In Business This Week
Edited by Monica Roman
HEADLINER
Hank Greenberg: AIG: The Next Generation
At 77, some executives might start to think about retirement. Not Hank Greenberg, chairman and CEO of American International Group (AIG
). On May 1, partly in response to continued questions about management succession, Greenberg appointed AIG veterans Martin Sullivan and Edmund Tse as co-chief operating officers, named Frank Zarb as chairman of the board's executive committee, and established a new office of the chairman.
What the insurance titan didn't reveal was when he might actually step down. "It's not going to be 10 years," says Greenberg, joking that it could actually be longer, despite 35 years at the helm. "Everybody ages differently." The new organization chart probably won't cut into Greenberg's work schedule, which generally runs from early morning to midnight. But Greenberg does expect the new appointees to take on a higher profile and more responsibility. And he wants the next leader to be young enough to have a long run in office. That might suggest Sullivan, at 47 the youngest among them, has the best shot.
By Diane Brady
Big Banks, Little Lending
Banks continued to tighten their purse strings through 2002, leading to the steepest drops in corporate lending in 30 years. A Federal Reserve study released on Apr. 26 found that big banks had $1.02 trillion in commercial loans outstanding through Apr. 17, down 7.1% from a year earlier. The drop comes as corporate defaults reach record levels, prompting lenders such as J.P. Morgan Chase (JPM
) and Citigroup (C
) to pull back from providing standby lines of credit. These lines generally remain unused until a borrower is in trouble.
UAL Needs a New Pilot
Six months after stepping in as an interim boss, UAL Chairman and CEO John Creighton announced on Apr. 30 that he would leave United Airlines (UAL
) as soon as a permanent successor can be found. Creighton, 69, a retired Weyerhaeuser chairman who had been a UAL director, was picked to lead the nation's No. 2 carrier after the board ousted James Goodwin in late October. While Creighton managed to pull United back from the brink of bankruptcy, management has yet to wring concessions from labor unions that Creighton insists are necessary for the airline's long-term survival. The pilots union has agreed to discuss temporary givebacks, but two other unions--the machinists and the flight attendants--refuse to consider pay cuts.
Disney: That's Not Entertainment
Walt Disney's (DIS
) ABC ratings doldrums claimed a second victim with the Apr. 30 resignation of ABC Television President Steve Bornstein, who said he is leaving to "pursue other interests." Four months ago, ABC programming head Stuart Bloomberg departed as ratings plummeted. Under pressure from Wall Street, Disney also revamped its corporate governance rules by raising stock ownership requirements for board members and prohibiting business relationships between the company and board members. In addition, the media giant has hired corporate governance attorney Ira Millstein as an adviser.
A Real Deal for Sony
Sony (SNE
) took a 1% stake in RealNetworks and forged stronger ties with the digital media software company on Apr. 30. And while the investment, roughly $11 million, is modest, the deal solidifies the bond between two rivals of Microsoft (MSFT
). Sony increasingly competes with Microsoft through game consoles and new technology to create a hub for digital activity in the home. Two years ago, Sony and Real inked an agreement to collaborate on digital media technology for PCs. This time, the pact calls for collaboration on non-PC devices, though the companies declined to disclose the specific products involved.
Let the HP-Compaq Merger Begin
Hewlett-Packard (HWP
) CEO Carly Fiorina's marathon effort to buy Compaq Computer (C
) is over. After a proxy battle by founding family member Walter Hewlett, the $18 billion deal has cleared what appears to be its last hurdle. On Apr. 30, Delaware Chancery Court Judge William Chandler III dismissed Hewlett's lawsuit against the company. The strongly worded opinion cleared Fiorina of any wrongdoing in wooing shareholder votes. But now comes the hard part. While experts have praised the company's integration plans, merging the two computer giants is a gargantuan task. As the new market leader in PCs, roughly 40% of HP's revenues will be exposed to fiercely competitive Dell Computer (DELL
). And Fiorina faces morale problems with staffers who didn't support the merger, which becomes official on May 7.
Et Cetera...
-- Cisco Systems (CSCO
) will acquire Hammerhead Networks and Navarro Networks for up to $258 million in stock.
-- Priceline.com (PCLN
) reported first-quarter net income of $3.9 million.
-- Kmart (KM
) will delay filing its annual report with the SEC to review its accounting.
CLOSING BELL
Underture
Shares of Overture Services (OVER
) sank 35.7%, to $21.99, on May 1, after AOL (AOL
) replaced the Web-search company's pay-per-click product with Google's rival service. Overture, formerly GoTo.com, expects to earn $60 million on sales of $530 million this year. But investors remain jumpy as Google continues to steal business from Overture.
CLOSING BELL
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Copyright 2002 , by The McGraw-Hill Companies Inc. All rights reserved.
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