Up Front
Edited by Sheridan Prasso
Talk Show
"The U.S. economic slowdown is larger than we and everyone else believed even a few weeks ago" -- Memo to employees from Dell Computer CEO Michael Dell and execs explaining their 4,000 layoffs
THE BIG PICTURE
INDIA INK
A Misguided Beef with McDonald's
For months, McDonald's (MCD
) has been trying to assure Europeans worried about mad and other diseased cows that its burgers are safe. But no sooner had sales finally started inching back up than McDonald's got hit by a new scare. The latest? That French fries in India are flavored with beef, a violation of Hindu dietary strictures.
The French fry flap follows a U.S. lawsuit May 1 seeking damages for vegetarians who unwittingly consumed a beef extract used to flavor fries in the U.S.--a fact McDonald's now concedes. But company execs stress that fries in India use absolutely no animal products. And Mickey D's 27 outlets there sell no beef, only veggie and lamb burgers.
That didn't stop Hindu nationalists, who trashed outlets after hearing about the suit. A McDonald's spokesman now says: "It seems the worst is behind us." But with outlets in 120 countries, it's hard to know where the next tempest is brewing.
By Michael Arndt
TECH TRAVAILS
Where to Go If the VC Says "No"
Tech may be in the tank, but here's a sector profiting from it: venture lending. With equity financing hard to get, more and more early-stage tech companies are turning to such lenders, which charge interest rates of up to 20%. The dozen or so firms nationwide are mostly divisions of specialty finance companies. "When the Nasdaq was soaring and money was easy, companies wouldn't return our calls," says Kathleen Wilkerson, managing director of Third Coast Capital. "Now they are calling us."
Loan volume at Third Coast, a division of medical equipment financier DVI, has doubled. And business at GATX Ventures, a division of a rail-car lease firm, is up 50%. Companies generally seek loans of up to $10 million for purposes ranging from operating capital to tech development.
The risky nature of tech makes these loans hard to get. Applicants must have at least one round of venture capital and proprietary technology. (E-commerce companies lacking patents need not apply.) On top of stiff rates--more than double what banks charge--these lenders usually demand the right to buy shares at a set price if the company goes public.
Such loans buy companies time until the climate for initial public offerings improves. "This has given us another quarter," says Howard Bailey, CFO of Nishan Systems, a Silicon Valley network-switch maker that's getting its second venture loan, for $10 million. With Nishan just launching its first product and aiming to go public next year, the beauty of a venture loan is that it doesn't dilute company shares.
By Robert Berner
TRADE WINDS
Oh, My Aching Greenback
Oh, how U.S. manufacturers have suffered lately. The downturn, on top of the rising trade deficit, has prompted mass layoffs and production cuts. But the industry has kept mum about a principal cause of its woes: the U.S. dollar. A strong greenback has been jacking up the cost of U.S. exports, particularly in Europe and Canada, while making imports cheap.
That silence is about to end. The National Association of Manufacturers will soon begin pressing the Bush Administration to weaken the dollar. NAM says that with the dollar's trade-weighted value up 27% since 1997, it can't compete in many sectors, from paper products to machine tools. Recently, the auto and aerospace industries have joined the low-dollar chorus.
As long as the U.S. economy was humming, industry thought the record-high trade deficit might force a dollar correction anyway. Since waiting around isn't working, though, NAM officials will urge the Administration to reverse policy and start talking the dollar down. But Treasury Secretary Paul O'Neill, himself an ex-manufacturer, will be a hard sell. After sending mixed signals earlier, O'Neill is now chanting the "strong dollar" mantra of his predecessors.
By Paul Magnusson
THE LIST
Check Out the E-Groceries
Many online e-grocers (Webvan, ShopLink) have foundered. But hold the mayo--there's life in the sector yet. Supermarkets are going e-tail on their own or partnering with dot-coms. Forrester Research predicts e-sales will grow from $600 million in 2000 to $7.2 billion in 2005.
ALBERTSON'S
Has offered online service to customers in Seattle since 1999
PUBLIX
Plans to launch its own online service in Atlanta this summer
GIANT, STOP & SHOP
Their Dutch owner, Royal Ahold, acquired Peapod.com and delivers in Connecticut, New York, Chicago, Boston, and metro Washington, D.C.
FOODLAND
Honolulu chain lets shoppers pick up online orders at a drive-thru
SAFEWAY
Acquired 50% of GroceryWorks.com, which serves four Texas cities
Data: BusinessWeek Online
SECOND ACTS
If You Flop in Business, Teach
J. Peterman, the purveyor of floridly written mail-order items aimed at armchair travelers, became a household name after being parodied on Seinfeld. In the TV series, his character waxed poetic about clothing and exotic destinations, introducing himself to Elaine by noting her coat's "deep bi-swing vents, perfect for jumping into a gondola." Yet despite the notoriety, John Peterman's $75 million business went bankrupt in 1999, shortly after Seinfeld went off the air. He lost his 13 retail stores and even his own "J. Peterman" name at bankruptcy auction.
Now, though, he's back. He's relaunching his business, teaching courses ("Following Your Entrepreneurial Dreams" at New York's Learning Annex), and lecturing MBA students at New York University's Stern School of Business.
What's a failed businessman doing giving advice? "You never really experience anything if you don't fail," explains Peterman, 59, outfitted in his trademark cowboy jacket ($184) and Australian "Drover's" hat ($69). "Failing is one of the most important processes of learning." As for his catalog, he has bought back his name and plans to resume publication in June. His e-commerce Web site is now up and running.
And guess who's one of his business partners? The actor John O'Hurley, who played him on Seinfeld.
By Joan Oleck
I-WAY PATROL
The Huddled Masses Swarm a Web Site
You may have heard the publicity blitz: A new Web site, ellisislandrecords.org, launched on Apr. 17, lets you look up your family immigration records for free.
But if you tried to log on, you probably had trouble. Turns out the huddled masses yearning to find their ancestors have flocked to the site in far greater numbers than it can handle. The Statue of Liberty-Ellis Island Foundation estimates 4 million have managed to get on. But on one recent heavily trafficked day, tracked by Web site performance company Keynote Systems, only 5% of those trying got on.
Ellis has since added 10 servers to its original 13, but it remains overwhelmed. Site organizers say the traffic is abating only slightly. Some 40% of Americans claim an ancestor among the 17 million who immigrated via Ellis Island from 1892 to 1924.
The flocking en masse seems fitting: Apr. 17, 1907, was the most heavily trafficked day at Ellis Island, when 11,747 immigrants passed through.
By Alex Salkever
As the Downturn Turns
A flourish of the pen has always been a good investment. Autographs generally retain their value--especially if they are from historical figures.
And never more than now. The Alexander Autographs biannual auction in New York on Apr. 21, one of the largest of the year outside of Sotheby's or Christie's, offered fewer items, thinking sales would be down 10% to 15%. But instead, Nasdaq-wary investors snapped up the old documents, says auctioneer George Hollingsworth. A letter from Theodore Roosevelt sold for $3,750 after bidding started at $1,000.
Other ex-Presidents, including Lincoln, also fared well. "I was scared to death going into that auction," says Hollingsworth. "I thought it was going to be all gloom and doom. But now that the market has tanked, our sales skyrocketed."
Footnotes
Americans who, because of mad cow disease, say they have: stopped eating meat, 6%; not changed their diet, 80%
Data: MyPoints.com
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Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
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