In Business This Week
Edited by Monica Roman
HEADLINER
Richard Barton: Traveling Man
It was surprising enough that Expedia thrived during the travel slump. But the online travel leader dropped a bomb on Feb. 5, when 35-year-old CEO Richard Barton resigned. He will be replaced by Expedia North America President Erik Blachford.
Even though he is leaving Expedia (EXPE
), Barton is joining the board of Barry Diller's USA Interactive, which owns 62% of Expedia. A former Microsoft product manager, Barton isn't easily intimidated. Last summer, when Diller tried to buy the shares of Expedia that he didn't already own, Barton argued that his company would perform better independently. Diller backed off. It's likely that Diller will try to buy the rest of Expedia and merge it with another travel site now that Barton has resigned.
Barton denies he is leaving because of any problems at Expedia and says that he and his family want to live in Europe.
Expedia's fourth-quarter results support Barton's claim. The company's earnings of $21.4 million on $164 million in sales beat analysts' expectations.
By Timothy J. Mullaney
Donaldson Drops Some Hints
At his Feb. 5 senate confirmation hearing, William Donaldson, President Bush's pick to head the Securities & Exchange Commission, gave no hints about how he would achieve his top goal: finding someone to chair the new accounting oversight board. But Donaldson did provide clues about how else he might flex his muscle. The 71-year-old founder of Wall Street firm Donaldson, Lufkin & Jenrette said he was distressed that as-yet-unregulated hedge funds were targeting less-sophisticated investors. He also said the SEC should "take a hard look" at credit-rating agencies, with a view to making what is now an oligopoly more competitive. And Donaldson put the financial conglomerates on notice that he regarded the practice of banks softening their credit standards to win investment banking business as being as worrisome as analysts' acting in cahoots with investment bankers.
Cutting Costs the American Way
American Airlines (AMR
) CEO Donald Carty is asking labor to kick in its share of his $4 billion cost-cutting target to avoid bankruptcy and compete long term. The goal: $1.8 billion in annual wage, benefit, and work-rule concessions. Labor leaders aren't dismissing Carty's plan out of hand but want more details. Says pilots' union spokesman Gregg Overman: "We understand that they have a real problem, and that it's not getting better." If Carty doesn't get some relief soon, American might be joining United Airlines and US Airways in bankruptcy court.
Biogen: Rashly Optimistic?
The FDA's approval of Amevive gives Biogen (BGEN
) a head start over rivals in the market for new psoriasis treatments. Biogen, based in Cambridge, Mass., predicts it will earn $85 million from Amevive sales this year and $500 million annually by 2005. But some analysts think that's too optimistic. They wonder how many of the estimated 1.5 million Americans with the chronic skin condition will be willing to trade convenient, but less effective, topical treatments for 12 weekly injections costing up to $10,000.
Exodus from Lazard
Four hedge-fund managers have left Lazard, the world's largest private investment bank. The managers--Robert Cope, Thomas Ellis, Ben Guest, and European Marketing Director Rupert Tyler--quit just weeks after Manager William von Mueffling also resigned. Von Mueffling ran Lazard's volatile European Opportunities Fund, which has posted annual gains of 57% since its inception in August, 1998. In response to the departures, Lazard President Charles Ward said: "We are reorienting our alternative investments to a research-driven, team approach."
Enigmatic at AIG
When American International Group (AIG
) CEO Maurice "Hank" Greenberg said on Feb. 3 that the insurer would take a $1.8 billion charge to hike reserves, investors got spooked. They sent its shares down nearly 10% in the next two days, on fears that it's underpricing its policies. But Greenberg says what AIG really needs is tort reform. He's urging Washington to impose caps on class-action lawyers' fees and on asbestos settlements. For those investors wondering who will fill the 77-year-old Greenberg's shoes when he steps down, he has an answer--albeit a qualified one. "The board knows who the successor is, and in the proper time the board will name that person," he said.
For an online-only Q&A with Hank Greenberg, click here.
Et Cetera...
-- Bankrupt Bethlehem Steel agreed to be acquired by International Steel Group.
-- GE (GE
) acquired Abbey National's consumer-lending business for $1.4 billion.
-- DaimlerChrysler (DCX
) reported a $4.9 billion profit, vs. 2001's $589 million loss.
CLOSING BELL
Energy Crisis
Despite promises to shore up its liquidity and bolster its balance sheet, El Paso's (EP
) stock plummeted 22.5%, to $6.20, on Feb. 5. That's when the energy company announced that it was slashing its dividend and selling more assets. It will likely miss analysts' earnings estimates for the year.
CLOSING BELL
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Copyright 2003, by The McGraw-Hill Companies Inc. All rights reserved.
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