Portfolio.com: News and Markets

Icahn Weighs Yahoo Fight

Tue, 13 May 2008 20:30:00 GMT

Microsoft has left the field of battle, but Yahoo may yet come under assault.

Carl Icahn, the activist investor with a long history of proxy fights, has accumulated as many as 50 million shares of Yahoo, The Wall Street Journal reports. That is nearly a 3.7 percent stake in the company.

Shares of Yahoo rose more than 5 percent on speculation that Icahn could start a challenge to win control of the board at Yahoo. The deadline for nominating rivals is Thursday.

Icahn has had mixed results in proxy fights. He has successfully pushed Motorola to split off its handset business and won seats at Blockbuster. His challenge to Time Warner led to a somewhat embarrassing retreat.

Still, there are a number of shareholders who are unhappy with how Yahoo and its chief executive, Jerry Yang, handled the discussions with Microsoft, and they could support a challenge.

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Celeb Mag Shakeup!

Tue, 13 May 2008 20:30:00 GMT

Bonnie Fuller, the model of the celebrity magazine editor, is resigning as executive vice president and chief editorial director of American Media Inc, the publisher of The National Enquirer and Star.

She will serve as editor-at-large of Star magazine, and will also act as a consultant to David Pecker, A.M.I.'s chief executive.

And after that?

"I can't tell you much yet. I can only tell you that I can tell you more in a few weeks," she told Jeff Bercovici of Portfolio.com. "Stay tuned."

She declined to say whether she plans to stay in the celebrity news arena, or whether she plans to work for someone else or start her own business—just that there is "a new direction I wanted to pursue." Read more here.

Earlier, Bercovici noted that "It was largely Star that brought Fuller to A.M.I. in the first place. Chairman David Pecker hired her to replicate her phenomenal success at Us Weekly, where she took a failing title and turned it into a newsstand hit in a matter of weeks. Fuller remade Star from a newsprint tabloid into a glossy, but never recaptured the magic touch she'd shown at Us."

In 2006, Fuller signed a three-year contract with A.M.I. that guaranteed a minimum pay of $2 million a year.

"I am proud of the significant achievements of American Media's celebrity and fitness brands over the past five years, and I am now ready for a new adventure," Fuller said in a statement. "The transformation of Star from a tabloid into a glossy magazine was unprecedented and has proven to be a great success."

HBO's iTunes Menu

Tue, 13 May 2008 16:30:00 GMT

Plenty of Sex and samples of Sopranos, Wire, Deadwood, and Rome were on the menu when HBO opened shop on iTunes today.

Every episode from Sex and the City's six seasons is for sale, at $1.99 per half-hour episode, or $22.99 for the whole season; limited seasons from six of HBO's other most popular series are also available on the Apple site. More shows will become available in the future.

News of HBO's reaching a deal with Apple to join iTunes was first reported Monday on Portfolio.com.

Sex and the City:
The Smackdown
It's been four years since HBO retired the popular series and Carrie, Big, and the rest of the crew had to audition in a post-S.A.T.C. world. Some have had more success than others.

The timing of the HBO's launch on iTunes is in tune with the theatrical release of the Sex and the City movie on May 30.

The first and last seasons of The Sopranos are available at $2.99 for every hour-long episode, or $38.87 for the first season and $62.79 for the final season.

For The Wire, only the first season is available, at a cheaper $1.99 for an hour-long episode and $25.87 for the whole first season.

The first seasons of both Deadwood and Rome are also for sale, at $2.99 per hour-long episode and $35.88 for the whole first season.

Flight of the Conchords rounds out the current selection, at $1.99 per half-hour episode and $23.88 for the whole first season.

There is no discount for buying a whole season of any series.

HBO spokesman Jeff Cusson said the pay-cable network plans to expand its offerings on iTunes at regular intervals in a "roll-out release" of programs.

Cusson also said that HBO shows would not be available on iTunes until after the DVDs of the shows are released. That contrasts with shows currently on sale at iTunes; many of them can be bought and downloaded one day after they are broadcast.

The iTunes store is the world's most popular online TV store, with a catalog of over 800 shows and 20,000 episodes.

Some free HBO content is hiding on iTunes, too, and it's been there for a few years. There's a small button on iTunes HBO network page labeled "Go to HBO Podcasts." It leads to 13 free podcasts, ranging from HBO Boxing to Def Comedy Jam.Related Links
Sex on the Go?
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Late Night: The Next Generation

Tue, 13 May 2008 15:30:00 GMT

NBC is playing a risky numbers game with Jimmy Fallon—and it ain't about the Nielsen's.

Next year, Conan O'Brien will replace the popular and all-around menschy Jay Leno as the host of NBC's The Tonight Show, and yesterday, Jimmy Fallon was anointed O'Brien's successor on the Late Show.

For a network accustomed to dominating the late-night arena—with Leno's mainstream appeal regularly trumping David Letterman's snide humor on CBS and ABC's Nightline, and O'Brien spanking ABC's Jimmy Kimmel and CBS' Craig Ferguson on their own late shows—the host shuffle is a surprising move.

Why, in the first place, displace Leno, a bastion of steady ratings? Industry gossip has Leno regretting his decision to hand the job over to O'Brien and contemplating jumping to another network, a move that would displease NBC greatly.

But it's a chance the network seems willing to take, and as for why—it's the numbers, stupid. And we're not talking about the ratings. Fallon's appeal is obvious: He's good-looking (in a comedian kind of way), funny, and young. And in this age of fragmented viewership, YouTube phenomena, and iTunes, the "young" part is the most important piece of the puzzle.

O'Brien is a proven youth-attractor, with the youngest average viewership among the late-night shows, at 47.3 years. Not quite frat boys, but strong compared to Ferguson's 50.2 and Kimmel's 49.7. In the earlier hour, Leno pulls in viewers of the ripe old average age of 54.3, while Letterman's crowd has a more youthful average of 52.6.

The age differences may seem minute, but younger viewers are more attractive than ever to advertisers in the digital age. NBC is increasingly trying to capitalize on mobile and online ad platforms, as it emphasized Monday in a "spotlight" presentation to advertisers.

Even Lorne Michaels, who was responsible for Fallon's appointment, acknowledges that "no one under the age of 18 comes home and turns on their TV before their computer."

Still, there are two sides to Fallon.

There's the Saturday Night Live Fallon. He joined the show in 1998 and eventually grabbed its brass ring, becoming the co-host, with Tina Fey, of the Weekend Update segment.

"The young kids think he's the cat's meow," says Caroline Hirsch, proprietor of Caroline's on Broadway, the comedy club where Fallon got his start performing stand-up in the mid-1990s.

Plus, "stand-ups really have much more going [for them] than the writer-producer or actor type," when it comes to talk-show jobs, says Hirsch. "They think fast. Their interviews are funnier."

Then there's the post-SNL Fallon—who doesn't seem to have done much besides appear alongside Drew Barrymore in Fever Pitch in 2005 and, more recently (and regrettably), in a much-YouTubed Pepsi commercial with fellow New Yorker Parker Posey in which the two danced spastically on the top of a taxicab.

"He strikes me as an unusual choice," says Russell Peterson, a visiting assistant professor in the department of American Studies at the University of Iowa, and the author of Strange Bedfellows: How Late-Night Comedy Turns Democracy Into A Joke, which was published this March.

"Fallon has a kind of likability," Peterson adds, "but I have my doubts about how well that likability will wear based on the fact that he hasn't had a real career since SNL ended."

And then there's the Simpsons episode—animated evidence of an anti-Fallon movement—in which Homer yells to his kids, "What are you two laughing at? And if you say Jimmy Fallon, I'll know you're lying!"Related Links
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New Static in Radio Deal

Tue, 13 May 2008 15:00:00 GMT

As a trial was about to get under way, a peace has been reached in a battle over one of the biggest buyouts to be endangered by the credit crunch.

The private equity firms heading a buyout of the radio-station chain Clear Channel Communications and the six banks that have agreed to finance the deal have reached a settlement, CNBC reports. The buyout's price has been reduced to $36 per share, from $39.20.

News of settlement talks emerged on Monday, and Justice Helen Freedman of the New York State Supreme Court adjourned the lawsuit brought against the banks by the private equity firms Thomas H. Lee Partners and Bain Capital will until at 2 p.m.

The six banks that agreed to finance the buyout—Citigroup, Deutsche Bank, Morgan Stanley, Credit Suisse, Royal Bank of Scotland, and Wachovia—had stood to lose billions of dollars if the deal closes as scheduled on June 12 with the original commitment terms.

A number of big buyouts, including deals for Sallie Mae and United Rentals, have fallen apart because of uncertainty over the financing.

The banks in the Clear Channel deal also faced a separate lawsuit filed by Clear Channel itself in Texas. A trial over the lawsuit, in which Clear Channel seeks more than $26 billion in damages, was scheduled to start on June 2.

Fed: Not So Fast

Tue, 13 May 2008 13:00:00 GMT

Many Wall Street chieftains have said that the worst of the credit crunch is over, and John Mack of Morgan Stanley even suggested that it might be "the top of the ninth" inning in the crisis.

Ben Bernanke could have continued the baseball metaphor: It's not over till it's over.

In a speech via satellite today to a Federal Reserve Bank of Atlanta conference, the Federal Reserve chairman said that markets "are still far from normal."

Bernanke said that "a number of securitization markets remain moribund, risk spreads—although off their recent peaks—generally remain quite elevated, and pressures in short-term funding markets persist. "

The Fed has increased the size of its main instrument created to respond to the credit crisis, the Term Auction Facility, an alternative way for the banks to borrow cash. Bernanke added, "We stand ready to increase the size of the auctions further if warranted by financial developments."

The auctions have helped improve liquidity in the Treasury repo and mortgage-backed-securities markets, among others.

"Ultimately, market participants themselves must address the fundamental sources of financial strains—through deleveraging, raising new capital, and improving risk management—and this process is likely to take some time."

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The H.P. Way: A Big Deal

Tue, 13 May 2008 12:00:00 GMT

Yahoo-Microsoft? No go. Something happening with Facebook? Don't hold your breath. If you want a hot, sexy tech deal, you have to look at data centers.

In the biggest tech acquisition since the $18 billion buyout of Freescale Semiconductor, Hewlett-Packard has agreed to buy Electronic Data Systems for $12.6 billion in cash.

The deal will make Hewlett-Packard a more formidable challenger to I.B.M. for big I.T. corporate and data-processing contracts around the world, a cutthroat business where size can be everything. With E.D.S., Hewlett's annual services revenue will more than double to more than $38 billion.

Corporate data centers may appear to be a business far from Web 2.0 factory smokestacks, but Steve Lohr on the New York Times' Bits blog notes that they may become strategically important.

Rod Bourgeois, a technology-services analyst at Sanford C. Bernstein, tells Bits that data centers are using technologies to become more green and to transform programs to Web-friendly software.

"There's a lot happening in the data center, and being in the middle of that is crucial for H.P.," Bourgeois told Bits.

Hewlett says it will create a new business unit, E.D.S., an H.P. company, which will be based at E.D.S.'s existing headquarters in Plano, Texas. It will be led by the chief executive of E.D.S., Ronald Rittenmeyer.

The combination of H.P. and E.D.S. will create a leading force in global I.T. services," said Mark Hurd, the chief executive of Hewlett-Packard.

The deal is Hewlett's biggest since the merger with Compaq Computer in 2002.

Hewlett is paying $25 per share for E.D.S., or $25.6 billion. The transaction has an enterprise value, which subtracts cash and includes liabilities of $13.9 billion. It is expected to close in the second half of his year.

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Wal-Mart: Strength, but Uncertainty

Tue, 13 May 2008 11:30:00 GMT

The weak economy has been a source of strength for Wal-Mart Stores, but at some point, the slowdown may start to drag.

The world's largest retailer reported an impressive 6.9 percent gain in first-quarter earnings, as its price-cutting attracted consumers trying to tighten their belts amid worries about their jobs, gasoline prices, and housing. Net sales rose 10.2 percent, to $94.1 billion.

But Wal-Mart also cautioned that the economy presented uncertainties for the rest of the year, saying that it expects sales at U.S. stores open at least a year to be essentially flat. The retailer forecasts earnings per share of 78 cents to 81 cents per share: the low end of analysts' estimates.

Last week, the company noted that it was seeing signs that U.S. sales would drop toward the end of the month, as shoppers awaited their next paycheck.

For the first quarter, Wal-Mart earned $3.02 billion, or 76 cents per share, compared with $2.83 billion, or 68 cents per share, in the quarter a year ago. International sales surged 22 percent, to $23.9 billion. Sales at U.S. stores open at least a year rose 2.9 percent, excluding fuel and gasoline sales.

"Our business is even more relevant to our customers today, given the current economic pressures," Wal-Mart's chief executive, Lee Scott, said on a conference call. "We're off to a solid start."

Douglas McIntyre on the 24/7 Wall St. blog says that Wal-Mart is achieving its growth at the expense of others. "There is no way that Wal-Mart could post numbers of this magnitude without taking business from other retailers," he says.

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Sex on the Go?

Tue, 13 May 2008 05:00:00 GMT

Some of HBO's most popular programs will be available for sale on iTunes starting on Tuesday, consummating a long-gestating deal between the cable network and Apple, according to a source within HBO, which is owned by Time Warner.

HBO spokesmen Jeff Cusson would not confirm today's launch, but did say that the official announcement of the deal between HBO and Apple could come as early as today.

Some HBO shows will cost more than the content currently on iTunes, according to Cusson, though he would not disclose specific prices. He also declined to say which programs would be available first, but it is expected that some of the network's most popular series—including The Sopranos, Sex and the City, and Entourage—will be among the first.

Cusson said that HBO shows would not be available on iTunes until after the DVDs of the shows are released. That's a much longer delay than current shows on iTunes, many of which can be bought and downloaded one day after they are broadcast.

Not all of HBO's library will be available on iTunes. HBO and Apple have agreed on a "rolled-out release," which means that over time more and more content from HBO's libraries will be available.

Cusson also said that the idea that HBO pursued the deal with Apple as a result of pressure from parent company Time Warner is "absolutely ridiculous."

Apple representatives did not return calls for comment.Related Links
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Taking on Big Blue

Mon, 12 May 2008 20:00:00 GMT

Hey you, Blue! Yeah, Big Blue. I'm talking to you.

Think you're so hot in I.T. services, winning corporate contracts around the globe?

Well, guess what? We are too. Hewlett-Packard's not just about PCs, you know. We had $17 billion in revenue from services last year. And now we are going to buy Electronic Data Systems. Gonna try anyway.

Oh, you heard right. The Wall Street Journal wasn't making that up. Ross Perot's old outfit has been slowly getting its act together. Talking about $5.6 billion in new contracts this year. You gotta like that. Worth a 26 percent premium, I would think. And we can certainly afford it, with more than $11 billion in cash in the till.

I heard that chortle. You say H.P. can't handle the big deals? What about Compaq, you ask? Hey, hey, that was Carly's show. Not mine. I'm not the "Let's Go to Davos and Change the World" C.E.O. I am supposed to be the nitty-gritty operational whiz, the cost cutter, remember?

Yep, this is the New H.P. Way: getting right in your rear-view mirror, Blue.

See ya soon,

Mark Hurd