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MAY 23, 2005
Edited by Monica Gagnier HEADLINER Terry Semel: An Ear For Music  For all of Terry Semel's success in restoring Yahoo! (YHOO
) to Net powerhouse status, the company has been an also-ran in the red-hot digital music game. But on May 10, Yahoo made itself heard in a big way, launching a music subscription service for a introductory price of just $7 per month. That's roughly half what rivals such as RealNetworks (RNWK
) and Napster (NAPS
) charge. Given the high cost to license music from the record labels, analysts figure Yahoo will lose money on the songs at first. But Semel & Co. are likely to raise prices down the road. And Semel has dramatically boosted the number of paying customers using Yahoo over the past four years. "I think they'll find a way to be successful at this," says David Pakman, chief operating officer of rival eMusic. Still, it won't be easy. One industry insider tells BusinessWeek that Microsoft (MSFT
) is expected get into the subscription game this summer. And if Yahoo succeeds, Apple Computer (AAPL
) could follow suit by moving beyond selling songs for 99 cents at its iTunes Music Store.By Peter Burrows Delta Keeps Sputtering Bankruptcy clouds are gathering over Delta Air Lines (DAL ) yet again. Faced with a $450 million pension bill this year, rising fuel costs, and flat revenues, the Atlanta airline says it faces "substantial" losses in 2005. As a result, Delta is asking two of its lenders, General Electric (GE ) and American Express (AXP ), to change the terms of a $500 million credit agreement reached last year. Delta's woes are unlikely to abate. UAL's United Airlines (UALAQ ) received court permission to terminate four pension plans, which it owed $3.2 billion, on May 10, ratcheting up pressure on Delta to file Chapter 11 and terminate its own plans -- or face $3.1 billion in payments through 2008. Delta's stock tumbled 8% on May 11, to $2.74.   Red Hat's Benefactor  Michael Dell has dropped a few dollars into Red Hat's (RHAT
) hat. MSD Capital, which manages the personal fortune of the billionaire founder and Dell (DELL
) chairman, has invested about $99.5 million in Red Hat, the top distributor of the Linux operating system. The move was disclosed in an Apr. 27 Red Hat filing that was first reported on May 10. The next day, Red Hat shares rose 7%, to $12. Michael Dell's investment indirectly strengthens the ties between Red Hat and the computer seller, which has been offering Linux on its PowerEdge line of servers since 1999. Even though the investment is coming from Michael Dell, it's in Dell Inc.'s best interest to see Red Hat and Linux thrive.
They've Had Their Phil Phil Purcell's credibility difficulties continue. If his first public meeting with investors since former Morgan Stanley (MWD ) executives called for his ouster in late March is any indication, Purcell has a lot to accomplish before stockholders vote on his stewardship at next year's annual meeting. On May 10, flanked by two recently promoted co-presidents, Zoe Cruz and Stephen Crawford, Purcell detailed a blueprint for growth in an accelerated time frame. He also frankly addressed concerns about morale and warned of a weak second-quarter business environment. But most of Wall Street wasn't impressed. Some analysts said there was nothing new. Punk Ziegel analyst Richard Bove wrote that the firm has no choice but to sell itself, since "no one seems willing to give management a chance." Morgan shares fell 2.6%, to close at $49.42, on May 10. Moving Up At The SEC Another tough cop is taking over the stock market beat. Securities & Exchange Commission Chairman William Donaldson is expected to promote Linda Chatman Thomsen from deputy to director of the agency's Enforcement Div. In the past three years, Thomsen oversaw the SEC's probe of Enron and financial institutions accused of aiding the failed energy giant. Thomsen's promotion signals that Donaldson is resisting Corporate America's pressure to ease up on enforcement. She will succeed Stephen Cutler, who is leaving to return to private practice. Et Cetera... -- Early returns showed Carl Icahn and two allies won Blockbuster (BBI ) board seats. -- DreamWorks (DWA ) cut its profit forecast after selling fewer Shrek 2 DVDs than expected. -- Duke Energy (DUK ) is acquiring Cinergy (CIN ) of Cincinnati in a $9 billion stock deal. Closing Bell: Warner Music Group  Although Jimmy Page played Whole Lotta Love at the New York Stock Exchange to kick off trading in Warner Music (WMG
) on May 11, the initial public offering hit a sour note. The IPO price was cut to $17 a share, from a range of $22 to $24. It fell 3.5%, to $16.40, on its first day.
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