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AT&T Deal With T-Mobile Takes a Step Back

November 24, 2011 by Leave a Comment

Deutsche Telekom, the parent of T-Mobile, and ATT said in a joint statement that they still intended to pursue the $39 billion merger and would prepare for a federal antitrust lawsuit that is seeking to block the deal.

But the companies also said that ATT planned to take a $4 billion charge against earnings to reflect the potential breakup fees that ATT would have to pay Deutsche Telekom if the deal failed to go through.

The actions followed the decision earlier this week by Julius Genachowski, the F.C.C. chairman, that the merger did not meet the commission’s standard for approval. Mr. Genachowski sent other commissioners a proposed order to refer the case to an administrative law judge, the first step toward a commission move to block the deal, which would combine the second- and fourth-largest cellphone carriers in the United States.

The application withdrawal appears in part designed to prevent the F.C.C. from making public ATT and T-Mobile records about the potential effects of the merger, records that could then be used by the Justice Department in the antitrust trial.

The companies have maintained publicly that the deal would not lessen competition and that it would create jobs in the United States. But the Justice Department has said that the merger would severely restrict competition, and F.C.C. officials have said that ATT’s confidential filings indicate the merger would eliminate jobs.

The withdrawal of the F.C.C. application “is a tacit acknowledgment by ATT that this story is all but over,” said Craig Moffett, an analyst at Sanford C. Bernstein. “The fat lady hasn’t started singing yet, but she’s holding the mike and the band is about to play.”

The efforts by the Justice Department’s antitrust division and the F.C.C. to block the merger reflect a reinvigoration of federal efforts to rein in excessive business practices after a prolonged period of deregulation that preceded the 2008 financial crisis.

President Obama came into office pledging to take a harder look at the antitrust implications of proposed mergers, but the Justice Department was criticized by consumer groups in its first year for appearing hesitant to follow through on that promise.

Similarly, the F.C.C. drew rebukes for its approval last year of the merger between Comcast and NBC Universal, which critics claimed would concentrate too much power over both television content and its transmission to consumers.

The move this week to conduct a hearing on the cellphone deal was the first time the F.C.C. had done so on a merger since the 2002 proposed alliance between Echostar and Direct TV, which ultimately was scrapped.

In this case, however, ATT has noted that expansion of the nation’s Internet infrastructure is one of Mr. Obama’s top goals to help rebuild the economy, and the F.C.C. itself has predicted that its recent initiative to expand broadband Internet access to rural areas would create hundreds of thousands of jobs.

Consumer groups, which generally have opposed the merger, said this week’s combined actions indicated that the deal was falling apart.

“The chances that ATT will take over T-Mobile are almost gone,” Gigi B. Sohn, president of the consumer group Public Knowledge, said in a statement. “While you can never count out ATT entirely, the fact that they pulled their F.C.C. application speaks volumes about the company’s lack of confidence” in getting approval.

Deutsche Telekom, based in Germany, said in a statement that the withdrawal “is being undertaken by both companies to consolidate their strength and to focus their continuing efforts on obtaining antitrust clearance for the transaction from the Department of Justice. As soon as practical, Deutsche Telekom and ATT intend to seek necessary F.C.C. approval.”

ATT issued its own statement saying that the companies were taking this step “to facilitate the consideration of all options at the F.C.C.,” as well as to consider other options.

Edward Wyatt reported from Washington and Jenna Wortham from New York.

Article source: http://www.nytimes.com/2011/11/25/technology/att-deal-with-t-mobile-takes-a-step-back.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Wal-Mart Posts a Profit Despite Struggles in the U.S.

August 16, 2011 by Leave a Comment

Job security replaced gas prices as the top concern for customers at Wal-Mart, the nation’s biggest retailer, in the second quarter.

Shoppers at the low end of the market are under as much pressure as ever, Wal-Mart executives said Tuesday.

“Our core customer continues to be strained, and we still see what we call the paycheck cycle as pronounced as ever, and of course the volatility in the headlines, the volatility caused last week, doesn’t help the customer,” said Charles M. Holley Jr., Wal-Mart’s chief financial officer, in a call with reporters. “We haven’t seen any relief,” he said, and “we’re starting to see jobs as the number one concern among our customers at Wal-Mart.”

Those worries among customers contributed to the ninth consecutive quarter of declining same-store sales at Wal-Mart’s United States stores. The decline, 0.9 percent, was worse than analysts’ forecasts for a 0.6 percent decline.

Net income at the company increased 5.7 percent to $3.8 billion, or $1.09 a share, a penny better than analysts had projected. Its revenue rose 5.4 percent to $109.3 billion.

Analysts said the company’s better-than-expected profit and its brisk international growth were good, but that the United States stores remained problematic. Wal-Mart removed products from its shelves during the recession to appeal to more upscale customers with cleaner aisles. When sales were hurt, it reversed that decision, and is now adding back merchandise to its stores.Executives “noted that trends improved sequentially each month of the quarter. However, second-quarter comps showed little improvement versus the 1.1 percent decline in the first quarter, particularly given expected benefits” from Wal-Mart’s adding back merchandise, and from inflation, said a Sanford C. Bernstein Company analyst, Colin McGranahan, in a note to clients. “Results were relatively uninspiring.”Even within Wal-Mart, there seems to be a divide between rich and poor. Wal-Mart’s Sam’s Club warehouse division had a 5.0 percent increase in same-store sales, excluding the effect of fuel prices; including fuel prices, that rise was 9.6 percent. It was the sixth quarter of improving same-store sales at Sam’s.

Mr. Holley said that while Sam’s executives had been doing a good job, the difference in results was also attributable to the customer profile.

“Sam’s does have a member that has a higher income level than Wal-Mart in the U.S.,” he said.

Meanwhile, the Wal-Mart shoppers in the United States are having a tough time of it.

“The unemployment is actually a lot higher for people who have less education and had less income to begin with — it’s much more severe as you go down the economic scale,” Mr. Holley said. “Negative headlines don’t help consumer sentiment at any level of income, but our customer, also just from a job perspective and a real income perspective, is really stretched. Gas prices have eased a little bit over the quarter, and that has helped our core customer. At the same time, having negative headlines does not help consumer sentiment.”

And William S. Simon, who oversees Wal-Mart’s United States stores, told investors, “We also have seen an increase in the number of customers relying on government assistance for food and necessities for their family” in the quarter.

“They have to be very careful what they spend their money on. They’re buying necessities; they’re not buying discretionary items,” Mr. Holley said of shoppers using public assistance programs.

Wal-Mart executives said it continued to address its customers’ reluctance to spend by adding back in merchandise in a range of product sizes and prices. Mr. Holley said that in the first categories Wal-Mart had done this in — food, health and wellness — it had registered positive comparable-store sales, “so we feel like it’s definitely working.”

Home Depot, which also reported quarterly results on Tuesday, said that despite a lackluster housing market, its profit and sales were strong.

“We saw strength across the store,” Carol B. Tomé, Home Depot’s chief financial officer, said in an interview. That was a result of “storm damage related sales, the garden business coming back as weather improved, the heat we saw across the country which meant we sold a lot of air movement,” she said.

The company said its profit increased by 14.3 percent from a year earlier, to $1.36 billion, or 86 cents a share, three cents higher than what analysts expected. Sales increased 4.2 percent to $20.2 billion, and same-store sales were up 4.3 percent.

The company increased its full-year earnings projections by 10 cents, to $2.34 a share.

Ms. Tomé said that the company’s sales so far in August were in line with what Home Depot had projected.

“We don’t see that our customers are immediately reacting to the stock market,” she said.

Article source: http://feeds.nytimes.com/click.phdo?i=88de7bededca909e930386f6fa8ae019

Filed Under: Economy News Tagged With: , ,

DealBook: J.&J. Announces $21.3 Billion Deal With Synthes

April 27, 2011 by Leave a Comment

Johnson Johnson said Wednesday that it had agreed to buy Synthes, the medical equipment maker, for $21.3 billion in cash and shares, one of the biggest deals ever in the healthcare sector.

Johnson Johnson is offering 159 Swiss francs per share of the Swiss-American company, which manufactures bone implants and surgical tools, and specializes in treatments for trauma. The bid is comprised of 55.65 francs in cash and 103.35 francs worth of Johnson Johnson common stock. It represents a 22 percent premium over the 130.60 francs that Synthes was trading at on April 14, before reports first emerged of the deal.

“It’s a pretty fair price,” said Lisa Bedell Clive, an analyst at Sanford C. Bernstein in London. “For J.J. it’s a great deal. Trauma is one of the few med-tech markets where they haven’t had a top-three business.”

Both companies’ boards have unanimously approved the transaction, and a group of shareholders, led by the Synthes founder and chairman Hansjoerg Wyss and other directors, have pledged to vote their shares in support of the deal, the companies said.

Mr. Wyss controls 47 percent of Synthes, a stake that will be worth slightly more than $10 billion when the deal closes. In the companies’ statement, he said he was pleased to see his “life’s work will continue as part of Johnson Johnson.”

His support for the deal, combined with the size of his stake, make it unlikely that shareholders pushing for a higher price would be able to block the bid.

Synthes will be merged with the Johnson Johnson unit DePuy Companies to become the group’s largest medical devices business, specializing in orthopedics.

“Orthopedics is a large and growing $37 billion global market and represents an important growth driver for Johnson Johnson,” Bill Weldon, head of Johnson Johnson, said in the companies’ statement.

The deal, which will be Johnson Johnson’s largest ever, is expected to close in the first half of next year, pending the approval of regulators in the United States and Europe, as well as Synthes shareholders.

In acquiring Synthes, Johnson Johnson will be combining the second and third largest businesses for spine-related implants worldwide, which could draw regulators’ attention and force a divestment.

“Antitrust authorities look at this on a product line by product line basis,” Ms. Clive said. “If you look at the precedent of the cardiac market, it could happen that they’ll let this go untouched.”

She noted that Boston Scientific’s acquisition of the heart device maker Guidant in 2006 for about $27 billion — the conclusion of a bidding war against Johnson Johnson — had not led to any forced divestments.

It is set to have a “modestly dilutive impact” on Johnson Johnson’s earnings per share, the company said.

Article source: http://dealbook.nytimes.com/2011/04/27/j-j-announces-21-3-billion-deal-with-synthes/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,