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BREAKFAST WITH THE FOOL
Providian Agrees to Settle Lawsuits

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By Mike Trigg (TMF Tonto)
December 29, 2000

Credit-card provider Providian Financial Corp. (NYSE: PVN) announced after the market's close yesterday that it settled a series of consumer class-action lawsuits for $105 million, including attorneys' fees and restitution in the form of cash and other payments. According to the company, the decision was part of an effort to leave its legal troubles behind. The company also reaffirmed that fourth-quarter forecasts would not change.

The agreement with the federal Office of the Comptroller of the Currency, the California Attorney General, and the San Francisco District Attorney's Office includes millions of Providian customers, dating as far back as March 1995. The suits accused Providian of improperly marketing and selling products to customers, through practices such as enrolling customers in certain products or services without permission.

For Providian, this was not the first time it had chosen to settle. Last June, the company paid more than $300 million to customers who claimed foul play in the form of illegal charges and sales tactics. According to a Reuters article, the settlement was believed to be one of the biggest in credit card consumer fraud history. However, like yesterday's settlement, the eighth-largest credit card issuer in the United States admitted no unlawful activity.

The San Francisco-based company expects to take a charge of about $22 million, or $0.07 per share, in the fourth quarter, but still expects to make between $0.71 and $0.73 per share excluding the charge. That's in line with previous guidance. The Street consensus is calling for earnings of $0.73 per share.

While legal troubles never polish a company's image, Providian's credit card business has remained healthy, growing its customer base over the past year and a half by roughly 50% to more than 15 million cardholders. That's partly the result of a major initiative launched in mid-1999 to improve customer satisfaction. According to yesterday's press release, the company has seen strong improvements in customer retention, and customer complaints have declined.

Remember, Step 2 in The 13 Steps to Foolish Investing advises settling your personal finances, warns of the dangers of credit card debt, and recommends that everyone pay off any such debt as soon as possible. There are more than one billion credit cards in circulation in the U.S., and nearly 70% of credit card holders carry a revolving balance each month. If you haven't read the 13 steps, why not register to become a Fool and do so now?

News to Go

According to a press release, Israeli telecommunications company ECI Telecom Ltd. (Nasdaq: ECIL) announced that it would cut 400 jobs to reduce costs. The company made no additional comments regarding the layoffs. However, it indicated earlier in the week that it would eliminate jobs by splitting into five separate companies. Yesterday's release also pointed out that ECI is negotiating $450 million in loans for the new companies. 

Patent information provider Information Holdings Inc. (NYSE: IHI) announced that it expects fourth-quarter net income between $0.10 and $0.12 per share, well above the Street consensus estimate of $0.06 per share. Revenues are expected to come in at $22 million to $23 million. According to Bloomberg, citing an interview with CEO Mason Slaine, the better-than-expected earnings are the result of its Transcender unit. That business teaches information technology workers about Internet certification and is benefiting from a worker shortage in the United States. 

Elderly communities operator Sunrise Assisted Living Inc. (Nasdaq: SNRZ) said it would sell nine properties for $131 million to a partnership associated with Prudential Real Estate Investments. Sunrise will continue managing the properties. Including that transaction, Sunrise has agreed to sell or has already sold 22 properties for $314.1 million this year. The deals are part of a plan to sell 15 to 20 holdings every year while still continuing to manage them. The company also indicated that it's comfortable with earlier forecasts for a fourth-quarter profit between $0.37 and $0.40 per share. The Street is calling for a profit of $0.40 per share.

Digital Internet access equipment maker Westell Technologies Inc. (Nasdaq: WSTL) announced that its third-quarter results would fall short of previous estimates, citing the slowing economy and weak demand for its products. The company expects revenues in the current period, which ends Dec. 31, to be between $76 million and $78 million, though the Street was expecting roughly $92.3 million. For the period ending March 31, the company cut its forecast to expect sales between $75 million and $80 million, well below the $121 million Street consensus.

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