Up Front
Edited by Sheridan Prasso
Talk Show
"I am convinced that the United States has regained its economic footing." -- Treasury Secretary Paul O'Neill
PRODUCT PEEK
A Porsche You Can Boot Up
Tired of boring beige in a PC? Check out the new Matrix from, ahem, Best Buy. The nation's leading electronics retailer plans to relaunch its house-label computer this summer with a sleek makeover by Porsche Design, the firm set up by a grandson of the German sports-car maker. Best Buy is betting that the angular, bluish-black-and-silver computer will steal a march on the best-sellers on its aisles from Hewlett-Packard and Compaq Computer. "Our customers want more than a white box," says Steven Lee, Best Buy's vice-president for development.
The vpr Matrix, introduced as a plain box in January, offers more features than its competitors for about $100 less. Even though customers had to purchase a separate monitor, they responded enthusiastically and many stores sold out. Now, with the sexier, complete Matrix, Best Buy hopes to craft a more distinct brand identity. But challenges loom: Along with possibly alienating its PC vendors, Best Buy faces the same hurdles that forced others out of private-label PCs--fluctuating component prices and rapid obsolescence. Still, by turning to a designer of things from sunglasses to high-end appliances, Best Buy plans to take the risks in style.
By Robert Berner
BANK NOTES
More Bankers Are Saying "Hola"
The U.S. doesn't exactly roll out a red carpet for Mexican immigrants, but banks these days are sparing no effort to garner their business. And they're not even asking to see legal residence papers. Bank of America (BAC
), Citibank (C
), and Wells Fargo (WFC
) are wooing the 21 million people of Mexican descent in the U.S. Previously, the estimated 4 million illegals without ID were unable to open accounts. But in the past few months, banks have begun accepting ID cards from Mexican consulates, thousands of which were issued post-September 11.
Now, banks are trying to corner the lucrative money-transfer trade, too--amounting to $10 billion last year. On Apr. 24, Bank of America launched SafeSend, which allows Mexicans to send home $500 for a $10 fee. In comparison, Western Union and Money Gram, which handle 40% of money transfers to Mexico, charge $25. SafeSend recipients, who are sent an ATM card, can withdraw the money for free from one of 20,000 ATMs in Mexico. That's handy, as poor Mexicans don't have bank accounts. "This is faster, cheaper, more convenient, and safer than other money-transfer services," says SafeSend manager Jeffrey Bierer.
Citibank, which last year bought Mexico's Banamex bank, is also jumping into the business, charging $10 for transferring up to $1,000 to a Banamex branch. Recipients, however, must have a bank account.
By Geri Smith
SPORTS BIZ
Jockeying for the Tracks
It's a neck-and-neck race. And we're not talking the May 4 Kentucky Derby. Rather, two publicly traded companies are in a competition to consolidate the $14.5 billion U.S. horse racing industry. Churchill Downs Inc. (CHDN
) had an early lead. The Kentucky company now owns six tracks, including Arlington Park outside Chicago. But rival Magna Entertainment (MIEC
) has pulled ahead in the past three years. The Toronto company, started by Canadian auto-parts magnate Frank Stronach, has acquired 11 tracks including Santa Anita Park near Los Angeles and Miami's Gulfstream Park.
Next, they may be racing to purchase the Maryland Jockey Club, which includes the Pimlico Race Course, home of the Preakness. Between the two, Churchill and Magna now control 50% of horse track betting in the country.
Owning the top tracks is key. Live racing attendance has been declining for years, but the companies with the best lineup of horses can increase revenues by simulcasting races to other sites, where 80% of bets are placed. Says Stronach: "I want to get them in living rooms around the world."
By Christopher Palmeri
THE LIST
Don't Just Sell--Run!
It may be tough to get a "sell" rating out of a Wall Street analyst,
but the folks who rate mutual funds aren't nearly so reticent. Here are
five mutual funds to avoid, according to Morningstar:
FUND/ YEAR-TO-DATE
ADVISER RETURN WHY IT'S SO BAD
BERKSHIRE FOCUS -20.5 Bold bets on tech haven't
(THE BERKSHIRE FUNDS)* paid off
IPO PLUS AFTERMARKET -8.5 The name says it all
(RENAISSANCE CAPITAL)
AIM EUROLAND -6.7 This European fund doesn't
(AIM ADVISORS) invest in Britain or Switzerland
PHOENIX-ZWEIG STRATEGY -4.3 Fund turned bullish just as
(PHOENIX INVESTMENT PARTNERS) market became bearish
AXP INTERNATIONAL +0.3 Consistent laggard, despite
(AMERICAN EXPRESS FINANCIAL) changes in management
* No relation to Warren Buffett
Data: Morningstar Inc.
WIRELESS BANKING
Talk About a Low Interest Rate
Few people, it seems, care about having instant access to their bank accounts. Only about 16,000 Americans use wireless banking, according to tech research firm IDC. And several banks have found that customers with alternatives such as ATMs, online access, or phone service don't need to check their balances or move their money around on handheld devices. At least one, Bank of America (BAC
), dropped plans for wireless after disappointing trials. "Transactions aren't that urgent that people have to use a cell phone," says Ron Shevlin of Forrester Research.
At FleetBoston Financial (FBF
),wireless use peaked at less than 1% of online customers shortly after its late-2000 launch. Usage has fallen ever since--except among one group, the blind. Because wireless delivers only data, the text reader that synthesizes voice does not have to wade through graphics, speeding the transaction. Fleet says it will keep wireless going, though it did cancel one feature, stock trading. "We've gotten zero complaints," says Jim Goodwin, Fleet's head of Online Financial Services.
The take-up rate is equally abysmal at tech-savvy Wells Fargo, where 6,000 people, less than 0.25% of 3 million online customers, use wireless. The bank hasn't yet decided whether to cancel it.
By Faith Keenan and Timothy J. Mullaney
PRODUCT PEEK
A Health Drink from Old Wealth
Just because you're a member of the horsey set doesn't mean you can't be an entrepreneur. A bunch of youthful heirs to the Campbell Soup(CPB
), Dow Jones (DJ
), Exxon (XOM
), and Johnson & Johnson (JNJ
) fortunes are grouping together to make a run at the healthy-beverage sector via a company called Hampton Mills in Far Hills, N.J. First up: soy- and whey-based sports shakes called Robin.
The powder in a plastic bottle (add water and shake) offers a high-protein, low-cal "meal replacement" that's targeted as much at active moms as musclemen. (Hence, the name Robin, meant to stand out from medicinal- or macho-sounding rivals.) Company president and veteran adman John Susskind says his investors--all fitness buffs and several with food-industry backgrounds--aren't taking a passive role. Campbell heir Chester Weber, 26, who studied at Cornell University's hotel-administration school, is working retail connections to win shelf space. Elisabeth Goth, 38, a champion equestrian and heir to the Dow Jones fortune, helped refine the label and recipes. Says Goth: "As an athlete, I relied rather heavily on products like these." Now, they hope others will, too.
By Gerry Khermouch
AFTER ENRON
Field Trips for Execs: Prison
Imagine Scared Straight for the suit-and-tie set: a daylong, face-to-face encounter with seemingly normal execs--except they've traded their Brooks Brothers' pinstripes for the prison-issue variety.
With the Enron (ENRNQ
) and Arthur Andersen scandals thrusting ethics to the top of the agenda, one business school thinks execs should see firsthand possible consequences of being too aggressive in the pursuit of profits. So the University of Maryland's Smith School of Business executive education program will include a session with white-collar convicts in federal prison. "We're trying to drive at the reality behind white-collar crime," says Associate Dean Scott Koerwer. More than a dozen companies have signed up for the four-day course starting in June. There's at least one precedent for the reality check. Since the early 1990s, Pepperdine University's Graziadio School of Business has sent executive MBAs to Nellis Federal Prison near Las Vegas. "These guys talk themselves into believing what they did was O.K.," says Rich Noyes, a 1999 Pepperdine grad. "But then we go back and look at what was presented in court and realize the truth." And perhaps feel a measure of deterrence.
By Jennifer Merritt
THE BIG PICTURE
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Copyright 2002 , by The McGraw-Hill Companies Inc. All rights reserved.
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