TOP STORIES -- Sept. 26-Oct. 1
Oil Tops $50 a Barrel; Stocks End Week Up
Oil prices closed above $50 a barrel for the first time, capping months of soaring oil and gasoline prices that have weakened consumers’ spending power and threatened economic growth.
Having eclipsed $50 a barrel several times during intraday trading last week, crude prices finally settled above that peak as the forces driving up prices remained firmly in place. They include strong global demand, especially in the U.S. and Asia; tight global supplies; real and potential supply disruptions in the Gulf of Mexico, Nigeria and other major oil-production centers; and heavy market speculation by institutional investors.
Gasoline prices in Southern California jumped several cents last week to $2 a gallon or more for self-serve regular. Oil for November delivery jumped 48 cents Friday to $50.12 a barrel on the New York Mercantile Exchange.
On Wall Street, for the week, the Dow gained 1.5%, Nasdaq was up 3.3%, and the S&P; 500 rose 1.9%. Bargain hunting in the technology sector and end-of-the-quarter portfolio shuffling helped stocks move higher despite rising oil prices.
*
Merck Decides to Pull Arthritis Drug Vioxx
Merck & Co. voluntarily withdrew its blockbuster arthritis drug Vioxx from the market after a study showed that it nearly doubled the risk of heart attacks and strokes among people taking it for 18 months or longer.
The loss of the drug, with worldwide sales of nearly $2.5 billion a year, represents a major financial setback for Merck. Investors sent the company’s shares down 27% to $33, off $12.07, on the New York Stock Exchange on Thursday.
Physicians recommended that patients taking the drugs -- about 2 million worldwide -- talk to their doctors and switch to other medications. Merck said it would set up a program to buy back unused supplies of Vioxx.
“We are taking this action because we believe it best serves the interest of patients,” Merck Chairman Ray V. Gilmartin said in announcing the recall.
Experts said the risk of life-threatening events was small.
*
Spaceflights Are Bound for Virgin Territory
Richard Branson, British billionaire and owner of Virgin Atlantic Airways, said he was launching a commercial rocket service that would take well-heeled passengers for a suborbital ride into space.
The two-hour trip, including drinks and four minutes of weightlessness in space, is set to cost about $190,000.
Branson will spend $100 million to buy five passenger rocket ships from Mojave-based aviation designer Burt Rutan for Virgin Galactic. He expects the first flight in 2007. The spacecraft is to be modeled after Rutan’s SpaceShipOne. On Wednesday, SpaceShipOne completed the first half of a $10-million flight competition, reaching an altitude of nearly 64 miles. Branson said his commercial flights would climb to nearly 70 miles, about 10 times as high as regular commercial airline flights.
He estimated that over five years at least 3,000 people would pay the fare for what he called the trip of a lifetime, generating about $600 million in revenue.
*
Union Workers Strike San Francisco Hotels
Union workers walked off the job at four prominent San Francisco hotels, but the move did not trigger a multi-city strike as union locals in Los Angeles and Washington said they had no immediate plans to join the action.
The strike by 1,400 union members, whose picket-line chanting roused some hotel guests from their sleep, was the most aggressive step taken yet by the Unite Here union in this year’s protracted contract disputes. Its members have authorized strikes in all three cities.
Mike Casey, president of San Francisco Unite Here Local 2, said the walkout would last two weeks. It targets four of 14 hotels involved in on-again, off-again negotiations.
“The actions of the union today have significantly escalated” the situation, said Barbara French, spokeswoman for the 14 San Francisco hotels, which are collectively known as the Multi-Employer Group.
On Friday, 10 San Francisco hotels retaliated by locking out their union workers.
*
2 Rivals May Jointly Bid for Adelphia
The nation’s two largest cable operators, Comcast Corp. and Time Warner Inc., said they were jointly pursuing a bid to buy all or some of Adelphia Communications Corp., the leading cable TV provider in Southern California.
The companies said talks were in the early stages.
Adelphia, which filed for bankruptcy protection in 2002, agreed in April to put itself up for sale to repay creditors. Adelphia’s founder, John Rigas, 79, and his son Timothy were convicted in July for looting the firm and misleading investors about its financial condition.
Greenwood, Colo.-based Adelphia has asked potential bidders to express initial interest by the end of next month. In the last few weeks, 20 potential suitors signed confidentiality agreements that would give them access to financial data to fashion offers, said Ron Cooper, Adelphia’s chief operating officer.
*
PeopleSoft ReplacesCEO With Its Founder
In a surprise move, PeopleSoft Inc. fired Chief Executive Craig Conway, who adamantly opposed a buyout offer from business-software rival Oracle Corp., replacing him with company founder David Duffield.
Duffield, 63, became CEO after independent directors voted unanimously to remove Conway, a spokesman said.
Also, the U.S. government dropped its opposition to Oracle’s bid. Pleasanton, Calif.-based PeopleSoft said its board would review the implications of the decision.
PeopleSoft shares rose 15% on Friday on expectations Duffield would open talks with Oracle CEO Larry Ellison.
Support for Conway, 49, waned as he became enmeshed in a battle with Ellison. Company executives insisted the move had nothing to do with Oracle’s takeover attempt, but observers said it opened an avenue for negotiations between the two Silicon Valley firms.
*
Colony Capital Reaches Deal for 4 Casinos
Colony Capital reached a final agreement to buy four major casino properties and for the first time pinpointed the price: $1.24 billion.
The Century City-based private investment firm said it would buy the Atlantic City Hilton and Bally’s Tunica in Mississippi from Caesars Entertainment Inc. and Harrah’s East Chicago in Indiana and Harrah’s Tunica from Harrah’s Entertainment Inc.
The two Las Vegas-based gambling concerns are shedding the properties to ease possible antitrust concerns over Harrah’s planned $5.2-billion acquisition of Caesars.
The sale of the four properties, expected to close next year, would make Colony a small but significant national player in the gaming business. It was reported in August that Colony was negotiating for the casinos.
This deal would give the company six casinos, including two of the 12 casinos in Atlantic City and two in Tunica.
*
Ex-Boeing Employee Is Sentenced to Prison
A former Air Force official was sentenced to nine months in prison after admitting that she helped Boeing Co. obtain a lucrative contract in hopes of landing an executive job at the company.
“I deeply regret any damage I have done,” Darleen Druyun said.
Druyun, 56, pleaded guilty in April to conspiring to violate conflict-of-interest rules by negotiating with Boeing for a job while overseeing Pentagon consideration of a $23-billion deal to provide 100 refueling tanker planes. She was hired by Boeing and then fired 10 months later.
Druyun had maintained that her crime was a technical violation and that she had upheld the government’s interests during the contract process. But she later conceded that her conflict produced substantive benefits for Boeing, prosecutors said.
U.S. District Judge T.S. Ellis III sentenced Druyun to nine months in prison and seven months in a halfway house.
The Defense Department is reviewing the refueling-tanker deal.
*
Netflix, TiVo Team Up to Offer Movies Online
Intensifying the battle for control of the living room, Netflix Inc. and TiVo Inc. said they were developing a service to deliver movies over the Internet.
The service, which the companies said might debut next year, would allow owners of TiVo digital recorder devices to download and, potentially, store dozens of movies.
Executives at Los Gatos, Calif.-based Netflix and Alviso, Calif.-based TiVo offered few details and probably won’t until they lock up distribution agreements with studios.
Those deals, analysts said, won’t be easy.
For Netflix, which gets all of its $272 million in annual revenue from mailing DVDs to subscribers, the deal is a long-term bet to get ready for a distant future when mainstream consumers can sit on a couch and order movies at the click of a button.
Until then, “DVDs will remain the dominant way people watch movies at home for a long time,” said Netflix Chief Executive Reed Hastings.
“Our announcement with TiVo is just the first step in a very long process,” he said.
*
Lawmakers Blast Media on Movie, TV Ratings
Reacting to growing public concerns about sex and violence in the media, Capitol Hill lawmakers turned up the pressure on the entertainment industry to provide clearer information about content of films and TV shows.
Legislators also signaled that stronger punishments are ahead for broadcasters airing shows with objectionable content.
During a Senate Science, Technology and Space subcommittee hearing, Sen. Sam Brownback (R-Kan.) blasted the movie and broadcast industries’ separate rating systems. Brownback said they failed to help parents shield children from inappropriate content.
The hearing marked the first Capitol Hill appearance by Hollywood’s new top lobbyist, Dan Glickman, who joined predecessor Jack Valenti in defending the film rating system. The two maintained that surveys showed the vast majority of parents found the ratings information “very useful.”
For a preview of this week’s business news, please see Monday’s Business section.
