Cable May Have Gained Broadband Share From Telcos In 2Q

NEW YORK -(Dow Jones)- Disappointing high-speed Internet numbers from the two largest U.S. telecommunications companies suggest the cable companies could post surprisingly strong customer growth when they report their second quarter results. The second quarter marks a difficult time for all broadband providers because college students tend to disconnect their lines as they go on summer vacation. The weakened economy and housing problems have also weighed on the service providers. Even with the lowered expectations, the telcos failed to match Wall Street's estimates, suggesting competition was a more worrisome issue than previously thought.

"When the chapter is closed on the second quarter, the cable industry will very likely have garnered the highest share in the history of the broadband market," said Craig Moffett, an analyst at Sanford C. Bernstein & Co. LLC.

The telcos and cable providers are aggressively tustling over broadband customers because the Internet line is seen as the key service for customers. Consumers are more willing to forego phone service, where wireless is an alternative, or even television, which can be replaced by online videos, than their Internet connection.

Cable, however, still has an advantage in speed. While the telcos have been ramping up their faster fiber-optic-powered Internet service, the offering is limited. Cable, meanwhile, has pushed the advantage through aggressive marketing, with players such as Comcast Corp. (CMCSK, CMCSA) increasing the airtime for its Slowsky turtles commercials, which mock slower DSL customers. Moffett envisions a scenario where the cable companies gained as much as 75% to 80% of the net new broadband customers in the second quarter.

Wall Street will know if these trends play out according to his expectations when the cable companies report. Comcast Corp. (CMCSK, CMCSA) releases its results Wednesday. Cablevision Systems Corp. (CVC) reports Thursday. Time Warner Cable Inc. (TWC) reports on Aug. 6. Spokesmen for Comcast and Cablevision weren't immediately available for comment. Time Warner Cable declined to comment.

AT&T, which reported last Wednesday, set the tone by reporting 46,000 net new broadband connections, which analysts considered surprisingly weak. Chief Financial Officer Rick Lindner, speaking to analysts on a conference call, said that the company and its cable competitors have seen a fairly even split of the new customers. He blamed the weakness more on the seasonal factor and weaker economy than competition, but acknowledged the market share picture may have slipped in cable's favor.

"I don't think that's a big factor," he said, noting that AT&T had been ahead of cable in the last few quarters. Verizon, meanwhile, reported 54,000 net new high-speed Internet customers, with a decline of 133,000 DSL subscribers eating into the 187,000 net new FiOS Internet subscribers.

Verizon was more forthcoming on the disappointing figure. Chief Financial Officer Doreen Toben said in an interview with Dow Jones Newswires that in areas where FiOS isn't available, the company is unable to keep up with customers' demands for higher Internet speeds. She noted that a quarter of the DSL losses were from subscribers migrating to FiOS. Verizon has some reason to be optimistic. The company on Monday officially launched its rollout of FiOS TV in New York City. The bundling of television service with Internet is expected to drive growth in the lucrative market.

In addition to the economic issues and the seasonal impact, the companies are facing a maturing market where nearly everyone has a broadband connection.

"When you're starting to push on 90% broadband penetration, the growth rate was going to slow," Toben said. She declined to comment on whether she expects further DSL losses in the coming quarters.

The DSL numbers for Verizon have already been weak for the last several quarters, said William Power, an analyst at Robert W. Baird & Co. He doesn't expect the trend to change because the penetration rate is already at such a high level. Likewise, Moffett is pessimistic about the telcos. He expects the cable industry to continue to win market share in broadband and voice services at an accelerated rate.

"It's important not to get lost in the weeds from quarter to quarter and focus on the broader trend line," he said, which will continue to favor cable. Verizon slipped 1.8% to $33.84. AT&T fell 0.5% to $31.24.

-By Roger Cheng, Dow Jones Newswires

Mercedes to cut petroleum out of lineup by 2015

By Jaymi Heimbuch (Yahoo! Green)

In less than 7 years, Mercedes-Benz plans to ditch petroleum-powered vehicles from its lineup. Focusing on electric, fuel cell, and biofuels, the company is revving up research in alternative fuel sources and efficiency. The German car company has a few new power-trains in the line-up that European journalists have had the opportunity to test out in the Mercedes facility in Spain. One vehicle includes the F700, powered by a DiesOtto engine that combines HCCI and spark ignition to get nearly the same efficiency as diesel, but minus the expensive after-treatment systems. The engine can run on biofuels, and we may have a purchasable vehicle by 2010 -- a year that seems to be popular for the debut of a lot of new alternative fuel car models, making ’08 and ’09 simply thumb-twiddling years for consumers. I don’t know, maybe car makers just like the roundness of “2010.” The company’s next big step will be to launch a Smart electric car which is fuel and emission-free.

Anyway, Mercedes is looking into electric vehicles, both battery-powered and fuel-cell powered. Not only are models in development, but we’ve also seen the company making steps towards its zero-petroleum goal right now, from better cabs in London to li-ion battery improvements. The company also has about 100 Smart electric cars undergoing testing in London, with that favorite 2010 year as the projected market release date. Mercedes is making serious investments, already putting nearly $4 million into the pot of its long-term Sustainable Mobility plan, with another nearly $1.4 billion going in before 2014. While car models may be able to run on fuels other than gasoline or diesel, we have yet to find a method of both running and producing vehicles entirely free of fossil fuels. I’m waiting for a mainstream car line that creates renewable fuel, clean-running vehicles out of 100% recycled materials in plants run on 100% renewable, clean power … Will I even be alive when that finally happens? I have hope.

EPA chief says Congress should pass greenhouse gases legislation

(Los Angeles Times) Responding to a U.S. Supreme Court order, Environmental Protection Agency Administrator Stephen Johnson said today that the Clean Air Act was "the wrong tool for addressing greenhouse gases" because it would be too costly to the American public, and said that Congress should move forward with passing legislation to tackle the issue instead.

The high court had ordered the EPA more than a year ago to determine if greenhouse gases were a danger to the public. If so, the justices said, under the Clean Air Act, the agency was required to develop regulations to reduce the risk.

Instead, Johnson signed what he said was an unprecedented 1,000-page document this morning that included letters from numerous White House environmental and economic agencies detailing how such regulations could harm major sectors of the economy.

"One point is clear," Johnson said. "The potential regulation of greenhouse gases under any portion of the Clean Air Act could result in an unprecedented expansion of EPA authority that would have a profound effect on virtually every sector of the economy and touch every household in the land."

He said he would accept comments on the proposed EPA regulations in response to the court order, but stressed repeatedly that it was the wrong approach because of the costs.

The document also includes a sharply revised version of a May draft by EPA staff members in which they concluded as much as $2 trillion in savings to consumers at the gas pump could be achieved if greenhouse gas regulations were implemented. That number was slashed to $830 billion, and the price of gas was calculated at $2 a gallon for the next 30 years. EPA press secretary Jonathan Schradar said he did not know why the numbers had been changed, but said extensive review of the earlier draft had been performed by agency staff members.

Today's announcement once again effectively eliminates any likelihood of the Bush administration regulating greenhouse gases.

-- Janet Wilson

Scribe Fire

This is my first post with ScribeFire. It's a blog editing addon for FireFox. Looks interesting.

Boeing Wins Protest of Northrop Aerial-Tanker Award

June 18 (Bloomberg) -- Boeing Co. deserves another chance to bid on the $35 billion U.S. Air Force aerial-tanker contract won by rival Northrop Grumman Corp., a government agency said.

``Our review of the record led us to conclude that the Air Force had made a number of significant errors that could have affected the outcome of what was a close competition between Boeing and Northrop Grumman,'' the U.S. Government Accountability Office announced today in Washington. ``We therefore sustained Boeing's protest.''

Boeing appealed to the GAO after Northrop and partner European Aeronautic, Defence & Space Co. won the contract Feb. 29, snaring a program that had been Boeing's for more than half a century. Boeing claimed changes the Air Force made during the competition favored Northrop. The selection of Northrop was undermined June 12 when both companies confirmed the Air Force miscalculated operating costs of the competing aircraft.

``While the variance in costs is trivial, it points to a broader erosion in the government's rationale for picking the Northrop-EADS plane,'' Loren Thompson, an analyst at Lexington Institute, an Arlington, Virginia-based public policy research group, said in an e-mail before the announcement. ``The outcome of the competition was fairly close, as Boeing has argued in its filings, rather than a decisive win for the Northrop-EADS team as the Air Force asserts.''

Boeing shares have declined 11 percent since the decision, compared with a 12 percent drop in Northrop. Boeing rose $1.08 to $75.46 at 1:22 p.m. in New York Stock Exchange trading, while Northrop fell 33 cents to $70.76.

Air Force Response

Boeing beat the odds in winning support from the GAO, the investigative arm of Congress that sustains only one in four protests. Winning the protest also helps Boeing keep its main commercial-aircraft rival, EADS' unit Airbus SAS, from a getting a foothold in the U.S. defense industry. Airbus took the No. 1 commercial-plane position away from Boeing in 2003.

GAO rulings are advisory. While the Air Force isn't required to follow the agency's recommendation, the service has to explain to Congress if it chooses to ignore the advice.

The Air Force must now respond within 60 days with a course of action based on the GAO findings, adding to a four-year delay in the program that the service says is needed to replace a fleet of airborne tankers in use since 1956.

Replacing Fleet

Efforts to begin replacing the fleet of more than 500 tankers have been held up since 2004, when a plan to lease and buy 100 aircraft from Boeing collapsed amid ethical violations by an executive and an Air Force official that sent both to jail.

Alabama Governor Bob Riley was in an editorial board meeting at Bloomberg headquarters in New York when he learned of the news, which will create further delay in Northrop's plans to build the tankers in his state and create at least 1,500 jobs.

``Oh, God, that's not good,'' said Riley, a Republican serving his second term. Earlier, he said it would take ``an absolute nutcase'' to prefer the Boeing bid over Northrop's.

The GAO decision doesn't imply that Boeing now has an easy road to reversing the original award and capturing the work for itself, said Jim McAleese of McAleese & Associates, a government contracting and national-security law firm in McLean, Virginia.

``To be successful in any potential re-competition, Boeing must demonstrate that it is either technically superior at a reasonable cost/price-premium, or that it is significantly lowest-evaluated-cost,'' McAleese said in an e-mail before the announcement. He wasn't involved in the protest.

Bernanke's Rate Spike Poker Face

By Maurna Desmond

(Forbes) Investors and economists placed their bets Tuesday, some with investments and some with pens, on whether Federal Reserve Chairman Ben Bernanke will make good on his tough inflation talk and spike U.S. fed funds interest rates.

Late Monday, the Fed chief said that the likelihood of a significant American economic downturn had diminished substantially in recent months. He expressed concern, however, about inflationary pressures in the United States. His statements implied the Federal Reserve is more worried about stemming inflation, perhaps by raising interest rates, than stimulating a not-quite-so-weak economy.

While many on Wall Street jumped at the prospect of a rate hike, some aren't buying that the Fed will increase interest rates again. Morgan Stanley's Global head of interest rate strategy said Monday that he thinks it is "unlikely" the Fed will raise rates until mid-2009. He added that U.S. two-year treasury bonds are undervalued due to Fed interest rate hike fears. The economist added that he views the U.S. as "lingering below-trend growth" and not a prolonged recession according to tradethenews.com.
Treasury bonds were hit hard by the Fed chairman's statement, with interest rates apparently rising both because of the outlook that the Fed might begin to undo its easy-money policy of the past year and because of the inflation threat. The yield on the 10-year Treasury note, a benchmark for the world's capital markets, rose to 4.10% from 3.99% late Monday. As inflation rises, investors demand higher returns on bonds since the purchasing power of the money invested will be eroded. The 10-year yield ended the first quarter of this year at 3.43% as fears of financial collapse had investors running for the perceived safe haven of the U.S. government market.

The dollar benefited from the idea that the Fed might raise short-term rates. While the greenback gained to 107.20 yen from 106.30 late on Monday, the euro fell to $1.547 from $1.563 and the British pound slipped to $1.9548 from $1.9733.

Boston Fed President Eric Rosengren echoed Bernanke's concerns Monday saying that rising food and energy costs are impacting the economy from the top down, complicating the outlook for inflation. Dallas Fed President Richard Fisher warned that gradualism was still a watchword for the central bank, even though it had acted very aggressively in lowering interest rates to combat the fallout of the subprime mortgage crisis last year.

Not everyone believes that inflation is the greatest threat to the U.S. economy, but rather the burgeoning U.S. trade deficit which hit $60.9 billion in April, up from $56.5 billion in March. April's gap was substantially larger than the $59.5 billion economists had expected.

"The trade deficit heightens the risk of recession and surging unemployment," said Peter Morici, a professor at the University of Maryland School of Business and Forbes columnist. "Ben Bernanke’s recent comments about oil driven inflation only serve to distract attention from these issues and aggravate risks."

Morici argued that money spent on foreign oil, China's lopsided trade relationship that is propped up by a devalued yuan, and a few other key deficit components pose a growing threat to the financial health of the United States.

Natus Medical cuts full-year profit expectations

NEW YORK (Associated Press) - Natus Medical Inc., a provider of medical devices for newborn care, said Thursday it lowered its 2008 full-year profit projection as a result of an acquisition and two stock offerings. Natus now expects full-year profit between 68 cents and 70 cents per share on revenue between $163 million and $164 million. Previously, the company projected per-share profit between 70 cents and 72 cents and revenue between $161 million and $162 million. Analysts surveyed by Thomson Financial expect full-year profit of 69 cents on revenue of $161.7 million. The company reaffirmed its second-quarter earnings projection of between 14 cents and 15 cents per share. Analysts expect earnings of 14 cents per share. For the second quarter, the company now expects revenue of $38.3 million to $39.3 million. It had previously said it expected revenue of $38 million to $39 million. Analysts expect revenue of $39 million. In May, Natus completed its $9 million acquisition of privately held Sonamed Corp., which makes products to test for hearing loss in newborns. Natus also completed a public offering of 4.6 million shares in May, bringing in proceeds of $84.3 million before expenses. In April, the company closed a 885,500 share offering, raising $15.4 million.