- RR Donnelley to buy Bowne. RR Donnelley & Sons (NASDAQ:RRD) announced Tuesday evening that it will buy Bowne (BNE) for $11.50 per share in cash, or $481M total. Donnelley called Bowne an "exceptional fit" and said the deal should be accretive to earnings within the first twelve months of completion. The news sent Bowne's shares up nearly 64% in after hours trading. Along with the purchase, Donnelley also reported Q4 earnings ahead of schedule, with a net loss of $0.39 per share, compared to a loss of $3.35 per share the year before. Excluding special items, earnings per share was $0.46 vs. $0.43 consensus. Revenue was down 7.6% Y/Y to $2.6B vs. $2.5B consensus.
- Xerox sues Google, Yahoo over search. Xerox (NYSE:XRX) filed suit against Google (NASDAQ:GOOG) and Yahoo (YHOO) last Friday, accusing them of violating Xerox's patents related to internet search. According to the lawsuit, Google Maps, YouTube, Adsense, Yahoo Shopping and other tools infringe on Xerox patents granted as long ago as 2001. Both Google and Yahoo deny the claims and intend to "defend against them vigorously."
- Google search faces antitrust probe. Google (GOOG) is the subject of a preliminary antitrust investigation launched by the European Commission. The probe will examine whether Google penalizes competitors in its search rankings, and whether it uses its search dominance in Europe to keep advertising prices artificially high. According to a Google blog posting, EC regulators received complaints from three companies, including a Microsoft (NASDAQ:MSFT) subsidiary called "Ciao from Bing."
- Support for Volcker rule starts to fizzle. The Obama administration is backing off its proposed "Volcker rule" in favor a watered-down version. Instead of issuing an outright ban on proprietary trading, the White House wants to give regulators some discretion to define proprietary trading and federally insured banks that want to run prop trading desks can do so if they keep higher cash reserves. Officials say they need flexibility to avoid disrupting the $7.2T Treasurys market, but the White House may just be trying to save face in light of strong congressional opposition to the original proposal.
- Yahoo, Twitter get cozy. Yahoo (YHOO) will announce a partnership with Twitter today, enabling Yahoo users to read their Twitter feeds on several Yahoo sites and to update their Twitter status from Yahoo sites. Yahoo will also better integrate Twitter into its search results. The search integration will begin immediately, while the rest of the features will be available later this year.
- Hummer sale not humming along anymore. China has reportedly rejected the sale of GM's Hummer unit to Sichuan Tengzhong Heavy Industrial Machinery. The two companies, which had set a deadline of this week to complete the $160M deal, are said to be looking at alternatives, and may possibly use an offshore vehicle for the transaction because it would be exempt from Chinese regulations. Chinese officials deny the reports, and say they haven't even received a deal application yet. Meanwhile, GM announced that it has completed its sale of Saab to Spyker cars.
- Intel targeted in cyber-attack. Intel (NASDAQ:INTC) admitted it was the target of a cyber-attack in January, around the same time Google (GOOG) said it was attacked by Chinese hackers, but it's unclear if the two events are related. An Intel spokesman said there's been no evidence that the attack was successful. Separately, as expected, Intel and 24 venture capital firms announced yesterday that they plan to invest $3.5B in U.S. start-ups over the next two years. In addition, Intel, Google (GOOG), Microsoft (MSFT) and 14 other employers promised to add jobs in 2010 by hiring 10,500 U.S. college graduates.
- Citi in talks to sell hedge fund. Citigroup (NYSE:C) is said to be in advanced talks to sell its hedge fund business to SkyBridge Capital, an alternative-asset manager, as it works to shed non-core assets. Terms of the potential deal couldn't be determined.
- Battered Toyota faces another hearing. Toyota (NYSE:TM) is back in the spotlight again today with another congressional hearing. At yesterday's hearing: Rep. Henry Waxman said the crisis "will require legislation," though he didn't offer specifics; Toyota said its recalls may not completely solve the unintended acceleration problems; and, regulators said they will expand a federal probe to include other automakers. Toyota President Akio Toyoda, who will testify today, will express his fear that the automaker grew too quickly in the last decade, compromising safety standards in the process.
- Hyundai recalls. Hyundai (OTCPK:HYMLF) will voluntarily recall 47,000 of its new Sonata sedans to fix faulty door latches. The company will also halt U.S. sales of its 2011 Sonata as it tries to avoid the criticism Toyota (TM) faces over its handling of safety problems.
- Bernanke testifies on economy. Bernanke will appear before Congress today for the first time since his bruising confirmation hearing in January. He's set to testify on monetary policy and the state of the economy, but with few improvements to report, the hearing will likely turn into another grilling by lawmakers who want to know what Bernanke can, or will, do to ease the unemployment situation, encourage economic recovery and tighten credit when appropriate.
- FDIC's problem banks surge. In its Quarterly Banking Survey, the FDIC reported problem banks jumped 27% in Q4 to 702, the highest level in over 15 years, while assets held by those banks increased $403B, or 3% of GDP. The industry managed to squeeze out a $914M profit, but the improvements were concentrated in the largest banks. The report implied that lending dropped a substantial 7.5%. Though this is the largest decline since the 1940s, the impact of charge-offs, higher reserves and decreased demand means the drop may not be as alarming as it seems. Separately, there are reports the FDIC may begin selling bonds tied to the assets of failed banks as soon as next month.
- Treasury deposits $200B with the Fed. The Treasury plans to borrow $200M and leave the money on deposit with the Federal Reserve, reviving the Supplementary Financing Program which will make it easier for the Fed to raise interest rates when it's ready. It will also allow the Fed to complete $1.25T of purchases of mortgage backed securities by the end of March without printing more money. Officials stressed that the move does not signal a tightening move is imminent.
- Corporate tax cut proposed. Two senators, one a Democrat and one a Republican, jointly introduced a bill yesterday that would heavily reduce the corporate income tax rate to a flat 24% from 35%. "The United States has the second highest corporate tax rate in the industrialized world. After this law goes into effect, which I certainly hope it will, we will be pretty much competitive with everybody who’s a major player in the corporate world but, certainly, the countries which are our primary competition in Europe and Asia."
- Airline mergers on the horizon? Speaking at a travel summit yesterday, the leaders of two major U.S. airlines separately expressed their willingness to consider a merger. United Airlines (UAUA) CFO Kathryn Mikells said the company "has been supportive of consolidation for a long time. It is something we will continue to look at." Separately, US Airways' (LCC) Derek Kerr said the airline is open to merging with a domestic carrier. In 2008, sources reported that United Airlines and US Airways had come close to merging, so the renewed openness suggests a consolidation is possible.
- Confidence dips. ABC's Consumer Comfort Index registered -50 yesterday, down a point from last week and still just above record lows. Positive ratings for the national economy held steady at 8%, but confidence in personal finances slipped a point to 43%. Investors were slightly less confident too, as State Street's February index came in at 103.9 yesterday, down 0.7 from the previous month. Confidence was up in North America and Europe, but down in Asia. The Conference Board's February Consumer Confidence Index showed the largest drop, registering 46 yesterday vs. 54.8 expected and 55.9 prior. Present situation, at 19.4, was at its lowest level in 27 years. "Consumers also remain extremely pessimistic about their income prospects. This combination of earnings and job anxieties is likely to continue to curb spending."
Earnings: Wednesday Before Open
- Garmin (NASDAQ:GRMN): Q4 EPS of $1.43 beats by $0.48. Revenue of $1.05B (+1%) vs. $0.95B. (PR)
- Trina Solar (NYSE:TSL): Q4 EPS of $0.74 beats by $0.14. Revenue of $313M (+44.8%) vs. $283M. (PR)
Earnings: Tuesday After Close
- American Capital (NASDAQ:ACAS): Q4 EPS of $0.07 misses by $0.03. Net unrealized appreciation of portfolio investments at $410M. Shares -2.6% AH. (PR)
- Autodesk (NASDAQ:ADSK): Q4 EPS of $0.30 beats by $0.07. Revenue of $456M (-7%) vs. $432M. Shares +6.8% AH. (PR, earnings call transcript)
- BioMarin Pharmaceutical (NASDAQ:BMRN): Q4 EPS of $0.05, beats by $0.04. Revenue of $87M (-12.3%) vs. $86M. Guides FY10 revenue in-line. Shares +0.6% AH. (PR)
- Century Aluminum (NASDAQ:CENX): Q4 EPS of -$0.28 may not be comparable to consensus of $0.03. Losses from aluminum price hedging, debt extinguishment and modification. Revenue of $257M (-36.2%) vs. $247M. Shares -8.2% AH. (PR, earnings call transcript)
- Chiquita (NYSE:CQB): Q4 EPS of -$0.52 misses by $0.24. Revenue of $879M (+5%) vs. $794M. Expects fiscal 2010 revenue up 3-5%. Shares +0.9% AH. (PR)
- Exco Resources (NYSE:XCO): Q4 EPS of $0.29 beats by $0.07. Revenue of $107M (-61%) vs. $192M. (PR)
- Hertz Global Holdings (NYSE:HTZ): Q4 EPS of $0.06 beats by $0.05. Revenue of $1.74B (-3%) vs. $1.7B. Shares +1.7% AH. (PR)
- Northeast Utilities (NU): Q4 EPS of $0.48, beats by 0.07. Revenue of $1.32B (-9.0%) vs. $1.63B; Reaffirms FY10 EPS guidance. (PR)
- Orient-Express Hotels (OEH): Q4 EPS of -$0.12 misses by $0.01. Revenue of $114M (+61%) vs. $112M. (PR)
- Range Resources (NYSE:RRC): Q4 EPS of $0.32 beats by $0.05. Revenue of $277M (+9%) vs. $278M. Shares -0.1% AH. (PR)
- Stone Energy (SGY): Q4 EPS of -$1.35 may not be comparable to consensus of $0.85; loss of $64.1M included pretax charge of $165M for writedowns. Operating revenue of $199M (+20%) vs. $172M. Shares -6.6% AH. (PR)
- In Asia, Nikkei -1.5% to 10199. Hang Seng -0.8% to 20468. Shanghai +1.3% to 3022. BSE -0.2% to 16256.
- In Europe at midday, London +0.3% to 5330. Paris flat at 3708. Frankfurt -0.1% to 5601.
- Futures: Dow +0.08% to 10307. S&P +0.02% to 1098. Nasdaq +0.21%. Crude 0% to $81.89. Gold -0.26% to $1170.90.
Wednesday's Economic Calendar
7:00 MBA Mortgage Applications
10:00 New Home Sales
10:00 Hearing: "Toyota Gas Pedals: Is The Public At Risk?"
10:00 Fed's Bernanke: 'Monetary Policy and State of Economy'
10:30 EIA Petroleum Inventories
1:00 PM 5-Yr Note Auction
- Notable earnings before Wednesday's open: ALD, AMT, CFL, CHS, CLWR, DLTR, FTR, GRMN, HPT, LXP, PQ, RIG, SKS, TJX, TOL, TSL, ZLC
- Notable earnings after Wednesday's close: AVGO, BDN, BEXP, CRM, ESRX, FLS, HCN, HLX, LTD, NTES, TQNT, WRI
Seeking Alpha editors Eli Hoffmann and Jason Aycock contributed to this post.
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