Business News You Need Today: Aug. 27, 2010
Here's news from the business world and other money matters to watch out for Friday (last updated at 7:33 a.m. Eastern time)
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Gambling With Welfare Benefits: In the U.S., welfare payments are made electronically in the form of Electronic Benefits Transfer cards, which work similarly to debit cards. In two states, Michigan and California, controversy is brewing because many welfare recipients use ATM machines at casinos to withdraw their welfare payments. As DailyFinance columnist Michael Kaplan explains, politicians in both states are crying foul and want beneficiaries' ability to access welfare funds in gambling establishments to end.
Blockbuster To File Chapter 11: Once-dominant video-rental giant Blockbuster (BBI) is beginning the process to file a pre-planned bankruptcy by mid-September and is in discussions with stakeholders about potential restructuring plans, according to a Los Angeles Times report. Blockbuster seeks to restructure crippling debt of nearly $1 billion and escape leases on 500 or more of its 3,425 U.S. stores. The company has been signaling since March that it might file for bankruptcy.
3Par Backs Dell Takeover Bid: Data-storage maker 3Par (PAR) has agreed to accept an upgraded $1.8 billion takeover offer by Dell (DELL), which matches an earlier bid by Hewlett-Packard (HPQ). Dell's offer, which values 3Par stock at $27 a share, is three times more than the stock traded for before the bidding war broke out last week. 3Par, of Fremont, Calif., says its board continues to recommend the Dell offer.
Obama Vacation Home Sold: The Hawaii house rented by the Obama family for winter outings has been sold to new investors, Luxist reports. The five-bedroom home on Kailua Beach built in 2006 sold for $1.05 million less than its $7.95 million asking price. The listing agent declined to name the new owner, but sales documents show the buyer as Paradise Points Estates. Despite the sale of the "Winter White House," the agent said, the new owners are eager for the Obamas to return.
U.S. Homes Shrinking: McMansions, those popular gargantuan homes built on postage-stamp lots, appear to be going the way of Hummers. U.S. homesteads are shrinking as Americans downsize in response to the lackluster economy and high unemployment, WalletPop reports. The average size of a new home fell to 2,135 square feet in 2009, down from more than 2,300 square feet earlier in the decade.
Downward Revision In GDP Expected: The Commerce Department is expected to report Friday that U.S. economic growth in the second quarter was less robust than previously reported. Gross Domestic Product likely rose just 1.4% in the three months ending June, down from the previously reported rate of 2.4%. The expected drop affirms what many economists and consumers already know: that recovery appears on hold.
Global Stock Markets Weak: Stocks around the world mostly fell Friday on continued bad news about the global economic recovery and ahead of key economic data and a speech to be delivered later by Federal Reserve Chairman Ben Bernanke. Key European markets were flat, while those in Asia closed mostly lower. Stock futures on Wall Street were little changed. In his comments Bernanke will likely seek to soothe investors who are anxious about the U.S. economy and a possible double-dip recession.
Gulf Residents Question BP Cleanup: Oil may have stopped flowing into the Gulf of Mexico, but the controversy surrounding BP's (BP) use of a toxic dispersant to break up the oil is still erupting. As DailyFinance's Bruce Watson reports, though the oil giant reportedly stopped using the chemical dispersant known as Corexit more than a month ago, area residents claim it is still being sprayed from planes and boats.
USA Today To Cut Jobs: USA Today, the nation's second largest newspaper, is taking steps to dramatically overhaul its business, a makeover that will result in about 130 layoffs this fall, USA Today Publisher Dave Hunke told the Associated Press. The cuts amount to a 9% reduction in the 1,500-member workforce employed by the newspaper, which is owned by Gannett (GCI), the nation's largest newspaper chain.
Boeing Again Delays 787 Delivery: Boeing (BA) has once again pushed back the approximate date it expects to deliver its first new 787 jetliner, to the middle of the first quarter next year. The latest delay follows an announcement last month by the airplane maker that the first delivery would be pushed into the first few weeks of 2011 because of a series of issues. In a statement Friday, Boeing said it is working closely with Rolls-Royce to expedite engine availability, and that flight testing continues as planned.
Egg Prices Headed Skyward: The massive recall of tainted eggs is likely to push egg prices higher in coming weeks. Since the recall of 550 million eggs two weeks ago, wholesale egg prices in the Northeast and Midwest have soared nearly 40%, according to the U.S. Department of Agriculture. The news could be devastating for egg lovers, who have enjoyed five straight months of falling egg prices.
