Tuesday PM May 13th, 2008
by: Ed Mayberry, May 13, 2008 3:05:00 pm
Hewlett-Packard has agreed to buy Plano-based Electronic Data Systems for nearly $12.6 billion. HP says the acquisition has an "enterprise value" of $13.9 billion--but that included assumed debt. The companies announced their boards unanimously approved the deal. EDS stockholders would get $25 per share. The sale should close in the second half of this year. The combined services business would have 210,000 employees and operations in more than 80 countries. California-based HP says the business will be based at EDS headquarters and led by EDS Chairman and CEO Ronald Rittenmeyer. HP says it expects the deal will produce "significant" cost savings and add to earnings. Meanwhile, HP also announced its fiscal second-quarter earnings exceeded expectations and the company has raised its full-year financial targets. HP did not provide net income or sales figures. Full second-quarter results will be out on May 20th.
Consumers, who are battling soaring gasoline prices and a slumping economy, cut back further on their spending in April. The Commerce Department reports that retail sales dipped two-tenths of a percent last month, right in line with economists' expectations. It was the second drop in the past three months and was led by a 2.8 percent decline in auto sales, the biggest setback in this category in ten months. It reflected the problems that automakers are having as a weak economy and soaring gasoline prices cut into demand for new cars.
The Commerce Department says that business inventories rose 0.1 percent in March. It's the smallest increase in a year, and a sign of a weakening economy. That was below the 0.4 percent rise that many economists were expecting, an indication that businesses are avoiding a build-up in their stockpiles in the face of tepid demand.
The National Association of Realtors says median home prices fell in two-thirds of the cities surveyed during the first three months of this year. The real estate trade group reports that median prices for existing single-family homes dropped in 100 of 149 metropolitan areas in the January-March period. During the same period 48 metropolitan areas saw prices increase. One reported no change. Nationally, the median home price fell to $196,300 in the first quarter. That's down nearly eight percent from the same period a year ago. The decline is the latest indication of the problems facing the housing market. An economist for the realtors says part of the problem is that it was hard to get so-called jumbo loans because of the credit squeeze triggered by rising mortgage defaults.
ExxonMobil is asking Alaska to pay $800 million in damages, claiming the state breached a deal when it revoked gas and oil leases on a North Slope oil field. The Irving-based company also filed a separate request for reconsideration of a gas field development proposal that was rejected by State Resources Commissioner Tom Irwin last month. Both filings were submitted to the Alaska Department of Natural Resources by ExxonMobil on behalf of itself and its lease partners over the revocation of Point Thomson oil and gas leases. Development of the field is considered vital to a successful natural gas pipeline project under consideration by the state.
The Senate has rejected a Republican energy plan that calls for opening an Alaska wildlife refuge and some offshore waters to oil development. Supporters of the measure couldn't get the needed 60 votes to overcome a democratic-led filibuster threat. Republican leader Mitch McConnell of Kentucky said more domestic oil production is needed to keep prices in check and to reduce U.S. dependence on oil imports. Opponents said areas such as the Arctic National Wildlife Refuge and coastal waters that have been off limits to drilling for 25 years ought to remain that out of bounds to oil companies. The GOP measure, defeated Tuesday by a vote of 56-42, would have allowed coastal states to get a waiver to the offshore drilling ban.
Texas customers of Allstate Insurance will get $71 million in refunds, credits and rate reductions for homeowner policies in a settlement that resolves legal disputes with the state dating to 2004. The settlement was announced by Texas insurance officials Monday. Allstate will refund almost $37 million for new and renewal policies written between December 1st, 2004 and April 23rd, 2006, a period when the state said its rates were too high. Allstate also will reduce homeowner rates by three percent statewide for new and renewal policies written for one year beginning June 2nd. And it will credit or refund policy holders three percent between August 20th, 2007 and June 1st. The Texas Department of Insurance estimates as many as 700,000 policy holders will be affected by the settlement. Allstate is Texas' second-largest writer of homeowner policies and covers nearly 15 percent of the market.