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PG&E, parent of California’s Pacific Gas & Electric utility, said Thursday its fourth-quarter earnings rose 34%, as it reaped benefits from capital investments and a year-ago period that was hurt by severance costs.

The company earned $203 million, or 56 cents per share, compared with $152 million, or 43 cents per share, in the same quarter of 2006. PG&E said the 2006 quarter included $18 million, or 5 cents per share, in severance costs from job cuts.

Analysts were expecting a profit of 55 cents per share, according to a poll by Thomson Financial.

The company said the quarter was driven mostly by earnings from higher capital investments in energy infrastructure projects.

For the full year, the company posted a profit of $1.01 billion, or $2.78 per share, compared with $991 million, or $2.76 per share, in 2006.

Operating revenue rose 6 % to $13.2 billion.

The company also reaffirmed its 2008 adjusted earnings prediction within a range of what Wall Street is expecting.

The company expects earnings from continuing operations, which excludes some one-time items, of $2.90 per share to $3 per share. Fifteen analysts polled by Thomson Financial offered predictions between $2.87 and $3.05 per share, with an average estimate of $2.97 per share.

For 2009, the company expects to earn $3.15 per share to $3.25 per share. Ten analysts polled by Thomson Financial forecast earnings between $3.18 per share and $3.25 per share, with an average prediction of $3.21 per share.

PG&E raised its quarterly common stock dividend to 39 cents from 36 cents. The first-quarter dividend is payable April 15 to shareholders of record March 31.

Shares of PG&E (PCG, Fortune 500) rose 41 cents to $39.58 in morning trading. 

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Troubled French bank Societe Generale SA said Thursday that a trading scandal and writedowns linked to the crisis in financial markets led to a net loss in the fourth quarter.

France’s second-largest bank said it made a net loss of $4.91 billion compared with a $1.73 billion net profit in the same period of 2006.

The French bank took a $7.18 billion hit closing unauthorized positions attributed to futures trader Jerome Kerviel. Though it discovered the positions on Jan. 18, the losses that resulted were booked in the fourth quarter.

Societe Generale is seeking nearly $8 billion in new capital to shore up its finances after the trading loss and $3.8 billion in previously announced writedowns linked to the U.S. mortgage crisis.

The Paris-based bank had already announced preliminary results Feb. 11 in a prospectus for investors taking part in the capital increase, whose subscription period runs from Thursday until Feb. 29.

For the full year, SocGen confirmed that despite its recent troubles, it made a net profit of $1.39 billion, after $7.62 billion in 2006.

The trading scandal is "an isolated event that doesn’t even put the bank’s profitability into question," said Axel Pierron, an analyst with research house Celent in Paris.

"Without this event, the results of Societe Generale were not at all bad."

The bank warned of the possibility of "further write-downs" in the first quarter at its asset management division as the liquidity crisis in financial markets continues.

Banks globally have written off more than $150 billion in the past half-year, including large fourth quarter write-offs by European competitors such as UBS AG and Credit Suisse.

Societe Generale’s subprime-related writedowns are bigger than the $868.3 million announced Wednesday by cross-town rival BNP Paribas SA but are dwarfed in comparison with the $13.7 billion writedown announced by UBS.

As banks globally assess the fall-out from the subprime crisis, Societe Generale is also faced with questions about its controls systems after Kerviel was able to hide positions worth around $73.28 billion.

An internal report on Wednesday said bank officials failed to follow up on warnings and carry out more detailed checks, leaving concealment tricks allegedly used by Kerviel uncovered.

Societe Generale has tightened controls in the wake of the trading scandal, the report said.

Without the trading losses, Societe Generale said it would have gained $6.11 billion over the full year.

Full-year revenue fell 2.2% to $32.13 billion from $32.86 billion in 2006. Fourth-quarter revenue dropped 32% to $5.69 billion from $8.31 billion a year-earlier.

SocGen said it is proposing a 2007 dividend of $1.32 a share compared with $7.62 the year before. 

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Bain Capital Partners and China’s Huawei Technologies Co Ltd have withdrawn their application for U.S. security approval of a $2.2 billion purchase of 3Com Corp after failing to satisfy the concerns of a U.S. government panel.

While the companies said they were still in discussions and the proposed transaction had not yet been terminated, a source familiar with the situation said the failure kills the deal in its current form.

Shares of network equipment maker 3Com fell 23 percent, or 86 cents, to $2.87 on Nasdaq on Wednesday as the possibility of the takeover proceeding seemed remote.

The Committee on Foreign Investment in the United States (CFIUS) had raised concerns about the deal, through which Huawei — China’s top telecom equipment maker — would have initially owned as much as 16.5 percent of 3Com, whose Tipping Point unit makes national security software.

The panel, which is led by the U.S. Treasury Secretary, reviews corporate acquisitions involving foreign buyers.

Despite winning deals with top-tier carriers such as Deutsche Telekom’s T-Mobile and Vodafone, Huawei remains hampered by concerns over its founder’s connections to the Chinese military, said Duncan Clark, chairman of Beijing-based investment advisory firm BDA.

“Huawei’s challenge is that they’re just perceived as an extension of China, and China is perceived in the U.S., in this charged political environment, as somewhat of a menace or unknown threat,” he said, adding that the ending of the deal was not likely to improve trade tensions between the two countries.

Ren Zhengfei, a former People’s Liberation Army soldier, founded Huawei in 1988. The firm has always maintained it is a private company and wholly owned by its employees. 

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Troubled bond insurer Financial Guaranty Insurance Co. asked New York state insurance regulators to split its troubled structured finance arm from its healthy municipal bond insurance business, New York Insurance Superintendent Eric Dinallo said Friday.

In a televised interview, Dinallo told CNBC that the New York-based FGIC proposed the offer after seeing its credit rating downgraded by the Moody’s Investors Service a day earlier.

Calls to FGIC were not immediately returned.

Moody’s downgraded FGIC to a ‘A3′ rating from ‘AAA’ Thursday, citing the company’s weakened capital position and its exposure to the mortgage market.

As part of the plan, FGIC would essentially split into two firms - one focused on its sound municipal bond business, the other on the troubled structured finance portion of its portfolios - ultimately protecting the insurers’ municipal bond customers.

Dinallo, who has been spearheading rescue efforts for the troubled industry, warned however that the break-up was "not a done deal."

Bond insurers like FGIC, Ambac (ABK) and MBIA (MBI) have occupied much of Wall Street’s attention lately.

The three firms, among others, guaranteed billions of dollars worth of toxic mortgage-backed securities in recent years that have plummeted in value. Worried that they will not be able to handle existing claims and retain enough capital, the credit rating agencies have threatened to strip them of their top-notch ‘AAA’ ratings.

Such downgrades would not only cripple the insurers’ municipal and corporate debt insurance business, but would spread across the broader financial landscape, possibly resulting in further writedowns at major U.S. financial institutions.

A downgrade would most likely raise the cost of issuing municipal bonds, which directly affects local governments and could create an additional drag on the already troubled U.S. economy.

On Thursday, Congress waded into crisis as lawmakers tried to both assess blame and prescribe a remedy. 

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Breaking up U.S. bond insurers may be difficult and add to some Wall Street banks’ heavy credit related losses, but for at least some insurers it may be the only solution to a crisis roiling credit markets.

FGIC Corp has told regulators it wants to break into two, a spokesman for the state insurance regulator said on Friday.

The municipal bond insurance operations, which are seen as safer, would be put into a new company. The structured finance business, where the company is likely to make big payouts, would stay in the current company.

That split would be a boon for capital markets, which fear bond insurers would lose their top ratings, forcing investors to sell billions of dollars of municipal bonds.

Investment banks that traded with FGIC, on the other hand, would be forced to take losses. Among the banks that were working on a rescue of FGIC, and therefore presumably have exposure, are Calyon, the investment banking unit of French bank Credit Agricole SA (CAGR.PA: Quote, Profile, Research).

Other banks involved in the FGIC rescue talks include Barclays (BARC.L: Quote, Profile, Research), Citigroup Inc, (C.N: Quote, Profile, Research) Societe Generale,(SOGN.PA: Quote, Profile, Research) and UBS (UBSN.VX: Quote, Profile, Research).

According to two people briefed on the situation earlier this week, when insurers are split, banks could provide credit lines or other backing to the companies left with the structured finance piece of the business. That could help support the existing companies for a little longer than they might otherwise last. Other options are being considered as well, people said.

Banks are generally facing the risks of big writedowns from hedges they put on with bond insurers. 

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News Corp. and Yahoo are in talks about combining MySpace and other News Corp.-owned online properties, according to a report in The Wall Street Journal Wednesday.

The deal under discussion would give News Corp a stake in Yahoo (YHOO, Fortune 500) that could top 20%, according to the report. A News Corp-Yahoo alliance would help the Internet search engine fend off a $44.6 billion unsolicited buyout attempt by Microsoft (MSFT, Fortune 500).

A spokeswoman for Yahoo told Fortune that the company does not comment on "rumors or speculation" but confirmed that Yahoo is looking at multiple options beyond Microsoft’s bid. Yahoo rejected Microsoft’s offer on Monday, saying that the bid "substantially undervalues" Yahoo.

Spokespeople for News Corp. and Fox Interactive Media, the News Corp. unit that owns MySpace, were not immediately available for comment. News Corp. also owns The Wall Street Journal.

The two companies have been considering joining forces in some way for 18 months, the report indicated. The deal could involve contributions from News Corp (NWS, Fortune 500) and a private equity firm, according to the report.

Placing a value on MySpace could complicate the matter, since previous discussions have fallen apart over disagreements on what the social networking site is worth. News Corp is likely to push for a valuation of between $6 billion and $10 billion for MySpace, the Journal said.

News Corp. chairman and CEO Rupert Murdoch also said during an earnings conference call earlier this month that News Corp. would not bid for all of Yahoo.

Shares of Yahoo and Microsoft rose Wednesday while News Corp.’s stock fell.

Fortune reporter Michal Lev-Ram contributed to this report. 

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Allergan’s stock took a dive on Friday after the Food and Drug Administration said its Botox had been linked to severe side-effects, including death in children being treated for cerebral palsy.

The FDA said that Botox, and the similar product Myobloc from Solstice Neurosciences, "have been linked in some cases to adverse reactions, including respiratory failure and death, following treatment of a variety of conditions using a wide range of doses."

Botox is primarily used as an injectable cosmetic drug to remove wrinkles, but is FDA-approved for other uses, such as underarm sweating and certain neurological conditions.

The FDA said the "most severe adverse effects were found in children treated for spasticity in their limbs associated with cerebral palsy." The FDA also said that Botox and Myobloc are not approved for this use, in either children or adults.

Allergan’s (AGN) stock fell 6% on the news.

Allergan spokeswoman Caroline Van Hove said children with cerebral palsy have much larger doses injected into their calf muscles than those used by men and women for wrinkle-removing.

Also, Van Hove said that Botox has not been proven to cause the side-effects mentioned in the FDA warning, even though the FDA said there is a "link" between the side-effects and the products.

Solstice also released a statement saying the FDA did not blame Myobloc for causing the side-effects.

The FDA said it is not advising doctors to stop prescribing Botox and Myobloc. 

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ExxonMobil Corp. has secured court orders to freeze more than $12 billion in worldwide assets of Venezuela’s state-owned oil company, as it prepares to dispute the nationalization of a multibillion-dollar oil project.

The move limits Petroleos de Venezuela’s room to maneuver as it fends off challenges from major Western oil companies over President Hugo Chavez’s 2007 decision to nationalize four heavy oil projects in the Orinoco Basin, one of the richest oil deposits in the world.

Exxon (XOM, Fortune 500) and ConocoPhillips (COP, Fortune 500) opted to walk away from the contracts rather than stay on in a minority role. Both have filed arbitration proceedings with the World Bank seeking compensation and Conoco "continues to discuss an amicable resolution specific to the assets that were expropriated in Venezuela," Conoco spokesman Bill Tanner said.

ExxonMobil has so far been the most aggressive in fighting back. The Irving, Texas-based oil major’s legal action essentially seeks to ring-fence Venezuelan assets ahead of any decision by the arbitration panel.

According to documents filed last month in the U.S. District Court in Manhattan, Exxon Mobil has secured an "order of attachment" on about $300 million in cash held by PdVSA. A hearing to confirm the order is scheduled in New York for Feb. 13. Exxon also filed documents with the New York court showing it had secured a freeze on $12 billion on PdVSA’s worldwide assets from a U.K. court.

"On Jan. 24, the High Court of England and Wales was satisfied that there is a real risk that PdVSA will dissipate its assets and accordingly entered a Worldwide Freezing Order ex parte," Exxon said in the filing to the New York court. The order prohibits PdVSA from "disposing of its assets worldwide up to a value of $12 billion whether directly or indirectly held."

Further hearings on the $12 billion freeze are scheduled on Feb. 22, according to Exxon’s filing.

In a statement, Exxon Mobil spokesperson Margaret Ross confirmed the court filings. She added that the company "has obtained attachment orders from courts in the Netherlands and Netherlands Antilles against PdVSA assets in each of these jurisdictions up to $12 billion." Exxon said the orders are subject to further review by the courts. "We will not comment further on legal proceedings," she said.

In a filing, PdVSA disputed the need for a freeze. In a Jan. 24 response disputing orders of attachment from Dec. 27 and Jan. 8, PdVSA said Exxon Mobil "has failed to sustain its burden of establishing that any arbitration award it obtains may be rendered ineffectual without provisional relief." A PdVSA spokesman declined to comment.

Exxon’s move signals an aggressive response to the trend of resource-rich countries flexing their muscle over the large oil majors. Since oil prices began skyrocketing earlier in the decade, oil-producing nations have grown bolder in their dealings with publicly traded companies active on their territories by demanding larger stakes in existing projects and raising taxes.

Venezuela will pay two European oil companies that were partners in other Orinoco heavy oil projects less than half the estimated market value of their stakes, according to a copy of the compensation agreement reviewed by Dow Jones Newswires.

That agreement offers an inkling of what ExxonMobil and ConocoPhillips could be expecting as they carry on compensation talks with PdVSA. 

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About one million child safety seats made by Evenflo are being recalled because they could fail to protect children from vehicle side-impacts.

Seats affected by the recall are Evenflo Discovery child safety seat models 390, 391, 534 and 552 made between April 2005 and January 29, 2008. The serial number and date of manufacture can be found on a white label on the underside of the safety seat.

Tests by Evenflo and the National Highway and Traffic Safety Administration indicate that the safety seats can potentially separate from that base during an accident. Each product has a separate base that connects to the vehicle’s seat, allowing the safety seat to be removed from the vehicle without removing the base.

Owners of the affected Discovery safety seats are urged to immediately contact Evenflo and receive a free dual-hook fastener that will secure the seat to its base. Parents should continue using the safety seats while waiting for their fasteners to arrive, said NHTSA.

NHTSA urged parents affected by the recall to contact Evenflo at 1-800-356-2229 between the hours of 8am and 5pm EST, or visit the Evenflo web site: http://safety.evenflo.com/cs/sc/cssc_RD.phtml.

NHTSA also recommended that owners register their seat with Evenflo to receive any future safety notices.

Consumer Reports issued a negative report on the Evenflo Discovery car seat in January, 2007, given it a poor rating and requesting recall. However, the report and the recall request were both retracted just 14 days later when errors were uncovered in the magazine’s tests. 

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Florida has subpoenaed Countrywide Financial Corp (CFC.N: Quote, Profile, Research) as part of a widening investigation into subprime lending practices, the state’s attorney general said on Thursday.

Attorney General Bill McCollum told fellow cabinet members the investigation involving the nation’s largest mortgage lender was linked to practices that may have hurt Florida’s state-run investment pool.

McCollum’s office issued the subpoena to the California-based company on January 17, seeking information and documents on Countrywide’s lending practices, especially relating to subprime loans that go to people with poor credit histories.

“It’s a broad subpoena seeking information about whether or not the company potentially violated Florida’s deceptive and unfair trade practices act in a manner related to mortgages,” McCollom’s spokeswoman Sandi Copes told Reuters.

“Countrywide has received the subpoena from the Florida Attorney General and will cooperate fully with the State’s investigation,” the company said in a statement. “As a matter of policy, Countrywide does not comment further on the status of pending investigations.”

The subpoena is part of a larger investigation of the industry in response to the subprime lending fiasco.

In November, investors made a multibillion-dollar run on the state’s Local Government Investment Pool after a small percentage of its investments were downgraded to “junk” status.

The pool, which local governments and schools use like a money market account, saw deposits drop from nearly $27 billion to less than $10 billion in a matter of weeks as depositors withdrew their funds. 

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