In Business This Week
Edited by Monica Roman
HEADLINER
Ronald Sargent: Straightening Out Staples
As a teenager, Ronald Sargent faced a choice: Pursue a career as a jammer for a professional Roller Derby team or go to Harvard University. Sargent chose Harvard, but he'll still need sharp elbows in his new job. On Sept. 5, Sargent, 46, was named chief executive of office-supply giant Staples (SPLS
), effective Feb. 3, 2002. The 13-year Staples veteran and chief operating officer replaces longtime CEO and founder Thomas Stemberg, who becomes executive chairman.
After growing rapidly for most of its 16 years, Staples has hit a rough patch, with six straight quarters of flat or declining profits. What's more, a recovery is in full swing at rival Office Depot, whose stock has nearly doubled this year vs. a 30% gain for Staples.
"We do feel like we've hit bottom," says Sargent, who expects profits to start turning up in the third quarter. But Sargent also says he doesn't expect the economy "to bail us out." His top priority is to keep customers coming in the door by improving service at the chain's 1,300 stores.
By Geoffrey Smith
The Citi Sometimes Sleeps
Automated teller machines, online banking services, and debit-card networks crashed in the U.S. at Citigroup (C
), the country's largest bank, on Sept. 4. The culprit? A problem with the bank's proprietary software. By midday on Sept. 5, at least one ATM at all U.S. Citibank locations was working, according to spokesman Keith Anderson. The online and debit-card functions were still down, however, and the bank could not say when they would be fixed. Citibank added 500 telephone customer-service representatives to answer questions, Anderson says. But on the evening of Sept. 5, some customers said they were unable to get through on the phone. Citigroup has more than 2 million debit-card customers and 750,000 online banking customers. The bank said it would refund any charges or fees that Citi customers pay to use other banks' ATMs.
Getting Bigger in Big Oil
Consolidation continues in the energy sector: Texas oil-field-services companies Global Marine (GLM
) and Santa Fe International (SDC
) agreed to a $6 billion merger that would create the world's second-largest offshore drilling contractor. In the oil and gas production sector, Oklahoma's Devon Energy (DVN
) said it would buy Canada's Anderson Exploration for $4.6 billion. Last month, Devon agreed to buy Mitchell Energy & Development (MND
) for $3.1 billion. Together, the deals will make Devon North America's largest independent production outfit for oil and natural gas.
A Breach of Confidentiality
On Aug. 23, a New York state appeals court publicly censured lawyer Steven Lyon Holley for improperly disclosing a sealed court document to a reporter from BusinessWeek. In 1995, Holley, a partner at Manhattan's Sullivan & Cromwell, gave reporter Linda Himelstein a copy of a motion that had been filed by Procter & Gamble (PG
) as part of a fraud lawsuit against Bankers Trust. That document contained details about the bank's sales practices that eventually formed the basis for "The Bankers Trust tapes" (Cover Story, Oct. 16, 1995). In its ruling, the court said that Holley had failed to take the ordinary level of precaution mandated by state disciplinary rules and had violated Sullivan & Cromwell's own policies. It noted that the purpose of the punishment was "to put attorneys on notice" of the importance of maintaining confidentiality.
An Aussie Bank's Problem Child
U.S. interest rates continue to take their toll on National Australia Bank. The country's largest financial institution said on Sept. 3 it would take a $1.75 billion charge to reduce the value of HomeSide Lending, a U.S. mortgage lender it bought in 1998. This is the second such charge for National Australia, which said on July 5 it would take a $450 million charge to revalue HomeSide's mortgage assets. On Sept. 4, the bank said that HomeSide CEO Hugh Harris, President Kevin Race, and CFO Blake Wilson had left the company.
Swifter Chips at Motorola
On Sept. 4, Motorola (MOT
) announced a manufacturing breakthrough that will make the silicon chips used in such devices as computers, cell phones, and fiber optics 35 times as fast as those on the market today. The discovery also makes it possible to build some chips much more cheaply. Among the applications that could result from the new chipmaking process: creating integrated circuits that would sharply cut the price of connecting high-speed Internet networks to the home--and would also hasten the arrival of radar systems to help cars avoid collisions. Motorola expects to begin selling the new chips in 2003.
Et Cetera...
-- Boeing (BA
) opened its new world headquarters in Chicago, relocating from Seattle.
-- Exodus Communications (EXDS
) Chairman and CEO Ellen Hancock resigned on Sept. 4.
-- AIG will face competition in China from other foreign life insurers for the first time.
CLOSING BELL
Credit Crunch
Providian Financial (PVN
) is feeling pinched as consumer spending slows. The San Francisco credit-card issuer, which lends to folks with shaky credit records, said on Sept. 4 that it's cutting profit forecasts. The news sent shares sliding 22% that day, to $30.36, and an additional 4.8% on Sept. 5, to $28.90.
CLOSING BELL
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Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
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