In Business This Week
Edited by Monica Roman
HEADLINER
Robert Willumstad: The Citi after Sandy?
Citigroup (C
) tapped its consumer-lending chief, Robert Willumstad, as president on Jan. 15. Willumstad, 56, fills a spot vacant since James Dimon, now Bank One (ONE
) chairman, was ousted in 1998. The move helps silence criticism that CEO Sanford Weill, 68, has no succession plan, but it doesn't guarantee Willumstad the top job. The reserved exec has run Citigroup's global consumer division since December, 2000. The unit, whose income grew more than 20% in the first nine months of 2001, contributed to Citigroup's relatively stable earnings. Willumstad now takes on added financial and human-resources duties. A onetime Chemical Bank executive, Willumstad has worked with Weill for 15 years, first at Commercial Credit, which became Travelers Group. He's the last remaining high-profile Weill loyalist at the company. Last year, vets Joseph Plumeri and Jay Fishman left to head insurance firms. But Weill isn't heading out soon. "You'll learn about my succession plans when the company decides to name a successor," says Weill.
By Heather Timmons
MGM: On the Block or on the Prowl?
The hottest drama in Hollywood is whether the fabled Metro-Goldwyn-Mayer (MGM
) is up for sale or looking for acquisitions. MGM execs have retained investment bankers Goldman Sachs and for months have said they intend to get critical mass through acquisitions or a merger. The studio, majority-controlled by billionaire Kirk Kerkorian, refused to confirm published reports that it has put itself on the auction block for an estimated $7 billion. In recent months, MGM has held talks with Sony, DreamWorks SKG, and others about its library of more than 4,100 movies, including the James Bond and Pink Panther series. It has also bought or launched more than a dozen cable channels worldwide on which to run its films. Last year, MGM also paid $825 million for 20% of Rainbow Media, which owns U.S. cable channels including Bravo and American Movie Classics.
An Intel Insider Moves Up
Intel (INTC
) veteran Paul Otellini became heir apparent at the giant Santa Clara (Calif.) chipmaker by being named president and chief operating officer. Otellini, head of Intel's core microprocessor business since 1998, fills a COO post that has been vacant for nearly four years. With Intel struggling to find its way out of the worst semiconductor sales slump in history, Otellini, 51, will oversee the day-to-day development and delivery of new products and technologies. CEO Craig Barrett, 62, who gives up his title as president, will focus on corporate strategy and long-term planning.
Taking Aim at Tyco--Again
Two years after its stock was shellacked by short-sellers, Tyco International (TYC
) is once again under fire. On Jan. 15, its stock plunged 8.5% after Tyco warned that because of weakness in its electronics business, earnings would rise only 14% to 17% in the quarter ending Mar. 31, instead of the 23% expected by analysts. And the stock has fallen some 20% since Jan. 1, amid rumors of possible SEC investigation of its accounting. Sources close to the matter deny that the SEC is investigating, and Tyco dismissed the rumors.
A WTO Blow for Uncle Sam
The costliest trade dispute ever between the U.S. and the European Union is nearing an end. On Jan. 14, a World Trade Organization appeals panel ruled that the U.S. tax code contains a $4 billion-a-year export subsidy that violates international trade law. The U.S. now has tough choices: higher European tariffs on U.S. exports or lower U.S. tariffs on European imports. Other options include ending the U.S. export subsidy, resulting in a tax increase on U.S. multinationals, or doing away with all foreign-source income taxes, which means a big loss for the U.S. treasury. The WTO is expected to decide by Mar. 28 the amount of penalty tariffs that Europe can levy on U.S. exports.
Deflating Those Pro Forma Figures
Companies that want to puff up earnings, take heed. On Jan. 16, the Securities & Exchange Commission for the first time went after "pro forma" numbers--earnings and revenue figures that don't follow generally accepted accounting principles. The SEC charged Trump Hotel & Casino Resorts with fraud in connection with its 1999 third quarter, when it reported operating earnings of 63 cents a share. The company's press release noted that the pro forma number excluded a one-time charge of $81.4 million but didn't disclose that it included a one-time gain of $17.2 million. Trump Hotels agreed to cease and desist from improperly reporting earnings without admitting or denying the charges and wasn't fined.
Et Cetera...
-- AT&T (T
) will pay $2.6 billion to consulting firm Accenture to help it cut costs.
-- Jeff Mallett resigned as president and COO of Yahoo! (YHOO
)
-- Nucor (NUE
) dropped its opposition to U.S. Steel's plan to take over seven steelmakers.
CLOSING BELL
Falling Dow
When it took over Union Carbide last year, Dow Chemical (DOW
) hoped to gain market share and economies of scale. Turns out it also acquired a docket of asbestos liability. After settling a Texas lawsuit against Carbide on Jan. 9, Dow shares fell 29%, closing at $24.55 on Jan. 16. Dow calls its liability immaterial.
CLOSING BELL
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Copyright 2002 , by The McGraw-Hill Companies Inc. All rights reserved.
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