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BREAKFAST WITH THE FOOL
Time Warner, EMI Call Off Merger

By Chris Rugaber (TMF RFK)
October 5, 2000

Time Warner (NYSE: TWX) and EMI Group announced today that they are dropping plans for their proposed $20 billion merger in the face of European Union (EU) antitrust concerns. The move increases the likelihood that EU regulators will approve America Online's (NYSE: AOL) separate $150 billion purchase of Time Warner.

Meanwhile, EMI and Time Warner will continue their efforts to formulate an agreement that will satisfy both U.S. and European antitrust regulators, but decided to withdraw their current EU filing in order to avoid a formal decision blocking their merger. The two companies may submit a new merger proposal at a later date. EMI Chairman Eric Nicoli noted in a statement that "The withdrawal allows additional time to reassess regulators' concerns and to pursue solutions simultaneously in Europe and the U.S."

Concerns over the merger focused on the two companies' potential dominance of recorded music, music publishing, and online music distribution. According to a Bloomberg report, the two companies combined would control the rights to 2 million songs, dating back to the 1940s, and would own five major record labels: Atlantic Records, Elektra Entertainment, Warner Bros., Virgin Records, and EMI.

In addition, EU regulators noted that the merger would drop the number of major music labels to four: Seagram's (NYSE: VO) Universal Music, Sony's (NYSE: SNE) Music Entertainment division, Bertelsmann's BMG Entertainment, and the EMI/Time Warner combination. Last week, the two companies floated the possibility of selling Virgin Records and a music publishing subsidiary to assuage those concerns. Yet the offer was not formalized in time for a meeting today of the European Commission and its antitrust task force, and therefore would not have been taken into consideration.

By withdrawing its proposed combination with EMI, however, Time Warner has made approval of its purchase by AOL that much more likely. According to The Wall Street Journal, the EU's merger task force has already prepared a draft decision clearing the acquisition.

News to Go

PC direct seller Dell Computer (Nasdaq: DELL) announced after yesterday's market close that third-quarter and full-year sales are lagging expectations, thanks to soft demand in Europe and slower sales to small-business customers. The company's revenue warning follows similarly disappointing announcements in recent weeks from high-profile technology companies Intel (Nasdaq: INTC) and Apple (Nasdaq: AAPL). Dell added that it still expects to meet profit estimates for the third quarter. For more info and analysis, check out yesterday's article from the Fool News team.

Leading computer memory manufacturer Micron Technology (NYSE: MU) confounded the negative PC hardware trend and reported a doubling of sales after the market's close yesterday. The company reported fiscal fourth quarter earnings of $726.7 million, or $1.20 per share, compared to a loss of $17.4 million in the year-earlier period. Consensus analysts' estimates were for $0.96 per share. Sales jumped to $2.57 billion from $1.08 billion in last year's fourth quarter. In addition to rising sales, the company has cut manufacturing costs and increased gross margin.

It's the first Thursday of the month, and that means monthly retail sales reports. Recently, it has also meant another round of bad news from former Rule Maker Gap (NYSE: GPS), which announced a September same-store sales drop of 8%. The company blamed sluggish back-to-school sales. For more information on Gap, check out the Motley Fool Research report. And for more retail company reports, don't forget that the Fool compiles a list of retail sales figures every month, so be sure to check back in a few days when September numbers for are posted.

Leading satellite TV provider Hughes Electronics (NYSE: GMH) announced yesterday that it signed up 450,000 new customers for its DirecTV unit in the third quarter, 6.3% more new customers than it added in the year-earlier period. The company now counts over 9 million customers, and expects third-quarter revenues between $1.65 billion and $1.7 billion.

Check out yesterday's Foolish market wrap-up with just one click.

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