The Week in Business: Profits, Losses, and Everything in Between
A hedge fund scandal revolves around Dell, AT&T turns its gaze on Dish Network, and Houston executives rake it in.
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The Texas economy is one of the most robust in the world. Wildly profitable companies and ingenious entrepreneurs call this state home, and what happens here influences businesses around the nation. Here’s a slice of the profits, losses, big deals, and backroom decisions happening across Texas this week.
The FBI arrested seven hedge fund analysts this week as part of an ongoing investigation of insider trading, and Dell appears to be caught in the middle.
The traders are accused of illegally obtaining financial information from a connection at the Round Rock-based computer maker in 2008 and using it to make trades worth nearly $62 million, Forbes reported. So far three of the traders have pleaded guilty in the scheme, which “is the largest identified by the U.S. to date to involve a single stock,” according to Bloomberg.
The Bottom Line: The FBI refers to its crackdown on Wall Street corruption as ‘Operation Perfect Hedge,’ which is more than just a cool nickname: More than sixty people have been arrested since the stings began four years ago.
Words With Foes
Technology companies across Texas this week joined the chorus of protests against the Stop Online Piracy Act (SOPA) and the Protect Intellectual Property Act (PIPA). The Texas Tribune discussed the issue with Lanham Napier, CEO of the San Antonio web hosting company Rackspace, who believes the bills would give the government too much power to shut down websites without due process.
Also, Austin-based gaming company Zynga—which joined Twitter, Google, Facebook and other tech giants in opposing SOPA in a full-page ad in the New York Times last fall—reaffirmed its stance on its blog Wednesday, spelling out anti-SOPA messages in Words With Friends tiles.
The Bottom Line: The SOPA legislation, which was postponed Friday, was sponsored by U.S. Rep. Lamar Smith of San Antonio, who believes the act would protect copyright holders from overseas violators. According to the Tribune’s report, “the majority of Smith’s campaign financing, $59,300, in this year’s election cycle has come from the entertainment industry.”
Dishing for Dollars
In the wake of its failed merger with T-Mobile, AT&T could be looking to acquire the Dish Network to expand its reach in the wireless market.
The Dallas-based telecommunications behemoth is eager to increase its wireless spectrum, an asset that is becoming increasingly important as customers use more and more data to stream video, music and other types of mobile content. The investment site the Motley Fool says that if the AT&T/T-Mobile merger had been approved, “AT&T would have increased its 4G spectrum capacity by 62 percent.”
The Bottom Line: The Dish deal would not come cheaply: Bloomberg estimated that AT&T could have to pay a 77 percent premium on the satellite provider’s current share price.
The Electric Reliability Council Of Texas will spend almost $9 billion in the next five years on power grid improvements, much of which will be invested in wind energy and other renewable sources, NBC-DFW reported. The plan calls for 6,700 miles of new and improved transmission lines, which ERCOT hopes “will help decrease the need for rolling outages.”
The Bottom Line: Texas already leads all other states in wind power capacity by a considerable margin—we have 10,135 megawatts, as compared to second-ranked Iowa’s 3,675-megawatt capacity. An analysis by Forbes indicates that ERCOT’s planned upgrades would position the state as the primary energy exporter for the Southeastern U.S.
Winners of the Week: Houston Executives
The Houston Business Journal reported this week on the bonus packages of Houston executives, finding that the CEOs of the city’s four largest companies—ConocoPhillips, Marathon Oil, Enterprise Partners and Sysco—are compensated primarily through large incentive payments ranging from $5 million to $17 million. An executive recruiter quoted in the article says big bonuses are necessary to recruit quality talent, especially in the oil and gas industry.
Losers of the Week: Texas Health Insurance Customers
Texas has joined several other states in challenging the 2010 federal healthcare bill, which has several provisions set to go into effect this year. One of them requires insurance companies to spend at least eighty percent of customer premiums on medical care, limiting the amount they can spend on executive salaries, marketing, administrative costs and other expenses. If the companies do not meet the eighty percent threshold, they will have to rebate the difference to customers by August.
These rebates would amount to about $160 million for 690,000 Texans, the Fort Worth Star-Telegram reported. But the Texas Department of Insurance wants to cut that amount by 75 percent, saying the new rule would cut deeply into insurer profits and that the companies need more time to adjust. The agency expects a ruling from Washington by next month.