In Business This Week
Edited by Monica Roman
HEADLINER
Louis Camilleri: More Than Just a Numbers Guy
Break out the smokes and cheese. Philip Morris (MO
) on Jan. 30 named its chief financial officer, Louis Camilleri, to be its new president and CEO. Camilleri, 47, will take over the job from Geoffrey Bible--who stays on as chairman--on Apr. 25. Camilleri cast his appointment as the continuation of a great regime, calling Bible a "veritable institution" while pledging to build on his "enormous legacy and outstanding track record."
Still, analysts welcomed Camilleri's promotion, noting that he is more than just a numbers guy. Among other things, Camilleri expanded the company's tobacco business in Central and Eastern Europe, headed up corporate planning, and even acted as CEO of Kraft Foods' international operations.
Camilleri is expected to be savvy about unlocking shareholder value, from stock buybacks to a possible tracking stock for tobacco. "This hasn't been the most sophisticated company in terms of financial engineering," says Rob Campagnino, an analyst with Prudential Securities. "He could change that."
By Diane Brady
Results Xerox Hopes to Duplicate
At last, some good news from Xerox (XRX
): On Jan. 28, the company announced that it posted an operating profit in its 2001 fourth quarter, excluding restructuring charges and not counting the impact of unhedged currency. CEO Anne Mulcahy hailed the results as "an important milestone in Xerox' turnaround." Investors agreed, driving the stock up 14%, to $11.24 a share, that day.
Still, plenty of issues remain for the copier maker, including a Securities & Exchange Commission probe into its lease accounting, the continuing search for a new chief financial officer, and so-far unresolved negotiations with bankers regarding a $7 billion revolving credit line that expires in October. Also, sales were down 13% in the quarter, and even though the company is predicting profitability for the coming year, next quarter will probably bring fresh losses.
Making Headway at Gateway
The PC price war is back on. Gateway (GTW
) slashed its prices for desktop and notebook computers on Jan. 28, undercutting market leader Dell Computer (DELL
) by as much as 20%. Higher prices had helped Gateway turn in a $5.1 million profit in the fourth quarter, but the Poway (Calif.) PC maker now says it needs to rebuild its market share, which fell to 6.3% in December from 7.8% in September, according to IDC. Gateway will take pretax losses for the coming few quarters, cut 2,250 jobs, and close 19 of its 296 Country Stores. Not to be outdone, market-leader Dell lopped as much as $200 off the price of some PCs, and is doubling the size of hard drives for free.
No Fun and Games at Toys `R' Us
These are serious times in toyland. Despite a surprisingly strong Christmas season, when Toys `R' Us (TOY
) stores bucked a bad economy to sell 5% more Monopoly games, Lego blocks, and Barbie dolls than the year before, CEO John Eyler is making big cuts. On Jan. 28, he said he would close 27 toy stores and 37 Kids `R' Us stores, eliminate 1,900 jobs, and take a restructuring charge of $213 million. Eyler estimates that the cuts will add $25 million to pretax earnings in 2002 and contribute $45 million a year starting in 2003. Since Eyler took over the company two years ago, he has remodeled 433 toy stores, worked to improve customer service, and stacked the shelves with exclusive toys in a bid to beat discount-store competition.
Diller's Doozy of a Quarter
Barry Diller's bet on interactive commerce seems to be paying off. Growth in online travel and Internet dating helped boost fourth-quarter revenues at his USA Networks (USAI
) by 33%, beating Wall Street estimates. The protracted ad slump took its toll on USA's cable channels, including its flagship USA Network, which Diller recently agreed to sell to Vivendi Universal (V
). That deal could close within weeks, said Diller. Rid of its entertainment holdings, the company raised its 2002 estimates.
The Yawn That Greeted Merck
Merck (MRK
) thought it had found the right remedy for its ailing stock price. On Jan. 29, the drugmaker announced it would spin off Merck-Medco, its pharmacy-benefit-management company, in the hopes that the stock market would reward it for focusing on its drug business. But Wall Street yawned, sending Merck's stock up less than 1%, to $57.52, on the news. The reason? The spin-off does little to offset the pressure from patent expirations and a weak new-product pipeline. "This deal doesn't change the underlying issues in their drug business," says John Borzilleri, portfolio manager at State Street Research & Management.
Et Cetera...
-- Crossmann Communities will be acquired by Beazer Homes (BZH
) for $603 million.
-- Mirant (MIR
) may sell all or part of its European marketing and risk-management operations.
-- ABB doubled the amount set aside to cover potential asbestos liability, to $940 million.
CLOSING BELL
Big Premium
Shares of Conseco (CNC
) rose 18%, to $3.81, on Jan. 30 after the Carmel (Ind.) insurance and loan company said it would raise as much as $800 million in cash by repurchasing bonds, selling some assets, and expanding a credit line. The cash will be used to pay down debt and offset any earnings shortfall.
CLOSING BELL
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Copyright 2002 , by The McGraw-Hill Companies Inc. All rights reserved.
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