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JULY 21, 2003
Edited by Monica Roman HEADLINER Joe Tucci: Software Safari Ever since Joseph Tucci became CEO of data-storage powerhouse EMC in early 2001, he has promised to make high-margin software a larger part of the hardware company's revenue mix. He had little choice: Hardware prices have been falling by at least 40% a year, destroying the once high-flying profit margins at Hopkinton (Mass.)-based EMC. Now, Tucci is finally delivering. On July 8, EMC announced it would buy Legato Systems of Mountain View, Calif. After the deal closes in December, Legato could nearly double EMC's software sales and increase software's share of total revenue, from the current 22% to 24%. EMC shares fell 4.3%, to $11.24, on the news, while Legato's shares climbed 8.9%, to $9.91. Big deal? Well, Tucci isn't finished. He wants software to make up 30% of EMC's sales by the end of 2004. To get there, Tucci says he'll continue shopping. He vows to pick up more software companies "of some size" over the next 18 months to reach his goal -- and keep the battered EMC in the black. By Faith Arner Tenet's Condition Only Gets Worse Seven months after launching an informal investigation of embattled hospital chain Tenet Healthcare (THC ), the Securities & Exchange Commission has stepped up its probe. On July 9, the Santa Barbara (Calif.) company revealed that the SEC subpoenaed documents concerning Tenet's Medicare billing and other financial practices. The disclosure came two weeks after Tenet warned earnings for the year ending July, 2004, could be 30% lower than expected. Tenet is facing a number of industry pressures, including insurers that are no longer willing to pay high prices for hospital services.   Global Crossing's Star-Crossed Deal The Defense and Homeland Security Depts. may oppose Singapore Technologies Telemedia's bid to acquire control of bankrupt telecom provider Global Crossing (GBLXQ ) on national security grounds. Similar concerns prompted Hong Kong's Hutchison Whampoa to pull out of a joint bid earlier this year. A bankruptcy court judge approved the proposed acquisition on July 1, but the deal must still pass muster with the Committee on Foreign Investment in the U.S., a consortium of federal agencies. If Washington nixes the deal, it would open the door to rival bidders, including IDT (IDT ) which has expressed interest, and financier Carl Icahn's XO Communications, which already controls more than one-third of Global Crossing's bank debt. MCI: First, the Good News... For MCI investors, it was the best of weeks and the worst of weeks. They'll receive $750 million in cash and stock as part of a settlement of civil fraud charges with the SEC, which was approved on July 7 by the company's bankruptcy court judge. On the same day, however, MCI reduced its 2005 revenue projections by $3 billion. It cited steep price declines in services ranging from consumer long distance to high-speed Internet access. Winning court approval of the SEC settlement removed a major obstacle for MCI. But a greater hurdle still remains: rebuilding a financial base on which to resurrect the second-largest telecom company when it emerges from bankruptcy, expected some time this fall. Throwing a Lifeline to Nautica Wrangler jeans maker VF (VFC ) has decided to rescue floundering Nautica (NAUT ), known for its maritime motif clothing. VF agreed to pay $585.6 million for Nautica, whose men's sportswear unit has struggled in recent years after straying from its original casual look to more contemporary designs. Nautica is fetching a good price -- $17 a share in cash, or a 28% premium over the price of its stock when the deal was announced. Greensboro (N.C.)-based VF hopes to use Nautica as a springboard to reach beyond mass marketers such as Sears (S ) Roebuck and to enter upscale department stores. A '90s Legacy: Hypertension More bad news about the nation's health. Hypertension, the leading cause of stroke and heart failure, rose in the 1990s after three decades of decline. A study published on July 9 in the Journal of the American Medical Association found that one in three U.S. adults -- 58.4 million people -- had high blood pressure in 1999-2000. That's almost 4% more than the last national survey conducted between 1988 and 1991. The new study, conducted by doctors from the University of South Carolina and the Medical College of Wisconsin, also found that nearly one-third of adults with high blood pressure are unaware of their condition, and that only 31% had their condition properly under control. The authors put much of the blame on a rising obesity rate. Et Cetera... -- Yahoo! reported a second-quarter profit of $51 million and raised its annual forecast. -- Irene Rosenfeld resigned as president for North America of Kraft Foods (KFT ). -- New rules require packaged foods to carry labels disclosing the level of trans-fats. CLOSING BELL Extra Cash  NCR investors cheered on July 9 when the maker of ATMs said second-quarter profits would top forecasts. Although Dayton (Ohio)-based NCR's business hasn't rebounded, it said cost-cutting would push profits to $6 million or more, vs. the $4 million loss analysts expected. Shares rose 13.5%, to $32.25.
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