Microsoft says it will slash 5,000 jobs over the next 18 months as it reported an 11 per cent drop in second-quarter profit. The software giant said the moves were driven by deteriorating global economic conditions and lower client revenue, resulting from weakness in the PC market and a shift to lower-priced notebook models. The Redmond, Washington-based company says profit slipped to $4.17 billion from year-ago earnings of $4.71 billion. It says total revenue edged up two per cent to $16.63 billion, as server, tools and entertainment sales helped offset an eight per cent drop in client revenue. The results missed Wall Street's forecast for sales of $17.08 billion. Microsoft says the job cuts will reduce operating costs by $1.5 billion as it prepares for lower revenue and earnings in the second half of the year. The company says it is unable to offer profit and revenue guidance for the rest of the year, due to market volatility.
Quarterly profit at Google fell for the first time, although the performance was better than analysts anticipated. The results indicate the company was able to rein in its free-spending ways enough to offset a slowdown in the online ad market that generates most of the revenue. That contrasted with a missed forecast and 5,000 layoffs announced earlier in the day by rival Microsoft.
Chemicals maker Huntsman says it'll cut 1,175 jobs, close a plant in the United Kingdom and cut capital spending to slash costs. The moves come as demand for its products falls amid the recession. The job cuts represent more than nine per cent of its work force and are expected before the end of the year. The Woodlands-based company also plans to cut 490 full-time contractor positions. Huntsman expects the cuts to save about $150 million per year.
The government says the number of first-time jobless benefit claims jumped more than expected last week, as companies cut jobs at a furious pace. The Labor Department says initial jobless benefit claims rose to a seasonally adjusted 589,000 in the week ending January 17th, from an upwardly revised figure of 527,000 the previous week. The latest tally was well above Wall Street economists' expectations of 540,000 new claims. The total matches a 26-year high reached four weeks ago. The last time claims were higher was in November 1982, when the economy was emerging from a steep recession, though the work force has grown by about half since then.
State officials project Texas will have a $447 million shortfall in its unemployment compensation trust fund on October 1st. That's after the temporary suspension of the unemployment replenishment tax at the behest of Governor Rick Perry. The fund that pays jobless claims was flush with $90 million in savings nearly a year ago when Perry temporarily halted the replenishment tax. That's one part of the unemployment insurance tax. The suspended tax was reinstated this month. But officials say it won't be enough to cover the shortfall between the $414 million the state expects to be in the fund October 1st and the $861 million it's supposed to have. Meanwhile, jobless claims have skyrocketed because people are having a hard time finding jobs. Perry spokeswoman Allison Castle says the governor stands by his decision to suspend the replenishment tax. But Ed Sills of the Texas AFL-CIO says "this goes to show is that the unemployment insurance system shouldn't be politicized."
Retail gasoline prices in Texas jumped six cents this week to average $1.72 a gallon. AAA Texas noted the cost at the pump statewide was still about 12 cents lower than the national average, which rose a nickel this week. Houston's average is at $1.70 per gallon. The association says El Paso had the most costly gas this week, at $1.84 a gallon. Corpus Christi had the least expensive gasoline, at $1.67 a gallon. AAA spokeswoman Sarah Schimmer says the continued increase in gasoline prices defies explanation, as "supply remains healthy and demand remains low." Oil prices have slid to less than $45 per barrel.
The government says new-home construction plunged to an all-time low in December, capping the worst year for builders on records dating back to 1959. The Commerce Department reported that construction of new homes and apartments fell 15.5 per cent to an annual rate of 550,000 units last month from November. It was a much weaker showing than the pace of 610,000 that economists were forecasting and ended 2008 on a dismal note. For all of last year, the number of housing units in which builders broke ground on totaled just over 904,000, also a record low. That marked a huge 33.3 per cent drop from the 1.355 million housing units started in 2007.
Florida-based Walter Industries, the parent of Jim Walter Homes, has shut down its home-building business, affecting its Houston outlet. Arlington-based Wall Homes Texas earlier this week filed for Chapter 11 bankruptcy protection.
Tax breaks totaling more than $275 billion have been approved by a House committee, the latest success for President Barack Obama's economic recovery program. The package cleared the House Ways and Means Committee on a party-line vote of 24-13. It includes tax breaks of $500 for many workers and $1,000 for millions of couples, including those with earnings so low that they pay no federal income tax. The overall economic stimulus legislation will include federal spending as well as the tax cuts. Democratic leaders have promised to pass it by mid-February.
A House Republican leader says the GOP is seeking a meeting with President Barack Obama to discuss concerns the minority party in Congress has with parts of $825 billion economic recovery program. House Republican Whip Eric Cantor of Virginia said Republicans want to cooperate with the new administration, but that many facets of the stimulus program being pushed by majority Democrats would not create jobs. Cantor, interviewed on CBS's The Early Show, said that on the Hill, "there's a lot of discussion about ramping up more government spending"' and that Republicans are concerned about that. Cantor said Republicans worry that much of the plan that Democrats are pushing "does not stimulate the economy." He singled out a provision for weatherizing poor people's homes, causing it a worthy goal but saying it does nothing to create new jobs.
Some Democrats are also expressing frustration that the $825 billion measure doesn't do enough to rebuild America's crumbling infrastructure. Just $30 billion is reserved for highway repair and construction. An Oregon Democrat, Congressman Peter Defazio, says the measure doesn't cover "short-term needs" and doesn't deal with long-term problems in "any meaningful way." Meanwhile, House Speaker Nancy Pelosi says President Obama is making an effort at bipartisanship by meeting with the Congressional leaders from both parties tomorrow and with House Republicans next week. Two House panels are preparing the package for a floor vote as soon as next week.
Two U.S. Senators are proposing a September 11th-style commission with subpoena powers and a $3 million budget to investigate what caused the banking and financial crisis. Senators Johnny Isakson and Kent Conrad said the bipartisan panel would conduct a comprehensive "forensic audit" to find out what went wrong and recommend ways to keep it from happening again. Under their plan, the commission would have seven members appointed by the president, Congressional leaders of both parties and the Federal Reserve chairman. Isakson, a Georgia Republican, and Conrad, a North Dakota Democrat, say the commission would look at the actions of private companies, government agencies and federal regulators. They said the investigation is needed to hold people accountable. The first half of the financial bailout came with no requirement for the banks to boost lending. But even having the extra cash as a cushion hasn't stopped the bank slide. Market strategist Joe Battipaglia says, "we're halfway through the bailout money and the banks are in worse shape than they were six months ago.'' The range of options open to the Obama team includes pumping more money into banks and encouraging them to lend again by buying up their bad assets.
The president will get a daily economic briefing, similar to the national security briefing he receives every morning. White House spokesman Robert Gibbs said President Obama wants to know the most up-to-date-information as he and his top aides work on reviving the struggling economy. The new administration is facing skyrocketing home foreclosures and job layoffs, tightening credit and a weakening dollar. Gibbs says economic adviser Lawrence Summers briefed Obama, Vice President Joe Biden, Chief of Staff Rahm Emanuel and other top advisers this morning. He says that briefing and future closed-door meetings will help Obama make decisions about how to best move forward.
President Barack Obama isn't the only one ordering pay freezes amid the fallout, economic and political, from a brutal recession. Tropicana Casino and Resort and Avis are all part of a growing trend by employers to use pay freezes as a key cost-saving tool for surviving hard times. The unemployment rate has bolted to a 16-year high of 7.2 per cent and 2.6 million jobs vanished last year, the most since World War II. Squeezed employers seeking an alternative to layoffs are turning to pay freezes and pay reductions. Other cost-cutting options include ending their contributions to 401(k) accounts. For Obama, who ordered a pay freeze for white house employees earning over $100,000 a year, the move on his first full day in office sent a message to a nervous country: we're in this together.
Rates on 30-year mortgages rose above five per cent this week, ending a five-week run at record low levels. Mortgage rates have been in decline since the Federal Reserve said in late November it would buy up to $500 billion in mortgage-backed securities to get banks to lend more money in hopes of bolstering the troubled U.S. housing market. Freddie Mac reports that average rates on 30-year fixed mortgages rose to 5.12 per cent this week from a record low of 4.96 per cent established last week. At this time last year, the 30-year fixed rate mortgage averaged 5.48 per cent. Last week's mark of 4.96 per cent was the lowest since Freddie Mac started its survey in April 1971. The lower rates also kick-started mortgage refinancing activity.
An army investigation calls the electrocution death of a U.S. soldier in Iraq "negligent homicide" caused by military contractor KBR and two of its supervisors. In a document obtained by the Associated Press, an army criminal investigator says the manner of death for Staff Sgt. Ryan Maseth, 24, has been changed from accidental to negligent homicide because the contractor failed to ensure that "qualified electricians and plumbers" worked on the barracks where Maseth died. The Green Beret from Pittsburgh died of cardiac arrest on January 2nd, 2008. He was electrocuted while taking a shower in his barracks in Baghdad.
The sharp drop in crude prices is forcing oil companies to exclude some untapped oil and natural gas reserves from their books. That's because the reserves are no longer economically viable, potentially affecting company borrowing power. Under Securities and Exchange Commission rules, oil companies are required to report the size of their proven oil and gas reserves each year. They also must determine whether they can be produced economically, based on year-end prices. But with crude at $40 a barrel, some deep-water offshore and other costlier production is no longer feasible. The rules will change next year, allowing companies to use 12-month average prices instead of year-end values. Until then, some companies will have to omit reserves deemed too costly to produce. That's a big blow for any oil company because new reservoirs are getting harder to find, and reserves represent a key measure of a company's value and long-term financial prospects. Last week, Houston-based ConocoPhillips said it expected to reduce its proven reserves by an unspecified amount because of the year-end price rule. That's the last thing any major producer wants to do as new sources of oil and gas grow more scarce. The nation's third-largest oil company noted it likely would replace only about 25 per cent to 30 per cent of its 2008 production with new reserves.
ExxonMobil says it's discovered oil in deep water off the coast of Rio de Janeiro. The find is near massive fields that could hold as much as 80 billion barrels of oil. Brazilian media report a notification filed with Brazilian petroleum authorities does not estimate the size of the discovery. Agencia Brasil says the company is drilling one well and plans another. ExxonMobil has a 40 per cent stake in the block under exploration. Hess Corporation is said to own another 40 per cent. And a Brazilian firm holds the remaining 20 per cent.
The Texas Agri-Life Extension Service for Harris County presents a "Prospective Wine-Grape Growers Workshop" at its offices on Bear Creek Drive tomorrow. The workshop will look at unique requirements and risks of commercial vineyards in Texas, including site selection, risk factors, labor considerations and operational costs.
Several Houston firms are named in Fortune magazine's 100 Best Places to Work. Methodist Hospital System is up two places from last year to number eight. Devon Energy is listed as 13th best. EOG Resources is up from number 64 to number 40. Camden Property Trust is up from 50 to number 41. And Men's Wearhouse placed at number 71. Ten other Texas companies made the list.
Three Houston hotels have been given sour-star ratings for 2009 by Mobil Travel Guide. In the annual rating, the Four Seasons Hotel, Hotel Granduca and The St. Regis are among seven Texas hotels receiving four stars. Quattro is the only four-star restaurant recipient in Houston, and Trellis, The Spa at the Houstonian is one of five spas in the state to receive four stars.
The existing terminals at Dallas Love Field — home of Southwest Airlines — will be replaced with a new 20-gate concourse as part of a $519 million capital improvement project. The upgrades — which include additional baggage facilities — and future new routes are expected to nearly double Love Field's passenger traffic from its current four million passengers a year to about eight million annually. The Dallas Morning News reports Southwest and the city of Dallas plan to finish the renovation by 2014. That coincides with the expiration date of the last of the Wright Amendment restrictions. The law limited how far planes could fly from Love Field. Southwest spokeswoman Beth Harbin said the carrier's experience managing other airport improvement projects will help smooth the transition for passengers and keep the airline running on time.Earnings
Southwest Airlines says it lost money in the fourth quarter as its fuel-hedging strategy lost punch. It was Southwest's second losing quarter of 2008 after 16 straight years without finishing a three-month period in the red. The Dallas-based airline said that it lost $56 million, compared with a gain a year ago of $111 million. Southwest paid 23 per cent more for fuel than a year earlier.