tv Nightly Business Report PBS December 22, 2010 1:00am-1:30am PST
>> corporate cash is quite high right now and you can get some attractive values. so my guess is that 2011 will be a better year for mergers and acquisitions. >> susie: as those big deals prepare to kick off, we'll tell you what sectors experts think are ripe for buyouts. you're watching "nightly business report" for tuesday, december 21. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
like two years ago. stocks are now trading at their highest level since september 2008. the dow tacked on 56 points today to close at 11,534. the nasdaq added 18 closing at a three-year high, and the s&p gained seven and a half. financials were a big part of today's move, as t.d. bank announced it's buying chrysler financial for $6.3 billion. as the year draws to a close, mergers and acquisitions are picking up again. erika miller takes a look at whether the deal-making will continue in 2011. >> reporter: if you listen closely, you might start hearing wedding bells on wall street. more companies are expected to tie the knot in the coming months. while 2010 was a recovery year for mergers and acquisitions, activity is expected to pick up a bit in 2011. m&a expert rich peterson says it depends on the health of the u.s. economy.
>> there's a correlation between the rate of g.d.p. growth and m&a activity. and we're in a period of positive growth in terms of the economy, but it's tepid. >> reporter: peterson is betting that next year u.s. m&a activity could reach $900 billion. that would be a sizeable increase from this year's $800 billion level, but a far cry from the heady days before the financial crisis. so what's likely to fuel the urge to merge? for some companies, it may be the desire to go global with their business, as well as all the money they've squirreled away. >> if you look at corporate cash levels, according to numbers we see here at standard and poor's, non-financial companies in the s&p 500 have approximately $1 trillion cash on hand. so, there's the currency to do the deal activity. >> reporter: experts predict many deals will happen in the cash-rich technology arena. also look for mergers in the
basic materials and energy sectors. for individual investors, it's difficult to guess which companies will get hitched. but market strategist phil dow says m&a activity is good for the stock market overall. >> deal activity up is kind of like the market heading up-- it draws people in. my guess is this is a sustainable economic recovery. if you note corporate earnings have been strong for two years, beating analysts expectations for two years now, my guess is that continues next year. >> reporter: it's not just american companies looking for mates. analysts expect more cross- border marriages, as long the global economy continues to improve. erika miller, "nightly business report," new york. >> susie: here are the stories in tonight's "n.b.r. newswheel." ernst and young has been sued by new york's attorney general. the accounting firm is accused of helping to hide financial risks at lehman brothers before its 2008 collapse. the civil fraud case seeks
$150 million in fees collected by ernst and young. it's the first time a major accounting firm has been sued for its role in the financial crisis. late today, ernst and young responded by calling the charges "baseless." deutsche bank admitted today that it engaged in criminal behavior, and settled with the justice department, paying more than $550 million. prosecutors say the fine represents the fees the company earned helping customers establish illegal tax shelters. and toyota's been slapped with the maximum fine allowed by law for failing to quickly recall millions of dangerously defective vehicles. the fines total more than $32 million for two separate violations. the japanese auto maker has recalled more than 11 million vehicles globally in the last year. still ahead, our word on the street is "technology." find out what tech stocks you should own in 2011.
new regulations for broadband internet service were approved today by the federal communications commission. the controversial new rules prevent broadband operators from unfairly discriminating against their competitors. for example, comcast and at&t cannot favor programs and movies they provide over rivals like netflix. the concept is called "net neutrality." it's growing in importance as consumers increasingly watch tv and movies online, as opposed to cable. but today's regulation is likely to face intense scrutiny on capitol hill once republicans take over the house. the results are in from this year's census report, and we got a look today at how the u.s. has changed over the last decade. the u.s. population now stands at more than 308 million people. that's an increase of nearly 10% over the last decade, but it's the slowest pace of growth since 1940.
the report shows more americans are living in the west and the south. the south had the fastest growth since 2000 at 14.3%. the west was close behind at 13.8%. census data is used to determine how many representatives each state gets in the house over the next decade. based on today's data, texas will gain four seats, florida adds two, while new york and ohio each lost two. 14 other states gained or lost one seat. the gainers included arizona, georgia, nevada, south carolina and utah. the losers included illinois, louisiana, massachusetts and new jersey. no matter where you live, your health in the future will depend, in part, on the education the next generation of doctors is now receiving. that's why pharmaceutical companies say it is so important to educate medical students
about their products. but some student physicians are concerned drug company marketing could corrupt their schools and their profession. tonight, darren gersh continues our "dollars for doctors" coverage with a look at how those students are turning the tables by grading their own universities. >> reporter: it's saturday night in las vegas, and far from the bright lights, these medical students are gathering for a lecture. the subject is not cell biology or anatomy. >> you guys get bought and sold in a blink of an eye, and you don't even realize it >> reporter: today's topic is marketing-- specifically, drug company marketing. and the lecturer, shahram ahari, is a former pharmaceutical company sales rep who left the profession to become a medical student himself. >> as much as i liked to think i was helping patients, the truth of the matter is, i was helping shareholders more than anyone else-- in fact, oftentimes, at the expense of patients. >> reporter: programs like these are part of a campaign to change the culture of medicine. and it's being led by medical
students under the banner "pharmfree." the goal-- to put scientific evidence ahead of pharmaceutical marketing in their education and their profession. john brockman is president of the american medical student association, which runs the pharmfree campaign. >> when i first started, physicians could take meals, they could take drug pens, they could take clocks, clipboards, tissues even. and now, those restrictions have become much more prohibitive. >> reporter: but medical students want to go further. they are now, in effect, grading their teachers, awarding medical schools high marks for policies that restrict drug company marketing on campus. >> in 2008, only ten schools had an "a" or a "b". this year, 76 schools have strong pharmfree policies and have grades of "a" or "b". >> reporter: still, the students say about half the medical schools in the country don't have strong enough policies on conflicts of interest and
pharmaceutical industry marketing. and, as we reported last night, even at schools with policies restricting faculty from speaking for drug companies, the independent newsroom propublica found enforcement has been lax. brockman says med students will now be watching to see whether that changes. >> oftentimes, some of these policies are just that-- policies. they don't have the oversight and implementation that we as the american medical students association would like to see. >> reporter: in a statement, the industry trade group phrma says industry ties with academics must be maintained. a top phrma officials says, "providing physicians and medical students with timely, accurate information about the medicines they prescribe clearly benefits patients and advances healthcare throughout the united states. "biopharmaceutical research companies take this responsibility seriously and remain committed to ensuring that these interactions follow the highest standards." at the association of american medical schools, dr. darrell
kirsh says medical students have been a key catalyst in raising awareness about the proper line between industry cooperation and marketing. >> faculty had habits that had been engendered over decades. the medical students came in with a fresh look and helped us re-examine ourselves. we weren't where we needed to be. we're now moving very strongly to a balance point that the public can feel good about. >> reporter: but change takes time, and sometimes some strange looks, like the kind brockman gets when he turns down offers of drug company-provided food that other students are happy to accept. >> and you try to explain to them and you say, "you know what? this lunch really isn't free, that the patients are the ones who ultimately pay for it when they pay for their drugs." they understand a little bit, but they still think that you're crazy, and why would you ever pass up a free lunch? darren gersh, "nightly business report," washington.
>> susie: as we reported earlier, financials led the way higher on wall street today. it looks like investors are betting that today's deals in the sector are the beginning of more mergers in the new year. let's take a look in tonight's "market focus." you can see the pop in financials. shares of the e.t.f. that tracks
the big financials rose nearly 2% today. and besides that t.d. bank deal today, lots of market buzz about other takeovers. royal d-s-m-- that's the dutch life sciences group-- is offering more than a billion dollars for marteck biosciences, a u.s. based nutrition firm. shares of martek surged on the news, up 35% to $31.67. royal d-s-m wants to expand into infant formula and dietary supplements. assa abloy, the world' biggest lock maker, is breaking into a new security business. it's paying $80 million for laser card, an identity-security firm. that works out to about $6.25 a share, a 40% premium to yesterday's closing price. and that's right about where laser card shares closed the day-- $6.24 a share. a.i.g. in the news today.
the u.s. government gave more details on its plan to exit the bailed-out insurer. the u.s. treasury will sell a large chunk of its stake in two stock offerings next year. that helped a.i.g. move higher, up $1.76 or 6% on the news. a couple of big stock moves on strong earnings news: first up, nike-- shares plunged in after-hours trading. that's even though the sports apparel maker posted a 22% jump in quarterly earnings today, and the company said future orders are strong, up 11%. nike earned 94 cents a share, beating expectations, and revenues of around $5 billion also came in slightly better than estimates. despite all that, nike stock hit an all-time high of $92 during
regular trading session, but the stock fell as much as 6% from these levels in after-hours. carnival-- the latest results show smooth sailing for the big cruise line, thanks to an improving economy and savings on its fuel bill. carnival earned 31 cents a share in its fourth quarter, right in line with analyst expectations. revenues rose almost 7%. the stock cruising up by almost 5% to a 52-week high of $45.18. solid earnings from jabil circuit today. it makes circuitboards used in everything from computers to telecom equipment. it earned 61-cents a share, seven cents more than estimates. investors liked the numbers: the stock rose 11% to $19.55, its highest level in three years. adobe shares moved higher, up 6%.
as we told you yesterday, the software giant swung to a fourth quarter profit. and we see darden restaurants falling nearly 6%. as we reported last night, its quarterly earnings jumped 24%, but the stock sold off on concerns that the competition is gaining ground on darden's chains like the olive garden and red lobster. and we're one step closer to restarting rare-earth mineral mining here in the u.s.-- california-based molycorp inked a deal with japan's hitachi metals for a joint venture here in the u.s. they'll work together to produce rare-earth alloys and magnets used in high-tech products from cell phones to satellites. molycorp shares surged on the news-- up 13%, or more than $5, to a 52-week high. and that's tonight's "market focus."
>> susie: "technology" is our word on the street tonight. our guest says technology stocks will be market leaders in the new year. he's robert walberg, chief market strategist at thestreet.com. >> susie: hi, bob. >> hi, susie. >> susie: let's start off by talking a little about technology in 2010. it wasn't one of the top performers. when you look at the stock sectors that did well this year. we see industrials -- well, actually, we see consumer discretionary stocks at the top with a
gain of 26%. followed by industrials. energy, basic materials, and consumer staples. if technology were on the list, it would have posted a 9% gain in 2010. sounds good, but nothing like the double digits we see in the other sectors. so why do you think technology will play a leadership role in the now year? >> susie, i think there are basically foyer factors that are converging right now that should lead to significant growth in 2011. the four factors basically are: a growth in i.t. or information technology spending in 2011. we're looking at corporations sitting on nearly $2 trillion in cash on their balance sheets. and a need to improve operating efficiencies. those two things suggest we're going to see growth in i.t. spending where between 5% to 7%. that growth will be driven in part by the second
factor, everything from networking to software. the improvements we have seen over the last couple of years are by operating efficiencies and cutting costs, we'll see the new products drive the revenue growth. and that will be substantial change. i think the fact we're going to see the top-line growth will change the discounted prices we've currently seen in the sector. the evaluations are trailing the market in a lot of areas, aside from the cloud. as we see the i.t. spending improve, we're going to see multiple explanation, and that will be good news for the sector. and, finally, i think you'll see strong m.t. improve. and i think it will continue because of the low interest rate environment. >> susie: bob, you are recommending three stocks that will benefit from all of these trends you told us. let's start with oracle,
what is the line there? >> revenue growths and licensing 21%. strong pipelines and growth potential there. solid management team, decent balance sheet. the stock really poised for a move up to the 40 level, we think, right now. >> susie: and you're also recommending jupiter networks. what is the attraction of j.n.p.r. >> they're stealing share from the larger sectors like cisco. 18% on the top line, and 25% on the bottom line, evaluations, although a little richer than the other stocks. we think right now discounted to growth, and jupiter to $46 a share. >> susie: and can you tell us in 30 seconds or less, the omni vision. >> they enhance the image quality from everything from cell phones to cameras, and medical, and automotive industries. strong growth a real
winner here. up side to $40 a share. >> susie: all right. any disclosure you want to tell us about? >> i don't own any of the stocks, but jim kramer's charitable trust owns oracle. >> susie: we've been speaking with robert walberg, the chief market strategist at thestreet.com. here's what we're watching for tomorrow: existing home sales for november, and quarterly results from bed, bath and beyond, and walgreen. we'll also find out how hilary kramer's stock pick, supermedia, is doing in our "street critique" segment. and we'll answer your questions. email us at "street critique" at nbr.com, or you can send us a note on twitter or facebook. another major milestone for apple. sales of apple tv are on track to top a million units this week after just three months on the market. apple tv is a small box that connects to a television, just like the ones cable companies provide.
once connected, customers can rent high-definition movies for 99 cents through itunes. the device also lets people stream movies from their personal computer, iphone or ipad directly to the tv. microsoft also released sales figures today for its windows 7 phone. the company says one and a half million have been sold since its launch six weeks ago. now, those numbers represent sales to retail stores and carriers. device sales to customers are expected to be far lower. microsoft says sales are in line with expectations, but compared with competitors, they aren't that impressive. apple sold nearly two million iphone 4s in just two days.
>> susie: rising treasury yields amid rising federal debt. tonight's commentator has thoughts on both. she's gillian tett, u.s. managing editor at "the financial times." >> what is happening to the treasuries market right now? that is a question many investors are asking, given how yields have suddenly surged. after all, rising bond yields are bad for mortgage borrowers and financial institutions holding treasury bonds. it threatens to tighten monetary conditions at the very moment the fed wants to loosen them. but there might just possibly be a silver lining in this cloud, too. it might concentrate political minds on the need to produce fiscal reform. think about it. american politicians have known
for months that the debt problems are spiraling out of control. but thus far, there has been little pressure to act. yields have hitherto stayed at rock-bottom rates, and investors have continued to gobble up treasury bonds, irrespective of the political gridlock. thus, there has not been anything to stop them staving off difficult decisions, as we saw when the bipartisan tax commission recently issued a sensible report. but if markets are now getting more jittery, this might inject more urgency into the debate. the threat of more investor vigilance might even break the debilitating political log jam. after all, one reason why the u.k. has recently pressed ahead with a proactive debt-reduction package is that it has seen what has happened to the rest of the euro-zone. so while a big jump in yields would be bad, a little wobble might be exactly what is needed to knock some sense into washington, before it is too late. here, at least, is hoping. i'm gillian tett. and finally, toys "r" us is catering to procrastinators this holiday season. for the first time ever, america's biggest toy store will stay open for 88 consecutive
hours. stores opened at 6:00 this morning, and will stay that way until 9:00 pm on christmas eve. so with just days to go before christmas, if you wake up in the middle of the night and remember that you need a barbie, elmo or playstation, you have some options. toys "r" us isn't the only store offering marathon shopping. more than a dozen macy's locations around the country will be open around the clock. and wal-mart will welcome shoppers until 8:00 pm on christmas eve, two hours later than last year. that's "nightly business report" for tuesday, december 21. i'm susie gharib. thanks for joining us. have a great evening. we hope to see all of you again tomorrow night. "nightly business report" is made possible by: