In Business This Week
Edited by John Protos
Timothy Koogle: Do You Yahoo? Not Anymore
The Internet freefall has hit new depths. Yahoo! Chief Executive Timothy Koogle announced on Mar. 7 that he is stepping down, pending the hire of a new CEO. Salting the wound, Yahoo also warned it would badly miss its first-quarter revenues, a target that was already trimmed in January. Yahoo's current No. 2, president and COO Jeffrey Mallett, will remain in his current post, as the company seeks to hire a veteran from a traditional media firm.
Now, Yahoo expects to garner about $175 million in sales for the first quarter, 45% lower than the $320 million some analysts projected as late as December. "The macroeconomic environment has weakened dramatically," says Koogle, who will stay on as chairman.
Like other ad-based Internet firms, Yahoo has failed to lure enough corporate advertisers with attractive rates. Even though consumers are clicking on nearly 60% more Yahoo pages compared with last year. And while Koogle didn't change 2001's full year revenue projections, investors should not be relieved. Management wouldn't speculate that far into the future.
By Ben Elgin
Bedtime for Napster?
On Monday, Mar. 5, Napster's volume was officially turned down, if not off. That's when U.S. District Judge Marilyn Hall Patel issued her latest ruling. Effective immediately, the song-trading service has just three days to block the trading of copyrighted music on its service after being informed of the song title and other related info by a record company. Closing a potential loophole, Napster and the music industry must use "reasonable measures in identifying variations" or different spelling of the song or artists' names. Record industry people are calling the ruling a complete --and final--victory. They claim that without their copyright cooperation, the exchange will soon be nearly gutted. Napster says it is working to fulfill the order.
A Glimmer in California's Gloom
California Governor Gray Davis announced another fix for California's electricity mess. The state has negotiated 40 long-term contracts with more than 20 power marketers at rates far below the $228 per megawatt that the state was paying at the end of February. The contracts should provide some stability to the state's wildly fluctuating electricity market. California isn't out of the dark yet, however. The contracts--enough to provide power for 7 million homes--won't cover all the state's needs. And consumer activists complain that the contracts, as long as 20 years in one case, may become a burden on ratepayers.
Xerox Gets an Infusion from Fuji
With pressure building to raise cash, struggling Xerox agreed to sell a stake in Fuji Xerox, and not a minute too soon. After completing the sale of half of its 50% stake to longtime partner Fuji Photo Film, Xerox will net roughly $1 billion in cash. The Tokyo venture, which gets 90% of its sales from slumping Japan, has seen profitability shrink in recent years. Xerox' net income from the joint venture--which totaled some $55 million in 1999--will fall because of its smaller, 25% stake in the company. But it had little choice: Xerox has $2.6 billion of debt coming due this year, and the company needed to sell $2 billion to $4 billion of assets to stay afloat. The Mar. 6 deal helps, but analysts say more sales are needed.
Jamie Kellner: Tops at Turner
The remaking of Aol Time Warner continues, with the elevation of WB Television Network Chairman Jamie Kellner. He has been named to run newly united Turner Broadcasting System and WB cable networks. Kellner, one of the architects behind the creation of Fox network in 1986, created the WB network in 1994. Kellner will succeed Turner Chairman Terence McGuirk, who is becoming vice-chairman of the unit. Turner President Steve Heyer has left the company for a stint at Coca-Cola.
How Down, Dow Jones
The advertising slowdown has hit yet another big media player. Dow Jones now says its first-quarter earnings will be between 16 cents and 20 cents a share. That's well below the 56 cents expected by Wall Street, and a far cry from the 88 cents per share earned in last year's first quarter. Dow Jones, which publishes The Wall Street Journal, blames a larger-than-expected drop in financial and technology advertising. Advertising in the WSJ fell 32.1% in February and is expected to be down 25% to 30% for the first quarter. The company plans to respond by cutting spending and jobs.
Et Cetera...
-- Royal Dutch/Shell Group bid $2.2 billion for natural gas producer Barrett Resources.
-- Carl Icahn supported a last-minute $650 million bid for TWA, stymieing AMR Corp's plans to purchase the airline.
-- In 2001, Citibank plans to cut spending--by $1 billion to $2 billion.
Broadsided
A rash of bad news sent shares of chipmaker Broadcom down 14%, to $41.31 on Mar. 7. The Irvine (Calif.)-based company announced that a slowdown in orders, as well as the loss of major customer 3Com, would result in first-quarter earnings 68% below analysts' estimates. Broadcom also said that it may change its accounting method for stock warrants it issued to customers of companies it acquired. That, management said, could further reduce revenues.
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Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
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