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October 25, 2007
NEWS AT A GLANCE
Bank of America cuts jobs
Bank of America, the No. 2 U.S. bank, is cutting 3,000 jobs, mostly in its investment banking division. Those losing their jobs include Gene Taylor, the head of the 20,000-person division. The job cuts, and a broader top-to-bottom reevaluation of the investment banking unit, follows BoA’s $1.45 billion in third-quarter trading losses reported last week. (The Wall Street Journal) A shake-up was expected after CEO Ken Lewis said last week he’d “had all the fun I can stand in investment banking,” following the losses. “The retail bank is always going to be the driver of profitability at Bank of America,” said University of North Carolina professor Tony Plath. (Bloomberg)
Microsoft pays for Facebook toehold
Microsoft paid $240 million for a 1.6 percent stake in social networking site Facebook, valuing closely held Facebook at a cool $15 billion. Facebook is expected to break even on $150 million in revenue this year. Microsoft beat Google, which was also bidding for the Facebook stake. (The Wall Street Journal) The deal gives Microsoft exclusive right to sell banner ads for Facebook globally—60 percent of Facebook’s nearly 50 million active users are overseas. (MarketWatch) Google sells ads on Facebook’s larger rival, MySpace. “This was a muscle-in from Microsoft,” said Gartner analyst Allen Weiner. “It would have been a nice-to-have for Google.” (AP in Yahoo! Finance)
Daimler suffers Chrysler hangover
Daimler AG, the world’s second-largest luxury car maker, reported a $2.2 billion loss in the third quarter, in line with analysts’ expectations. Write-offs related to the sale of Chrylser overwhelmed higher earnings from Mercedes Benz. “It’s a loss that washes away the bad odor of Chrysler,” said Cantor Fitzgerald strategist Stephen Pope. “Now Mercedes-Benz can shine.” (Bloomberg) Chrysler also took a step forward, as United Auto Workers members at four crucial Detroit-area plants approved a contentious labor pact last night. The votes pushed the pact close to approval. (The New York Times, free registration required)
What to do with fraudulent whistle-blowers?
James Marchese was set to take about $2.8 million of a $10.5 million federal whistle-blower settlement won from his former employer, Cell Therapeutics. But then the Justice Department determined that Marchese had masterminded the scheme—which involved fraudulently promoting a cancer drug—and it is now asking a judge to cut him out of the settlement. Marchese said giving him nothing will deter other whistle-blowers. Experts disagree. “If the message goes out that you better not start a fraud internally and think you can profit it from it, then that is a good message to send out,” said attorney John R. Phillips. (The New York Times, free registration required)
of The Week magazine.