Dell Turnaround 1st Qtr 2008 Earnings

Dell today reported record fiscal first quarter revenue of $16 billion, a 9 percent year-over-year increase, and earnings of $0.38 cents per share, a 12 percent increase. The results were driven by better-than-industry growth of commercial and consumer products and services, and lower operating expense as a percent of revenue.

Product shipments in the quarter increased 22 percent, with servers growing three times the industry rate at 21 percent. Storage revenue increased 15 percent and enhanced services revenue was up 13 percent. Notebook unit growth, a Dell strategic priority, rose sharply at 43 percent and 1.2 times the industry growth rate. Consumer units grew at more than two times the industry rate and the company increased its global share by 1.2 points to 8.8 percent during the quarter.

“We are executing on all points of our strategy to drive growth in every product category and in every part of the world,” said Michael Dell, chairman and CEO. “These results are early signs of our progress against our five strategic priorities. Through a continued focus, we expect to continue growing faster than the industry and increase our revenue, profitability and cash flow for greater shareholder value.”

Dell’s headcount has been reduced by 7,000 in the past year – including a reduction of about 3,700 in the first quarter – or 8 percent before the impact of acquisitions. Dell has added about 2,700 employees through acquisitions, making the net reduction for the company about 5 percent.
Operating expenses were 12.9 percent of revenue for the quarter. Cash flow from operations was $143 million and impacted by lower payables and tax and bonus payments. The company still expects to generate cash flow from operations in excess of net income on an annualized basis. Dell ended the quarter with $9.8 billion in cash and investments and weighted average shares were 2.04 billion.
In the quarter, Dell issued $1.5 billion in private placement and medium- and long-term notes to be used for general corporate purposes. Dell spent more than $1 billion to repurchase 52 million shares of stock and plans to spend at least $1 billion on share repurchase in the second quarter.

Regional Highlights (This is the key for Dell's long term success (Tim))
Revenue from outside the United States during the quarter surpassed revenue from the U.S. for the first time. BRIC countries – Brazil, Russia, India and China – led accelerated growth in emerging countries with 73 percent year-over-year increase in shipments and 58 percent increase in revenue, and accounted for almost 9 percent of Dell’s total revenue.
Asia-Pacific and Japan Commercial (APJ): Revenue in the quarter grew by 19 percent on a 31 percent increase in units. Operating income was up 52 percent on a balanced country, segment and product performance. India and China led the region with revenue increases of 52 percent and 30 percent, and unit shipment growth of 68 percent and 43 percent, respectively. APJ growth continued strong across all product categories, with shipment increases of 46 percent in notebooks, 23 percent in server shipments and 25 percent in desktops.
Americas Commercial: Total unit growth was up 3 percent driven by an 11 percent increase in notebooks and a 20 percent increase in servers, which was more than four times the rate of the industry.
Europe, Middle East and Africa Commercial (EMEA): Revenue increased 15 percent and shipments were up 30 percent, with a 59 percent increase in shipments of notebooks. Storage revenue increased 48 percent. Unit growth in the region was led by the largest countries: United Kingdom up 20 percent; Germany up 26 percent and France up 14 percent.

Business Week's No. 22 - Exelon

No. 22: Exelon
Industry: Utilities
Sales: $18.7 billion
Net Income: $2.7 billion

Chicago-based Exelon (EXC) operates two utilities—one in its hometown and another in Philadelphia—and runs the nation's largest fleet of nuclear plants. Thanks to its 17 reactors, Exelon's profit margins fattened nicely in the past year. Its nuclear fuel costs stayed relatively flat, while coal prices doubled, driving up electricity prices. Exelon's nukes give it another edge, too. Should the U.S. put a price on carbon, as is expected, emission-free reactors won't incur big added costs, unlike coal-burning plants. No surprise then that CEO John Rowe is a gung-ho advocate for carbon limits and plans to build new nuke plants.

Busniess Week's No. 21 - Goldman Sachs Group

No. 21: Goldman Sachs Group
Industry: Financials
Sales: $84.3 billion
Net Income: $9.9 billion

Goldman Sachs (GS) has shown again why it's widely acclaimed as the cream of the Wall Street crop. Over the past year, as CEO Lloyd Blankfein watched peers get slaughtered by the subprime mortgage mess, Goldman managed to make money. Unlike other big investment banks, Goldman got out of the market at just the right time. Such savvy trading generated a robust 40% return on equity. The bank faces tougher sledding in 2008: The credit crunch is taking a big bite out of both merger activity and new stock issuance, two of the firm's bread-and-butter lines of business. Shares of Goldman are already down 21% this year.

Merck's VIOXX Ruling Overturned

WHITEHOUSE STATION, N.J., May 29, 2008 - "We are gratified that the Texas appeals court correctly found that VIOXX did not cause Mr. Ernst's death and reversed the previous decision for the plaintiff in the first VIOXX case to go to trial. In addition, the New Jersey court correctly reversed the awards of punitive damage and consumer fraud. Today's decisions overturn almost $40 million of damages and attorneys fees previously awarded to plaintiffs at trial. We intend to seek further review of the portion of the award that remains standing after the New Jersey decision. We continue to believe Merck acted responsibly."

TRENTON, N.J. (AP) - A Texas appeals court on Wednesday overturned a multimillion-dollar verdict against Merck & Co. in one of the few trials it lost over its withdrawn painkiller Vioxx. A jury in Rio Grande City, Texas, in April 2006 awarded $32 million to thewidow of 71-year-old Leonel Garza, a short-term Vioxx user who died of a heartattack in 2001. That award -- $7 million for compensatory damages and $25 million for punitive damages -- later was cut to about $7.75 million under Texaslaw limiting damages.

On Wednesday, a three-judge panel of the Texas 4th Court of Appeals overturned the verdict, ruling in favor of Merck. The opinion was signed by Justice Sandee Bryan Marion. The judges wrote that Garza's family did not prove his brief use of Vioxx caused two blood clots that the family's attorneys argued triggered his heart attack. The judges also concluded the family did not provide sufficient evidence to rule out his long-standing heart disease as the cause of his fatal heart attack. Garza had a prior heart attack and heart bypass surgery, smoked for nearly 30 years and died of the second heart attack after taking Vioxx for less than a month. Merck lawyers had argued that heart attack was the end result of his 23 years of heart disease.
"There was simply no reliable evidence Vioxx caused Mr. Garza's heart attack," Travis Sales, one of the attorneys who represented Merck during the trial, said in an interview. David Hockema, one of the Garza family attorneys, said they had just read the opinion and had not decided on their next move. Possible next steps would be a motion for a rehearing before the same court of appeals or a petition to the Texas Supreme Court, he said. "I think the decision is clearly wrong and sets an impossible burden for the plaintiff to show the offending instrument (Vioxx) was the sole cause of their injury," Hockema said.

After the trial, a juror admitted previously borrowing more than $12,000 from Garza's widow, Felicia, an issue that Merck also raised in its appeal, Sales noted. However, that was not mentioned in the three-page appellate court decision.

Whitehouse Station, N.J.-based Merck pulled Vioxx from the market in September 2004 after research showed the painkiller doubled risk of heart attacks and strokes. That triggered an avalanche of lawsuits against Merck, which has a $4.85 billion settlement pending to end the bulk of the personal injury suits. The Garzas and others whose cases went to trial before the settlement agreement in November are not eligible to participate. Wednesday's ruling gives Merck 10 victories and four losses in the trials that reached verdicts, with retrials pending in a few cases.

Merck shares rose 66 cents, or 1.7 percent, to $39.83 in regular trading
Wednesday, and rose another 23 cents in after-hours trading. Shares have traded
between $36.80 and $61.62 over the past 52 weeks.

Revised 1st Qtr GDP

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 0.9 percent in the first quarter of 2008,according to preliminary estimates released by the Bureau of Economic Analysis. In the fourth quarter,real GDP increased 0.6 percent. The GDP estimates released today are based on more complete source data than were available for the advance estimates issued last month.
In the advance estimates, the increase in real GDP was 0.6percent (see "Revisions" on page 3). The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE) for services, exports of goods and services, federal government spending, and private inventory investment that were partly offset by negative contributions from residential fixed investment and PCE for durable goods. Imports, which are a subtraction in the calculation of GDP, decreased. The small acceleration in real GDP primarily reflected an upturn in inventory investment that was partly offset by a deceleration in PCE. Final sales of computers contributed 0.06 percentage point to the first-quarter growth in real GDP after contributing 0.16 percentage point to the fourth-quarter growth. Motor vehicle output subtracted 0.35 percentage point from the first-quarter growth in real GDP after subtracting 0.86 percentage point from the fourth-quarter growth.

The price index for gross domestic purchases, which measures prices paid by U.S. residents,increased 3.5 percent in the first quarter, the same as in the advance estimate; this index increased 3.7 percent in the fourth quarter. Excluding food and energy prices, the price index for gross domestic purchases increased 2.2 percent in the first quarter, compared with an increase of 2.3 percent in thefourth. About 0.3 percentage point of the first-quarter increase in the index was accounted for by the pay raise for federal civilian and military personnel, which is treated as an increase in the prices of employee services purchased by the federal government.

Real personal consumption expenditures increased 1.0 percent in the first quarter, compared with an increase of 2.3 percent in the fourth. Real nonresidential fixed investment decreased 0.2 percent, incontrast to an increase of 6.0 percent. Nonresidential structures increased 1.1 percent, compared with an increase of 12.4 percent. Equipment and software decreased 0.9 percent, in contrast to an increase of 3.1 percent. Real residential fixed investment decreased 25.5 percent, compared with a decrease of 25.2 percent. Real exports of goods and services increased 2.8 percent in the first quarter, compared with an increase of 6.5 percent in the fourth. Real imports of goods and services decreased 2.6 percent,compared with a decrease of 1.4 percent. Real federal government consumption expenditures and gross investment increased 4.4 percent in the first quarter, compared with an increase of 0.5 percent in the fourth. National defense increased 5.6 percent, in contrast to a decrease of 0.5 percent. Nondefense increased 1.8 percent, compared with anincrease of 2.8 percent.

Real state and local government consumption expenditures and gross investment increased 0.6 percent, compared with an increase of 2.8 percent. The real change in private inventories added 0.21 percentage point to the first-quarter change inreal GDP, after subtracting 1.79 percentage points from the fourth-quarter change. Private businesses decreased inventories $14.4 billion in the first quarter, following a decrease of $18.3 billion in the fourth quarter and an increase of $30.6 billion in the third. Real final sales of domestic product -- GDP less change in private inventories -- increased 0.7 percent in the first quarter, compared with an increase of 2.4 percent in the fourth.

Costco 3rd Qtr 2008 Earnings

ISSAQUAH, WA, May 29, 2008 (MARKET WIRE via COMTEX News Network) --

Costco Wholesale Corporation (NASDAQ: COST) announced today its operating results for the third quarter (12 weeks) and first thirty-six weeks of fiscal 2008, ended May 11, 2008.
Net sales for the third quarter of fiscal 2008 increased 13% to $16.26 billion, from $14.34 billion during the third quarter of fiscal 2007. As previously reported, prior year third quarter sales results were negatively impacted by an increase in our sales returns reserve of $228.2 million. Excluding the sales returns reserve increase, the net sales increase would have been 12%.
Net sales for the first thirty-six weeks of fiscal 2008 increased 12% to $48.35 billion, from $43.00 billion during the first thirty-six weeks of fiscal 2007. Excluding the sales return reserve adjustments recorded in the second and third quarters of fiscal 2007, which aggregated to $452.6 million, the net sales increase would have been 11%.
Comparable sales for the fiscal third quarter (twelve weeks) and the first thirty-six weeks of fiscal 2008, both ended May 11, 2008, were as follows:

---------------12 Weeks---36 Weeks
--------------------------------------
US-------------- 6%----------5%
International----16%---------17%
Total Company---8%--------- 7%
======== ========
The U.S. comparable sales figure includes, among other things, the effect of recent gasoline price inflation, with the average sales price per gallon of gasoline up 20% year-over-year for the quarter. Excluding this, U.S. comparable sales in the third quarter would have been 4%. In addition, significantly stronger foreign exchange rates, primarily in Canada, positively impacted the third quarter's international comparable sales results. On a local currency basis, international comparable sales increased 6% in the third quarter.

Net income for the third quarter of fiscal 2008 was $295.1 million, or $.67 per diluted share, compared to $224.0 million, or $.49 per diluted share, during the third quarter of fiscal 2007. Included in last year's third quarter results was a $48.1 million pre-tax ($30.3 million after-tax) charge primarily reflecting the reduced gross margin on estimated future returns recorded in the adjustment to the sales returns reserve noted above. Excluding this adjustment, last year's third quarter net income would have been $254.3 million, or $.56 per diluted share.

Net income for the first thirty-six weeks of fiscal 2008 was $884.9 million, or $1.99 per diluted share, compared to net income for the first thirty-six weeks of fiscal 2007 of $710.4 million, or $1.54 per diluted share. Excluding the sales return reserve adjustments outlined above, as well as two additional non-recurring items recorded in the second quarter of fiscal 2007, which in total aggregated to $132.5 million pre-tax ($83.4 million after-tax), net income for the first thirty-six weeks of fiscal 2007 would have been $793.8 million or $1.72 per diluted share.

GE Ready To Unplug Appliance Division?

May 28 (Bloomberg) -- General Electric Co. Chief Executive Officer Jeffrey Immelt said LG Electronics Inc. and China's Haier Group Corp. are among potential suitors that may acquire the company's century-old appliances division.

Immelt, who last week told investors the Fairfield, Connecticut-based company is also ``seriously considering'' a spinoff, named Mexico's Controladora Mabe SA, Sweden's Electrolux AB and Turkey's Arcelik A.S. as other potential suitors. The unit may draw bids of $3 billion to $8 billion, according to analysts at Citigroup Inc. and Goldman Sachs Group Inc.
``The players become very obvious,'' Immelt said during a breakfast meeting with businessmen in Seoul today. ``It's Haier in China, LG in Korea and so on. Of course, LG is one of the leading candidates.'' Buying GE's unit would help Seoul-based LG Electronics challenge Whirlpool Corp.'s lead in the production of appliances worldwide, while a purchase by Haier would give the Chinese company a household name to help drive its U.S. expansion. GE said this month it may sell the unit amid calls for the company to speed up divestitures of slower-growing operations.
GE's appliances division is the biggest provider of refrigerators, ovens and dishwashers for newly-built U.S. homes.

LG hasn't decided whether to bid for the GE unit, the company said today in response to a query by the Korea Exchange. LG is ``carefully monitoring'' the sale of GE's appliances division, Chief Executive Officer Nam Yong said yesterday. Zhao Rui, a spokeswoman at Haier, declined to comment. Speculation that LG will bid for GE ``has been overdone, without any concrete developments,'' James Kim, an analyst at Lehman Brothers Holdings Inc., wrote in a note today. ``According to our channel checks, GE and LG Electronics have not talked about this potential acquisition.''

GE fell 13 cents to $30.27 at 10:26 a.m. in New York Stock Exchange composite trading and have declined about 18 percent so far this year and 7 percent this month.
LG Electronics shares fell 3.6 percent to close at 134,000 won in Seoul. The stock has declined 14 percent this month as analysts at JPMorgan Chase & Co. and Deutsche Bank AG cut ratings on the stock, citing lower earnings prospects.
Haier Electronics closed unchanged at HK$1.2 in Hong Kong trading and has declined 28 percent so far this year and is up 1.7 percent this month.
``Both LG and Haier need GE to break into the U.S. market because it has a very strong brand,'' Castor Pang, an analyst at Sun Hung Kai Securities in Hong Kong, said. ``Buying GE would be a big advertisement for them. After all, the U.S. market is still a very big market.''

Immelt said today the sale of the appliances unit ``will be a long process.''
There have been ``lots of inquiries'' about the appliances unit, mostly from outside the U.S., and GE is also ``seriously'' considering a spinoff, Immelt said this month.
``We within GE agree that every business has to have a global footprint,'' he said today.
GE's appliances business had 27 percent of the U.S. market in 2006, the latest available data, according to Stephen Tusa, an analyst at JPMorgan Chase & Co. The unit had revenue of $7.2 billion in 2007, according to Credit Suisse Group estimates.
Whether LG Electronics, Haier or other companies participate in the sale remains to be seen, Immelt told reporters in a separate media briefing in Beijing today.
LG Electronics posted sales of 11.8 trillion won ($11.3 billion), including those of overseas affiliates, in 2007 from appliances. The North American market accounted for 29 percent of the division's first-quarter sales.

China's Economic Observer reported on May 24 that Haier is considering buying the GE unit and has held talks with China Development Bank on financing a bid. Still, the Qingdao, China- based company hasn't contacted GE yet, the newspaper said, citing an unidentified Haier official.
Haier, China's largest maker of home appliances, is the parent of Hong Kong-listed Haier Electronics Group Co. and Shanghai-listed Qingdao Haier Co. In 2005, the company, which sells products in the U.S. through retailers such as Wal-Mart Stores Inc. and Home Depot Inc., pulled out of a $1.28 billion bid for U.S. appliance maker Maytag Corp.

Haier Electronics
Haier Electronics will have sales of about HK$10.6 billion ($1.4 billion) in 2008, UBS AG analysts Randy Zhou and Erica Poon Werkun said in January. Qingdao Haier, which sells refrigerators and freezers, will have sales of 33.5 billion yuan ($4.8 billion) this year, according to UBS.
Qingdao Haier, whose shares are down 45 percent this year, gained 3.2 percent to 12.37 yuan in Shanghai.
Sales of washers, refrigerators and other appliances accounted for more than half of last year's $13.3 billion in sales at GE Consumer & Industrial. GE had total revenue of $172.7 billion last year. More than half of the company's sales come from overseas, while the appliances division is tied to a single market, primarily in the U.S.
Other potential bidders mentioned in analyst reports earlier included South Korea's Samsung Group.
Videocon Industries Ltd., India's largest consumer electronics maker, is studying the viability of a bid for the appliances division, Venugopal N. Dhoot, chairman of the Aurangabad-based company, said May 23.
General Electric today also unveiled a plan to cut its own water consumption by one-fifth by 2012 as part of its companywide conservation program, called ``ecomagination'' begun in 2005. The company also raised its goal of selling environmentally friendlier products to $25 billion by 2010, a 25 percent rise from its projection three years ago.

Durable Goods Definition

From Wikipedia, the free encyclopedia

A car (Toyota Corolla S) is a durable good in economics. The gasoline that powers it is a non-durable good.

In economics, a durable good or a hard good is a good which does not quickly wear out, or more specifically, it yields services or utility over time rather than being completely used up when used once. Most goods are therefore durable goods to a certain degree. Perfectly durable goods never wear out. As an example, a rubber band is not very durable.
Examples of durable goods include cars, appliances, business equipment, electronic equipment, home furnishings and fixtures, houseware and accessories, photographic equipment, recreational goods, sporting goods, toys and games.
Durable goods are typically characterized by long interpurchase times--the time between two successive purchases.
Nondurable goods or soft goods are the opposite of durable goods. They may be defined either as goods that are used up when used once, or that have a lifespan of less than 3 years.
Examples of nondurable goods include cosmetics, food, cleaning products, fuel, office supplies, packaging and containers, paper and paper products, personal products, rubber, plastics, textiles, clothing and footwear.
Durable goods, nondurable goods and services together constitute the consumption of an economy.

Durable Goods Orders For April 2008

New Orders
New orders for manufactured durable goods in April decreased $1.0 billion or 0.5 percent to $214.4 billion, the U.S. Census Bureau announced today. This was the third decrease in four months and followed a 0.3 percent March decrease. Excluding transportation, new orders increased 2.5 percent. Excluding defense, new orders decreased 0.3 percent.

Shipments
Shipments of manufactured durable goods in April, up following two consecutive monthly decreases, increased $2.5 billion or 1.2 percent to $212.2 billion. This followed a 0.9 percent March decrease.

Unfilled Orders
Unfilled orders for manufactured durable goods in April, up twenty-six of the last twenty-seven months, increased $7.6 billion or 1.0 percent to $804.5 billion. This was at the highest level since the series was first stated on a NAICS basis in 1992 and followed a 1.3 percent March increase.

Inventories
Inventories of manufactured durable goods in April, up nine of the last ten months, increased $1.7 billion or 0.5 percent to $328.6 billion. This was also at the highest level since the series was first stated on a NAICS basis in 1992 and followed a 1.0 percent March increase.

Capital Goods Industries
Nondefense
Nondefense new orders for capital goods in April decreased $1.0 billion or 1.4 percent to $74.4 billion.

Defense
Defense new orders for capital goods in April increased $0.4 billion or 4.8 percent to $8.8 billion.
Released May 28, 2008. This report presents advance information on two key business indicators: durable goods manufacturers' shipments and orders. Revised and more detailed estimates plus nondurable goods will be published June 3, 2008. The advance report on durable goods for May is scheduled for release June 25, 2008.

April 2008 New Home Sales

Sales of new one-family houses in April 2008 were at a seasonally adjusted annual rate of 526,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 3.3% above the revised March rate of 509,000, but is 42.0% below the April 2007 estimate of 907,000.

The median sales price of new houses sold in April 2008 was $246,100; the average sales price was $321,000. The seasonally adjusted estimate of new houses for sale at he end of April was 456,000. This represents a supply of 10.6 months at the current sales rate.

Home Prices Continue Decline

To the left is the latest Case-Shiller Home Price Index. On average housing peaked in June 2006. As of March 2008 housing values in the largest 20 markets are down 17.7%.

The Week Ahead

Market Movers -

Tuesday May 27 - Case-Shiller home price index

Wednesday May 28 - Durable Goods Orders

Thursday May 29 - Revised 1st Qtr GDP

Friday May 30 - Personal Spending Results

Notable Earnings -

Wednesday May 28 - American Eagle (est $0.19)

Thursday May 29 - Costco (est. $0.65)

---------------------Dell (est. $0.33)

Business Week's No. 20 - Sunoco

No. 20: Sunoco

Industry: Energy
Sales: $41.8 billion
Net Income: $891 million

Surging oil prices aren't necessarily good news for refiners like Philadelphia-based Sunoco (SUN). High prices benefit refiners only when they can pass costs on to consumers of refined products like jet fuel and gasoline. That hasn't been the case recently. Sunoco made money in 2007, but booked a $9 million loss for the last three months of the year—vs. net income of $123 million for the same period in 2006. Still, CEO John Drosdick has held fast to his shareholder-first ethos, hiking the dividend and spending $300 million last year to buy back shares. Sunoco's earnings should rise this summer, as gas prices hit record levels.

Business Week's No. 19 - Cognizant Tchnology Solutions

No. 19: Cognizant Technology Solutions

Industry: Information Technology
Sales: $2.1 billion
Net Income: $350.1 million

One of the fastest-growing Indian outsourcers is based in Teaneck, N.J. Last year, Cognizant's (CTSH) revenues climbed 50%, to $2.1 billion, and CEO Francisco D'Souza projects another growth spurt this year. The secret: focus. It concentrates on U.S. and European clients, a handful of industries, and just three core services—software programming, business process outsourcing, and managing computer equipment. Of late, the stock has tumbled on worries that Cognizant may rely too much on the troubled financial-services industry, from which it draws nearly half its sales.

Boeing Dreamliner 787 Back On Track

CHICAGO (AP) - Boeing Co. CEO Jim McNerney on Wednesday defended the company's reliance on overseas suppliers in building its 787 jetliner despite admittedly "big stutter steps," saying the new plane's innovations give the company a five-year lead over rival Airbus.
His remarks came as Boeing executives provided assurances to investors that the 787 program is sticking to the latest timetable after numerous delays over the past year.
Pat Shanahan, vice president and general manager of the program, reiterated that the first plane is on track for the "power on" milestone by the end of next month.
"We have made great progress since March and we're on track to make these commitments," he said at the company's annual investors meeting in Seattle, which was broadcast over the Internet.

Despite the reassurances, Boeing shares tumbled $3.95, or 4.6 percent, to $81.19 on Wednesday, hurt by the steep drop of stocks of its airline customers amid ever-rising oil prices.
McNerney said Boeing's new strategy of using outside contractors for the bulk of its airplane manufacturing needs refinement but will continue for future aircraft.
"We're going to learn from it, move on and do it better next time, because it's the right model," he said.

Fifty-eight airline customers have placed 896 orders for the much-anticipated 787. Boeing touts the plane for its greater fuel-efficiency potential since it's the first large jetliner to be built mostly from lighter, carbon-fiber composites.
But the Chicago-based company has lost credibility, and billions of dollars in expected additional costs and penalties, with three delays in the 787's delivery schedule that leave it more than a year behind the original schedule.
The initial test flight now isn't expected to take place until the fourth quarter, with the first delivery to All Nippon Airways targeted for the third quarter of 2009.
McNerney said that while there have been problems in carrying out the global supply chain strategy, the company is now working more closely with suppliers and removing the bottlenecks on its final assembly line, which got bogged down as Boeing employees had to tie up loose ends caused by suppliers.

The supply-chain glitches notwithstanding, he said, "We have gotten the innovation piece of it right. ... In fact, we believe the design innovations embedded in the 787 has given us roughly a five-year lead on the competition." Besides its fuel savings, Boeing says the 787 will be cheaper to maintain than planes of comparable size and will have passenger-friendly features such as bigger windows and a more comfortably pressurized cabin.

Energy 101 - Products From A Barrel

After crude oil is removed from the ground, it is sent to a refinery by pipeline, ship or barge. At a refinery, different parts of the crude oil are separated into useable petroleum products. Crude oil is measured in barrels (abbreviated "bbls"). A 42-U.S. gallon barrel of crude oil provides slightly more than 44 gallons of petroleum products. This gain from processing the crude oil is similar to what happens to popcorn, it gets bigger after it is popped.

One barrel of crude oil, when refined, produces about 20 gallons of finished motor gasoline, and 7 gallons of diesel, as well as other petroleum products. Most of the petroleum products are used to produce energy. For instance, many people across the United States use propane to heat their homes and fuel their cars. Other products made from petroleum include: ink, crayons, bubble gum, dishwashing liquids, deodorant, eyeglasses, records, tires, ammonia, and heart valves.

Energy 101 - Consumption And Source

This graph indicates what sector consumes energy and what is the source of the energy.

Busniess Week's No. 18 - Avon Products

No. 18: Avon Products

Industry: Consumer Staples
Sales: $9.9 billion
Net Income: $530.7 million

Chief Executive Andrea Jung's makeover of Avon Products (AVP) is almost half done, and the results are already pretty. Two years of restructuring have helped end a sales slump. Revenue last year climbed 13%, to a record $9.9 billion, bolstered by the New York beauty product maker's first global ad campaign. But there's more restructuring to come. Next, Jung plans to reduce the corporate headcount, but she wants to bulk up the ranks of Avon sales reps, now at 5.4 million worldwide. A recession may actually help. Women looking to supplement income have signed up in previous downturns.

Energy 101 - Where Does It Come From?

The United States imported about 60% of the oil we consumed during 2006. About half of these imports came from the Western Hemisphere. Our dependence on foreign oil is expected to decline in the next two decades.

Although we are the third largest oil producer, most of the oil we use is imported.

Net Imports and Domestic Oil as Shares of U.S. Demand








About Half of U.S. Oil Imports Come from the Western Hemisphere
Some may be surprised to learn that almost 50% of U.S. crude oil and petroleum products imports came from the Western Hemisphere (North, South, and Central America and the Caribbean including U.S. territories) during 2006. We imported only 16% of our crude oil and petroleum products from the Persian Gulf countries of Bahrain, Iraq, Kuwait, Qatar, Saudi Arabia, and United Arab Emirates. During 2006, our five biggest suppliers of crude oil and petroleum products were:
Canada (17.2%)
Mexico (12.4%)
Saudi Arabia (10.7%)
Venezuela (10.4%)
Nigeria (8.1%)

Energy 101 - Part 1 Consumption

The United States consumed 20.7 million barrels per day (MMbd) of petroleum products during 2006 making us the world’s largest oil consumer. The United States produces 10% of the world’s oil and consumes 24%.

The United States was third in crude oil production at 5.1 MMbd. In addition to crude oil, significant contributions to U.S. petroleum supplies came from natural gas plant liquids, refinery gain, and alcohol fuels. However, we still needed 13.7 MMbd of imported crude oil and petroleum products to meet U.S. demand. The United States also exported 1.3 MMbd of crude oil and petroleum products during 2006, so our net imports (imports minus exports) equaled 12.4 MMbd or about 60% of our needs.

Petroleum products imported by the United States during 2006 included gasoline, diesel fuel, heating oil, jet fuel, chemical feedstocks, asphalt, and other products. Still, most petroleum products consumed in the United States were refined here. Net imports of petroleum other than crude oil were 17% of the oil consumed in the United States during 2006.

HP 2nd Qtr 2008 Earnings

HP reported a profit that exceeded analysts' expectations but matched a recent preannouncement from the company.
HP said it earned 87 cents a share in the second quarter, on sales of $28.26 billion. In the same period last year, HP earned 70 cents a share on sales of $25.53 billion.
HP, the world's largest technology company by revenue, preannounced better-than-expected earnings for the quarter last week.
HP said then that according to preliminary results it earned 80 cents a share in the quarter ended April 30. The figure of 87 cents a share excludes amortization costs.
Analysts, on average, expected a profit of 85 cents per share, excluding items, on sales of $28.1 billion, according to a poll by Thomson Financial.
The company kept intact its earlier forecast for third-quarter earnings of 82 cents to 83 cents per share, excluding special items.

For the third quarter, HP expects sales of $27.3 billion to $27.4 billion. The Street had originallly anticipated sales of $27.3 billion for HP's third quarter.
Operating margin, excluding special items, was 10 percent, up from 9 percent a year earlier and 9.9 percent in the first quarter, HP said.

HP shares edged lower by less than 1 percent in extended electronic trading after finishing 0.54 percent lower at $46.46 Tuesday. Shares of Palo Alto, Calif.-based HP gained 6 percent during the quarter to close at $46.35 at the end of April.
International markets accounted for 70 percent of revenue, with that from Europe, the Middle East and Asia rising 16 percent on the year to $11.1 billion. Revenue from Brazil, Russia, India and China grew 26 percent over a year earlier.
"HP turned in another strong quarter, supported by improvement across our businesses," Chief Executive Mark Hurd said in a statement. "We benefited from robust demand in emerging economies."

HP's personal computer business grew 16 percent from a year earlier, with unit shipments up 21 percent. Notebook revenue grew 31 percent while desktop revenue was flat.
The company's imaging and printers segment grew 6 percent, while enterprise storage and servers revenue rose 4 percent and services grew 12 percent, HP said.
The tech bellwether had pushed back its quarterly report, originally scheduled for last week, after announcing last Tuesday it agreed to buy Electronic Data Systems.

This Is Why The Price of Energy Is So High

Drilling for Defeat?
By DAVID SIROTA
Published: May 18, 2008

Nearly two decades ago, Republicans won the West by linking Democrats to environmentalists, who supposedly cared more for the spotted owl and other favored species than they did for the jobs of loggers or miners. But now, as a boom in natural-gas drilling reshapes the region, Western Democrats have found success recasting environmentalism as a defense of threatened water supplies, fishing spots and hunting grounds. As a result, the party may hold the advantage this fall in the region’s key Congressional races. The simultaneous rise of Western energy production and the Western Democrat is no coincidence.

The Rocky Mountain drilling boom has been aided by the 2005 Energy Policy Act, which was once considered a partisan political masterstroke. In providing incentives for energy development, Republicans delivered a profitable gift to an industry that directs most of its campaign contributions to G.O.P. candidates. That gift was sweetened by the Bureau of Land Management, which, under President Bush, has expanded the amount of federal land open to energy development and increased the number of drilling permits.
But the acceleration of energy exploration has split the national Republican Party from local Republicans upset by the downsides of the energy boom. “Republicans created a monster for themselves,” said Rick Ridder, a Colorado-based Democratic consultant. “They put public policy in direct conflict with their base voters.”

In Wyoming’s Upper North Platte Valley, Jeb Steward, a Republican state representative, helped lead the successful 2007 opposition to the B.L.M.’s proposed sale of 13 oil and gas parcels. “We have customs and cultures that have developed over a hundred years based on the utilization of multiple renewable resources — agriculture, tourism, wildlife, fisheries,” Steward said. “When B.L.M. proposed issuing the leases, residents were asking, ‘What does this mean to the lifestyles that we’ve all grown accustomed to?’ ”

One wing of the Bush administration appears to have heard the message. In February, the Environmental Protection Agency asked the Bureau of Land Management to revise its plan to allow nearly 4,400 new natural-gas wells on the Pinedale Anticline in Wyoming, citing ozone pollution from drilling rigs. “We have to balance economic success, energy development and the love that the people of Wyoming have for their special places,” said Gary Trauner, the Democratic candidate hoping to replace Wyoming’s retiring Republican congresswoman, Barbara Cubin.

Energy is also likely to affect politics in two Western states where the offspring of conservation icons are running for Senate. In New Mexico, Representative Tom Udall, a Democrat and the son of Stewart Udall, secretary of the interior under Kennedy and Johnson, may face off against the Republican congresswoman Heather Wilson. Two years ago, Wilson belatedly backed Udall’s bill to limit local drilling after being criticized on the issue by a 2006 election opponent.
In Colorado, Representative Mark Udall, Tom’s cousin and the son of the late environmentalist congressman Morris (Mo) Udall, is running for the Senate against Bob Schaffer, a former Republican congressman who works for a natural-gas company. Colorado has experienced a sixfold increase in drilling permits since 1999, and the B.L.M. has leased a New Jersey-size 5.2 million acres of federal land for new energy exploration in the state. Already a conservative group has broadcast television ads attacking Udall for trying to limit drilling. But election trends suggest that such criticisms may be losing effectiveness.

Of course, a recession — and corresponding fears of job losses — could halt the political shift. At a recent hearing convened by the Colorado Oil and Gas Conservation Commission, industry workers upbraided officials for considering rules that could slow gas drilling along the Colorado-New Mexico border. Century-old antigovernment emotions are now aimed at state regulators — and much of the vitriol comes from working-class Democrats.
But can they swing an election? According to Headwaters Economics, a Montana-based research group, the energy sector currently employs only 1.3 percent of the region’s work force. And mining generated just 2.9 percent of all personal income in the five natural-gas-producing Western states in 2006. By contrast, retirement benefits, service jobs and professional industries generated about 55 percent of the region’s income. Many of these sectors have an interest in reducing energy development. After all, retirees, professionals and tourism businesses often come to the region for the open spaces.

“Lots of drilling is great for the industry,” said Headwaters Economics’ associate director, Ben Alexander. “But is it good for the region as a whole?” The political battle for the West will be won by whichever party offers the most convincing answer.

This is amazing. No one wants to do anything about the energy crunch. But eventually the energy crunch will become a self inflicted energy crisis. It's not a crisis yet because we still can fill up everyday, albeit at a high, and ever increasing price. But if there is continued opposition or foot dragging on clean coal technology, nuclear power expansion and replacement, oil and natural gas exploration, and the siting of windmills then I guess we deserve what we get. Higher prices, less energy, and a reduced standard of living. Wake up America before it's too late. (Tim)

A Personal Hedge Against The Rise In Gasoline

In April 2007 I bought into the Vanguard Energy Fund. I used money from a 401K account which had luke warm returns. Although it wasn't planned as a hedge against the increasing price of gasoline that's exactly what it's been. The 1 year return has been 18.2% even with a downturn in oil prices last year. However my return has been 17.5% for 2008 with an annualized rate of approximately 40%. This clearly has outpaced my cost of gasoline.

In addition our investment club (ICK) has holdings in Exxon.

Consider investing in oil/energy as a hedge against rising prices.

(Tim)

Target 1st Qtr 2008 Earnings

MINNEAPOLIS--(BUSINESS WIRE)--May 20, 2008--Target Corporation (NYSE:TGT) today reported net earnings of $602 million for the first quarter ended May 3, 2008, compared with $651 million in the first quarter ended May 5, 2007. Earnings per share in the first quarter decreased 1.4 percent to $0.74 from $0.75 in the same period a year ago. All earnings per share figures refer to diluted earnings per share.
The company also announced today that the transaction to sell an undivided interest in approximately 47 percent of its credit card receivables to JPMorgan Chase for cash proceeds of about $3.6 billion was completed on Monday, May 19, 2008. This transaction is expected to provide Target with sufficient liquidity to implement its business plans, including previously announced capital investment and share repurchase activity, without the need to access term debt capital markets again this year.
"Our first quarter earnings per share met our expectations despite softer-than-expected sales performance," said Gregg Steinhafel, president and chief executive officer. "Though the current economic environment remains challenging, we will continue to generate long-term value for our shareholders by remaining focused on the disciplined execution of our strategy. In addition, we believe our shareholders will benefit over time from our significant share repurchase activity and the unique relationship that has been created through this innovative agreement with JPMorgan Chase."
As previously disclosed, beginning this quarter, the company is reporting two business segments for all periods presented: retail and credit card.
Retail Segment Results
Sales grew 5.0 percent in the first quarter to $14.3 billion in 2008 from $13.6 billion in 2007, due to the contribution from new store expansion partially offset by a 0.7 percent decline in comparable store sales. Retail segment earnings before interest expense and income taxes (EBIT) were $959 million in the first quarter of 2008, down 2.2 percent from $980 million in 2007.
First quarter gross margin rate declined slightly from last year, driven by faster sales growth in lower margin rate categories, substantially offset by increased margin rates within categories. First quarter selling, general and administrative (SG&A) expense rate grew modestly from 2007, benefiting from well-controlled dollar growth offset by the de-leveraging effect of slower-than-expected sales growth. As a reminder, for all periods presented, reported gross margin and SG&A expense rates reflect the reclassification of distribution and other supply chain costs from SG&A expense into cost of sales.
Credit Card Segment Results
Average credit card receivables in the quarter grew $1.9 billion, or 28.3 percent, from the first quarter of 2007, although quarter-end receivables declined $204 million, or 2.4 percent, from year-end 2007.
Interest Expense and Income Taxes
Net interest expense for the quarter increased $65 million from first quarter 2007, due to higher average debt balances supporting capital investment, share repurchase and receivables growth, slightly offset by lower average debt portfolio interest rates. Over the past four quarters, the company has invested $4.1 billion in capital expenditures, $3.7 billion in share repurchase and grown its investment in accounts receivable by $1.9 billion.
The company's effective income tax rate for the first quarter was 37.1 percent in 2008, down from 38.8 percent in 2007, due in part to favorable resolution during the quarter of specific tax uncertainties. For the full year, the company now expects an effective income tax rate in the range of 37.5 to 38.5 percent.
Share Repurchase
In the first quarter, under the share repurchase program announced in November 2007, the company repurchased approximately 30.5 million shares of its common stock at an average price of $51.55, for a total investment of approximately $1.6 billion.
Program-to-date through the end of the first quarter, the company has acquired approximately 57.0 million shares of its common stock at an average price per share of $52.98, reflecting a total investment of approximately $3.0 billion. The company expects to complete the program by the end of 2010 or sooner, and under the right combination of business results, liquidity and share price would expect to complete half or more of the $10 billion authorization by the end of 2008.
Subsequent to the end of the first quarter, the company repurchased an additional 10 million shares related to a set of derivatives transactions executed in the fourth quarter of 2007, for a total investment of approximately $502 million. Including these repurchases, outstanding shares have been reduced approximately 8 percent since the announcement of this share repurchase program six months ago.

Indicator Definition

Coincident Indicators- are measurements of economic indicators whose movements closely coincide with the overall cycle of economic activity. Along with lagging and leading indicators, this index highlights the speed and size of growth or shrinkage in an economy.

Employees On Nonagricultural Payrolls

Personal Income Less Transfer Payments

Industrial Production

Manufacturing And Trade Sales

Leading indicators- are measurements of economic factors that change ahead of changes in the overall economic cycle. They are used to predict changes in overall output and activity in an economy and include such things as share prices, new orders for investment goods, housing construction orders and the index of consumer confidence.

Average Weekly Hours - Manufacturing

Average Weekly Initial Claims For Unemployment Insurance

Manufacturers' New Orders - Consumer Goods And Materials

Index Of Supplier Deliveries

Manufacturers' New Orders - Nondefnse Capital Goods

Building Permits - New Private Housing Units

Stock Prices - 500 Common Stocks

Money Supply - M2

Interest Rate Spread - 10 Year Treasury Bonds Less Federal Funds

Index Of Consumer Expectations

Lagging indicators- are economic indicators that follow a change in the economic cycle, reflecting what has already happened in the overall economy. They include such things as labour costs and interest rates.

Average Duration Of Unemployment

Inventories To Sales Ratios - Manufacturing And Trade

Labor Cost Per Unit Of Output - Manufacturing

Average Prime Rate

Commercial And Industrials Loans

Consumer Installment Credit To Personal Income Ratio

Consumer Price Index For Services

April Leading Economic Indicators

Released: Monday, May 19, 2008

The Conference Board announced today that the U.S. leading index increased 0.1 percent, the coincident index remained unchanged and the lagging index increased 0.1 percent in April.
The leading index increased for the second straight month in April. Stock prices, the interest rate spread, and housing permits made large positive contributions to the index this month, more than offsetting the sharp declines in average weekly hours and consumer expectations. In April, the six-month rate of decline in the leading index slowed to -1.2 percent (a -2.3 percent annual rate), from - 2.4 percent (a -4.7 percent annual rate) from July 2007 to January 2008. In addition, the weaknesses among the leading indicators have become somewhat less widespread in the last two months.

The coincident index was unchanged again in April, and this measure of current economic activity has not increased since October 2007. Industrial production and employment decreased this month, but these declines were offset by gains in personal income less transfer payments* and real manufacturing and trade sales*. The six-month change in the coincident index continued to fall, to -0.4 percent (a -0.7 percent annual rate) in April, down from an increase of 0.3 percent (a 0.6 percent annual rate) from July 2007 to January 2008. The lagging index continued to increase this month and as a result, the coincident to lagging ratio decreased further.

After declining steadily since the middle of 2007, the leading index appears to have stabilized lately, increasing slightly in March and April. Meanwhile, the coincident index declined slightly since October 2007 and the weaknesses among its components have been widespread in recent months. During the first quarter, real GDP expanded at a 0.6 percent annual rate, the same growth rate that prevailed in the fourth quarter of 2007. The current behavior of the composite indexes so far still suggests that economic activity is likely to remain weak in the near term.

April PPI

WASHINGTON (Thomson Financial) -

US inflation at the wholesale level rose slower than expected in April, while core inflation, which strips out volatile food and energy prices, rose twice as fast as expected, the Labor Department said today.

The department's Producer Price Index, which measures inflation pressures before they reach the consumer, rose 0.2 pct in April following a 1.1 increase in March.
Core inflation rose 0.4 pct for the month, after rising 0.2 pct in March. That left core inflation up 3.0 pct in the past twelve months, the largest change since December 1991. Overall inflation has risen an unadjusted 6.5 pct for the year.
Economists polled by Thomson's IFR Markets had expected overall wholesale inflation to rise 0.4 pct, while core inflation was expected to increase 0.2 pct.

The slower than expected overall inflation was due to falling energy prices and flat food prices, categories that boosted inflation in the previous month. Energy fell 0.2 pct, the largest drop since December, while food was unchanged in the month.
Within the energy sector, gasoline fell 4.6 pct, the largest drop since December. Home heating oil rose 5.4 pct and liquefied petroleum gas rose 3.5 pct. Residential electric power rose 1.2 pct, the largest increase since January 2006.
Although overall food prices were unchanged, the cost of milled rice rose 17.4 pct, the largest increase since November 1993. however that increase was offset by a 12.3 pct price decline in fresh eggs, the largest decline since June. The price of vegetables, beef and veal also fell in the month.

The Lowdown On Lowes

NEW YORK (MarketWatch) - Lowe's Cos., the No. 2 U.S. home-improvement retailer, said Monday that its first-quarter profit dropped 18%, hurt by the declining housing market and a spate of other economic worries that cut into consumers' discretionary spending. The company lowered its full-year outlook.

Lowe's shares dropped 3.6% in pre-market trading. They have lost 24% of their value the past year.
Net income dropped to $607 million, or 41 cents a share, from $739 million, or 48 cents a share, in the year-earlier period, the Mooresville, N.C.-based company said. Sales fell 1.3% to $12 billion in the quarter, while same-store sales decreased 8.4%. :
Lowe's Companies, Inc forecast per-share profit of 54 cents to 59 cents for the second quarter and $1.45 to $1.55 for the year with continued declines in comparable-store sales expected. In February, its outlook for the fiscal year ending Jan. 30 was pegged at $1.50 to $1.58.
Analysts, on average, expected the company to earn 40 cents a share in the first quarter, 56 cents in the second quarter and $1.54 for the year, according to FactSet Research. First-quarter sales missed analysts' estimates of $12.4 billion, according to FactSet.
"No signs yet of a recovery," said Deutsche Bank analyst Mike Baker in a report. "We don't believe investors were looking for much improvement, but we have yet to see trends get 'less worse.'"

The challenging economic environment of the past six quarters continued into the first-quarter, leading Lowe's to miss its own sales plan, the company said. Lowe's said it is controlling expenses and has gained market share, even against the backdrop of rising food and fuel prices and housing-market malaise.

Home Depot, Inc Lowe's larger rival, also has been hurt by the housing and economic downturns. Home Depot, which reports quarterly results Tuesday, said earlier this month it would slow its new-store growth, abandoning plans to add about 50 U.S. stores to save cash for existing locations as part of its strategy to improve customer service and remodel stores after it had lost market share to Lowe's. See full story.
First quarter gross margin at Lowe's narrowed to 34.69% from 34.99%. Total expenses rose to 26.59% of sales from 25.20% as the company is on track to open about 120 stores this year

The Week Ahead

Market Movers -
May 19 - Leading Economic Indicators
May 20 - Producer Price Index
May 21 - Boeing Dreamliner Update
May 23 - Existing Home Sales

Notable Quarterly Earnings Reports -
May 19 - Lowes (consensus $0.40)
May 20 - HP ($0.85)
---------Home Depot ($0.37)
---------Target ($0.71)

Business Week's No. 17 - Robert Half International

No. 17: Robert Half International

Industry: Employment Services
Sales: $4.6 billion
Net Income: $296.2 million

In a Sarbanes-Oxley world, accounting knowledge remains in demand. That's the sweet spot for Robert Half (RHI), the Menlo Park (Calif.) staffing company, where finding gigs for accountants and finance professionals makes up 60% of sales. Of late, CEO Harold Messmer Jr. has focused on foreign markets, adding offices throughout Continental Europe. Clients there are particularly hot for permanent recruits, which has become the fastest-growing segment of Robert Half's business, soaring 32%, to $444 million of its record $4.6 billion in sales last year. It helps, too, that Robert Half deals with more-educated workers. In the U.S., the overall unemployment rate is near 5%, but the rate is closer to 2% for college grads.

Business Week's No. 16 - Starbucks

No. 16: Starbucks

Industry: Consumer Discretionary
Sales: $9.8 billion
Net Income: $675.8 million

A weaker Starbucks (SBUX) is still a pretty good business. The company's shares are in a nosedive, falling 40% in the past 12 months, due to a more modest growth trajectory and slowing same-store sales. Yet the ubiquitous Seattle-based coffee chain still has enviable fundamentals: Over the past three years it has rung up average annual sales growth of 20.8%. Analysts look for 11.5% earnings growth in 2008. Howard Schultz, who retook the chief executive reins in January, is on a crusade to restore the chain's image. His moves: streamlining management, closing underperforming stores, and reeducating baristas.

The Oil Price Gusher Continues

By Reuters 16 May 2008 09:10 AM ET

Goldman Sachs, the most active investment bank in energy markets, on Friday sharply raised its forecast for oil prices in the second half of this year, citing tight supply.
The bank expects U.S. crude to average $141 a barrel in the second half of 2008, up from a previous projection of $107, it said. Goldman also forecasts prices will rise further next year to average $148. "Tight supply conditions continue to be the primary catalyst for higher crude prices," the bank said in a research note.

"The near-term outlook for oil prices continues to be bullish." The Goldman forecast helped send crude prices to a record high of $127.82 on Friday, analysts said.
The 2009 estimate is the most bullish among more than 30 banks regularly polled by Reuters.
Goldman, one of the first to point to triple-digit oil more than two years ago -- a once unthinkable level -- earlier this month said oil could shoot up to $200 within the next two years.
Its note on Friday said that despite the advent of alternative sources such as biofuels, oil supply growth has slowed to 1 percent from about 1.8 percent in 2005 and less than the bank's forecast for 2008 world GDP growth of 3.8 percent.
"Given this imbalance, long-term oil prices will need to continue to rise," Goldman said.
Goldman's view that prices are rising in response to tight supply contrasts with others in the industry that oil's rally is being driven by factors beyond supply and demand fundamentals.

The Organization of the Petroleum Exporting Countries, source of two in every five barrels of oil, has rebuffed calls from the U.S. and other industrialised countries for more oil, saying supply is sufficient.
In OPEC's view, factors like the weakness of the U.S. dollar, speculative trading, a lack of capacity at oil refineries and political tension are lifting prices, not a lack of oil.
Royal Dutch Shell Plc, the world's second-largest fully publicly traded oil company by market value, has also said current prices contain an element of speculation.
Goldman is the latest bank to raise its price outlook this week.

UBS lifted its projection on Thursday and said inflation risks from rising oil costs would put a global economic recovery in 2009-2010 at risk. In a note, the bank said oil economist Jan Stuart had lifted the UBS oil price forecast for U.S. crude to $115 a barrel from $86.96, a 32 percent rise

McCain Shops At Costco - Gotta Love That

US News) John McCain isn't fancy. While his Democratic presidential rivals like a little flash and color, McCain is comfy in Levi's and a sweat shirt stamped with an old family photo. And forget nuevo cuisine. In fact, forget hired chefs. This is a guy with a family that likes to pick out chow and cook it on the deck. From Costco, no less. McCainiacs tell us that the GOP presidential candidate and wife Cindy regularly stop at a Phoenix Costco to load up en route to their Sedona, Ariz., retreat, Hidden Valley Ranch. McCain recently raved about Costco's baby back ribs, though he likes the consumer warehouse's chicken quarters and brats, too. And that's not all: He recently upgraded his outdoor cooking area with a new gas grill from the store. Showing his Costco card is a wise move politically, too, pollster John Zogby tells us.

Zogby, who can chart trends simply by determining where voters shop, says Costco's mainstream customers are must-wins in a fall victory. "The key for someone like McCain is to be able to connect with these value shoppers," says Zogby, adding that Target shoppers are similar "centrists." While McCain also has to recover the more conservative Wal-Mart shoppers peeved at President Bush, Zogby says he more than Barack Obama or Hillary Clinton can authentically connect with Costco-ers to "display an understanding of the difficult times they are experiencing."

HP vs. IBM

May 15th 2008 SAN FRANCISCOFrom The Economist print edition

Having bested Dell for the time being, Hewlett-Packard takes on IBM
DURING the first half of this decade Carly Fiorina, then boss of Hewlett-Packard (HP), was forever answering the same frustrating questions about Dell and IBM, HP's two more successful rivals. Dell, she said, offered computers that were “low-tech and low-cost”, whereas IBM offered “high-tech and high-cost”. Only HP, she said, was preparing to give customers “high-tech and low-cost”.
It was easier said than done. When Ms Fiorina tried to buy the computer-services arm of PricewaterhouseCoopers in 2000 to compete with IBM, the leader in that field, IBM beat her to it. And when she bought Compaq to take on Dell, the leading PC-maker, shareholders revolted. In 2005 the board fired her and hired Mark Hurd, a disciplined operations type, to focus on execution rather than vision.

Three years on Mr Hurd has mostly done that. HP, having fully digested Compaq at last, has surpassed Dell to become the world's biggest PC-maker. This means that Mr Hurd is now ready to take on IBM, which has more than 7% of the $748 billion market for services, such as running the data centres of large companies and governments, or handling entire functions, such as personnel or claims processing. The second-largest services firm, Electronic Data Systems (EDS), has much lower profit margins. HP lags in fifth place.

Mr Hurd's answer, announced this week, is to buy EDS for $13.9 billion. He is getting a big name: EDS, founded by Ross Perot in 1962, pioneered the business of outsourced data-management. But the company has been through turbulent times. Mr Perot sold EDS to General Motors in 1984—an unhappy combination that ended in 1996, when EDS was spun off. It then suffered during the technology bust and made a big loss. Under a new boss, it went into profit again, but with unimpressive margins. Its subsequent boss, Ronald Rittenmeyer, will now become head of the combined services arm of EDS and HP, which will be almost as large as IBM's.

The prospect of digesting yet another big acquisition after Compaq may seem daunting. Middle managers at HP still subscribe to the gentle, collegiate “HP way” of doing things. The culture is that of Silicon Valley—relaxed and casual—and the cafeteria is big on ahi tuna. At EDS, based in Plano, Texas, the style is “military, buttoned-down, and staid,” says Rick Sturm, the founder of Enterprise Management Associates, a consultancy. People wear ties. The cafeteria is full of steak and fries. Compared with other services firms, which increasingly hire and operate in India, EDS is overwhelmingly American.

Mr Hurd, who came to California from Ohio, is likely to feel the culture clash less than his colleagues in the ranks. His demeanour makes him “an EDS guy sitting on top of the HP way,” says one consultant. Culture aside, EDS's big selling point is to be the largest services firm that is independent of any hardware or software vendor. It will continue to advise clients to buy systems from all vendors, says Mr Hurd, but those clients are now likely to pay more attention when the boxes come from HP.

Nonetheless, the deal marks another step in HP's impressive comeback. This week Mr Hurd increased his estimate of this year's revenues to over $114 billion, despite the weak economy. The verdict on Mr Hurd is that he has skilfully executed the strategy of his flamboyant predecessor. The verdict on that predecessor, Ms Fiorina, has also improved. Her idea was controversial, but apparently right. Fittingly, Ms Fiorina seems to be making her own comeback now. As a supporter of John McCain, she is playing a bigger role in his presidential campaign by the week.

GE To Shed Appliance Division

May 15 (Bloomberg) -- General Electric Co. may sell or seek a partner for the unit that makes refrigerators and washers, ending more than a century in an industry that helped make GE a household name, people familiar with the situation said.
GE, the biggest maker of appliances for new U.S. homes, hired Goldman Sachs Group Inc. to explore options that include a spinoff or auction, according to one of the people, who declined to be identified by name. A sale may bring $5 billion to $8 billion, the Wall Street Journal reported yesterday.
Chief Executive Jeffrey Immelt, who took over from Jack Welch in 2001 and surprised investors with a decline in profit last quarter, has been paring consumer businesses to cope with a slower U.S. economy. The units he's selling don't expand fast enough to help GE reach its goal of 10 percent annual profit growth. Appliances, which like light bulbs are the GE products most familiar to consumers, accounted for about $7.2 billion in sales last year, or just 4.1 percent of the 2007 total.
``We would positively perceive a more aggressive approach to selling off slow-growth businesses,'' Robert Schenosky, a New York-based analyst with Jefferies & Co. who rates the shares ``hold'' and doesn't own any, said in an interview.
Prices for some appliances haven't increased in more than half a century. In 1953, an 11-cubic-foot refrigerator was advertised for more than $500. Today, an 18.2-cubic-foot GE model lists for as little as $519 on the NexTag.com shopping site.
Gary Sheffer, a company spokesman, declined to comment on a possible sale. Fairfield, Connecticut-based GE rose to $32.73 at 9:07 a.m. today in New York, after closing at $32.51 yesterday in regular New York Stock Exchange composite trading.

Housing Slump
U.S. home foreclosure filings climbed 65 percent in April amid a subprime mortgage crisis. Home prices fell the most in 29 years last quarter, making it tougher for homeowners to refinance loans or borrow more money to buy goods such as refrigerators.
Louisville, Kentucky-based GE Appliances accounted for about 13,000 of GE's 327,000 employees as of the end of last year.
``This isn't a piece of business at this point that has got much more incremental opportunity for GE,'' said Nicholas Heymann, an analyst at Sterne, Agee & Leach Inc. in New York, who has a ``hold'' rating on the stock.
Since unveiling his basic plan to shift out of economically sensitive sectors in December 2002, Immelt has divested more than $75 billion in GE businesses, including the plastics and insurance units, while making more than $50 billion in purchases in faster-growing areas such as water treatment and aviation. Investors and analysts have been asking ever since whether he planned to shed appliances and the light-bulb unit.
In December 2007, Immelt put the U.S. private-label credit card division on the block and is also selling the consumer finance unit in Japan, called Lake.

Earnings Surprise
GE's shares fell 13 percent, the most in two decades, on April 11 after Immelt reported a 12 percent decline in first- quarter earnings and said annual profit would trail his $2.42-a- share target. GE changed its forecast to $2.20 to $2.30 a share.
Welch told the GE-owned CNBC network that the surprise had jeopardized Immelt's ``credibility'' and later followed up to reiterate his support for the CEO. Welch had divested the small- appliance business, which made products such as toasters, and consumer electronics in the 1980s.
Since its inception in 1892 through the merger of the Edison Electric Co. and the Thomson Houston Co., GE was usually first to introduce appliances, from the room air conditioner to the two- door refrigerator-freezer combination, according to its Web site.
In 1928, GE introduced the Calrod electric range and about 19 years later came out with the first completely automatic clothes washer. In 1969, it introduced the first side-by-side refrigerator-freezer with an ice and water dispenser in the door.

Valuation
A sale would continue consolidation in the U.S. appliance industry and provide a possible vehicle for overseas companies looking to grab a larger share of the U.S. market.
Sterne Agee's Heymann told Bloomberg Television today he expects the sale may fetch about 9 times earnings before interest, taxes, depreciation and amortization, or about $6.5 billion. Goldman Sachs analyst Deane Dray, in a research note, said reported estimates of a possible value for the deal range from 8 to 12 times Ebitda. Dray rates the stock as ``neutral.''
The biggest recent acquisition of an appliance company was Whirlpool Corp.'s purchase of Maytag Corp. in 2006, creating the world's biggest appliance maker. The final sales price excluding assumed debt was $1.68 billion, or about 8.4 times Maytag's Ebitda in its final four quarters, according to Bloomberg calculations.

Appliance Makers
Haier Group, China's biggest appliance maker, was one of the unsuccessful suitors in the bidding for Maytag. South Korea's LG Electronics Inc. and GE said in February they would share patents on cooking appliances and refrigerators. Sally Lee, a spokeswoman for Seoul-based LG Electronics, declined to comment on the GE report, as did Zhao Rui, a spokeswoman at Haier Group in Qingdao.
``Haier would definitely be interested because they've been trying for years to get a bigger share of the U.S. market,'' said Zhang Xiaoga, an analyst at Orient Securities Co. in Shanghai. He has an ``add'' rating on the company's Qingdao Haier Co. refrigerator and air conditioning unit listed in Shanghai.
Stockholm-based Electrolux AB, the maker of Frigidaire appliances, in April reported its first quarterly loss in more than two years because of the slowdown in the U.S. Electrolux spent 120 million kronor ($20 million) in the first quarter to introduce new products in the U.S.
Royal Philips Electronics NV, Europe's largest consumer- electronics maker, has said it is looking for acquisitions to build its appliances division. The company raised 680 million euros ($1.05 billion) earlier this year when it sold a stake in its liquid-crystal display venture with LG.