In Business This Week
Edited by Monica Roman
HEADLINER
Douglas Daft: A Quenching Quarter
After three tough years, Coca-Cola (KO
) Chairman and CEO Douglas Daft may finally be starting to steer his Big Red ship out of troubled waters. Thanks to revamped advertising campaigns and new products, Coke is again clicking with consumers.
The changes added some fizz to Coke's fourth-quarter numbers, released on Feb. 12. Sales jumped 13%, to $4.8 billion, although earnings inched up just 1.8%, to $930 million. Coke's acquisition of the Seagram line of mixers and its deal to distribute Evian water in the U.S. helped pump up results. Better still, unit volume was up 6% overall, riding the success of such Daft initiatives as Vanilla Coke and Dasani bottled water.
Still, to get earnings up, Daft's turnaround has a ways to go. He plans to integrate the company's North American bottle and can operations with fountain sales and Minute Maid juice. And Coke will take $400 million in pretax charges to cover staff reductions. The cuts should shave $100 million in costs annually by 2004--another step in the right direction for Coke.
By Charles Haddad
NASDAQ: Marooned by Archipelago
When NASDAQ shares finally rebound from their depths, will the NASDAQ Stock Market rein supreme? The odds of that decreased somewhat on Feb. 12 when the Archipelago Exchange announced that it would quit routing trades to NASDAQ's system, which is known as SuperMontage.
Archipelago, one of the upstart electronic trading systems that have challenged NASDAQ, instead will match buyers and sellers on its own market, a supercharged cyberspace version of the former Pacific Stock Exchange. By the end of March, Archipelago says, its initiative will take 10% of SuperMontage's volume--and $35 million in revenues from selling stock quotes to investors--away from NASDAQ. Officials at the older market, which hopes to issue an initial public offering later this year, say the hit from Archipelago will be far less.
A Revival from Phoenix?
Can Harry Potter revive a struggling Scholastic (SCHL
)? The New York publisher announced plans to boost the number of initial copies it will publish of J.K. Rowling's fifth Potter book (6.8 million, vs. 3.8 million for the fourth book's first printing) and says it will increase its marketing budget for the new book by 25%, to $1 million. Promotions for Harry Potter and the Order of the Phoenix, due out in June, will include more advertising and contests. Scholastic can use the help: After it trimmed earnings projections on Feb. 11 because of lower book-club sales, shares plummeted 23%, to about $26.
Deere Is Pulling in Bucks Again
Much of the farm economy is still mired in recession. Luckily for Deere (DE
), it makes more than tractors and combines. Thanks to double-digit sales increases in bulldozers, backhoes, riding lawn mowers, and other nonagricultural equipment as dealers restocked inventories, Deere swung back into the black in its fiscal first quarter, ended Jan. 31. It posted a profit of $68 million on sales of $2.8 billion, handily beating forecasts. Still, the Moline (Ill.) manufacturer warned that the farm slump could continue for another year.
Unlikely Allies in Asbestos
The American Bar Assn. handed manufacturers a victory on Feb. 11 when it endorsed a plan to cut asbestos claims by weeding out plaintiffs who aren't yet sick. The voice vote by the bar's policymaking body puts the 410,000-member group on the same side as Big Business, which it often opposes. The bar will join the National Association of Manufacturers and other groups to lobby for legislation that would set medical criteria for asbestos plaintiffs to meet before they can file a claim for nonmalignant illnesses. Many trial lawyers fought the vote, saying it would bar 90% of some 600,000 pending cases. Asbestos litigation has forced 60 companies into bankruptcy since 2000.
Putting the Squeeze on Brazil
The Bush administration on Feb. 11 stepped up pressure on Brazil to agree to a 34-nation hemispheric free trade zone by proposing to cut most U.S. tariffs on imports from the entire region to zero. The deal would increase access to the U.S. markets for sugar and citrus fruit and eliminate U.S. tariffs on clothing imports from Latin America by 2010. The poorest nations of the Caribbean and Central America would get first dibs on a duty-free U.S. market as long as they reciprocated by dropping duties on U.S. exports. If Brazil drags its feet in the talks for a Free Trade Area of the Americas (FTAA), the Bush Administration will offer other nations separate free-trade deals.
Et Cetera...
-- Citigroup (C
) CEO Sanford Weill said that he would not take a bonus for 2002.
-- William Wise will step down as El Paso Corp. (EP
) CEO.
-- Johnson & Johnson (JNJ
) will buy biotech player Scios (SCIOS
) for $2.4 billion.
CLOSING BELL
Happy Ending
Wall Street has feared video rental giant Blockbuster (BBI
) is losing DVD business to discount retailers. But a $30.7 million profit on revenues up 17% for the fourth quarter helped temper worries. The numbers fell shy of estimates but were strong enough to boost Blockbuster shares 10.3%, to $14.50, on Feb. 11.
CLOSING BELL
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Copyright 2003, by The McGraw-Hill Companies Inc. All rights reserved.
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