In Business This Week
Edited by Monica Roman
HEADLINER
Greg Whalley: In the Line of Fire
Greg Whalley knows a thing or two about getting ready for battle. During the 1980s, the West Point graduate served with the U.S. Army. That experience could come in handy in his new job as president and chief operating officer of Houston energy trader Enron.
Since the beginning of the year, Enron (ENE
) shares have plunged 50% in the wake of dropping energy prices. The stock has also been hit by fallout from other issues, including the company's ailing broadband venture and the abrupt, Aug. 14 resignation of President and CEO Jeffrey Skilling.
Following Skilling's departure, Whalley, 39, was promoted along with Mark Frevert, who was named vice-chairman. Both were elevated to the office of the chairman.
Whalley is now seen by outsiders as the leading contender for Enron's top post. But Chairman Kenneth Lay, who reassumed Enron's CEO title when Skilling stepped down, cautions that the promotions should not be viewed as the last word in the company's succession plan.
By Stephanie Anderson Forest
More Money Woes for Excite@Home
The fortunes of broadband provider Excite@Home (ATHM
) took a turn for the worse as one of the cash-strapped company's lenders demanded repayment of $50 million. Promethean Asset Management, a New York hedge fund that led a $100 million investment in the company in June, said Excite@Home had to repay the $50 million by Aug. 31 because it had misrepresented its financial state at the time of the original loan. Only two months after Excite@Home raised the new capital, its auditors said the company may not survive. Excite@Home may have to file for bankruptcy to protect what little cash it has left. The company said in a statement that the repayment would "have a materially adverse impact on the company's liquidity and its ability to fund its operations." Separately, former White House Chief of Staff Mack McLarty is advising an investor group that is weighing a stake in the company.
CA Beats Back an Insurgency
A proxy challenge by Texas billionaire Sam Wyly was defeated on Aug. 29 when shareholders of Computer Associates (CA
) voted to reelect the company's 10-member board. The battle was a wake-up call for management of the ailing software giant. Already, the board is looking for two additional outside directors--which would bring the total to nine. It has hired a corporate governance consultant. And management has explained its pro forma accounting methods for software sales, which had confused some investors.
Two Paper Players Bind Together
The paper industry, which has been consolidating into a business of fewer, bigger players, shrank its roster further on Aug. 29 as Mead (MEA
) and Westvaco (W
) announced a stock-swap merger. The new company, MeadWestvaco, will be headed by the chiefs of the predecessor companies and have roughly $8 billion in annual sales. It will be based in Stamford, Conn., Westvaco's headquarters, though it will retain offices in Mead's home of Dayton. MeadWestvaco will be the No. 2 producer of coated paper, behind International Paper, which has been gobbling up rivals to dominate the industry.
Early Maneuvers in the Game Wars
Players in the game-console wars are jockeying for position ahead of the holiday selling season. On Aug. 23, Nintendo (NTDOY
) said its new GameCube console will arrive in U.S. stores on Nov. 18, two weeks later than expected. While the later date could curb holiday sales, Nintendo says it wants to have more units available so customers don't go home empty-handed. Microsoft (MSFT
) plans to delay the Japanese launch of its Xbox console by two months, pushing the debut to Feb. 22. It, too, wants to focus on the U.S., where it will roll out Xbox on Nov. 8. Although three companies will fight it out in the U.S., only two will do battle for holiday sales in Japan.
Ericsson and Sony Connect
Sweden's Ericsson (ERICY
) and Japan's Sony (SNE
) confirmed a joint venture of their wireless phone units is on track to start Oct. 1, squashing rumors that the deal could collapse. The new London-based company, to be called Sony Ericsson Mobile Communications, will have capital of $500 million and employ 3,500 people. The companies said the venture would challenge Nokia (NOK
) and Motorola (MOT
), the industry's top two handset makers. The opportunity is ripe: Market leader Nokia lost share in the second quarter, falling to 34.8%, according to researcher Gartner Dataquest. Ericsson regained the No. 3 spot, climbing to 8.3% from 6.8%.
Et Cetera...
-- Sun Microsystems (SUNW
) said it may not turn a profit in its first quarter.
-- Delta (DAL
) flight attendants filed a petition calling for a vote on unionization.
-- Philip Morris (MO
) will raise its quarterly dividend by 9%, to 58 cents from 53 cents.
CLOSING BELL
Aching Back
Herman Miller (MLHR
), whose Aeron chair was the darling of the dot-com set, is feeling the pinch as commercial construction stalls. Since mid-August, shares have slipped 7%, to $23.60 on Aug. 29. Two days earlier, it warned that sales in the quarter ending Sept. 1 would be $405 million to $420 million, vs. forecasts of as high as $485 million.
CLOSING BELL
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Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
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