Merrill Lynch in $8 B Deal

Elena
13 Feb, 2006
New York City

A report warning about intensifying competition for Google from Yahoo and Microsoft, as well as the absence of major economic and earnings news, sent stocks lower. Merrill Lynch drew a positive reaction with news that it is near a deal to buy half of fund manager BlackRock for about $8 billion. Microsoft released software with push e-mail function built-in for handheld devices made by HewlettPackard, Chunghwa Telecom, Asus and Fujitsu Siemens.

U.S. MARKET AVERAGES

Stocks opened lower in line with futures predictions, reflecting a downbeat report on Google, downgrade of Starbucks and the lack of significant economic and earnings data. Acquisition news involving Merrill Lynch was also in focus.

Technology stocks fell after Barron's warned in a negative article on Google that the company’s shares could be cut in half over the next year on competition from Microsoft and Yahoo and pricing pressures for online ad sales.

UBS downgraded coffee chain operator Starbucks Corp. to neutral from buy, citing a slowdown in the stock’s upside movement and a potential for slower same-store sales growth.

Merrill Lynch & Co is reported to be in advanced talks to acquire a large stake in fund manager BlackRock for $8 billion.

Microsoft released software with push e-mail function built-in for handheld devices made by HewlettPackard, Chunghwa Telecom, Asus and Fujitsu Siemens. However, Research in Motion leads the push e-mail market with its popular BlackBerry device.

Energy stocks showed modest weakness in the early going. The semiconductor and HMO sectors traded slightly below the flat mark. Internet stocks dropped on a notable slide in Google ((GOOG)).

The airline sector posted a gain of nearly 1%, supporting a modest advance in the Dow Jones Transportation sector. Bank and retail stocks also moved modestly to the upside.

In the first hour of trading, the Dow Jones industrial average rose 2.96, or 0.03%. The Standard & Poor''s 500 index was down 2.90, or 0.23%, and the Nasdaq dropped 12.35, or 0.55%.

Bonds extended last week''s decline, with the yield on the 10-year Treasury note edging up to 4.59% from 4.58% late Friday, while the two-year Treasury yield held steady at 4.68%.

MOVERS AND SHAKERS

Agilent Technologies ((A)), maker of electronic measurement solutions, announced Q1 profit more than doubled from last year. The company reported net income of $154 million, or 32 cents per share, up from $71 million, or 15 cents per share a year ago, exceeding estimates of 30 cents per share. Including a $2.7 billion gain from the sale of certain businesses, the company's Q1 profit was $2.82 billion, or $5.83 per share. For Q2 the company predicted a profit range of 35-40 cents a share per share compared with analyst estimates of 36 cents per share. The stock fell 3.7%.

Genentech ((DNA)) and majority owner Roche Holdings announced they stopped recruiting for a Phase III trial of Avastin to treat post-surgical adjuvant colon cancer. Outside of colon cancer, there were more deaths among those taking the Avastin therapy with Xelox than those taking Folfox or Folfox with Avastin, the companies said. The company’s shares fell 1.5%.

BlackRock ((BLK)) surged 12% on report that Merrill Lynch & Co is in advanced talks to acquire a large stake in the fund manager for $8 billion.

The Home Depot Inc. ((HD)) is in talks to buy a 49% stake in China's Orient Home, one of the mainland's leading do-it-yourself chains, for more than $200 million. The stock gained 1.6%.

Celestica Inc ((CLS)), electronics manufacturing services company, was upgraded to buy from neutral at Merrill Lynch, citing valuation and expectations of improved operational performance. The stock rose 5.6%.

INTERNATIONAL MARKETS NEWS

Asian-Pacific benchmarks finished largely in the negative with Tokyo leading the decliners. The Nikkei tumbled 2.3%, or 380.17 points on strong export data which renewed speculations that the Bank of Japan would tighten its monetary policy. South Korea’s Kospi and Sydney All Ordinaries fell 1.1% each, while the Bombay Stock Exchange Sensitive index gained 0.4% and Singapore Straits Times gained 0.3%.

European stocks advanced at mid-day, supported by higher close of U.S. markets Friday and strong auto sector on the back of steady oil and weaker euro. Auto stocks like Volkswagen. BMW, DaimlerChrysler and Renault rose above 2.5%. The German DAX 30 rose 0.3%, the French CAC 40 gained 0.1%, and London’s FTSE 100 added 0.1%.

OIL, METALS, CURRENCIES

Crude oil prices hovered round $62 a barrel, but are expected to rise again as Iran’s tensions keep markets on the alert. Light sweet crude for March delivery gained 9 cents to $61.93 a barrel. London Brent rose 25 cents to $59.89.

European gold traded lower Monday. In London gold fell to $546.60 bid per troy ounce from $547.60. In Zurich the precious metal traded at $546.20, down from $550.40. In Hong Kong gold dropped $14.20 to close at $545.30. Silver opened at 9.26, down from $9.30.

The U.S. dollar grew stronger against other major currencies. The euro was quoted at $1.1887, down from $1.1901. The dollar bought 118.19 yen, down from $117.88. The British pound stood at $1.7385, down from $1.7441.

EARNINGS NEWS

Mercury General Corp., ((MCY)), private passenger automobile insurance underwriter, posted Q4 income of 84 cents a share, downs from $1.36 a share in the year-ago quarter. Company-wide net premiums written were $728 million in Q4 of 2005, up 8%. Q4 net income includes net realized investment gains, net of tax, of 1 cent a share, and net realized investment gains, net of tax, of 19 cents a share for the entire year. Included in net income as well are hurricane losses, net of tax benefit, of 29 cents a share in Q4 of 2005, and hurricane losses, net of tax benefit, of 32 cents a share for the 2005 year.

ServiceMaster Core, ((SVM)), maker of Terminix pest control and lawn care products, reported Q4 net income of 9 cents a share, down from 60 cents a share in the year-ago period, missing analyst estimate by a penny. Income from continuing operations came to 8 cents a share.

K&F Industries Holdings Inc., ((KFI)), maker of aircraft wheels, brakes and other products, reported Q4 earnings of 41 cents a share on sales of $105.6 million, topping analyst estimate for a profit of 34 cents a share.

Great American Financial Resources Inc, ((GFR)), market retirement products company, reported Q4 net income of 16 cents a share, down from 48 cents a share in the year-earlier period. Q4 core earnings from continuing operations before significant items advanced to $1.38 a share, up from $1.20 a share in the same period the prior year.

Gilat Satellite Networks Ltd, ((GILTF)), satellite networking technology company, reported Q4 earnings of 4 cents a share, up from a loss of 8 cents a share a year-ago despite revenue decline. The Israeli company said that its backlog rose to $206 million as of Dec. 31 from $192 million a year ago.

Orbotech Ltd, ((ORBK)), maker of systems that inspect circuit boards and flat panel displays, reported that Q4 net income jumped 84.6% to 36 cents a share on 9.8% revenue growth, in line with analysts’ predictions. The company, said it has recently received orders worth an additional $20 million from two companies in the Far East that will be filled during 2006.

Radica Games Ltd, ((RADA)), developer of electronic games, videogame accessories and high-tech toys, reported that it reversed to Q4 profit 18 cents a share, up from 9 cents a share on 5.1% higher sales. Sales reached $45.7 million from $43.5 million. The electronic-games segment performed the best, offset by lower VGA sales as videogame-platform producers are in transition to new models, the company announced. Gross-profit margin grew to 41.5% from 35.1%.

Syneron Medical Ltd, ((ELOS)), producer of medical devices for aesthetic applications, reported Q4 net income growth of 47% to 43 cents a share, up vs. 30 cents a share in the year-ago period on 36% higher sales, missing analyst view of 46 cents a share. The company''s gross-profit margin was level with the year-earlier period at 87%.

Alpha Natural Resources Inc, ((ANR)), coal producer, reported Q4 net income of 20 cents a share up more than double from 8 cents a share in the year-ago period on revenue growth, beating analyst estimate of 13 cents a share. The company announced that current quarter earnings include a previously announced after-tax charge of 5 cents a share for stock-based compensation.

Holly Corp, ((HOC)), petroleum refining and pipeline transportation company, reported Q4 earnings of $1.31 a share, up from a profit of 23 cents a share a year-ago on revenue growth, missing analyst estimate of $1.38 a share. The company said its latest earnings were boosted by higher refined product margins, which went to $13.76 per produced barrel in the period from $7.03 a barrel a year ago.