Wall Street Breakfast: Must-Know News

by: SA Editor Yigal Grayeff
SA Editor Yigal Grayeff
Seeking Alpha's flagship daily business news summary, gives you a rapid overview of the day's key financial news. It is published before 7:00 AM ET every market day and delivered to over 900,000 email subscribers.

  • GE to buy France's Converteam. GE (NYSE:GE) has just announced that it has agreed to acquire 90% of Converteam, a French provider of electrification and automation equipment and systems, for $3.2B. GE is buying the stake from a controlling shareholder group that includes management, Barclays Private Equity (NYSE:BCS) and LBO France. Converteam generated 2010 sales of approximately $1.5B and EBITDA of around $239M, and achieved a 36% growth in orders vs. 2009.
  • Wal-Mart attempts to avoid massive class-action suit. Wal-Mart (NYSE:WMT) will today attempt to prevent a sex discrimination lawsuit from becoming a massive class-action case. At a Supreme Court hearing, a small group of female employees who are suing the retailer for discrimination in pay and promotions will try to persuade justices to let them represent a nationwide suit that could include up to 1.5M current and former workers. Wal-Mart's supporters warn that if the judges allow the case to become a class action suit an avalanche of cases would swamp companies in the U.S. However, this particular lawsuit is not itself expected to prove ruinous to Wal-Mart, with a Morningstar analyst saying that even an eventual $25B ruling would not dramatically affect his firm's valuation of the retailer.
  • Amazon advances cloud ambitions. Late yesterday, Amazon (NASDAQ:AMZN) rolled out Amazon Cloud Drive and Amazon Cloud Player, which let consumers upload, store and access files from any computer and from Android-based (NASDAQ:GOOG) smartphones and tablets. Amazon plans to charge for its Cloud Drive service, though it's offering users with an Amazon account 5GB of storage for free on hopes consumers will like the free service enough to pay for an upgrade. The moves preempt similar offerings that are reportedly in development by both Google (GOOG) and Apple (NASDAQ:AAPL), and show just how serious Amazon is about transforming itself into more than just an e-retailer.
  • Rio Tinto continues efforts to buy Riversdale. Rio Tinto (NYSE:RIO) is continuing its efforts to take over Riversdale Mining (OTC:RFLMF) and is in talks to buy stock owned by a major shareholder in the Australian coal miner. Sources say the prospective seller is Brazil's CSN, which holds 19.9% in Riversdale. Rio now owns 41.04% and today extended a sweetened $3.9B bid for its target, saying that it would raise its offer to A$16.50 ($16.90) a share from A$16 should it increase its stake beyond 47% by April 6. A slightly different revised deal expired yesterday. Premarket: RIO +1.9% (7:00 ET).
  • Siemens plans Osram IPO as part of revamp. Siemens (SI) plans to float its Osram lighting unit in the fall as part of a major restructuring in which it will also add a new division. Siemens plans to remain an anchor investor in Osram, which is the world's second-largest lighting company and is estimated to be worth €5B-€7B ($7B-$10B). The new division will be called infrastructure and cities, and will join Siemens' existing industry, energy and healthcare businesses. CEO Peter Loescher, who pledged to slim the conglomerate down, said the aim of the revamp was to help the company top €100B in business volume in the next few years. Premarket: SI -0.5% (7:00 ET).
  • Home Depot to repurchase shares. Home Depot (NYSE:HD) announced yesterday evening that it would issue $2B in senior notes. Half of the proceeds will be used to refinance $1B of senior notes that came due this month. The other half of the proceeds will be used to repurchase $1B of stock through an accelerated share repurchase program. The retailer also reiterated its FY'11 outlook of a 2.5% gain in sales with earnings per share of $2.20, excluding share repurchases. In after-hours trading, HD +0.9%.
  • Saudi Arabia prepares 28% increase in oil rigs. Saudi Arabia, the world's top oil producer, intends to increase the number of rigs by 28% to 118, according to a report from investment bank Simmons & Co. State-run Saudi Aramco met with leading oil service companies such as Halliburton (NYSE:HAL) over the weekend to discuss the issue, with analysts saying the kingdom is trying to either maintain or increase its reserves. Saudi Arabia has increased production in recent weeks in order to make up for losses in world supply brought about by unrest in Libya. Crude futures -0.7% to $103.29 (7:00 ET).
  • Oilfield services companies issue profit warnings. Although it's in talks with Saudi Arabia about building oil rigs (see above), Halliburton (HAL) shares fell in after-hours trading after it warned that the Middle East conflict and weather-related events in North America and Australia would hit its Q1 2011 earnings. Schlumberger (NYSE:SLB) and Cameron (NYSE:CAM) also said that the events in the Middle East would hurt their income. In after-hours trading, HAL -2.1%, CAM -0.7%, SLB -0.1%. (See also: Schlumberger investor presentation, Cameron statement)
  • BP managers could face manslaughter charges over Gulf spill. U.S. prosecutors are considering charging BP (NYSE:BP) managers with manslaughter for their role in last year's explosion at the Gulf of Mexico oil well that killed 11 workers and caused a massive spill, sources say. The probe is focusing on whether the managers sacrificed safety in favor of speed and cost savings. Investigators are also examining the congressional testimony of former CEO Tony Hayward and other executives to determine whether it differs from what they knew. However, a former Justice Department official says a case against individuals would be difficult. Premarket: BP -2.4% (7:00 ET).
  • Toyota restarts some Japan production. Toyota (NYSE:TM) has resumed production at plants in Japan for the first time since the earthquake and tsunami brought manufacturing in the country to a complete halt. The carmaker began output at two factories that make three hybrid models and will gradually expand domestic production as its supply of parts recovers. Premarket: TM -0.65% (7:00 ET).
  • Cracks begin to show in Fed's QE2 stance. Two Fed officials said yesterday the Federal Reserve needs to continue with its planned $600B of bond purchases, despite some signs the recovery is strengthening. Charles Evans, president of the Chicago Fed and a voting FOMC member, said "slow progress in closing resource gaps and underlying inflation trends that are too low lead me to conclude that substantial policy accommodation continues to be appropriate." Eric Rosengren, president of the Boston Fed but not a voting FOMC member, said 'stubbornly high' unemployment and low core inflation justify moving forward with QE2. The comments stand in stark contrast to suggestions made over the last week by three Fed officials (Bullard, Plosser, and Fisher) that the Fed's accommodative monetary policy may need to reverse course in the near future.
  • eBay takes aim at Amazon with GSIC deal. Shares of eBay (NASDAQ:EBAY) fell 4.3% yesterday, despite the announcement of a deal that most analysts see as a net positive for the company. eBay's $29.25/share ($2.4B) purchase of e-commerce and marketing services provider GSI Commerce (NASDAQ:GSIC) is a bid to bring its legions of sellers more closely into the fold and offer them an expanding menu of services; it's also a challenge to Amazon (AMZN), as eBay tries to transform itself from an auctions website to an e-commerce platform. "This is a big hole strategically that eBay is trying to plug," said Stifel Nicolaus analyst Jordan Rohan, and "gives eBay more competitive weapons to minimize the market share shift to Amazon." GSIC closed +50.7% to $29.20. (More: Why eBay's purchase of GSIC is a 'no-brainer')
  • Bertelsmann eyes Warner Music and EMI publishing units. German media group Bertelsmann would consider buying the music publishing units of Warner Music (NYSE:WMG), which is up for auction, or Citibank-owned EMI. CFO Thomas Rabe said he expects Citibank (NYSE:C) to put EMI up for sale in the coming months, although he said that Bertelsmann wouldn't overpay for either unit and that the company had other plans if prices spiralled.
  • Ally to file for IPO. Auto and mortgage lender Ally Financial, which the U.S. government bailed out during the financial crisis with $17B, is expected to file for an IPO in the next two weeks, sources say. The float could ultimately raise $6B-$7B and would allow the government to begin divesting its 73.8% stake in the firm. The IPO would also be the latest in a handful of offerings by government-rescued companies, including GM (NYSE:GM).

Earnings: Tuesday Before Open

  • Apollo Group (NASDAQ:APOL): FQ2 EPS of $0.83 beats by $0.14. Revenue of $1.05B (-2% Y/Y) beats by $0.03B. Sees FY'11 revenue of $4.65-4.75. Shares -4.1% premarket. (PR)
  • Lennar (NYSE:LEN): FQ1 EPS of $0.14 beats by $0.19. Revenue of $557.9M (+8.7% Y/Y) beats by $50M. (PR)

Earnings: Monday After Close

  • Phillips-Van Heusen (NYSE:PVH): Q4 EPS of $0.93 beats by $0.11. Revenue of $1.4B beats by $0.03B. Shares +1.8% AH. (PR)

Today's Markets

  • In Asia, Japan -0.2% to 9459. Hong Kong -0.0% to 23060. China -0.9% to 2958. India +0.9% to 19121.
  • In Europe, at midday, London -0.3%. Paris -0.6%. Frankfurt -0.8%.
  • Futures at 7:00: Dow +0.1%. S&P +0.1%. Nasdaq +0.2%. Crude -0.7% to $103.29. Gold -0.5% to $1412.90.

Tuesday's Economic Calendar

The SA Currents team contributed to this post.

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