In Business This Week
Edited by Monica Roman
HEADLINER
Todd Bradley: Gotta Hand It to Him
Call Todd Bradley the Miracle Worker. In the past year, the Palm Solutions Group CEO has pulled the handheld maker back from the brink of extinction by negotiating a cash infusion and a radical restructuring in the face of stiff competition. Bradley then defied conventional wisdom that high-priced handhelds are key to profits by rolling out the $99 Zire and selling more than 1 million units in six months. His biggest coup yet came on June 4, when Palm announced it would acquire rival Handspring (HAND
) in an all-stock deal currently worth $170 million.
The merger returns Donna Dubinsky and Jeff Hawkins to the company they founded 11 years ago. It also gives Palm a bigger product lineup to attack the corporate market. Both companies recently have been hammered by competition from the likes of Sony (SNE
), HP, Toshiba, Dell, and others. Handspring will receive a $10 million cash infusion to keep it afloat as it rolls out a successor to its Treo PDA-smart phone combo. Now, maybe, Bradley won't have to work quite as many miracles.
By Cliff Edwards
Shaking Up Coke's Ads
In recent years, critics have attacked Coca-Cola (KO
)'s marketing as lackluster: Once known for creating memorable advertising featuring the likes of Mean Joe Greene, Max Headroom, and singers offering to "buy the world a Coke," the company has recently produced one dud campaign after another. The low point: a 2001 ad showing a wheelchair-bound grandmother flipping over a table because there was no Coke on hand -- which consumers and bottlers alike panned. But now, Coke is taking steps to overhaul its marketing. On June 3, the Atlanta-based beverage giant said it had hired Eastman Kodak (EK
) marketing executive Daniel Palumbo as its chief marketing officer -- the first outsider in recent history to hold that post at Coke. At Kodak, the 45-year-old Palumbo was credited with the warm-and-fuzzy "Share Moments, Share Life" campaign.
For Polo, It's Fisticuffs
Its refined image notwithstanding, Polo Ralph Lauren (RL
) is slugging it out in court with Jones Apparel (JNY
) Group. Polo and Jones filed suit against each other on June 3 in New York State Supreme Court, following a months-long dispute. Jones, which manufactures Polo's Lauren line for women, has accused Polo of trying to end the Lauren license at yearend, three years before Jones believes the pact is to expire. Polo is asking the court to issue a judgment that the Lauren license and another agreement allowing Jones to produce Polo's Ralph line are to end this year. Jones is stopping work on Lauren products due out next spring. Polo plans to manufacture the spring line on its own.
The SEC Casts a Wide Net
The Securities & Exchange Commission is demanding that 50 Wall Street execs turn over e-mails, memos, and performance reviews relating to their stock analysts. Following up on their $1.4 billion settlement of charges that research was biased, regulators want to learn whether supervision at 12 major banks broke down, allowing analysts to act more as salesmen than as researchers. This probe could result in civil charges against research department heads, banking chiefs, and even some CEOs. Meanwhile, the federal judge overseeing the initial agreement is holding up the deal. The judge is raising questions about how the money will be shared and how brokerage customers will get independent research.
The Changing Face of PeopleSoft
The long-awaited consolidation in the software industry got a lift on June 2, when PeopleSoft (PSFT
) announced that it would acquire rival J.D. Edwards (JDEC
) in a stock swap worth $1.7 billion. The new company, which will keep the PeopleSoft name, will have more than $2.8 billion in sales, making it the second-largest seller of corporate automation software. Analysts worry about customer overlap, but execs say they're not concerned. "I think you are going to see we have been active in very different areas," says PeopleSoft Chief Financial Officer Kevin Parker.
Hale and Hearty at WellPoint
WellPoint Health (WLP
) Networks, the nation's No. 2 health insurer, continued its growth spurt on June 3, when it announced it would buy Cobalt (CBZ
) Corp. for $906 million. Cobalt, which owns Blue Cross & Blue Shield United of Wisconsin, is the fifth regional health plan that WellPoint has picked up in the past two years. The newest addition will add $1.5 billion in annual sales to WellPoint, whose revenues grew 40%, to $17 billion, last year. Investors gave the deal a healthy prognosis, pushing WellPoint's stock up 2%, to $84.46, while Cobalt rose 15%, to $20.62.
Et Cetera...
-- Carl Icahn made an unsolicited $700 million bid for bankrupt Global Crossing (GBLXQ
).
-- A jury ordered Taco Bell (YUM
) to pay $30.1 million to two men for allegedly stealing the idea for a talking-Chihuahua ad.
-- Amazon.com (AMZN
) has received orders for 1 million copies of the latest Harry Potter book.
CLOSING BELL
Recharged
The tech downturn has hit contract electronics manufacturers especially hard. But things may finally be looking up. On June 4, Flextronics (FLEX
) International stock rose 14%, to $11.54, after CEO Michael Marks said business is improving. Marks said more firms are outsourcing and Flextronics is gaining share.
CLOSING BELL
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