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FEBRUARY 9, 2004
Edited by Robin Ajello Harry M. Jansen: Time For New Blood  After lowering earnings forecasts four times in the past 15 months, Baxter International's (BAX
) chairman and chief executive is calling it quits. Harry Jansen Kraemer Jr., 49, announced on Jan. 26 that he'll leave the medical-products maker once a successor is found.Kraemer has been CEO of the $8.1 billion company for five years and was Baxter's chief financial officer before that. Initially, Kraemer wowed investors with steadily higher profits and sales, thanks mostly to new blood products. But he clearly lost his credibility after a string of disappointments. The latest came in December, when Baxter said fourth-quarter operating profits would inch up 7% or so, instead of leaping 27% to 44%. Baxter shares, which closed on Jan. 28 at $28.78, are down by half from their 2002 peak, and the Securities & Exchange Commission is investigating Baxter's forecasting. With no clear second in command ready to step up, the Deerfield (Ill.)-based company is expected to go outside for its next chief. By Michael Arndt A River Of Black Ink It only took eight years. On Jan. 27, Amazon.com (AMZN ) announced its first full-year profit, reporting net earnings of $35.3 million for 2003 on a 34% jump in sales, to $5.3 billion. Yet shares fell 7% the next day, to $51.96. Given the stock's 185% gain since the start of '03 -- and with a lofty price-earnings ratio of 70 -- investors felt the good news was already priced in. Many also noted that gross margins slipped a point in the fourth quarter, to 22%, raising concerns that discounting and free shipping are taking a toll. CEO Jeffrey Bezos has no plans to back off from his low-price strategy and raised Amazon's 2004 sales forecast to $6.2 to $6.7 billion, or 18% to 27% growth.   Catching A Break Today So much for mad cow disease. McDonald's (MCD ) reported on Jan. 26 that it returned to profitability in the fourth quarter, after posting its first-ever quarterly loss a year earlier. After the first case of bovine spongiform encephalopathy was found in the U.S. in December, investors worried the Big Mac would take a hit if people stopped eating burgers. But McDonald's said U.S. sales jumped 14% in December, helping to boost net income to $125.7 million on a 17% rise in sales, to $4.55 billion. McDonald's also got a lift from its new McGriddle breakfast sandwiches and premium-priced salads. This year, CEO James Cantalupo sees even better numbers. For one, he says, McDonald's shouldn't be taking any big charges; it wrote off $323 million in the fourth quarter, mostly for selling off some of its outside ventures. Seared At Sears Sears Roebuck (S ) told its employees on Jan. 27 that it will phase out its pension plan and cut compensation packages for many salaried workers. Why? To become more cost-competitive with retailers such as Wal-Mart Stores (WMT ). Sears said workers under 40 will shift to 401(k) plans, and stock option grants will be dropped for salaried employees below director level. Bonuses will also be reduced, though 20% of hourly workers will receive raises. The moves come as Sears' efforts to revamp its stores have done little to reverse a nearly three-year slide in sales. Mutual-Fund Fee-For-All Is the mutual-fund industry starting to get it? On Jan. 27, in an effort to win back business after market-timing charges, Putnam Investments (PEYAX ) announced that it will cut the sales fees on its mutual funds from 5.75% of assets to 5.25%. Beleaguered MFS Investment Management (MITTX ) plans to cut fees as well, while Oppenheimer Funds (OPPEX ) expects to present new fee proposals to its board in February. Alliance Capital Management Holding (AC ), also caught up in the mutual-fund scandal, announced back in December that it would reduce fees. But don't count on any discounts from fund firms already low on the fee scale, such as American Funds (AMUSX ). It says it has no plans to lower its charges. Et Cetera... -- Cargill is merging its fertilizer operations with IMC Global (IGL ). -- ExxonMobil was ordered to pay nearly $7 billion to victims of the 1989 Exxon Valdez oil spill. -- AOL (TWX ) lost 1.6% of its 24.7 million subscribers, the fifth straight quarterly decline. -- Kraft will close 20 factories and slash payrolls by 20% worldwide over three years. Closing Bell: Tenet Healthcare  On Jan. 28, Tenet Healthcare (THC
) said it will sell about a quarter of its 100 hospitals and take a $1.4 billion charge in the fourth quarter. Facing probes into billing practices, Tenet is expected to report net losses through 2004. Its shares fell 18%, to $13.18, on the news.
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