10/11/05:
Microsoft & Gets Real And Settles with Real Networks
SUSIE GHARIB: A major milestone for Microsoft today: it has
reached a legal settlement with rival Real Networks, ending the last major
antitrust case against the software giant. Microsoft will pay $761 million
to Real Networks and pledged to promote Real Networks` music and game
services. In exchange, Real Networks will drop all its antitrust claims
against Microsoft. The two companies have been at odds for years over Real
Networks` digital media player. That product suffered after Microsoft
forced Windows users to use its own digital media system. When the two
companies announced the deal, Microsoft Chairman Bill Gates made it clear
that won`t be the case in the future.
BILL GATES, MICROSOFT CHAIRMAN & CHIEF SOFTWARE ARCHITECT: We`ve
agreed on the Windows front to make our platform as effective as possible
for Real. That is, to design the components and what we sometimes call an
OCX so that they`re available for their software to call. So, both in
terms of ease of engineering for them and the ease of use for the end user,
it`s more advantageous than it might have been before.
GHARIB: For its part, Real Networks has agreed to support Microsoft`s
MSN search product. The companies will also jointly promote a Real
Networks music subscription service called Rhapsody to Go.
GHARIB: When I talked to Real Networks` CEO Rob Glaser
today, I asked him why, after so many years, he decided to settle with his
long-time rival Bill Gates.
BOB GLASER, CEO, REAL NETWORKS:Well, we obviously, what we said publicly was when we filed the
lawsuit a little less than two years ago, it was a three-year process and
that we wouldn`t give people any inner information about anything other
than what was actually going on in the courtroom or on the financial side.
So we didn`t make any statements either way about whether we were
negotiating anything.
In terms of the actual sort what was I call the productive
conversation in Microsoft, it started about a year ago. We had released a
technology called Harmony that allowed for interoperability of different
digital rights management systems for music and I sent an e-mail message to
Bill Gates who I had known for the time 21 years suggesting that this might
be an interesting technology for us to work with Microsoft on, because they
also valued interoperability and that led to a series of technical and
business conversations that were kind of the antecedent to today`s
announcement.
GHARIB: And Mr. Glaser, why did you settle for this agreement that`s
part cash and some part soft credit as opposed for going all cash like
Microsoft has done in its other antitrust settlements?
GLASER: First off the agreement has a very substantial cash component.
It`s actually about $460 million of cash up front, and another $301 million
of cash that is paid out over an 18-month period. What we said in our
press release is that if Microsoft gives us subscribers from the marketing
distribution things they do, we will pay them sort of a market competitive
rate, a bounty if through, for those subscribers. So it turns out that the
deal is worth at least $761 million to us and if we get subscribers from
them out of this deal and we certainly will get some -- the question is how
many -- those subscribers are actually quite profitable for us, so the
actual value of the deal to us goes up from there.
So to answer the second part of the question, the reason we went this
way is we thought it was a better deal than a pure cash deal in terms of
the value that we`d get that would be directly measured in terms of
subscribers that we`d get that would be profitable and also indirectly
measurable things like the (INAUDIBLE) out of promotion that our services
would get on Microsoft`s websites and that the value of that both measured
and unmeasured would be quite substantial.
GHARIB: So what are you going to do with the cash? Can we expect some
acquisition from you?
GLASER: We haven`t made any specific pronouncements about what we`re
going to do with this cash. We`re going to do an investor call a little
later this afternoon and we`ll obviously answer some questions from
investors there. But I think it`s fair to say that we`ve been pursuing a
strategy that involves some acquisitions over the last two, two and a half
years we`ve made three acquisitions, two about $35 million, one about $15
million. We already frankly had a very good balance sheet even before this
transaction, had close to $400 million in cash and cash equivalents before
this. So the thrust is finding the right prospects to join forces with us
where we think there will be the technology and the services will be adding
to our business and we certainly will still be on the lookout for that.
GHARIB: Let`s talk a little bit about the service side of what you`re
doing with Microsoft. If you see any risk that Real Networks is going to
be relying on Microsoft for growth and as you said, it`s a 18-month
agreement that the relationship could disappear when the agreement expires,
is there any way you can push this partnership forward?
GLASER: Well, there`s several different dimensions, several of the
agreements last many, many years. The marketing pieces in terms of the
payments for the moneys go out over 18 years, although we think the value
that we get from that activity goes well beyond 18 months. So my view is
the following. Today we get very little distribution from Microsoft. We
have many distribution partners. We have our own distribution on the
Internet. We have partners with people like Comcast on the cable side. So
with this expands our distribution. I don`t have the concern that we will
expand our distribution too much. I think having broad distribution is
very good. And certainly if we (INAUDIBLE) with Microsoft, we`ll see what
makes sense for us to do going forward in the future.
GHARIB: (INAUDIBLE) We just have 15 seconds. Huge move on your stock
today. Is this sustainable?
GLASER: Well, I think we`ve got a terrific business. We`ve announced
our guidance this year is that our business will be before this settlement
like would be between $323 and $332 million in revenue, which was up from
about $266 million the year before and up from $200 million the year before
that. So we already had a business that was growing in a way that we
believe is sustainable and I think this just adds on top of that.
GHARIB: All right, well good luck to you Mr. Glaser. Thank you very
much for talking to NIGHTLY BUSINESS REPORT.
GLASER: Thank you very much.
Nightly
Business Report transcripts are available on-line post broadcast.
The program is transcribed by eMediaMillWorks. Updates may
be posted at a later date. The views of our guests and commentators
are their own and do not necessarily represent the views of
Community Television Foundation of South Florida, Inc. Nightly
Business Report, or WPBT. Information presented on Nightly
Business Report is not and should not be considered as investment
advice. Copyright
(c) 2005 Community Television Foundation of South Florida,
Inc. ALL RIGHTS RESERVED. Terms of use.
10/11/05:
Billionaire Investor Carl Icahn Targets Time Warner
PAUL KANGAS: The management of Time Warner is under increasing fire tonight
from billionaire investor Carl Icahn. He is ramping up his criticism of
the media company`s management and business strategy. In an open letter,
Icahn and other investors laid out their own plan for the company`s future.
Erika Miller reports.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Carl Icahn minces
no words in his open letter to Time Warner shareholders. He lashes out at
the company`s board of directors for what he calls quote, a dismal record
of mistakes and inaction, end quote. Specifically, he accuses Chairman
Dick Parsons and other executives of compounding problems caused by Time
Warner`s merger with AOL. Icahn criticizes them for selling valuable
assets, like Warner Music Group and a 50 percent stake in Comedy Central,
at fire sale prices. But industry analysts defended those sales.
TUNA AMOBI, MEDIA ANALYST, STANDARD & POOR`S: Management, based on
what they knew at the time and based on the fact that they were trying to
de-leverage the balance sheet, you know, I think investors actually look
back and look at those transactions as helping to reduce the huge debt
burden that the company had at that point.
MILLER: Carl Icahn also takes aim at Time Warner for what he calls a
bloated corporate cost structure. As proof, he points to the company`s
headquarters in New York, which cost $800 million to build and houses only
a small fraction of Time Warner employees. In response to Icahn`s
criticisms, Time Warner released its own statement touting its
accomplishments of the past three years. Among them: selling low-return
businesses, slashing debt, stabilizing AOL and settling government probes.
Time Warner shares fell today and they are down for the year, but some
analysts rate the stock a buy, saying it is poised for a turnaround.
AMOBI: And that`s based on, you know, improving fundamentals. That`s
based on the potential of the cable systems business to throw off
significant amount of free cash flow.
MILLER: Time Warner says it will share new strategies to boost
shareholder value in the coming weeks, but Icahn is already recommending
major strategic changes. The first is a $20 billion share buyback -- four
times what Time Warner`s board has already pledged. Icahn also wants to
see a spin-off all Time Warner cable assets, not just 16 percent as already
planned. And finally, Icahn wants a shakeup of the board with new
independent directors appointed. Last month, Icahn indicated he would seek
a seat on the company`s board, but analysts say that appointment seems
unlikely.
ROBIN DIEDRICH, MEDIA ANALYST, EDWARD JONES: You`d have to get quite a
bit more investors behind him to make some major changes like that. And,
really, from what I`m hearing most investors are fairly pleased with the
direction the company has been going and with what the CEO has been able to
do in the last couple years.
MILLER: But analysts do expect Icahn to continue his campaign for
change, leading up to the company`s annual meeting in May. Erika Miller,
NIGHTLY BUSINESS REPORT, New York.
Nightly
Business Report transcripts are available on-line post broadcast.
The program is transcribed by eMediaMillWorks. Updates may
be posted at a later date. The views of our guests and commentators
are their own and do not necessarily represent the views of
Community Television Foundation of South Florida, Inc. Nightly
Business Report, or WPBT. Information presented on Nightly
Business Report is not and should not be considered as investment
advice. Copyright (c) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
10/11/05: One On One With John C. Bogle, Founder & Former CEO The Vanguard Group
SUSIE GHARIB: There`s no one better to tell us about the failures of
the American financial system than John Bogle. The legendary mutual fund
pioneer has just come out with a book called "The Battle for the Soul of
Capitalism," looking at what has gone wrong with the American way of
investing. When I met with Bogle this morning, he explained why American
capitalism has been moving in the wrong direction.
JOHN C. BOGLE, FOUNDER & FORMER CEO, THE VANGUARD GROUP: We`ve gone
from a system where individuals, individual investors own 91 percent of all
stocks, back in the early 1950s, to only 32 percent now. They were direct
owners. They could look out for their own interests. But now we have an
institutional system where the agents of these owners, the pension plan
trustees and the mutual fund managers are the owners of stocks and they
simply aren`t paying attention to the interest of their principles. We
have basically an agency society that has failed.
GHARIB: Mr. Bogle, you say that the problems in corporate America are
more than just a few bad apples; it`s a bad barrel. So are you saying that
despite all the reforms we`ve seen and the CEO`s going to prison and all
the trials that the system is still broke?
BOGLE: The system has a long way to go to get where we want it to be.
There`s still much too much financial engineering on corporate books. The
accountants don`t seem to have a very stern eye on the corporations that
they, whose financial statement they audit.
GHARIB: You single out top several bad apples, and there`s some predictable
names like Ken Lay of Enron or Bernie Ebbers of Worldcom. But you also
single out Jack Welsh of General Electric. Why is he on your list of bad
Apples?
BOGLE: Well, the reason I have him in there, and I will grant you it`s
a close call, but the value of General Electric stock, the market
capitalization of General Electric is a lot of I think financial
machinations going on to smooth those earnings for years and years, and the
value of that stock has dropped by something like $250 billion, which is
more than the loss in WorldCom and Enron combined. A big drop in market
cap, almost 50 percent below the high, and I think that`s because of
financial engineering.
GHARIB: Let`s talk about what needs to be done to reverse course.
What do you see as the solution to fix the system?
BOGLE: The primary thing is we`ve had a failure of gate keepers, the
directors, the regulators, the accountants. But the one group that has
failed investors the most is the owners of these corporations. And if the
owners don`t care about the takeover of managers capital, who on earth
think about it should care?
GHARIB: Do you agree with President Bush`s plan for a ownership
society and his plans for personal savings accounts?
BOGLE: Well, on the ownership society, that is gone because we have an
inter mediation society with very little direct ownership by individuals.
And the individuals don`t have control other these accounts, the trustees
do. His approach, however, for personal savings accounts is I think by and
large the correct approach, and that is if we`re going to have personal
savings accounts, we should not entrust those resources to the wiles of the
mutual fund industry but rather have an index orientation where the
investors and personal savings accounts are doing something nice and
simple, owning a stock market and holding it for essentially their entire
life.
GHARIB: What`s at risk if the corporate world and the investment world
continue to do business as usual?
BOGLE: If they continue to do business as usual, the loser will be the
individual investor, the man on the street who is the beneficiary, the
pension plan or the owner of a mutual fund, because the costs of that
system are so high that in the long run you will get about 25 percent of
the compound rate of return the stock market delivers. You the owner put
up 100 percent of the capital, you the owner take 100 percent of the risk,
and you the owner get 25 percent in the long term market return, just
because of the excess cost of the system and the failure of the
institutional managers to represent you.
GHARIB: Is it too late to fix the system?
BOGLE: Never too late, not for an idealist like me. You keep at it
day after day, and change will come. What we need people to do is --
investors in particular, is to speak up and speak out and demand the change
they`re entitled to. If we can just wake up, investors of the world unite
is one of the themes in the book, if we can do that, we can fix the system.
GHARIB: Mr. Bogle, thank you very much.
BOGLE: Great to be with you, Susie.
Nightly
Business Report transcripts are available on-line post broadcast.
The program is transcribed by eMediaMillWorks. Updates may
be posted at a later date. The views of our guests and commentators
are their own and do not necessarily represent the views of
Community Television Foundation of South Florida, Inc. Nightly
Business Report, or WPBT. Information presented on Nightly
Business Report is not and should not be considered as investment
advice. Copyright (c) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
10/11/05: "Commentary"-Growing Old & Outgrowing Retirement & Healthcare
SUSIE GHARIB: Tonight`s commentator looks at an age-old problem: growing old and the
demographic challenges that it presents. Here`s Daniel Henninger, deputy
editor of the editorial page of the "Wall Street Journal."
DANIEL HENNINGER, WALL STREET JOURNAL EDITORIAL PAGE: In "Old Man
River," Oscar Hammerstein and Jerome Kern described an old man river who
"don`t say nothin` but must know somethin`." Well, what that old man knows
is that he`s about to overflow his banks as the American population and
indeed the world`s population gets older very fast. This spells trouble
with a capital "T" for the way we pay for retirement and our health care,
but not just here in the U.S. The "Wall Street Journal" recently reported
the simple numbers on the global economics of aging. Experts measure this
issue with something called the fertility rate. That`s the number of
children born per woman in a country. The break-even number is 2.1 to be
precise and if a nation`s fertility rate falls below that, a smaller number
of workers has to really produce to keep the economic pie from shrinking.
Only two major economies have fertility rates higher than two: India
at three and us at two. China? 1.6. That`s the first major economy that is
going to get older before it gets rich. Most of Europe is well below two.
With people living longer thanks to expensive medicine, their financial
support has to come from somewhere. Something`s got to give, but I`m going
to boil it down to one thought: growth. We need tax and regulatory
policies that max out on economic growth. Without it, we baby boomers in
Sun City won`t just be resting on the beach. We`ll be living on that
beach. I`m Dan Henninger.
Nightly
Business Report transcripts are available on-line post broadcast.
The program is transcribed by eMediaMillWorks. Updates may
be posted at a later date. The views of our guests and commentators
are their own and do not necessarily represent the views of
Community Television Foundation of South Florida, Inc. Nightly
Business Report, or WPBT. Information presented on Nightly
Business Report is not and should not be considered as investment
advice. Copyright (c) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
10/11/05:
"Paul Kangas' Stocks In The News"
PAUL KANGAS: Wall Street`s blue chips opened higher with buyers encouraged
by yesterday`s better than expected after the bell earnings from Alcoa and
Genentech. A rebound in GM stock also helped the Dow post a 68-point gain
early on with the NASDAQ up four. The blue chips lost their luster this
afternoon as oil prices surged and the tech-laden NASDAQ headed south. The
Dow Industrial Average came in with a gain of only 14.41 at 10,253.17. The
NASDAQ Composite lost 17.83 points ending at 2061.09. That`s a new three-
month low. Standard & Poor`s 500 down 2.46 ending at 1,184.87. In the
bond market, the 10-year note fell 9/32 to 98 27/32, putting the yield at
4.40 percent.
Big board volume leader on 20.7 million shares, General Motors (GM)
making a $0.94 comeback, traded as high as $27.80 during the session. Kurt
Kerkorian`s Tracinda Corp., it received antitrust approval to boost its
stake from 9.5 to 9.9 percent of GM stock and it will seek representation
on the board of directors.
Pfizer (PFE) down $0.15.
Corning (GLW) fell $0.46.
Lucent Technology (LU) a $0.04 drop.
Nokia (NOK) managed to gain $0.08, fifth in big board volume.
Texas Instruments (TXN) down $0.69.
Followed by Citigroup (C) $0.43 loss there.
Motorola (MOT) down $0.27.
Wal-Mart Stores (WMT), which received favorable comment in this week`s
"Barron`s` financial, up $0.48.
And ExxonMobil (XOM) up $0.90, along with higher oil prices.
Alcoa (AA) up $0.19 on the day. After the close yesterday, as we
reported, third quarter earnings $0.33, $0.04 above the Street estimate.
Today Standard & Poor`s repeated a "buy" recommendation on the stock.
IBM (IBM) doing well, up $1.94. Yesterday, Citigroup upgraded it from
"hold" to "buy" and today CS First Boston upgraded it from "neutral" to
"out perform."
McDonald`s (MCD), another Dow stock, showed no change at the close,
but it traded as high as $33.35 in the morning after UBS financial boosted
its price target to $43 a share.
Genentech (DNA) up $3.09. After the close yesterday, third quarter
earnings $0.35, up from $0.24 a year ago. Revenues shot up 46 percent. The
company sees 2005 earnings growth of about 50 percent.
Falconbridge Ltd (FCL), the big nickel producer, is going to be
acquired by Inco for $34 a share Canadian. That works out to about $29 a
share in U.S. funds. The other choice for Falconbridge shareholders is to
take 2/3 of a share of Inco. That`s worth about $29 as of today as Inco
stock moved up $0.94 to $43.97.
NCR Corp (NCR) up $1.29. Company boosted its third quarter earnings
guidance which had been $0.28 to $0.33, all the way up to $0.43 to $0.45 a
share because of better than expected results in its data warehousing
operations.
Big loser, Intl Rectifier (IRF) tumbling $6.33. The company now sees
first quarter earnings at $0.40 to $0.42 versus the $0.51 Wall Street
estimate. Standard & Poor`s downgraded it from "strong buy" to "sell."
Harley-Davidson (HDI) up $1.20. Citigroup upgraded "hold" to "buy" in
the belief that the Wall Street pessimistic outlook for the company is
already priced in the stock. Earnings due out tomorrow.
And Ryder System (R) up $1.18. The company`s board approved $175
million share buyback over the next two years.
And then we see Vail Resorts (MTN) up $1.81. Lehman brothers upgraded
it from "equal weight" to "over weight."
Volume leader on NASDAQ, Google (GOOG) down $4.55, a little profit
taking.
Microsoft (MSFT) dropped a nickel.
Apple computer (AAPL) closed in regular trading up $1.22, but after
the close those iPod sales being below expectations sent the stock as low
as $46 a share after hours.
Cisco Systems (CSCO) down $0.30.
No change in Intel (INTC), fifth in dollar volume.
Amgen (AMGN) was down $0.36.
Dell (DELL) dropped $0.29.
No change at all on Ebay (EBAY) on the day.
Oracle (ORCL) was a $0.07 gainer.
And Yahoo! (YHOO) down $0.43, tenth in volume.
Sigmatel (SGTL) down $3.52. This company supplies parts for Apple`s
iPod and it sees third quarter earnings of only $0.20 a share, well below
the $0.30 Wall Street earnings estimate. Company blames some delays in
orders.
Those are the stocks in the news tonight.
Nightly
Business Report transcripts are available on-line post broadcast.
The program is transcribed by eMediaMillWorks. Updates may
be posted at a later date. The views of our guests and commentators
are their own and do not necessarily represent the views of
Community Television Foundation of South Florida, Inc. Nightly
Business Report, or WPBT. Information presented on Nightly
Business Report is not and should not be considered as investment
advice. Copyright (c) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
10/11/05:
Market Stats
NET PERCENT
CLOSE CHANGE CHANGE
DOW CLOSE 10253.17 +14.41 + .1
HIGH 10312.88
LOW 10234.20
NASDAQ COMP. 2061.09 -17.83 -.9
HIGH 2085.61
LOW 2058.19
VOLUME 1,729.6
PREVIOUS 1,636.9
UP VOLUME 607.7
DOWN VOLUME 1,092.6
DOW TRANSPORTS 3687.73 +21.88 + .6
DOW UTILITIES 408.29 +2.26 + .6
CLOSING TICK +183
S&P 500 1184.87 -2.46 - .2
S&P 100 549.31 -.69 - .1
MIDCAP 400 683.91 -3.89 - .6
REUTERS/CRB 330.46 +4.50 + 1.4
NYSE COMPOSITE 7380.81 -4.76 - .1
VALUE LINE 390.57 -3.22 - .8
RUSSELL 2000 630.08 -7.89 - 1.2
DJW 5000 11830.22 -37.18 - .3
U.S. TREASURIES
5-YEAR NOTE 3.875%
Sept. 15,2010 98 8/32 -6/32 + 4.27
10-YEAR NOTE 4.25%
Aug. 15,2015 98 27/32 -9/32 + 4.40
30-YEAR NOTE 5.375%
Feb. 15, 2031 111 16/32 -18/32 + 4.60
LEHMAN BROS.
LONG BOND INDEX 1774.32 -4.56
DOW CLOSE 10253.17 +14.41 + .1
ADVANCES 1251
DECLINES 2061
NEW HIGHS 26
NEW LOWS 192
NET PERCENT
NYSE MOST ACTIVES 4PM CLOSE CHANGE CHANGE
GM GM 26.42 +.94 +3.7
PFE Pfizer 24.30 -.15 -.6
GLW Corning 17.79 -.46 -2.5
LU Lucent Tech 3.09 -.04 -1.3
NOK Nokia 16.90 +.08 +.5
TXN Texas Instrument 29.37 -.69 -2.3
C Citigroup 44.80 -.43 -1.0
MOT Motorola 20.55 -.27 -1.3
WMT Wal-Mart Stores 45.02 +.48 +1.1
XOM Exxon Mobil 59.40 +.90 +1.5
NASDAQ CLOSE 2061.09 - 17.83 - .9
VOLUME 1,885.1
PREVIOUS 1,433.8
ADVANCES 848
DECLINES 2149
NASDAQ ACTIVES
GOOG Google 306.10 -4.55 -1.5
MSFT Microsoft 24.41 -.05 -.2
AAPL Apple Computer 51.59 +1.22 +2.4
CSCO Cisco Systems 17.19 -.30 -1.7
INTC Intel 23.42 unch. unch.
AMGN Amgen 76.34 -.36 -.5
DELL Dell 32.53 -.29 -.9
EBAY eBay 40.46 unch. unch.
ORCL Oracle 12.08 +.07 +.6
YHOO Yahoo! 34.10 -.43 -1.3
AMEX CLOSE 1652.97 + 1.90 + .1
INDEX SHARES
DIA DIAMONDS TRUST 102.53 +.21 +.2
QQQ NASDAQ 100 37.94 -.19 -.5
SPY S&P DEP.RECEIPTS 118.48 -.11 -.1
STOCKS IN THE NEWS
AA Alcoa 22.85 +.19 +.8
IBM IBM 83.19 +1.94 +2.4
MCD McDonald's 32.34 unch. unch.
DNA Genentech 84.59 +3.09 +3.8
FAL Falconbridge 29.37 +2.96 +11.2
NCR NCR Corp 32.24 +1.29 +4.2
IRF Intl Rectifier 34.37 -6.33 -15.6
HDI Harley-Davidson 45.60 +1.20 +2.7
R Ryder System 34.43 +1.18 +3.6
MTN Vail Resorts 32.01 +1.81 +6.0
SGTL Sigmatel Inc 13.69 -3.52 -20.5
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