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NOVEMBER 10, 2003
Edited by Monica Roman A.G. Lafley: Turning The Tide A.G. Lafley's turnaround of Procter & Gamble (PG ) just keeps getting better. On Oct. 27, the maker of Tide, Crest, and Pampers reported fiscal first-quarter profits of $1.76 billion, up 20% from the year-earlier period. Those earnings -- on a 13% increase in sales, to $12.2 billion -- slightly exceeded Wall Street estimates and marked a strong start to Lafley's fourth year as chief executive. Driving profits were 9% unit volume growth, excluding acquisitions, and reduced manufacturing costs. P&G's health-care division posted the biggest gains, propelled by the successful launch of the over-the-counter heartburn drug Prilosec OTC. The quarter eased doubts about P&G's ability to post strong profits without the aid of special charges, which Lafley stopped at the end of the last fiscal year to improve accounting transparency. "The skeptics are falling by the wayside," says Banc of America Securities (BAC )analyst William Steele. P&G's competitors aren't finding the going any easier, either. By Robert Berner Stent Woes At J&J Johnson & Johnson (JNJ )'s stock slid 2.1% on Oct. 29, after the Food & Drug Administration warned doctors about problems with its new blockbuster stent. A meshlike metal tube that exudes a drug to help keep arteries open, the stent was approved by the FDA in April. Because the technology was new, the agency required J&J to conduct additional studies and report side effects. On Oct. 29, the FDA said that it had received more than 290 reports of cases where serious clots formed within a month in newly stented arteries. More than 60 patients have died. Still, analysts note that the number of problems still appears far lower than it was with conventional, metal-only stents.   Not Out Of The Woods Yet Frank Quattrone dodged a bullet with his Oct. 24 mistrial, but his troubles aren't over. Before the four-week trial ended, prosecutors said they would be likely to retry the former star tech banker on obstruction-of-justice charges if the jury was deadlocked. A hearing is set for Nov. 5 in U.S. District Court in Manhattan to assess the case. It can't give Quattrone comfort that the last jury vote was 8 to 3 to convict. Still, he might do better in a second trial if he doesn't testify. Jurors said the former Credit Suisse First Boston (CSR ) banker's case was hurt when he appeared to contradict himself. After the mistrial was declared, Quattrone's lawyer, John Keker, said: "We are disappointed, because Frank is innocent." Even if he wins a second trial, Quattrone faces possible action by the NASD for allegedly doling out hot initial public offering stock allocations to clients. A Rustle In The Hedges The Securities & Exchange Commission and the U.S. Attorney's Office in New York brought fraud and criminal charges against Edward Strafaci, a former portfolio manager with Kenneth Lipper's New York hedge-fund shop. Strafaci pleaded not guilty to overstating the value of the convertible bonds and preferred stock held by several of Lipper's convertible hedge funds. The misleading values were contained in statements to investors. "We are confident he will be fully exonerated," says Strafaci's lawyer, Seth Rosenberg. Irony In The Fire Wildfires, stretching through five Southern California counties, have already caused more than $2 billion in damage, according to state officials. Fueled by breezes from the Pacific Ocean, the fires destroyed more than 1,800 homes in five days, scorching 620,000 acres from San Diego to north of Los Angeles and killing at least 17 people. Home insurers with potential exposure include Allstate (ALL ), Safeco (SAFC ), and State Farm Mutual. Ironically, the fires are likely to increase economic activity in the coming months, say economists, who note that in the aftermath of the 1994 Northridge earthquake, retail sales soared and home construction rebounded. Et Cetera... -- GM (GM )'s Saturn division will double its offerings to six over the next few years. -- Treasury Under Secretary nominee Kenneth Leet has withdrawn, citing his health. -- Verizon (VZ )'s third-quarter profits declined 60%, despite strong wireless results. Closing Bell: Oxford Health Plans  Shares of Oxford Health Plans (OHP
) plunged almost 10%, to $41.63, on Oct. 28, despite a 300% surge in third-quarter net. Wall Street was displeased by the news that membership is shrinking and could decline further in 2004 because of stiffer competition.
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