Earnings & Stocks To Watch

Today’s highlights: BBBY, CKR, DRI, MON, NKE, PAYX, RHT, & RAD

Stocks in Play

& they do not like ruffled feathers….why not talk about crimes against humanity ?

China defended itself against charges from the U.S. and Europe that its restrictions on raw materials exports violated international trade rules, saying those restrictions were in keeping with WTO regulations.

China Trade
Reed Saxon / AP

The European Union and the United States said on Tuesday that they are taking action against China at the World Trade Organization over export restrictions on some industrial raw materials used in steel, cars, microchips, planes and other products.

In the first official Chinese response to the complaint, the country’s Ministry of Commerce said in a faxed statement: “The main objective of China’s relevant export policies is to protect the environment and natural resources. China believes the policies in question are in keeping with WTO rules.”

The Ministry also said it would “appropriately handle” the request from Washington and Brussels for consultations on the case.

The U.S.’s decision to bring the dispute before the WTO is seen as part of a more muscular trade policy promised by the Obama administration, but it added to tensions at a time when Washington counts on Beijing to keep buying its debt.

Europe and the United States had earlier failed to persuade resource-hungry China to reduce its export tariffs and raise quotas on materials like bauxite, coke and manganese that are used in steel, microchips, planes and other products.

Billions of dollars in trade flows are affected, and China gives its industries an unfair edge, U.S. officials said.

“After more than two years of urging China to lift these unfair restrictions, with no result, we are filing at the WTO today,” U.S. Trade Representative Ron Kirk told a news conference in Washington.

“We are most troubled that this appears to be a conscious policy to create unfair preferences for Chinese industries” that use the materials, he said.

As a first step, the United States and the European Commission — which oversees trade for the 27-nation EU bloc — formally sought consultations with Beijing at the global trade watchdog. If these talks fail, after 60 days the next step would be to request a WTO panel to hear the complaint.

“It is very much hoped that we will not have to proceed to the next stage,” Kirk said.

In Brussels, EU Trade Commissioner Catherine Ashton said: “The Chinese restrictions on raw materials distort competition and increase global prices, making things even more difficult for our companies in this economic downturn.”

“I hope that we can find an amicable solution to this issue through the consultation process,” she said in a statement.

China Limiting Exports

The EU and the United States say China restricts exports of raw materials despite a pledge to eliminate export taxes and charges made when it joined the WTO in 2001.

This hurts foreign “downstream producers” of goods, such as aluminum producers and steelworkers, since the export restraints limit their access to raw materials and raise world market prices for the materials while lowering the prices that domestic Chinese producers have to pay, U.S. officials said.

U.S. officials said the nine materials covered by their case were bauxite, coke, fluorspar, magnesium, manganese, silicon carbide, silicon metal, yellow phosphorus and zinc.

In Ottawa, Canadian officials indicated they had not ruled out joining the case. “For the moment, we are closely monitoring developments in this file,” said Melisa Leclerc, spokeswoman for Canadian Trade Minister Stockwell Day.

The action could jeopardize already brittle U.S. trade relations with China. It was the first WTO case brought against Beijing by President Barack Obama, who accused the country of unfair trading practices during last year’s election campaign.

Trade disputes between Brussels and Beijing are on the rise since the EU’s trade deficit with China has ballooned. Brussels has imposed a number of anti-dumping tariffs on imports of Chinese goods ranging from shoes to steel products.

The move against China was welcomed by U.S. steelworkers and manufacturers, both of whom said it could signal a new U.S. seriousness about enforcement of trade rules.

But Frank Vargo, vice president for international economic affairs at the National Association of Manufacturers, said it would be ridiculous to think that the case heralds a trade war between the United States and China.

The WTO is “the impartial place you go to resolve trade disputes so you don’t have to have a trade war,” Vargo said.

The United States has filed seven other cases against China since it joined the WTO; China has brought four cases against Washington.

“While I am sure China will say they haven’t done anything wrong and will contest the charges before the WTO, China’s past record on settling and complying with WTO cases has been pretty good,” Vargo said.

Fun times

BRUSSELS (AFP) – European nations need to find a “credible exit strategy” for their public finances as the aid shelled out to shore up banks could reach 16.5 percent of GDP, an EU report warned Tuesday.

In its annual report on public finances, the European Commission estimated the direct fiscal costs of the current crisis in the EU anywhere in a broad band from 2.75 percent to 16.5 percent of gross domestic product (GDP).

Which end of the estimate the final figure veers towards depends partly on how well governments manage to recover their cash injections and loans, the commission said in a statement.

Rising public debts and planning by governments to support the financial sector, together with likely increases in spending on aging populations and slowing growth “raise concerns about public finance sustainability,” it said.

Therefore “an exit strategy strengthening fiscal policy frameworks, reforming age-related spending and spelling out the broad consolidation measures envisaged when the recovery has taken hold is required,” it added.

The report, which examines the budgetary costs of the banking crisis, showed that 49 crises since 1970 around the world resulted in net direct fiscal outlays worth an average of 13 percent of GDP to revive the banking system.

“Experience shows that the costs were lower when the banking crisis resolution strategy was implemented swiftly; was transparent and received broad political support,” the EU executive stressed.

This is our state of affairs America

Geez, and we thought that cutting education funding was the easiest way to play on people’s emotions

But Arnold is taking it one step further in California:

NBC Los Angeles: The Hayden Bill, enacted 11 years ago, requires that California shelters provide care to animals for at least six days before euthanizing them. According to a report by the Legislative Analyst’s Office, the state could save $23 million by slashing that mandate in half.

The cost of recovery for each animal adopted is typically paid for via fees, but the LAO claims that keeping these animals alive a few extra days does nothing for their long-term.

Give us a bailout, Obama, or the puppy gets fried with laser beams.

Record margins on cost cutting, but an unexpected drop in software sales

By Jim Finkle

BOSTON (Reuters) – Oracle Corp reported quarterly earnings above expectations as the No. 3 software maker’s profit margin hit a record thanks to robust growth in its maintenance business, sending shares up 2.7 percent.

The company run by billionaire Larry Ellison also reported a smaller-than-expected drop in new software sales and said it grabbed market share from SAP in certain segments — signs that Oracle may be weathering the downturn better than rivals.

“We’ve been able to push through the economic situation rather well and I have to tell you that I still see the pipeline growing rather significantly,” Oracle President Safra Catz said in a conference call.

Oracle’s quarterly results and outlook beat expectations it set in March, when executives warned the recession and strong dollar would take a substantial bite out of profits. Since then, the economy has stabilized and the currency has weakened, setting Oracle up to beat those conservative estimates.

Oracle executives were more optimistic on Tuesday, saying customers are telling the company they need to move forward in implementing new projects to keep their businesses running.

Ellison cited customers as saying they want to spend more in the second half, but he added that remained to be seen.

Morgan Stanley analyst Adam Holt believed Oracle was taking customers away from German rival SAP AG in the market for business management software as well as boosting share in its database business, where it competes with IBM and Microsoft Corp.

“If they are able to gain share through the downturn then they will have stronger customer relationships as the economy improves,” Holt said.

New software sales, a closely watched revenue measure, fell 13 percent to $2.7 billion. Analysts had been expecting them to slide about 18 percent.

GREAT EXPECTATIONS

Oracle reported profit, excluding items, of 46 cents per share in the fourth quarter, ended May 31, beating analysts’ average forecast of 44 cents, according to Reuters Estimates.

“It’s all about expectations. Everything looks good across the board,” said Goldman Sachs analyst Sarah Friar.

Oracle said its adjusted operating margin was 51 percent, up 2.4 percentage points from a year-ago.

Catz said much of the increase was due to growth in revenue from its highly profitable software maintenance business, which rose 8 percent from a year earlier to $3.05 billion.

Customers buy annual maintenance subscriptions that entitle them to upgrades, bug fixes and technical support for about 22 percent of the original software cost.

“We are not a cost-cutting story for the margins. We really are a profitability story for having such a large install base of customers,” Catz said.

She forecast that new software sales will fall between 4 and 14 percent this quarter, assuming current exchange rates.

Catz also projected the company will post a profit, excluding items, of 29 to 31 cents per share this quarter, assuming current exchange rates, in line with analysts’ average forecast of 30 cents.

Analysts said Oracle’s costs also benefited from the decline in new software sales because the company paid less in commissions to its sales staff, whose bonus targets were set a year ago when the economy was in better shape.

Oracle reported net income fell 7 percent to $1.9 billion, or 38 cents a share, from $2 billion or 39 cents a year ago.

Ellison said that his development team has completed writing code for the biggest revision of its business management software in the company’s 32-year history. The product, dubbed Fusion Apps, will be released next year.

It will be sold as traditional software, but is also designed to allow customers to access a wide range of programs as services over the Internet, hosted at Oracle data centers.

Although Ellison only briefly described the offering in the company’s earnings conference call, his comments suggest that Oracle will soon have the widest range of programs delivered over the Web as a service.

The company currently offers a limited selection of software in that area, where it competes primarily with Salesforce.com Inc and Microsoft Corp.

Oracle’s shares rose to $20.41 in extended trading. They had fallen 0.5 percent to $19.87 on the Nasdaq.

& it should be

By Kevin Drawbaugh and Karey Wutkowski

WASHINGTON (Reuters) – The outspoken head of a U.S. Congressional watchdog panel will strongly urge lawmakers on Wednesday to set up a new government agency to protect consumers from “tricks and traps” set by banks.

President Barack Obama has called for creating an independent financial products agency to oversee consumer lending as part of his sweeping proposal to overhaul the U.S. financial regulatory system.

“We can help fix the broken credit market. And I can sum it up in four words: Consumer Financial Protection Agency,” said Elizabeth Warren, chairman of the Congressional Oversight Panel of the Troubled Asset Relief Program, in prepared remarks.

Warren, who is a professor at Harvard Law School, will be the marquee witness at a House of Representatives committee hearing on Wednesday looking at a key provision of Obama’s broad plan to drag the aging U.S. financial regulatory system into the 21st century.

The provision to establish a financial protection agency for consumers “will be carried out,” Senator Jack Reed, chairman of the Senate securities subcommittee, said in an interview with Reuters Television on Tuesday.

“Definitely you have to have a consumer protection agency,” he said, echoing vows made in recent days by Obama and by Senate Banking Committee Chairman Christopher Dodd on a proposal that is meeting more criticism from business interests than perhaps any other part of the Obama plan.

Congress is only beginning to delve deeply into the plan, a far-reaching response to the severe banking and capital markets crisis that has rocked economies around the world. The European Union is eyeing similar reforms.

One issue in the crisis was the enormous debt shouldered by Americans in a real estate bubble fueled by subprime mortgages that many borrowers could not afford and did not understand, a factor that contributed to a huge spike in foreclosures that has helped drag the United States into recession.

Ending such lending practices is a key goal of the reforms being proposed by Obama and backed by congressional Democrats.

WARREN SEEN HEADING AGENCY

Warren, in her remarks to be given before the House committee led by Democratic Representative Barney Frank, cited studies and said that most consumers don’t understand the terms underlying credit cards, mortgages, payday loans, tax refund anticipation loans and credit scores.

“The broken credit market has put American taxpayers on the hook for billions in subsidies and trillions in guarantees to shore up our largest financial institutions. … If we do not fix this, we will be hurt again and again,” she said.

A financial protection agency would help consumers make better decisions for themselves, she said.

Warren said that banking has changed over the years, from an old model that she called “simple and effective: consumers shopped around for products and terms, and lenders evaluated the creditworthiness of potential borrowers before making loans.

“Today, the business model has shifted. Giant lenders ‘compete’ for business by talking about nominal interest rates, free gifts and warm feelings, but the fine print hides the things that really rake in the cash. Today’s business model is about making money through tricks and traps,” she said.

The proposed new watchdog, however, is already drawing sharp criticism.

The Obama plan “would create a very powerful agency that could make it much more expensive for banks to offer products and services to consumers,” said financial services policy analyst Jaret Seiberg at research firm Concept Capital.

“The chairman of the (agency) would be vested with tremendous power and few checks or balances. This should be especially worrisome to the banking sector as we would expect Professor Elizabeth Warren … to get the job.”

DELAHUNT OFFERS BILL

Representative Bill Delahunt has introduced legislation in the House to create a “Financial Product Safety Commission.” He said in prepared remarks that it was originally Warren’s idea.

It would “review financial products for safety; modify dangerous products before they hit the markets; establish guidelines for consumer disclosure; and collect and report data about the uses of different consumer loans,” Delahunt said.

Some current regulators have said they fear separating bank safety and soundness oversight from consumer protection.

Ellen Seidman, a former bank regulator who is now a senior fellow at the New America Foundation, a think tank, expressed support for the new agency in her prepared remarks for the committee. But she said bank regulators should retain consumer protection responsibilities.

“The bank regulators, given the proper guidance from Congress and the will to act, are quite capable of effectively enforcing consumer protection laws,” Seidman said.

A leading bank industry group said in its prepared remarks that new rules and examinations from the proposed safety agency would be costly, especially for smaller banks, and would not likely result in better protections for consumers.

Edward Yingling, president of the American Bankers Association, said the agency would contradict the goal of fashioning an integrated, comprehensive regulatory system.

“Simply put, it is a mistake to separate the regulation of an institution from the regulation of its products,” he said.