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Chris Gets His Man. Now, Can Whittle Get Going?


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CHRIS GETS HIS MAN. NOW, CAN WHITTLE GET GOING?

Even for one of the most persuasive entrepreneurs in medialand, it was a breathtaking coup. On May 25, Christopher Whittle announced that Yale University President Benno C. Schmidt Jr. would forsake his lofty academic perch to head one of the riskiest projects Whittle has undertaken: a national chain of for-profit schools.

The high-profile hire couldn't have come at a better time for Whittle. His Knoxville (Tenn.)-based company, Whittle Communications, has been struggling with lower profits and pressure from some of its key backers. Time Warner Inc., which owns 37.5% of Whittle, says it has urged Whittle to focus on electronic media instead of its traditional mix of narrowly targeted magazines and TV services. And Dutch consumer-electronics giant Philips, which owns 25%, has instilled in Whittle a "new consciousness" about costs, according to a former Whittle executive.

Just two weeks ago, Whittle announced the first major cuts in its 21-year history, laying off 100 and trimming executive salaries. The privately held company won't disclose earnings, but both Whittle and Time Warner say they're unsatisfied with fiscal 1992 results. "Our margins were average, and we think they should be among the best in the industry," Whittle says. The company says revenues rose 11%, to $230 million, for the year.

Whittle has been hurt by the ad recession. But Time Warner executives say he also has been distracted by his many new projects, which include Channel One, a satellite service that beams current-events programming and ads into 10,000 high schools, and the Special Report Network, a TV and magazine service for doctors' offices. "He had so much going on that the focus was getting blurred," says Reginald K. Brack Jr., chairman of Time Inc.

Whittle's restructuring is part of his plan to phase out much of the print business in favor of electronic media and the schools projects. Whittle also is scrapping Highway One, a video service for shopping malls. Now, most of the company's sales come from Channel One, which is growing rapidly but has had a stubborn image problem. What's more, a recent study by the University of Michigan found that the programming didn't do a whole lot to boost current-events knowledge among its student viewers.

Such setbacks haven't deterred Whittle from his plan to open 200 for-profit schools by 1996. He hopes to raise $1.2 billion for them and says he may offer eight-hour days and 11-month school years. Tuition isn't supposed to top the average spent by public schools--now $5,500 a student. "This is a rare instance where it's possible to design a new educational institution," says Schmidt.

Whittle will spend an initial $60 million in research and development on the Edison Project but is fuzzy about how he plans to raise the rest of the money. "We have to come up with a business plan that has limited risk in it that will attract investors," he says. "I'm still working on that." Some educators fear he may use advertising-based media to help support the schools.

RELENTLESS. But Whittle says he will tap venture capitalists, banks, and other investors. That's where Schmidt comes in: The 50-year-old former law professor is a deft fund-raiser. During his tenure, Yale's endowment grew faster than any other private university's, jumping from $1.7 billion in 1986 to almost $3 billion today. Yet his stay was marred by battles over how to close Yale's $15 million budget deficit. "It's a little bit like presiding over the Roman Empire at a time of stress," says writer Calvin Trillin, a member of Yale's governing board.

Another big reason Schmidt signed up may have been Whittle's relentless pursuit. He says he met with Schmidt more than 30 times to push the idea after the two met at a New York dinner party two years ago. There was one more lure: A banker close to the company says that based on the salaries of Whittle's other top managers, Schmidt could earn upwards of $800,000 a year, compared with $240,000 at Yale. Both Schmidt and Whittle decline to comment.

The Edison Project isn't the only new venture on the company's plate: Whittle plans to announce a new medical broadcast service soon but won't give details. Outsiders speculate that it will be aimed at physicians and supported by pharmaceutical advertising. But that's nothing next to the Edison Project. With its huge cost and high ambitions, Chris Whittle's future may well be in the hands of his illustrious new employee.WHITTLE'S LEARNING CURVE

1991

OCTOBER Forstmann Little backs away from talks to invest $350 million in Whittle

1992

FEBRUARY Philips Electronics pays $175 million for 25% of Whittle

APRIL A University of Michigan study finds that kids who watch the Channel One

classroom newscast are only slightly more aware of current events than those

who do not

MAY 13 To boost profit margins, Whittle announces a corporate overhaul, laying

off 100 employees, forcing executive pay cuts, and eliminating some print and

electronic media ventures

MAY 25 Yale University President Benno Schmidt signs on to head the Edison

Project, Whittle's for-profit school venture

DATA: COMPANY REPORTS

Walecia Konrad in Atlanta, with Mark Landler in New York and Lisa Driscoll in New Haven


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