Sotheby's, Christie's Pay Steep Price for Fixing Auctions
BAY: An after-the-bell profit warning from Lexmark International is hurting more than just its own investors tonight. Amanda Lang joins us now with the very latest action -- Amanda.</s>LANG: Willow, Lexmark International said that weak inkjet cartridge sales and the continued weak euro will affect its coming quarters, third and fourth -- that stock trading down after hours and dragging down Hewlett-Packard with it, the number-one computer printer-maker. Lexmark now down 8 9/16 on REDIbook trading. Earlier, it had been down further on Instinet. Similarly, Hewlett-Packard is now down 1 1/4 at 100 1/16. It had been down as much as 3 15/16 on Instinet trading -- all of this in relatively light after-hours volume. Over on the other side of the ledger, Palm reported earnings today that beat expectations: came in at 4 cents a share, not the 2 cents the street was looking for. But its stock has suffered after hours. It is, however, now coming back. It's now off 1 1/4 at 51 on volume of 132,000 on REDIbook trading, and it is well above its earlier lows. It was down 1 3/4 at 50 1/2. Back to you, Willow.</s>BAY: Amanda Lang with the after-hours action, thanks -- Stuart.</s>VARNEY: Thanks, Wills. A case that rocked the art world may have reached a resolution, as the two top companies of the auction business signed off on a monumental settlement. Sotheby's and Christie's agreed to pay $512 million to settle civil charges that they had cheated art buyers and sellers and colluded on their fee structure. Susan Lisovicz has been following the story and she joins us now with a report -- Susan.</s>SUSAN LISOVICZ, CNN CORRESPONDENT: Hello, Stuart. Well, settling the class-action suit not only helps Sotheby's and Christie's put this unseemly episode behind them, but it sends a signal to the Justice Department that the two auction houses want to quickly settle the government's criminal charges as well.</s>UNIDENTIFIED MALE: Sold.</s>LISOVICZ (voice-over): Whether it's the great or merely the grand, only two auction houses count in the art world: Sotheby's and Christie's, which account for an estimated 95 percent of the art auction market. The Justice Department says that for years the two fixed fees on what they charged buyers and sellers, and the criminal case is still pending. But over the weekend, Sotheby's and Christie's agreed to pay more than $250 million each to settle a separate class-action suit on the same charges. Many art experts said they were stunned by the huge settlement, but some analysts say it could have been worse had the case gone to court.</s>JAMES MEYER, JANNEY MONTGOMERY SCOTT: It's to sign a settlement for perhaps a third of what they could have possibly been to get rid of an uncertainty is a plus.</s>LISOVICZ: Sotheby's former chairman Alfred Taubman will pay more than half Sotheby's settlement. But the $100 million Sotheby's will pay represents more than two years of profit. And while Christie's is privately owned, the scandal has resonated with Sotheby's shareholders. Its stock has plunged 50 percent from its high in April of last year, this at a time when Sotheby's expenses are increasing as it launches on to the Web.</s>AMY PAGE, ART EXPERT: People are wondering about Sotheby's financial viability, not just because of these fines or the question of whether these people -- what if these might go to jail, but the fact that they just recently spent $44 million on an Internet venture I'm not sure how successful it really is.</s>LISOVICZ: Sotheby's vulnerability has fueled talk in the art world that the auction house itself may be on the blocks, and that one of the most likely suitors would be Bernard Arnault, the head of LVMH, whose recent acquisitions include Philip's auction house, which remains a distant third to Sotheby's and Christies, and that Sotheby's interest in settling all its litigation is one of the conditions before any such deal can proceed -- Stuart.</s>VARNEY: Who is in the better position of these two companies as these criminal charges go forward? Is it Sotheby's or is it Christie's?</s>LISOVICZ: Well, they both paid a lot of money to settle, so they made it very clear that they want it to go away. But certainly the prevailing wisdom has been Christie's is in the better position because it provided the government with some very damning information, but it gave it some game amnesty as it proceeded forward with the case.</s>VARNEY: And Christie's is a privately held company?</s>LISOVICZ: Privately held.</s>VARNEY: Susan Lisovicz, thanks very much. Well let's just check in with the settlement and how it gave a boost to Sotheby's stock. It is publicly traded. The bid -- the symbol, by the way, is BID, B-I-D. Sotheby's gained 3 1/8 today -- Willow.</s>BAY: Stuart, coming up next on MONEYLINE, we continue with our stock-picking stars. Today, we'll talk with fund manager William Nygren about how he is beating the S&P; 500. That's next.