In Business This Week
Edited by Monica Roman
HEADLINER
Daniel Carp: Kodak: Not a Pretty Picture
After more than 30 years at Eastman Kodak (EK
), you might think Daniel Carp, the company's chairman and CEO, had seen it all. Then came the fourth quarter of 2002, when film sales dropped 5% from the already weak year-ago period and revenue for 2002 slid 3%, to $12.8 billion. The outlook for 2003 isn't much better. "The film industry is under pressure unlike ever before," Carp told investors on Jan. 22.
So is Kodak: Film sales continue to suffer as more consumers buy digital cameras. Although Kodak scored big last year with its EasyShare digital camera, competitors have copied it and prices have fallen.
Carp has tried to control what he can: costs. Kodak said it would cut up to 2,200 jobs, or 3% of its workforce. It's moving more manufacturing to China and hopes to boost sales there as well. But not even Carp expects the picture to get much brighter this year. Kodak says net income will likely be flat or down from the $770 million it earned in 2002. The bad news drove shares down 11%.
By Faith Keenan
More McLawsuits?
McDonald's (MCD
) claimed victory when a federal judge in New York on Jan. 22 dismissed a lawsuit that claimed the fast-food giant has some responsibility for making children obese. McDonald's declared: "Common sense has prevailed." Not so fast. A closer look at the 65-page opinion from Judge Robert Sweet hints that the case was thrown out more for lack of proper argument from the plaintiffs' lawyers than for its frivolity, as McDonald's claims. Judge Sweet says it "presents unique and challenging issues," adding that the complaint can be amended. Sweet even lays out some possible arguments that plaintiffs could use, calling the Chicken McNuggets a "McFrankenstein" creation. John Banzhaf, a George Washington University law professor and anti-tobacco crusader, says: "This opens the door for more lawsuits." Watch out, McDonald's.
It's Still Rich Man, Poor Man
The poor got a wee bit richer, and the rich got a lot richer. That's according to the Jan. 22 release of the Federal Reserve's triennial Survey of Consumer Finances, covering developments from 1998 to 2001. Families with incomes in the lowest 20% of the distribution did best, with their median wealth more than doubling. But even that gain left the median family in the group with net worth of only $1,100. By contrast, the median family in the top tenth of wealth enjoyed a $326,000 increase in net worth, to $1.3 million.
Verizon Must Face the Music
Fighting off internet piracy that last year slashed its sales by 9%, the music industry won a key battle when a federal judge ordered telco Verizon Communications (VZ
) to turn over the name of a Net subscriber who had allegedly made songs widely available online. U.S. District Judge John Bates ruled that Verizon was required to turn over the name to the Recording Industry Association of America, the industry group that filed suit. Verizon argued that the hundreds of songs allegedly pirated by the subscriber resided not on its server but on the subscriber's computer. It said it will appeal the ruling.
Triumvirate in the Sky
American Airlines (AMR
) may be the world's biggest carrier, but three rivals plan to launch a marketing pact this summer that will effectively create a larger airline. Northwest (NWAC
) and Continental (CAL
), which have been linked since 1998, got Justice Dept. clearance Jan. 17 to form a code-sharing alliance with Delta (DAL
) that will allow travelers to book flights on any of the three airlines and earn frequent flier points on the carrier of their choice. United and US Airways won approval of a similar partnership last fall. The trio still faces a few hurdles. For instance, the Transportation Dept. wants the three to give up underutilized gates at hub airports.
One Less Gap at the Gap
Paul Pressler has started the housecleaning at Gap (GPS
). As part of his turnaround strategy, CEO Pressler on Jan. 18 tapped Disney executive Byron Pollitt to be Gap's chief financial officer. Among the first tasks for Pollitt, who held the top finance job under Pressler at Disney's theme-parks and resorts unit, will be to cut costs by closing some of Gap's 4,200 stores. Pollitt will also have to figure out how Gap can improve its bruised bond ratings, which have suffered for more than a year as the chain struggled with rising debt amid eroding profits and sales at its Gap, Old Navy, and Banana Republic stores. Pressler is still looking to hire heads for the chain's international division and the Gap brand's marketing team.
Et Cetera...
-- News Corp. (NWS
) has put the Los Angeles Dodgers up for sale.
-- Motorola (MOT
) posted a $174 million net profit in the fourth quarter.
-- Mark McCormack, founder of sports marketer International Management Group, suffered a serious heart attack.
CLOSING BELL
Bailing Out
Investors drove down General Dynamics (GD
) shares more than 12.4%, to $64.85, on Jan. 22. While the company's defense businesses remained strong in the fourth quarter, aerospace earnings plunged. CEO Nicholas Chabraja said GD will earn $5.15 a share in 2003, vs. the $5.49 analysts had been expecting.
CLOSING BELL
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Copyright 2003, by The McGraw-Hill Companies Inc. All rights reserved.
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