IBM to Invest $6 B in India

Elena
06 Jun, 2006
New York City

Stock futures recovered slightly from yesterday

[R]9:00AM Stock futures indicated a positive start.[/R]
U.S. stock futures pointed to a slightly positive start, recovering from yesterday’s steep declines when the Dow fell to its lowest close in almost three months and the Nasdaq had its biggest one-day percentage decline since January 20 as warnings from Federal Reserve Chairman Ben Bernanke and another top Fed official about inflation suggested the Fed was not finished raising interest rates.

On Tuesday, IBM ((IBM)) is expected to be in focus as the computer services company announced plans to invest nearly $6 billion in India over three years. General Motors Corp. ((GM)) will also attract attention before the company''s annual shareholders'' meeting later. Shares of Human Genome Sciences jumped 11.5% before the opening bell as Swiss drug maker Novartis AG unveiled a $507 million deal with the company. Shares of Bob Evans Farms Inc. rose 7.2% in pre-market trading after the restaurant operator reported Q4 adjusted earnings, exceeding analyst estimates. Standard & Poor''s 500 futures were up 1 point, above fair value. Dow Jones industrial average futures were up 9 points, and Nasdaq 100 futures were up 0.75 points.

School Specialty Inc, ((SCHS)), education products company, reported a Q4 loss of $1.42 a share, bigger than a loss of 37 cents a share a year-ago. If not for a goodwill impairment charge of $25.6 million related to its Visual Media business, the company added it lost 71 cents a share in Q4. Revene advanced to $180.9 million from $175.2 million in the same period a year ago. The company said the widening loss in Q4 was due to the declining performance of the Visual Media business and increased off-season operating costs related to acquired Delta operations. The analysts’ estimates were for a loss of 43 cents a share.

Korn Ferry International, ((KFY)), provider of executive search services, reported Q4 earnings of 45 cents a share, up from a profit of 27 cents a share a year-ago. On an adjusted basis, aside from net tax benefits of $6.5 million, the company earned 31 cents a share in Q4. Revenue advanced to $152.9 million from $131 million in the same period a year ago. The analysts’ estimate was for a profit of 29 cents a share. Korn Ferry expects earnings of 28 to 33 cents a share for Q1, apart from stock option expensing, on fee revenue of between $138 million and $145 million. Including stock option expensing, the company anticipates to earn 26 to 31 cents a share in the quarter.

Nortel Networks, ((NT)), telecommunications equipment maker, reported Q1 loss of 4 cents a share, bigger than a year-ago loss of 2 cents a share. Revenue came in at $2.38 billion, roughly flat with $2.39 billion a year ago. The latest results incorporate an income tax expense of $23 million, a shareholder litigation expense of $19 million, and a benefit of $35 million from asset sales. The analysts’ forecasts were for a loss of 1 cent a share.

Severn Trent, ((SVT.UK)), U.K. water utility, reported that net profit for the fiscal year ending March 31 advanced 41% to 223 million pounds ($417 million), or 63.5 pence a share on 13.9% revenue growth. The growth was due to price hikes and an increase in landfill and waste collection revenue from its Biffa waste management arm. Having previously announced plans to demerge Biffa, the company said it hopes to complete the demerger by the end of October. Severn Trent added it will return an undisclosed amount of capital to shareholders once the spin-off is complete. It announced it will lift its dividend by 3.1% to 31.97 pence and plans to adopt a new policy to increase dividends by 3% above inflation until 2010.


[R]8:00AM BAA PLC accepted a 10 billion pound takeover bid.[/R]
Operator of seven airports in Britain BAA PLC agreed to be acquired by a consortium led by Spanish airport operator and engineering company Ferrovial SA. for 10 billion pound ($19 billion) or 950.25 pence ($17.79) per share. The Ferrovial consortium also includes Canadian investment fund Caisse de Depot et Placement du Quebec and Singapore government fund GIC. Last week BAA rejected a 900 pence ($16.81) per share offer from Ferrovial as too low. The announcement came a day after BAA, which operates London''s Heathrow, Gatwick and Stansted airports, confirmed that it was in talks with Ferrovial and with another consortium. The Goldman Sachs-led group made a preliminary offer of 870 pence a share in May, which BAA rejected. On Tuesday, Goldman Sachs confirmed that the rival consortium had made a bid of 955.25 pence ($17.98) per share for BAA, including a declared final dividend of 15.25 pence.

Ferrovial said that BAA shareholders could opt to exchange their shares for a combination of cash and shares in a new company. In a filing with the Spanish stock market supervisor, the CNMV, Ferrovial said the shares in the new company would be listed on the AIM market of the LSE. BAA shares gained 2.1% to 947.5 pence ($17.84) in trading on the LSE.


[R]7:30AM Asian stocks track U.S. decline.[/R]
Asian markets closed lower. In Japan, the Nikkei 225 Index fell 1.81% to 15384.86, its lowest close since January 23. Trading exporters led declines. Electronics maker NEC was down 2.27%, Kyocera lost 2.43% and Konica Minolta shed 4.64%. Auto stocks also fell, as Nissan Motor declined 1.93% and Mitsubishi Motor dived 2.9%. In Hong Kong, the Hang Seng Index shed 0.27% to close at 15973.11. Property stocks, constituting a large component of the Hang Seng, declined on interest-rate concerns. The Hong Kong dollar is tied to the U.S. currency, and local interest rates follow those set by the Fed. Property stocks will keep underperforming until the U.S. interest rate cycle kicks in reverse. IPOs kept looming large in Hong Kong, with Shanghai-based developer Shui On Land launching a nearly $1 billion offering to help finance six projects in the mainland. Benchmarks in Australia, Malaysia, Indonesia and Singapore also declined. Taiwan regained some lost ground after being off 3.51% on Monday, while stocks in Shanghai remained flat. Markets in South Korea were closed for a holiday.


[R]6:30AM European shares fell broadly across the region.[/R]
European markets fell by mid morning. The FTSE Eurofirst had shed 12.9 points or 1% to 1,305.91, while the German Dax declined 40.8 points or 1% to 5,580.83 and the French CAC 40 dropped 66.4 points or 1.4% to 4,849.68. The takeover struggle for BAA saw another turn as Goldman Sachs announced it was prepared to offer 955.25p after market talk prompted the UK airport operator had been up to a revised 950.25p takeover offer from Grupo Ferrovial of Spain. Both bids include the BAA dividend of 15.25p. Ryanair shed 1.9% after the budget airline announced it anticipated profits growth of 5 to 10% this year if oil prices stayed close to $70 a barrel. Axa, the French insurance company, said it had reached an agreement to sell its Axa Re business to Stone Point Capital, the US private equity group. Axa dropped 1.2%. Novartis reported that it would pay up to $507m in milestone payments to the US biopharmaceuticals company Human Genome Sciences to acquire rights to Albuferon, a treatment being developed for chronic hepatitis C infections. Novartis declined 0.5%.

Light, sweet crude oil for July delivery dropped 20 cents to $72.40 a barrel and July Brent crude on London''s ICE Futures exchange declined 29 cents to $71.08 per barrel. Gold traded at $633.50 an ounce on Tuesday, down $10 an ounce from Monday''s close of $643.50. The dollar gained against the other major currencies. The euro dropped to $1.2906 from $1.2909, after it rose on Monday to its highest level since May 15. The greenback advanced to buy 112.39 Japanese yen from 112.16 the day before, while the British pound fell to $1.8720 from 1.8724 in New York.