Hal Varian of the NY Times pens an interesting piece today on how lagging productivity in the service sectors of the U.S. economy has been dramatically improved through innovation in information technology.
Following up on this earlier post, the Houston Chronicle reports that Texas Republican congressman Joe Barton will replace retiring Louisiana Republican Billy Tauzin as chairman of the House Energy and Commerce Committee.
In other energy news, the Chronicle reports that, despite the current run-up in oil prices, many in the energy industry believe that the better long-term play is in natural gas.
Following on yesterday’s post regarding the Comcast bid for Walt Disney Co., the Wall Street Journal (subscription required) provides its typically thorough coverage here, notes Comcast President’s Stephen Burke‘s familiarity with Disney here, speculates on rival suitors here, and provides a handy timeline-lineup card here.
The LA Times also provides a good follow up article today on consolidation in the entertainment industry and an analysis of Eisner’s options in dealing with the Comcast bid.
The WSJ (subscription required) weighs in with this article on Philadelphia-based Comcast‘s bid for Walt Disney Co. (can something be surprising and expected a the same time?). The LA Times article is also on top of the story, including a copy of Comcast’s letter to Disney’s Michael Eisner.
Given Eisner’s poor recent performance as Disney’s CEO and his stubborn refusal to give up the reins to Disney, the fact that an adverse takeover bid has emerged is not surprising. However, it is surprising that a company such as Comcast is the bidder. Comcast, essentially a cable TV company, controls a rather unusual programming line, including the controversial talk-show host Howard Stern’s show, the Golf Channel, and G4, a videogame channel.
My sense is that the late Walt Disney would not be particularly bullish on the potential market benefits of combining Tinkerbell with Howard Stern.
Acquiring assets from a company in bankruptcy is arguably the best way to acquire assets in a way that prevents the bankrupt companies’ creditors from asserting any interests or claims against the assets. However, such bankruptcy “cleansing” of sales is not limitless. John Higgins, a Houston attorney and old friend, oversaw the writing of this Houston Business Journal article on asset sales in bankruptcy. It is a good overview of the law in this area for businesspersons and non-bankruptcy lawyers.
In the aftermath of Enron‘s demise, Congressmen fell over themselves in self-righteous indignation proposing legislation that would ensure that such a debacle would never occur again. Not only does the nature of man ensure that another Enron debacle will occur, Congressional laws enacted in a misguided attempt to overwrite man’s nature often have unintended (and in this case, quite costly) consequences.
The Wall Street Journal reports today (subscription required) that U.S. companies are complaining that new Enron-resultant rules regarding corporate accountability are costing extraordinary amounts of money and management time.
The rules stem primarily from the 2002 Sarbanes-Oxley Act, which Congress enacted for the purpose of enhancing corporate governance on the heels of the Enron, Tyco, and WorldCom accounting scandals. The regulations were intended to strengthen corporate accountability and thus, restore investor confidence. Proponents of the statute contended that the new regs will help companies save money because they will avoid costly problems that would occur but for the additional regs.
However, reality is often far different than theory. As the WSJ article points out:
While there is agreement that governance rules are needed, some companies cited the increased cost of complying. “The real cost isn’t the incremental dollars, it is having people that should be focused on the business focused instead on complying with the details of the rules,” said Peter Bible, chief accounting officer at General Motors Corp. “Everybody feels they have to do something to react to the corporate scandals, [but] you really have to scratch your head and say, ‘How is this really benefiting our shareholders?’ ”
The rules are coming into effect at a time when corporations already are battling other increasing costs, including health-care expenses. Even before the most expensive Sarbanes-Oxley rules take effect, companies say their audit costs are increasing by as much as 30% or more this year due to tougher audit and accounting standards, including complex rules to bring more off-balance-sheet items onto the books. Companies also are paying steep fees to fund a new accounting-oversight board — as much as $2 million apiece annually for some large businesses.
* * *
A survey of 321 companies released Tuesday shows that businesses with more than $5 billion in revenue expect to spend an average of $4.7 million each implementing the new 404 rule this year, according to Financial Executives International, which represents top corporate officials. Much of the money is being spent on consultants, lawyers, auditors and new software.
One of my sage clients summed it up in this manner: “The lawyers win again.”
The Seattle Times runs a good article on the brewing storm between Google and Microsoft , and how Microsoft better not think that Google will be as easy to defeat as Netscape was in the browser war.
The NY Times reports that OPEC made a surprise announcement earlier today that it was cutting its production quotas. The Houston Chronicle reports that Crude prices rose on the news. The Wall Street Journal‘s analysis of the action is here (subscription required).
By this action, OPEC is attempting to do its part to maintain oil prices at their highest level in two decades. My sense is that this move may benefit the OPEC members in the short term, but that long term prices will fall from increased exploration and production that will result.
Yesterday’s Wall Street Journal includes an interesting section (subsciption required) on trends in ten selected industries: Travel, the Internet, Aviation, Professional Sports, Commercial Real Estate, Television, Telecom, Banking, Oil and Gas, and Pharmaceuticals. A subscription to the Journal is expensive, but this type of coverage makes a WSJ subscription a good investment.
The thoughtful Daniel Drezner reminds us of the Economist‘s definition of when a recession becomes a depression:
When your neighbour loses his job it?s a slowdown (or, if you dislike him, a correction); when you lose yours, it?s a recession; when an economic journalist loses his, that?s a depression.