Business Digest


October 12, 2004

In The Region

Lockheed to devote profits to fixing damaged satellite

Lockheed Martin Corp., the largest U.S. defense company, said yesterday that it will contribute all of its profits from the construction of a government weather satellite to efforts to rebuild the spacecraft, which was damaged when it fell to the floor during assembly in September 2003.

The Bethesda-based company has "voluntarily contributed" all profits from the $233 million N-Prime satellite project to the rebuilding project and will complete the spacecraft on a "cost-only basis," Lockheed spokesman Buddy Taylor said. He declined to give specific figures.

The 14-foot-high satellite was about 3 feet off the ground, being moved from an upright to a horizontal position for replacement of a scientific instrument, when it fell to the floor of Lockheed's facility in Sunnyvale, Calif., on Sept. 6 last year, the National Aeronautics and Space Administration said.

The mishap was traced to 24 bolts that weren't installed on a plate holding the satellite to a cart that turns the spacecraft over during construction, a board investigating the accident said in its final report Oct. 4.

Legg's Miller doubles fund's Netflix shares

Legg Mason mutual fund manager William H. Miller III, making another bet on an Internet company shunned by investors, doubled his stake in movie-rental service Netflix Inc. to 11.5 percent in the third quarter, according to a Securities and Exchange Commission filing

The Legg Mason Opportunity Trust, one of two mutual funds managed by Miller, held 6 million Netflix shares Sept. 30, an increase from 2.9 million June 30, according to the filing.

Shares of Netflix, based in Los Gatos, Calif., plunged 57 percent in the third quarter amid concerns the company's mail-order DVD service may lose sales to a rival service started by Blockbuster. Miller, known for besting the Standard & Poor's 500 index for a record 13 straight years, has used price declines at companies such as Inc. to increase his wager on the future of electronic commerce.


Boeing is confident of jet deal, despite end to lease program

Boeing Co. chief executive Harry C. Stonecipher said yesterday that he remains confident that the company will ultimately get an air-tanker contract from the government despite the formal demise in Congress last week of the previously approved $23 billion deal.

The previous contract was undercut by ethical concerns about the role of former Pentagon procurement official Darleen A. Druyun. Druyun was sentenced Oct. 1 to nine months in prison for lining up a job with Boeing while she was overseeing the contract review.

The defense legislation passed by Congress eliminates any possibility of Boeing leasing converted 767s to the Air Force as refueling tankers, a plan that drew criticism for its high government costs. But the government still might decide to buy Boeing tankers, and that option remains under review in the Defense Department.

Stonecipher said the company would be able to "find our way through this" and satisfy any lingering concerns in Congress. "If there is a contract for tankers, as I feel quite confident, Boeing will get it," he said in a conference call with reporters.

Merck director gives CEO a vote of confidence

Merck & Co. Inc., the U.S. drugmaker that recalled its Vioxx painkiller because of a link to heart disease, doesn't expect Chief Executive Officer Raymond V. Gilmartin to step down early, Merck Director William G. Bowen said yesterday.

Merck has picked a firm to search for Gilmartin's successor and plans to announce a choice by December 2005, Bowen said in an interview from Merck's headquarters in Whitehouse Station, N.J.

The Vioxx withdrawal Sept. 30 hasn't accelerated the board's plans, said Bowen, 70, the former president of Princeton University who is president of the Andrew W. Mellon Foundation and has been a Merck director since 1986.

Gilmartin surprised directors at a regular board meeting Sept. 28 with the decision to withdraw Vioxx, the company's fourth-biggest product, Bowen said in an interview Sept. 30. The drug's $2.5 billion in annual revenue - 11 percent of the company's total - made it the biggest drug ever recalled. The move cost investors $26.8 billion in market value Sept. 30.

Avoid Delta shares, says Morgan Stanley analyst

Shares of Delta Air Lines Inc. fell yesterday amid fear among some analysts that the struggling carrier will be forced into bankruptcy if it doesn't get significant wage concessions from its pilots in the next three weeks.

Representatives for the nation's third-largest airline and its pilots union said the two sides continue to negotiate, though they would not say if a deal is possible soon. Meanwhile, 99 Delta pilots retired in September, effective Oct. 1, the union said yesterday.

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