"Is That All There Is?" -- Song made popular by Peggy Lee, who died Jan. 21 It might have seemed like a return to old, profligate ways. AT&T (T), which used to spend billions on consulting, announced Jan. 14 that it will now pay Accenture $2.6 billion in a five-year consulting pact. Accenture will automate, revamp, and run AT&T's sales and customer service.
As it turns out, the deal may give AT&T a big financial boost. The key lies in a previously undisclosed-but-important detail: If Accenture can't stay within its $2.6 billion, five-year-budget, it must "eat all the additional cost," a manager familiar with the deal tells BusinessWeek. That essentially puts all of the risk on Accenture. Accenture and AT&T won't confirm details. Accenture Partner Jon Harrington says he's "confident we will be able to deliver significant technology enhancements."
The financial structure of the deal clearly favors AT&T. The company would have spent $5 billion over the next five years on sales and customer service anyway. Accenture managing it for $2.6 billion means a savings to AT&T of 50%. If Accenture can reduce costs beyond that, it can keep half the additional savings. But if Accenture exceeds $2.5 billion, it must pay the shortfall. "The great thing about this agreement is we can address the need for world-class customer care... 50% below the current run rate," says AT&T Consumer Div. President Betsy Bernard.
AT&T had tried to revamp customer service for years, so the task may be harder than it looks. Now, it's entirely up to Accenture. There's an interesting sidelight to the ongoing feud over whether Hewlett-Packard (HWP) should merge with Compaq Computer (CPQ): HP director Walter Hewlett, who has publicly opposed the merger saying it's bad for shareholders, has been snatching up shares of Agilent Technologies (A), the HP spin-off where Hewlett is also a director. He's bought 575,000 Agilent shares since last February--including 70,000 since late June, when HP and Compaq began flirting, according to SEC filings. That brings the stake he controls in Agilent to 4.9%, on par with what he owns of HP.
Although Hewlett declines comment, associates say he believes Agilent is more faithful to the philosophies that made HP an icon. These include job security, technical innovation, and high margins, rather than what he says is HP's fondness for marketing and market share. (Agilent descended from the original lab-equipment business Hewlett's father co-founded in 1939.) Says Agilent CEO Ned Barnholt: "Walter very passionately believes in the vision." Agilent has fallen 48%, and HP 40%, since the buying began.
HP's brain trust wouldn't be sorry to see Hewlett resign to focus on Agilent instead. In a Jan. 18 letter to shareholders, HP rebuked Hewlett, saying he believes "resting on our legacy is better than building on it." It's a good question whether HP will even renominate Hewlett for a board seat. A date for this year's annual meeting hasn't been set. Last Fall, as $1.5 billion poured in to aid September 11 victims, other charities began to fret. Their worry: that generosity toward those victims would siphon off funds needed for other causes. What would become of funding for the arts in Los Angeles? For homeless shelters in Chicago?
Well as it turns out, many charities didn't suffer the great sucking sound they expected. With the December giving rush now over, some are saying their dire predictions were too hasty. Of 18 local United Way campaigns, 12 met or exceeded their goals--one, in Texas, by $2 million, or 6%. The Salvation Army won't have final numbers until February, but based on a sample of kettle drives, a spokeswoman says 2001 looks "on a par with last year." The trend extends even to small local groups thought to be the most in danger. "I'm happy to say we're holding our own," says Christina Thoburn of the University [of Michigan] Musical Society, which raises $2.6 million a year for classical music and other performances.
All this has experts such as Eugene Tempel of Indiana University's Center on Philanthropy predicting that even excluding September 11 funds, charitable giving in 2001 will still match the $203 billion level reached in 2000. Is nothing private anymore? Your bosses snoop through your e-mail. Strangers gawk at your unmentionables as airport screeners paw through your luggage. And now, there's a gadget that lets your landlord know how many times you flush the toilet and how often you bathe. Then, you get the bill.
The wireless device, sold by startup Wellspring International of San Diego, is about the size of a deck of cards and can be attached to every water pipe in an apartment. It monitors water flow and beams the data every eight hours to an in-building computer. For the landlord, the setup costs about $500 per apartment, plus $3 or so a month.
Archstone-Smith, which rents out 80,000 apartments nationwide, estimates that it spends $40 a month per apartment on water--an amount it tries to recoup in rent. In the past few months, however, Archstone has been installing meters in 900 rental apartments in Washington, D.C., and plans to add 2,000 more, mostly in Florida, this year. "It is really fair and right for tenants to pay for their own water," says Archstone's chief information officer, Daniel Amedro. "We like this solution a lot."
By billing renters for the water they use, landlords also might encourage water conservation, which is why some environmentalists like the device, as well. But some tenant advocates are flush with anger. Says Kathy Brown, coordinator of the Boston Tenant Coalition: "This just feels like another way to create more wealth for landlords." Well, uh, maybe they'll kick back the $40 from the rent. The beleaguered U.S. Postal Service can't catch a break. If anthrax-tainted mail and falling revenues weren't enough, now comes a scathing report on its foray into electronic commerce.
Post office attempts to get into Internet bill payment, online stamp sales, and other e-commerce ventures generated only about $1 million last year. That's less than 1% of the post office's own $104 million e-commerce projections for 2001, a General Accounting Office study found. The GAO said slow public adoption of services, "fragmented" management, and "inconsistent" implementation were to blame. For example, the Postal Service revamped internal rules for developing e-commerce initiatives twice in just one year. On the sloppy accounting front, online stamp sales weren't counted as e-commerce revenue, even though all costs for it were reported as e-commerce costs.
In a written reply, Deputy Postmaster General John Nolan says the report neglects a September restructuring that brought all marketing, including e-commerce, into one division and tightened management control. He also says the Postal Service has more clearly defined its e-objectives.
A USPS spokeswoman hints at new online services beyond e-payments, money transfers, online greeting cards, and e-transmission of documents that are printed and mailed. "Having these online makes it convenient for our customers," she says. The postal service charges for transactions ($6.95 for 20 e-payments, for example), so that's one way of supplementing falling sales. Internet access provider Excite@Home is bankrupt, and some of its prized pieces are selling for pennies on the dollar, if that. Creditors, with $1 billion in claims, will be lucky to get $400 million. Here's a look at where the parts of a company that two years ago had a a market cap of $17 billion are ending up:
Excite paid $82.5 million for the photo site in 1999. In January, its founders bid $2.4 million and bought it back.
Assets of the ad-tracking site were divvied up at auction in December. The total take: $2.2 million. Excite paid $89 million to purchase MatchLogic in 1998.
InfoSpace and iWon paid $10 million to take over the portal in November. In 1999, @Home paid $6.7 billion.
AmericanGreetings.com snagged the greeting-card site in September for $35 million. In 1999, Excite@Home paid $780 million for the site.
An auction for @Home's fought-over cable assets, expected to bring in some $25 million, is slated to end in April.