TIME stocks

Stocks Fall After Bad Earnings Reports

Traders work on the floor of the New York Stock Exchange.
Traders work on the floor of the New York Stock Exchange. Andrew Burton—Getty Images

Microsoft and Caterpillar suffer major stock losses on the heels of disappointing earnings reports

Wall Street kicked off trading in the wake of an East Coast snowstorm, but the results weren’t pretty.

U.S. stocks fell dramatically immediately following the opening bell Tuesday morning after a series of big U.S. companies issued dour earnings reports, and a drop in durable goods orders shook investors’ confidence in the economic outlook for 2015.

The Dow Jones Industrial Average plummeted at the open, and was lately down more than 350 points. One week after a market surge nearly wiped out all of market’s losses for the year, the blue-chip index is now more than 500 points below where it started 2015.

The Nasdaq composite fell about 2%, dropping more than 100 points, while the S&P 500 was recently down over 35 points, or 1.8%. All three major U.S. indices were basically flat on Monday.

Orders for durable goods — including anything from home appliances to commercial aircraft — in the U.S. dropped 3.4% in December after the fell more than 2% the previous month, according to new data from the Commerce Department.

Meanwhile, a diverse set of companies that includes Microsoft, Procter & Gamble and Caterpillar saw their share prices drop Tuesday morning as a result of weak quarterly earnings reports.

Microsoft took an especially hard hit, falling nearly 10% in early trading after analysts downgraded the company’s stock due to a decline in earnings in its most recent quarter. Caterpillar’s stock fell more than 7% after the company posted a disappointing forecast for 2015 due to the ongoing decline in prices of commodities such as oil and copper.

Tuesday’s U.S. sell-off came on the heels of a decline for European stocks, which had improved recently on the European Central Bank’s new stimulus measures before falling again Tuesday due to concerns over political upheaval in Greece. London’s FTSE 100 dropped 0.8% during the day while Germany’s DAX fell 1.5%.

This article originally appeared on Fortune.com.

TIME Companies

Microsoft’s Profits Dip Despite Strong Phone Sales

Microsoft Holds Annual Shareholder Meeting
Microsoft CEO Satya Nadella addresses shareholders during Microsoft Shareholders Meeting December 3, 2014 in Bellevue, Washington. Stephen Brashear—Getty Images

Sales of Surface tablets are gaining steam, even if they still trail far behind Apple’s iPad

Microsoft said Monday its profits fell more than 10% during its latest quarter despite an uptick in sales. Here are the key points from the tech giant’s latest earnings.

What you need to know: Microsoft’s sales jumped nearly 8% in the quarter ending Dec. 31, improving to $26.5 billion. That is in line with the $26.3 billion in revenue that analysts expected, according to Thomson Reuters. But the company’s profits fell by 10.6% to $5.9 billion, or 71 cents per share.

Contributing to the decline in earnings was a $243 million charge the company took from “integration and restructuring expenses” related to the massive layoffs Microsoft announced last summer as well as ongoing costs from integrating the mobile phone business it acquired from Nokia in early 2014.

Microsoft shares dropped by 2.5% in after-hours trading following the release of the company’s financials.

The big number: CEO Satya Nadella has put a lot of focus on cloud computing since taking control of the company last year. Now, the company has said that commercial cloud sales more than doubled again in the latest quarter, the third under Nadella’s watch as CEO. That’s after cloud sales jumped 128% in the previous quarter.

A 30% gain in non-corporate Office 365 subscribers last quarter helped drive the increased cloud revenue, which Microsoft said extrapolates to $5.5 billion annually based on last quarter’s returns. “Microsoft is continuing to transform, executing against our strategic priorities and extending our cloud leadership,” Nadella said in a statement.

Microsoft’s overall revenue also received a major boost from its phone hardware sales, which added $2.3 billion to the quarterly tally by selling a record 10.5 million Lumina smartphones. Still, Windows Phones lost some of their share of the U.S. smartphone market in 2014, dropping to 3.1% from 3.3% the previous year, according to data from eMarketer.

What you might have missed: Sales of the company’s Surface tablets continue to gain steam, even if they still lag far behind iPad sales. Microsoft said its Surface revenue crossed the $1 billion mark for the first time, rising 24% year-over-year to $1.1 billion last quarter. By comparison, Apple reported $5.3 billion in iPad sales in its most recent quarter.

Meanwhile, Microsoft said its search advertising revenue jumped by 23% last quarter, helped by a slight increase in the company’s share of the U.S. search market. Microsoft’s Bing grabbed a 19.7% U.S. market share last year, which was up slightly and outpaced Yahoo’s 10.2%, according to comScore.

Microsoft also received a boost from a strong holiday retail season for its Xbox One gaming console, which sold 6.6 million units in the quarter. The company said last week that the Xbox One was the bestselling console in the U.S.in November and December after Microsoft slashed the price of the popular console, from $499 when it was first released in 2013, to $349 at the end of October. Still, overall sales for the company’s computing and gaming hardware segment dropped more than 10%, to $3.9 billion, in the second quarter.

This article originally appeared on Fortune.com

TIME Aviation

Airlines Cancel Thousands of Flights Due to East Coast Blizzard

APTOPIX Winter Weather Flights
A plane is de-iced at LaGuardia Airport in New York City on Jan. 26, 2015. Seth Wenig—AP

Nearly all of the major U.S. carriers have waived the change fee for customers

Major airlines are preemptively canceling thousands of flights scheduled to come into and out of the East Coast of the United States as a potentially historic blizzard is expected to dump as much as three feet of snow and snarl transportation for tens of millions of people.

Flight-tracking website FlightAware.com noted Monday morning that around 4,000 flights have been cancelled for Monday and Tuesday. The post also said that almost all New York City flights will be cancelled Tuesday.

Delta Air Lines said on Sunday it will cancel 600 flights because of the blizzard warning, while United Airlines said it will cancel all Tuesday flights at airports in New York, Boston and Philadelphia. Beginning on Monday night, the carrier will limit operations at Newark, LaGuardia and John F. Kennedy airports in the New York area, a spokeswoman said.

Southwest Airlines said Sunday evening it would cancel more than 130 of 3,410 flights scheduled for Monday due to the storm, an increase from its earlier plan to cancel about 20 flights.

American Airlines said cancellation plans would not be finalized until Monday morning, but that the airline expected “quite a few” flights to be affected. Flightaware.com showed 637 flights canceled for Monday as of Sunday evening.

Nearly all of the major U.S. carriers have waived the change fee for customers flying from affected cities during the storm, reported USA Today.

Information from Reuters contributed to this report. This article originally appeared on Fortune.com.

TIME Fast Food

McDonald’s CEO Pleads for Time to Turn Things Around

A sign stands outside of a McDonald's restaurant in San Francisco.
A sign stands outside of a McDonald's restaurant in San Francisco. Justin Sullivan—Getty Images

Many changes are to come for the fast food giant

The only good thing about 2014 for McDonald’s is that it’s finally over.

As Fortune detailed in November, this has been a terrible, horrible, no good, very bad year for the iconic fast food giant. Today the company capped it off by reporting fourth-quarter and full-year results that made 2014 the first year since 2002 in which it reported a decline in global same-store sales.

The year was historically bad for McDonald’s U.S. business in particular. Nation’s Restaurant News reported last week that the company’s slump in the U.S. market would be the first time its numbers waned compared to the year before in at least 30 years, ending the longest run ever of domestic restaurant sales growth for a single chain.

On the earnings call today CEO Don Thompson cited a litany of actions the company is taking to turn things around, including localizing its menu, allowing patrons to customize their burgers, and launching fresh marketing. He stressed that McDonald’s is “acting with a sense of urgency”—but he also made the case for giving management more time for a turnaround to kick in. He noted that McDonald’s is only six months into the 12- to 18-month plan he outlined in July.

“History tells us that these efforts will take time to resonate,” Thompson said on the call, “[and therefore] expect continued volatility in the market through most of 2015.” As he put it, “2015 will be a year of regaining momentum globally…. It will take time, especially in larger markets to notice the comprehensive changes that are under way.” He warned that the company would continue to feel pressure on sales and earnings in the first half of the year, with negative same store sales already expected for January.

Thompson certainly inherited some of the company’s issues, such as menu bloat, which had been a long time in the making when he became CEO in July 2012. Thompson had to report a slowdown in sales growth in most major markets his very first quarter on the job, but he’s now had two and a half years to change the company’s trajectory and the arrows keep pointing the wrong direction.

One promising sign, perhaps, came from a subtle shift in what McDonald’s said about food quality—a sensitive issue for the company. McDonald’s management has always maintained that its food is excellent, arguing that it was a simply a perception problem; the company, it said, just needed to do a better job educating consumers about its ingredients and how they’re prepared. But this time Mike Andres, president of the U.S. business, acknowledged on the call that “we have to make sure our quality aligns with consumers’ definition of quality moving forward. And so we’re going to be very agressive in that area.” He said that he’s building culinary talent and bringing in outside consultants to help with “menu vision.”

It was an important acknowledgement. But the company’s challenge remains daunting. It needs to simultaneously pare its menu, improve its offerings, increase its speed, and hone its message—a combination of factors that will be hard to pull off, particularly in a world where many customers are craving healthier offerings.

This article originally appeared on Fortune.com.

TIME Companies

SkyMall Files for Bankruptcy

Time to raise a giant, novelty wine glass to the demise of the inflight retail catalog

The parent company of in-flight shopping catalog SkyMall has filed for Chapter 11 bankruptcy, citing an increased prevalence of mobile devices on planes as the primary reason for the company’s flagging sales.

Xhibit Corp. and several of its affiliates, including SkyMall, have asked a U.S. Bankruptcy Court in Phoenix to supervise a sale of their collective assets, the company announced on Friday. “We are extremely disappointed in this result and are hopeful that SkyMall and the iconic ‘SkyMall’ brand find a home to continue to operate as SkyMall has for the last 25 years,” said Scott Wiley, Xhibit’s chief financial officer and acting CEO.

“With the increased use of electronic devices on planes, fewer people browsed the SkyMall in-flight catalog,” Wiley said in a bankruptcy filing.

The SkyMall catalog has long been an option for bored or curious flight passengers who could peruse its pages to find myriad products for purchase — from clothing and electronics to more non-essential fare such as glow-in-the-dark toilet seats or Justin Bieber Dental Floss. SkyMall’s widely diverse offerings cemented the catalog’s place in popular culture, inspiring parodies as well as blogs and listicles dedicated to its more perplexing products (a lithograph simply titled “Drunk Cat”?).

In recent years, though, SkyMall fell victim to declining sales as revenue dropped from $33.7 million in 2013 to just $15.8 million for the first nine months of 2014. In a court filing, Wiley blamed the fall-off in sales on the fact that more and more passengers now spend their flights engaged with their smartphones and tablets due to technological advances, such as in-flight WiFi, as well as evolving air safety rules that provide allow passengers to keep their mobile devices on during flights. Those changes “resulted in additional competition from e-commerce retailers and additional competition for the attention of passengers, all of which further negatively impacted SkyMall’s catalog sales,” Wiley said in a filing. “These technology changes, and the costs incurred by airlines in carrying a printed SkyMall catalog, have also made the traditional in-flight SkyMall catalog increasingly unattractive to the airlines.”

Xhibit asked in a bankruptcy court filing that the asset sale be completed by April at the latest and noted that “an expeditious sale process is very important.” The company said SkyMall’s cash reserves can support business operations through that target date, but noted that it is “critical” that the process wind down within the next few months.

This article originally appeared on Fortune.com.

TIME Companies

Expedia Snaps Up Travelocity for $280 Million

The Expedia Inc. homepage and logo.
The Expedia Inc. homepage and logo. Bloomberg—Getty Images

Another travel site Orbitz is reportedly looking for a buyer as well

Two major travel sites are about to be under the same corporate umbrella.

Expedia will be purchasing rival Travelocity for $280 million in cash. The two sites have been working together since 2013, when they signed a marketing agreement allowing Travelocity access to Expedia’s supply and customer service program in exchange for Expedia powering the technology platforms for Travelocity’s websites in the US and Canada.

Travelocity is currently owned by travel technology company Sabre. Sabre also owns Sabre Airline Solutions, Sabre Travel Network, and the Sabre Hospitality Network. Expedia’s brand portfolio includes the popular Expedia.com, plus other properties including Hotels.com and Hotwire.com.

More deals could be coming in the online travel booking arena. Orbitz is said to be actively looking for a buyer.

This article originally appeared on Fortune.com.

TIME stocks

European Stimulus Encourages Gain in U.S. Stocks

European Central Bank President Mario Draghi meets the press at the European Central Bank Headquarters in Frankfurt on Jan. 22, 2015.
European Central Bank President Mario Draghi meets the press at the European Central Bank Headquarters in Frankfurt on Jan. 22, 2015. Horacio Villalobos—Corbis

Thursday’s strong gains turn the S&P 500 and Nasdaq composite positive for 2015

—Wall Street soared Thursday, with U.S. stocks chalking up their fourth straight day of gains, as the world’s stock markets cheered a European Central Bank stimulus program worth more than one trillion euros.

ECB president Mario Draghi said the central bank will buy a total of 60 billion euros in assets every month in an effort to stimulate the region’s economy that is reminiscent of the stimulus program put into place several years ago by the U.S. Federal Reserve. (Fortune took an in-depth look at the ECB’s larger than expected quantitative easing earlier today.) London’s FTSE 100 improved by 1% following the news on Thursday while Germany’s DAX rose 1.3%.

Investors readying for a rise in global liquidity initially lifted U.S. Treasuries, whose relatively rich yields grew more attractive with prospects of lower euro zone bond yields, before they turned lower at midsession.

“It’s likely to impact yields everywhere,” said Aaron Kohli, an interest rate strategist at BNP Paribas in New York. “When you put this much stimulus into the markets, it’s going to go other places that you hadn’t intended, and one of those places is going to be U.S. debt.”

U.S. stocks rallied, with the Dow Jones industrial average jumping 260 points, or 1.5%. The Dow finished at 17,814, just a few points below where it started 2015. Meanwhile, the S&P 500 and the Nasdaq composite gained 1.5% and 1.8%, respectively, in a day that saw both indices wipe out all previous losses for 2015 seen earlier in January.

U.S. stocks have had a turbulent start to the year as low oil prices and concern over economic growth overseas have wreaked havoc on investor confidence and sent stocks on several losing streaks.

A handful of strong quarterly earnings reports also gave the U.S. market a boost on Thursday as shares of Southwest Airlines and railroad company Union Pacific both surged on strong financial numbers. EBay’s shares also gained 7% one day after the e-commerce giant announced massive job cuts and a standstill agreement with activist investor Carl Icahn.

—Reuters contributed to this report.

This article originally appeared on Fortune.com.

TIME mergers

Family Dollar Shareholders Approve Dollar Tree Takeover

Inside A Family Dollar Store Ahead Of Earnings Figures
A man walks into a Family Dollar Stores Inc. location in Mansfield, Texas on Jan. 7, 2014. Ben Torres—Bloomberg/Getty Images

The vote sidelines Dollar General’s competing offer, in favor of long-term growth over immediate earnings

Family Dollar’s shareholders have overwhelmingly approved a $8.5 billion takeover bid by rival discount chain Dollar Tree, a vote that sidelines Dollar General’s competing offer.

At the vote held in North Carolina, investors holding 74% of Family Dollar’s total outstanding shares voted in favor of the proposal, an outcome that Chairman and CEO Howard Levine praised. The merger still requires approval from the Federal Trade Commission, and that could come as soon as March.

The discount-retail sector has been the subject of a complicated and drawn out love triangle that has made headlines since July, when Dollar Tree initially made a play for Family Dollar in a cash-and-stock deal. But rival Dollar General swooped in with a competing offer, saying it would pay $80 per share for Family Dollar while Dollar Tree has stuck with its original $74.50 cash-and-stock offer.

While the Dollar General offer guarantees a higher price paid to shareholders, the vote ultimately asked investors to consider the growth potential of a merged Family Dollar-Dollar Tree (if they are willing to stick with their investment) over the long term.

Dollar Tree also lauded the outcome, while Dollar General was unsurprisingly disappointed.

“Today’s vote is a loss not only for Family Dollar shareholders, but also for consumers across the country who will not have the opportunity to benefit from the cost savings and efficiencies that we believe would have been created by a merger between Dollar General and Family Dollar,” said Rick Dreiling, Dollar General’s CEO and chairman.

The Dollar Tree bid also comes with fewer headaches, as the merged company would need to unload far fewer stores than if Dollar General had been successful, with divestitures needed from both proposals to win backing from the FTC.

Investors were finally persuaded the Dollar Tree deal was the right course to pursue. The Family Dollar vote had been postponed at one point because there hadn’t been enough votes to adopt the Dollar Tree merger, which Family Dollar has backed since the beginning. Since then, two influential shareholder advisory firms — Institutional Shareholder Services and Glass Lewis — have thrown their support behind the Dollar Tree bid.

Dollar Tree’s offer was a roughly 23% premium over Family Dollar’s trading price at the time the offer was officially made. The combined company will generate annual sales of about $18 billion, putting it slightly above Dollar General and making it a larger rival to Wal-Mart and other stores that sell goods at low prices. Dollar Tree sells everything in its stores for $1 or less, while Family Dollar has multiple price points to court value-conscious shoppers.

While the Family Dollar winner had remained in doubt for months, one clear winner was activist investor Carl Icahn. Icahn last year called on Family Dollar to put itself up for sale immediately, and at one point held a 9.4% stake in the company. He scored a reported $200 million profit on his investment when a bidding war broke out shortly after he lamented the retailer’s underperformance.

This article originally appeared on Fortune.com.

TIME europe

European Central Bank Unveils Stimulus Plan to Jolt Eurozone Back to Life

Will buy up to a total of €60 billion ($69 billion) of bonds a month through September 2016

As expected, the European Central Bank Thursday launched a massive program of bond-buying to support the Eurozone economy and stop the 19-country currency union falling into a destructive spiral of deflation.

President Mario Draghi told his regular press conference that the ECB would expand its current, limited programs of buying private-sector bonds and buy up to a total of €60 billion ($69 billion) a month through September 2016, or as long as it takes to drive away the threat of deflation.

The program “will in any case be conducted until we see a sustained adjustment in the path of inflation which is consistent with our aim of achieving inflation rates below, but close to, 2% over the medium term,” Draghi said. That compares with a rate of -0.2% in December.

The program breaks beyond any doubt the taboo over government bond-buying that has constrained the ECB since the Eurozone debt crisis erupted in 2010. With a maximum value of €1.26 trillion between now and September next year, it’s also much bigger than leaks over the last month had led financial markets to believe. Consequently, the euro fell over a cent to a new 12-year low against the dollar. By 0920 Eastern Time, it was trading at $1.1493.

However, the Frankfurt-based institution was forced to make some concessions to (mainly German-led) objections to the buying of government debt.

Most of the buying will be done by national central banks, and the ECB will only underwrite potential losses on bonds issued by European institutions such as the European Investment Bank or the Eurozone’s bailout vehicle. As such, if a country is forced to leave the Eurozone in the future and is unable to repay euro-denominated debt, then the losses will stay with the national central bank concerned.

Draghi also warned that the measures taken today would only be effective if Eurozone governments did their part in pushing through reforms to revive growth. German Chancellor Angela Merkel has repeatedly voiced concern that too much generosity from the ECB would relieve the pressure on governments elsewhere to enact such reforms.

In addition, the ECB also scrapped the 0.10% percent premium over its main rate that it was charging for the ultra-long-term loans it has been offering for the last four months, known as TLTROs.

Draghi said there was a “large majority” to trigger the program immediately, indirectly confirming that a minority had dissented against the decision.

This article originally appeared on Fortune.com

TIME E-Commerce

EBay Plans to Cut 2,400 Jobs and Unload Enterprise Business

The shake up comes as the e-commerce giant makes peace with investor activist Carl Icahn in prelude to a planned spin off of PayPal later this year

EBay plans to cut 2,400 jobs and unload its business unit that helps retailers manage their online shopping operations. The news came as eBay made peace with investor activist Carl Icahn by naming one of his allies as a board member. Here are the key points about the shakeup Wednesday and the company’s fourth-quarter earnings.

What you need to know: EBay confirmed reports from last month that it would eliminate thousands of jobs by saying it would slash its workforce by 2,400 positions, or 7%. The restructuring comes ahead of the company’s pending spin-off of online payments service PayPal into a separate, publicly-traded company.

Additionally, eBay said it may also part ways with its Enterprise unit, which works with online and brick-and-mortar retailers. The company said it may sell the business or hold an initial public offering after determining that it does little to lift sales in its core online marketplace. The decision is a major u-turn for eBay, which had previously invested heavily in enterprise, most notably by paying $2.7 billion four years ago for GSI Commerce, which fulfills orders for retail partners.

Meanwhile, eBay also patched things up with Icahn, the company’s largest shareholder and a thorn in its side by giving his ally, Jonathan Christodoro, a board seat. The two sides have reached “a standstill agreement” that also calls for PayPal to adopt certain corporate governance provisions post spin-off.

The big number: News of the job cuts, potential sale of the Enterprise unit s and strong quarterly financial numbers sent eBay’s shares up about 2.5% in after-hours trading.

EBay posted fourth-quarter revenue of $4.9 billion, up from $4.5 billion during the same period last year. Fourth-quarter profits were also up, rising 10% to $936 million, or 75 cents per share, from $850 million during 2013’s fourth quarter. Full-year revenue rose 12%, from $16.1 billion in 2013 to $17.9 billion this past year. For the full year, eBay posted a loss of $41 million after seeing $2.9 billion in profits in 2013.

What you might have missed: EBay’s payments unit — which is mostly PayPal — continued to show the most growth of any of the company’s segments. The payments unit generated $2.2 billion in revenue in the fourth quarter, representing an 18% gain year-over-year, while full-year revenue increased 19%, to $7.9 billion.

The Marketplaces segment still generated the largest revenue stream, though, bringing in $2.3 billion in the fourth quarter — up an anemic 1% year-over-year. That unit saw revenue increase 6% on the year, to $8.8 billion. The Enterprise segment, which is now in limbo, generated $443 million in the fourth quarter and $1.2 billion across 2014.

CEO John Donahoe, who is due a big payday when he leaves the company after the planned spin-off, called 2014 “a year of unexpected events and distractions” in a statement. He also bragged about PayPal’s results while promising better things for both that unit and what will remain of eBay. “EBay, while facing challenges, continues to be a great business and is focused on stabilizing performance and engaging its core customers,” he said.

This article originally appeared on Fortune.com

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