer advocates, however, who complained that AT&T; would be left with far too much clout in the cable TV industry.
8. A consumer-products giant suffers new woes. Procter & Gamble’s Durk Jager joined a growing list of chief executives to leave blue-chip companies after short-lived attempts to boost their bottom lines. The giant maker of household products warned of disappointing profit for the second quarter in a row as Jager, 57, said it was his personal decision to retire after 17 months as chief executive, chairman and president. P&G; brought back former CEO Jack Pepper as chairman, in a move seen as refocusing the company on its core soap and personal-care businesses.
9. A music industry accord. A truce between the music and computer industries over how to distribute music digitally moved closer to reality as online music portal MP3.com settled copyright-infringement claims by two of five major record labels and reportedly agreed to pay as much as $100 million for the right to license their songs over the Internet. The licensing deals with Warner Music Group and BMG Entertainment could benefit consumers who, unable to legitimately buy most music in an electronic form, have turned the Net into a global pirate jukebox where any song can be had for free.
10. More troubles for Internet firms. The pile of “dot-gones” and “almost-gones” grew. Citing lack of financing, giveaway site Surfbuzz.com announced its end, as did Torrance-based retailers Toytime.com and Babytime.com. Los Angeles-based Iwin.com, a popular free-sweepstakes Web site, said it laid off more than a quarter of its staff in May after having grown to 105 employees from 30 in the previous three months. News sites APBnews.com laid off all 140 of its journalists and Salon.com cut 13 employees, about 9% of its work force. The party was nearly over for EParties until another struggling Internet company based in Santa Monica, EToys, came to the rescue with a $1.6-million buyout offer.
Uncovered:
The world’s largest concert promoter, SFX Entertainment, is making a killing selling stealth seats directly to brokers, a small piece of what appears to be a thriving underground ticket economy, according to a six-week investigation by The Times.
SFX sells nearly 200 prime seats to every show at Verizon Wireless Amphitheater in Irvine exclusively to ticket brokers, who then jack up prices charged to consumers, in transactions conducted under the guise of corporate sponsorships. The 200 seats are in “phantom” rows that can’t be found on any seating chart, the report showed. Artists also lose out in the deal because they’re paid nothing for these “phantom” seats.
The Quiz:
In percentage terms, which of the following is down the most so far this year?:
A. S&P; 500
B. Intel stock
C: Coca-Cola stock
D: Dow Jones utilities average
Answer on C13
Answer: C: Coca-Cola is off 9.3% in the year to date. The S&P; 500 is off only 0.84%, Intel is up a whopping 53.3%, and the Dow utilities are up 15.0%.
A New Feature
Today the Business section introduces Week in Review, which is designed to help you catch up with the week’s top business stories. It will appear every Sunday on this page. Kathy Kristof’s Personal Finance column moves to C3.
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Microsoft Jitters
Investors afraid of a Microsoft breakup had fled the stock before last week’s antritrust ruling, slashing its value by more than one-third since December. Analysts don’t expect dramatic changes in the stock any time soon because the appeals process leaves a lot up in the air. Weekly closes and latest:
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Friday: $68.81
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Source: Bloomberg News
