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tv   Nightly Business Report  PBS  September 12, 2013 4:30pm-5:01pm PDT

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report" with tyler mathisen and susie gharib brought to you by. >> sailing through the heart of historic cities and landscapes on a river, you get close to iconic landmarks, to local life, to cultural treasures. viking river cruises, exploring the world in comfort. different directions, twitter is going public. dell goes private. what it all means. >> stopped cold, the s&p seven day winning streak snap, the longest since july as gold suffers the lowest close in a month. and curb appeal. what sales, what doesn't?
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one home builder is going to extraordinary lengths to figure that out and hoping to gain a competitive edge in the process. we have that and more tonight on "nightly business report" for thursday, september 12th. good evening everyone. a big announcement a short time ago out of silicon valley. twitter filing for an initial public offering. the company filing paperwork with the securities and exchange commission though it will keep details of the business secret for now and of course, the company told the world by tweeting it. julia boorstin joins us now with more. julia, it is hard to say this is a surprise people have been anticipating this for a long time, but now we at least know they are going forward with it. >> absolutely. we knew this was coming. we expected this before the end of the year. now we know the process is in motion. i think it's fascinating that twitter announced this news in a tweet. that tweet saying we confidentially submitted a filing to the scc for an ipo and
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adds the tweet does not constitute an offer for any securities for sale. the key thing is this is a confidential filing. twitter is making use of the job act provision that allows companies with less than $1 billion to file confidentially at first. we don't get to read the filing and see what the revenue is. they go back and forth, get comments from the scc feedback like what risk factors in a question quiet period. we will get to see it no later than 21 days before the road show begins. tyler, twitter did not need to disclose they were taking the next step and we heard goldman sachs will be the lead banker and kayla reporting that and see what other under writers were named. >> julia, you took us through
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the mechanics and that makes sense but investors will be really excited when this ipo is filed. do we have any clues from any of the reporting that you've been doing about when this might happen, this year or next year and maybe even how big it will be? >> well, you know, what, susie, it depends on what feedback twitter gets from the scc. it seems like after facebook's ipo was such a debook l and the first day of trading so crazy, twitter will be careful and cautious and right now it's in communication with the scc and depending on the feedback, that will determine how long it takes to file the public s 1. too soon to say how it could happen but months before you could get the official filing, which will be fascinating for us and everyone to read and in terms of evaluation, twitter was originally valued at $10 billion when it raised money recently
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and we heard it could be $15 billion, evaluation as high as $15 billion when it files. >> exciting developments. julia boorstin reporting on the ipo. from one big company going public to the end of anner ro and another going private. dell computer, one of the leaders of the tech revolution is going private after shareholders approved a deal by founder michael dell. the company which once boosted a cap in excess of $100 billion is being bought out for a fraction of that, about $25 billion. jackie deangelis was there for the vote and has more on dell's past, present and future. >> reporter: after three failed attempts to approve a proposal from ceo michael dell to take the company private in a $25 billion deal, they finally voted today. the results are in in the affirmative. >> well, it wasn't any different from what i eventually expected.
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>> reporter: the big move from the pc maker in his dorm room at the age of 19. once hailed as a revolutionary company for direct sales model, dell topped fortune magazine's for the most admired companies but going private in hopes of turning around. inside the meeting room today, shareholders had mixed feelings. some were relieved concerned the stock price could falter more amils the uncertainty and others worry $13.75 under values the company and leaves dell himself the beneficiary from a come back. >> a long-term shareholder that prices have been a lot higher and if i rode it this far, i could go all the way. >> reporter: for those who want to keep the company private, echoing carl icahn who opposed the deal, even trying to fight it in court before throwing in the towel saying it would almost be impossible to win.
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>> i figure that we can't win, just too difficult. >> reporter: they thought the vote was skewed to michael dell's favor when they changed the voting rules after the last meeting altering the record dates and how extensions would be counted. on a call following today's vote michael dell said he was pleased. >> this is a great outcome for the customers and company and i'm more than excited to move even faster towards our goal of becoming the industry's leading provider of schoend to end solutions. >> reporter: while it's part of dell's next chapper it's up to michael dell to provide and execute a strategy to turn the struggling pc maker around. a lot of people think it's doable and michael dell will reap the benefit of that if it is possible. for "nightly business report," i'm jackie deorange laos. >> joining us to talk more about the chapter is jp eggers, professor of management at stern
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school of business. professor eggers, nice to have you back again. michael dell said this is a great outcome but what does he have to do to reinvent the a private company. it as a >> this would require a significant change of the organization. the decision to go private is to move away from the eyes of wall street, look at longer term targets and reinvent the organization from the ground up. there is really no more money to be made in the pc market, certainly for dell at this point in time so this move to services nine years after ibm sold off it's pc division and made the same move in many ways will be a difficult challenge that they have to try and acquire skills, restructure the organization and build an entirely new system for the firm. >> does going private give dell the best chance of success at this challenge and secondly, mr. dell has basically been there at the helm or closely involved with that company throughout this most recent period.
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why should anyone think that he now has the right recipe to fix it? >> well, as far as why he has the recipe to fix it, he certainly was the visionary that started this off in the first place, and he's put a lot of his own money on the table to make this work, whether we believe he deserves a chance based on that, it's hard to tell. you know, it's a very difficult thing to try and reorganize a business so focused on the pc market while publicly traded because trying to disentangle itself is a difficult thing to do when you look at quarterly returns. moving private gives him a chance to think longer term and build again from the ground up this way, and it certainly gives them the flexibility and privacy to take it in a new direction. >> there is this perception to be innovative if you're private rather than public company. we reported twitter is going to
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go public. it makes you wonder, is that really true? >> there is a lot of data to support the idea companies become less innovative when they go ipo public in the first place. a lot of the original innovators within the organization tend to leave, they like to be in smaller companies and cash out with the stock options they have. the pressure to move towards quarterly earnings tends to diminish invasions, certainly radical invasion and things happen. they can use that money to acquire invasions. there is much less detail to say what happens when a company goes private whether it gets the same benefit, but certainly, the potential is there to focus on longer term gains and provide the stock option incentives should the company go public or get aquired again that can actually provide the right incentive for innovators within the firm to be successful. >> is dell's experience a lesson to opter companys? that's
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question one. number two, when you just hinted at, did you expect to see dell go public? >> the second question first. certainly, there has to be an exit strategy at some point in time. i think the vision would be to reorganization the business model and then yes, to try and go public again or to be sold off at some point in time. as far as the lesson organizations, dell is in many ways the latest in a very, very long line of one-time leading iconic organizations fallen on hard times. you can look at kodak, poloroid and many companies have been successful for long periods and that success led the downfalls in many ways. >> certainly a story to be continued. thank you so much for coming on the program. >> thank you. >> jp eggers professor of management at sterns school of business. on wall street the big september rally hit the news
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button today. the s&p 500 seven session win streak was snapped as we mentioned earlier and so was the dow's run. it ended the first loss of the week despite big stock moving news from one of its components, disney. the house of the mouse announced it will buy back up to $8 billion in shares, that sent disney stock up more than 2% today. nevertheless, the dow dropped near lly 26 points and the s&p diped to 16.83 and the nasdaq fell nine to close at 37.15. the price of gold tumbling 33 an ons to a four-week low as the safe haven run up in prices appears to be unwinding. the u.s. government posted a narrower budget short fall in august compared to the same month ayear ago. last month's budget gap of $148 billion is keeping the nation on track to keep this year's budget deficit under $1 trillion for the first time in five years.
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an encouraging development for walmart and it's plans to open as many as six new stores in the nation's capital. the mayor of d.c. vetoed a bill that would force the chain and big box retailers to pay workers as much as a 50% premium over the minimum wage of $8.25 an hour. it was approved by the city counsel two months ago, but today their mayor vincent gray called it a job killer. still ahead on the program, tieing ceo pay to company performance, is it working? that's coming up. but first, how the international markets closed today.
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there has been a big push to tie company performance to ceo pay and a study takes a look at whether it's working. mary thompson joins us with more on the finalings. so, mary, is it working? >> this is interesting. this was a survey done and it looked at performance-based grants made from 2008 to 2010 and found in 2/3 rrds of the grants, the ceo met or ex seeded expectations. however you don't have a bunch mark to compare it to and don't know how a company performed in paper forms in past years using other types of pay. >> and this is a good year to perform well. the economy was improving, stock market was booming, easy for ceos to meet targets. >> that was part of the issue with performance based pay because that was driven by the economy. you have to take it with a grain of salt when you see them meet of exceed these expectations, as
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so many did. >> is pay coming down? >> not really -- >> not -- >> pay is still pretty significant and that's -- you know, it's still a concern out there. >> so is this a case where the guys and women who do not exceed the goals make less but they are still making a lot? it's not like they are really -- >> they are really hurting. you know, there is a new term out there called realizable pay and what it takes into account if you receive options or performance based stocks they may be valued at different levels during different times depending on the stock base performance. let's take a look at larry elson. if you added up the compensation given over the last couple years, his compensation would be double what the realized or current market value of that compensation is in large part because oracle stock hasn't performed as well as many expected so his options are
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under water. >> very interesting study. mary, thank you very much. amr has been cleared for take off. a judge okayed plans by the parent of american airlines to exit with bankruptcy protection and go ahead with the plans to merge with u.s. airways. the merger is conten get on the justice department lawsuit to stop the carrier from joining forces with u.s. airways because it could lead to higher fairs and less competition. well, it's almost check in time for hilton hotels on wall street. the giant hotel operator owned by the black stone group filed paperwork today to begin selling stock to the public. hilton plans to use some of the $1 billion it hopes to raise from the stock sales to pay down some debt. well, we begin market focus with a stock that experienced sheer drops this year and again today. lulu lemon said they got off to a late start because of late
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deliveries and a recall. they are looking for a new ceo. investors didn't care the company beat estimates. the stock went down more than 5% to $65.29. mens warehouse having a tough day. the retailer cutting the full-year guidance after missing estimates. the company said it was hurt by one-time charges and an early easter. it's the first without company founder george zimmer ousted over the summer. you won't like the stock today, fell 12% to $34.08. johnson, the maker of infamil, in audition to another buy back program. the stock rose a fraction to $74.75.
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royal caribbean is doubling the dividend coming under pressure from the largest shareholder. it increased quarterly dividend to 25 cents payable october 8th and will hold annual elections for directors. the stock rose a bit to $38.95. and regional banking deal announced today, oregon's biggest bank is buying sterling financial. the acquisition doubles umpqua. shares of umpqua tunnelled to $16.14, sterling financial surged to $28.40. what is the risk of having a great idea? one of them is that someone else likes it as much as you do, so they copy it. and that's what is happened to rainbow loom, the creator of colorful bracelet making kits that become a national hit including with my little guy.
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the company filed a lawsuit against the maker of fun loom accusing it of copying the idea to the trademark plastic c shape fastener that holds the bracelets together. joining us now to discuss this is sarah needle man. she did a fascinating story about rainbow loom. i can't get enough of it. i'm wearing it on my wrists here. you got some, too. they are seriously the rage. now, the crux of this suit boils down to a c shaped plastic fastener, somebody can't patent the letter c or this fastener, can they? >> the creator of rainbow loom got a patent for the clip. the patent covers the hook that is used to grab the rubber bands and loom as well but the clip is one of the biggest parts of the complaint so that's what we
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focused on. >> i thought what was interesting not story today is this is a small business and very motivated ceo that came up with the bright idea and now he wants to protect his business from knockoffs. how does a small business guy without lawsuits and everything protect their ideas? >> attorneys recommend an entrepreneur get a patent prevent, a couple hundred dollars and one year to protect your idea. you spend that one year testing market to see if your product is something that could be a seller, and if it is, it's worth the investment to some people, to go ahead and apply for a patent, which can be several thousand dollars, it could take two years. if you are granted it, it's good from the time you filed so you're protected. >> so the rainbow loom owner is going after not only fun loom maker but toys r us which is the
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seller of the fun loom and at least one other manufacturer, crazy loom. how many of these looms are being sold and at what price? >> well -- >> and why didn't i think about it? >> they cost $15 at retail. the creator of rainbow loom is suing zenicom, toys r us for selling crazy loom which is made by another small company. >> it seems like the ceo says he created the market, everybody is copying him and trying to put them out of business. can you really patent a market? are the chances he'll be successful? >> he's not patenting the market. he said he sold more than 1.2 million rainbow loom kits and many, many more that have been sold under different brands but patented the kit itself and components and that's been the entrepreneur's best protection
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and look after knock offs and go after them. >> the danger in this day in age, sarah, with the speed of manufacturing and the ability to copy things through 3 d printers and other means, that you can come to market with a close knockoff very, very quickly. he quit his job a year ago. he was working at nissan as a crash test guy and quit his job a year ago. is that really the point here that you can come out to market with a copy cat product or copy product, though, they would say not a copy cat very quickly? >> you can manufacture a product faster today than a few years ago and 3 d printing is a big part because you can make a mold quickly from home. they aren't as expensive as they used to be and you can come up with an exact model you want, send it off and set up an e commerce site and sell it
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through facebook. it's a much quicker process and the knock offs can come out quickly, and you have to pay attention. >> thank you very much. sarah needle man, small business reporter. how far are home builders willing to go to give potential buyers what they want? you might be surprised by the answer but first look at commodities, currencies and treasuries. fewer americans are defaulting on home loans. foreclosures fell to a low last month dropping another 8% from the month prior and down a staggering 44% from august of last year, so what is going on? reality track credits higher home values, steady job growth and fewer troubled loans. with the housing market in
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recovery mode, some home builders are working with potential buyers to figure out what they really want in a new home. one big builder made a test kitchen for housing to see what will sell. diana olick has the story. >> reporter: in a none discrypt warehouse, they are doing what they do best, building homes or frames complete with cardboard kitchens and fireplaces. >> it's amazing what people know and can imagine. >> reporter: this market research is the brain child of the cmo debra wall who for 20 years helped sell cars. >> i watch add chief engineer at toyota, and this is the best thing here, have people run through homes, see what they need, how they would interact, where they would go and as a team, how can we actually do this in home building?
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>> reporter: that's why they are running focus groups through the homes, literally walking them through the floor plan. >> as a researcher, i want to know how you feel about these homes and be open and honest with me. >> i like the openness of not feeling the forier as you walk through the walls. >> as you walk through the room, you can figure out where the kids would be, furniture would be, it seemed to help out. >> reporter: they will run through the models for a week and run to another market. they will get at least five new ideas from each one of these events. one idea that came from a recent group is this kid's work center visible from the kitchen, and the idea was so popular in fact within a year the room recame a reality. >> at a high level i would say most fires are more practical than their purpose in the past consumers were more interested in more is better. they are not as interested in that. >> reporter: buyers today are looking for larger mud rooms, better organizational space,
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bigger bathrooms for the kids and full home automation where everything from the lights, locks, alarm system, heat and ac can be controlled from your smart phone. >> does this really work? can we do this? the information is valuable. >> reporter: because in today's competitive housing market, knowledge is power and knowing what the buyers want is just as important sz knowing what they do not want. for "nightly business report," i'm diana olick in chicago. and finally tonight, author j.k. rolling appears to have more magic in her. the author of the wildly popular harry potter books has signed a deal to write one more screen play based on a little-known charter from the series. the story will be about newt and his book "fantastic beasts and where to find him." it's a textbook they study at school. it will start in new york city 70 years before harry was born and tyler, you know, she's a money machine. she's sold half a billion books, eight movies came out of them.
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$8 billion at the box office -- >> yeah -- >> theme parks and now this deal to continue. i've got my rainbow looms. >> anyway, that's "nightly business report" for us. for more on the business stories we covered tonight go to >> i'm tyler mathisen thanks for joining us. have a good night, everybody, and we'll see you back here tomorrow night. "nightly business report" has been brought to you by. >> sailing through the heart of historic cities and landscapes on a river, you get close to iconic landmarks, to local life, to cultural treasures, viking river cruises, exploring the world in comfort.
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hello there. welcome to "newsline." it's friday, september 13th. i'm catherine kobiyashi in tokyo. syrian leaders seem to be taking steps to give up their chemical weapons. bashar al assad has endorsed a proposal. and he said his country is


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