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With few economic indicators today and earnings season winding down, investors are dealing with reports that Japan's economy is slowing.
Japan's cabinet office reported that gross domestic product (GDP) grew at a 1.4% annualized rate in the second quarter, compared to 5.5% in the previous quarter and below the 2.3% economists expected.
Investors are eyeing Europe with a continued sense of apprehension after Italy completed a successful round of selling one-year Treasury bills. Yet, investors worry that Italian yields on ten-year bonds will soon reach Spain's which is once again hovering at the dangerous 7% line.
Companies Making News in the Stock Market Today
In what is expected to be a light trading day here are today's major headlines:
Google Inc. (Nasdaq: GOOG) announced it would cut 4,000 jobs from its Motorola Mobility Holdings Inc. unit in an attempt to bring Motorola's mobile devices unit to profitability.
The reductions amount to 20% of Motorola Mobility's staff and two-thirds of the layoffs will be outside the U.S. Google has been slashing Motorola's vice-presidents as well, letting go 40% of VPs since the takeover.
The acquisition of Motorola Mobility Holdings, which was completed in May, gives Google more than 17,000 patents which it hopes will help it avoid the legal battles facing Samsung and Apple.
Google expects the restructuring move will lead to more innovative smartphones and allow the company to continue its drive into the hardware market.
"Google is trying to focus on the broader array of smartphones," Brian Wieser, a Portland, OR-based analyst at Pivotal Research Group who recommends buying the shares, told Bloomberg News. "The legacy feature phones, although still important in many countries like India, are not necessarily able to take advantage of Google's competencies."
Motorola Mobility lost $233 million in its first six weeks under Google and Motorola's phone business has been unprofitable for 14 of the last 16 quarters. Google hopes streamlining the unit will key the turnaround.
"Investors should expect to see significant revenue variability for Motorola for several quarters," Google said in a regulatory filing today. "While lower expenses are likely to lag the immediate negative impact to revenue, Google sees these actions as a key step for Motorola to achieve sustainable profitability."
GOOG stock rose 1.9% to $654 as of noon.
Sysco Corp. (NYSE: SYY) is the biggest company in terms of market cap of those reporting earnings today. The food distributer reported fourth-quarter earnings that missed on earnings but beat revenue estimates.
The company reported profits of $309.3 million, or 53 cents per share, for the period ended June 30. A year earlier it earned $336.3 million, or 57 cents per share. Revenue rose 6% to $11.05 billion from $10.43 billion in last year's fourth quarter.
Analysts had expected earnings per share of 54 cents per share on revenue of $11.04 billion. For the full year, Sysco Corp. earned $1.12 billion, or $1.90 per share. That compares with earnings of $1.15 billion, or $1.96 per share, in the previous year.
Sysco said that its food costs climbed 3.3% in the quarter, mostly due to price hikes for poultry, meat and canned/dry goods.
"Market conditions remained challenging throughout the year due to increasing product costs and an uneven economic recovery," President and CEO Bill DeLaney said in a statement.
Sysco stock was up more than 3.5% as of noon.
Groupon Inc. (Nasdaq: GRPN) announces earnings after the bell Monday for its second quarter and the company needs a great report to change investors' minds about the online deals site.
Groupon stock is trading around 65% below its IPO price of $20 and has yet to prove that its business model has long-term stability.
Groupon introduced its product selling business named "Groupon Goods" earlier this year and that has reignited concerns about accounting and transparency for the company. Some analysts are skeptical of the first-quarter revenue that was reported and want to hear more about Groupon Goods.
"Based on a better understanding of Groupon Goods accounting and the impact it may have had on the first-quarter revenue growth rate, we are less sure the underlying first-quarter revenue trends were in fact as strong as we had originally thought," Arvind Bhatia, an analyst at Sterne Agee told Reuters.
Investors are waiting to hear if Groupon will detail how the sales of its "Goods" business are accounted for in an attempt to better understand where the company could be headed.
"I can see it becoming a really good, big business for them," Sameet Sinha, an analyst at B. Riley & Co. told Reuters. "Unfortunately, it's more mired in controversy than appreciation right now."
"The stock will continue to suffer until there's more transparency," he said. "The company should realize that."
Analysts, on average, expect earnings of 3 cents per share on revenue of $573 million. GRPN stock was up almost 3% as of noon.
The Dow Jones today was down 92 points, or 0.70%, and the S&P 500 was down 7.61 points, or 0.54% as of noon.
Related Articles and News:
- Bloomberg News:
Google Plans To Eliminate 4,000 Jobs At Motorola Divison