Home > Uncategorized > Business this week: 21st – 27th October 2006

Business this week: 21st – 27th October 2006

Business this week

Oct 26th 2006
From The Economist print edition

Jeffrey Skilling, Enron’s former chief executive, was sentenced to more than 24 years in prison and ordered to pay $45m in restitution for his part in the fraud that bankrupted the energy trader in 2001. Mr Skilling was found guilty in May along with Kenneth Lay, but Mr Lay’s convictions were recently “vacated” following his death in July. Enron employees who lost their pensions expressed satisfaction at Mr Skilling’s sentence. He said he was innocent and would appeal against the verdict. See article

The former chief financial officer of Comverse Technology pleaded guilty to fraud in relation to a stock-options scandal. He was the first senior executive to plead guilty in a host of similar scandals that have recently come to light, though other big corporate cheeses have resigned from their jobs. Comverse’s former boss, Jacob “Kobi” Alexander, who fled America, is fighting his extradition from Namibia.

The retrial began of Josef Ackermann, the chief executive of Deutsche Bank, and five others who face criminal charges that stem from the awarding of executive bonuses at Mannesmann. Mr Ackermann was on the company’s supervisory board at the time of its takeover by Vodafone in 2000 (Deutsche Bank is not connected to the trial). There is speculation that Mr Ackermann will plead guilty to non-criminal charges in order to concentrate on running Germany’s biggest bank.

United Biscuits, which makes some of Britain’s best-known snacks, including Jaffa Cakes, Penguin biscuits and Hula Hoops, agreed to be bought by two private-equity firms for some £1.6 billion ($3 billion).

Altria announced that it would reveal its decision on whether (and how) to spin off Kraft Foods at a shareholders’ meeting in January. The conglomerate has long wanted to sell Kraft, but its plans were put on hold after its Philip Morris unit became embroiled in tobacco litigation.

Carl Icahn won his battle to shake up the management of ImClone Systems, a biomedical company, when it appointed him chairman and sacked its interim chief executive. Mr Icahn, who owns around 14% of the company, had led a shareholders’ campaign to oust several directors.

Ford reported its biggest quarterly loss in 14 years—$5.8 billion—as it booked writedowns and charges. The performance of Ford’s North American auto unit, where sales dropped by some 15% compared with a year ago, and its premier-car group, which includes Jaguar, continued to pull down its earnings. Alan Mulally, who was appointed Ford’s chief executive in September, said the results were “unacceptable”.

DaimlerChrysler’s quarterly profit, 37% lower than a year ago, was also hampered by plunging sales in America, offsetting an improved performance at the company’s Mercedes unit. But there was some good news for Detroit when General Motors said a net loss of $115m (compared with $1.66 billion last year) was actually an adjusted profit of $529m if special items, which are related to its restructuring, were excluded.

Some much-needed good news for Airbus. It sealed a deal to set up a plant in China and won an order for 150 A320 jets from the country.

A substantial merger was announced in Australia’s insurance industry as Promina agreed to a A$7.9 billion ($6 billion) takeover proposal from Suncorp-Metway, a rival which also operates banks.

In an unusual move for the company, IBM filed two lawsuits against Amazon claiming the online retailer infringed five patents on internet technology, including processing online transactions. IBM holds more patents than any other American company and usually seeks to resolve licensing disputes out of court.

Meanwhile, Amazon said its quarterly profit had fallen (again). But as sales exceeded forecasts, its share price rose. Investors also cheered Amazon’s statement that it would put a brake on buying new technology that has enabled it to launch services such as film downloads, but dragged down earnings.

Sony’s net profit plunged by 94% in its second quarter (and it made an operating loss) compared with a year ago. Along with the continuing troubles at its gaming unit, the conglomerate took a hit from the safety recall of 9.6m laptop batteries, for which its executives apologised. See article

Existing-home sales in America slid in September for a sixth month as the housing market continued to slow. The median home price also fell, to $220,000—2.2% less than a year ago. But the fall was bigger in some regions—5.1% in the north-east for instance.

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