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THE EVENING WRAP
April 8, 2005 -- 5:28 p.m. EDT
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As the Dolans Turn
By MARK GONGLOFF
THE WALL STREET JOURNAL ONLINE
In the latest turn in the corporate soap opera that is Cablevision, the company is shutting down its Voom satellite television business at the end of April.
The money-hemorrhaging unit is the rope in a tug-of-war between the chairman of New York's biggest cable provider, Charles Dolan, and his son, CEO James Dolan. Though the venture lost more than $661 million last year, the elder Mr. Dolan has fought to keep it alive. The younger Mr. Dolan has fought to kill it, and Cablevision's board sided with him, voting in January to dissolve it and sell its only satellite. The elder Mr. Dolan countered by replacing several directors with friendlier faces, who gave him until the end of March to raise funds to buy Voom himself. Investors hoped he would sell Cablevision for some quick cash, and pushed its shares up 74% since last summer. But his window of opportunity closed last week, and it seems that 40,000 or so Voom customers -- including some signed since the end of March -- must soon find another way to watch TV.
Continuing its recent pattern of bizarre behavior, Cablevision didn't bother to publicly announce Voom's fate when Mr. Dolan's deadline passed; instead, it quietly notified the Securities and Exchange Commission. Meanwhile, it's still in what may be a losing battle to block the New York Jets from building a Manhattan stadium/convention center that could compete with its Madison Square Garden property. It's in a dogfight with Time Warner Cable that's kept the New York Mets off many local TV sets (maybe not such a bad thing). And it unexpectedly tried to buy Adelphia out from under Time Warner and Comcast. Cablevision seems to have lost that fight, pleasing investors who sent its shares up slightly.
And Cablevision's still got plenty of drama ahead. Some analysts believe it won't have its head on straight until it's sold out from under Charles Dolan. They don't like his iron grip on the board or his distracting forays into non-core businesses. "This should be the best cable system in America on a per-subscriber basis," said Cathay Financial analyst Andrew Baker. "These are systems that could do better in the hands of a much larger organization; Cablevision has taken them as far as it can take them."
Ford Warns on Profit
Ford joined No. 1 auto maker General Motors in warning of weak profits this year. Citing "historically high prices for steel and crude oil, escalating health-care expenses and a weak U.S. dollar," the No. 2 U.S. auto maker said it expected to earn between $1.25 and $1.50 a share this year, down sharply from its previous range of between $1.75 and $1.95 a share. Wall Street analysts, on average, expected Ford to earn $1.68 a share. GM's shares fell to their lowest levels in more than a decade last month, when it made even deeper cuts to its own profit forecast. Ford's shares fell more than 2% today and could fall harder tomorrow.
Pope Buried
Pope John Paul II was buried in St. Peter's Basilica in the Vatican this morning, attended by an estimated four million people, including hundreds of world leaders. German Cardinal Joseph Ratzinger, considered by many to be a potential papal successor, delivered the homily. Infuriating many observers, the Vatican said Cardinal Bernard Law, the former archbishop of the Boston diocese who resigned in 2003 after being accused of shielding child-molesting priests, will preside over one of the daily masses to be delivered during the mourning period following the pope's funeral. After his resignation, Cardinal Law received an honorary Vatican post that entitled him to play a prominent role in the pope's funeral. The controversy was a reminder of one of the many challenges facing the next pope in guiding the Catholic church. Though Pope John Paul II was personally popular, helped bridge divides between the world's religions and played a role in ending communism in Eastern Europe, he also left a church divided about issues of dogma, particularly on issues such as contraception and the role of women in the church. And critics have faulted the Vatican's reaction to the sex-abuse scandal that hurt the church's reputation and contributed to declining membership and thinning priesthood ranks in the U.S. and elsewhere.
Spitzer Subpoenas Drug Wholesalers
New York Attorney General Eliot Spitzer has subpoenaed Cardinal Health and AmerisourceBergen, two of the nation's biggest drug wholesalers. The companies said Mr. Spitzer was looking for info about the wholesalers' practice of occasionally buying drugs from each other, rather than from manufacturers. Neither the companies nor Mr. Spitzer's office would provide any color commentary on the probe, but analysts speculated that it might have to do with counterfeit drugs slipping into the system via this secondary market. Though analysts also said these trades were a small and shrinking part of the wholesalers' operations, their shares fell more than 2% each on the news. Shares of McKesson, the third major U.S. wholesaler, also fell more than 2%, though it hasn't been subpoenaed.
ShopKo Sold
Discount retailer ShopKo agreed to be bought by a private equity firm for about $715 million. ShopKo operates about 218 Pamida stores and about 141 ShopKo stores in the western U.S. The buyout by Minneapolis-based Goldner Hawn Johnson & Morrison marks the latest episode in a wave of retail consolidation, including mergers between Kmart and Sears and Federated and May. ShopKo's shares jumped more than 14%.
Sears Holdings plans to lay off 500 workers, according to a new filing with the state of Illinois, double the amount it warned about last week. The company, formed last month in the $12.3 billion purchase of Sears by the once-bankrupt Kmart, has predicted some $500 million in cost savings from the merger, though it has also promised that most of its 400,000 employees will keep their jobs. Its shares rose nearly 2% today to more than $141.
MG Rover Bankrupt; Threat to Blair?
MG Rover Group, Britain's last big auto maker, filed for bankruptcy protection. The British government immediately offered a loan of about $75 million to MG Rover's suppliers, to dissuade them from cutting jobs. Prime Minister Tony Blair has a big stake in the matter, having just set a May 5 date for the next national election. Though his Labour Party is expected to win, it has been losing support in recent polls. The health of the U.K. economy is its sharpest weapon in the fight, and its main counter to widespread disgust with Mr. Blair's support for the Iraq war. Having 6,000 MG Rover employees and about 15,000 suppliers' employees at risk of unemployment won't help Labour's case much. The 100-year-old MG Rover has in various incarnations produced such snazzy cars as the MGB, the Triumph and the Austin Healy. But it has struggled financially for several years; the German media called it "the English Patient" when BMW bought it in the 1990s. There was hope that a merger deal with Chinese auto maker Shanghai Automotive Industrial Co. would save the day and win a huge government bridge loan; but the deal collapsed last night. Though the deal could still go through, SAIC may simply wait for MG Rover to enter bankruptcy to take the juicier bits.
Stocks Stumble
After gaining for four straight days, U.S. stocks stumbled at the end of the week, though they did manage to turn in the first positive week in more than a month. The Dow fell about 85 points, with about 1.66 billion shares changing hands on the Big Board. The Dow rose a net 57 points on the week. Dow component AIG fell nearly 2% on a New York Times report that documentation of a sketchy reinsurance deal between AIG and Berkshire Hathaway unit General Re was altered by General Re. GM, another Dow component, slid more than 3% after Deutsche Securities became the latest of many analysts to downgrade its beaten-up shares. The S&P 500 fell about 10 points, and the Nasdaq fell about 19 points. Crude-oil prices fell to nearly $53 a barrel on the New York Mercantile Exchange. U.S. Treasury bond prices fell, sending yields higher. The dollar rose against the Japanese yen and the euro. Asian stocks were mixed, while major European markets were mostly higher.
Postal Service Seeks Rate Hike
The U.S. Postal Service has asked the federal government for permission to raise the price of a first-class stamp to 39 cents from 37 cents. It said it would withdraw the request if Congress overturned a 2003 law requiring it to set up a $3.1 billion escrow fund. It may take a year for the fast-moving government to approve the rate increase, which would be the first since 2002.
Report: Rudolph to Plead Guilty to Olympics Bombing
Eric Rudolph will plead guilty to a series of late-1990s bombings in the southern U.S., including the 1996 bombing at the Atlanta Olympics, the Associated Press reported. Mr. Rudolph, who was captured two years ago after a five-year manhunt in the mountains of western North Carolina, will also plead guilty to a 1998 bombing at an abortion clinic in Birmingham, Ala., along with two 1997 bombings in downtown Atlanta, one at a lesbian bar and another at an abortion clinic, the report said. Jury selection in his trial for the 1998 bombing began this week. If convicted in that case, Mr. Rudolph faced the death penalty. In a deal with prosecutors, Mr. Rudolph will get four life sentences instead, the AP said. As part of the deal, he told investigators the location of 250 pounds of dynamite hidden in the North Carolina mountains, the AP said. The Olympics bombing killed one person and injured 100 more, while the Birmingham clinic bombing killed one person and injured another.
Spammer Sentenced to Slammer
Jeremy Jaynes, the first person in the U.S. to be convicted of felony spamming charges, was sentenced to nine years in prison by a Virginia judge. The sentence was suspended pending appeal. Attorneys for the Raleigh, N.C., native say the sentence is too long, especially considering the fact that Virginia's law was passed just two weeks before he was charged. Prosecutors said Mr. Jaynes was one of the world's top 10 spammers at the time of his arrest, sending some 10 million emails a day through Virginia-based America Online under a false identity and grossing a cool $750,000 a month. Mr. Jayne did not deny the spamming, but his attorney argued that Virginia's law was poorly crafted and violated his First Amendment right to free speech.
No Patent for PBJ
A federal appeals court rejected J.M. Smucker's effort to patent its crustless version of the peanut butter and jelly sandwich. Smucker's bought the idea for the "Uncrustable" sandwich, which it sells frozen and in roughly the shape and size of a pierogi, from its North Dakota inventors in 1995. Smucker's won patent protection for the treat in 1999. Before long, though, smaller operators were trying to nibble at its share of the crustless PBJ market, which generated an estimated $27.5 million for Smucker's last year. When the company tried to expand its patent, the U.S. Patent Office turned it down, saying the process of making Uncrustables wasn't unique, pointing to evidence in a cookbook and a recipe printed in a newspaper. Smucker's countered by noting that it sealed its PBJs with a special process, rather than by "commingling the two bread slices into an amorphous homogenous mass" as other cooks might do. A federal appeals court was not impressed. "It is a patent that never should have been issued," Adam Jaffe, economics professor at Brandeis University, told the Wall Street Journal earlier this week. "This is a technology -- if you can call it that -- that has been around in many forms for many years."
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TODAY'S MARKETS
The Dow industrials, burdened by hefty losses at AIG and GM, finished down 84.98 points at 10461.34, snapping a four-day winning streak. Analysts, though, were upbeat about stocks.
http://online.wsj.com/article/0,,SB1112958...tml?mod=djemTEWWal-Mart's ex-vice chairman had subordinates create fake invoices to get the firm to pay for personal expenses, papers suggest. The questionable activity appears to involve dozens of transactions, including hunting vacations and alligator boots.
http://online.wsj.com/article/0,,SB1112914...tml?mod=djemTEWThe FDA ordered drug makers to include stronger warnings on their painkiller labels and pressured Pfizer into pulling Bextra from the market.
http://online.wsj.com/article/0,,SB1112879...tml?mod=djemTEWWhen Warren Buffett directed his lawyers to turn over documents of a deal with AIG to regulators, he set off a chain reaction that dashed Hank Greenberg's career -- and will land both before prosecutors in a burgeoning scandal.
http://online.wsj.com/article/0,,SB1112913...tml?mod=djemTEW