ECONOMY

PRODUCTIVITY GROWTH SLOWS IN THIRD QUARTER, RAISING HIRING HOPES

The productivity of America’s workers grew at a 1.8% annual rate in the third quarter, the slowest pace in nearly two years, the government reported yesterday. The deceleration in this vital economic indicator, however, raised some hope that employers who have squeezed so much efficiency out of their existing work forces may seek to boost hiring as a way to meet customer demand.

The Labor Department’s latest snapshot of productivity – the amount an employee produces for every hour of work – showed that efficiency gains were slightly weaker than the 1.9% growth rate first estimated for the July-to-September quarter. The new figure – based on more complete data – marked a slowing from the 3.9% productivity pace logged in the second quarter.

“I think we are setting ourselves up for much better, firmer hiring,” said Anthony Chan, senior economist at JPMorgan Fleming Asset Management.

Some analysts were expecting productivity to rise slightly to a 2% growth rate for the third quarter. Still, the long-term productivity trend remains healthy, economists say.

– Associated Press

TECHNOLOGY

LENOVO BUYS IBM’S PC BUSINESS FOR $1.25 BILLION

Lenovo Group agreed to pay $1.25 billion for IBM’s personal computer business, lifting China’s largest PC maker to third in global rankings and giving it a globally recognized brand. Lenovo will pay $600 million in cash and $650 million in stock, Lenovo’s chief executive, Yuan Yuanqing, said at a press conference in Beijing. Lenovo will also assume $500 million of debt. IBM will hold an 18.9% stake in Hong Kong-listed Lenovo after the acquisition, which is expected to be completed in the second quarter, the companies said in a statement.

The purchase vaults Beijing-based Lenovo from eighth place among PC makers, giving the company a leg up in a global market now dominated by American manufacturers Dell and Hewlett-Packard. Armonk, New York-based IBM is pulling out of a business it helped create two decades ago to concentrate on services.

IBM sold its hard-disk drive business in 2002 after the technology behind the products became widely available and easy to copy, leading to a series of price cuts that depressed profit. The same thing has happened in PCs as consumers use new items such as mobile phones to access the Internet, analysts said.

IBM, which made its first PC in 1981 and won orders by catering to businesses, retreated from selling its Aptiva PCs to retailers in America in 1999 and instead decided to sell over the Internet. It continued to sell ThinkPad notebook PCs to stem losses that grew to almost $1 billion in 1998.

Lenovo, and formerly known as Legend, will reap benefits of the world’s third most recognized brand behind Coca-Cola and Microsoft.

– Bloomberg News

NATIONAL

GUIDANT RISES ON REPORT JOHNSON & JOHNSON MAY BUY IT

Guidant Corporation’s shares rose as much as 7.9% after the New York Times reported yesterday that Johnson & Johnson, the world’s biggest maker of medical devices, is in talks to buy the defibrillator maker for more than $24 billion.

Guidant is the second-biggest maker of implantable defibrillators and dominates the market for bare-metal stents, tubes used to prop open heart arteries. Doctors are switching to more effective drug-coated stents such as Johnson & Johnson’s Cypher, which Indianapolis-based Guidant already helps market.

Johnson & Johnson’s chief executive, William Weldon, may need new products to bolster revenue growth as sales of the company’s Procrit anemia treatment decline and Boston Scientific Corp. took leadership of the U.S. stent market. The market for pacemakers and implantable defibrillators may grow more than 24 percent this year to $4.7 billion, analysts said.

“It would be a great relief to see them do a merger or acquisition like this. It puts them in some really growing markets,” said Susan Cross, an analyst at Wilmington, Del.-based Wilmington Trust, which owns 8.5 million Johnson & Johnson shares. “Procrit is one of the areas people are really whining about.”

A Guidant spokesman, Steve Tragash, declined to comment. Jeff Leebaw, a spokesman for New Brunswick, N.J.-based Johnson & Johnson, said the company doesn’t comment on speculation.

Guidant shares rose $3.60 to $72.35 in New York Stock Exchange composite trading after climbing as high as $74.20.They had gained 14% this year before yesterday. Johnson & Johnson fell $1.42, or 1.42%, to $60.41.The stock is the fifth-best performer in the Dow Jones Industrial Average this year, with an 18% gain.

– Bloomberg News