In Business This Week
Edited by Monica Roman
HEADLINER
Tom Glocer: Bearer of Bad News
Ever since Tom Glocer became the first non-journalist CEO of Reuters in 2001, he has been hit with one piece of bad news after another.
On Feb. 18, things got worse again. London-based Reuters announced a $788 million pretax loss for 2002, its first annual loss, on revenues of $5.7 billion, an 8% drop. Worse, Glocer predicts further declines in recurring sales in the first half of 2003 because of slack demand for Reuters' financial information products.
Glocer isn't sitting around feeling sorry for himself. On Feb. 18, Reuters acquired the 94% of investment research firm Multex that it didn't already own for $195 million. And he's trimming 3,000 jobs in an effort to cut costs by $700 million per year.
But as long as the brokerage houses and asset managers that are Reuters' (RTRSY
) key customers continue to shed staff, Glocer is going to have a hard time selling them enough data and products to turn Reuters around. It's also far from clear that he has found the kryptonite to weaken his nimble New York rival, Bloomberg Financial Networks.
By Stanley Reed
AOL Management, Version 8.0
The revolving door is still spinning at AOL Time Warner (AOL
). Jamie Kellner is leaving as chairman of AOL's Turner Broadcasting unit, which oversees the WB Network, CNN, and the company's other cable channels. Former CNN President Philip Kent, who left in 2001, is returning to the company and will succeed Kellner. The 55-year-old Kellner, who shuttles between his California home and Turner's Atlanta office, says he wants to spend more time with his family. But the longtime entertainment executive also says he was disappointed that the merger negotiations he had championed between CNN and Walt Disney's ABC fell apart.
Kellner will continue to run the WB from Los Angeles through the summer of 2004, when his contract expires. Last month AOL paid Kellner, who founded the WB, an estimated $100 million for his 8% stake in the network.
The Rock Keeps Its Options Open
Wachovia (WB
) is finally getting a piece of the rock. On Feb. 19, it agreed to acquire Prudential Financial's (PRU
) network of 4,400 retail stockbrokers in a deal that gives the Charlotte (N.C.)-based bank the nation's fourth-largest broker workforce. Under terms of the deal, the insurance giant won't receive cash but will retain a 38% stake in the new venture, which will have a combined 12,500 brokers managing $537 billion in client assets. For Prudential, which exited the investment banking business a few years ago, the Wachovia deal positions it to minimize its exposure to the volatile securities business: The Wachovia pact allows Prudential to sell its remaining minority stake in either two or five years.
A Bad Break in La Jolla's Pipeline
La Jolla Pharmaceutical (LJPC
) shocked investors on Feb. 18 by announcing that its highly anticipated lupus drug proved disappointing in a late-stage clinical trial. The San Diego company hoped to file for FDA approval of the drug, called Riquent, this year. But Riquent failed to delay kidney inflammation in patients with lupus, an autoimmune disease that affects 1 million patients in the U.S. and Europe. La Jolla's stock plunged 73%, to $2.08, on the news.
Two More Search Engines Click
Consolidation continued in the Internet search-engine business on Feb. 19, when Overture Services (OVER
) announced it would buy former highflier AltaVista for $140 million in cash and stock. Overture, formerly known as GoTo.com, is a "pay for performance" search engine, which ranks advertisers in search results based on how much they're willing to pay when customers click on their listings. With AltaVista, Overture will be able to offer a wider variety of services to its advertisers and to Web portals. Overture got quite a deal: In 1999, CMGI (CMGI
) paid Compaq Computer (CPQ
) $2.3 billion for an 83% stake in AltaVista. Still, investors frowned on the acquisition because they are afraid it will dilute Overture's earnings. Overture's stock fell 19%, to $18.50, following the announcement.
Campbell's Gamble on Convenience
Campbell Soup (CPB
) CEO Douglas Conant is trying to heat up the company's less-than-piping-hot soup business. On Feb. 18, Conant announced an ambitious plan to expand the company's convenience soup offerings, including new varieties of Campbell's recently launched line of microwavable soups dubbed "Soup at Hand." The effort is aimed at persuading Americans, who are increasingly eating on the go, to consume more off-the-shelf soup. And Conant is putting big bucks behind the initiative: He plans to spend $60 million on advertising.
Et Cetera...
-- Northrop Grumman (NOC
) head Kent Kresa said his No. 2, Ronald Sugar, will replace him on Apr. 1.
-- Former Tyco International (TYC
) CFO Mark Swartz was indicted on federal tax evasion charges.
-- Micron Technology (MU
) plans to lay off 10% of its staff, or about 1,800 workers.
CLOSING BELL
Melting Plastic
Credit-card giant MBNA (KRB
) is feeling the effects of a weak economy. On Feb. 19, its stock fell 12%, to $14.50, after it said credit losses on its loan portfolio hit 5.59% in January, up from 5.18% in December. Wilmington (Del.)-based MBNA doesn't expect the loss ratio to improve until this year's second half.
CLOSING BELL
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Copyright 2003, by The McGraw-Hill Companies Inc. All rights reserved.
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