Skip to main content

Opening Bell: 2.1.07

US Airways Withdraws Its $10.2 Billion Offer for Delta (NYT)
Just to reiterate what we've been saying all along, there's no wave of consolidation coming in the civil aviation sector coming any time soon. It's just too difficult to merge these kinds of companies. To the outside observer, sure, it looks like consolidation is natural, that there's a bunch of weak hands that would be better if they were to band together. But, in reality, it just doesn't work out so nicely. So US Airways has withdrawn its bid for Delta, which means Congress can stop worrying about what it will all mean to passengers, and they can take down their "Independent Delta" posters from their corporate offices. Meanwhile, the analysts can go back and start dreaming up new fusions that will never see the light of day.
Google Stock Drops Despite 4Q Earnings (AP)
Last week we pointed out how this quarter's tech earnings seasons saw a role reversal, as all the cool kids have been disappointing investors, while the dorks are finally getting their day in the sun. Companies like Microsoft and Yahoo rose after their releases, while Google, which actually turned in a breathtaking quarter, fell in after-hours trading. The problem wasn't that the company did badly (really, it didn't at all), or even that it warned on future results. It just didn't exceed analyst estimates, which is basically getting impossible since everyone is play "Price Of Right" (who can make the highest guess, without going over the top).
Turnaround time for Michael Dell (CNET)
Now that Dell's back at Dell, does anyone have any idea that the company's eponymous leader is actually going to do? Does he have some fresh ideas to help re-invigorate the company, or is he hoping that his iconic status will be enough to motivate the troops? Ultimately, how Dell performs at this point will go along way in burnishing his legacy. If he rights the ship, then maybe he'll get to keep all of the Henry Ford comparisons, the great logistician, who redefined how we build computers. But if Dell sinks further into the abyss, is it too harsh to compare him to Ted Waitt?
Power Financial Unit to Buy Putnam for $3.9 Billion (Bloomberg)
The long slow divorce of Marsh & McLennan and its mutual fund unit, Putnam, is finally heading to settlement. After plenty of sound and fury, and claims of irreconcilable differences, the two parties have reached an agreement, with Putnam to be sold of for $3.9 billion, to Canadian mutual funds company Power Financial Corp. It will be the company's first foray into the US mutual fund market.

Putin to Name Favored Successor When Election Starts (Bloomberg)
Not sure if you realized, but by 2008, Putin will be gone from Russia, as the constitution bars him from seeking another term in office. That's pretty big news, considering Russia's burgeoning geopolitical influence. Seems like a good time to start boning up on the candidates waiting in the wings, and figuring how they're gonna change things, if at all. Crazy, in a few years there will be no more Bush, Blair, Putin or Chirac.
Time Extended in Cisco - Apple iPhone Suit (NYT)
Last night, Cisco an Apple announced that they were sitting back down to hammer out a deal over the iPhone trademark. As you'll recall, the company's were in serious negotiations, apparently, right up until the announcement, upon which Apple just went ahead anyway with its plans, and said it had no interest in discussing anything more with Cisco. Even if the company thinks it will prevail, it still doesn't make much sense to invest so much in a launch with some uncertainty about the brand hanging in the balance. So expect a deal before a court case really begins.
Vornado to Raise EOP Bid In Latest Shot at Blackstone (WSJ)
The battle for Equity Office Properties is becoming one for the history books. It's like a furious eBay auction with two bidders continually hitting "reload" on their browsers as they try to top each other for the highest winning bid. With Blackstone currently in the lead, Vornado will fire another barrel and put its rival on the defensive. If Blackstone chooses to give up, it then wins a $500 million fee for its troubles, so in a sense it wins either way. But we're pulling for them to right back at it.
Meanwhile, Imports Are Rising (WSJ)
A big part of the case for ethanol is to achieve the dubious goal of "energy independence", which is a phrase that doesn't mean much, though it can be loosely translated as a state of not having to import fuel from overseas. Well, we'll probably have to keep importing no matter what kind of fuel we use to run our cars. In 2006, ethanol imports surged, as logistically it makes more sense to get some ethanol from Brazil to certain parts of the country. Of course, this is an outrage to the nation's ethanol producers. "This is supposed to be OUR gravy train," one lobbyist shouted. "This is OUR chance to milk the nation."
Wall Street Journal Likes Looks of Rival (Dealbook)
Really, we're flattered, but it's hard to see the synergies. Oh, actually their "rival" is the Financial Times, which they're seen as a likely bidder for.