Tax preparer H&R Block has named the former president of Europe as its new chief executive.
Russ Smyth takes over Aug. 1. He will also be president of H&R Block (HRB).
Smyth was with McDonald’s (MCD, Fortune 500) for 21 years. He also joins the company’s board of directors, as does his predecessor, former interim CEO Alan Bennett.
Intel Corp (INTC.O: Quote, Profile, Research, Stock Buzz) said on Tuesday quarterly net income rose 25 percent, helped by strong sales of microprocessors used in notebook computers, and gave a revenue forecast that topped expectations.
The world’s biggest chipmaker also reported an improved gross margin for the second quarter, but it was slightly below the midpoint of its own forecast range due to price pressures.
For the current quarter, Intel said it expects revenue of $10.0 billion to $10.6 billion, compared with the average analyst forecast of $10.0 billion, according to Reuters Estimates.
Intel has been benefiting from brisk sales of notebook PCs, which are on track to outpace sales of desktop PCs this year. On Monday, Intel rolled out the latest generation of its Centrino wireless chip after a delay of several months.
Shares of Intel ticked higher following the results, after gaining 1.2 percent in regular Nasdaq trading.
“I like the revenue outlook and the gross margin outlook,” said Doug Freedman, an analyst with American Technology Research. “The only slight negative is the spending level on marketing and general administration is slightly higher.”
Second-quarter net income rose to $1.60 billion, or 28 cents per share, from $1.28 billion, or 22 cents per share, a year ago. That beat the average Wall Street estimate for a profit of 26 cents per share, according to Reuters Estimates.
Revenue rose to $9.47 billion from $8.68 billion, whereas analysts had expected $9.32 billion on average.
The European Commission opened an in-depth investigation on Friday into BHP Billiton’s (BHP.AX: Quote, Profile, Research, Stock Buzz)(BLT.L: Quote, Profile, Research, Stock Buzz) $170 billion unsolicited bid for rival miner Rio Tinto (RIO.L: Quote, Profile, Research, Stock Buzz), with prices of iron ore already soaring.
The European Union’s executive arm issued a tough statement with a list of sweeping concerns but said Australian BHP would be able to respond. The probe has a deadline of November 11.
The move came on the same day BHP matched Rio Tinto’s prices with a near doubling of its own prices for iron ore lumps, mostly produced in Australia and many of them shipped to China.
“Concerns arise in particular as regards the markets for iron ore, coal, uranium and aluminum and mineral sands, because the proposed takeover could result in higher prices and reduced choice for these companies’ customers,” the Commission said.
Competition Commissioner Neelie Kroes said the firms produced basic commodities and competition in Europe must remain strong.
“The recent surge in commodity prices has had a serious impact on the industries buying these commodities, their customers, and ultimately all the consumers in Europe and elsewhere in the world,” she said in a statement.
BHP would gain new power over iron ore and reinforce its leading position in metallurgical coal, the two main ingredients in steel.
The Commission said that would lead to “very high” levels of market concentration.
Bidders on eBay will have the chance to win lunch with billionaire Warren Buffett next month.
Last year, two investors paid $650,100 for the chance to have lunch with the chairman and CEO of Berkshire Hathaway Inc (BRK.A).
The auction benefits the Glide Foundation, which provides social services to the poor and homeless in San Francisco.
This will be the sixth year Buffett auctions a lunch on eBay (EBAY, Fortune 500) and donates the proceeds to the foundation.
This year’s auction will begin at 7p.m. Pacific on June 22 and end at 7p.m. Pacific on June 27.
The winner and up to seven friends will dine with Buffett at the Smith & Wollensky steakhouse in New York City.
A U.S. official urged China on Tuesday to join the International Energy Agency - a group of major oil consumers that includes the United States and European governments - and aid its efforts to keep petroleum markets stable in times of crisis.
"China’s participation in the IEA’s collective emergency response system would make the system stronger," Daniel S. Sullivan, an assistant U.S. secretary of state, said in a speech at a business conference.
China is the world’s second-largest oil consumer after the United States. Its surging demand for energy to fuel its booming economy has stirred unease abroad about the possible impact on global prices, as well as over China’s intentions as state-owned companies pursue access to supplies in Africa, Central Asia and elsewhere.
A key function of the 27-nation IEA is to coordinate the release of petroleum from national stockpiles to stabilize prices if crises threaten to disrupt supplies, Sullivan said. He said that was last done in 2005 in response to Hurricane Katrina in the United States.
"This helped calm oil markets, which clearly benefited the United States but also other major oil consumers like China," he said. "I believe it is important for China and other key economies in the world, such as India, to prepare to eventually join the IEA as full members."
The conference was organized by the Institute for 21st Century Energy, a Washington think tank created by the U.S. Chamber of Commerce.
Sullivan, who is the American envoy to the Paris-based IEA, said the group has invited Beijing to take part in an exercise next month to practice responding to a possible emergency, and he urged the Chinese government to accept.
"China’s involvement would benefit China and it would benefit the IEA," he said. "China might also consider a declaration that it plans to pursue membership in the IEA. This could help the anxiety expressed in some quarters over China’s intentions as it pursues greater energy security."
The Chinese Foreign Ministry referred questions about whether Beijing might join the IEA to the Cabinet’s National Development and Reform Commission, which oversees energy policy. The NDRC did not immediately respond to requests by phone and fax for comment.
China long met its energy needs from domestic oil fields but became a net importer in the 1990s.
China is building a strategic oil reserve meant to help insulate it from possible disruption in foreign supplies. The United States maintains a similar stockpile.
Beijing and Washington agreed in December as part of their long-range Strategic Economic Dialogue to cooperate in constructing and managing oil stockpiles.
Sullivan noted that a precondition for joining the IEA is membership in the Organization of Economic Cooperation and Development, a group of major economies, a status that China lacks. But he said the United States doesn’t think that has to be mandatory for Beijing, given its importance in global energy issues.
The IEA also includes Japan, Australia and South Korea.
The popular online hangout MySpace has won a $234 million judgment over junk messages sent to its members in what is believed to be the largest anti-spam award ever, The Associated Press has learned.
A federal judge ruled against two of the Internet’s most prominent spam defendants, Sanford Wallace and Walter Rines, after the two failed to show up at a court hearing Monday.
Wallace has earned the nicknames "Spamford" and "spam king" for his past role as head of a company that sent as many as 30 million junk e-mails a day in the 1990s.
It’s a big victory for MySpace, although service providers often have a tough time collecting such awards. But even if the News Corp. (NWS.A)-owned site never collects, the company hopes the judgment will deter other spammers.
"Anybody who’s been thinking about engaging in spam are going to say, `Wow, I better not go there,"’ MySpace’s chief security officer, Hemanshu Nigam, said. "Spammers don’t want to be prosecuted. They are there to make money. It’s our job to send a message to stop them."
There was no telephone listing for Wallace in the Las Vegas area. Service was disconnected for two listed numbers for Rines in Stratham, N.H.; a third number was unlisted.
Billionaire financier Kirk Kerkorian announced Monday that he’s offering $170 million for 20 million shares of Ford Motor Co., which - combined with the 100 million shares he purchased earlier this month - would boost his stake in the automaker above 5%.
Shares of Ford (F, Fortune 500) soared 55 cents, or 7.3%, to $8.05 in pre-market trading on news of the offer.
Kerkorian’s investment firm, Tracinda Corp., announced the $8.50-a-share offer for Ford shares in a statement.
The price represents a 13.3% premium over Friday’s closing price of $7.50. The 20 million shares would represent just under a 1% stake in Ford on top of the 4.7% stake Tracinda - whose sole shareholder is Kerkorian - said it now owns.
Investors need to disclose when they purchase more than 5% of a publicly traded company, meaning Kerkorian could not have added many additional shares to his current stake without a public filing.
Ford issued a statement in which CEO Alan Mulally said he welcomes confidence in the company and the progress it is making in its transformation plan. Since 2005, the company’s cost-cutting efforts have tried to stem losses in Ford’s core North America operations.
Tracinda said it has been buying shares since April 2, when shares were trading at between $5.93 and $6.33 a share. It said the average price for the 100 million shares was $6.91.
Shares of Ford jumped after the company reported a surprise $100 million first-quarter net income last week. Shares climbed as high as $8.79 in trading Thursday, before retreating to $8.40 at the close. It gave up much of that gain Friday.
Kerkorian’s statement said he was making the offer because of his confidence that the company will see continued improvement in its financial results under the leadership of Mulally.
"Tracinda has been following Ford closely since the company released its fourth-quarter 2007 results which indicated that Ford’s management was starting to achieve highly meaningful traction in its turnaround efforts," the statement said. "Last week, this was reinforced by Ford’s first-quarter 2008 results, achieved despite the difficult U.S. economic environment."
Despite the improvement and the better-than-expected results, Ford has continued to lose money in its core North American auto operations.
Ford has closed numerous plants in recent years and plans to close more in an effort to bring capacity more in line with reduced demand. It also has offered all 55,000 of its hourly workers buyouts and early retirement packages, hoping to replace them with lower-paid workers with less expensive benefit packages - an option it won in a labor deal struck last year with the United Auto Workers union.
Ford lost its long-held position as the nation’s No. 2 automaker to Japanese rival Toyota Motor (TM) last year as its U.S. sales fell nearly 12%. Part of its lost U.S. market share came from a deliberate decision to cut back on less profitable fleet sales to businesses such as auto rental companies.
But Ford was also hurt by a 13% drop in sales of the F-Series pickup truck, the nation’s best selling vehicle. A favorite of contractor, pickup sales were hurt by the downturn in the housing market.
In the first quarter, Ford’s sales were down another 9% from a year earlier and early readings on April sales suggest it will see another sharp downturn this month due to the slowing U.S. economy and tighter credit for potential car buyers. But the weak sales are now more of an industrywide problems.
Kerkorian made a similar tender offer to buy shares of General Motors Corp. (GM, Fortune 500) back in 2005, and he pushed the company toward a number of steps, including a cut in its dividend to preserve cash and a cut in executive and director pay in order to win concessions from unions.
But he was unsuccessful in his efforts to push GM to combine with the alliance between French automaker Renault and Japanese automaker Nissan. He eventually sold his stake in GM in 2006, giving him a slight trading loss on his investment, but a narrow profit when considering dividends.
He also was once the largest individual shareholder of Chrysler until its purchase by German automaker Daimler Benz in 1998. When Daimler put Chrysler up for sale in 2007, he announced a $4.5 billion offer for that company, only to lose out to private equity firm Cerberus Capital Management.
You may think your job is safe. But you still may not be spared the pain resulting from the weak labor market.
The loss of nearly a quarter-million jobs so far this year and a jump in the unemployment rate means the debate over whether there is a recession is pretty much over.
"There is a recession. The question now is how deep and how long," said Lakshman Achuthan, the managing director of the Economic Cycle Research Institute. And he thinks the economy could get worse.
Here’s a look at how a deteriorating job market could lead to a worse recession than many are predicting.
Less money in workers’ pockets
First of all, a weak labor market could lead to smaller wage increases for workers in all types of industries, as employers get more conservative.
A recent survey by human resources consulting firm Mercer found that 6% of U.S. employers are already trimming their compensation budgets and another 10% are considering cuts.
But the real problem for workers is that slim salary increases may not keep up with inflation, especially with food and energy prices soaring.
From November through February, average hourly wages have fallen compared to a year earlier, when adjusted for inflation, and the modest gain in wages reported for March will likely be wiped out by price gains when the Consumer Price Index is reported later this month.
Inflation pressures could intensify further if the Federal Reserve continues to slash rates in an effort to spur the economy. That’s because the Fed’s rate cuts have been one factor behind the weak dollar.
A weaker dollar means higher prices for imported goods, especially commodities like oil. The record high for gasoline and the record lows for the dollar are not a coincidence.
Ashraf Laidi, chief foreign exchange strategist for CMC Markets US, said the dollar could lose another 5 percent this year versus both the dollar and the yen as the economy continues to slow. He thinks it will be "difficult for the dollar to make any recovery" if the Fed keeps cutting rates.
Deeper problem for troubled sectors
It now appears the recession started late last year. But the labor market was the one bright spot for much of 2007. Now, a rising unemployment rate has the potential to further dent consumer confidence and put a crimp in spending.
"As long as the unemployment rate was low, people had the sense they could continue to spend and count on improving income," said Bernard Baumohl, executive director of The Economic Outlook Group, a Princeton, N.J. economic research firm. "That has all dramatically changed since the summer of 2007."
An even bigger fear is that the most troubled spots in the economy — housing, Wall Street and the auto sector — will suffer even more.
More home price declines
The housing market has already taken a major hit. And the plunge in home values, the worst since the Great Depression, happened even with the labor market being relatively healthy last year.
Normally, home sales and prices don’t plunge unless there is weakness in the job market. Well, now there is. So that’s another big concern for the already battered real estate market.
Some homeowners who lose their jobs may not be able to afford their mortgage payments because of a loss of income. That could force more people to sell at distressed prices, or have their homes go into foreclosure if they can’t find a buyer.
And this could hurt you even if you have a safe job and home that’s fully paid off since it may mean that your house will now be worth less than previously.
More shocks to Wall Street
The housing problems triggered a meltdown on Wall Street last year, the aftershocks of which are still being felt. When mortgage defaults and delinquencies on subprime mortgages started to rise, it caused big problems for securities backed by those riskier home loans.
But if more people who had conventional home loans find themselves out of work and have difficulty paying their mortgages, this could affect safer loans backed by government-sponsored mortgage finance firms Fannie Mae (FNM) and Freddie Mac (FRE, Fortune 500).
A rise in defaults in mortgages made to people with good credit, Fannie’s and Freddie’s bread and butter, would put more strain on their already stretched capital reserves.
In the worst case scenario, they might need their own government-sponsored rescue, said Dean Baker, co-director of the Center for Economic and Policy Research.
"Subprime loans went bad first but a lot of the prime loans will go bad as well," he said. "I would be surprised [Fannie and Freddie] don’t need some help before this over."
What’s more, Wall Street is awash in securities backed by other types of consumer debt, including car loans and credit card balances. If rising unemployment causes higher delinquencies with those types of loans, then there is a strong possibility of more unpleasant surprises ahead in the credit markets.
"I’ll be surprised if we don’t see another investment bank get itself into trouble," Baker said.
Auto woes: Not just Detroit any more
The auto industry was battered by high gas prices last year. Sales fell 2.5% in the U.S last year. This year started out even worse, with first quarter sales down 8% compared to a year ago.
And the weak economy is starting to hurt overseas automakers like Toyota Motor (TM), which also saw U.S. sales fall in the first quarter.
Automotive market research firm CNW reports that buyer traffic is sharply lower across the industry. According to the most recent report from CNW, floor traffic at dealerships plunged nearly 30% in the second half of March, the largest drop since the early 1990s.
If more people find themselves out of work, this trend is likely to continue. That could spell trouble for employees of leading Asian automakers, which now make about half the cars and trucks they sell in the U.S. at North American plants.
So far, many of these manufacturers have avoided the temporary shutdowns and closings common at GM (GM, Fortune 500), Ford (F, Fortune 500) and Chrysler. But weak demand could lead to job cuts and reduced hours by the likes of Toyota, Honda and others.
And if that happens, this could be bad news for many companies that depend upon the auto industry, from parts makers to dealerships and even to media companies that depend on advertising from car companies.
Simply put, fewer auto sales could lead to a deeper recession.
The FBI is looking into fraud allegations against Countrywide Financial Corporation, a U.S. government official told CNN.
The investigation is still in its early stages, another government official familiar to the situation said.
The story was first reported in The Wall Street Journal Saturday.
The probe will examine underwriting and mortgage origination practices, and whether the company misrepresented losses related to subprime loans, the paper said.
Subprime mortgages, or home loans given to borrowers with weak credit, have been at the root of a crisis that has rocked the U.S. economy.
Though the Federal Bureau of Investigation has acknowledged ongoing investigations related to the subprime debacle, neither the FBI nor the Justice Department would comment on the specific targets.
"The FBI has been investigating potential fraud in the mortgage/sub-prime lending industry, however, we can not confirm or deny which companies are under investigation," said FBI spokesman Richard Kolko.
A law enforcement official told CNN that there are currently 16 companies being investigated.
Both Countrywide and Bank of America (BAC, Fortune 500), which agreed in January to acquire Countrywide for $4 billion in stock, did not return calls to CNN.
Calabasas, Calif.-based Countrywide is the nation’s largest home lender, responsible for roughly one-fifth of the mortgages in the United States.
When the housing crash began, Countrywide (CFC, Fortune 500) was faced with an increasing number of subprime customers who were delinquent with their mortgage payments. The company was forced to essentially shut down its subprime lending operations last year to focus on originating loans that conform to Fannie Mae (FNM) and Freddie Mac (FRE, Fortune 500) guidelines, considered to be safe investments.
On Friday Countrywide’s founder and CEO, Angelo Mozilo, testified before the House Committee on Government and Oversight Reform, along with two other CEOs who resigned in the wake of the mortgage crisis - Charles Prince of Citigroup (C, Fortune 500) and Stanley O’Neal of Merrill Lynch (MER, Fortune 500). All three defended their lofty compensation packages, despite the loss of billions to their companies and shareholders.
– CNN America Bureau Producer Kevin Bohn contributed to this report.
Defying the gloom that many retailers are feeling, Wal-Mart Stores Inc. expects a more profitable year selling to penny-pinching shoppers after its renewed focus on low prices paid off over the holidays with a 4 percent rise in fourth-quarter profit.
The world’s largest retailer, emerging from a yearlong turnaround effort after sales stumbles in 2005 and 2006, said Tuesday that aggressive holiday discounts and improvements in its more than 4,000 U.S. stores boosted sales despite consumer worries.
"No one has a crystal ball to look into the economic future, but we know the economy will be a critical factor this year," Chief Executive Lee Scott said in a recorded call after releasing results.
Scott said Wal-Mart’s decision to re-emphasize low prices last year came at the right time and added: "In a volatile economy, I believe we are well positioned to succeed."
Chief Financial Officer Tom Schoewe told The Associated Press that Wal-Mart expects a spending boost as consumers receive federal income tax rebates under the $168 billion economic stimulus plan.
"When those checks have been issued in the past, we’ve experienced (spending) either equal to or indexed a little bit higher than our overall market share," Schoewe said.
Analysts said Wal-Mart has several unique factors, including the scale of its grocery business that can bring in traffic for other areas of the store, so that its optimism for the year ahead is not necessarily an indicator for the broader retail sector.
"If I was grading them, I would give Wal-Mart a B. Unfortunately, the rest of retail is getting a C-minus," said Patricia Edwards from investment manager Wentworth Hauser and Violich.
As major U.S. retailers report their fourth-quarter earnings results, the industry is bracing for its bleakest times since the 1991 recession.
Other merchants have closed stores, laid off thousands of employees, scaled back store expansions or pared inventories as consumer spending screeches to a halt.
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