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EMI STOCK INCHES BACK
After Two Steps Back on Profit Warning, Shares Take One Step Forward
After taking a 35% hit in share price following a warning that profits would be off by 20% this year, EMI watched its stock claw its way back up on the London Exchange today. In heavy trading, EMI shares battled back to 250 pence ($3.68) from their low of 214 pence ($3.15) at yesterday’s close, marking a gain of nearly 17%. That gain brings the shares back about halfway to pre-plunge levels. Over the past year, EMI has traded as high as 580 pence ($8.53), but has been in decline since January.

EMI issued its profit warning based on worsening conditions for the global music industry. While EMI chief Eric Nicoli has said he expects upcoming releases from Robbie Williams, Garth Brooks, Lenny Kravitz and Pink Floyd to buoy the company during the second half of its fiscal year (which ends in April), first-half troubles—which have included the tragic loss of Aaliyah and soft sales for a troubled Mariah Carey’s "Glitter"—will continue to weigh down year-end results.

Meanwhile, a memo from EMD chief Richard Cottrell to his troops details somewhat EMI’s plans for exiting the manufacturing and distribution business. In the memo, Cottrell attempts to clarify earlier EMI statements, saying that the company’s stated intent to get out of the low-margin sector "is strictly limited to the physical distribution and manufacturing functions and does not include the sales and marketing functions." The memo goes on to say that EMI is in active discussions with companies interested in its manufacturing business and will likely announce its intentions by the end of the year. In addition, Cottrell writes, the company "will be restructuring under-performing labels, moving towards Shared Services, and continuing to manage costs aggressively."

Tuesday’s stock slide immediately re-ignited speculation that EMI might be subject to a takeover, though regulators’ scuttling of earlier acquisition attempts by AOL Time Warner and Bertelsmann make it unlikely that any music-related company will be able to make a play. Other companies previously thought to be likely suitors, including Disney and Viacom, have yet to make a move.

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