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DECEMBER 18, 2006
Executive Suite Shuffle The corridors of power experienced repeated tremors this week. The most severe came, naturally, in California, where struggling Yahoo! (YHOO ) on Dec. 5 said it was restructuring. Out: COO Dan Rosensweig, who'll leave in March, and Lloyd Braun, head of the media group. In: CFO Susan Decker, who'll lead one of three operating units and may now be in position to succeed Chairman Terry Semel. Over in earthquake-prone Japan, Sony (SNE ) Computer Entertainment on Nov. 30 said that Ken Kutaragi, legendary father of the PlayStation, will hand daily management of the unit to his deputy in the U.S., Kazuo Hirai. Kutaragi will remain CEO and will become chairman of the unit, though his move upstairs is widely seen as a loss of favor. Speaking of which, Wal-Mart (WMT ) on Dec. 5 said that high-profile marketer Julie Roehm is leaving after less than a year, along with her deputy, Sean Womack, but declined to say why. On the same day, DaimlerÂChrysler (DCX ) announced that embattled Chrysler sales and marketing chief Joe Eberhardt is departing for a retail job at Mercedes-Benz. See "Yahoo's Shakeup" and "New Leader for Sony's PlayStation Unit" Fiasco At Pfizer There goes $1 billion in development costs down the pipeline: Pfizer (PFE ) on Dec. 2 canned its would-be blockbuster drug torcetrapib because of bad results in clinical trials. Pfizer shares promptly got sick, falling 11% by Dec. 6. See "Pfizer's Bitter Pill"   BONY Bags Mellon Sometimes patience pays off. Nearly a decade after Mellon Bank (MEL ) rebuffed its first attempt at a merger, Bank of New York finally nabbed its prey on Dec. 4 when Pittsburgh-based Mellon agreed to be acquired for $16.5 billion. That's $6 billion less than its rival offered to pay back in 1998. The combined company, to be called Bank of New York Mellon, would be one of the world's top 10 asset managers and would boast a dominant share of the gritty--but nicely profitable--business of securities processing. See "The Man Behind the Mellon Merger" Closed Skies? Less competition and higher trans-Atlantic air fares: not exactly what the business traveler ordered. But those are the likely results of the Bush Administration's Dec. 5 decision to scrap a proposal that would have given foreigners the right to own up to 25% of American carriers. For now the move effectively scuttles an "open skies" treaty with the European Union that would have opened up London's Heathrow airport and allowed EU airlines to fly across the Atlantic from anywhere in the Union. Here Comes Hank On Dec. 5, American International Group (AIG ) settled a raft of legal spats with longtime business partner C.V. Starr, a commercial insurer controlled by ousted AIG CEO Maurice "Hank" Greenberg. The two sides had been feuding over everything related to the C.V. Starr trademark, all the way down to its domain name, which AIG claimed to own. Although the two sides are still fighting over other issues, Greenberg can devote more time to making good on a vow to build Starr into an AIG rival. Betting On Casinos The action is getting hotter in Las Vegas. Frank and Lorenzo Fertitta, the top two execs at Station Casinos (STW.N ), offered to take their company private for $4.7 billion, plus assumption of $3.4 billion in debt. They would be joined by Los Angeles real estate investment firm Colony Capital. Station is the largest player in the so-called locals market. Its specialty is off-the-Strip properties catering to Vegas natives. The deal is the latest in a string of casino and hospitality buyouts complete or in the works, including one for industry leader Harrah's Entertainment (HET ). Chip Wars It's the battle of the other chipmakers. Intel (INTC ) and AMD (AMD ) may be duking it out in the PC arena, but Qualcomm (QCOM ) and LSI Logic (LSI ) have set their sights on handhelds and networking. LSI said on Dec. 4 that it will buy Agere Systems (AGR ) for $4 billion to try to grab new business with hard-drive maker Seagate (STX ) and giant Samsung Electronics. The same day, Qualcomm said it would acquire Wi-Fi chip company Airgo Networks for an undisclosed sum and the Bluetooth business of RF Micro Devices (RFMD ) for $39 million. That will bolster Qualcomm's patents and may help counter Intel's push to dominate the fledging WiMAX wireless networking standard. See "Plenty of Deals in the Chips" Airbus, Hat In Hand? The European planemaker on Dec. 4 unveiled plans for a jet to challenge Boeing's (BA ) hot-selling 787 but omitted one little detail: where it will get the $15.5 billion needed to develop the A350 XWB, or Extra Wide Body. Airbus says it will tap cash flow, but there won't be much available for five years as it digs out of a $6 billion hole caused by production snarls on the A380 megaplane. Meanwhile, Airbus' woes deepened as leasing company ILFC deferred a 10-plane order for the A380 and Lufthansa (DLAKY ) appeared close to buying 20 of Boeing's updated 747s. See "Can Airbus Afford the A350?" and "Boeing Scores a Jumbo Coup" China's R&D Prowess If you're still thinking of China as mainly a low-cost manufacturing colossus, think again. On Dec. 4 the OECD released a study showing that China is likely to spend $136 billion on research and development in 2006, outpacing Japan's $130 billion and putting China in second place behind the U.S. True, America still leads by a long shot, with an expected $330 billion in R&D this year. But China's spending on R&D as a percentage of GDP has more than doubled in the past decade, rising from 0.6% in 1995 to 1.2% in 2004. No Class It's high fives all around at 55 investment firms following the Dec. 5 decision of a federal appeals court in New York to nix a class action that accused them of manipulating the price of IPOs during the late '90s tech boom. The claims, brought on behalf of small investors, are "bristling with individual questions," the court ruled, making a class action inappropriate. While a big victory for the banks, the ruling is an equally big blow to Milberg Weiss Bershad & Schulman, one of the plaintiffs' lead law firms. Milberg is already reeling after it and two of its partners were indicted in May for paying kickbacks to clients. Edict Of The Week New York City is determined to make its residents healthier, whether or not they're interested. On Dec. 5 the city's Board of Health voted to ban artificial trans fats at all restaurants, making it the first city in the nation to outlaw the artery-clogging substances. Eateries must stop using most frying oils and spreads containing trans fats by next July, and have until July, 2008, to eliminate trans fats from oils used for deep frying doughnuts and the like. Mayor Michael Bloomberg lobbied hard for the ban, just as he pushed for one of the nation's toughest antismoking laws in 2003. The city's finest restaurants sniff that they could care less because they wouldn't touch the stuff, but fast food joints are trans fat addicts. Still, McDonald's (MCD ) has already said it's experimenting with alternatives, and Wendy's (WEN ) introduced zero-trans fat oil in August. Trans fats are believed by many experts to be particularly harmful to the heart. See "Why McDonald's Isn't Free of Trans Fat"
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