BUSINESS BRIEFS
Microsoft backs effort to oust Yahoo's board
Associated Press
SAN FRANCISCO — Microsoft Corp. threw its weight behind investor Carl Icahn's effort to dump Yahoo Inc.'s board, saying yesterday that a successful shareholder rebellion would encourage the software maker to renew its bid to buy Yahoo's Internet search engine or possibly the entire company.
The unexpected endorsement gives Icahn a carrot to dangle before Yahoo shareholders as he wages a campaign to replace Yahoo's directors at the company's annual meeting Aug. 1.
It marks the first time that Microsoft has publicly sided with Icahn since the billionaire investor launched his attempted coup nearly eight weeks ago.
The two sides decided they could work together after Icahn held "frequent" discussions with Microsoft Chief Executive Steve Ballmer and some of his top lieutenants during the past week, according to a letter that Icahn sent yesterday to Yahoo shareholders.
FANNIE MAE AND FREDDIE MAC TANK
WASHINGTON — Investors dumped shares of Fannie Mae and Freddie Mac yesterday because of worries that the two pillars of the housing market could be forced to raise $75 billion of capital, potentially confronting them with an overwhelming burden and crippling already struggling financial markets.
Fannie Mae's stock price plunged 16.2 percent, to $15.74, and Freddie Mac's fell 17.9 percent, to $11.91 — their lowest since 1995.
The sell-off came after a report warning that a proposed change in accounting rules could weaken Fannie Mae and Freddie Mac so severely that it "could possibly topple the already fragile capital markets."
Though it raised the specter of a calamity, the report by Lehman Brothers analyst Bruce W. Harting predicted that accounting rulemakers would make an exception sparing Fannie Mae and Freddie Mac.
But an official at the Financial Accounting Standards Board, which sets accounting rules, said a first draft of the board's proposed change would apply to the two companies. The draft underscores that point by including an example that covers their business operations, the official said. The official spoke on condition of anonymity because the document is preliminary and has not yet been released for public comment.
FINANCIAL FIRMS LOSE $1.3 TRILLION
NEW YORK — U.S. financial companies have lost more than $1 trillion in value this year, and yet another decline yesterday shows concerns aren't going away soon.
Banks and brokerages began the week lower on the same fears that have been proven toxic since last summer in the ongoing credit crisis.
The drop in names like Lehman Brothers, Morgan Stanley and Merrill Lynch caused the financial section of the Standard & Poor's 500 index to lose almost $150 billion in value yesterday, according to the rating agency. That means S&P 500's 85 financial components have lost some $1.3 trillion since the sector reached a high last October.
Even more startling is that shares of 35 of the companies, which include insurers, have lost more than half their value this year. The financial sector used to be the index's main driver, and many economists believe that the broader market will rise or fall on their health.
ENTERTAINMENT OUTLOOK WORSENS
LOS ANGELES — A Lehman Brothers analyst downgraded the entertainment industry yesterday and slashed forecasts for its five major companies, saying digital downloads of movies and TV shows posed a huge threat to profits from DVD sales.
The stocks of The Walt Disney Co., News Corp., CBS Corp., Time Warner Inc. and Viacom Inc. fell slightly more than the market by close, with CBS falling the most, by 4.7 percent, or 87 cents, to $17.73.
"Shifts from physical to digital will disrupt the marginal economics of the TV and movie businesses, just as it did for music," analyst Anthony DiClemente said.
