In Business This Week: HEADLINER
JERRY SANDERS: KAYOED BY THE K6
W.J. "Jerry" Sanders must think he's on a roller coaster. As recently as midsummer, the silver-haired, silver-tongued chairman of Advanced Micro Devices was looking forward to an upswing, thanks to strong demand for its new K6 chips. But on Oct. 7, AMD came down to earth with a third-quarter loss of $31.7 million. Only a week earlier, analysts had expected a loss of just $4 million.
Third-quarter revenues rose 31% from last year, to $596.6 million. But that didn't offset the problem AMD is having manufacturing K6 processors, which rival Intel's latest Pentiums but cost 25% less. AMD hoped to ship about 1.4 million K6s in the quarter but managed about 1 million. And only 15% of them were the fast-est K6 model, which sells for top dollar. "We needed to execute flawlessly, and we didn't," Sanders says.
Wall Street is wearying of AMD's failure to deliver consistently. The stock has dropped 25% since early September. But Sanders predicts that AMD can ship 2 million K6s in the fourth quarter. If so, hang on to your seats.EDITED BY KELLEY HOLLAND By Andy ReinhardtReturn to top
AT&T AND GTE: STILL ALL TALK
AS RUMORS FLEW THAT GTE might be acquired by AT&T, GTE's stock shot up to a 52-week high of 52 1/4 on Oct. 8. Wall Street thinks this is a marriage made in heaven--giving AT&T an entree into local calling and, in GTE CEO Charles Lee, a strong telecom executive to replace Chairman Robert Allen. But there's a catch: Lee, say sources close to GTE, would probably not agree to a deal unless he were given the top job at AT&T. And that does not appear likely. AT&T insiders say that the company is getting close to tapping Vice-Chairman John Zeglis to be the next CEO. That doesn't rule out an AT&T-GTE deal entirely. But this telecom wedding could suffer through a long courtship.EDITED BY KELLEY HOLLANDReturn to top
HEROIC MEASURES AT CHAMPION
PERENNIAL UNDERPERFORMER Champion International is finally making good on its promise to get serious about shareholder value. On Oct. 8, the Stamford-based paper company said it would take a $553 million charge, lay off 2,000 employees, and put up for sale businesses that collectively employ 6,255 more. The proceeds will allow Champion to pay down debt, boost dividends, and buy back shares. Champion says the moves will increase pretax profit by $400 million annually over the next three years. The company earned $141 million in 1996.EDITED BY KELLEY HOLLANDReturn to top
GOOD BUY, SUITE PRINCE
SAUDI PRINCE ALWALEED BIN Talal is moving in on Movenpick, the Zurich-based hotel and food giant. On Oct. 6, Alwaleed announced the purchase of a 30% stake in the Swiss group's hotel business, which comprises 40 hotels in 10 countries. The $100 million deal will help Movenpick expand in the Middle East and Africa. It also gives Alwaleed an important midlevel hotel brand to complement his more upmarket holdings: San Francisco-based Fairmont Hotels and Ontario-based Four Seasons Hotels.EDITED BY KELLEY HOLLANDReturn to top
FEDEX' GREAT BIG PACKAGE
FEDERAL EXPRESS IS hoping to deliver a body blow to United Parcel Service with its $2.7 billion purchase of Caliber System, announced on Oct. 6. The deal for Caliber, the owner of ground delivery system RPS, will enable FedEx to go head to head against UPS' nonexpress delivery service for the first time. FedEx also gets two other delivery services and Caliber Logistics, which develops and manages logistics solutions. Says FedEx CFO Alan Graf Jr.: "To the extent that our strategy prevails over UPS, that's what we get paid to do."EDITED BY KELLEY HOLLANDReturn to top