Merrill Lynch's agreement to sell
$30.6 billion of toxic securities gives away the bank's
potential profits on the securities and leaves it on the hook
for most of the risk, strategists at Bank of America wrote on
Merrill Lynch & Co Inc (MER.N) has financed 75 percent of
the sale of the securities, meaning it is on the hook if the
assets decline by more than 5 cents on the dollar, Bank of
America strategist Jeffrey Rosenberg wrote.
Merrill agreed earlier this week to sell the $30.6 billion
portfolio of collateralized debt obligations to private equity
firm Lone Star Funds for 22 cents on the dollar, or $6.7
Analysts, including Rosenberg, initially reacted positively
to the deal, and Merrill's shares rose nearly 8 percent on
Tuesday, even though the investment bank sold $8.55 billion of
new shares to raise capital after selling the assets at a loss.
Citigroup analysts called the asset sale a "watershed
But Rosenberg wrote Wednesday that "perhaps the initial
euphoria over Merrill's asset sale and capital raise ...
overstates the positive implications."
In a report entitled "On Second Thought ... " Rosenberg
wrote, "Merrill now finds itself effectively in the position of
having sold off its upside but retaining its downside."
Because Merrill is still exposed to losses, the asset sale
can't be seen as a sign the financial sector has finally
touched bottom as some analysts have suggested, Rosenberg
Merrill shares rose 63 cents, or 2.4 percent, to $26.84 on
the New York Stock Exchange on Wednesday.
(Reporting by Elinor Comlay; editing by Jeffrey Benkoe)
Comcast Corp (CMCSA.O), the larger
U.S. cable service provider, posted a higher quarterly profit
as it gained market share in phone and Internet services and
controlled expenses, sending shares up 6 percent.
measurement of net cash the company prefers, largely due to a
drop in capital expenditure as a slowdown in U.S. homebuilding
meant that it spent less expanding its cable systems to new
While that spending slowdown contributed to weaker video
subscriber growth, analysts said Comcast was winning market
share from phone competitors including AT&T Inc (T.N) and
Verizon Communications Inc (VZ.N).
"Free cash flow was better than we expected and that was
partly due to the fewer customer adds, so they didn't incur
costs of adding new subscribers," said Tom Eagan, analyst at
Shares in Comcast rose $1.08 cents to $20.26. Shares of
Time Warner Cable (TWC.N) also rose 4 percent, while
Cablevision (CVC.N) shares rose 4.8 percent
Comcast, which has 24.6 million subscribers, said it added
278,000 high speed Internet subscribers and 500,000 phone
subscribers in the second quarter. Seven analysts polled by
Reuters had on average forecast Comcast to add 327,000 new
Internet subscribers and 579,000 new phone subs.
Comcast Chief Operating Officer Steve Burke told analysts
on a conference call that Comcast's faster Internet access
speeds are helping to win over phone company DSL customers as
they want to watch more online video.
Burke said the company is also on target to add more than 2
million phone subscribers by the end of the year. It currently
has 5.6 million, making it the fourth largest U.S. phone
Comcast lost 138,000 basic video subscribers during the
quarter while analysts had on average been expecting the
company to lose 129,000 such customers.
The cable company added 320,000 digital video subscribers,
while the analysts had expected Comcast to add around 450,000.
Net profit in the second quarter rose to $632 million, or
21 cents a share, from $588 million, or 19 cents a share, a
year earlier, Comcast said on Wednesday.
Revenue rose 11 percent to $8.553 billion.
Wall Street expected Comcast to post revenue of $8.574
billion and per-share profit of 22 cents, according to Reuters
The Philadelphia-based company posted a 216 percent rise in
free cash flow to $1.163 billion.
Comcast spent less on buying new digital TV set top boxes
than a year ago, when it bought a significant number of new
boxes ahead of a U.S. regulatory deadline to adopt a different
(Reporting by Yinka Adegoke; Editing by Derek Caney)
Private employers added 9,000 jobs in
July, according to a private report by ADP Employer Services
released on Wednesday.
In June, the private sector slashed 77,000, according to
revised data. June was originally reported as 79,000 jobs lost.
The median of estimates from economists surveyed by Reuters
was for the ADP report to show a drop of 60,000 private-sector
jobs in July. The 32 forecasts ranged widely from a decline of
110,000 to a fall of 4,000.
The ADP report comes ahead of the government's more
comprehensive labor market report on Friday, which economists
expect to show a decline 75,000 jobs. That would make July the
seventh consecutive month of job losses for the world's largest
(Reporting by Burton Frierson; Editing by Theodore