NEWS AT A GLANCE
GE comes up short
General Electric posted a worse-than-expected 6 percent drop in quarterly profits, to $4.3 billion, due largely to weakness in its financial services business. Revenue climbed 8 percent, to $42.2 billion, led by a 22 percent increase in global revenue. (AP in Yahoo! Finance) The company also cut its annual earnings target to zero to 5 percent growth, from an earlier estimate of “at least” 10 percent. GE, the second-largest U.S. company by market capitalization, owns NBC and makes jet engines and locomotives, among other things. “These results confirm that the slowdown is widespread” said Cantor Fitzgerald analyst Stephen Surpless, and “unlikely to abate in 2008.” (Reuters)
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Linens ’n Things readies for bankruptcy
Houseware retailer Linens ’n Things, controlled by private equity firm Apollo Management, is preparing to enter bankruptcy protection, according to news media reports. The company and its creditors are meeting today to negotiate a “prepackaged” bankruptcy plan, in which the restructuring details are agreed to beforehand. (New York Post) It has already hired a restructuring firm, Conway Del Genio Gries & Co. Linens ’n Things and larger competitor Bed Bath & Beyond have both been hit by the U.S. economic slowdown. “Ever since the onset of the housing weakness they’ve been operating in a tough environment,” said Fitch analyst Tiffany Co. (Bloomberg)
Japan’s Mizuho bank hit by U.S. subprime losses
Mizuho Financial Group, Japan’s second-largest bank by revenue, projected a 50 percent drop in profits for fiscal 2007, to $3 billion, after its brokerage unit lost $4.1 billion, largely from U.S. subprime losses. (MarketWatch) All told, the bank said it lost $5.5 billion on mortgage securities, the most reported so far by any Asian company. Mizuho’s shares have dropped 48 percent over the past year, erasing $40 billion in market value. (Bloomberg) But “Japan’s subprime exposure is still relatively small,” said Shigemi Nonaka at Polestar Investment Management. “You can’t compare this to the likes of UBS.” (Reuters)
The persistence of the MD-80
The airplane behind all the recent flight cancellations is the MD-80, a noisy gas-guzzler that dates back to 1980. So why does American still fly 300 of the aging jets, and Delta 117? The 18-year age of American’s MD-80 fleet isn’t actually all that old, by airline standards, and it owns most of the planes outright. And many pilots, having flown the planes for more than a decade, are fond of the MD-80. Still, spiking airplane fuel costs may ground the planes, when a viable alternative comes along. In the meantime, airlines will stick with what they have, fuel costs and all. “It’s problematic but it’s not like it’s a dagger in their financial heart,” says aviation consultant Michael Boyd. (BusinessWeek.com)
