TOP STORIES -- Aug. 17-22
Virus Havoc Diverted;
FBI Homes In on Hacker
One of the fastest-spreading e-mail viruses ever threatened to discombobulate computers around the world, but law enforcement officials succeeded in shutting nearly all of the 20 computers that were supposed to give new instructions to the virus dubbed SoBig.F.
As many as 19 of the 20 had been knocked offline by noon Friday, when thousands of computers infected by the SoBig e-mail virus tried to contact them for directions on downloading potentially malicious software, according to anti-virus firm Symantec Corp., one of several companies assisting the FBI, the Department of Homeland Security and other authorities.
Experts expected the virus writer to attempt to send out new instructions through the surviving master computer today or later.
There were signs that the FBI was making progress in its hunt for the author of the virus. The chief technology officer of Easynews Inc., a Phoenix Internet access provider, said his company had been subpoenaed for information about a customer and turned the data over.
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FCC Chairman Vows
to Meet Local Needs
Moving to quell criticism that the Federal Communications Commission went too far in easing media ownership rules, FCC Chairman Michael K. Powell said the agency would take steps to make broadcasters more responsive to local communities.
Powell said the FCC would form a task force to determine whether broadcasters should be compelled to produce more local news and other programming. Powell said the agency staff would begin a formal inquiry into rules that would promote “localism” at TV and radio stations.
The FCC also plans to accelerate the licensing of as many as 1,000 low-powered radio stations that are largely being sought by churches, schools and other nonprofit groups, Powell said.
The initiatives were unveiled nearly a month after the House of Representatives overwhelmingly approved an appropriations measure with a provision that would reverse the FCC by preventing any broadcaster from owning TV stations that together reach more than 35% of U.S. households. The legislation would roll back the 45% TV ownership cap approved by the FCC on June 2.
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HP Posts Disappointing
Fiscal 3rd-Quarter Profit
Hewlett-Packard Co. blamed overzealous discounting in posting disappointing fiscal third-quarter financial results.
The Palo Alto-based high-tech bellwether said profit for the quarter ended July 31 was $297 million, or 10 cents a share, compared with a loss of $2.03 billion, or 67 cents, a year earlier. Excluding $403 million in adjustments for restructuring and other costs, HP profit would have been 23 cents a share; analysts had expected 26 cents.
Sales rose 5% to $17.3 billion from last year’s third quarter, HP’s first full quarter after completing a $19-billion merger with Compaq Computer Corp.
HP’s corporate computer sales group continued to lose money, and its personal computer division fell back into the red after two quarters of meager profit.
Investors were harsh in their assessment, unloading HP shares after the earnings report.
Chief Executive Carly Fiorina, attributing the loss to “overly aggressive pricing actions” that hurt HP’s gross margins, said: “We’ve already made corrective pricing decisions and will return this business to profitability in the fourth quarter.”
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Suitors for Vivendi’s U.S.
Assets Enter Round Two
Three of the original six suitors for Vivendi Universal’s U.S. entertainment assets met last week’s deadline for second-round bids, but the company declined to say whether they reached its minimum asking price of $14 billion.
John Malone’s Liberty Media Corp. and a consortium headed by Vivendi Vice Chairman Edgar Bronfman Jr. submitted offers for Universal’s movie studio, theme parks and TV businesses. General Electric Co.’s NBC has proposed a merger of assets, sources said.
The offers pose stark choices for Paris-based Vivendi, which is trying to unload its U.S. operation to focus on its French telecom and pay-TV businesses.
Executives are expected to decide whether to accept cash now to pay down debt or agree to a merger with NBC that could be lucrative in the long term.
A Vivendi spokesman confirmed that Vivendi had received “proposals and confirmations” but would not elaborate.
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Californians May Win
Right to Sue Brokerages
A state court ruling could allow some California investors to pursue legal claims against brokerage firms in court rather than before industry-sponsored arbitration panels.
The decision by an appellate court in Los Angeles marked the latest chapter in a battle between the state and the securities industry over ethics standards for arbitrators.
Investor Jordan Alan filed a complaint in Los Angeles County Superior Court against UBS Financial Services after refusing to waive California ethics disclosure rules or agree to leave the state for a hearing.
UBS tried to force the case to arbitration, and a trial judge agreed in December.
But the appellate court overruled that decision.
Investor attorneys have long complained that arbitration favors brokerage firms.
But the right to go to court, even if upheld for other investors, probably would last only until the larger legal battle between the state and the securities industry is resolved.
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State Supreme Court
Upholds Edison Rescue
In a victory for Southern California Edison, the California Supreme Court upheld a rescue agreement crafted in secret with state regulators that allowed the Rosemead-based utility to repay $3.6 billion in debts run up during the energy crisis.
The court unanimously turned down claims that the California Public Utilities Commission lacked authority to negotiate the deal. On a 6-1 vote, justices said that because the commission’s closed-door settlement talks with the company were about litigation, they didn’t violate an open-meeting law.
The ruling disappointed consumer activists who had challenged the legality of the agreement. They wanted Edison to refund $3.6 billion to customers from a surcharge it used to cover debts.
For SCE, the decision will help bring back the utility’s lost investment-grade credit rating and allow it to begin paying a dividend again to common shareholders by the end of the year, said John E. Bryson, chief executive of parent company Edison International.
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More Signs Point to an
Accelerating Recovery
The week brought fresh signs that the economic recovery is speeding up.
The Fed’s Philadelphia bank said its general business index rose to 22.1 in August from 8.3 in July, far above the consensus estimate of 10. The August reading is the highest in five years, with new orders and shipments rising strongly. Economists said the index showed that the factory sector is improving.
In another report, the New York-based Conference Board said its index of leading economic indicators, which is meant to predict economic performance three to six months ahead, rose 0.4% in July.
On the jobs front, initial claims for jobless benefits, as reported by the Labor Department, fell by 17,000 to 386,000 in the week ended Aug. 16.
Bond investors reacted with renewed heavy selling, betting that the economic turnaround is for real and that interest rates would rise. The selling drove yields on two-year and five-year Treasury notes to their highest levels since last year.
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Intel Boosts Sales Its
Outlook, Spurring Hopes
Tech bellwether Intel Corp. unexpectedly beefed up its sales outlook Friday, giving a boost to semiconductor stocks and spurring hopes that a broader industry recovery is underway.
The Santa Clara, Calif.-based chip maker, traditionally conservative in its forecasts, said it was seeing jumps in almost every product category, suggesting stronger computer and gadget sales. Intel boosted its revenue projections to $7.3 billion to $7.8 billion for the third quarter, up from $6.9 billion to $7.5 billion.
The revision represents an 11% increase over the same quarter last year.
Intel shares rose $1 to $27.39 on Nasdaq, after touching a 14-month high earlier in the day. The SOX chip stock index, which comprises Intel, AMD and 16 other big chip companies, rose nearly 1% to 439.66.
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Schrager’s Clift Hotel
Files for Chapter 11
Hotelier Ian Schrager, whose high-design properties cater to affluent travelers, has filed for Chapter 11 bankruptcy protection for his plush Clift Hotel in San Francisco.
The historic 373-room Clift has been suffering along with the rest of the San Francisco hotel market after a big drop in tourism and business travel since the Sept. 11 terrorist attacks.
The filing in U.S. Bankruptcy Court in New York is for only the Clift Hotel, which has debts totaling $57 million. But Schrager also has been scrambling to refinance $355 million of debt secured by four of his other hotels: the Mondrian in West Hollywood, the Delano in Miami Beach and the Royalton and the Morgans in New York.
The Clift will continue to operate, according to a spokesman for Ian Schrager Hotels, who said the hotel would be out of bankruptcy proceedings within four months.
From Times Staff
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For a preview of this week’s business news, please see Monday’s Business section.
