In Business This Week
Edited by Anne Newman
HEADLINER
Terry Semel: Two Cheers for Yahoo!
When Terry Semel took over the helm at Yahoo! 20 months ago, many insiders blanched. After all, what did the former Warner Bros. exec know about running an Internet portal?
Now, some skeptics are being won over. On Jan. 15, Yahoo announced a 2002 profit of $43 million, after a 2001 loss of $93 million. Yahoo's revenues jumped 33%, to $953 million.
Indeed, Semel's boldest moves may be paying off. A broadband-access deal with SBC Communications added nearly $10 million to fourth-quarter sales, estimate analysts. And a partnership with Overture Services to sell ads on its search-results pages should garner $140 million in 2003. Most encouraging is Net advertising revenue, which grew 32%, to $178 million, in the fourth quarter. Semel expects 20% growth in ad sales for 2003.
But he can't rest. Although Yahoo's stock rose 36%, to $19.58, in the past three months, it fell 6% on Jan. 15 in after-market trading, in part because of concerns that reliance on Overture masks otherwise mediocre results. And with acquisitions of search-technology firm Inktomi and career site HotJobs, Yahoo must prove it can execute across multiple fronts.
By Ben Elgin
Cautious Intel, Worried Investors
Intel is having a hard time erasing the gloom that has clouded the semiconductor industry's fortunes. On Jan. 14, the Santa Clara (Calif.) chipmaker reported fourth-quarter earnings that handily beat analysts' expectations. Intel said fourth-quarter profit nearly doubled, to more than $1 billion, from $504 million a year earlier, as price wars abated. Sales rose slightly, to $7.16 billion, from $6.98 billion a year earlier. But investors focused on news that the company plans to cut spending sharply on new manufacturing plants until strong demand returns. With one of the world's largest technology companies playing it safe, Wall Street is worried that the technology train wreck will continue for months. Analysts say it's too soon to tell whether Intel is being a worrywart or whether a strong recovery in demand really will not arrive until 2004.
Mickey Is Still in the Mouse House
Mickey Mouse can sleep a little more easily. Copyright protection for Mickey, Minnie, and Donald Duck can be extended to 95 years, the Supreme Court ruled in a 7-2 decision that upheld passage of the 1998 Copyright Term Extension Act. Media companies like Walt Disney, which maintains Mickey Mouse's rights, had lobbied Congress to extend the current 70-year protection. The legislation was appealed to the high court in 1999 by Eric Eldred, an Internet hobbyist in New Hampshire who wanted to build a free library of characters for the Net. Mickey Mouse first appeared in the 1928 short Plane Crazy.
A Red Light for Gene Therapy
The once-promising field of gene therapy has suffered another setback. On Jan. 14, the Food & Drug Administration put 27 clinical trials on hold until it decides whether or not there are dangerous side effects. The action was prompted by a new case of a leukemia-like disease in a child being given new genes in a French trial. The French researchers are attempting to cure "bubble boy syndrome" by inserting a gene that enables children to build a working immune system. But in some cases, it appears that the procedure can damage blood cells, causing them to multiply and create the leukemia-like condition.
Does Kmart Have a Road Map?
Kmart on Jan. 14 unveiled plans to get out of Chapter 11 bankruptcy by late April --obtaining $2 billion in exit financing, closing 326 more stores, and laying off at least 35,000 workers. But the discount retailer's strategy remains murky. The new plan eschews two previously considered options: shrinking by region or focusing on superstores that sell groceries. The closings will be scattered across 44 states and include 60 supercenters. Kmart officials say they'll stick with their plan for frequent sales and brand-name franchises such as Martha Stewart and Joe Boxer--the same strategy that led it into bankruptcy a year ago.
WorldCom's Race against the Clock
For WorldCom, time is of the essence. New CEO Michael Capellas fears big customers will flee if the telecom giant doesn't emerge from bankruptcy protection by the end of April. That's ambitious, given that WorldCom filed for protection in late July. Capellas told employees on Jan. 13 that he will slash operating expenses by 4% more, meaning more layoffs in addition to the 17,000 jobs already cut. But WorldCom still needs to expedite new services in development. Many of those services will be aimed at small and midsize businesses--a new and essential market for WorldCom, says Capellas.
Et Cetera...
-- Seven Datek execs and ex-traders agreed to a record SEC fine of more than $70 million.
-- Apple Computer expects flat sales rather than the typical second-quarter decline.
-- Wal-Mart Stores said it will jump into the bidding for British food retailer Safeway.
CLOSING BELL
Radio Flyer
XM Satellite Radio's stock is enjoying a nice ride after falling 75%, to about $3 a share, in the past year. General Motors said it plans to offer XM's 101-channel satellite-radio service in 44 of its 57 models in 2004, up from two models last year. From Jan. 14, XM's stock rose 34% in two days, to $4.11 a share.
CLOSING BELL
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Copyright 2003, by The McGraw-Hill Companies Inc. All rights reserved.
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