Week in Review
Shortage Fears Boost Oil Prices to New High
Persistent fears about oil shortages, abetted by Hurricane Ivan’s disruption of supplies from the Gulf of Mexico, lifted oil prices to a new closing high and kept upward pressure on the outlook for pump prices.
The benchmark light crude oil for current delivery climbed 42 cents to $48.88 a barrel on the New York Mercantile Exchange on Friday, its highest price in the 21 years that the futures contract has traded on the Nymex.
But adjusted for inflation, prices remain well below peak levels reached in 1981.
Oil prices have rallied all year amid concerns that supplies could be disrupted by terrorism or political instability. Hurricane Ivan added to those concerns last week, after the hurricane temporarily shut down oil output, refining and imports along the Gulf Coast. Heavy speculation by institutional investors also helped prices surge.
Wall Street closed out its worst week since early August.
For the week, the Dow fell 2.3%, and the S&P; was down 1.6%. Nasdaq dropped 1.6%.
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SBC Raises Lease Rates, Prompting Outcry
State regulators raised wholesale telephone rates an average of 19%, prompting outcries that higher prices would hamper competition and drive some companies out of business.
The 3-2 vote by the California Public Utilities Commission allows SBC Communications Inc., the state’s dominant carrier, to charge more for leasing its lines and other gear to AT&T; Corp., MCI Inc. and smaller providers.
The rate structure approved by the PUC takes effect immediately and raises the cost of leasing SBC’s copper lines 21.5% to an average of $11.93 a month per line. The cost of leasing the full platform of lines and gear for a dial tone rose nearly 19% to an average of $16.53 a month.
SBC competitors roundly criticized the decision.
“This will make it a lot tougher for me to compete,” said Tony DiStefano, chief executive of Bakersfield-based Arrival Communications Inc., which serves 30,000 lines for small-business customers in the Central Valley.
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Franklin Agrees to Pay $5-Million Settlement
California mutual fund giant Franklin Resources Inc. agreed to pay $5 million to settle Massachusetts regulators’ allegations that it abetted improper trading of a Franklin stock fund.
Massachusetts officials said they scored a victory for investors by obtaining an admission from Franklin that it permitted “market timing” in a fund whose bylaws forbade the practice. The fund industry has been loath to publicly acknowledge any wrongdoing in the trading scandal.
However, San Mateo-based Franklin said in a statement that it “did not admit or deny engaging in any wrongdoing” but believed it was “in the best interest of the company and its funds’ shareholders to settle this issue now.”
The $5 million the company is paying to settle the case will go into Massachusetts’ coffers.
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Disney Board Presses Hunt for New Chief
Walt Disney Co.’s board announced that it expected to name a successor to Chief Executive Michael Eisner no later than June, setting in motion a wide-ranging search while raising new questions about Eisner’s future in the company.
Board Chairman George J. Mitchell said Eisner, whose contract expires in September 2006, would step down as soon as a new CEO was installed. The board indicated that it expected Eisner, who Tuesday celebrated his 20th anniversary at Disney’s helm, to remain in some capacity until the end of his contract.
Among the possible contenders, the board singled one out for praise: Disney President Robert Iger. The lone inside candidate and Eisner’s top choice, Iger is “highly qualified for the position,” the board said.
The board said that “the process should include full consideration of external candidates as well.”
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Fed Raises Key Rate by a Quarter-Point
The Federal Reserve raised short-term interest rates in an effort to keep inflation in check, noting that the economy had “regained some traction” after slowing in the spring.
The central bank’s policymaking committee, headed by Fed Chairman Alan Greenspan, said it was raising its benchmark rate on federal funds -- overnight loans between banks -- to 1.75% from 1.5%.
Analysts interpreted the Fed’s language as a relatively bullish comment on the strength of the recovery.
Fed policy remains “accommodative,” the panel said, signaling its intent to continue raising rates until they reach a level that neither stimulates nor damps economic growth.
Recent data suggested that the recovery was regaining momentum, the panel said. It added that inflationary pressures remain contained.
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Wal-Mart Ad Aims to Counter Criticism
In the first step of a statewide effort to polish its reputation, Wal-Mart Stores Inc. published a newspaper advertisement promoting its employment practices and promising to continue its expansion in California.
The ad -- published as an open letter to the people of California in 15 newspapers statewide, including The Times -- was designed to counter recent criticism of the company’s business practices, Wal-Mart said.
In its letter, the world’s largest retailer said, “We’ve become a target for negative comments from certain elected officials, competitors and powerful special interest groups.”
The company pays competitive wages averaging $10.37 an hour in California, the advertisement said.
Wal-Mart said that it offered medical coverage to full- and part-time workers and that its stores generated “significant tax revenue for local communities.”
In Southern California, Wal-Mart has faced strong opposition to its Supercenters. Inglewood voters rejected plans in the spring for a store, and Los Angeles adopted an ordinance last month to make it harder for the behemoths to move into the city. This month, though, Rosemead approved plans for the first Supercenter in L.A. County.
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New CBS TV Show Captures Key Viewers
CBS’ new forensic crime drama “CSI: NY” beat NBC’s longtime powerhouse “Law & Order” on Wednesday night. It not only drew more viewers overall but also captured the coveted 18-to-49-year-old segment.
The victory demonstrated the strides CBS has made in shedding its image as a haven for older viewers. It also comes at a particularly welcome time for the Viacom Inc. network, which is grappling with the controversy surrounding it’s the flawed CBS News story about President Bush’s National Guard service.
General Electric Co.-owned NBC moved “West Wing” out of its Wednesday 9 p.m. slot to make room for two episodes of “Law & Order.” The first episode won in the 9 p.m. time period. But at 10 p.m., “CSI: NY” topped the second episode, attracting nearly 4 million more viewers than “Law & Order,” for a total of 19.3 million. In the 18-to-49 demographic, the CBS show drew 2 million more viewers.
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Cogent Stock Up 50% in First Trading Session
Shares in Cogent Inc., a South Pasadena company that makes fingerprint identification systems, rocketed 50% in value in their first day of trading Friday. The strong debut made Cogent one of the hottest initial public stock offerings of the year and also made company founder Ming Hsieh a billionaire.
Hsieh, chairman and chief executive, retained 60 million Cogent shares, worth $1.07 billion based on Friday’s closing price of $17.98 on the Nasdaq.
Cogent makes systems that allow government agencies to compare millions of fingerprints from computer databases in seconds. Nearly all of its government customers have vastly expanded their use of fingerprint identification systems since the Sept. 11, 2001, terror attacks.
Cogent profit was $12.5 million for the first half of 2004 on revenue of $32 million. (Pro forma profit was $7.3 million, adjusting for taxes to be paid under the company’s new structure.)
Cogent priced shares at $12, higher than planned, late Thursday. Shares rose $5.98 to $17.98 Friday.
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Hollywood Writers Elect Petrie as President
Hollywood TV and film writers overwhelmingly elected Daniel Petrie Jr. president of their union, a mandate he hopes marks an end to one of the group’s most tumultuous years.
Petrie, 52, received 71% of 2,111 votes cast by members of the Writers Guild of America, West, where he is interim president. Challenger Eric Hughes received 26%. The remaining 3% of ballots listed write-in candidates or were left blank.
Petrie said he hoped the decisive win would allow the guild to tackle some of its pressing issues, most notably its stalled contract negotiations with studios and networks.
One of the most contentious issues between writers and studios is how to divvy up the money generated from booming DVD sales and from the fledgling video-on-demand business.
Writers had been working without a contract since May 2, as talks with the Alliance of Motion Picture and Television Producers foundered.
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Directors Reach New Labor Pact With Studios
Negotiators for Hollywood directors reached agreement on a labor pact with studios and networks.
The 12,800-member Directors Guild of America and the Alliance of Motion Picture and Television Producers agreed to a new three-year deal, which includes a boost in healthcare benefits and increases in pay and residuals. But the accord sidesteps the issue of getting a bigger percentage of studios’ DVD revenues.
Given the directors guild agreement, it seems unlikely that other unions -- the Writers Guild of America, West; the Screen Actors Guild; and its sister American Federation of Television and Radio Artists -- will win major concessions on how spoils from DVDs are divided.
The Screen Actors Guild said it planned to aggressively negotiate its coming contract over such issues as boosting residuals and its health and pension plan.
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For a preview of this week’s business news, please see Monday’s Business section.
