- GM ousts CEO, vows progress. Faced with large challenges, General Motors said Tuesday CEO Frederick "Fritz" Henderson will step down and Chairman Edward Whitacre will take his place until a permanent replacement is found. Whitacre, the former AT&T chief installed by the Obama administration, said GM needs "to accelerate our progress," and that the next step is to return the company to profitability and repay tens of billions of dollars in loans owed to U.S. and Canadian taxpayers. GM will presumably focus on selling off brands it has struggled to shed outside its four core brands, Chevrolet, Cadillac, Buick and GMC.
- Data suggest fragile recovery. A medley of economic data Tuesday suggested the U.S. recovery is still alive, but fragile. Manufacturing rose for the fourth straight month in November, though at a slower pace. And even as the housing market bounced back in October, construction spending was flat. The ISM said its index of national factory activity slipped to 53.6 in November from 55.7, below economist calls for 55 (readings above 50 indicate expansion). The report's employment index slipped to 50.8 from 53.1 in October, which had been the strongest showing since April 2006. New manufacturing orders rose to 60.3 from 58.5. Pending sales of previously owned U.S. homes rose for the ninth consecutive month to the highest level in 3.5 years. Signs of strength were also evident in U.S. auto sales, which edged higher in November, led by an outsized gain for Hyundai (OTC:HYMLF) and mixed results for rivals.
- Another suitor calls as clock ticks for Saab. Beijing Automotive Industry Holding, a possible bidder for GM's Saab, is only interested in parts rather than all of the automaker, sources say. GM said Tuesday it will review all bids for the brand and decide by month-end whether to sell or kill the Swedish unit after Koenigsegg reneged on an agreement to buy the automaker last week. Spyker Cars, Merbanco, and Renco Group have also expressed interest, sources say. Beijing Auto was part of Koenigsegg's bid.
- Google bows to publisher pressure. Under fire from publishers who want to yank their news from its search engine, Google (GOOG) said Tuesday it will allow publishers to set a daily limit on how many articles readers can see for free. The change will let publishers, who have complained that Google is earning revenue off their free content, limit readers to five free articles per day. News Corp.'s (NWS) Rupert Murdoch has been one of the most vocal critics of Google's excerpting from its content.
- Nokia Siemens ups Nortel bid. Nokia Siemens (NOK, SI) is challenging Ciena (CIEN) in bankruptcy court after the U.S. networking gearmaker won an auction for Nortel's optical networking and carrier ethernet business. Nokia Siemens said it's upping its offer to $810M in cash from a prior offer of $770M, which was trumped by Ciena's $769M offer of cash and debt. The court will decide Wednesday whether to approve the deal. If Ciena wins, the deal would vault the company to No. 3 in the optical network equipment market, behind rivals Alcatel-Lucent (ALU) and Huawei Technologies.
- Candidates to BofA: Break it up. Bank of America (BAC) has been told by two prospective CEO candidates that it should consider breaking itself up, sources say. So far, the board overseeing the search has stood fast against such a move, a snag that could delay the replacement process even longer. The search to fill departing CEO Ken Lewis' shoes has already gone beyond several self-imposed deadlines. One of the candidates who suggested a breakup is Michael O'Neill, a Citigroup (C) director and CEO of Bank of Hawaii Corp. (BOH), sources said.
- Cisco plays chicken with Tandberg shareholders. Cisco Systems (CSCO) said Wednesday it now controls 84% of shares in Norway videoconferencing developer Tandberg, and said it will not extend its $3.4B offer past Dec. 3 after pushing it off from a previous Dec. 1 deadline yesterday. If it does not gain control of 90% of Tandberg's shares (which would force the other 10% to sell) by Thursday, Cisco said it will decide whether to withdraw its offer (and watch shares plunge) or waive the 90% condition. Analysts say Cisco would gain operational control of Tandberg at current levels.
- Morgan draws up CICC short list. Morgan Stanley (MS) has shortlisted KKR, Bain, Carlyle, General Atlantic and TPG as bidders for the firm's stake in CICC, one of the most successful investment banks in China, sources say. One foreign buyer - Taiwan's Fubon Financial - was also selected to conduct due diligence, despite possible tensions around cross-border investments. Morgan paid just $37M for a 34.3% stake in CICC 13 years ago. The stake has been profitable for Morgan, but it doesn't like that it lacks control of management decisions at the Chinese bank. Sources say Morgan is seeking $1.2-1.5B for its stake.
- SEC intensifies insider trading probes. The SEC, itself under fire for being lax in its oversight duties, has reportedly delivered at least 36 subpoenas to hedge funds and brokerages over the past month alone. One investigation is said to focus on Sears' (SHLD) aborted pursuit of home-furnishings retailer Restoration Hardware in 2007. Others focus on the role of Goldman Sachs (GS) bankers in roughly a dozen healthcare deals since 2006. It's unclear if the subpoenas are linked to the insider-trading case involving New York hedge fund Galleon Group.
- GE wins pay delay in NBC sale. GE (GE) will delay paying Vivendi (OTC:VIVDY) cash for its $5.8B purchase of the French media group's stake in NBC Universal, a move that will help boost GE's cash flow, sources say. The stake purchase is needed for a NBCU joint venture GE plans with cable operator Comcast (CMCSA). Sources said Tuesday that GE and Vivendi agreed to a $5.8B valuation, though the payment schedule was unclear. Now sources say Vivendi will only get its money once the Comcast (CMCSA) deal closes, which could take more than a year due to regulatory reviews. If the deal doesn't close by late 2010, Vivendi would be entitled to a payment of up to $2B from GE. Separately, sources say Comcast and GE agreed to value Comcast's cable channels at as much as $7B, potentially lowering the amount of cash the cable company would have to pay into the JV.
- Mortgage apps inch up. Mortgage applications rose 2.1% last week, including a 1.7% increase in refinancing, MBA said Wednesday. The average 30-year fixed mortgage rate fell three points to 4.79%, the lowest rate since May.
- Northrop yanks Air Force tanker bid. Northrop Grumman (NOC), the third-largest defense company in the U.S., appears ready to pull its bid for the $35B Air Force refueling tanker program, complaining of "financial burdens" over the draft request for proposals, although some analysts think the threat may be a play for more negotiating power. Northrop and partner EADS had been competing since September against Boeing (BA) to build the refueling tankers. The Air Force plans to buy 179 tankers starting in 2011, at the rate of about 15 planes a year.
- Investors gain China foothold. China said it will allow foreign firms and individuals to establish limited partnership firms in the country starting March 2010, a move that could encourage some overseas investors to enter the domestic market. The State Council didn't specify how extensive the change would be, saying only that it would not apply fully to "investment-oriented" partnerships in China. Right now, foreign-invested private equity funds can be structured as limited partnerships through complex offshore platforms, but must be structured as corporations or unincorporated entities if investing onshore through yuan-denominated funds.
- BoJ buckles down on deflation. Just one day after saying it would initiate a new loan program to pump more liquidity into the system, the Bank of Japan injected ¥1T ($11.5B) into short-term money markets Wednesday. On Tuesday, Japan's central bank called a surprise policy meeting to unveil steps to fend off deflationary pressures and a surging yen, saying it will arrange a new ¥10T ($120B) facility. "While Japan's economy is picking up, there is not yet sufficient momentum to support self-sustaining recovery in business, fixed investment and private consumption," the BoJ said.
- Actively managed funds: wheel of fortune? A new study says investors casting their fortune with "active" fund managers in the hope of beating cheaper index funds tend to lose out. "People don't understand the effects of chance [on returns]," said Eugene Fama, co-author of the study and professor of finance at the University of Chicago. Based on 10,000 simulations of what investors could expect from actively managed funds, Fama and Dartmouth professor Kenneth French found that outside the top 3% of funds, active management lags results that would be delivered due simply to chance.
Earnings: Wed. Before Open
- Charming Shoppes (CHRS): Q3 EPS of -$0.42 misses by $0.29. Revenue of $460M (-16.8%) vs. $486M. SSS -13%. (PR)
Earnings: Tue. After Close
- Shanda Games (GAME): Q3 EPS of $0.24 beats by $0.03. Revenue of RMB1.27B ($186M, +45%) in-line. Shares +1.3% AH. (PR)
- Shanda Interactive Entertainment (SNDA): Q3 EPS of $1.08 beats by $0.20. Revenue of RMB1.38B ($203M, +48%) vs. RMB1.35B ($198M). Shares +2.2% AH. (PR, earnings call transcript)
Asia stocks were mostly higher Wednesday, but Europe markets have moved lower and futures are slightly in the red.
- Asia: Nikkei +0.4% to 9609. Hang Seng +0.8% to 22290. Shanghai +1.1% to 3270. BSE -0.2% to 17170.
- Europe at midday: FTSE -0.5% to 5285. CAC -0.1% to 3772. DAX -0.3% to 5758.
- Futures: Dow -0.1% at 10451. S&P -0.1% to 1107. Nasdaq -0.1%. Jan. crude -0.8% to $77.72. Feb. gold +0.9% to $1,210.50. Mar. 30-year Tsy -0.18% to 121-13. 10-year -0.16%. 5-year -0.07%. Euro flat vs. dollar. Yen -0.5%. Pound +0.4%.
Wednesday's Economic Calendar
- 7:00 MBA Mortgage Applications
7:30 Challenger Job-Cut Report
8:15 ADP Jobs Report
9:30 Geithner: OTC Derivatives reform
10:30 EIA Petroleum Inventories
1:15 PM Fed's Lacker: Economic Outlook
2:00 PM Fed's Beige Book
- Notable premarket earnings: CHRS
- Notable post-market earnings: ARO, PSS, SNPS
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