In Business This Week
Edited by Monica Roman
HEADLINER
David Pottruck: A Broker Bent on Banking
Will mortgages, CDs, and checking accounts help pull Charles Schwab (SCH
) out of its slump? CEO David Pottruck is certainly betting on it. On Apr. 28, the brokerage firm unveiled a host of long-awaited banking services that it hopes will produce a steady source of revenues amid steep declines in trading volumes. The downturn has produced disappointing earnings and a host of headaches for Pottruck, who has cut staff and slashed costs.
While the new banking services broaden Schwab's offerings, which also include financial advice and trust services, they might be too little, too late. Schwab is targeting its new banking products primarily at existing customers. But most are already ensconced at traditional banks.
Moreover, Schwab is entering banking years after rivals such as E*Trade Group (ET
). To win over customers, Pottruck is throwing Schwab's marketing muscle behind mortgages: It's promising to beat any competitor's price by $100 and make decisions within 24 hours. But getting customers to sign on the dotted line could be harder.
By Louise Lee
Changing of the Guard in the Valley
One of Silicon Valley's best-known chief executives is stepping aside. On Apr. 30, James Morgan of Applied Materials (AMAT
) said he will hand over CEO duties immediately to Michael Splinter, a former Intel executive vice-president. Morgan, who in his 27 years at the helm transformed Applied from a struggling startup into the world's largest producer of gear to make chips, will remain chairman. His retirement from the CEO job had been a matter of speculation as tech slowly emerges from its slump. Says Splinter: "The big challenge is how to get Applied Materials back to growth."
Vivendi: Good-bye to Hollywood
Bowing to growing investor pressure, French media giant Vivendi Universal (V
) has put its Hollywood unit up for sale. Saying the company could no longer run the unit from Paris, CEO Jean-René Fourtou said he was talking to various media companies about the sale of all or part of the unit, which includes the Universal studio, theme park, and cable channels. Among those that have expressed interest are Viacom, General Electric, and Liberty Media dealmaker John Malone, who may bid with or without USA Interactive Chairman Barry Diller. Los Angeles billionaire Marvin Davis has already bid $15 billion for 60% of both the Hollywood assets and Universal's music unit, which the company is likely to keep for now.
United's Unions Do Their Part
United Airlines is closer to emerging from bankruptcy now that flight attendants and airport personnel have joined pilots in endorsing new contracts that will help slash labor costs by $2.56 billion a year. Under the new six-year pacts, set on Apr. 29, the 30,000-member International Association of Machinists agreed to a 13% wage cut and rule changes permitting more outsourcing. The 17,000-member Association of Flight Attendants approved a 9% pay cut. The Air Line Pilots Assn., which represents 7,700 employees, will fly more hours and cut wages by 30%.
MasterCard Makes Peace with Stores
For years, retailers have grumbled that Visa USA and MasterCard International have exploited their control over credit cards to force retailers to honor their debit cards as well -- at much higher fees than those charged by regional automated teller machine networks. But now it appears that retailers, which sued the two card associations for illegally "tying" their credit and debit products, will hold all the cards. On Apr. 28, MasterCard settled with retailers by agreeing to pay $1 billion, reduce debit-card fees, and loosen the "honor all cards" requirements that irked merchants. Two days later, Visa said it, too, was negotiating a settlement with retailers. If Visa follows MasterCard's lead, smaller rivals could gain some traction in the growing debit-card market.
A Second Waksal Resigns at ImClone
Another Waksal has fallen from grace at ImClone Systems: Dr. Harlan Waksal, brother of ousted former CEO Samuel Waksal. Harlan Waksal resigned as CEO on Apr. 29 along with Chairman Robert Goldhammer amid a probe into the company's failure to pay taxes on stock options exercised by Sam Waksal and other executives. Harlan Waksal will remain as chief scientific officer, overseeing the development of the beleaguered cancer drug Erbitux. His demotion comes as the outlook for Erbitux is improving. ImClone's German partner is on track to apply for approval of the drug in Europe by mid-2004, and there is speculation that promising clinical trial results may be reported in June.
Et Cetera...
-- Hutchison Whampoa withdrew its bid for Global Crossing (GBLXQ
) in the face of U.S. national security concerns.
-- The music industry is using instant messaging to warn against illegal file-sharing.
-- Dial (DL
) settled a sexual-harassment case that includes a $10 million payment.
CLOSING BELL
Right Track
Tyco International investors took the Apr. 30 news of fresh accounting woes in stride. They pushed shares of the conglomerate up 1.5%, to $15.60, after Tyco announced plans to take $1.3 billion in charges in the second quarter ended Mar. 31 as part of an effort to adopt more conservative accounting.
CLOSING BELL
|
Copyright 2003, by The McGraw-Hill Companies Inc. All rights reserved.
Printer-Friendly Version
