By Patrick Rucker - Analysis
WASHINGTON (Reuters) - If anyone thinks the current U.S. housing downturn is bad now, things would get far worse if Fannie Mae or Freddie Mac to suddenly stop buying mortgages, a move that would drive up the costs of home loans and devastate the economy. Fannie Mae and Freddie Mac, the nation's two largest sources of mortgage finance respectively, recently reported combined losses of $3.5 billion. Borrowing costs have skyrocketed and investors have erased billions of dollars in each company's equity market capitalizations. Few think the two companies are likely to pull out of the housing market, even temporarily. However, if the stream of home loan failures were to force the companies to suspend new mortgage investments, the market for mortgage bonds would "freeze up," said Tom Sowanick, chief investment officer of Clearbrook Financial LLC in Princeton, New Jersey.
Already, the housing slowdown has subtracted about 1 percentage point from growth in inflation-adjusted gross domestic product so far this year. Taking Fannie Mae and Freddie Mac out of the home loan business would flatten the already listless real estate market, said Robert MacIntosh, chief economist with Eaton Vance Management in Boston. "It would be devastating," he said. "Why would anyone consider buying a house if the two biggest ultimate credit givers and lenders to the housing industry shut down?"
While Fannie Mae and Freddie Mac do not offer credit directly to borrowers, they do buy home loans and repackage them as investments for Wall Street. The companies also buy mortgages to hold in their money-making investment portfolios. Both steps make the market more liquid by taking long-term investments off a lender's books.
Fannie Mae and Freddie Mac own or guarantee a combined $4.8 trillion of U.S. home mortgage loans of more than 40 percent of the total outstanding. That size, in part, explains why Fannie Mae and Freddie Mac are likely to survive the current housing and credit downturns. Another factor is that these companies were relatively cautious during the recent housing boom and did not make big bets on the risky subprime market, which involves borrowers with damaged credit. While Fannie Mae and Freddie Mac expect the number of failing mortgages on their books to double, that still represents less than 0.12 percent of the home loans they guarantee for investors. And maybe most importantly, the companies benefit from their status as government-sponsored enterprises, which many investors treat as a guarantee of a federal bailout if either were to stumble.
Fannie and Freddie also have credit lines to the Treasury Department, which have never been tapped, fostering the perception that they are wards of Uncle Sam. The companies are simply so large and risk-averse that they set a standard for the industry that would be hard to replicate if they were to step away from the market, said Jim Vogel, who tracks the companies for FTN Financial in Memphis, Tennessee. "They are like the U.S. Treasury of the mortgage market," said Jim Vogel, who tracks the companies for FTN Financial in Memphis, Tennessee. "The general mortgage-backed security trades on the spread set in the Fannie and Freddie market."
If Fannie Mae and Freddie Mac were to step away from the mortgage investments, it would not only send the mortgage market into a devastating tailspin, but the broader market as well, which is why many observers say it simply will not happen.
"It would aggravate the liquidity crunch. The psychological impact would be huge. The GSEs have been seen as the backstop buyers for all types of mortgage paper," said Wan-Chong Kung, senior portfolio manager at FAF Advisors at Minneapolis. But most agree with MacIntosh when he says: "It would be devastating -- but I don't think that would happen at all, there is no chance of that." And any move away from the mortgage market would destroy their stock prices -- both of which are already trading at around 10-year lows. "Fannie Mae and Freddie stocks would collapse because there would be no growth prospects," for the companies, Sowanick added.
Dan Fuss, vice-chairman of Loomis Sayles, which manages $100 billion in fixed-income assets, said he doesn't believe Fannie and Freddie will stop buying mortgages. And he points out: "You need a public policy response to the housing crisis."
Sunday, November 25, 2007
Tuesday, November 20, 2007
Feds Urge Vigilance on Toy Safety
By HOPE YEN (AP)
Despite a record number of recalls this year, potentially dangerous toys remain on store shelves days before the start of the busy holiday shopping season, consumer groups warned Tuesday. Federal regulators, under fire for lax enforcement, urged shoppers to be vigilant.
The Consumer Product Safety Commission has worked closely with Mattel Inc and other manufacturers on recalls of millions of toys tainted with lead and other products, yet two consumer investigations released Tuesday cited possible violations, including sales of toys with small parts that could pose a choking hazard.
"Why is it we are the ones that are getting this information out to parents, and not the government and not the toy companies?" asked Charles Margulis, of the Center for Environmental Health.
In CPSC's annual toy safety message, Nancy Nord, acting head of the CPSC, sought to reassure parents that the agency was doing all it can to remove unsafe toys. She noted the Chinese government recently had signed agreements to help prevent lead-painted toys from reaching the U.S.
"Toys today are undergoing more inspection and more intense scrutiny than ever before," said Nord, citing CPSC's "daily commitment to keeping consumers safe 365 days a year."
Vallese left the door open to the possibility of several more CPSC recalls before year's end, declining to say if most dangerous toys had already been removed from store shelves given the recent spate of toy recalls. "When we find violations, we will announce them," she told The Associated Press.
Joan Lawrence, a vice president of the Toy Industry Association, said more recalls were probable given recent manufacturer retesting of products. "That's why it's so important for consumers to pay attention to recall notices," Lawrence said.
Among the biggest toy hazards cited by CPSC:
_Riding toys, skateboards and inline skates that could cause dangerous falls for children.
_Toys with small parts that can cause choking hazards, particularly for children under age 3.
_Toys with small magnets, particularly for children under age 6, that can cause serious injury or death if the magnets are swallowed.
_Projectile toys such as air rockets, darts and sling slots for older children that can cause eye injuries.
_Chargers and adapters that can pose burn hazards to children.
The series of announcements Tuesday, coming three days before the start of the busy shopping season, helped cap a year of harsh congressional criticism of CPSC enforcement following a number of recalls involving millions of lead-tainted toys and other products - the highest number of recalls ever due to product defects. The agency's staff has dropped from almost 800 employees in 1974 to an all-time low of about 400 employees now.
Both the House and Senate are now considering legislation to overhaul the product safety system by substantially increasing CPSC's budget, raising the cap on civil penalties for violations and giving the CPSC authority to provide quicker notice to the public of potentially dangerous products.
The measures also seek to ban officials at federal regulating agencies from taking trips financed by industries they oversee. Both Nord and her predecessor as chairman, Hal Stratton, accepted free trips worth thousands of dollars at industry expense.
In its 57-page annual survey released Tuesday, U.S. PIRG agreed that toys with small magnets as well as small parts that pose choking hazards create significant risks.
Between 1990 and 2005, at least 166 children choked to death on children's products, accounting for more than half of all toy-related deaths at a rate of about 10 deaths per year, the group said. Several times this year potentially dangerous toys were sold without the required warning labels of possible choking risks while the CPSC also has been slow to issue public warnings, U.S. PIRG said.
"The Consumer Product Safety Commission is a little agency with a big job it simply cannot do," said Ed Mierzwinski, the group's consumer program director. "Congress must give it the tools it needs to do that big job better."
In a four-day investigation of toys it purchased at stores such as Target Corp, Wal-Mart Stores Inc and The Disney Store, the Center for Environmental Health found that 9 out of the 100 toys it purchased had high lead levels of 900 parts per million or more.
Another six toys had levels higher than 100 parts per million, the approximate trace level that some consumer groups would like to see as the limit whether in paint, coatings or any toys, jewelry or other products used by children under 12.
On Monday, California Attorney General Jerry Brown sued 20 companies in state court, including Mattel Inc. and Toys "R" Us, claiming they sold toys containing "unlawful quantities of lead." The move follows major recalls of toys, lunch boxes, children's jewelry and other goods during the last year by CPSC.
Despite a record number of recalls this year, potentially dangerous toys remain on store shelves days before the start of the busy holiday shopping season, consumer groups warned Tuesday. Federal regulators, under fire for lax enforcement, urged shoppers to be vigilant.
The Consumer Product Safety Commission has worked closely with Mattel Inc and other manufacturers on recalls of millions of toys tainted with lead and other products, yet two consumer investigations released Tuesday cited possible violations, including sales of toys with small parts that could pose a choking hazard.
"Why is it we are the ones that are getting this information out to parents, and not the government and not the toy companies?" asked Charles Margulis, of the Center for Environmental Health.
In CPSC's annual toy safety message, Nancy Nord, acting head of the CPSC, sought to reassure parents that the agency was doing all it can to remove unsafe toys. She noted the Chinese government recently had signed agreements to help prevent lead-painted toys from reaching the U.S.
"Toys today are undergoing more inspection and more intense scrutiny than ever before," said Nord, citing CPSC's "daily commitment to keeping consumers safe 365 days a year."
Vallese left the door open to the possibility of several more CPSC recalls before year's end, declining to say if most dangerous toys had already been removed from store shelves given the recent spate of toy recalls. "When we find violations, we will announce them," she told The Associated Press.
Joan Lawrence, a vice president of the Toy Industry Association, said more recalls were probable given recent manufacturer retesting of products. "That's why it's so important for consumers to pay attention to recall notices," Lawrence said.
Among the biggest toy hazards cited by CPSC:
_Riding toys, skateboards and inline skates that could cause dangerous falls for children.
_Toys with small parts that can cause choking hazards, particularly for children under age 3.
_Toys with small magnets, particularly for children under age 6, that can cause serious injury or death if the magnets are swallowed.
_Projectile toys such as air rockets, darts and sling slots for older children that can cause eye injuries.
_Chargers and adapters that can pose burn hazards to children.
The series of announcements Tuesday, coming three days before the start of the busy shopping season, helped cap a year of harsh congressional criticism of CPSC enforcement following a number of recalls involving millions of lead-tainted toys and other products - the highest number of recalls ever due to product defects. The agency's staff has dropped from almost 800 employees in 1974 to an all-time low of about 400 employees now.
Both the House and Senate are now considering legislation to overhaul the product safety system by substantially increasing CPSC's budget, raising the cap on civil penalties for violations and giving the CPSC authority to provide quicker notice to the public of potentially dangerous products.
The measures also seek to ban officials at federal regulating agencies from taking trips financed by industries they oversee. Both Nord and her predecessor as chairman, Hal Stratton, accepted free trips worth thousands of dollars at industry expense.
In its 57-page annual survey released Tuesday, U.S. PIRG agreed that toys with small magnets as well as small parts that pose choking hazards create significant risks.
Between 1990 and 2005, at least 166 children choked to death on children's products, accounting for more than half of all toy-related deaths at a rate of about 10 deaths per year, the group said. Several times this year potentially dangerous toys were sold without the required warning labels of possible choking risks while the CPSC also has been slow to issue public warnings, U.S. PIRG said.
"The Consumer Product Safety Commission is a little agency with a big job it simply cannot do," said Ed Mierzwinski, the group's consumer program director. "Congress must give it the tools it needs to do that big job better."
In a four-day investigation of toys it purchased at stores such as Target Corp, Wal-Mart Stores Inc and The Disney Store, the Center for Environmental Health found that 9 out of the 100 toys it purchased had high lead levels of 900 parts per million or more.
Another six toys had levels higher than 100 parts per million, the approximate trace level that some consumer groups would like to see as the limit whether in paint, coatings or any toys, jewelry or other products used by children under 12.
On Monday, California Attorney General Jerry Brown sued 20 companies in state court, including Mattel Inc. and Toys "R" Us, claiming they sold toys containing "unlawful quantities of lead." The move follows major recalls of toys, lunch boxes, children's jewelry and other goods during the last year by CPSC.
Freddie Mac Posts a $2 Billion Loss
By MICHAEL M. GRYNBAUM (New York Times)
Turmoil in the housing sector continued to reverberate today across several parts of the industry, reinforcing the mood among investors that the downturn has not yet reached its bottom.
Freddie Mac, the big mortgage finance company, posted a $2 billion loss for the third quarter and warned that it might not have enough capital on hand to cover the mandatory reserves for its mortgage commitments. The company has been battered by a rising wave of foreclosures tied to subprime mortgage defaults and is now “seriously considering” cutting its stock dividend.
Freddie’s misfortune is particularly rattling because the company is considered to be protected by an implied government guarantee. There was no mention in this morning’s earnings release about an infusion of federal capital, though the company said it would seek counsel from Goldman Sachs and Lehman Brothers for its short-term efforts to shore up its reserves.
Shares of the company plummeted 29 percent, to $26.50, its lowest level in 11 years. Shares of its sister firm, Fannie Mae, dropped 25 percent.
“Without doubt, 2007 has been an extremely difficult year for the country’s housing and credit markets,” Richard F. Syron, the chairman and chief executive of Freddie Mac, wrote in a statement.
Mr. Syron was not alone in his lament. D. R. Horton, the nation’s largest home builder, reported a $50.1 million loss in its fiscal fourth quarter as the housing downturn pummeled its inventory, goodwill and land-use contracts. Lower demand and tighter lending standards have cut back the company’s business and caused many clients to cancel contracts.
“We expect the housing environment to remain challenging,” Donald R. Horton, the company’s chairman, said in a statement.
The subprime debacle also claimed another high-profile casualty: H&R Block’s chairman and chief executive, Mark Ernst, who said today he would resign amid the company’s difficulties with subprime exposure. Mr. Ernst had come under fire for the bungled sale of the Option One Mortgage Corporation, a company subsidiary that took heavy losses on risky loans.
His replacement as chairman will be Richard C. Breeden, the former chairman of the Securities and Exchange Commission, who was recently elected to H&R Block’s board after sharply criticizing Mr. Ernst. The chief executive slot will be temporarily filled by Alan M. Bennett, a former top executive at Aetna, the insurance company.
Home building data released today suggested that housing troubles will only worsen. Groundbreaking permits fell 6.6 percent in October to their lowest level in over 14 years, a sign that builders are cutting back on residential home projects. Permits have dipped nearly 25 percent since last October, to a seasonally adjusted 1.18 million annual rate, the Commerce Department said.
New residential construction grew slightly last month, rising 3 percent, to a 1.23 million annual pace. It was the first increase in four months, but the increase came mostly from a 44 percent leap in multifamily homes, like condominiums.
Construction of single-family homes dropped again last month, and over all, housing starts remain near the lowest level since the recession of the early 1990s. “With mortgage financing further constrained and inventories of unsold homes quite high, the near to medium term outlook for housing starts is not good,” Joshua Shapiro, chief United States economist for MFR, wrote in a research note.
That would be unfortunate for Freddie Mac, whose mortgage-related securities rapidly lost their value as the subprime market began to collapse. The company was forced to write down about $2.7 billion in assets related to credit guarantees and derivatives. Freddie lost $3.29 a share in the third quarter, compared with a loss of $1.17 a share a year earlier. The company also said it did not expect earnings to improve in the fourth quarter.
“We’re not happy about this,” Mr. Syron told investors and shareholders on a conference call today. “We don’t expect you to be happy about it.”
Turmoil in the housing sector continued to reverberate today across several parts of the industry, reinforcing the mood among investors that the downturn has not yet reached its bottom.
Freddie Mac, the big mortgage finance company, posted a $2 billion loss for the third quarter and warned that it might not have enough capital on hand to cover the mandatory reserves for its mortgage commitments. The company has been battered by a rising wave of foreclosures tied to subprime mortgage defaults and is now “seriously considering” cutting its stock dividend.
Freddie’s misfortune is particularly rattling because the company is considered to be protected by an implied government guarantee. There was no mention in this morning’s earnings release about an infusion of federal capital, though the company said it would seek counsel from Goldman Sachs and Lehman Brothers for its short-term efforts to shore up its reserves.
Shares of the company plummeted 29 percent, to $26.50, its lowest level in 11 years. Shares of its sister firm, Fannie Mae, dropped 25 percent.
“Without doubt, 2007 has been an extremely difficult year for the country’s housing and credit markets,” Richard F. Syron, the chairman and chief executive of Freddie Mac, wrote in a statement.
Mr. Syron was not alone in his lament. D. R. Horton, the nation’s largest home builder, reported a $50.1 million loss in its fiscal fourth quarter as the housing downturn pummeled its inventory, goodwill and land-use contracts. Lower demand and tighter lending standards have cut back the company’s business and caused many clients to cancel contracts.
“We expect the housing environment to remain challenging,” Donald R. Horton, the company’s chairman, said in a statement.
The subprime debacle also claimed another high-profile casualty: H&R Block’s chairman and chief executive, Mark Ernst, who said today he would resign amid the company’s difficulties with subprime exposure. Mr. Ernst had come under fire for the bungled sale of the Option One Mortgage Corporation, a company subsidiary that took heavy losses on risky loans.
His replacement as chairman will be Richard C. Breeden, the former chairman of the Securities and Exchange Commission, who was recently elected to H&R Block’s board after sharply criticizing Mr. Ernst. The chief executive slot will be temporarily filled by Alan M. Bennett, a former top executive at Aetna, the insurance company.
Home building data released today suggested that housing troubles will only worsen. Groundbreaking permits fell 6.6 percent in October to their lowest level in over 14 years, a sign that builders are cutting back on residential home projects. Permits have dipped nearly 25 percent since last October, to a seasonally adjusted 1.18 million annual rate, the Commerce Department said.
New residential construction grew slightly last month, rising 3 percent, to a 1.23 million annual pace. It was the first increase in four months, but the increase came mostly from a 44 percent leap in multifamily homes, like condominiums.
Construction of single-family homes dropped again last month, and over all, housing starts remain near the lowest level since the recession of the early 1990s. “With mortgage financing further constrained and inventories of unsold homes quite high, the near to medium term outlook for housing starts is not good,” Joshua Shapiro, chief United States economist for MFR, wrote in a research note.
That would be unfortunate for Freddie Mac, whose mortgage-related securities rapidly lost their value as the subprime market began to collapse. The company was forced to write down about $2.7 billion in assets related to credit guarantees and derivatives. Freddie lost $3.29 a share in the third quarter, compared with a loss of $1.17 a share a year earlier. The company also said it did not expect earnings to improve in the fourth quarter.
“We’re not happy about this,” Mr. Syron told investors and shareholders on a conference call today. “We don’t expect you to be happy about it.”
HP profit jumps 28%
By John Boudreau (Mercury News)
Hewlett-Packard, the world's leading computer maker, reported a 28 percent spike in profit for the most recent quarter as sales of laptops rose nearly 50 percent and international business soared.
The Palo Alto-based computer and printer company reported earnings of $2.2 billion, or 81 cents a share, compared with earnings of $1.7 billion, or 60 cents a share for the same period a year ago.
HP's computer division had a 30 percent revenue jump to $10.1 billion for the quarter ending Oct. 31. Shipments were up 31 percent. Meanwhile, HP's software business doubled in revenue, reaching $698 million. Software sales got a boost from the company's acquisitions, including Mercury Interactive.
For the fiscal year, the company reported revenue of $104.3 billion, a 14 percent jump from the previous year and the first time HP has racked up $100 billion in annual sales.
"We had a strong quarter characterized by double-digit growth across all our regions," HP Chairman and Chief Executive Mark Hurd said in a conference call with analysts. "We did this while continuing to make progress on our cost structure. I am confident we can continue to execute with discipline and produce another year of strong financial returns."
As fears of an economic slowdown spooked the markets, analysts probed Hurd about his economic forecast. While declining the role of economist, the CEO of the world's largest information technology products company eased some concerns with an upbeat fiscal 2008 guidance.
The company predicts earnings, excluding one-time charges, of 80 cents a share in the first quarter, which is 3 cents higher than what analysts had forecast. HP expects sales of $27.4 billion to $27.5 billion, also higher than the $27 billion analysts were expecting. The company expects revenue for fiscal year 2008 to be $111.5 billion.
Hewlett-Packard also announced it was setting aside an additional $8 billion for share repurchases, indicating the company believes its share to be undervalued.
Overall, analysts viewed the company's financial snapshot as a hopeful sign, particularly after Cisco Systems reported weak sales to U.S. corporations a week and a half ago.
"Obviously, the concern that the IT spending environment would come to a screeching halt is alleviated," said Pacific Crest Securities analyst Brent Bracelin. "HP is the largest IT supplier in the world and its comments are that things are healthy and spending continues to be healthy."
Hewlett-Packard, though, is not as reliant on the U.S. market as other tech companies. For the fourth quarter, the company reported that nearly 70 percent of its revenue came from overseas.
"They are the most global company among large hardware companies," observed American Technology Research analyst Shaw Wu. "Being more international is an advantage these days."
While the PC sales were impressive, HP's Imaging and Printing Group represented 42 percent of the company's $2.63 billion in operating profit for the fourth quarter, almost twice that of the Personal Systems Group, which includes PCs.
"Their performance in the last three years has been two-pronged," said Michael Cuggino, president of Permanent Portfolio Fund in San Francisco, who overseas $1.5 billion in investments, including shares of Hewlett-Packard. "On the one hand, they are reducing excess costs and infrastructure. HP was a bloated organization for a while. At the same time, they've been growing revenue and gaining market share. When you look at PCs and services, they've been doing a great job."
Still, Hewlett-Packard will continue to face multiple battles with giants like IBM and Dell, which is "having a midlife crisis," Cuggino said.
Cost-cutting can take a company only so far, he added.
"The real challenge going forward is going to be less about streamlining operations and more about achieving sustained revenue growth in the face of pretty tough competition."
Shares of HP were up 83 cents, or 1.7 percent, to $50.27 in after hours trading.
Monday, November 19, 2007
Crude Futures Trade Flat
By MATT CHAMBERS (Wall Street Journal)
NEW YORK – Crude-oil futures were little changed in quiet trading Monday, supported by colder-than-normal temperatures in the U.S. Northeast and uncertainty about the dollar, whose weakness has helped crude to recent records.
Light, sweet crude for January delivery on the New York Mercantile Exchange was recently up 3 cents at $93.87 a barrel. Prices rose as high as $95.15 in early screen trading. Brent crude on the ICE futures exchange rose 2 cents to $91.64 a barrel.
Temperatures in the U.S. Northeast, the world's biggest heating oil market, are forecast to be lower than normal going into December, according to National Weather Service climate predictions.
"A lot of the strength seems to be coming from the colder weather, and the OPEC (heads of state) meeting at the weekend" is helping, said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago. "The reasons for today's early rise aren't that solid and I think we could see a fall later in the day."
Organization of Petroleum Exporting Countries' heads of state met over the weekend, but declined to discuss any future production increases to ease higher prices. While there was no mention in the official communique to the dollar, Venezuela and Iran have pushed OPEC to discuss a possible oil currency basket and sought to include a mention of the weakening dollar in the communique.
"A concerted bid to change the OPEC (currency) peg could leave Saudi Arabia in direct conflict with extreme OPEC factions," Mike Fitzpatrick, vice president of risk management at MF Global in New York, said in a research note. Crude "prices also seem to be getting a lift overnight by some OPEC members declaring oil prices to still be undervalued due to the weak dollar."
Large speculators, such as hedge funds and investment banks, slashed their net bets on a gain in futures prices in Nymex crude to its lowest level since August in the week ended Nov. 13, according to the U.S. Commodity Futures Trading Commission.
The speculators cut their net long position in futures to 27,566 from 105,816 a week earlier, according to the CFTC's weekly Commitments of Traders report, released Friday. The net long position is the difference between the number of short positions, or bets on a fall.
Analysts were divided on the implications for crude markets. While some saw a distinct change in sentiment from the large speculators that could drive prices lower, others thought it left more room for them to come back on the long side and push prices higher.
"Combined with the drop in open interest from last week's December contract expiration, (the cut in net longs) provides the market with ample room for the re-establishment of long positions going forward," Addison Armstrong, an analyst at TFS Energy Futures in Stamford, Conn. said in a research note. Open interest, or the number of futures contracts not expired or closed, declined Wednesday and Thursday ahead of Friday's expiration of December crude.
Front-month December reformulated gasoline blendstock, or RBOB, fell 64 points, or 0.3%, to $2.369 a gallon. December heating oil rose 52 points, or 0.2%, to $2.5923 a gallon.
Wednesday, November 14, 2007
Marvel pops comics online, hopes fans pay
Robert MacMillan (Reuters)
NEW YORK, Nov 13 - Spider-Man may spin a good yarn in comic books, but Marvel Entertainment Inc hopes that he finds the World Wide Web equally comfortable. The publisher said on Tuesday that it will start a Web site that will feature access to thousands of its comic books and the famous heroes who populate them, from Spider-Man and the X-Men to the Fantastic Four and The Avengers. Marvel will charge subscriptions -- $4.99 a month if people sign up for a year, or $9.99 a month if they don't.
"This is a major new piece of my overall publishing plan," Dan Buckley, president of Marvel Publishing, said in an interview.
"It's a different entertainment experience, online versus reading a book." Marvel plans to offer access to 2,500 comics, Buckley said. It will make 250 available for free to entice people to pay up, but for a limited time, a company statement explained. The Digital Comics Unlimited site then will add 20 additional books a week, including a mix of new and vintage comics.
Among the older titles will be the first 100 issues of "Amazing Spider-Man" and "The Fantastic Four," as well as the initial 66-issue run of "Uncanny X-Men" and the first 50 issues of "The Avengers." It will feature other super heroes like the Incredible Hulk, Wolverine and the Silver Surfer. It will also include the first appearances of villains Dr. Octopus, Sandman, Lizard and Dr. Doom, not to mention the first appearance of Spider-Man's black costume.
New titles will include Joss Whedon's "Astonishing X-Men," "The House of M," "Young Avengers" and "Runaways." To present the titles in a quality format, Marvel has recolored and redigitized some of its offerings. The move to the Internet is unlikely to account for a major portion of Marvel Publishing's sales, Buckley said, but it will be an important addition. It sells its magazines at newsstands, though he said the business has been contracting in the past 10 years. What has been performing well is the hobby business, he said, with some 2,500 shops across the companies that attract collectors and other fans. Titles must be in print for at least six months before they will go online, Buckley said. Marvel's move runs contrary to newspaper and magazine publishers, which have been moving toward not charging people and supporting themselves through advertising. Buckley said the nature of the content is what makes Marvel's plan different.
"Our comic book distribution and our comic book properties aren't part of the mass medium where you can it for free easily," he said. Dennis Webb, owner of the Comics and Cards Collectorama in Alexandria, Virginia, doubted that it would attract a mass audience used to reading and collecting their comics in print. "I think most of them like to buy their own comics and read them where they want to go," he said. "I don't think they want to have it just online because if they're really a collector, they're going to want the actual collection."
NEW YORK, Nov 13 - Spider-Man may spin a good yarn in comic books, but Marvel Entertainment Inc hopes that he finds the World Wide Web equally comfortable. The publisher said on Tuesday that it will start a Web site that will feature access to thousands of its comic books and the famous heroes who populate them, from Spider-Man and the X-Men to the Fantastic Four and The Avengers. Marvel will charge subscriptions -- $4.99 a month if people sign up for a year, or $9.99 a month if they don't.
"This is a major new piece of my overall publishing plan," Dan Buckley, president of Marvel Publishing, said in an interview.
"It's a different entertainment experience, online versus reading a book." Marvel plans to offer access to 2,500 comics, Buckley said. It will make 250 available for free to entice people to pay up, but for a limited time, a company statement explained. The Digital Comics Unlimited site then will add 20 additional books a week, including a mix of new and vintage comics.
Among the older titles will be the first 100 issues of "Amazing Spider-Man" and "The Fantastic Four," as well as the initial 66-issue run of "Uncanny X-Men" and the first 50 issues of "The Avengers." It will feature other super heroes like the Incredible Hulk, Wolverine and the Silver Surfer. It will also include the first appearances of villains Dr. Octopus, Sandman, Lizard and Dr. Doom, not to mention the first appearance of Spider-Man's black costume.
New titles will include Joss Whedon's "Astonishing X-Men," "The House of M," "Young Avengers" and "Runaways." To present the titles in a quality format, Marvel has recolored and redigitized some of its offerings. The move to the Internet is unlikely to account for a major portion of Marvel Publishing's sales, Buckley said, but it will be an important addition. It sells its magazines at newsstands, though he said the business has been contracting in the past 10 years. What has been performing well is the hobby business, he said, with some 2,500 shops across the companies that attract collectors and other fans. Titles must be in print for at least six months before they will go online, Buckley said. Marvel's move runs contrary to newspaper and magazine publishers, which have been moving toward not charging people and supporting themselves through advertising. Buckley said the nature of the content is what makes Marvel's plan different.
"Our comic book distribution and our comic book properties aren't part of the mass medium where you can it for free easily," he said. Dennis Webb, owner of the Comics and Cards Collectorama in Alexandria, Virginia, doubted that it would attract a mass audience used to reading and collecting their comics in print. "I think most of them like to buy their own comics and read them where they want to go," he said. "I don't think they want to have it just online because if they're really a collector, they're going to want the actual collection."
The EU Delays Google's Ad Buy
European officials want more time to review the proposed DoubleClick deal, and critics in the U.S. hope the FTC is paying attention
by Catherine Holahan (Business Week)
Sheer size has helped Google (GOOG) dominate much of the world's $30 billion online advertising market. But the search giant's massive reach is proving to be a liability in Europe. On Nov. 13, the European Union's antitrust authority held off on approving Google's proposed $3.1 billion acquisition of online ad company DoubleClick, opting instead to subject the transaction to further review.
The European Commission's move, which extends the decision deadline until Apr. 2, is a setback for a deal that would broaden Google's already considerable ability to determine ad placement not only on its own search engine—the world's largest—but also across untold sites across the Web. Google may have to jump through additional hoops to win approval for the deal, whereas rivals Microsoft (MSFT), Yahoo! (YHOO), and Time Warner's (TWX) AOL are moving ahead with similar acquisitions that have already passed EU muster (BusinessWeek.com, 10/1/07). "We can't just treat this as just another competition case," Sophia In't Veld, a Dutch member of the European Parliament, says in defense of the decision.
Approval Still Likely
Google was quick to cry foul. "We are obviously disappointed by the European Commission's decision to extend its review of our acquisition of DoubleClick," Google Chairman and CEO Eric Schmidt said in a statement. "We seek to avoid further delays that might put us at a disadvantage in competing fully against Microsoft, Yahoo, AOL, and others whose acquisitions in the highly competitive online advertising market have already been approved."
The Google deal will most likely also get a green light—but not before European officials take measures to prevent the enlarged company from exerting undue control over the market. "It could lead to additional conditions being placed on the combined company's actions, which could compromise Google's efforts to fully exploit the DoubleClick value," analysts at securities firm Stifel Nicolaus wrote in a Nov. 13 note. Only 3% to 4% of mergers reviewed by the EU in the last several years have been subjected to the second level of scrutiny, according to the Stifel analysts.
Pleased Opponents
Opponents of the merger are hoping the additional review will influence the U.S. Federal Trade Commission, which is also examining the deal. Like the EU, the FTC has approved comparable deals by Microsoft, Yahoo, and AOL. "The European Commission decision has sent a friendly European wind to prop open the doors at the FTC," says Jeff Chester, executive director of the Center for Digital Democracy, one of the 35-plus groups urging the commission and the FTC to impose restrictions on the merger. Other opponents include the International Advertising Assn., the World Federation of Advertisers, and Google competitors Microsoft, Yahoo, and Ask.com.
The concern is that Google would amass too much data on its users and their online habits. It already has a vast storehouse of information on what people using its Web search tool are looking for, and it uses that information to place ads alongside users' search results. The fear is that owning DoubleClick would improve Google's ability to use that data to place targeted ads on other sites, too. To date, the information DoubleClick collects on clients' site visitors is owned by the clients and is not shared.
Targeting + Reach = Ad Dollars
Google's girth is the primary reason it has attracted more opposition than its competitors. Google already has the most popular search engine in the U.S. and much of Europe, and it controls more than 75% of the $8.3 billion U.S. search advertising market, according to a recent eMarketer report. Google also owns YouTube, the largest video site on the Web, potentially giving it access to a significant slice of the nearly $2 billion online video advertising market. And it has deals to serve ads on some of the Web's most popular sites (BusinessWeek.com, 8/8/06) including the leading social site, News Corp.'s (NWS) MySpace.
Google isn't alone in expanding its sphere of influence with such partnerships. During the past few years, the fight for online ad dollars has become a battle of bulk. Audiences have become scattered across the Web due largely to the emergence of sites such as MySpace and Facebook, which let users create countless pages of their own content for public consumption. Little wonder that Internet companies are clamoring for advertising alliances with social networks. Microsoft, for example, recently paid $240 million for a stake in Facebook (BusinessWeek.com, 10/25/07) that enables it to serve ads on the site.
But the most important way online ad giants have sought to increase their influence is through the acquisition of ad networks. Because these networks serve ads on sites across the Web and often monitor the kinds of sites visited by unique computers, they are able to promise marketers large audiences comprising people likely to be interested in what they are selling, or at the very least give marketers information about the people who have responded to their campaigns. It's that power, and the potential to increase it, that spurred Microsoft to buy aQuantive for $6 billion and Yahoo to shell out about $1 billion for Right Media and BlueLithium.
Privacy Concerns
If the deal is approved, DoubleClick's large network of participating Web sites could expand Google's already extensive ability to serve ads off its own site—and render rivals incapable of competing with the Goliath for ad dollars. Why would a marketer bother, for example, to work with a small ad network that can only deliver ads to a relatively small audience on less popular sites, when it can buy the ability to reach a million members of its target market on premier Web sites across the Internet?
Further complicating the issue is the possibility that Google eventually could gain access to the user data DoubleClick collects for clients—information Google could use to better target ads to specific consumers on sites across the Web. "The Google-DoubleClick merger is truly unique because you are merging the global search leader with the company that delivers billions of data-collecting cookies to the world's largest corporations," says Chester, of the Center for Digital Democracy. "We have to be concerned about the creation of these private ministries of information…[this] handful of data-collecting giants could ultimately collude with the government and business."
Chester's privacy concerns also apply to recent acquisitions made by Microsoft, Yahoo, and AOL. But so far, those companies' individual shares of the online advertising pie have been too small to attract regulatory scrutiny. Google will argue it shouldn't be singled out for providing a search advertising product that Web surfers and publishers alike want to use. After all, users can switch to another search engine at any point. For that matter, so can advertisers. But with Google serving as the one-stop shop for ads placed nearly anywhere on the Web, why would anyone want to?
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