U.S. Stocks Drop; Skype IPO

Arthi Gupta
10 Aug, 2010
New York City

U.S. stocks trade lower after second quarter productivity fell 0.9%. BP Plc forms Gulf of Mexico oil spill escrow trust with the initial deposit of $3 billion. Skype plans for $100 million IPO. KKR cancels public offering of $500 million of common units.

[R]9:35 AM New York – U.S. stocks trade lower after second quarter productivity fell 0.9%. BP Plc forms Gulf of Mexico oil spill escrow trust with the initial deposit of $3 billion. Skype plans for $100 million IPO. KKR cancels public offering of $500 million of common units.[/R]

U.S. stocks fall on cautious optimism ahead of the FOMC report and Asian and European markets declined. Research in Motion Ltd was granted permission to continue Internet access services through its wireless devices in Saudi Arabia. Honda recalls vehicles citing ignition problems.

The U.S. Labor Department report today noted a decrease in labor productivity in the second quarter with a significant increase in hours worked in the second quarter outpacing an increase in output.

Productivity fell 0.9% in the quarter following an upwardly revised 3.9% increase in the first quarter. The Labor Department also said that unit labor costs rose 0.2% in the second quarter compared to a revised 3.7% decrease in the first quarter.

The Bank of Japan kept its interest rates flat and did not unveil any new measures to stem the strengthening of the yen against the dollar.

China''s trade surplus for July rose to an 18-month high of $28.7 billion compared to a surplus of $20.7 billion in June. A sharp decline in imports due to some tightening measures implemented domestically led to the higher surplus.

BP plc established a trust and made a $3 billion initial deposit of the previously-announced $20 billion escrow account to pay legitimate claims arising from the Deepwater Horizon incident and the resulting oil and gas spill.

“The purpose of the escrow account was to assure those adversely affected by the spill that we indeed intend to stand behind our commitment to them and to the American taxpayers,” said Bob Dudley, CEO of BP’s Gulf Coast Restoration Organization. “Establishing this trust and making the initial deposit ahead of schedule further demonstrates our commitment to making it right in the Gulf Coast.”

Two individual trustees have been named to the newly-established trust that will administer the account; John S. Martin, a former U.S. District Judge for the Southern District of New York, and Kent Syverud, Dean of the Washington University School of Law. The company further stated Citigroup will serve as corporate trustee and paying agent for the account.

BP said on June 16 that it would create a $20 billion escrow account and make initial payments of $3 billion in the third quarter of 2010 and $2 billion in the fourth quarter of 2010 to the escrow fund. It also agreed to follow up these with payments of $1.25 billion per quarter until a total of $20 billion has been paid in.

Google Inc. and Verizon Communications, Inc unveiled a proposed open Internet framework for the consideration of policymakers and the public which focuses on consumer protection and transparency and network management.

In a post in Google''s official blog Alan Davidson, Google director of public policy, and Tom Tauke and Verizon executive vice president, said “the joint proposal takes the form of a suggested legislative framework for consideration by lawmakers.""

Skype S.Ã r.l. announced its plan to go public through an initial public offering of up to $100 million of American depositary shares, or ADSs, each representing ordinary shares of Skype S.A., a joint stock company existing under the laws of Luxembourg.

In its Form S-1 filing with the U.S. Securities and Exchange Commission, the company did not disclose any details about the number of shares to be offered and its estimated price range. The company plans to file an application to list its ADSs on the Nasdaq Global Select Market.

Skype, which enables real-time communications over the Internet, was founded in 2003. In November 2009, Skype was acquired from eBay Inc.

Goldman, Sachs, JP Morgan and Morgan Stanley will be the joint global coordinators as well as joint book-running managers for the offering.

Honda Motor Co. Ltd., the Japanese automaker announced the recall of 427,000 vehicles in the U.S. and Canada, citing ignition problems that could allow the key to be removed without the transmission being shifted to park.

The recall, expected to begin in late September, affects 197,000 Accord and 117,000 Civic sedans from the 2003 model year and about 69,000 Element sport-utility vehicles from the 2003 and 2004 model years in the U.S.

Honda will remove the original interlock pin and lever and replace them with redesigned components. The company noted that the reshaped component will prevent the vehicle from being turned off without being in park.

KKR & Co. L.P. decided not to proceed with the public offering of $500 million of common units citing unfavorable market conditions.

The private equity firm filed its plan for the offering on May 10, 2010, according to regulatory filings. KKR commenced trading on the New York Stock Exchange on July 15, 2010.

KKR had planned to use the offering proceeds to fund growth of existing asset management business, to provide capital to support the continued development of capital markets business, to facilitate expansion into complementary lines of business and for other general corporate purposes.

Saudi Arabia''s telecoms regulator decided not to go ahead with a planned ban on BlackBerry messenger services as mobile companies operating in the kingdom have satisfied certain regulatory requirements, according to several media reports, which cited the state-owned Saudi Press Agency.

Reports quoted saying Communication and Information Technology Commission or ""CITC"" that the decision was due to ""positive developments in the completion of part of the regulatory requirements on the part of service providers.""

Saudi Arabia allowed Research In Motion Ltd. to continue BlackBerry services, while asking the Canadian company to put in place a system that would let the kingdom monitor user data, the reports added.

Earnings Review

Fossil, Inc., the fashion accessories and watch retailer said second quarter net sales for the quarter surged 30.6% to $412.56 million from $315.87 million in the same quarter last year. Net income in the quarter soared 227.9% to $54.49 million or 80 cents per diluted share as against $16.62 million or 25 cents per share in the prior-year quarter.

Kohlberg Kravis Roberts & Co., the investment firm second quarter fee revenues soared 69%% to $87.07 million from $51.48 million in the year-ago quarter. Net income attributable to the company plunged 92% to $29.91 million or 15 cents per unit from $365.83 million or 70 cents per unit in the same quarter last year.

Lions Gate Entertainment Corp., the motion picture maker reported first-quarter revenues decreased 13.9% to $326.58 million from $379.22 million last year. Net loss in the quarter was $64.07 million or 54 cents per diluted share compared to a profit of $36.35 million or 30 cents per share a year-ago quarter.

McDermott International Inc., the engineering and construction firm said second quarter revenue fell 15% to $1.33 billion from $1.56 billion in the same quarter last year. Net income in the quarter declined 18% to $76.0 million or 32 cents per diluted share, compared to $92.6 million or 40 cents per share for the year-ago quarter.

McDonald’s Corp., the fast-food chain retailer reported a 7% increase in its global comparable sales for July, reflecting strong sales across its segments. Beverages, premium menu offerings and breakfast items were the main drivers.

Nuance Communications Inc., the speech-based solutions provider stated third quarter revenue rose 13.4% to $273.2 million from $241.0 million in the same quarter last year. Net loss in the quarter narrowed 46.4% to $1.5 million or 1 cent per diluted share, compared to a net loss of $2.8 million or 1 cent per share in the prior-year quarter.