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MARLBORO COUNTRY BLUES

Poor Michael A. Miles. Since taking charge at Philip Morris Cos. in 1991, he has more often than not been the bearer of extremely bad news.

First, there was "Marlboro Friday"--Apr. 2--the day Philip Morris announced it was slashing prices on Marlboro cigarettes by 40 per pack. The news sent its stock down 23%. Then, on Nov. 24, the company's board approved Miles's plan for a wholesale restructuring. Under its terms, Philip Morris plans to eliminate 14,000 jobs, or 8% of its work force, and close roughly 40 plants. Among the casualties: Miller Brewing Co., which announced on Dec. 1 that it will lay off 1,200 workers and shutter a plant. The moves will reduce profits by almost $1 billion this year. And for the first time in 25 years, Philip Morris's dividend ($2.60 this year) will not be increased. Still, Philip Morris stock jumped 62.5 , to $55.50, on the news of the restructuring.

Kraft General Foods Inc. will bear the brunt of Miles's knife. Kraft sold its frozen-desserts business to Unilever PLC in October and is in the midst of selling Birds Eye frozen vegetables to Dean Foods Co. for $140 million. Analysts speculate that Kraft's food-service and American Gourmet frozen-meals divisions may go on the block next. "The margins for food service are next to nothing, so that's going to be downsized," says John McMillin at Prudential-Bache Securities Inc.

At the same time, there's no end in sight for the problems at Morris' domestic tobacco division. It's true that since slashing prices on Marlboros, the company's market share has jumped to 24.3% from 21%. But the effort to buy back lost market share, on top of the restructuring, has come at great expense. "They're accomplishing the objectives they laid out on Apr. 2, but it's costing them $2.3 billion in operating profit," this year, says Gary Black, a tobacco analyst at Sanford C. Bernstein & Co. "The question is, is it worth it?" The tobacco division's Richmond, Va., office said on Dec. 1 it would lay off roughly 900 workers.

What a comedown all this is for Miles, who inherited a $56 billion company that enjoyed a fantastic run during the 1980s. Now, investors--and employees--want Miles to bring back the good old days. "Miles will go down in history as the man who cut prices on Marlboro," says Black. If he can't enact a turnaround, though, Miles will be lucky if that's all his epitaph will say.Laura Zinn in New York


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