Deliberations underway in Enron Broadbnand trial…Hewlett-Packard expected to announce restructuring, job cuts…Cyberonics delays filing annual report pending federal decision on its VNS Therapy System…
Deliberations have been underway in the Houston fraud and conspiracy trial of five former Enron Broadband executives. Some of the defense lawyers say federal prosecutors bought witnesses with immunity and then twisted facts. Attorney Jim Lavine represents Kevin Howard, who’s a former Enron Broadband Services finance chief. Lavine, during closing arguments, said Howard is a person of integrity who “tried to do things the right way.” But prosecutor Cliff Stricklin said the defendants got cash and recognition, while the public got caught holding the bag. All five defendants testified during the three-month trial that they didn’t lie. Conviction could get them lengthy prison terms.
The Enron board’s five directors have voted themselves pay raises of as much as $1 million. The company revealed the move in a filing with the New York bankruptcy court that oversaw its reorganization last year. According to the filing, the Enron board said it voted to increase its compensation retroactively to the beginning of June. It raises the annual salary of Enron Chairman John Ray III from $200,000 to $1.2 million. Vice Chairman Robert Deutschman gets a raise from $150,000 to $420,000. Three other board members saw their pay double to $300,000. None are Enron employees. Creditors chose them last year as part of the bankruptcy reorganization. According to the Wall Street Journal, the directors found that more of their time was demanded than expected. They say the raises are temporary and will be revisited within six months.
Hewlett-Packard is expected to unveil a restructuring plan soon, according to the Houston Chronicle, citing sources within the company. HP declines to comment, but some analysts believe the restructuring will reduce the company’s work force by up to ten percent, or 15,000 workers. HP is one of Houston’s largest employers, with 8,000 workers who are mostly part of the company’s technology solutions business. That includes data storage products, research and development, call centers, customer support, ProLiant server manufacturing and sales and marketing. HP Chief Executive Mark Hurd told analysts in May he planned to slash costs across the company to increase profits. HP employs about 150,000 workers.
Retail prices in the Houston area fell a half percent during May and June, as measured by the Consumer Price Index from the Bureau of Labor Statistics of the U. S. Department of Labor. Declines occurred in five of the eight components, but lower transportation costs were the biggest factor. Following a 4.7 percent increase in March and April, transportation costs fell 1.4 percent in May and June, primarily due to lower gasoline costs and lower prices for new vehicles. The apparel index fell 2.1 percent in the last two months, as retailers introduce end-of-season price reductions. But prices for medical care have risen 2.3 percent over the past 12 months.
Crude oil prices dipped below the $60-a-barrel mark today after U. S. government figures showed a growth of domestic distillate fuel stocks. Also shaping the price was an International Energy Agency prediction that global demand is cooling. Analysts say sliding prices also reflected a growing belief that supplies would be adequate for the northern hemisphere’s winter and signs of an economic slowdown in big consumer China. Elsewhere, the U. S. Minerals Management Service said Hurricane Dennis forced a halt of 5.2 million barrels of crude production in the Gulf of Mexico from July 8th to 13th. That’s far less than Hurricane Ivan’s destructive path through the Gulf of Mexico and Louisiana last year. Forecasters are monitoring Hurricane Emily, which is making its way from the Caribbean toward Mexico. But there were signs it may miss key producing regions in the Gulf.
Cyberonics said it will delay the filing of its annual report pending a federal decision on its VNS Therapy System. The Houston-based medical device maker is awaiting word from the Food and Drug Administration regarding approval of VNS use for depression. Cyberonics tells the Securities and Exchange Commission that it’s delaying its report on its fiscal year ended April 29th to allow the FDA more time to decide. The company also says it wants to incorporate the information into the report. Cyberonics expects to file its annual report within 15 days. In June, Cyberonics reported a more-than-fivefold increase in its fourth-quarter loss to $6.5 million. That was still better than analysts expected. Meanwhile, Cyberonics shareholders filed a class action suit today in a federal court in Houston. The suit alleges that company insiders sold about $2 million in stock at a time when it says share prices were “materially and artificially inflated.”
Delta Air Lines has announced it is raising the “cap” on its most expensive fares by $100 because of high fuel costs. Continental Airlines and United Airlines were first to match the move and other carriers say they are studying it. Airline stocks rose in response. Delta, the nation’s third-largest airline, says one-way walk-up fares are capped at $599, up from $499 for economy class. The ceiling is $699 for first class. The move comes six months after it announced a ticket price overhaul designed to draw in more business travelers. Shortly after the announcement, United and Continental said they were matching. Industry expert Terry Trippler, with Cheapseats.com, says consumers should be prepared for a steady rise in fares in the coming months, because of high jet fuel prices.
Southwest Airlines continues to buck the industry’s losing trend, posting a second-quarter profit that rose 41 percent over last year. The Dallas-based low-cost carrier says fare increases helped offset a 25 percent rise in fuel costs. Net income grew to $159 million, or 20 cents per share. That’s up from $113 million a year ago. Revenue rose 13 percent to nearly $2 billion, despite a glut of airline capacity on the east coast. Looking ahead, CEO Gary Kelly notes that although Southwest remains well-hedged, its employees understand they must be prepared for higher fuel costs. He says they are working harder than ever to reduce the company’s cost structure through increased productivity.
A plaintiff’s attorney in the Vioxx wrongful-death suit against Merck told jurors today the drug maker traded healing for greed more than a decade ago. Houston lawyer Mark Lanier made the comment as opening statements began in Angleton in the nation’s first lawsuit to go to trial involving the use of Merck’s painkiller Vioxx. Lanier represents Carol Ernst, whose husband Robert died four years ago of an irregular heartbeat. Her lawsuit blames Vioxx for the death. Lanier promised jurors that he will expose what he called Merck’s murky ethics. He says the company knew the popular painkiller could be dangerous years before a study showed it could double risk of heart attack or stroke. That study prompted Merck to voluntarily sweep it from the market last year. Merck’s attorneys will follow Lanier in addressing the Brazoria county jury.
Shareholders of May Department Stores and Federated Department Stores have approved Federated’s $11 billion buyout of May. The Federal Trade Commission must still complete antitrust reviews. Both have stores in the Houston area, and May owns Houston-based Foley’s.
The Cazares family dedicated their new Habitat for Humanity home today less than three months after raising the first walls alongside employees from BG North America, who helped in the construction. The home on Greencanyon in the Greensbrook subdivision is being purchased at cost with a zero-interest loan. BG Group is a global gas company based here in Houston.
Round Rock-based Dell Computer is adding flash to a revamped lineup of desktop and notebook computers. Dell Senior Vice President Jeff Clarke says many of the new models were designed in response to customers’ desire for sleeker, more stylish computers. Business travelers wanted a more travel-savvy laptop. Dell came up with the silvery, featherweight, 2.5 pound Latitude x-1–a design licensed from Samsung Electronics. For consumers, Dell’s new white-on-silver Dimension 9100 and 5100-C desktops are slimmer and have a more accessible layout of ports and connectors. Dell’s main rival, Hewlett-Packard, already has made the switch to silver-on-black with its Pavilion desktops.