With our investment news briefs, Money Morning provides investors with a quick overview of the most important investing news stories from all around the world.
Kraft Raises Cash Bid for Cadbury; Google Phone Sales Begin; Automakers See Strong U.S. Sales Gains; Whitney Slashes Goldman Forecast; Gulf Infrastructure Gets a Boost; Construction Collapse; IT Obstacle
Kraft Foods Inc. (NYSE: KFT) has agreed to sell its DiGiorno and Tombstone pizza brands to Nestle SA (OTC ADR: NSRGY) for $3.7 billion, using all the net proceeds from the sale to boost the cash portion of its offer for Cadbury PLC (NYSE ADR: CBY) . In related news, Warren Buffet's Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) voted against Kraft's offer to issue up to 370 million shares for the Cadbury acquisition, saying it would change its vote if the transaction doesn't "destroy value for Kraft shareholders." Berkshire's stake of more than 9% in Kraft makes it the food maker's largest shareholder. Nestle, meanwhile, formally took its name out of the running of any possible bidders for Cadbury in a terse statement.
As expected, Google Inc. (Nasdaq: GOOG) formally unveiled its self-branded smartphone, dubbed Nexus One. Manufactured by Taiwan's HTC Corp., the phone went on sale yesterday (Monday), with two versions: a $529 so-called "unlocked" phone gives users a choice of which wireless provider they want to use, and a $179 version that is subsidized by T-Mobile USA Inc. for consumers who sign a two-year contract. Verizon Communications Inc. (NYSE: VZ) and Europe's Vodafone Group PLC (Nasdaq ADR: VOD) will also offer the Nexus One this spring, Google said. The phone uses the latest version of Google's Android operating system, already available on multiple phones made by other manufacturers.
Ford Motor Co. (NYSE: F) , Toyota Motor Co. (NYSE ADR: TM), Honda Motor Co. (NYSE ADR: HMC) and Nissan Motor Co. Ltd. (OTC ADR: NSANY) all showed year-over-year December sales gains in the United States, showing further signs of stabilization in the auto industry. Ford was the big winner of the month, showing a 33% gain, with Toyota close behind at 32%. Honda and Nissan posted 24% and 18% gains, respectively. "Ford is suddenly becoming an acceptable buy for people who it wasn't before," IHS Global Insight Inc. analyst John Wolkonowicz told Bloomberg News . "Ford is a cool purchase now, which it didn't used to be. And that is huge." Meanwhile, General Motors Corp. (NYSE: GRM) posted a 7% gain in U.S. sales, and Chrysler Group LLC saw its December sales fall 4%.
Meredith Whitney, an analyst who runs an advisory group that bears her name , cut her earnings estimates for Goldman Sachs Group Inc. (NYSE: GS) for the second time in less than a month, again without explanation. She now expects Goldman to earn $5.50 per share for the fourth quarter, down from a previous estimate of $6. Whitney also expects Goldman's earnings per share (EPS) to be less for the full and subsequent two years. Shares of Goldman Sachs jumped $3.06, or 1.77%, to close at $176.14.
The six countries that make up the Gulf Cooperation Council (GCC) are expected to spend over $119 billion on infrastructure improvements in the next 10 years, according to an analysis by Kuwait Financial Centre 'Markaz' , a leading asset management and investment banking institution in the Arabian Gulf Region. The estimate is based on announced projects in Saudi Arabia, United Arab Emirates, Bahrain, Qatar, and Kuwait. About $109 billion will be spent on constructing new railways, including $60 billion on the Pan GCC railway. About $10.6 billion will be spent on building new roads. The council is projecting a population boom from an influx of expatriates and a strong 3% growth rate in its indigenous population will increase demand for transportation infrastructure through 2020.
A liquidity squeeze is dampening construction in the United Arab Emirates as the debt crisis in Dubai spreads caution throughout the rest of the gulf region. "Banks have started lending but they remain very cautious, granting loans with significant restrictions. While they were lending up to 95% of the value of the project earlier it has now been reduced to 65% or less," Rizwan Saajan, an official with building supplier Danube told Emirates Business, a Middle East business journal. Cement production by members of UAE Cement Producers Association (CPA) dropped by 34% in November 2009 compared to January 2009, said a senior official from the association. Industry officials told Emirates Business that it would take another 18 to 24 months for the situation to improve in the UAE. The situation is exacerbated by an increase in cement production capacity in Saudi Arabia, which is leading to fierce competition and lower prices.
New accounting rules required by the Emergency Economic Stabilization Act of 2008 could prove costly for many financial firms that have delayed upgrading their information technology systems, according to Boston-based financial systems consultant Jane M. Stabile. The rules requiring firms to apply the adjusted-cost basis of securities may seem relatively straightforward, but the deceptively complex nature of the process will pose challenges that exceed functionalities of many existing systems, said Stabile, principal of IMP Consulting. Implementing the changes "could take three to six months of planning and testing. To date we have not seen very much attention to this at the executive level within the financial services industry," she stated. She also cited a survey of financial services professionals that found fewer than 20% of the firms had allocated funds for making upgrades.