In Business This Week
Edited by Monica Roman
HEADLINER
Sanford Weill: The Trouble with Sandy
Sanford Weill can't seem to stay out of hot water. The Citigroup (C
) CEO admitted in a Nov. 13 memo that he asked telecom analyst Jack Grubman to "take a fresh look" at AT&T (T
). Grubman raised his rating on the stock in early 2000, and Citi won an investment-banking deal soon after. That October, Grubman lowered his rating. The events are being investigated by New York Attorney General Eliot Spitzer.
Weill's admission came after The Wall Street Journal reported that Grubman bragged in an e-mail that he was raising his AT&T rating to help Weill gain board support for co-CEO John Reed's ouster. Weill called the e-mails "defamatory." He said he never told any analyst what they "had to write" and said his request came because of AT&T's "dramatic transformation." Grubman said in a statement that his e-mails were lies.
Weill's request to Grubman wasn't illegal, experts say. But it may end up being costly for Citi as regulators weigh how to punish Wall Street for conflicts of interest between research and investment banking.
By Heather Timmons
Content Is King at AOL
With the decision by AOL Time Warner (AOL
) to give America Online veteran Ted Leonsis a greater role at the online-services unit, the push is on to develop more compelling content and focus less on advertising. AOL Vice-Chairman Leonsis, one of the last of the AOL Old Guard, assumes the responsibilities of AOL Interactive Services President James de Castro. The former hotshot radio exec with a strong advertising sales background resigned on Nov. 12, seven months after being recruited by AOL Time Warner co-COO Robert Pittman, who resigned in July.
Vivendi's New "Co-Producer"
Hollywood mogul Barry Diller, chairman of online retailer USA Interactive (USAI
), has been given the interim title of co-CEO at Vivendi Universal (V
). Diller owns a 1.5% stake in Vivendi's U.S. entertainment unit, and USAI owns 5.4%. The onetime Fox (FOX
) and Paramount (VIA
) studio head is helping to design a strategy for Vivendi's entertainment assets, which include the Universal studio and theme parks. A Universal spokeswoman says Diller has been effectively operating as co-CEO along with Jean-René Fourtou, who became Vivendi's CEO in July when the board ousted Chairman Jean-Marie Messier. The USAI chairman does not draw a salary from Vivendi and has no contract.
Yes, Penney, There Is a Santa Claus
J.C. Penney (JCP
) gave investors an early Christmas present on Nov. 12 when it announced better-than-expected third-quarter earnings and reaffirmed its holiday forecasts. Aggressive marketing, better merchandise, and improved presentation helped Penney more than double profits for the latest quarter, excluding one-time items. Net income climbed to $123 million--including the sale of the direct-marketing business--from $31 million in the year-ago period. Two years into his turnaround, CEO Allen Questrom said that the department stores, catalog, and Eckerd (JCP
) drugstore businesses "are all progressing well."
Can Nasser Develop Polaroid?
First, Jacques Nasser tried to remake Ford Motor (F
). But that didn't work. Chairman William Ford Jr. showed Nasser the door late last year, and Ford finished 2001 with a loss of $5.5 billion. Now Nasser will try to remake another corporate icon: Polaroid (PRDCQ
). One Equity Partners, Bank One's (ONE
) leveraged buyout arm, has charged Nasser with refocusing the instant-camera company. One Equity paid $255 million for 65% of Polaroid, allowing it to emerge from bankruptcy in July. Topping Nasser's to-do list: finding a CEO to help Polaroid compete in the Digital Age. The post has been empty since former CEO Gary DiCamillo left on July 1. Nasser's first step as non-executive chairman was to reach out to employees. "Like Polaroid, my company also confronted a major crisis," he wrote in an e-mail. They can only hope the results are better this time around.
Energy Regulators in the Woodshed
The Federal Energy Regulatory Commission missed warning signs about Enron (ENRNQ
) and isn't devoting enough resources to overseeing the energy markets, according to Senate investigators. "FERC must reorient itself to a changed and increasingly complex competitive industry," says a report by the Senate Governmental Affairs Committee. The committee, led by Senator Joseph Lieberman (D-Conn.), said that FERC needs to improve internal communication and its coordination with other agencies. FERC Chairman Pat Wood says the agency is overhauling its approach to "assure a competitive marketplace that protects consumers."
Et Cetera...
-- The FCC approved the Comcast (CMCSK
)-AT&T (T
) Broadband merger.
-- Cartoonist Stan Lee filed suit claiming he has not received royalties from the film Spider-Man.
-- Playtex (PYX
) hired J.P. Morgan (JPM
) to advise it on strategic alternatives, including a sale.
CLOSING BELL
Smoke Bomb
Philip Morris (MO
) shares fell 14% on Nov. 12, to $37.03, after the company said it couldn't stand by an earlier forecast of 8%-to-10% profit growth for 2003. As Marlboros hit $7.50 a pack in some areas, cheaper rivals are gaining. A string of tobacco litigation losses on the West Coast has added to investor concerns.
CLOSING BELL
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Copyright 2002, Bloomberg L.P.
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