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Plans to cut costs lift MGM shares

October 30, 2008|times wire services

Shares of MGM Mirage, the casino company majority-owned by billionaire Kirk Kerkorian, rose the most in almost 19 years after it shelved two planned casino developments and outlined cost reductions that would save $500 million a year.

Chief Executive Terrence Lanni said most of the expense cuts were permanent. He is halting work on the company's planned MGM Grand Atlantic City casino resort and indefinitely delaying a joint venture on the Las Vegas Strip with Kerzner International Ltd., the owner of the Atlantis casino in the Bahamas.

Cutting costs and delaying the projects may help MGM Mirage cover loans and finish its $11.2-billion CityCenter project on the Las Vegas Strip. Finding funds for new developments has become increasingly difficult amid the global financial crisis.

The company reported that third-quarter profit tumbled 67% as cash-strapped gamblers in the U.S. avoided Las Vegas.

Shares of MGM Mirage increased $3.42, or 33%, to $13.75.

Net income dropped to $61.3 million, or 22 cents a share, from $183.9 million, or 62 cents, a year earlier, the owner of 10 Las Vegas casinos said. Revenue slid 5.9% to $1.79 billion.

The 91-year-old Kerkorian and Dubai World, the government-owned investment group, are the largest shareholders in MGM Mirage. The two are developing the CityCenter complex of hotels, casinos and condominiums on the Las Vegas Strip, scheduled to open before the end of next year.

The financial crisis and Las Vegas' decline have made it harder for the partners to get loans to finish the project. They have raised $1.8 billion of the $3 billion they need, according to Oct. 6 filings.

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* Comcast Corp. said third-quarter profit increased 38% as the company cut capital spending and added Internet and telephone customers. Net income rose to $771 million, or 26 cents a share, Philadelphia-based Comcast said. Sales gained 9.9% to $8.55 billion.

* Kraft Foods Inc. reported third-quarter profit more than doubled to $1.4 billion, or 93 cents a share, with 57 cents of that coming from the sale of the Post cereals unit. Revenue climbed 19% to $10.5 billion, helped by an acquisition, the Northfield, Ill.-based maker of Cracker Barrel cheese and DiGiorno frozen pizza said.

* Office supply chain Office Depot Inc. said it might close North American stores and sell some assets after it posted a worse-than-expected loss in the third quarter because of slumping sales in the region. The chain said it lost $6.7 million, or 2 cents a share, compared with a profit of $117.5 million, or 43 cents, a year earlier. Sales fell 7% to $3.66 billion.

* Qwest Communications International Inc. plans to cut 1,200 jobs and said sales and earnings this year would be at the low end of its forecasts as customers end service. Third-quarter net income fell to $151 million, or 9 cents a share, from $2.07 billion, or $1.08, a year earlier when a tax-related gain lifted results. Sales dropped 1.6% to $3.38 billion.

* RealNetworks Inc., owner of the Rhapsody online music service, posted a third-quarter loss of $4.5 million, or 3 cents a share, after a profit of $4.34 million, or 3 cents, a year earlier. Sales gained 4.7% to $152 million, Seattle-based RealNetworks said.

* Branded and generic drug maker Watson Pharmaceuticals Inc. said its third-quarter profit more than doubled, helped by a favorable tax liability settlement and an asset sale. The Corona-based company said it earned $71.1 million, or 62 cents a share, compared with $34.6 million, or 31 cents, in the same period last year. Revenue increased 8% to $640.7 million.

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