TOP STORIES -- Nov. 10-15
Tech Stocks Extend Recent Recovery
Technology stocks continued their recent recovery last week as investors shrugged off bad news in the sector and concerns about terrorism and the strength of the U.S. economy.
The tech-laden Nasdaq composite index gained 3.8% for the week, bringing its gain to almost 27% since hitting a multiyear low Oct. 9. The gains came despite some negative news, such as a profit warning from chip equipment maker Applied Materials.
Nontech areas of the market didn’t fare as well but still managed to post gains for the week. The Dow Jones industrials inched up 0.5%. The Standard & Poor’s 500 index added 1.7%.
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Webster Steps Down From Accounting Panel
Former FBI Director William H. Webster resigned the top post of a new watchdog board created to address the recent wave of corporate accounting scandals. He said there was a “perfect storm” of controversy surrounding his appointment.
Webster’s action capped weeks of tumult stemming from a bitterly divided 3-2 vote of the Securities and Exchange Commission on Oct. 25 that approved his nomination. Since then, a major accounting firm accused Webster, 78, of making “false and misleading statements” about his awareness of financial problems at a small company at which he had been a director.
The political fallout led to the resignations this month of SEC Chairman Harvey L. Pitt, who championed Webster’s nomination, as well as the SEC’s top accountant, Robert Herdman.
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Vivendi Taps Diller to Play Broader Role
Hollywood deal maker Barry Diller was tapped by Vivendi Universal’s top executive, Jean-Rene Fourtou, to be interim co-chief executive of the ailing Paris-based conglomerate’s U.S. entertainment division.
That part of the corporation is now being rejiggered to add the lucrative games unit and Universal Music Group to Diller’s existing portfolio: Universal’s movie studio, theme parks and television properties.
The move came amid criminal investigations in France and the United States over allegations of financial improprieties, including whether Vivendi’s former chief executive misled investors about the severity of the company’s financial problems.
Since the ouster of former CEO Jean-Marie Messier in a boardroom coup, Hollywood corridors have been rife with speculation about the future of Universal and Diller, who is widely known for his business savvy and survival instincts.
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California to Settle Suits Against Williams
California agreed to settle lawsuits against Williams Cos., one of the major power companies accused of price gouging during the energy crisis. In exchange, the company has agreed to make concessions and payments that the state says could exceed $1.8 billion.
Gov. Gray Davis and Atty. Gen. Bill Lockyer announced the settlement with Tulsa, Okla.-based Williams days after federal prosecutors signaled they were pressing ahead with a criminal investigation of alleged manipulation of energy prices in California and issued subpoenas to Williams and four other firms.
However, new evidence emerged late in the week that AES Corp. and Williams conspired to squeeze electricity supplies to California in early 2000, drawing an angry response from state officials and threatening the settlement.
In its deal with California, Williams agreed to renegotiate $4.3 billion in long-term power contracts with the state.
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Former Compaq CEO to Head WorldCom
Michael Capellas was named to head WorldCom Inc. as the telecommunications company tries to shake off accounting scandals and retain customers.
Capellas, 48, will replace interim Chief Executive John Sidgmore and Chairman Bert Roberts, effective Dec. 2.
Earlier in the week, Capellas announced he would resign as president of Hewlett-Packard Co., walking away from the newly merged computer maker with nearly $14 million in bonuses. The former CEO of Compaq Computer Corp., who helped engineer its merger with Hewlett-Packard, won’t be replaced when he steps down Dec. 1.
WorldCom has been operating under bankruptcy protection since July and aims to emerge intact in mid-2003.
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NASA Decides to Extend Life of Shuttle
NASA had welcome news for thousands of Southern California space shuttle workers as the agency scrubbed plans for a reusable launch vehicle and decided instead to extend the life of the shuttle another decade.
Acknowledging that perfecting a reusable rocket technology could take 15 years, NASA said that in the interim it wanted to develop a smaller, less ambitious orbital space plane capable of ferrying astronauts to the International Space Station.
NASA Administrator Sean O’Keefe outlined the strategy shift as part of his broad new plan for transporting crews into space. The agency’s revised spending proposal was signed by President Bush and forwarded to Congress for approval.
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U.S. Won’t Pursue Penalties at Ports
The Justice Department said it will not pursue contempt penalties against the dockworkers union or shipping companies for contributing to slowdowns in violation of a court order to keep West Coast ports moving normally.
The statement was filed with the U.S. District Court in San Francisco before a status conference involving the International Longshore and Warehouse Union and the Pacific Maritime Assn., which represents shipping lines and terminal operators.
Both sides are working under an Oct. 8 federal injunction that reopened ports after a 10-day lockout. Mediated contract negotiations resumed last week.
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Redding Doctors Keep Their Licenses
Two doctors who are under investigation for allegedly performing unnecessary operations at Tenet Healthcare Corp.’s Redding Medical Center got to keep their licenses.
Shasta County Superior Court Judge Monica Marlow ruled that the California Medical Board’s evidence against cardiologist Chae Hyun Moon and heart surgeon Fidel Realyvasquez was insufficient to stop them from practicing.
“She sent a message that these kinds of proceedings cannot and should not be based on innuendo, hearsay and double hearsay,” said William Warne, Moon’s lawyer.
Realyvasquez lawyer Robert H. Zimmerman said the board “fired a dud.”
The board had sought temporary restraining orders in the wake of an FBI investigation of the doctors’ work. The FBI is probing alleged Medicare fraud, but the Medical Board was seeking the suspensions solely on public safety grounds. Neither the doctors nor Tenet has been charged with any crime.
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Key3Media Plans to Explore a Sale or Merger
Key3Media Group Inc., the Los Angeles-based company that runs the huge computer show Comdex that opens today in Las Vegas, said that it probably faces a sale or merger because it is plagued with losses and can’t pay its debt.
Key3Media is being crushed by a heavy debt burden amid the technology industry’s collapse and post-Sept. 11 cuts in business travel that have eroded attendance at shows such as Comdex. The company runs other shows for buyers and sellers of electronic gear.
Key3Media will explore a sale, merger or other restructuring, perhaps using a bankruptcy reorganization to facilitate the overhaul, the company said while announcing a quarterly loss. Pressure will intensify after Dec. 16, when the company faces a debt payment of about $15 million that it can’t afford.
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MaguirePartners Files for $890-Million IPO
Los Angeles commercial development firm MaguirePartners filed for the real estate industry’s biggest initial public stock offering in five years. The $890-million IPO, set for January, is designed to help fund future acquisitions and development.
Maguire Properties Inc., a new firm to be formed by a series of complex refinancing and acquisition deals, would operate as a real estate investment trust, according to a Securities and Exchange Commission filing. Company chief Robert F. Maguire would wind up with 20.5% of the new company’s stock.
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Isuzu to Cut More Than a Third of U.S. Staff
American Isuzu Motors, already in a downward spiral marked by slumping sales, layoffs and asset divestitures, is preparing to fire more than a third of its remaining U.S. staff by the end of the year.
About 150 of the company’s 400 employees will be laid off over the next two months, Isuzu employees at the company’s North American headquarters in Cerritos were told this month. A spokesman confirmed the plan but declined to comment.
Isuzu’s Japanese parent, Isuzu Motors Ltd., has been battered by the slumping Japanese economy.
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For a preview of this week’s business and economic news, please see Monday’s Business section.
