In Business This Week
Edited by Monica Roman
HEADLINER
Scott Livengood: Fat and Happy
In the three years since he took Krispy Kreme (KKD
) Doughnuts public, CEO Scott Livengood has watched as shares have risen faster than the chain's glazed treats. To the consternation of short-sellers -- who bet that the doughnut maker couldn't sustain its heady growth rate -- Krispy Kreme's shares have risen nearly fourfold. But it's Livengood who may be getting the last word.
On May 28, the Winston-Salem (N.C.) chain reported a 48% jump in profits, to $13.1 million, for the first quarter ended May 4, while revenues rose 34%, to $148.7 million. What's more, Livengood expects systemwide sales to grow 25%-30% for the rest of the fiscal year. And he insists that he has barely nibbled at Krispy Kreme's potential. "It's such a powerful brand," he says.
While the forecast is slightly below the company's earlier 30% target, investors digested the news well: Krispy Kreme shares rose 7%, to $34.18. Says Fulcrum Global Partners analyst Greg Schroeder: "They've silenced the critics."
By Dean Foust
A Cacophony of Online Music
A month after Apple Computer (AAPL
) launched its iTunes music download service, other legitimate music services are rushing to market. RealNetworks (RNWK
) is offering RealOne Rhapsody, which allows subscribers to download and burn songs at 79 cents apiece, 20 cents less than iTunes. Unlike iTunes, however, RealNetwork will charge a $9.95 monthly subscription fee. Another new player is likely to emerge shortly, with software maker Roxi (ROXI
) saying it would pay $40 million to buy Pressplay, an online service owned by music labels Universal and Sony (SNE
) Roxio, which purchased the name Napster from a bankruptcy proceeding, says it will spend $20 million to relaunch the former music-pirating site as a legitimate download service. RealNetworks, Roxio, and others had better hurry, however: Apple is said to be preparing to launch a version of its service for the larger Windows market by yearend.
eBay Lands in Hot Water
A Virginia jury has taken some of the wind out of eBay's sails. On May 27, jurors ruled that eBay (EBAY
) infringed patents held by inventor Thomas Woolston for online marketplaces. Damages were set at $35 million. Although that's a small fraction of eBay's $250 million in 2002 profits, the judge could choose to triple them because the jury said the violations were willful. The patents cover only fixed-price sales on eBay and its subsidiary Half.com (EBAY
) not the auctions that account for 74% of gross sales on eBay. But if the judge also decides to enjoin eBay from using the patented methods, its fast-growing fixed-price business could be disrupted. EBay said it will ask for the verdict to be set aside. If the request is denied, it will appeal.
One Cingular Ambition
Cingular Wireless, the nation's No. 3 wireless phone carrier, may soon be fleshing out its network. As first reported by CNBC, the company is close to buying up to $1.5 billion worth of radio spectrum from bankrupt wireless upstart NextWave Telecom. That would enable Cingular, which is owned by BellSouth (BLS
) and SBC Communications (SBC
), to increase its capacity in its existing markets as well as expand into some new ones. It might also postpone industry consolidation. The availability of cheap spectrum might alleviate the need for major carriers to boost capacity by merging, according to UBS Warburg LLC telecom analyst John Hodulik.
Tenet's CEO Checks Out
After a seven-month attempt to regain investors' confidence, Jeffrey Barbakow resigned as Tenet Healthcare (YHC
) CEO on May 27. Trevor Fetter, Tenet's president, will serve as acting CEO until the board names a permanent replacement. The Santa Barbara (Calif.)-based hospital operator had been under fire since revealing late last year that it had exploited a Medicare pricing loophole. It has since halted the practice and announced a $100 million cost-cutting plan. Investors pushed up Tenet's stock 4%, to $16.14, on news of Barbakow's departure.
Pepsi Scales the Great Wall
What the chinese want now are more bottles of Mountain Dew. At least that's the hope of PepsiCo (PEP
) which says it plans to spend $150 million over the next 18 months to expand bottling capacity by a third. That will mean 100 million more cases of Pepsi, 7 Up, and the caffeine-charged Mountain Dew. While the company's annual sales in China have grown at around 10% in recent years, it still has only about half the penetration of rival Coca-Cola. PepsiCo execs say they're determined to increase their beverage presence in China, despite the threat of SARS.
Et Cetera...
-- Cantor Fitzgerald was sued for $1 million in back rent at the World Trade Center.
-- Costco Wholesale (COST
) reported a quarterly earnings increase of 18% on an 11% sales gain.
-- Ex-Credit Suisse First Boston (CSR
) banker Frank Quattrone pleaded not guilty to obstruction of justice charges.
CLOSING BELL
Rosier at VISX
The outlook for VISX (EYE
) brightened considerably on May 27. The vision-correction giant's shares climbed 8.3%, to a 52-week high of $18.47, before retreating to $18.13 on May 28. The runup was triggered by the Food & Drug Administration's approval of the company's new laser vision-correction system.
CLOSING BELL
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