In Business This Week
Edited by Monica Roman
HEADLINER
Robert Pittman: Déjà Vu at AOL
It is looking the same as ever for Robert Pittman, co-chief operating officer of AOL Time Warner (AOL
), once heralded as the likely successor to CEO Gerald Levin. On Apr. 9, the company announced that Pittman would be taking over the CEO job at the America Online unit, whose slowing growth has dragged down its corporate parent's stock price to a recent low of $21. "We view this news as a signal that the AOL division is more troubled than the recent results or current estimates suggest," says Lehman Brothers new-media analyst Holly Becker.
Pittman will be replacing Barry Schuler, who's off to launch a new digital services unit. The CEO of AOL before the company acquired Time Warner in January, 2001, Pittman will also keep his corporate job, becoming the lone chief operating officer when Richard Parsons takes over for Levin in May. The onetime disk jockey and MTV pioneer has won kudos as an operations exec, so his return to AOL might help get the techies back on track. But Wall Street failed to boost AOL's stock on the news.
By Tom Lowry
Cheaper Drugs for Seniors
The drug industry is still looking for ways to blunt criticism about soaring pharmaceutical costs. On Apr. 10, seven large drugmakers, including GlaxoSmithKline (GSK
) and Bristol-Myers Squibb (BMY
), unveiled a new discount prescription-drug card aimed at low-income seniors. The companies figure some 11 million seniors could get discounts of 20% to 40% on more than 150 prescription drugs. But industry critics argue that the plan, which comes on the heels of similar discount programs from individual companies, is no solution for the nation's mounting drug tab.
HP and Hewlett: It Ain't Over
The Hewlett-Packard/Compaq Computer merger fight drags on. On Apr. 8, a Delaware Chancery Court judge denied HP's motion to dismiss a lawsuit by dissident shareholder Walter Hewlett challenging a proxy vote on the merger. The tally won't be known until mid-April. But Hewlett alleges that HP (HWP
) used company assets--possibly the promise of future banking contracts--to coerce shareholder Deutsche Bank to vote for the merger on Mar. 19. And on Apr. 10, the San Jose Mercury News published a voice-mail message in which HP Chief Executive Carly Fiorina tells CFO Bob Wayman that "we may have to do something extraordinary" to persuade Deutsche Bank and another shareholder to vote for the deal. HP says it did nothing wrong. Next round: a trial scheduled to start on Apr. 23.
A Doubly Damning Guilty Plea
By pleading guilty in the Enron document-shredding effort, auditor David Duncan also struck a blow against his former partners at Andersen. Duncan admitted on Apr. 9 that he obstructed justice in the Securities & Exchange Commission's probe of Enron. His insider admissions could damn the struggling firm. Prosecutors say "tons of paper" were destroyed from Oct. 23 to Nov. 9, 2001, the day after an expected subpoena from the SEC put an end to the shredding. Andersen fired Duncan for poor judgment, but it has insisted the firm's actions were not criminal. Andersen likely will seek a deal to settle its obstruction charges.
The Brawl in Kmart's Garage
Just when it looked as if Kmart's (KM
) turnaround was gaining momentum in bankruptcy court, its partner Penske on Apr. 6 pulled the plug on 563 Penske Auto Centers inside Kmart stores. Kmart sued for fraud and got a temporary court order blocking the closures. The two sides have reached a deal calling for the orderly shutdown of the repair shops and $21 million for severance payments and other costs. The auto shops, 36%-owned by Kmart, weren't a big moneymaker, so their loss "will not have any adverse effect on our business," says Kmart CEO James Adamson. But the closed shops will do little to reassure customers that it's business as usual at Kmart.
Cracking Down on California Power
Continuing a legal barrage against the electricity marketers he holds responsible for California's power crisis, State Attorney General Bill Lockyer filed additional unfair-business-practice suits against four companies on Apr. 9. Lockyer, who is running for reelection, told BusinessWeek he also plans to file an antitrust suit against producers on Apr. 15. The attorney general dismissed criticism that his suits have lacked obvious evidence of fraud. "These are awful abuses, and there is more coming," Lockyer said. "Our cumulative demands are close to $20 billion." Companies named in the suits, including Mirant and Williams Energy Marketing, have denied the charges.
Et Cetera...
-- Procter & Gamble (PG
) said CEO Alan Lafley would become chairman as well on July 1.
-- Insurer Lloyd's of London reported losses of $4.46 billion in 2001.
-- The FCC approved NBC's purchase of Spanish-language TV network Telemundo.
CLOSING BELL
Sears Robust
Sears (S
) stock rose 5.8% on Apr. 10, to $54.18, after it said first-quarter profits would beat estimates by nearly 50% despite soft sales. The retailer said that earnings were helped by cost-cutting measures launched last fall. It also said profits for the year would rise 17%, up from a previous forecast of 13% to 15%.
CLOSING BELL
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Copyright 2002, Bloomberg L.P.
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