NBR Complete Transcripts-April 17, 2008
Thursday, April 17, 2008Google Makes Gains Despite the Slow Economy
SUZANNE PRATT: Shares of Google surged 18 percent in after-hours trading after the company announces earnings that click with Wall Street. Its 30 percent jump in first-quarter profit shows online advertising continues to grow despite a slow U.S. economy. After the close of trading, Google posted earnings of $4.84 a share, well above analyst forecasts. The online search giant's revenues hit $3.7 billion, also topping estimates by a wide margin. Piper Jaffray analyst Gene Munster says Google's results proves the company continues to dominate the online search business.
GENE MUNSTER, SR. RESEARCH ANALYST, PIPER JAFFRAY: The reality is this, is Google is the oxygen of the Internet. They continue to gain share on the Internet, and we are seeing that in the results. We see it in the revenue per search continues to go up. Advertisers are willing to increase their bids for those search results, and so Google as a platform is becoming essentially the building blocks of the Internet, and the results tonight reflect that.
PRATT: Munster says Google's results also show that consumers continue to shell out money for online products and services, despite the economic slowdown.
Merrill Lynch Misses The Mark
PAUL KANGAS: While Google hit, Merrill Lynch missed. The investment bank posted its third straight quarterly loss on $6 billion in new loan write- downs. Merrill lost almost $2 billion in the quarter, or $2.20 a share. And that was far more than the $1.99 per share loss Wall Street expected. And, as Erika Miller reports, Merrill's CEO sees more challenges ahead.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Merrill Lynch's first quarter was more horrendous than Wall Street expected, but even worse, Merrill says the pain isn't over yet. In a Web conference call this morning, Merrill Lynch CEO John Thain warned investors of the tough environment.
JOHN THAIN, CEO, MERRILL LYNCH: We are planning for a slower and more difficult next couple of months and probably next couple of quarters. But we are also optimistic for our results for full-year 2008.
MILLER: The company's $2 billion loss was almost entirely due to $6 billion in new write-downs. Standard & Poor's credit analyst Scott Sprinzen believes Merrill will continue to have difficulty valuing many securities on its books.
SCOTT SPRINZEN, CREDIT ANALYST, STANDARD & POOR'S: The biggest challenge, we believe, is just the marketplace, the fact that there's such volatility that a good of the credit market is still seized up without much activity happening and a lot of people stuck with illiquid positions.
MILLER: Merrill also said it will cut about 4,000 jobs, roughly 10 percent of its workforce, to help reduce costs. Still, Morningstar analyst Ryan Lentell says there is one encouraging sign.
RYAN LENTELL, BROKERAGE ANALYST, MORNINGSTAR: I think investors are probably breathing a little bit of a sigh of relief today that the losses didn't force another capital raise, which was the scare that everybody had in the last week and week-and-a-half or so.
MILLER: He says that's a big reason Merrill shares rose sharply today, although the stock is still down 13 percent this year. The question is whether now is a good time to buy.
LENTELL: There's reason to buy it if you're a long-term investor. I think it is undervalued today, but it comes with significant risk and you have to be mindful of that risk. The next three to six months to a year are probably going to continue to be choppy. But if you look out over a longer time horizon, I think Merrill is a pretty good franchise with a strong wealth management business, and it should get through this.
MILLER: He's not the only one worried about trouble, Moody's Investors Service warned today that it might cut Merrill's long-term debt rating. Merrill Lynch's results are a stark reminder that the credit crisis is not over yet. Investors are also bracing for weak results from Citigroup (C) tomorrow, and Bank of America (BAC) on Monday. Erika Miller, NIGHTLY BUSINESS REPORT, New York.
"Economic Choices 2008" -The Issue of Climate Change
SUZANNE PRATT: In western Pennsylvania, it's the environment that's the big issue. All three major presidential candidates favor faster, more aggressive action on reducing greenhouse gas emissions. There's no question the climate change debate is heating up, and Pennsylvania is a good place to examine the economic stakes as the state prepares for next Tuesday's presidential primary. As our "Economic Choices '08" coverage continues, Darren Gersh heads to Pittsburgh, a city weighing the costs and benefits of capping greenhouse gas emissions.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Glass and chemical giant PPG Industries (PPG) is a good place to visit to get a sense of how the politics of climate change are evolving. Caps on greenhouse gas emissions may be a big election-year issue, but after pouring over the science and, more importantly, market trends, Senior Vice President Vicki Holt says PPG decided the time for talk was over, even if some PPG employees did not agree.
VICKI HOLT, SENIOR VICE PRESIDENT, PPG INDUSTRIES: If we have a few people that think global climate change isn't happening, it's a Democratic plot, there are a few people who probably believe that, it is irrelevant. The momentum is moving so rapidly in that direction, we've got to be ready.
GERSH: PPG is planning to cut its greenhouse gas emissions by 10 percent over the next five years. This is one of Pittsburgh's oldest and biggest companies, and when a manufacturer like this says it is going green, voters here take notice.
HOLT: The sense of urgency is there, and we believe we will be in an environment where carbon will be constrained and we will be paying for carbon, so let's prepare for that.
GERSH: That's the cost side. On the revenue side, demand for carbon- friendly products is soaring. Demand for fiberglass used in windmills is expanding 26 percent a year; glass for solar panels is growing 45 percent a year. That's a small indication of the kind of business opportunities available, as the political leaders in the United States and the rest of the world prepare to cut back on carbon emissions. Analysts say the climate change legislation backed by John McCain, Hillary Clinton and Barack Obama could lead to massive shifts in wealth from companies that generate carbon emissions to companies that control them. For western Pennsylvania, that is both an enormous economic challenge and an opportunity. The opportunity is making headlines in Pittsburgh. Westinghouse is headquartered here and just got a big order for new nuclear reactors. Economic development consultant Janet Lauer says news like that is changing the politics of climate change in the state.
JANET LAUER, ECONOMIC DEV. CONSULTANT, LAUER CONSULTING: People see job opportunities coming now, people see investment coming here, and I think that that's helping, that's moving attitudes.
GERSH: With universities like Carnegie Mellon and the University of Pittsburgh to draw on, the region is also emerging as a center for clean- coal technology.
LAUER: We have an opportunity to provide the solutions related to carbon for the rest of the world. We have the assets here. We also have the need, because we are a coal economy.
GERSH: And that's the challenge. As the billboards remind the presidential candidates shuttling in and out of Pittsburgh, this is still coal country. Half the region's power is generated by coal, and 250,000 people make their living off the industry. Peter Lilly is Consol Coal Group (CNX) president. He wants to make sure the candidates address the crucial economic question of how much emission controls will cost.
PETER LILLY, PRESIDENT, CONSOL ENERGY: I think the public, at this point, has become interested in seeing controls on CO2, and I don't think the public understands the implications of that yet.
GERSH: McCain, Obama, and Clinton are all likely to back caps on greenhouse gas emissions beginning around 2012. But Consol argues emissions caps should be tied to the development of clean coal technology.
LILLY: We can have that technology researched and developed and ready to be deployed probably by the order of magnitude of 2020, the early third decade of this century.
GERSH: The details of plans to cap carbon emissions and create markets for carbon credits are almost as mind-numbingly complex as the research into climate change itself. Peter Adams should know. He studies atmospheric chemistry: "cloud formation," to non-scientists.
PETER ADAMS, CIVIL & ENVIRONMENTAL ENGINEER, CARNEGIE MELLON UNIVERSITY: These are the cloud condensation nuclei.
GERSH: Adams says he's excited about the upcoming primaries, not because of any specific plan, but because all the top candidates want to make action on climate change mandatory, and Adams says that's what matters.
ADAMS: I think by taking this first step, and especially if we take a responsible, gradual, incrementalist kind of approach, what we'll see is that while there will be significant cost, they are not going to be economy breaking, bank-breaking kinds of costs.
GERSH: In past elections, talk of caps on greenhouses gases would probably have sunk a promising presidential campaign here. But this year, even those in coal country hope to be part of the solution to climate change. Darren Gersh, NIGHTLY BUSINESS REPORT, Pittsburgh.
PRATT: Our look at issues impacting Pennsylvania voters continues tomorrow with the state's take on the national housing crisis.
"Commentary"-Reel Life Lesson
SUZANNE PRATT: Tonight's commentator says corporate leaders could learn a thing or two from the big screen. Here's Bill Baker, executive in residence at the Columbia University School of Business and author of the new book, "Leading with Kindness."
BILL BAKER, EXECUTIVE IN RESIDENCE, COLUMBIA UNIVERSITY SCHOOL OF BUSINESS: One of my favorite movies is "Glengarry Glen Ross," a film about four salesmen who work for a sleazy real estate company. One day, the company announces its starting a new sales contest: first prize is a Cadillac El Dorado, second prize is a set of steak knives, and the third prize is you're fired. Sound familiar?
What concerns me is that some managers think this is the best way to run a business. In the movie, the four salesmen are driven to desperate measures and end up stealing from the company. But is this really so far from reality?
I have spent the last year researching management literature, particularly scholarly works by industrial psychologists. What I have found is what I've observed from a lifetime in business myself, that the best leaders set realistic goals and then encourage their employees to work as a team, searching for innovative ways to reach them. If they fall short occasionally, a good leader considers this part of the price to pay for moving forward and mines the failure for valuable lessons.
Maybe this is a lesson being forgotten by many of today's business leaders and it may be the cause for meltdowns of some companies. Despite the incredible short-term pressures markets place on corporate managements and their boards, the longer view of allowing employees to have their heads and to take risks, even to fail, make for ultimately better and more successful businesses.
That lesson might even go for us, the individual stockholder, stick with the companies whose leadership espouse these values. In the long term, they are the likely winners. I'm Bill Baker.
"Tech Talk" -Going Green
SUZANNE PRATT: And finally tonight, why computers are going green, why displays are going small, and why waiting for Verizon (VZ) is like "Waiting for Godot." Those stories and more tonight in Scott Gurvey's "Tech Talk."
SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Earth Day is almost here and many companies are going green, which is not a bad idea since all those computers consume a great amount of power. Many solutions have been hardware-based.
For example, Intel (INTC) is working to reduce power consumption across its processor product line. But a software firm called Verdiem has developed a system which lets companies centrally manage power consumption of all the computers in a company, placing them into power-saving mode by remote control, and even shutting them off automatically at night, something employees often forget to do.
Verdiem CEO Kevin Klustner says there is a lot of money to be saved.
KEVIN KLUSTNER, PRES. & CEO, VERDIEM: We consistently save 30 to 50 percent of the energy that's consumed by these PCs. That translates, depending on the type of PC and how much you're paying for electricity, annual savings of anywhere from $25 to $65 per PC per year. So the savings are very quantifiable.
GURVEY: Microsoft (MSFT) has updated its smart phone software, releasing Windows Mobile 6.1. Division President Robert Bach says it includes a new mobile device manager to help businesses protect the information employees are carrying around.
ROBERT BACH, PRESIDENT, ENTERTAINMENT & DEVICES DIVISION, MICROSOFT: As IT managers and enterprise managers realize that phones are a strategic asset for them and that there's company data on it that they needed to be secure, they need to roll out applications to it, they need to be able to distribute information, the phone becomes a key area and they have to be able to secure it.
GURVEY: There have been big-time reductions this year in the price of small display screens, and that is a good for anyone who has made the switch from film to digital for taking snapshots. This seven-inch screen from a company called Smart Parts can be purchased for about $60 and can display hundreds of images directly from a camera's memory card. This battery-powered frame from Coby has a one-and-a-half inch screen and is designed to fit on your key chain. It goes for about $15. Verizon has been getting rave reviews for its new fiber optic TV and Internet service called FiOS, but there can be such a thing as too much success. The company admits delays in delivering the 19-inch HDTV it offered as a holiday promotion, and I've personally had two failed installation dates. The second time I was stood up, the installer suggested I complain to Verizon CEO Ivan Seidenberg. I'm still waiting for an answer, and for FiOS. It wouldn't be so bad if my current Comcast (CMCSA) connection didn't fail every few weeks for no apparent reason. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.
Paul Kangas' Stocks in the News
PAUL KANGAS: Wall Street opened modestly lower on mild profit-taking after yesterday's hefty gains. Some selling was linked to disappointing results from outlooks, and outlooks from Merrill Lynch, Nokia (NOK), and Pfizer (PFE). A jump in new weekly jobless benefit claims also had a hand in sending the Dow down 44 points at mid-day, with the NASDAQ Composite off 21 points.
The market's relatively mild retreat attracted cautious buying this afternoon, which trimmed losses and resulted in a narrowly mixed close. The Dow Industrial Average ended with a gain of 1.22 at 12,620.49. The NASDAQ Composite fell 8.28 to 2,341.83, while the Standard & Poor's 500 Index rose 0.85, ending at 1,365.56. In the bond market, the 10-year note fell 6/32 to 98 2/32, putting the yield at 3.74 percent.
Pfizer (PFE) topped the active list on 21.3 million shares on the Big Board, down $0.70. Pfizer in with first-quarter earnings lower, $0.61 versus $0.68 a year ago, $0.05 below the Street consensus. Revenues actually fell 5 percent. And the company blamed the loss of U.S. exclusivity of its Norvasc and Zirtec drugs.
Nokia (NOK) in there with a big loss of $4.74. First-quarter earnings were up 28 percent on a 28 percent rise in sales. But the company gave a very cautious outlook. And according to analysts, it lost 1 percent of the industry market share, down to 39 percent as Research In Motion's (RIMM) BlackBerry product is really giving Nokia some tough competition.
You heard the news on Citigroup (C), maybe up to 25,000 job losses.
GE (GE) a $0.21 drop.
Ford Motor (F) a $0.07 gain.
Moving along on the active list, Merrill Lynch (MER) down -- or up a $1.82 as you heard, the company will have a first-quarter loss of nearly $2 billion. But it will be profitable for the year. And that helped the stock today.
JPMorgan Chase (JPM) a $0.16 gain.
Washington Mutual (WM) up $0.76.
Bank of America (BAC) a $0.49 advance.
And Procter & Gamble (PG), 10th in Big Board volume, down $1.71 after Deutsche Bank brokerage downgraded it from buy to just a hold rating.
IBM (IBM) up $2.61. And after the close yesterday, as we reported, Big Blue in with first-quarter earnings of $1.65. That was $0.20 above the Wall Street estimate.
United Technologies (UTX) down $1.84. First-quarter earnings nicely higher, $1.03 versus $0.82. But the company gave full-year guidance of $4.65 to $4.85 a share, that is below the Street estimate of $4.86 per share.
Nucor (NUE), the steel company, $1.23 gain there. First-quarter earnings, $1.41, up from 1.26 last year, $0.08 above the Wall Street consensus. The stock did nicely.
McMoRan Exploration (MMR) up $2.98. First-quarter turnaround, $0.46 versus a loss of $0.53 a share in the same period a year ago.
MGIC Investment (MTG) was up nearly $2 a share, even though it had a first- quarter loss of $0.41 versus earnings of $1.12 last year. But the Street was looking for a much bigger loss of $1.69. The company did also have a 50 percent rise in new insurance written. That helped the stock.
Leggett & Platt (LEG) up $2.10. Lower earnings first quarter, $0.23 versus $0.31. But Raymond James Financial brokerage upgraded it from market perform to outperform.
International Game Technology (IGT), which makes gaming machines, says second-quarter earnings dropped to $0.22 from $0.38 a year ago on a 6 percent drop in revenue, the stock down.
And then Briggs & Stratton (BGG), which makes the small engine for lawnmowers and things like that down $2.46, even though third-quarter earnings jumped to $0.75 versus $0.18 last year, but it sees 2008 earnings of only $0.60 to $0.71 a share. The Street estimate is up there at a $1.19.
And American Greetings (AM) gave good tidings to shareholders, up $1.74, fourth-quarter turnaround, $0.31 in earnings versus a loss of $0.22 last year. Those earnings $0.05 better than the Street was expecting.
NASDAQ's most active, Apple (AAPL), was up $0.79.
Google (GOOG) closed down $5.49, but on those good earnings you heard about saw the stock as $527 in after hours trading.
Baidu.com (BIDU) $8 gain there.
An $8.55 gain (sic) in First Solar (FSLR). Research In Motion (RIMM) down $1 -- these are losses not gains, I should say.
Microsoft (MSFT) a $0.27 gain.
Intel (INTC) a $0.02 loss.
Cisco Systems (CSCO) a $0.06 advance.
SunPower (SPWR) down $12.78.
And eBay (EBAY) down $1.11 after the close yesterday. Higher earnings, but this day, the stock down a bit.
Altera Corp. (ALTR) up $1.66. First-quarter earnings rose to $0.27 from $0.21 last year. Sales up 10 percent. And the company is boosting its quarterly dividend from $0.04 to $0.05 a share.
Those are our "Stocks in the News" tonight.
