In Business This Week
Edited by Monica Roman
HEADLINER
Charles Prince: Salomon's Persuasive Prince
During a recent Citigroup (C
) shareholder meeting, CEO Sanford Weill grew weary of fielding questions. After assuring activists that he heard their concerns, Weill urged them to write Charles "Chuck" Prince III. That got a laugh, but Prince's role as a problem-solver is no joke. The trouble-shooting lawyer, who has worked with Weill for 23 years, was named head of Salomon Smith Barney, Citi's investment bank, on Sept. 8. Salomon is being investigated for conflicts of interest by Congress and the New York Attorney General's office.
Don't underestimate Prince's influence on government types. He persuaded the New York State Banking Dept. to O.K. Citi's purchase of subprime lender Associates First Capital by vowing Citi would curb predatory lending. And he sold Congress on the then-illegal merger of Citi and Travelers by promising more customer value. Such powers of persuasion should prove crucial as he tackles Job One in his new post: cutting deals with investigators to put the embarrassing and costly probes behind Citi.
By Heather Timmons
Ford Is Running a Bit Smoother
Finally, a little good news at Ford Motor (F
). After last year's meltdown, when it lost $5.5 billion, Ford told analysts on Sept. 9 that it would earn a slim profit in the third quarter. That's in lieu of the $182 million loss the Street had predicted. Ford executives say the company's cost-cutting efforts, which include some layoffs earlier in the year, have worked their way to the bottom line. Heavy incentive spending also boosted sales in the quarter. As a result, Wall Street analysts raised their earnings projections for the year to about $690 million, up from $546 million previously. The stock moved on the news, rising 60 cents, to $10.80 a share. But investors still aren't convinced. Why not? Many are still worried that Ford's sales and market share will be down for the full year. Says Burnham Securities analyst David Healy: "There's still a lot of pessimism about Ford."
Genentech's Latest Setback
It has been a rough year for Genentech (DNA
). The latest disappointment came on Sept. 9, when it announced that clinical trials for Avastin, an experimental cancer drug, had fallen short of expectations. The biotech giant had hoped Avastin would prolong the lives of women with late-stage breast cancer by slowing the growth of tumors. But none of the 462 patients in the study showed meaningful benefits. The setback comes at a bad time. In June, a jury ordered Genentech to pay $500 million in a contract-dispute case. The company is appealing the verdict.
Disney Investors Get Their Say
Walt Disney (DIS
) CEO Michael Eisner will probably get an earful on Sept. 13, when he meets with the company's large investors in New York. Eisner is under pressure to increase Disney's stock price or face a possible ouster, as the company struggles with weak attendance at its theme parks and poor ratings on its ABC TV network. The meetings--of investors, Eisner, and Disney CFO Tom Staggs--which company executives call "routine," come 10 days before the board considers cutting its own size and other measures to improve governance, including removing insiders from most board committees.
Qwest Pulls in Its Horns
Qwest Communications International (Q
), the troubled Denver phone giant, withdrew its applications to provide long-distance phone service in nine states, citing Federal Communications Commission concerns about its accounting. Qwest is under investigation by the Securities & Exchange Commission and the Justice Dept. for financial decisions made by prior management. Qwest is the only Baby Bell that hasn't received permission to sell long-distance service in its local region. The company expects to refile its applications later this month.
A Fresh Stew for Martha
The U.S. Justice Dept. will look into whether Martha Stewart misled Congress--in addition to probing whether she illegally sold shares in ImClone Systems (IMCL
) last December. The expanded investigation follows the Sept. 10 announcement from the House Energy & Commerce Committee that it will not subpoena the CEO of Martha Stewart Living Omnimedia (MSO
) to testify about insider-trading allegations. Investors viewed this as good news, pushing up shares 17%. But the committee also said it was requesting that the Justice Dept. widen its probe by looking into whether Stewart lied to Congress earlier in the summer. Stewart, the doyenne of all things domestic, is a friend of ImClone ex-CEO Samuel Waksal, who has been indicted on insider-trading charges.
Et Cetera...
-- AOL Time Warner (AOL
) said its AOL unit would continue to suffer from slow advertising.
-- The FDA demanded that Allergan (AGN
) halt potentially misleading Botox advertising.
-- The Milton Hershey Trust asked to lift an order barring the sale of Hershey Foods (HSY
) without court approval.
CLOSING BELL
Wild Blue
JetBlue Airways (JBLU
) shares took off on the two trading days ended Sept. 11, rising 12% to $44.72. Investors lifted the stock after the discount carrier shelved plans for a secondary stock offering that would have diluted per-share earnings. JetBlue went public on Apr. 12 at $27 a share.
CLOSING BELL
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Copyright 2002, by The McGraw-Hill Companies Inc. All rights reserved.
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