Insights

Xerox acquires Affiliated Computer Systems; White House will commit $35bb to a shaky housing market

Xerox (NYSE:XRS) gets it going this morning by acquiring computer services firm Affiliated Computer Systems (NYSE:ACS.)  Xerox CEO Ursula Burns lauded the deal, noting that Xerox will become one the the leaders in business-process outsourcing.  The $6.4bb deal gives ACS shareholders $63.11 for each of their shares, almost a 35% premium over Friday’s closing price.  Xerox has risen from the abyss over the last decade, and now they are trying to re-invent themselves, moving away from just selling copiers.  On the heals of the Dell for Perot Systems deal, the message is clear that the money’s not in the hardware, it in the maintenance and servicing.

Solvey is selling its’ drug unit to Abbott Laboratories (NYSE:ABT) for approximately $6.6bb.  This latest pharma deal gives Abbott control of the cholesterol drug TriCor.

Oil inches up above $66 dollars per barrel.  Although some are blaming tensions with Iran for the increase in price, the fact that oil is staying south of $70 per barrel, means the Iran situation is not having much of an affect.  Demand is still low and inventories are high.

The New York Post reports that Terra Firma, the Private Equity company that owns EMI, is trying to work with Citigroup to restructure some of EMI’s debt.  Citgroup helped Terra Firma underwrite the $4.7bb buyout of EMI in 2007.  Citigroup was unable to syndicate the loan but has been left holding the entire amount on its books.  Expect Citi to put the screws to EMI in order to get this money back.  If Terra Firma and Citigroup don’t work something out, EMI may be heading toward bankruptcy.

The White House is set to commit $35bb to help give mortgages to low-and-middle income families.  This move will help keep a shaky housing market, above water, at least temporarily.

Regulators are looking to stop banks from depending on short-term borrowing, which ultimately brought Bear Stearns and Lehman Brothers to their knees.  The FT reports that there will be rules to help determine if a bank is too dependent on short-term cash.  One proposal would determine how quickly a bank would be able to unwind its positions if the short-term market dried up, as it did a year-ago.

The FDIC’s Board of Directors is meeting tomorrow at 10am.  Expect lots of chatter about increasing the size of their reserve fund.

Finally, the London Telegraph writes that “The Dollar is Dead.”  The Telegraph opines that the dollar’s dominance is over, a casualty of the recent financial crisis.

Jobless claims news is positive; the Goldman Sachs bonus pool keeps getting bigger

Weekly Jobless claims Fell to 530,000 – Existing claims are 6.138mm, lower than analyst expectations.  The news is pushing the S&P 500 futures up slightly.

In Europe, stocks fell as Copper and Oil continued to decline for the second day in a row.  Eyes continue to focus on the Federal Reserve.  As the economy gets healthier, will the Fed heed the calls to tighten monetary policy?  Since the banking crisis began, the Fed has added $800bb to the beleaguered banking system.  It won’t be an easy task for for Ben Bernanke and company to  slow or derail the printing presses.

Citigroup is apparently looking to focus their retail banking operations to only a handful of cities.  The banking giant will cut the number of branches in the U.S. and focus their consumer lending practices to credit cards and jumbo mortgages, according to the Wall Street Journal.  Citi is looking to get out of Texas and possibly reduce the number of branches in Philly and  Boston.

Are we really running out of oil?  The New York Times reports that big investments are yielding big returns for the oil companies as over 200 new discoveries have been reported so far in 2009. The oil companies are chalking up these finds to new technologies and R&D, but they still need the price of a barrel of oil to stay north of $60 in order to keep pouring money into research.  New discoveries are on pace for their highest levels since 2000.

In Goldman Sachs news, the bonus pool has grown to $16bb according to the New York Post.  To keep executives home, Goldman is considering paying the top earners in stock.  This number will surely bring out the haters, but the money machine run by Lloyd  Blankfein is expected to report very good numbers in October,  and the money has to go somewhere.  Meanwhile, Hank Greenberg is claiming Eliot Spitzer was politically grandstanding when he brought a lawsuit against the former Chairman of AIG.

Microsoft flatly denies any interest in Electronic Arts.  Phil Spencer, a Vice President of Microsoft Game Studios told Reuters “We have no plans to acquire EA.” It doesn’t get more definitive than that.

California was able to get rid of $8.8 billion of their short-term notes.  Bloomberg writes that the Sunshine Sheet got twice as many orders from individual investors as they did from the institutional side.