Stock Market Predictions

FDA says no need to recall Enfamil formula

Stock Market Predictions

The death of one baby, 10-day-old Avery Cornett in Missouri on December 18, is what led chains including Wal-Mart Stores Inc, Walgreen Co and Kroger to pull some cans of Enfamil Newborn from shelves in an effort to protect consumers from Cronobacter, which can cause severe illness in newborns and has been found in powdered milk-based formula.

The death of a second baby, in Florida, was not known until an update from the U.S. Food and Drug Administration and the Centers for Disease Control and Prevention late on Friday following the testing of samples taken from the infected babies' homes and company facilities.

"Parents may continue to use powdered infant formula, following the manufacturer's directions on the printed label," the agencies said in a joint statement.

"We're pleased with the FDA and CDC testing, which should reassure consumers, healthcare professionals and retailers everywhere about the safety and quality of our products," Tim Brown, Mead Johnson's general manager for North America, said in a statement.

Two other babies, one in Illinois and one in Oklahoma, were also reported with infections in recent weeks, but they both recovered.

The agencies said they found Cronobacter in an open container of infant formula, an open bottle of nursery water and prepared infant formula.

They said it was unclear how the contamination occurred, which suggests that it could have happened after the packages were opened. The agencies also said there was no evidence indicating that the infections were related.

"There is currently no evidence to conclude that the infant formula or nursery water was contaminated during manufacturing or shipping," said an FDA spokesman.

These findings basically clear Mead Johnson, whose shares have fallen 10 percent since the issue surfaced, said personal injury and product liability lawyer William Marler of the firm Marler Clark.

"It would be difficult to prove that this formula caused this child's death," said Marler, who has years of experience handling foodborne illness cases, including one in 2009 against Mead Johnson involving Cronobacter. That case was dismissed after no sealed cans tested positive, robbing the prosecution of the proverbial "smoking gun."

Officials for the CDC, Mead Johnson and Wal-Mart could not immediately be reached for comment.

MOVING FORWARD

Mead Johnson's name may be cleared, but the company will likely take some time to fully heal, experts say, given how serious the situation is and how sensitive people are about what they feed their babies.

"Bad news is bad news," said Robert Passikoff, president of research firm Brand Keys Inc. He said the negative publicity has already damaged Enfamil's brand equity and could have cost the company one cycle of new parents, who might feed their children formula for about a year.

Goldman Sachs lowered its earnings estimates for Mead Johnson last week for 2012 through 2014 by 3 percent on average, citing the risk of damage to consumers' trust in the Enfamil brand. It lowered its price target to $74 from $80.

Despite the costs of retesting its formula and the likely hit to earnings from something that is not its fault, Mead Johnson has little legal recourse against either the public health department, the victims' families or Wal-Mart, which pulled its product in the absence of a definite link.

"Could a lawyer cook up legal theories to sue? They can. Would that be a very wise move? I think it would be really, really stupid," Marler said, for two reasons.

"'We didn't know for sure and we wanted to protect our customers' is a pretty good defense," he said, adding that "Suing somebody isn't really the likely way you're going to get your product in their store."

Enfamil is the leading milk-based formula in the United States, controlling nearly 44 percent of the $4.29 billion market, according to Euromonitor International. No. 2 is Abbott Laboratories Inc's Similac, with a 24-percent share, followed by Nestle's Good Start with 10 percent and private label, or store brands, with 9 percent.

Still, the United States makes up less than 30 percent of Mead Johnson's sales, and is not what had been driving the company's shares, said RBC Capital Markets analyst Edward Aaron.

Until its latest troubles, the stock had more than tripled since its February 2009 spin-off from Bristol Myers Squibb, fueled by growth from emerging markets.

In the latest quarter, the company's sales rose 15 percent to $933.9 million, driven by a 30 percent jump in Asia and Latin America.

But Mead Johnson has done many things well in this crisis and should be forgiven quickly, said Mike Rozembajgier, vice president of recalls for Stericycle ExpertRECALL, a consulting and logistics firm.

"There's an understanding by the public that recalls are going to happen," Rozembajgier said. "How forgiving they might be with regard to a particular brand ... comes down to how the company manages the recall."

Mead Johnson has not had a recall, but has gone through many of the same steps, he said, such as working with the government,

being transparent and communicating with retailers and the press.

(Reporting By Martinne Geller in New York and Anna Yukhananov in Boston; Editing by Bob Burgdorfer, Steve Orlofsky, Gary Hill)

Nanosphere says bacterial infection test gets FDA nod

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Nanosphere, which makes diagnostic devices, said the Verigene BC-S test detects Staphylococcus aureus, Staphylococcus epidermidis, and determines antibiotic resistance from the mecA gene within two-and-a-half hours.

Shares of the company were up 20 percent at $1.52 in late afternoon trade on Tuesday on Nasdaq. They earlier touched a high of $1.70.

(Reporting by Shailesh Kuber in Bangalore; Editing by Joyjeet Das)

Chico's shares rise on possible PE buyout report

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A dealReporter.com story suggested that Chico's may be an attractive target for private equity firms, Interactive Brokers Group options analyst Caitlin Duffy wrote in a report on Friday.

Global Markets, however, could not access the report.

Tiburon Research Group analyst Rob Wilson said Chico's, which has seen its sales slow down, might be looking to sell itself before more bad news comes out.

Shares of Fort Myers, Florida-based Chico's were trading at $11.12 in Friday afternoon on the New York Stock Exchange. They had hit a high of $11.23 earlier in the day.

Chico's did not respond to an e-mail and calls seeking comment.

Retailers like Chico's have been forced to increase markdowns to attract customers in a heavily competitive environment, eating into their profits.

Three years ago, the company had set a goal to earn $1 a share for fiscal 2012. However, last month it said that the target would not be met.

For fiscal 2013, it expects to earn $1.50 a share.

"I think (Chico's) made a mistake putting up some very aggressive earnings target out there ... They're certainly not on the trajectory on which they'll be able to achieve their target," analyst Wilson, who thinks $14 a share would be a good price for the company, said.

Interactive Brokers Group's Duffy said call options on the specialty retailer were attracting buyers. She said investors traded more than three times as many calls on Friday compared with Thursday.

In November, the retailer had warned that its margins will remain under pressure as it offers higher discounts to draw shoppers in the holiday season.

(Reporting by Arpita Mukherjee and Ranjita Ganesan in Bangalore; Editing by Viraj Nair)

Two resign from Kodak board; represented KKR

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Both directors - Adam Clammer and Herald Chen - were representatives of private equity firm KKR & Co (KKR.N) on Kodak's board. Kodak said Clammer and Chen notified the company of their resignations on December 21.

The two directors joined Kodak's board in 2009, after KKR bought $300 million of Kodak's senior secured notes and warrants to buy 40 million of the company's shares.

"No reason given. We thank them for their service," Kodak spokesman Christopher Veronda wrote in a brief emailed statement when asked why Clammer and Chen had resigned. A KKR spokeswoman declined to comment.

Bill Brandt, chief executive of turnaround consultant Development Specialists Inc and chair of the Illinois Finance Authority, said there could be two reasons that board members from the same organization would abruptly resign.

"One, they could be about to file bankruptcy. Sometimes if you can see that decision <to file for bankruptcy> coming, you bail before it happens, and avoid having to be part of a directors and officers liability suit. Or, two, KKR may be trying to increase its stake in Kodak or bid on most of its patents. There would be a conflict of interest if KKR was doing that and its representatives stayed on the board," Brandt said.

Kodak has been struggling to cope with the collapse of its film business due to the dominance of digital photography.

Speculation flared in September that Kodak was on the verge of bankruptcy, after the Rochester, New York-based company hired restructuring experts. Last month, Kodak warned that unless it could raise $500 million in new debt or sell some patents in its portfolio, it might not survive 2012.

Kodak's five-year credit default swaps were quoted at distressed levels earlier this month, reflecting a 92 percent chance of default on its debt in the next five years.

(Reporting By Michael Erman; Additional reporting by Greg Roumeliotis and Nick Brown; Editing by Gary Hill)

Momenta shares rise on biosimilars deal with Baxter

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Momenta will receive an upfront payment of $33 million from Baxter for developing up to six biosimilars, and is entitled to additional milestone payments.

The deal also includes Momenta receiving royalties with a profit-share option on four drugs, for which Baxter will cover clinical trials, manufacturing and commercialization, according to Canaccord Genuity analyst Ritu Baral.

The analyst, who has a price target of $23 on Momenta stock, reiterated her "buy" rating.

Momenta and Baxter's deal comes just days after Amgen Inc (AMGN.O) and generic drugmaker Watson Pharmaceuticals Inc (WPI.N) announced a partnership to develop and sell biosimilars of cancer drugs.

Earlier in the month, Samsung announced an agreement with biotechnology company Biogen Idec (BIIB.O) to set up a joint venture for developing, manufacturing and marketing biosimilars.

Biosimilars are copies of existing biotechnology products developed from organic compounds. However, due to the complex nature of these compounds, biosimilars have come under the regulatory scanner.

Companies hoping to cash in on a potential multi-billion dollar market for biosimilars have long awaited guidelines from the U.S. Food and Drug Administration on the development of such drugs.

Analyst Baral said the slew of deals on biosimilars follows increased FDA clarity on the regulatory path.

Shares of Cambridge, Massachusetts-based Momenta were up 4 percent at $17.63 on Friday morning on Nasdaq.

(Reporting by Zeba Siddiqui in Bangalore; Editing by Roshni Menon)

Yue Yuen profit misses forecast, challenges seen

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Chairman Tsai Chi Neng said in a filing to the Hong Kong bourse that the global economic environment in 2012 would remain volatile as recovery was gaining momentum only gradually and consumers in developed economies "may be reluctant to spend and would rather increase their savings."

He added that customers should still be willing to purchase sports footwear and apparel ahead of the UEFA Champions League football competition in June next year and the Olympic Games in August.

Yue Yuen, which makes shoes for New Balance, Nike Inc (NKE.N) and Adidas AG (ADSGn.DE), on Friday posted a $449.8 million profit for the year ended September, down from $479.5 million in the previous year. The result missed a forecast $511.1 million profit from Thomson Global Markets Starmine.

Earnings per shares fell 6.2 percent to 27.28 cents.

Total production volume in 2011 rose 14 percent to 326.6 million pairs of shoes.

Shares of Yue Yuen have fallen about 11 percent this year, versus a 20 percent drop in Hang Seng Index .HSI. The stock was down 0.4 percent early on Friday.

"Despite a drop in earnings, hopes for (industry) consolidation and moderating cost growth in the coming year are expected to make companies like Yue Yuen look more defensive and attractive in the current investment climate," said Ample Finance Group Director Alex Wong.

Yue Yuen's 56.5 percent owned unit Pou Sheng International (Holdings) Ltd (3813.HK), which makes products for Li Ning Co Ltd (2331.HK), ANTA Sports Products Ltd (2020.HK), 361 Degrees International Ltd (1361.HK), XTEP International Holdings Ltd (1368.HK), posted a 152 percent profit gain to $53.7 million, with revenue up 20 percent at $1.6 billion.

RISING COSTS

While group volume and turnover maintained growth momentum, margins came under pressure, "mainly from rising raw materials costs and factory wages," said Tsai.

Yue Yuen said labor costs jumped 38.5 percent during the year and materials costs rose 24.6 percent, with production overheads up 26.6 percent.

Yue Yuen, in which Taiwan-listed parent Pou Chen Corp (9904.TW) holds a 49.98 percent stake, said revenue rose 21.7 percent to $7.05 billion, 28.5 percent of which came from the U.S. market, 21.9 percent from Europe and 28.06 percent from China. Sales in Asia grew 26.2 percent from last year.

Yue Yuen increased production lines by 16.7 percent to 537 during the year, with new factories in China, Indonesia and Vietnam to take advantage of lower costs and more stable labor supplies.

In November, one of Yue Yuen's major factories in the southern Chinese province of Guangdong was hit by a large-scale strike. A spokesman said the company was having difficulty raising wages as it had done in the previous 3-4 years as operational costs increased.

(Editing by Jonathan Hopfner and Chris Lewis)

United Continental shares off on revenue concerns

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United Continental said in a U.S. regulatory filing late on Thursday that it expects consolidated passenger revenue per available seat mile, an important measure called unit revenue, to rise 8.5 percent to 9.5 percent in the fourth quarter.

Helane Becker, an analyst with Dahlman Rose & Co, said her firm had estimated 10 percent growth in quarterly unit revenue.

"We think there are concerns about a recession in Europe," Becker said in an email. Dahlman Rose cut its fourth-quarter profit estimate for United Continental to 25 cents a share from 50 cents a share to account for lower capacity and traffic.

Becker said United would likely benefit in Chicago, Los Angeles and the Atlantic from the restructuring of AMR Corp's (AMR.N) American Airlines, which filed for Chapter 11 protection last month.

James Higgins, an analyst with Ticonderoga Securities, reduced his fourth-quarter profit estimate on United Continental to 16 cents a share from 43 cents a share. Analysts on average, currently expect 46 cents a share, according to Thomson Global Markets I/B/E/S.

In a note to clients, Higgins said exposure to mainland Asia revenue could be creating more revenue uncertainty for United than for other airlines.

"We like the carrier's longer-term prospects but are a bit wary of near-term revenue trends," Higgins wrote.

Most U.S. airlines have posted profits this year, aided by service cuts, higher fares and retirement of less fuel-efficient planes. Still, economic woes loom as a threat to overall demand for air travel.

Last week, Delta Air Lines Inc (DAL.N) said it expects recessionary effects from the euro-zone crisis to weigh on 2012 and said it would cut capacity in Europe by 7 percent.

Shares of United Continental were off 6.7 percent at $18.91 in morning trading as Delta and US Airways Group (LCC.N) also fell. The Arca Airline index .XAL was down 2 percent. AMR Corp was up 4.3 percent to about 60 cents and Southwest Airlines (LUV.N) rose 0.4 percent to $8.43.

(Reporting by Karen Jacobs, editing by Dave Zimmerman)

Verizon ditches $2 fee after customer uproar

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The biggest U.S. wireless operator retracted its decision on Friday, just a day after it announced the fee for one-time payments, which was to have begun January 15.

The consumer victory comes after Bank of America recently decided against a new $5 monthly fee for debit card users after consumers and lawmakers protested the charge.

"There is power in numbers and in the end, the customer is always right," one person said on the Verizon Wireless online forum. "How can any corporation expect to keep business by doing that? It's pure greed just like with Bank of America."

Verizon said it listened to its customers and made the decision based on customer input after many complained and some threatened to leave the service if the fee was instituted.

A spokesman said that the company had just wanted to encourage consumers to pay their bills via different methods such as autopay, where they give Verizon permission to charge their credit card or bank account automatically each month.

Verizon Wireless is a venture of Verizon Communications Inc and Vodafone Group Plc.

The quick turn-around came after little more than a day of complaints, but not before the U.S. Federal Communications Commission said it was "concerned" about the fee and that it was looking into it.

"On behalf of American consumers, we're concerned about Verizon's actions and are looking into the matter," an official for the FCC said earlier on Friday.

The prospect of a $2 fee created a flurry of online activity and one consumer organization, Change.org, said 95,000 people joined a campaign on its website urging Verizon to drop the fee.

"The era of corporations walking roughshod over consumers without consequence is officially over," Ben Rattray, chief executive of Change.org, said in a statement.

Verizon Wireless customers told the company, often in colorful language, that they would not put up with the fee.

"If this fee goes through, I will be taking my business elsewhere!!!" one person said on the Verizon Wireless website.

Another said "Victory is ours!" after the about-face.

The turnaround comes after another high-profile reversal of course earlier this year by video rental service Netflix Inc in the face of customer disgust.

In October it canceled plans to split its DVD rental service from its online streaming service. The move would have forced customers of both streaming and DVD options to visit different websites and maintain different accounts for each subscription.

The Verizon Wireless incident served to highlight fee practices elsewhere in the communications industry. Rivals AT&T Inc and Sprint Nextel said on Friday that they charge some customers $5 for bill payments, revising their comments from the day before.

AT&T and Comcast Corp say that they charge some customers who look for personal assistance in paying their bills but that they do not charge for online payments. Sprint said it charges customers with bad credit if they refuse to enroll for auto pay.

The Sprint and AT&T fees are even higher than Verizon's proposed levy at $5 per transaction. Comcast's payment fee, which is only levied in some states, is $5.99.

The FCC did not comment on whether it would look into other companies' fee policies for bill payment.

(Reporting By Sinead Carew; Additional reporting by Lisa Richwine in Los Angeles; Editing by Tim Dobbyn)

Amazon shares dip on growth concerns

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Goldman Sachs analysts said in a note from Wednesday that Amazon has typically bested overall online sales growth by 23 points.

comScore reported earlier this week that online holiday spending in the U.S. rose 15 percent to a record $35 billion from November 1 to December 26, versus the comparable period last year.

That would suggest a 38 percent increase in Amazon sales this season, below the 40 percent increase Wall Street expects, wrote Goldman, which expects 44 percent, including Kindle sales.

"While the comScore numbers are just one data point which does not capture international sales or breakout individual companies' sales, taken alone they seem to suggest the potential for downside risk to consensus forecasts for 4Q 2011," the analysts said.

Shares of Amazon fell as low as $166.97 in early trading on Thursday, the lowest level since late March. The stock recovered by midday to $173, down 0.5 percent.

Amazon shares reached almost $250 in October, but have dropped by about 30 percent since then. Shares of rival e-commerce company eBay have lost roughly 10 percent in the same period.

Amazon said on Thursday it has sold "well over" 1 million Kindle e-reader and tablet devices per week this month.

Goldman's 44 percent sales growth forecast for the fourth quarter, versus a year earlier, includes three to four percentage points of growth from Kindle device sales that the analysts said are not currently incorporated in Wall Street consensus estimates.

(Reporting By Phil Wahba and Alistair Barr; editing by Mark Porter and Tim Dobbyn)

Diamond Foods gains on rumors of Einhorn investment

Stock Market Predictions

When contacted, Einhorn, who runs hedge fund Greenlight Capital Inc, declined to comment. Diamond Foods also declined to

comment.

"For people who are long (on) Diamond stock, it would be a good thing... If someone takes a large stake who is a well regarded investor, others tend to follow like lemmings," said an investor, who did not want to be identified.

The rumors come at a time when the U.S. Securities and Exchange Commission is probing the snack maker's accounting of payments to walnut growers.

Diamond's stock has lost more than half its value since it first announced an internal probe into the matter. It fell to its lowest level in two years after the SEC announced its probe earlier this month.

The probes center on allegations that Diamond delayed payments to farmers to make its earnings for the fiscal year ended July 31 look better while it negotiated to buy Pringles from Procter & Gamble (PG.N).

The maker of Emerald nuts, Kettle potato chips and Pop Secret popcorn, which agreed to buy the snacks foods brand for $1.5 billion in April, has since delayed the acquisition.

Einhorn was in the news recently after he cast doubt on Green Mountain Coffee Roasters' (GMCR.O) accounting practices and long-term earnings power.

Shares of Diamond were trading up 9 percent at $32.04 on Thursday on Nasdaq. They earlier touched a high of $33.36.

(Reporting by Chris Jonathan Peters & Arpita Mukherjee in Bangalore; Editing by Viraj Nair and Joyjeet Das)

Momenta shares rise on biosimilars deal with Baxter

Stock Market Predictions

Momenta will receive an upfront payment of $33 million from Baxter for developing up to six biosimilars, and is entitled to additional milestone payments.

The deal also includes Momenta receiving royalties with a profit-share option on four drugs, for which Baxter will cover clinical trials, manufacturing and commercialization, according to Canaccord Genuity analyst Ritu Baral.

The analyst, who has a price target of $23 on Momenta stock, reiterated her "buy" rating.

Momenta and Baxter's deal comes just days after Amgen Inc (AMGN.O) and generic drugmaker Watson Pharmaceuticals Inc (WPI.N) announced a partnership to develop and sell biosimilars of cancer drugs.

Earlier in the month, Samsung announced an agreement with biotechnology company Biogen Idec (BIIB.O) to set up a joint venture for developing, manufacturing and marketing biosimilars.

Biosimilars are copies of existing biotechnology products developed from organic compounds. However, due to the complex nature of these compounds, biosimilars have come under the regulatory scanner.

Companies hoping to cash in on a potential multi-billion dollar market for biosimilars have long awaited guidelines from the U.S. Food and Drug Administration on the development of such drugs.

Analyst Baral said the slew of deals on biosimilars follows increased FDA clarity on the regulatory path.

Shares of Cambridge, Massachusetts-based Momenta were up 4 percent at $17.63 on Friday morning on Nasdaq.

(Reporting by Zeba Siddiqui in Bangalore; Editing by Roshni Menon)

United Continental shares off on revenue concerns

Stock Market Predictions

United Continental said in a U.S. regulatory filing late on Thursday that it expects consolidated passenger revenue per available seat mile, an important measure called unit revenue, to rise 8.5 percent to 9.5 percent in the fourth quarter.

Helane Becker, an analyst with Dahlman Rose & Co, said her firm had estimated 10 percent growth in quarterly unit revenue.

"We think there are concerns about a recession in Europe," Becker said in an email. Dahlman Rose cut its fourth-quarter profit estimate for United Continental to 25 cents a share from 50 cents a share to account for lower capacity and traffic.

Becker said United would likely benefit in Chicago, Los Angeles and the Atlantic from the restructuring of AMR Corp's (AMR.N) American Airlines, which filed for Chapter 11 protection last month.

James Higgins, an analyst with Ticonderoga Securities, reduced his fourth-quarter profit estimate on United Continental to 16 cents a share from 43 cents a share. Analysts on average, currently expect 46 cents a share, according to Thomson Global Markets I/B/E/S.

In a note to clients, Higgins said exposure to mainland Asia revenue could be creating more revenue uncertainty for United than for other airlines.

"We like the carrier's longer-term prospects but are a bit wary of near-term revenue trends," Higgins wrote.

Most U.S. airlines have posted profits this year, aided by service cuts, higher fares and retirement of less fuel-efficient planes. Still, economic woes loom as a threat to overall demand for air travel.

Last week, Delta Air Lines Inc (DAL.N) said it expects recessionary effects from the euro-zone crisis to weigh on 2012 and said it would cut capacity in Europe by 7 percent.

Shares of United Continental were off 6.7 percent at $18.91 in morning trading as Delta and US Airways Group (LCC.N) also fell. The Arca Airline index .XAL was down 2 percent. AMR Corp was up 4.3 percent to about 60 cents and Southwest Airlines (LUV.N) rose 0.4 percent to $8.43.

(Reporting by Karen Jacobs, editing by Dave Zimmerman)

American Greetings shares plummet as Q3 profit drops

Stock Market Predictions

Shares of the company slumped 25 percent to $12.85 on Thursday in heavy trading, making it one of the top percentage losers on the New York Stock Exchange.

S&P Capital said it expects margin pressure for the company to continue and cut its price target on the stock to $14 from $21.

American Greetings third-quarter net income fell to $20.2 million, or 50 cents per share, from $32.2 million, or 78 cents per share, a year ago.

Revenue rose 8 percent to $463.6 million.

Selling, distribution and marketing expenses rose 19 percent to $140.1 million.

The Cleveland, Ohio-based company plans to spend more on selling and marketing its greeting cards.

For the fiscal year ending February 29, 2012, the company expects cash flow from operating activities to be about $90-$110 million, compared with its prior estimate of $125-$145 million.

(Reporting by Chris Jonathan Peters in Bangalore; Editing by Roshni Menon)

Keppel shares jump on $809 million Brazil contract win

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At 0111 GMT (8:11 p.m. EST), Keppel shares were traded at S$9.46 with 886,000 shares changing hands.

Keppel said on Thursday it had secured the contract to design and build a semi-submersible rig for Urca Drilling BV, a unit of Sete Brasil Participações.

The contract win brings Keppel's total order wins so far this year to S$9.8 billion, DMG & Partners said.

(Reporting by Charmian Kok; Editing by Kevin Lim)

Oracle miss sparks Wall St fears of spending cuts

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The first earnings miss in a decade from Oracle, whose fiscal second quarter ended on November 30, drove its shares down more than 11 percent on Wednesday, destroying about $20 billion of market value. The shortfall from the No. 3 software maker also hit shares of many other technology companies, with VMware Inc, NetSuite Inc, and SAP among those suffering the biggest losses.

"Is this a preliminary example of what we could expect in January from Microsoft and other players? It raises an eyebrow that things may not be as hunky dory as we've been led to believe in terms of IT spending," said Daniel Morgan, a portfolio manager at Synovus Securities in Atlanta.

The troubles at Oracle follow ominous reports from big tech names including Hewlett-Packard Co, Intel Corp and Texas Instruments Inc.

The disconcerting news on Tuesday was not limited to Silicon Valley, with U.S. industrial conglomerate Emerson Electric Co reporting a drop in orders for equipment used in big data centers. Emerson shares fell 5.4 percent to $46.97.

"Overall, we have seen in the last 60 days ... a significant weakness in this whole electronics space," said Emerson Chief Executive David Farr. "I don't see that changing for the time being."

The fourth quarter is the crucial period of the year for many technology companies because corporations tend to spend most heavily on information technology during that time in what is known as a year-end "budget flush."

Oracle's disappointing results could signal that companies won't spend all the money that they still have budgeted for 2011 technology projects, said Howard Anderson, a lecturer at MIT's Sloan School of Business, who regularly talks to CEOs of top-tier corporations.

"Confidence is not there," he said. "We have a kind of rolling recession."

Oracle's quarter ended in November, but investors worried that the decline in business confidence could signal more troubles for peers whose quarters end in December. That includes arch rival SAP AG.

"The majority of deals in the fourth quarter are traditionally closed in the last two weeks of the quarter, so the delay of Oracle's deals is a negative cross read for SAP," said Silvia Quandt analyst Michael Busse.

SAP CEO Bill McDermott declined to comment on his business, saying the company was in a quiet period.

A slowing in tech spending would be troubling for the U.S. economy, which has had few bright spots in recent years.

"Since the technical end of the recession (in June 2009) we've been seeing double-digit growth in investment in technology. If Oracle is the canary in the coalmine, that would be something to worry about," said Michael Goodman, director of economic and public policy research at the University of Massachusetts at Dartmouth.

"There's a lot of concern about what the immediate future holds, so this may just be customers putting off investments they want to make until they feel like they have a better handle on what the future looks like," Goodman said.

MIXED SIGNALS

U.S. companies have been sending mixed signals about their spending plans for 2012. A survey released last week by the Business Roundtable found that 16 percent of CEOs of large U.S. companies planned to cut their capital spending over the next six months, up from 13 percent who had planned cuts in the third quarter.

But other data released on Wednesday by the Equipment Leasing and Finance Association showed U.S. businesses signed up for $6.2 billion in loans, leases and lines of credit to fund capital expenditures in November, a 38 percent increase from the month a year ago.

Oracle's stock fell $3.40 to $25.77, its lowest close since August, making it the biggest loser in the Standard & Poor's 500 index. It was the biggest one-day percentage drop in the stock since March 4, 2002, when Oracle last surprised investors with an earnings warning.

CEO and co-founder Larry Ellison, the company's biggest shareholder, lost more than $3.8 billion on Wednesday as the stock plunged, based on his holdings published in Oracle's annual proxy filing.

The declines accounted for about 16 points of the 27.6 point drop in the S&P 1500 Software index, which suffered a 4.5 percent drop in market cap to about $511 billion. The drop in Oracle shares represents 68 percent of the decline in total market cap for the index.

(Reporting by Sayantani Ghosh in Bangalore, Maria Sheahan, Christoph Steitz and Marilyn Gerlach in Frankfurt and Nicola Leske, David Gaffen, Ryan Vlastelica and Nick Zieminski in New York; Editing by Richard Chang)

Gloucester shares surge as Noble backs Yancoal bid

Stock Market Predictions

Analysts said on face value, the merged group would have an enterprise value of about A$6.8 billion, which included a heavy debt load.

Gloucester's 64 percent shareholder, Hong Kong-based Noble, said it would back the deal, which will leave it with a 14.8 percent stake in the merged group.

"Noble has informed the independent directors of Gloucester that, subject to approval by the Noble board of directors and in the absence of a superior proposal, it intends to vote its shareholding in favor of the merger proposal," Noble said in a statement.

Sydney-based Gloucester will be merged with Yancoal Australia Ltd., and Yanzhou will own 77 percent of the new company.

Gloucester shareholders will own the rest and receive A$700 million ($705.36 million) in cash, the equivalent of A$3.20 in per share, Yancoal said in a statement. Each Gloucester Coal shareholder will receive one share in the merged company.

Shareholders will also be entitled to participate in a pool of "contingent value rights" shares that protect the value of the merged company's shares. Under the terms of the deal, the shares will be protected at a value of $6.96 each.

This puts the total value of the deal at A$10.16 per share, or A$2.1 billion, a 45 percent premium to Gloucester's last trade before the deal was announced.

Gloucester shares surged 29 percent to a high of A$9.04, but that was well below the ostensible value of the deal, which analysts said reflected investors' uncertainty over the value of Yancoal's assets.

"You can't really value the deal without knowing the value of the Yancoal assets," said CLSA analyst James Stewart.

Yanzhou (1171.HK) shares were trading up 5.1 pct.

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Australia coal M&A graphic: r.reuters.com/neq65s

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FLOAT REQUIREMENT

The deal helps Yancoal meet a requirement to float 30 percent of its Australian assets by the end of 2012, a condition of its A$3.3 billion takeover of Felix Resources in 2009, but does not go far enough.

With Yancoal owning 77 percent of the merged group, it would need to dilute its stake down to 70 percent at some point later in 2012 to fully meet the requirement.

A lawyer not involved in the deal said he expected Australia's Foreign Investment Review Board to approve the deal.

"There's nothing that really leaps off the page as being of concern. It's not a supersensitive asset. There are no national security issues attached to it," said the lawyer, who declined to be named due to the sensitivity of the review process.

Noble Group (NOBG.SI) said it would make a one-time gain of about $200 million from the deal. Its shares rose 0.4 percent to S$1.195.

In a filing to the Singapore stock exchange Noble said it will receive about 130.9 million Yancoal Australia shares and A$420 million ($416 million) under the terms of the proposed merger.

Gloucester and Yancoal spokesmen said none of the parties involved were likely to release further details pending the outcome of an independent expert's report valuing the offer and other due diligence work expected to take until February.

The merger is conditional on the new entity obtaining a listing on the ASX, Gloucester said. It is also subject to approval by at least 75 percent of Gloucester shareholders.

Yancoal and Gloucester both have mines and projects in the Australian states of New South Wales and Queensland. Gloucester aims to expand production to 10 million tonnes a year by 2016, while Yancoal expects to produce 20 million tonnes a year by 2015.

That would put a combined group ahead of Whitehaven Coal (WHC.AX), which last week announced a $2.5 billion takeover of Aston Resources (AZT.AX) to create a company producing 25 million tonnes a year by 2016.

Since taking over Felix Resources in 2009, Yancoal has bought Syntech Resources for A$203 million and is about to complete the A$297 million acquisition of Premier Coal from Wesfarmers (WES.AX).

Those assets are not included in the deal.

It sought to buy Whitehaven Coal earlier this year but the two were unable to settle on a price.

(Reporting by James Regan, Victoria Thieberger; and Sonali Paul; Editing by Ed Davies)

Micron shares skyrocket, investors bet on 2012 bounce

Stock Market Predictions

Micron on Wednesday posted lower-than-expected results saying flooding in Thailand -- a major production center for hard drives and the components that go in them -- had slashed demand for basic memory chips 10 to 15 percent. But Wall Street analysts foresaw a bounceback next year as hard-drive shortages alleviate.

Wedbush Morgan upgraded Micron stock to "outperform" from "neutral," while Raymond James analyst Hans Mosesmann reiterated his strong "buy" position, arguing the worst of the market doldrums could be behind Micron and the company should ride fatter margins next year.

"We see more reason for optimism in FY12, as the current DRAM pricing dynamic is not sustainable; the worst of the HDD- related shortages are seemingly in the past" and higher-margin flash memory takes up a larger portion of sales, Mosesmann said.

Stock in Micron, the last U.S. DRAM manufacturer, soared as much as 16 percent in early trading, and was up 14.3 percent at $6.33 in the late morning.

(Reporting by Edwin Chan, editing by Maureen Bavdek)

Lockheed in up to $980 million U.S. missile shield deal

Stock Market Predictions

The ordering period under the sole-source contract is from January 1, 2012, through December 31, 2016, the Pentagon said in a digest item, without specifying the overall system at issue.

(Reporting By Jim Wolf)

Baby formula probe widens beyond Enfamil

Stock Market Predictions

An official from the Centers for Disease Control and Prevention (CDC) said the baby, 10-day-old Avery Cornett of Lebanon, Missouri, had consumed a variety of baby formulas before his death but declined to give more details.

Initial results of the probe could be available at the end of next week at the earliest, though the full investigation could take up to a month.

A top investment bank warned that Enfamil sales could be hurt even if health regulators find no link between it and the death.

Shares of Mead Johnson Nutrition Co, the largest U.S. formula maker, closed 5 percent lower on Friday, on top of a 10 percent drop on Thursday when news first emerged that Wal-Mart Stores Inc was pulling cans of Enfamil Newborn formula off its shelves following the death of the infant.

The baby had been fed the formula and tested positive for Cronobacter, a bacterium that has sometimes been linked to rare illnesses in newborns. Cronobacter has been found in milk-based powdered baby formula, and is also a relatively common environmental contaminant.

The CDC official said the infant also consumed other types of baby formula before his death, so the link to Enfamil was still unproven.

He declined to name the other formulas that could be involved, and whether they were also powdered, or liquid.

"At this point, no formula samples have yielded Cronobacter," said Dr. Robert Tauxe, deputy director of the CDC's division of foodborne, waterborne and environmental diseases.

While health officials remained wary of linking Enfamil to the infant's death, Goldman Sachs cut its financial targets for Mead Johnson. And Standard & Poor's said it was assessing the impact of the investigation on the company, including whether it would have to be put on credit watch.

"We see risk that consumers trust in the Enfamil brand is damaged, regardless of the outcome of any investigation," Goldman Sachs analyst Jason English said in a client note.

He lowered his estimates for Mead Johnson's earnings in 2012 through 2014 by 3 percent on average. In particular, he cut his 2012 earnings per share forecast to $3.17 from $3.27. He also trimmed that 2013 forecast by 10 cents to $3.50.

As a result of those lowered expectations, English cut his share price target for Mead Johnson to $74 from $80. The stock fell $3.47 to end at $65.29 on Friday.

Mead Johnson's "Enfa" family of products, which includes Enfamil, accounts for about 79 percent of total sales, according to Standard & Poor's. Mead Johnson reported $3.14 billion in sales in 2010.

The ratings agency retained its "triple-B" rating and "positive" outlook on Mead Johnson's debt, though it said the company could lose sales if consumers switch to another brand of baby formula while waiting for the results of the investigation.

FORMULA WOES

Another baby, in Illinois, got sick from Cronobacter infection earlier this month, but later recovered. Regulators said that infant consumed a number of products and investigators are still looking into what caused the illness. It is unknown whether the baby also used Enfamil formula, and investigators are analyzing the DNA from both infection strains to see if they are similar.

The batch was produced at Mead Johnson's facility in Zeeland, Michigan, company spokesman Chris Perille said. Enfamil Premium Newborn is produced exclusively for use in the United States and is not sold outside of the country, he added.

Abbott Laboratories - maker of Similac, the No. 2 U.S. formula brand - voluntarily recalled millions of containers of Similac powdered formula last year after beetles were found in the products and in a plant where they were made.

D.A. Davidson analyst Tim Ramey said it took about six months for Abbott's Similac business to recover. During that time, Enfamil sales rose.

"They're going to trade share back and forth," Ramey said. "If it turns out there's a problem, that will favor Abbott Labs." Shares of Abbott Labs edged 0.6 percent higher to $56.

Wal-Mart began taking 12.5-ounce cans of Enfamil Newborn from lot number ZP1K7G from shelves late Monday night. Other retailers who carried the same product - including Walgreen Co, Supervalu Inc, Safeway Inc and Kroger Co - followed suit.

Siobhan DeLancey, spokeswoman for the U.S. Food and Drug Administration (FDA), said the agency was analyzing samples of unopened baby formula containers from the infant's home, as well as from several retail stores, to see if other Enfamil lots had problems, and where the lots came from.

She said the Centers for Disease Control and Prevention (CDC) would test the open containers of formula, the water in the home, and the mixture of formula and water.

The results of the investigation could come as early as the middle of next week, DeLancey confirmed.

However, the CDC said DNA samples from the baby's strain of the infection will not be available until the end of next week, making it impossible to link the baby's illness to any kind of formula until then.

(Additional reporting by Brad Dorfman in Chicago; Editing by Richard Chang)

Chico's shares rise on possible PE buyout report

Stock Market Predictions

A dealReporter.com story suggested that Chico's may be an attractive target for private equity firms, Interactive Brokers Group options analyst Caitlin Duffy wrote in a report on Friday.

Global Markets, however, could not access the report.

Tiburon Research Group analyst Rob Wilson said Chico's, which has seen its sales slow down, might be looking to sell itself before more bad news comes out.

Shares of Fort Myers, Florida-based Chico's were trading at $11.12 in Friday afternoon on the New York Stock Exchange. They had hit a high of $11.23 earlier in the day.

Chico's did not respond to an e-mail and calls seeking comment.

Retailers like Chico's have been forced to increase markdowns to attract customers in a heavily competitive environment, eating into their profits.

Three years ago, the company had set a goal to earn $1 a share for fiscal 2012. However, last month it said that the target would not be met.

For fiscal 2013, it expects to earn $1.50 a share.

"I think (Chico's) made a mistake putting up some very aggressive earnings target out there ... They're certainly not on the trajectory on which they'll be able to achieve their target," analyst Wilson, who thinks $14 a share would be a good price for the company, said.

Interactive Brokers Group's Duffy said call options on the specialty retailer were attracting buyers. She said investors traded more than three times as many calls on Friday compared with Thursday.

In November, the retailer had warned that its margins will remain under pressure as it offers higher discounts to draw shoppers in the holiday season.

(Reporting by Arpita Mukherjee and Ranjita Ganesan in Bangalore; Editing by Viraj Nair)

Analysis: Can Zynga break free from Facebook?

Stock Market Predictions

Technically, the admission is called a risk factor. But since Zynga, the wildly popular maker of mobile and social games such as "Mafia Wars" and "FarmVille," generates about 95 percent of its revenue through Facebook, the worry for investors is that its relationship with Mark Zuckerberg's social network is less a risk factor than a business model.

And how Zynga ultimately performs as a public company -- it is aiming to raise $925 million at a $9 billion valuation when it begins trading on the Nasdaq on Friday -- will depend in large part on its ability to break free from Facebook. Or at least its ability to convince investors that it can do so.

So far, however, the skeptics remain unconvinced. At Zynga's IPO roadshow luncheon in San Francisco on Monday, investors spent most of the question and answer time with Zynga executives asking about Facebook.

"Any time you have such a large reliance on a single company, you have to be concerned," said Dan Niles, chief investment officer of AlphaOne Capital Partners, who didn't attend the luncheon but watched one of Zynga's presentations over the Internet.

From an investment perspective, ignoring the fact that all but 5 percent of Zynga's $828 million in revenue in the first nine months of this year came from Facebook could be detrimental.

Zynga conceded that point in its IPO prospectus, noting that, "any deterioration in our relationship with Facebook would harm our business and adversely affect the value of our Class A common stock."

Facebook takes a 30 percent cut of the revenue Zynga derives from the social network, which features more than 222 million monthly active Zynga users, according to the data tracking website AppData. Zynga itself makes most of its money from less than 3 percent of its players, who buy virtual items like trucks and poker chips.

Being so dependent on one company clearly poses risks to Zynga's growth potential. If Facebook's user growth slows, for instance, Zynga's growth is likely to slow as well. Or, in an extreme case, if Facebook suddenly decided to banish games, it could harm Zynga's entire business.

Zynga is also beholden to Facebook in other ways. According to a regulatory filing on July 18, the company has to publish some of its games exclusively on Facebook before other platforms.

What's worse, Zynga may have botched one main attempt it has thus far made at trying to break away from Facebook.

When the company unveiled its new online platform "Zynga Direct" during a rare media event at its San Francisco headquarters in October, it was billed as a way for Zynga to deal directly with its consumers without an intermediary.

But when players visited Zynga's website to sign up for a user name, called a "Z Tag," they were told to first install the Zynga app on Facebook, giving the impression that it was being more closely integrated with the world's largest social network instead of being weaned off of it.

A Zynga spokesman on Wednesday declined to comment on the company's IPO.

FACEBOOK FLIPSIDE

The counter argument is that Zynga's reliance on the platform may attract investors looking to bet on Facebook's growth. With Facebook's IPO at least several months away, there currently are not many ways to gain exposure to Facebook on the stock market.

"Ahead of Facebook's IPO, Zynga is the closest proxy investors have," said Robert W. Baird & Co analyst Colin Sebastian. "As of today, Zynga is highly dependent on Facebook and could bring in investors who are looking to find ways to gain exposure to social media."

Akram Yosri, managing partner of 3i Capital Group, attended Zynga's roadshow presentation in New York and said he was satisfied with how management responded to questions about Facebook and how Zynga can grow in partnership with the social network.

"They didn't dodge the question," said Yosri, whose firm has $1.4 billion in assets under management. "As long as it's a working relationship, it's a plus for Zynga because Facebook is going to be there a long time and has a proven business model. "

Zynga also gathers lots of data on its millions of users, more than half of whom are female, which marketers could find attractive.

CHINA AND BEYOND

Still, Zynga faces a long road to a less Facebook-dependent future. According to regulatory filings, Zynga's contract with Facebook doesn't come up for review until 2015. This gives it three years to find new revenue sources outside the social network such as moving into new markets like Asia and making more games for mobile devices.

In July, Zynga entered mainland China's games market for the first time, partnering with Chinese platform Tencent for a local version of the game "CityVille."

"Zynga has at least until that time to expand its presence in Asia and it is trying to do that aggressively in mobile," said Steve Soranno, an equity analyst at Calvert Investment Management, which has $12 billion of assets under management.

Soranno added, however, that investors might find Zynga too risky to bet on while it is building out its business in these new areas since it is unclear whether the company can deliver a high enough or sustainable return on capital investment.

"That's a relative unknown for a young company in an industry that is developing this rapidly. This raises risks for going in(to the stock) that early," Soranno said.

Zynga's total expenses rose 115 percent to $747.9 million in the first nine months of the year, a sign that its international ambitions are adding to costs.

With regard to mobile, while games such as "Words With Friends" have become hits, its roughly 13 million mobile users are dwarfed by the hundreds of millions of users who play it on Facebook.

While Zynga was one of the earliest game makers on the Facebook platform, it lacks that first mover advantage on mobile. For instance, Disney released a mobile game in September called "Where's my Water" that is ranked ahead of some Zynga titles in Apple's App store.

And investors said that Zynga may already be losing market share on Facebook itself, as video game companies such as Electronic Arts make large acquisitions to compete with it. Indeed, AlphaOne's Niles pointed to EA's "The Sims Social" game, which has 28 million monthly active users, as a successful example of encroachment by another video game company on Zynga's turf.

Over time, however, there is hope the Zynga can break free from Facebook with services like "Zynga Direct." Though that service still has no date for when it will launch or which games will be available, Sterne Agee analyst Arvind Bhatia said that it "should help reduce Zynga's platform risk somewhat."

(Reporting By Liana B. Baker in New York, additional reporting by Alistair Barr; Editing by Peter Lauria and Steve Orlofsky)

(Corrects spelling of analyst's surname to Soranno from Sorrano in paragraphs 22, 23 and 24)

Solutia aims to lift stock with dividend, strong forecast

Stock Market Predictions

The company - which makes a key chemical used to make tires, as well as parts for Apple's (AAPL.O) iPad - has seen its stock drop 34 percent so far this year, despite a string of strong earnings announcements and aggressive debt reduction.

"There's a fundamental disconnect between the financial performance of our company ... and the value that the public financial marketplace is putting on that success," Solutia Chief Executive Jeffry Quinn told Global Markets. "When you see that disconnect, it gets frustrating."

The company said on Thursday it will pay a quarterly dividend of 3.75 cents in March to shareholders of record as on February 15.

The dividend, Quinn said, was designed to show Wall Street "the confidence and strength we see in our businesses."

Quinn told Global Markets earlier this year he was considering such a dividend.

Solutia forecast 2012 adjusted earnings of $2.00 to $2.30 a share, above the $2.00 it expects for 2011. Analysts expect $2.24 a share in earnings for 2012, according to Thomson Global Markets I/B/E/S.

St. Louis-based Solutia expects 2012 revenue of $2.12 billion to $2.27 billion, while analysts, on average, expect $2.23 billion.

EUROPE

St. Louis-based Solutia is taking a "very conservative view" of European GDP in its 2012 estimates, Quinn said.

While he does see bumpy times ahead for that continent, "We've done well even with a soft European economy."

Part of Solutia's strength is its vast product line. The company sells insoluble sulfur to tire manufacturers. That material binds rubber together and is essential for tire production.

Solutia also sells film layers for electronic devices and glass. It recently launched a film product that will significantly block infrared solar heat in automobile windows.

While the company is spending heavily to expand into China, it was "a little disappointed" by its July 2010 purchase of Vistasolar, a German maker of protective coatings solar equipment, for $294 million, Quinn said.

"The market moved to China so rapidly," Quinn said. "The first 6 months was great. But 2011 was a little bit of a disappointment for that business because of a loss of share.

"But I think long-term we'll be very please with that acquisition."

Solutia shares closed at $15.28 on Thursday, up 2.6 percent for the day.

(Reporting by Ernest Scheyder in New York and Vaishnavi Bala in Bangalore; Editing by Sreejiraj Eluvangal, Gary Hill)

Amazon shares give up 2011 gains on profit concern

Stock Market Predictions

The shares slipped 30 cents to close at $180.21, but touched $170.25 earlier in the day. That put the stock at the lowest level since late March and left it in negative territory for the year.

As recently as mid-October, the shares hit a record $246.71, up more than 35 percent for the year to date.

Since then, Amazon has launched its Kindle Fire tablet at a $199 price point, which IHS iSuppli and other computer industry analysis firms estimate is close to cost.

The Fire has received a lot of negative reviews, but most analysts expect sales to be very strong. While that may be positive for Amazon's long-term goal of selling more digital content, profit will be pressured in the short term.

"There's a lot of concern about how profitable this company can be," said RJ Hottovy, an equity analyst at Morningstar.

He expects Amazon to sell at least 5 million Kindle Fire tablets in the fourth quarter and is considering raising that estimate.

"With the Kindle Fire selling so well, that means additional margin pressure," the analyst said.

Since the middle of November, when Amazon started shipping the Kindle Fire, shares of the company are down more than 20 percent. Stock of eBay, a big e-commerce rival, are down less than 5 percent in the same period, while the Nasdaq Composite Index has lost 4.9 percent.

In addition to the Kindle Fire launch, Amazon is investing heavily in digital content, such as movies and TV shows, and new distribution centers to support its fast-growing online retail business.

"There's also concern about how long it will take for all these investments to pay off, or whether they will pay off," Hottovy said.

BEST BUY COMPETITION

Concern about Amazon profit was exacerbated this week when Best Buy Co reported lower-than-expected earnings, hurt by heavy promotional activity this holiday season.

Amazon competes with Best Buy on sales of consumer electronics, and the Internet giant is known to aggressively match or beat rivals' prices, according to Chad Bartley, an analyst at Pacific Crest Securities.

"Best Buy's online business did significantly better than its traditional business, a sign that e-commerce continues to take market share," Bartley said.

"On the negative side, Best Buy results make it clear there's a lot of discounting this holiday," the analyst added.

In the past seven weeks, Amazon's consumer electronics prices averaged 9 percent to 10 percent lower than the average on leading e-commerce websites, including those run by Best Buy, Costco, Target, and Wal-Mart, according to Goldman Sachs data.

GOLDMAN WARNING

On Tuesday, Goldman Sachs analysts, led by Heather Bellini, warned that Amazon earnings estimates are probably too high for 2012.

The Goldman analysts forecast earnings per share of $1.42 next year, well below analysts' average estimate of more than $2 a share.

Amazon's current share price is based on assumptions that earnings per share will climb next year from low levels at the end of this year, the analysts added.

"For the stock to materially appreciate in the near term would require the company to beat and raise on the bottom line over the next few quarters," Bellini and her colleagues wrote. "Given our lower operating forecasts for 2012, we see this scenario as unlikely."

(Reporting by Alistair Barr; editing by John Wallace)

(Corrects share price performance in first and second paragraphs)

Olympus tells lenders cash crunch looms: report

Stock Market Predictions

Senior officials from the company met lenders on Friday, telling them they would come up with a new business plan in early May that could include equity tie-ups to bolster its balance sheet.

The company's main lender, Sumitomo Mitsui Banking Corp, agreed at the meeting to continue its support for the company, a source told Global Markets.

Assuming no new long-term borrowing, the company said cash and deposits would fall to 183.7 billion yen($2.36 billion) at the end of March 2013 and 94.2 billion yen a year after that, the Nikkei business said. Reserves could run out completely in 2015, the paper said.

Olympus's profits on its medical equipment business are hampered by losses on a struggling camera unit.

The company withdrew its full-year earnings forecast on Wednesday, but at Friday's meeting offered an internal forecast for a 7 percent year-on-year decline in sales to 790 billion yen and a 5.6 percent gain in operating profit to 35.6 billion yen.

($1=77.7 yen)

(Reporting by Isabel Reynolds; Editing by Robert Birsel)

Kroger sees hit, then gain, as pension plans merge

Stock Market Predictions

Kroger said it would borrow money at low interest rates to make a significant up-front pension contribution that will reduce future pension contribution related expenses. The fund merger also will lower administrative costs and investment fees.

Kroger said employees and retirees will gain because the pension plan will be more fully funded, which significantly reduces risk of decreased benefit payments. Kroger and the union also agreed to a set of calculations for retirement payments, which will be in effect for a decade.

The four United Food and Commercial Workers/multi-employer pension funds will merge into a new fund as of January 1, 2012, the company said.

Kroger, the largest traditional U.S. grocer, employs more than 338,000 workers. The company said the merged fund will secure pension benefits for more than 65,000 workers from 14 UFCW union locals. Eleven of those union locals have approved the deal. Kroger expects the remaining three locals to grant their approval by December 21.

The company plans to contribute about $650 million to the new fund in January. It now expects to incur a charge of about 73 cents per share in the fourth quarter of 2011 because of that contribution, though the exact effect on profit will depend on how much it actually contributes.

The new arrangement should lead to a lower 2012 pension expense and increase fiscal 2012 profit by 4 cents to 6 cents per share, Kroger said.

"This will establish funding certainty that benefits both participants and the company," Mike Schlotman, Kroger's chief financial officer, said on a conference call with analysts.

As of January 1, assets in the new fund will total about $2.5 billion. Kroger will be responsible for the investment and custody of all assets of the new plan. The assets previously were managed by the union and Kroger trustees.

The four funds involved in the merger represent roughly 30 percent of the current underfunding of all the multi-employer plans to which Kroger contributes.

Kroger has agreed to fund the unfunded obligation by March 2018. Underfunded pension plans don't have enough money readily available to cover current and future retirement obligations.

"Given the low interest rate environment, we believe it is prudent to fund a significant portion of this obligation now," Schlotman said.

"In a volatile financial environment, this plan represents a long term solution for a secure retirement," said UFCW International President Joseph Hansen. The union said the deal covers 170,000 retired and active Kroger workers in 15 states, primarily in the Midwest and South.

Defined pension benefit plans provide a pre-set monthly benefit, paid by the employer, upon retirement.

Many U.S. companies have replaced those plans with defined contribution plans such as 401(k)s, where employees contribute a portion of their salaries to investment accounts that do not promise a specific benefit.

Kroger and direct rivals like Safeway Inc (SWY.N) and Supervalu Inc (SVU.N) are squeezing costs as they compete with non-union discounter Wal-Mart Stores Inc (WMT.N), which sells more groceries than any other U.S. retailer.

Shares in Kroger were up 1.1 percent at $23.80 in midday trading on the New York Stock Exchange.

(Reporting by Jessica Wohl in Chicago and Lisa Baertlein in Los Angeles, editing by Gerald E. McCormick and Gunna Dickson)

Lender Processing Services shares tank after Nevada sues co

Stock Market Predictions

The lawsuit filed on December 15 in the 8th Judicial District of Nevada includes allegations of widespread document execution fraud, improper control over foreclosure attorneys and the foreclosure process, and misrepresentations about LPS' fees and services.

"Former employees and industry players describe LPS as an assembly-line sweatshop, churning out documents and foreclosures as fast as new requests came in and punishing network attorneys who failed to keep up the pace," Attorney General Catherine Cortez Mast said in a statement on her website. (here)

When contacted, Lender Processing Services said it had no immediate comment to make on the matter.

On November 17, two of LPS' employees were indicted for allegedly supervising a robosigning scheme on documents that were used to initiate foreclosure on local homeowners.

In May, Attorneys general in California and Illinois had subpoenaed Lender Processing Services and peer Nationwide Title Clearing Inc as part of probes into alleged "robosigning" in the mortgage servicing industry.

Shares of the company were trading at $14.59 on Friday on the New York Stock Exchange.

(Reporting by Satyanarayan Iyer and Arnav Das Sharma in Bangalore; Editing by Sriraj Kalluvila)

Shares of Asustek slip after tablet recall

Stock Market Predictions

An Asustek official said the number of tablets involved was only about 300, so the recall would not have an impact on the company.

Asustek shares were off 1.22 percent by 0130 GMT (8:30 p.m. EST), underperforming a broader market's .TWII 0.45 percent rise.

The Taiwanese PC vendor said in a statement on its website that it would recall Eee Pad Transformer Prime tablets sold in Taiwan before December 3 because of Wifi signal instability.

The tablet, the first featuring the NVIDIA Corp's (NVDA.O) Tegra 3 quad-core processor, was launched on December 1.

(Reporting by Clare Jim; Editing by Chris Lewis)

Covidien to spin off pharma business, shares jump

Stock Market Predictions

The spin-off, anticipated by Wall Street for several years, would likely take up to 18 months and be carried out as a tax-free distribution to shareholders.

The two units "have distinctly different business models, sales channels, customers, capital requirements and talent bases," Chief Executive Jose Almeida said in a statement.

Covidien's pharmaceutical business, which carries lower margins than its other businesses, accounts for about $2 billion of total company sales. After the spin-off, Covidien's medical products business would generate about $9.6 billion in sales, the company said.

BMO Capital Markets analyst Joanne Wuench said in a research note that the spin-off "removes a low-margin business and it will leave Covidien as more of a pure play for medtech investors with higher top line and better operating margins," adding that the pharma division has been "responsible for most of the negative surprises out of the company."

The Covidien decision follows a similar move by Abbott Laboratories Inc (ABT.N), which in October announced that it would split off its pharmaceuticals business into a separate publicly traded company.

Covidien's pharmaceutical business is one of the world's largest producers of bulk acetaminophen and the largest U.S. supplier of opioid pain medications. It is among the top 10 U.S. generic drug manufacturers, the company said.

It is also one of the world's leading suppliers of generators used to produce technetium-99m, a critical diagnostic medical isotope. It is the only manufacturer that offers a fully integrated system of diagnostic contrast media in prefilled syringes and injectors.

During a conference call with analysts, executives declined to say how much the transaction would cost.

Asked why management decided not to sell the pharmaceutical unit, Almeida said: "A spin is something we control ... and the tax efficiency component cannot be ignored."

The company was rumored to have been trying to sell the unit for quite some time. Management declined to say whether it had spoken to another party about a deal.

Covidien will not maintain any ownership in the spun-off company, which will likely seek out its own acquisitions to round out its product offerings, Almeida said.

The capital structure of the two new companies is expected to mirror Covidien's capital structure today, suggesting Covidien will reduce its debt load in the deal.

Almeida expects improved profits for the pharmaceutical company once it stands on its own, noting that it has an advancing pipeline in place, but declined to give a specific growth forecast.

Michael Weinstein, an analyst with JPMorgan, said once the transaction is completed, Covidien should have one of the best revenue and profit growth profiles among top medical device makers.

Covidien shares were up $1.44 or 3.4 percent at $43.60 in afternoon trade on the New York Stock Exchange. Earlier it traded as high as $44.37.

(Reporting by Debra Sherman in Chicago, Bill Berkrot in New York and Kavyanjali Kaushik in Bangalore; Editing by Michele Gershberg, Gerald E. McCormick)

Cablevision down 15 percent as executive quits

Stock Market Predictions

Cablevision announced the sudden resignation of Tom Rutledge, a nine-year veteran of the company, late on Thursday, leading to speculation that he would be joining a larger rival such as Charter Communications Inc (CHTR.O). It also raised the possibility that the Dolan-family-controlled Cablevision would be vulnerable as an acquisition target for Time Warner Cable (TWC.N) or Comcast Corp (CMCSA.O).

Analysts at Miller Tabak and ISI Group downgraded Cablevision on the news and others on Wall Street described the news as a major loss for Cablevision.

Although Rutledge renewed a five-year employment contract two years ago that would have taken him through to 2014, Bryan Kraft of Evercore Partners noted that a one-time special cash and stock award totaling $18.5 million he received at the signing of his employment contract became fully vested this month. Kraft said this might be an indication that Rutledge has been planning to resign for some time.

Rutledge's departure was especially of concern to investors because his long-time No. 2 John Bickham stepped down as president of Cablevision's cable operations last month.

Shares fell $2.10 to $11.80 in early trading on the New York Stock Exchange.

(Reporting By Yinka Adegoke; Editing by Gerald E. McCormick, Dave Zimmerman)