TOP STORIES -- Feb. 16-21
Powell Defeated in Push for Phone Deregulation
In a setback for Chairman Michael K. Powell, the Federal Communications Commission approved new rules requiring the regional Bell phone companies to continue renting their local networks to rivals at regulated rates. But the commission also freed the Bells from sharing new, high-speed data lines with competitors -- a key concession demanded by Powell.
The FCC’s 3-2 vote was a victory for AT&T; Corp., WorldCom Inc. and other carriers that have wrested more than 10 million local-phone customers, about 2% of the market, from SBC Communications Inc. and other Baby Bells. The Bells are required to lease part of their local networks to other carriers at discounted prices to spur competition. In exchange, the Bells can offer long-distance service.
In a rare move for an FCC chairman, Powell issued a blistering dissent, saying the majority’s decision was “confusing” and “legally suspect” and would prove harmful to consumers and the nation’s struggling economy.
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Judge Won’t Dismiss IPO Suit Against Banks
A federal judge in New York ruled that a massive class-action lawsuit against Wall Street brokerages can proceed, increasing pressure on the firms to reach financial settlements with investors who lost money in the late-1990s market mania.
U.S. District Judge Shira Scheindlin refused a request by the banks and the firms they took public during the bull market to dismiss the suit, paving the way for investors’ attorneys to conduct extensive discovery. The banks want to avoid turning over potentially incriminating documents, so the ruling may spur settlement negotiations.
The lawsuit alleges that 55 investment banks and 309 companies, mostly start-up tech firms, rigged the market for initial public offerings from 1998 through 2000. The banks named in the suit include Goldman Sachs & Co., Merrill Lynch & Co. and defunct California tech specialist Robertson Stephens. Several investment banks declined to comment on the ruling.
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Study Questions Safety of SUVs and Pickups
Sport utility vehicles and pickups aren’t as protective as many of their owners believe, and they also are uniquely dangerous to everyone else, according to new research.
A study co-authored by Marc Ross of the University of Michigan and Lawrence Berkeley National Laboratory scientist Thomas Wenzel contends that sport utility vehicles and pickups on average provide less protection for their drivers than most large or even mid-size cars.
The study, funded by the Energy Foundation and believed to be the first to assess fatalities among both drivers of various vehicles and the people they collide with, takes a contrarian jab at an iron maxim of highway safety: that heavy is good and heavier is better.
Others said the study’s numbers may not tell the whole story. In “all the studies we have done ... weight has a very substantial protective effect,” said Priya Prasad, senior technical fellow for safety at Ford Motor Co.
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Agilent Reports Loss, Plans to Cut 4,000 Jobs
Agilent Technologies Inc., Palo Alto-based maker of computer-chip and telecommunication testing equipment, said it would cut 4,000 jobs, or more than 11% of its workforce, as it posted a wider net loss.
Company officials pointed to the current troubles as a continuation of customers’ unwillingness to buy new equipment because of economic weakness or geopolitical uncertainties.
For its fiscal first quarter, ended Jan. 31, Agilent posted a net loss of $369 million, or 78 cents a share, compared with a loss of $315 million, or 68 cents, a year earlier. Agilent’s revenue fell to $1.41 billion, down slightly from $1.43 billion.
The company, spun off from Hewlett-Packard Co., was expected to lose 22 cents to 28 cents a share on revenue of $1.35 billion to $1.45 billion, according to Thomson First Call. Before special charges, Agilent’s loss was $112 million, or 24 cents a share.
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Low Loan Rates Fuel Southland Home Prices
The median sales price of a Southland home jumped nearly 20% in January as buyers dismissed concerns about a potential war with Iraq and terrorism in the U.S. to take advantage of low mortgage rates.
Brokers said buyers who feared being priced out of the market pounced on well-located homes across the region, sparking bidding battles for entry-level condominiums to million-dollar properties.
The median price of all homes and condos sold in Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura counties hit $283,000 in January, up 19.9% from a year earlier, according to research firm DataQuick Information Systems. Sales in the region rose 3.4% to 22,767 properties.
In L.A. County, the median price rose 18.3% to $278,000. The median price in Orange County surged 19.8% to $369,000.
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Turner Network Chief Stepping Down
After two turbulent years that saw CNN’s prime-time shows slip behind those of rival Fox News Channel, Jamie Kellner is stepping down as chairman of AOL Time Warner Inc.’s cable networks.
Kellner, 55, told top AOL executives late last year that he wanted to resign to return to his home in Santa Barbara and tend to the WB, the network he founded, before retiring next year. Kellner said he had fulfilled his promise to run Turner Broadcasting for two years.
The latest shuffle represents more upheaval in the executive suite of AOL Time Warner and a further dismantling of the management team set up after AOL and Time Warner merged two years ago.
Kellner will be succeeded by former CNN News Group President Philip I. Kent.
Kellner will continue to run Acme Communications, a group of WB television stations in smaller markets. He will remain chairman and chief executive of the WB network through June 2004, when his contract expires.
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Unocal May Face Antitrust Action by FTC
The Federal Trade Commission is preparing to charge El Segundo-based Unocal Corp. with using questionable gasoline patents to collect royalties from competitors and unfairly curb competition, say people familiar with the case. The commission is expected to vote as early as this week on a staff recommendation to file antitrust action.
If the commission proceeds with a civil lawsuit, it is likely to include allegations that Unocal engaged in abuse of trust and anti-competitive behavior to secure patents on government-mandated gasoline formulas.
State and federal officials contend Unocal acted improperly by quietly applying for formulation patents while working with the California Air Resources Board and other oil firms on new clean-fuel standards. A Unocal spokesman said the company did nothing wrong.
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Music Piracy Battle Shifts to Bertelsmann
Two world-renowned songwriters and two independent music publishers sued Bertelsmann for $17 billion, accusing the German media company of deliberately helping users of the Napster song-swapping service violate millions of copyrights.
Opening a new front in the war on Internet file-sharing, the suit in New York federal court seeks class-action status for about 160,000 songwriters and their publishers.
Bertelsmann invested about $90 million in Napster starting in October 2000 and exerted a large degree of control over its operations. The lawsuit alleges that without those investments, Napster would have shut down many months before its demise in July 2001. If it had folded earlier, fewer songs would have been illegally copied by its users.
A Bertelsmann spokeswoman declined to comment.
The named plaintiffs in the suit are songwriters Jerry Leiber and Mike Stoller and music publishers Frank Music Corp. and Peer International Corp.
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Disney Is Dealt Setback in Winnie the Pooh Case
Walt Disney Co. suffered a significant legal setback in its fight to avoid paying more than $200 million in royalties from sales of Winnie the Pooh video tapes and computer games.
The California Supreme Court for the second time has effectively blocked an appeal by Disney to keep jurors from being told that the company destroyed evidence in the case by shredding boxes of old documents, including one labeled “Winnie the Pooh -- legal problems.” Also, Disney will not be allowed to dispute that a late Disney executive promised plaintiffs they would be entitled to the royalties.
The Supreme Court refused to hear an appeal by Disney, which sought to have lifted sanctions imposed by a Los Angeles County Superior Court judge. This is the latest development in a 12-year-old lawsuit filed by Shirley Slesinger Lasswell and her daughter, Patricia Slesinger, who inherited Pooh merchandising rights in the 1950s. A Disney spokesman said the company will continue to press its case.
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For a preview of this week’s business news, please see Monday’s Business section.