Delta Air Lines Inc. on Thursday raised its fuel surcharge by $10 round-trip, according to airfare price tracking Web site FareCompare.com.
The Atlanta-based carrier attempted to raise fares by a similar amount last week, but that effort failed after most other airlines failed to follow suit. Because of stiff competition, widespread airfare increases launched by one airline typically gain hold only when they are matched by competitors.
A representative from Delta (DAL, Fortune 500) could not immediately be reached for comment.
The increase came as crude-oil prices shot back above $107 a barrel following the bombing of a key Iraqi oil pipeline. Light, sweet crude for May delivery rose $1.68 to settle at $107.58 a barrel on the New York Mercantile Exchange after earlier rising as high as $108.22.
Fuel represents one of the airline industry’s biggest expense, and carriers have been aggressively trying to push ticket prices higher as the cost of fuel has risen.
Delta shares fell 27 cents, or 3.2 percent, to $8.45 in afternoon trading.
Software giant Oracle announced fiscal third-quarter earnings rose 30% from a year ago, in line with Wall Street expectations. But sales missed forecasts, a possible sign that big businesses may be starting to pull back on tech spending.
Shares of Oracle plunged more than 8% in after-hours trading. The company said in a conference call Wednesday that it expected a strong fourth quarter.
Net income for the three months ending in February rose 30% to $1.3 billion, or 26 cents per share.
Excluding certain one time items, the company reported a profit of 30 cents per share, meeting analysts’ forecasts, according to estimates from Thomson Financial.
Sales rose 21% from a year ago to $5.35 billion, below consensus expectations of $5.42 billion.
Oracle (ORCL, Fortune 500) has been aggressively scooping up smaller software companies in order to compete with rivals Microsoft (MSFT, Fortune 500), IBM (IBM, Fortune 500) and SAP AG. (SAP) The company is in the process of purchasing BEA Systems (BEAS), an acquisition which is expected to close in the coming quarter and should give Oracle a dominant position in the middleware software segment.
In the company’s conference call with analysts Wednesday, Safra Catz, Oracle’s president and chief financial officer said she expects non-GAAP fourth-quarter revenue to rise between 14% and 18%. She also expects earnings between 43 and 44 cents per share and new software licenses to rise between 10% and 20%.
Oracle president Charles Philips said in a written statement that new software license revenues continue to grow rapidly, taking market share from companies like IBM. And CEO Larry Ellison boasted in the statement that Oracle has higher operating profit margins than its competitors, including Microsoft.
Despite that good news, new license sales were only up 16%, not as high as some analysts would have liked. This could be an indication that the economic slump is taking its toll on Oracle.
Some of the deals that started in the third quarter have already closed, according to Catz, but she said Oracle customers acted a bit more cautious than usual, due to the current economic slowdown. "Deals are getting done, but they are taking a little bit longer."
In a weakening economy, business managers may wait to install new software, says Damon Ficklin, an analyst for Polen Capital Management, a money management firm that owns shares of Oracle. Oracle is the firm’s third largest holding.
Ficklin points out that Oracle is not immune to a pullback in corporate spending but he does think Oracle will probably do better than other technology companies in the coming months because the software giant is so diversified.
In addition, Ficklin says Oracle is a global company that will profit from the weak dollar. Oracle has a large presence in the Middle East, Europe and Asia and international sales account for half of the company’s total revenue.
Oracle Corp (ORCL.O: Quote, Profile, Research) posted disappointing quarterly software sales on Wednesday and said its customers had become more cautious, quashing the idea that the software sector would be immune to the economic turmoil that has roiled the rest of the tech sector.
Oracle shares fell 8 percent on the news, which also pulled down the stocks of other software makers like SAP (SAPG.DE: Quote, Profile, Research).
Chief Financial Officer Safra Catz warned that businesses had delayed approving purchases of Oracle’s software toward the close of its fiscal third quarter, which ended on Feb 29. The company would likely have a tougher time closing sales this quarter than it did a year ago, she added.
“Customers got a little more cautious toward the end of the quarter,” Catz said on a conference call with analysts following the results.
Oracle’s stock had gained 10 percent in the month leading up to Wednesday’s fiscal third-quarter earnings report, on expectations the results would be a bright spot among an increasingly disappointing flow of corporate results.
“People have turned to the software sector in general as somewhat defensive, but it’s not immune,” said Charles DiBona, an analyst at Sanford C. Bernstein & Co who has a “market perform” rating on Oracle shares.
As Oracle’s fiscal quarter closes a month earlier than the typical March 31, investors look to it as an indicator of how other software makers will perform.
While profit matched market expectations, Oracle’s sales of new software — which investors look to as an indicator of future financial performance — rose 16 percent, near the low end of its December forecast of 15 to 25 percent growth.
Acting Bank of Japan Governor Masaaki Shirakawa said on Tuesday downside risks for the economy were growing and the outlook was uncertain, underscoring concern that the world’s second-largest economy may follow the United States into a recession.
Shirakawa, the BOJ’s first temporary governor in more than 80 years, repeated the central bank’s mantra that interest rates need to be raised from the current low 0.5 percent if the economy looks like staying on track for sustained growth.
But he stressed the importance of looking at various risks threatening the short-term economic outlook such as jittery financial markets, a global economic slowdown and rising raw material costs that are hurting smaller firms’ revenues.
“The outlook for the economy is always uncertain, and uncertainty is particularly high now,” Shirakawa told the lower house of parliament’s financial affairs committee.
“What I always tell myself is that we should not have any preconceptions and should act flexibly by examining risks and the feasibility of our economic forecast.”
Former BOJ Governor Toshihiko Fukui picked Shirakawa, approved by parliament as new deputy BOJ governor, to head the central bank until parliament can agree on a permanent successor to Fukui himself.
Kiyohiko Nishimura, a BOJ board member promoted to deputy governor last week, told the committee that downside economic risks were heightening and that the BOJ would need to act flexibly if the risks materialize.
The two, however, did not mention the possibility of a rate cut and reiterated that despite mounting risks, the Japanese economy was still expected to expand moderately as a trend.
Sometimes a safety issue literally blows up in the face of federal regulators. That was the case last month when an explosion and fire at an Imperial Sugar Co. refinery in Port Wentworth, Ga., likely caused by the ignition of sugar dust, killed 13 workers and left 10 others with serious burns.
The accident on Feb. 7 was the latest of some 300 since 1980 that have killed more than 100 workers and injured 800. The Labor Department’s Occupational Safety and Health Administration ignored a recommendation to create a single dust-control rule, saying it already has 17 regulations warning employers about deadly dust buildups.
An oversight hearing on the subject on March 12 shows how the Democratic-controlled Congress has grown weary of President George W. Bush’s approach to regulatory policy, which stresses partnerships with industry and voluntary efforts to keep workplaces safe.
"I see such an incredible lack of urgency on the part of your agency to protect workers," Rep. George Miller, D-Calif., who heads the House Education and Labor Committee, told OSHA director Edwin Foulke Jr.
"We believe the agency has taken strong measures to prevent combustible dust hazards," Foulke responded. The agency created a Web page with guidance material on combustible dust, he told the committee.
The agency also has sent letters alerting 30,000 employers of their responsibilities to prevent dust buildup. And OSHA is inspecting 300 facilities across the nation for compliance.
"You are clinging to what you have done, and it’s … incredibly ineffective," Miller said.
Dust explosions occur when accumulations of fine particles build up and ignite from a spark or some other heat source. Combustible dust is prevalent in many industries, including chemical, pharmaceutical and recycling operations.
OSHA insists that the current set of 17 rules, which cover housekeeping, emergency plans, ventilation and other issues, can prevent the explosions.
Members of the committee, especially the Democrats, pointed out that in 2003 three dust-related blasts took 14 lives. The companies involved paid a total of $170,000 in fines. One facility closed and the other two had to be rebuilt.
In 2006, the U.S. Chemical Safety and Hazard Investigation Board, an independent agency, urged OSHA to issue a single rule to address control of the dust, assessment of the hazard and worker training.
"The Chemical Safety Board has concluded that combustible dust explosions are a serious hazard in American industry, and that existing efforts inadequately address this hazard."
William Wright, interim executive of the board, said at the hearing that since OSHA set a grain dust standard in 1987 the agency estimates deaths and injuries from such explosions have dropped 60 percent.
Miller and Rep. Lynn Woolsey, D-Calif., who heads the workplace protections subcommittee, wrote to Labor Secretary Elaine Chao the day after the sugar refinery explosion, asking her to make issuing a standard a "high priority." They have yet to receive an answer.
Miller and Rep. John Barrow, D-Ga., introduced legislation to force OSHA to issue a rule regulating industrial dusts.
Foulke, meanwhile, said that his agency would address any need for a new rule after the sugar refinery investigation is complete and OSHA has finished reviewing other facilities.
He said American workplaces generally are safer than ever.
CINDY SKRZYCKI IS A BLOOMBERG NEWS COLUMNIST.
Citigroup Inc. is continuing to cut investment banking and trading jobs this year as the bank tries to lower costs while recovering from colossal credit-related losses.
"Each year we identify the bottom 5% of performers in the Institutional Clients Group, and some number of these people leave the firm," Citigroup spokesman Dan Noonan said Thursday in a statement. "This year we will have a larger number of reductions as we continue to strengthen the business and lower our expense base."
The Institutional Clients Group has about 60,000 employees, and includes the bank’s markets and banking unit and its alternative investments unit.
The bank’s executives said back in January, after releasing a nearly $10 billion loss for the fourth quarter, that they were slashing 4,200 jobs and there were more job cuts to come.
Citigroup would not confirm Thursday how many layoffs there have been since then, but The New York Times reported Thursday, citing people familiar with the matter, that Citi is cutting 2,000 jobs on top of the 4,200 announced earlier.
Citigroup (C, Fortune 500) employs about 320,000 people around the world. Even before the credit crisis started last summer, the company announced that it was reducing its staff by 17,000.
Most of Citi’s recent layoffs have been in its Institutional Clients Group. But the bank is also reducing staff in retail banking as well. Earlier this month, Citi’s home mortgage division said it is laying off 185 employees in the Des Moines area who worked in its home equity business.
Meanwhile, the bank has been closing several branches around the country this year - eight in Texas, six in Florida, three in New Jersey, one in California and one in Maryland, the company has said.
Many stock indexes worldwide are expected this year to suffer their first overall drop in six years but there is still scope for a significant bounce from the steep falls suffered so far, based on the belief that any U.S. recession will be short, a Reuters poll showed on Tuesday.
Global surveys of around 130 equity strategists and fund managers conducted last week and published on Tuesday showed all median forecasts for end-2008 from Taipei to Toronto were downgraded, and by as much as 25 percent.
But given that major stock markets are already down sharply this year, the poll results also promised across-the-board gains from current levels by year-end, from just 3 percent on the Toronto S&P/TSX to 28 percent on Mumbai’s BSE Sensex.
The surveys were taken before financial markets were hit on Monday with the weekend news of JPMorgan Chase’s firesale purchase of investment bank Bear Stearns in a move orchestrated by a US central bank that again relaxed its own lending standards.
And risk aversion is rising. Volatility hit a five-year high on Monday, according to the Chicago Board Options Exchange volatility index .VIX.
But many are looking ahead to the end, particularly given how aggressively the U.S. Federal Reserve has already slashed interest rates — and is expected to do more later on Tuesday.
“After reaching a low around the middle of the year, equity markets are expected to rebound on expectations that 2009 will be better for global growth and on an end to the steady drip of bad news from the financial system,” said Tony Dolphin at Henderson Global Investors.
Eight of the 13 indexes covered are expected to be down on the year, while five are expected to rise modestly. Back in December when the last poll was conducted the prevailing view was that the worst of the credit crunch would have passed by mid-year.
Consumer prices held steady in February, with milder-than-expected inflation giving the Federal Reserve some leeway in its interest rate-cutting campaign.
But with energy prices soaring, March may not be so tame.
The Consumer Price Index, a key inflation reading, was unchanged last month, according to the Labor Department. That was lower than the 0.4% jump recorded in January and the rise of 0.3% a consensus of economists surveyed by Briefing.com had forecast.
Inflation was at its tamest since August, when month to month prices were also left unchanged.
The more closely watched core CPI, which strips out volatile food and energy prices, also showed prices maintained the levels from the previous month. Economists had expected a 0.2% rise in that measure after a 0.3% jump in January. February’s core CPI month to month change was the lowest since November 2006.
February’s unchanged price levels left overall prices 4% above where they were 12 months earlier, down from the 4.3% rise on that basis in January.
But core CPI still posted a 12-month change of 2.3%, just below a 2.5% rise on that basis in January. The annual rate of core inflation has not been this low since October, when it showed a 2.2% pace.
Relief may be temporary. But prices are unlikely to maintain their levels again this month.
The Department of Labor report showed average gasoline prices fell 2% last month, dragging down overall inflation. Prices at the pump averaged $3.03 a gallon at the beginning of the month and $3.18 at the end.
But with March gas prices already 3% higher than the highest February level, it appears that inflation only took a one-month break.
"We’ll see a reversal in March," said Wachovia economic analyst Sam Bullard. "The report is good for headlines, but this is just temporary, just like any economic indicator."
Rising inflation becomes apparent. In recent days, price increases have taken their toll on the consumer.
Retail sales for February showed surprising weakness in a report released Thursday, with sales falling 0.6% during the month compared to economists’ forecasts of a 0.2% gain. As prices increase and homeowners lose wealth when their houses continue to be devalued, consumers kept their wallets closed last month.
The dollar dropped below ¥100 for the first time since 1995 Friday, and hit another in a string of record lows against the euro.
Commodity prices have soared in the past few days, as oil set 12 record highs in the past 13 trading sessions, now trading just below $110 a barrel. Gasoline has set record highs in four consecutive days, as U.S. consumers now need to shell out an average of $3.28 a gallon.
And when times get tough, investors typically start pouring money into gold as an anti-inflation investment. As a result, gold passed $1,000 an ounce Thursday for the first time ever.
"Food, commodities, and energy are a real risk to send inflation higher," Bullard said.
Fed watching closely. The rise in annualized core inflation, though lower than the previous month, is still a bit above the perceived comfort zone of central bankers. The Federal Reserve is generally believed to want to see the 12-month change in core inflation readings remain between 1% and 2%.
The Fed began a series of cuts to its key interest rate in September in an effort to boost the economy and stave off a recession. The Fed funds rate now stands at 3%, and some economists believe that a three-quarter percentage point cut is needed when the Fed meets next Tuesday.
But price pressures could mean that the central bankers only cut the rate by a half percentage point or even by a quarter point. The Fed uses its rate cutting tool not only in an attempt to maintain economic growth, but to keep inflation in check as well.
"Even if inflation were even with expectations, the Fed would have issued a rate cut," said Bullard. "But this report helps them, as it takes the foot off the inflation accelerator for a bit."
In recent speeches, Fed officials have suggested that keeping inflation within an acceptable range is important, but price increases are low enough that saving the economic environment is the more pressing need now.
"The slowing economy should do enough to help keep inflation pressures down," said Bullard, who believes the Fed will cut rates by a half percentage point.
Microsoft Corp’s (MSFT.O: Quote, Profile, Research) offer to buy Yahoo Inc (YHOO.O: Quote, Profile, Research) will likely succeed, but it may not be the best use of the company’s ample cash reserves, according to a poll of analysts by Reuters.
The stand-off between Microsoft and Yahoo has stretched six weeks since the world’s largest software maker went public with its proposal. The Web pioneer subsequently rejected Microsoft’s offer, which currently values Yahoo at $41.4 billion, saying the takeover bid “substantially undervalued” the company.
The Reuters poll finds Wall Street brokers who follow either company remain convinced that Microsoft will prevail in its takeover. Eight of eight Microsoft analysts surveyed and 14 of 15 Yahoo analysts believe Microsoft will get the deal done.
“Yahoo’s options are becoming more limited and it makes Microsoft’s offer look better,” said Andy Miedler, an analyst at Edward Jones, who has a “hold” rating on Microsoft.
Twenty-one brokerages responded. Seven brokers have analysts who follow both companies and their votes were counted separately. In total, 33 financial analysts currently follow Yahoo and 40 analysts track Microsoft.
Analysts at three firms — Morgan Stanley, Goldman Sachs and Lehman Brothers — are restricted by their firms from publishing research on the merger as their investment banking arms are working on behalf of either Microsoft or Yahoo.
There is disagreement, however, over whether Microsoft must raise its half-cash, half-stock bid in order to succeed. A majority of analysts believe that Microsoft need not boost its bid beyond the current $31-per-share offer, although some argue it may need to sweeten the bid by making it an all-cash offer.
Twelve believe Microsoft will not alter its bid and succeed, while four expect it to keep the price at $31 but make it a more lucrative all-cash offer.
An affiliate of U.S.-based buyout firm Carlyle Group has defaulted on about $16.6 billion of debt and expects its lenders to seize remaining assets as the global credit crunch tightens around leveraged investors.
The Carlyle Group said in a statement on Thursday that as Carlyle Capital Corp (CARC.AS: Quote, Profile, Research), a fund listed in Amsterdam, was unable to reach a deal with lenders it expected those lenders to take possession of the fund’s remaining residential mortgage-backed securities assets.
Carlyle said it had worked “exhaustively” to assist Carlyle Capital and took “extraordinary measures” to help it through its liquidity crisis.
It stressed that Carlyle Capital Corp (CCC) was a separate legal and business entity, and that it believed CCC would not have a measurable impact on Carlyle’s other funds, investments and portfolio companies. Carlyle Group said that Carlyle Capital’s defaults did not trigger cross-defaults for any Carlyle borrowings.
The Carlyle Group, based in Washington, DC, has more than $75 billion under management. One of the world’s largest private equity firms, it owns companies including TV ratings firm Nielsen, doughnut seller Dunkin’ Brands and former General Motors unit Allison Transmission.
Carlyle Capital said in New York late on Wednesday that talks with lenders deteriorated after a decline in the value of its mortgage investments, which it said would result in margin calls of $97.5 million on top of the $400 million it was already facing.
A “successful refinancing is not possible,” Carlyle Capital said, after trying for the past week to work out a deal with lenders to stave off bankruptcy.
The credit crisis, triggered last year when subprime mortgages made to risky U.S. borrowers went sour, has put increasing pressure on lenders to tighten credit and made it difficult to value collateralized debt, mortgage portfolios and other fixed-income securities — the investments that Carlyle Capital was set up to invest in.
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