In Business This Week
Edited by Monica Roman
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Ann Fudge: Moving to Mad Ave
Do marketing execs make good ad agency chiefs? Young & Rubicam (WPPGY
), a unit of WPP Group (WPPGY
), is betting that they do by appointing Ann Fudge as chairman and CEO. Fudge, who was previously a top executive of Kraft Foods (KFT
) becomes the first black woman to run a major ad shop.
Fudge, 52, has long been considered CEO material -- though most likely in consumer goods. After starting out at General Mills (GIS
) Fudge moved on to General Foods, which later merged with Kraft. There, she moved up to a president's post. Many believe she quit in February, 2001, because she was passed over for the top job.
Fudge replaces Michael Dolan, who led Y&R through an initial public offering, its acquisition by WPP, and a worsening ad climate. Y&R endured a rocky couple of years as it lost big accounts and suffered a new-business drought. Dolan seems to have stabilized the situation by winning accounts from ChevronTexaco (CVX
) and Burger King. Still, it will be up to Fudge to put Y&R back on a path of sustainable growth.
By Gerry Khermouch and Pallavi Gogoi
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NASDAQ Nails the Big Board
"Kick 'em while they're down" may be cruel -- but on Wall Street, it's good business. NASDAQ is using the New York Stock Exchange's latest trading scandal to attack a core profit center of the Big Board's franchise: companies that list their stocks on the NYSE. On May 13, NASDAQ urged the Securities & Exchange Commission to wipe out the NYSE's Rule 500, which requires companies that want to take their listing to other markets to get approval from their own boards and to notify big shareholders. NASDAQ argues that the rule is anticompetitive and claims it's keeping companies from fleeing "the front-running debacle on the NYSE." But NASDAQ's attack may also be spurred by the fact that its own listings have sagged sharply with the drop in new initial public offerings. Luring NYSE listed-companies with lower fees could be a source of growth for NASDAQ.
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Are the Feds Going After Gateway?
Ailing PC maker Gateway (GTW
) is now the subject of a criminal probe. On May 14, the company disclosed that the U.S. Attorney's Office has begun a preliminary investigation of revenues for 1999, 2000, and 2001. Earlier this year, Gateway restated sales for those years after adjusting the way it accounted for a partnership with America Online. The restatement followed a two-year SEC investigation. It has been a thorny distraction for the Poway (Calif.) company as founder and Chief Executive Theodore Waitt struggles to find a niche for his homegrown PC maker.
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J&J: Subpoena and Subpoena
Johnson & Johnson (JNJ
) is the latest health-care company to come under scrutiny for its marketing. On May 14, J&J disclosed in an SEC filing that it has received subpoenas from the New York State Attorney General's office and the Federal Trade Commission regarding the marketing of sutures and surgical instruments from two of the company's divisions. At issue are deals offered to hospitals and other buyers in which discounts are tied to the hospital hitting certain sales targets for both product lines. The company says it is responding to the subpoenas.
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The New Shape of Sprint
Sprint (FON
) officially stepped beyond its recent executive tax fiasco by ushering in new leadership and policies at its May 13 annual meeting. Shareholders named new CEO Gary Forsee chairman of the board, replacing William Esrey, whose 23-year tenure was ended by a tax shelter controversy. By a slim margin, shareholders approved the rehiring of Ernst & Young, the auditors involved in the tax shelter. Shareholders also voted in favor of a proposal aimed at reducing severance packages for executives. Sprint also appointed Howard Janzen, former Williams Communications CEO, to run its long-distance data and phone division.
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Play Nice? Not Console Makers
Game console makers face another round of Mortal Kombat. At the industry's annual E3 confab in Los Angeles, Sony and Microsoft showed no signs of ending the bloodletting that has pummeled profits. Sony, the king of console makers, announced it planned to go after rival Nintendo's lucrative handheld gaming market by rolling out a portable machine in late 2004. Sony also announced it was giving away a $40 online adapter free with a purchase of the $199 Playstation2. Microsoft responded by cutting the price of its Xbox console by $20, to $179. The competition puts Nintendo in the middle.
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Et Cetera...
-- Qwest founder Phil Anschutz will give up $4.4 million in stock profits in a settlement with New York State.
-- The number of CEOs fired for poor performance increased by 70% last year, says Booz Allen Hamilton.
-- A grand jury indicted former CSFB star technology banker Frank Quattrone on obstruction of justice charges.
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New Luster
Shares of jewelry maker Tiffany (TIF
) sparkled on May 14, rising 11%, to $30.93, on the news of strong first-quarter results. Solid overseas sales, help from a weaker dollar, and a 3% rise in sales at U.S. branch stores open at least one year more than overcame a 5% sales decline at its Fifth Avenue flagship.
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Copyright 2003, by The McGraw-Hill Companies Inc. All rights reserved.
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