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Economy Briefs: Manufacturing shrinks for first time in 3 years

U.S. manufacturing shrank in June for the first time in nearly three years, adding to signs that economic growth is weakening.

Production and exports declined, and the number of new orders plunged, according to a monthly report released Monday by the Institute for Supply Management.

The slowdown comes as U.S. employers have scaled back hiring, consumers have turned more cautious, Europe faces a recession and manufacturing has slowed in big countries such as China.

"This is not good," said Dan Greenhaus, chief economic strategist at BTIG, an institutional brokerage. Though the report "does not mean recession for the broader economy, it is still a terribly weak number."

The trade group of purchasing managers said its index of manufacturing activity fell to 49.7. That's down from 53.5 in May. And it's the lowest reading since July 2009, a month after the Great Recession officially ended. Readings below 50 indicate contraction.

Economists said the manufacturing figures were consistent with growth at an annual rate of 1.5 percent or less. That would be down from the January-March quarter's already tepid annual pace of 1.9 percent.

"Our forecast that the U.S. will grow by around 2 percent this year is now looking a bit optimistic," said Paul Dales, an economist at Capital Economics.

WASHINGTON

Microsoft to take $6.2B charge for online ad biz

REDMOND — Microsoft is absorbing a $6.2 billion charge to reflect its inability to produce more revenue from an online ad service that it bought nearly five years ago.

The noncash charge announced Monday could saddle Microsoft Corp. with a loss for its fiscal fourth quarter ending in June. Analysts polled by FactSet had predicted Microsoft would earn about $5.3 billion for the period. Microsoft is scheduled to release its latest quarterly results July 19.

The software-maker, which is based in Redmond, Wash., blamed the setback primarily on the disappointing performance of aQuantive, an online advertising service Microsoft bought in 2007 for $6.3 billion. It was the most expensive acquisition in the company's 37-year history at the time, surpassed only by the $8.5 billion purchase of Skype last year.

The charge represents Microsoft's sobering acknowledgment that aQuantive didn't increase the company's online advertising revenue as much as management had anticipated.

TEXAS

Dell buying Quest Software for $2.36B

ROUND ROCK — Dell said Monday that it's buying Quest Software for about $2.36 billion, ending recent speculation about who the unnamed bidder was in the battle for the company with investment firm Insight Venture Partners.

With consumer demand for PCs declining, Dell wants to branch out beyond the business of making personal computers into more lucrative fields. Helped by a recent string of acquisitions of software companies, Dell is trying to grow into advising corporations and governments on how to manage technology needs and selling them more software and computing equipment.

Dell said Quest would make it more competitive in the server, storage, networking and computing services business. Quest's technology would add to its security and data protections offerings, along with other services aimed at business customers, Dell said.

Quest Software Inc. had agreed to be bought by Insight for $23 per share, or $2 billion, in March, and a series of increasing bids from Insight and another bidder followed.

The March bid was a 19 percent premium to the company's closing stock price the day before the deal was announced. Dell's $28 per share offer announced Monday is a 44 percent premium to Quest's ending price of $19.40 from March 8.

The deal is expected to close in Dell's August-October quarter. Both boards have approved the deal, but Quest shareholders must still vote it through.

Quest CEO Vinny Smith, who has a 34 percent stake in Quest, had agreed to support Insight's offer in March. In a statement Monday, he said that with the Dell deal, Quest's products and workforce would be the "foundation" for Dell's software business.

TEXAS

Chinese fishermen sue ConocoPhillips over spills

HOUSTON — A group of Chinese fishermen is suing ConocoPhillips in U.S. federal court, claiming their livelihoods have been greatly impacted by a series of oil spills last year from the company's operations in northeastern China.

The lawsuit filed Monday in U.S. District Court in Houston seeks unspecified damages.

An attorney for the fishermen says the lawsuit was filed in the U.S. because similar efforts in Chinese courts have been blocked, and the fishermen deserve to be compensated for their losses.

Calls and emails to Houston-based ConocoPhillips were not immediately returned Monday. The company previously apologized for the spills and has set up compensation funds.

The two spills occurred in June 2011 in the Bohai Sea. They released a combined 723 barrels of oil and 2,620 barrels of mineral oil-based drilling mud.

From wire dispatches and staff reports

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