Global Investing Roundup

Merrill Writedown; STM Surprises; Longtop IPO Soars; Glaxo Cuts Costs; VW Deal Cleared

  • Merrill Lynch & Co. Inc. (MER) yesterday (Wednesday) took $7.9 billion in mortgage-related writedowns  - $3.5 billion more than the company predicted only two weeks ago - for the third quarter, spawning fears that the global credit crisis might be entering a new leg. The writedowns, the biggest reported by any bank during the credit squeeze, raised serious questions about the leadership of Merrill Lynch Chief Executive Officer Stan O'Neal, the Financial Times reported. Overall, Merrill reported a $2.3bn loss for the third quarter after writedowns of $8.4bn, including losses on leveraged loans.  Merrill Lynch shares fell $3.90 each, or 5.81%, to close at $63.22.
  • Shares of STMicroelectronics NV (STM) - Europe's largest maker of semiconductors - jumped nearly 6% yesterday after the quarterly earnings beat analyst estimates, and the company said revenue will increase during the current quarter. STM's ADRs rose 5.67%, or 93 cents each, to close at $17.34 in regular trading, and rose just under 1% more in after-hours trading. The company reported third-quarter net income of $187 million, a decline of almost 10% from the same quarter a year ago, but well ahead of the $156 million that analysts were expecting. STM, which makes chips for cell phones, also predicted that sales for the fourth quarter will increase between 4% and 9%. Worldwide chip sales will advance at a 2% clip for the fourth quarter, and STM will grow faster than the market, the company said.
  • Shares of the China-based Longtop Financial Technologies Ltd. (LFT) soared more than 85% in its U.S. stock market debut yesterday, the latest in a series of China-based initial public stock offerings (IPOs) that have posted huge gains on their first day of trading.  The Xiamen, China-based Longtop provides information-technology services to that country's financial-services sector - yet another white-hot business segment, as middle-class workers start to amass wealth. Services include bank-transaction execution, payroll and risk management for customers, and other services. For the quarter that ended June 30, Longtop said revenue rose a blistering 47%, rising to $16.1 million this year from $10.9 million a year ago. Net income, however, dipped slightly, to $4.9 million this year to $5.1 million last year.
  • GlaxoSmithKline PLC (GSK) will cut jobs and look to shave $3.1 billion in costs after reporting that profits dropped nearly 6% in the third quarter, the company announced yesterday (Wednesday). Glaxo posted a net profit of  $2.68 billion for the quarter ended Sept. 30, down from $2.85 billion during the same quarter a year ago. Revenue rose only 2% to $11.02 billion, the chief culprit being a 7% decline in U.S. revenue. Factors hampering U.S. sales included stiffer generic competition, and a 38% plunge in sales of its Avendia family of drugs that followed an earlier FDA announcement that the drug increased heart-attack risks.
  • The European Court of Justice has struck down a German law that was preventing Porsche AG from purchasing the 69% of Volkswagen AG that it does not already own, the New York Times reported yesterday. In its decision, the court said that the law illegally restricted the free flow of capital within the European Union (EU). Porsche will be taking the matter under consideration at its supervisory board meeting currently scheduled for Nov. 12 of this year. Porsche has previously said that owning a majority of the shares would allow it to extract the maximum value from its investment in its fellow German auto giant.