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Contrary to its name, Edison International (EIX – 10-5/16) is a utility company that serves customers in Southern California. A subsidiary of the firm owns power plants in New Zealand, Australia, and Europe. During the short duration of 2001, the stock has dropped 34 percent. Yesterday, the stock receded over 12 percent after the California Public Utility Commission said it would call for rate increases in the neighborhood of seven to 15 percent within the next three months. This hike was seen as falling far short of what is needed to bring EIX and competitor PG&E (PCG – 12-5/8) back into healthy territory.
Reacting to this news, Merrill Lynch and Jeffries both reduced their respective ratings on EIX shares. Today, Deutsche Banc stepped up to the downgrade plate, cutting EIX to a "market perform" from a "buy." Also this morning, EIX was downgraded by Moody's.
Mid-afternoon today, EIX officials warned of an impending announcement wherein the firm would announce cost-cutting measures. After the close, the company said it would cut its work force by 1,400 jobs, saving $30 million-$50 million in the process. The layoff, which will affect just over 10 percent of EIX's staff, will primarily affect non-permanent workers.
Today's news generated a slew of activity in the EIX options pit. Over 5,600 contracts traded on the January 15 call, which was previously home to only 252 open call options. The bulk of this transpired in small and mid-sized blocks that crossed the tape throughout the trading session. One large block consisting of 2,800 contracts was executed near the ask price around 11:30 a.m.