Merck: A $5 billion settlement in Vioxx case
Merck last week agreed to pay nearly $5 billion to settle most of the claims generated by its nowwithdrawn painkiller Vioxx, said Matthew Herper and Robert Langreth in Forbes.com. Plaintiffs’ lawyers agreed to settle after Merck won 12 of 17 civil trials brought by people who claimed that they or family members suffered strokes or heart attacks after taking Vioxx. The total settlement works out to about $125,000 per plaintiff. The settlement figure is considerably less than the $10 billion to $20 billion many analysts expected Merck to pay, and “less than Vioxx generated in total sales during its time on the market.” Now comes the hard part—deciding who gets what, said Amir Efrati in The Wall Street Journal. Awards to individual plaintiffs will be adjusted for age and risk factors, and legal fees and payments to insurers will reduce individual payouts. “It may take years to sort out” the competing claims. “It’s going to be a battle royal,” predicts University of South Dakota law professor Roger Baron. The lawyers in the case will share an estimated $1 billion in fees, plus expenses.
Financial services: Bankruptcy talk rocks E-Trade
Shares of online stock brokerage E-Trade fell more than 50 percent this week, after an analyst suggested the company might have to file for bankruptcy protection, said Dow Jones Newswires. Last week, E-Trade warned investors that it might have to further reduce the value of its $3 billion subprime mortgage portfolio after taking a $200 million write-down in the third quarter. Citigroup analyst Prashant Bhatia said the additional write-down might wipe out E-Trade’s net worth.
Computing: A new recipe for chips
Intel this week unleashed a “fundamental shift in chip-manufacturing technology,” said Don Clark in The Wall Street Journal. The market-leading microchip producer unveiled a new microprocessor made from a material called hafnium, rather than silicon, which has been the chip industry’s mainstay since the 1960s. Intel says that making chips from the new material will “increase their switching speeds by more than 20 percent while reducing power consumption by about 30 percent.” The new chips will be used to improve videogame graphics and enable transmission of highdefinition video to mobile devices.
Aerospace: Airbus logs new orders
In a head-to-head battle of airplane manufacturers at the Dubai air show, Europe’s Airbus consortium walked away the winner, said Aude Lagorce in Marketwatch.com. Airbus won “a highly coveted order” potentially worth $31 billion for 70 of its A350 midsize jetliners from Dubai-based carrier Emirates. “The airline was seduced by the larger size” of the Airbus model, compared to Boeing’s 767 Dreamliner. Saudi Prince Walid bin Talal also ordered an Airbus A380 superjumbo jet for his private use.
Candy: Board shake-up at Hershey
Eight of 11 members of the Hershey board resigned this week amid plunging sales and profits at the candy maker, said the Associated Press. It’s the latest sign of upheaval at the Pennsylvania-based company, “which is trying to revive its sales while undergoing a dramatic shift to cut its domestic plants and expand production in China, India, and Mexico.” CEO Richard Lenny resigned in October. The eight departing directors will be replaced by people “with deep roots in Pennsylvania,” including former Gov. Tom Ridge, who served as the first head of the Department of Homeland Security.
Dick Grasso’s story ought to be uplifting, said Greg Farrell in USA Today. Grasso—who was ousted from the CEO spot at the New York Stock Exchange in 2003 amid a furor over his $187 million pay package—is the subject of a new book, King of the Club, by CNBC’s Charles Gasparino. Written at the urging of Grasso and his supporters, it’s “a ragsto- riches tale of a kid from Queens” who works his way to the top of the world’s premiere stock exchange. But in this telling of his life story, Grasso bristles with resentment at almost everyone he encountered during his career, including Grasso’s predecessor and “polar opposite,” William Donaldson. Grasso originally considered the patrician Donaldson “the perfect boss,” but the two eventually fell out, with Grasso “undercutting him behind his back and playing childish tricks designed to humiliate him.” The irony is that in a book written to restore his reputation, Grasso still emerges “as a greedy, imperious character who turned the NYSE into a vehicle for his own enrichment and self-aggrandizement.”
The bottom line
With the falling dollar making U.S. goods cheaper overseas, the U.S. trade deficit sank to $56.5 billion in September, a two-year low. The deficit with China, however, was a nearrecord $23.8 billion.
The price of natural gas is plunging as oil soars. It now takes $48.37 of natural gas to produce the same amount of energy as a barrel of oil, which costs $94.45 at current prices.
The New York Times
Amid falling revenue and profits, investment bank UBS for the first time will limit cash pay for employees this year to $750,000, while sharply increasing the portion of compensation paid in company stock.
The Wall Street Journal
Auto insurer Progressive has added a collision benefit for pets. For no additional cost, Progressive will pay up to $500 if a customer’s pet is hurt or killed in an auto accident.
The median pay of college presidents has grown 37 percent in the past five years, to $528,105. William Brody of Johns Hopkins in Baltimore is the highest-paid president, earning almost $2 million in salary and benefits last year.
In a sign that deal fever is cooling, half of Wall Street’s IPOs last week were priced below their expected ranges. Several closed their first day of trading below their initial offering price.
The Wall Street Journal