In Business This Week
Edited by John Protos
Jack Messman: Here, You Fix It
Novell Inc. CEO Eric Schmidt believes he's not the man to turn around his slumping software company. On Mar. 12, the company announced that it will buy consulting firm Cambridge Technology Partners for $266 million in stock and hand the CEO's job over to CTP chief Jack Messman. Schmidt will stay on board at Novell as chairman and chief strategist.
Schmidt, a longtime executive at Sun Microsystems (SUNW
), was hailed as a savior when he arrived at then-moribund Novell four years ago. The Provo (Utah) company enjoyed a two-year renaissance before sales faltered, largely because of competition from Microsoft (MSFT
). But Schmidt believes that Messman is the tough manager Novell now needs. The company, with $1.16 billion in revenues, is banking its future on a new "Net-services" strategy and has been shopping around for a potential consulting arm since last summer. Wall Street isn't convinced that it will work, though. Novell (NOVL
) shares dropped more than 7%, to $5.13, in the two days after the deal.
By Jim Kerstetter
A Downdraft for Big Carriers
The major airlines, already feeling the heat from widespread labor strife, are finally getting pinched by the slowing economy. Both Delta Air Lines and Northwest Airlines expect hefty losses in the first quarter. Delta says it will lose between $85 million and $110 million in the January-to-March period, on a $350 million drop in revenues, while Northwest says it could lose $130 million to $150 million--three times earlier estimates. The culprits: travel cutbacks by high-margin business travelers and for Delta, also a reduced flight schedule and customer concern over a possible strike by disgruntled pilots refusing to fly overtime.
The High Cost of Cybercrime
Computer crime is costing companies more than ever. That's the conclusion of the Computer Crime and Security Survey, the much ballyhooed annual tally mounted by the San Francisco-based Computer Security Institute (CSI) and the FBI. The study found that 85% of the 538 companies and large governmental institutions polled detected security breaches in the past year. And 65% acknowledged suffering financial losses from the intrusions. The 186 respondents willing to tally their losses claimed they totaled $378 million, a 42% jump from 1999. That's also the highest damage amount recorded since the CSI started these surveys six years ago. A full 70% of the respondents blamed their Internet connection as the source of security problems.
Motorola Workers Feel the Pain
An already reeling Motorola continued its strategy of slashing jobs to keep its wireless phone business from posting further losses. On Mar. 13, the Schaumburg (Ill.) electronics giant said it would lay off another 7,000 workers from its handset division in a continued effort to reduce costs. The cuts, expected to span the unit's global operations, bring total layoffs to 12,000 since December. Wireless chief Mike Zafirovski called the move "a necessary next step" as he tries to gain ground lost to wireless rival Nokia.
Does This Deal Need Insurance?
British insurer Prudential PLC's Mar. 12 deal for Houston insurance company American General got off to a rocky start. Pru shareholders sent its stock down 17% in three days, slicing the deal's value from $26.5 billion to $2 billion. American General CEO Robert Devlin, who will run North American operations, says the company plans to become the leader in U.S. retirement services. It will also sell its insurance and annuity products through Prudential's network in Japan, South Korea, and Taiwan.
Bush Does a 180 on Carbon Dioxide
So much for campaign promises. On Mar. 13, President Bush said he won't ask utilities to cut their output of carbon dioxide emissions, which contribute to global warming. The move was a major reversal of a Bush campaign pledge to address climate change. Bush blamed the continuing energy crisis. He says new regulations on coal-burning power plants, the biggest source of carbon dioxide emissions, could lead to a spike in energy prices and further damage the economy. The White House had been under pressure from conservative and energy industry groups to reverse positions. Those factions had interpreted promises to reduce emissions as a tacit endorsement of the Kyoto Protocol, an international agreement to reduce greenhouse gasses. Environmental groups called the move a serious betrayal.
Et Cetera...
-- Hershey Foods named Richard H. Lenny of Kraft Foods its new CEO.
-- Schering-Plough has been included in a criminal probe for its marketing practices.
-- Slowing demand sent Nextel Communications shares down 28% in a day.
Sick Burgers
Those golden arches are looking pretty tarnished. On Mar. 14, McDonald's warned that first-quarter and full-year earnings will fall short of forecasts, as European fears about mad cow disease cut into sales. The Oak Brook (Ill.) fast-food chain now expects to record first-quarter earnings of 29 cents to 30 cents per share, down from an estimated 32 cents. Shares fell further on the news. From a high of $34.68 on Jan. 17, they are now down 20%, to $27.54.
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Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
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