Archive for May, 2008
May 13, 2008 9:26AM
By Donna Fuscaldo
Given the conference call was with the press, it was brief, only lasting around twenty minutes. One reporter wanted to know how the deal came to be, but EDS’s CEO was mum on the behind the scenes saga. He says the companies have been in talks “for sometime” but said investors and reporters will have to wait for the proxy to get all the nitty gritty details. The proxy will be out in a couple of weeks, says Rittenmeyer. Hurd, also being tight lipped, would only say when asked if H-P was done making services buys “never say never.” Hurd did say H-P is focused on “getting this one right,” noting that the acquisition of EDS “made a lot of sense for us.” Call is over but the analysis will continue on the Fox Business Network.
May 13, 2008 9:14AM
By Donna Fuscaldo
With any merger there’s always concerns about overlap and thus layoffs. EDS CEO Ronald Rittenmeyer says H-P’s services business and EDS have “little” overlap. As for layoffs, Rittenmeyer says the company, before the deal, had been in the process of “streamlining” the business. “Obviously there’s going to be some changes,” says Rittenmeyer.
May 13, 2008 9:08AM
By Donna Fuscaldo
H-P’s (HPQ) CEO Mark Hurd says on the call the acquisition of EDS (EDS) meets the company’s goal of expanding its services businesses. According to Hurd, who largely reiterated comments in the company’s press release, says with EDS, H-P will double its services business. H-P’s services business which had revenue of more than $38 billion, already has 210,000 employees. The deal, says Hurd is “compelling financially, compelling strategically and compelling commercially.” The deal is expected to close in the second half of the year.
May 13, 2008 8:45AM
By Donna Fuscaldo
In its biggest deal since acquiring Compaq, Hewlett-Packard (HPQ) announced it’s buying Electronic Data Systems (EDS) for $13.9 billion, marking a more than 30% premium from EDS’ stock closing price Monday. Reports have been swirling that H-P was close to inking a deal for EDS. The move is designed to bolster H-P’s computer services business, making it second only to IBM, the powerhouse of IT services. Speculation has abounded for years that H-P would make a services buy, with Computer Sciences Corp. (CSC) once mentioned as a possible target. Integrating the company will be a challenge for H-P CEO Mark Hurd. Still Hurd, known as an operations guy, has won accolades from investors ever since he took over the reigns from ousted former CEO Carly Fiorina. H-P’s Hurd, along with EDS CEO Ronald Rittenmeyer will sell the deal to Wall Street during a conference call happening at 9:00 a.m. Stay tuned for comments from the executives.
May 9, 2008 11:56AM
By Donna Fuscaldo
Alas the Citi analyst meeting is over after more than three hours. Not too many shockers coming from the meeting given the intense attention Citi garners from the press. Analysts largely went easy on the Citi executives including Pandit. The same couldn’t be said for Citi’s investor meeting last month. Check out Elizabeth MacDonald’s blog posting for that story. http://emac.blogs.foxbusiness.com/2008/04/29/in-search-of-citigroups-robert-rubin/ Citi’s stock isn’t showing much confidence or disappointment. Shares of Citi were recently down slightly at $24.14. Stay tuned to Fox Business Network and Foxbusiness.com for further analysis on Citi in the days to come.
May 9, 2008 11:14AM
By Donna Fuscaldo
Executives at Citi faced questions about its move to raise capital by selling shares. Citi defended the practice by saying that having excess capital is a sign of strength in times of uncertainty. Citigroup says there are a number opportunities that the company can use the excess capital for. Since November Citi has raised $40 billion and recently announced it widening a new stock offering from $3 billion to $4.5billion.
May 9, 2008 10:53AM
By Donna Fuscaldo
Right out of the gate analysts want to know why Citi isn’t divesting more assets and why Pandit seems to be embracing the old business mix under ousted CEO Chuck Prince. One analyst asked Pandit why Citi doesn’t get rid of its U.S. consumer business, a business analysts have said make sense to shed. Pandit says Citi won’t do that because he thinks the U.S. consumer unit is a “great business.” The U.S. credit card business has an annuity revenue stream and is “critical” to its credit card business growing internationally, says Pandit. As for the consumer finance business, Pandit said it’s a “great business,” with high credit quality. Ditto for its US retail bank.
May 9, 2008 10:42AM
By Donna Fuscaldo
On asset sales, Crittenden said most of the legacy assets that will be sold or taken off the books are in the securities and banking and consumer banking units. Citi is aiming to have the securities and banking legacy assets off the company’s books in two to three years with 50% of the consumer banking legacy assets gone in that time frame. As for revenue, the CFO said the company is targeting 9% growth in global wealth management, 7% in global cards, 8% in consumer banking and 9% in securities banking. All told the company is targeting revenue growth of 8% to 10%. Grilling by analysts starting….
May 9, 2008 10:18AM
By Donna Fuscaldo
What will make Citi’s stock actually increase is the 800 pound gorilla in the room. Citi’s stock is down 53.7% since 2001. Citi CFO Gary Crittenden is trying to answer that as the presentation portion of the meeting starts to wrap up. (Most companies save the CFO for last to keep analysts and investors at the meeting and interested.) Crittenden says Citi is targeting a 75% efficiency ratio in its global wealth management unit, a 33% efficiency ratio in its global card business and a 54% efficiency ratio in the consumer banking unit. CFO says Citi plans to wind down its legacy assets in its mortgage portfolio. As for securities and banking, Citi is targeting an efficiency ratio of 65%. Crittenden reiterated that the cost of credit over the next several quarters will increase because of the deterioration in the credit card business and the residential mortgage business. Crittenden says the company is targeting an efficiency ratio for the entire company of 58% in two to three years. He says the company over the next three years, including this year, will have a total re-engineering benefit of $15 billion, largely from cost cuts.
May 9, 2008 9:58AM
By Donna Fuscaldo
With the credit market crisis creating A LOT of turmoil in the financial services industry, Pandit took time to discuss risk with analysts and investors. According to Pandit the financial market is shifting away from just-in-time liquidity and capital, which means the future model for Citi and other financial services companies will be to have more capital and larger balance sheets beyond what was required in the past. That, says Pandit, is another reason Citi’s large size is an advantage. He says risk has to be rethought but also is an opportunity for Citi. Underscoring the changing capital requirements for companies like Citigroup, Citi has raised some $40 billion since November. Citi’s chief of risk Brian Leach talking now……
