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The Honolulu Advertiser

Posted at 12:30 p.m., Wednesday, May 16, 2007

Business highlights: HP, Amazon, Bausch & Lomb

Associated Press

WORLD BANK PRESIDENT WORKING ON DEAL TO RESIGN

WASHINGTON — Embattled World Bank President Paul Wolfowitz is negotiating an agreement to resign, according to an official familiar with the talks.

His departure would include an acknowledgment from the bank that he doesn't bear sole responsibility for the controversy surrounding a generous pay package for his girlfriend, the official said.

The negotiations were taking place as the bank's board resumed deliberations over Wolfowitz's fate Wednesday afternoon.

The official said Wolfowitz wanted the bank to accept some responsibility for conflicts of interest cited against him by a special bank panel. The official spoke on condition of anonymity because of the delicate state of the negotiations.

It was not clear whether the bank's 24-member board would accept Wolfowitz's terms. It is up to the board to decide what action should be taken in the matter.

NATION'S HOUSING INDUSTRY STILL IN A SLUMP

WASHINGTON — Home building posted a small gain in April, but permits for future construction plunged by the largest amount in 17 years, a sign the nation's housing industry is still in a deep slump.

Construction of new homes and apartments rose to a seasonally adjusted annual rate of 1.528 million units in April, an increase of 2.5 percent from the March level.

Even with the improvement, housing construction is 25.9 percent lower than a year ago, reflecting the amount of the slide since a five-year boom in housing ended last year.

In a troubling sign for the future, builders cut their requests for new construction permits by 8.9 percent in April. That was the sharpest drop since a 24 percent fall in February 1990, another period when housing was going through a significant downturn. The slide pushed the annual rate for permits down to 1.429 million units, the lowest level in nearly 10 years.

HIGHER SALES DON'T HELP HP PROFIT

SAN JOSE, Calif. — Hewlett-Packard Co.'s second-quarter profit fell 7 percent despite a dramatic rise in personal computer and server sales, narrowly beating Wall Street's forecast.

For the three months ended April 30, HP earned $1.78 billion, or 65 cents per share, compared with $1.9 billion, or 66 cents per share, in the same period last year.

Excluding one-time charges, HP's net income came in at $1.9 billion, or 70 cents per share.

Sales in the quarter leaped to $25.5 billion, a 13 percent jump from the $22.55 billion HP rang up in the same quarter last year. The increase was spurred partly by booming sales of laptop computers and servers.

The results would have provided Wall Street a pleasant upside surprise had HP not pre-announced its basic results last week because an employee had accidentally sent an e-mail with the quarter's financial details to someone outside the company.

DAIMLERCHRYSLER GETS OK TO DUMP CHRYSLER

BERLIN — DaimlerChrysler AG's supervisory board formally approved plans to shed its money-losing Chrysler unit on Wednesday, clearing the way for one of Germany's oldest carmakers to re-enter the market as a streamlined Daimler AG.

The decision by the board, the equivalent of a U.S. board of directors, came two days after the company announced plans to sell an 80.1 percent stake in Chrysler to the private equity firm Cerberus Capital Management LP.

The 5.5 billion euro ($7.45 billion) deal unravels a $36 billion takeover from 1998, an attempt to create a global automotive powerhouse. The future Daimler AG will retain a 19.9 stake in Chrysler.

Analysts say the German company will do much better when it sheds most of its American arm, which is expected in the third quarter.

BAUSCH & LOMB AGREES TO BUYOUT

ROCHESTER, N.Y. — Bausch & Lomb Inc., struggling to recover from the global recall of a contact lens cleaner blamed for severe eye infections, agreed to a $3.67 billion buyout by Warburg Pincus, though Wall Street seemed to see potential for a higher price tag.

The 154-year-old eye-care company's stock rose nearly 10 percent after Wednesday's announcement, exceeding the amount Warburg agreed to pay, a sign investors may expect a rival bid.

Warburg said it would pay stockholders $65 a share, which represents a 26 percent premium to the average price of the stock over the 30-day period when rumors began circulating about a possible buyout. The New York-based buyout and venture capital firm also would take on about $830 million of debt from Bausch.

Over the last 18 months, Bausch & Lomb has been plagued by product recalls, accounting woes and delayed financial reports. Three weeks ago, it finally revealed that year-over-year sales fell 2.6 percent to $2.9 billion in 2006, dragged down by a 21 percent slide in lens care revenues.

FEDERATED DEPARTMENT STORES REPORTS PROFIT

CINCINNATI — Federated Department Stores Inc. said Wednesday it swung to first-quarter profit, but adjusted earnings missed Wall Street estimates as sales at newly converted Macy's stores remained weak.

The company earned $36 million, or 8 cents per share, in the quarter ended May 5, compared with a year-ago loss of $52 million, or 9 cents per share, hurt by a hefty charge.

Excluding costs associated with the company's integration of May Department Stores Co., which it acquired in 2005, earnings rose to 16 cents per share from 1 cent per share last year. Analysts had forecast a profit of 19 cents per share.

Sales slipped 0.1 percent to $5.92 billion from $5.93 billion last year, missing estimates for $5.99 billion. Last week the company announced sales at stores opened at least a year — considered a key indicator of a retailer's success — rose by 0.6 percent.

AMAZON.COM TO OPEN ONLINE MUSIC STORE

SEATTLE — Amazon.com Inc. plans to open an online music store offering only songs that are free of copy-protection technology and can be played on anything from PCs to portable gadgets such as Apple's iPod or Microsoft's Zune.

The Internet retailer decided to steer clear of digital-rights management technology because consumers want to be able to listen to their music on any device they choose, executives said Wednesday.

The market-leading iPod, for instance, can't play copy-protected music purchased from Napster or RealNetworks Inc.'s Rhapsody store. A Zune can't play tunes bought on iTunes. All players support music in the MP3 format.

Shares of Amazon rose $2.64, or more than 4 percent, to $63.22 Wednesday, toward the high end of the company's stock price over the past year.

DEERE & CO. SEES IMPROVED EARNINGS

MOLINE, Ill. — Farm equipment maker Deere & Co. beat Wall Street's expectations for its second quarter Wednesday though profits were down by 16 percent compared with a year ago, when the company sold its healthcare business for millions.

The company reported improved earnings from continuing operations as strong international demand for farm machinery offset weaker results in North America. Deere also boosted its full-year outlook, predicting growth of biofuels will help boost farm equipment sales.

Deere's shares fell $2.26 to $118.40 Wednesday after reaching a 52-week high of $121.76 on Tuesday.

Analysts say shares likely slipped because Deere's revised forecast could be seen as conservative amid a robust farm economy that is riding high on strong demand for corn-based ethanol.