) CEO Alan Lacy is turning to the top line after shoring up profits through cost-cutting. On May 13, Sears said it would buy cataloger Lands' End (LE
) for $1.9 billion, cementing talks that Lacy's predecessor, Arthur Martinez, began back in 1998. Sears, which will continue to run the Lands' End catalogs and Internet site, also plans to carry the brand's merchandise in its stores to bolster Sears' eroding apparel sales.
Lacy figures that buying a well-known brand will help in its bid to develop an in-house label. And being the only retail shop to carry the Lands' End line should also help distinguish Sears from rival chains. "It allows you to compete on something other than price," Martinez says.
But there are risks as well. Lands' End is aimed at higher-income shoppers, who may be alienated as Sears lowers prices. Store sales might also end up cannibalizing Lands' End catalog sales. Those sales are about where they were three years ago, suggesting the brand might not have much growth potential. Lacy could find more in this package than he bargained for. It was chaos at online music-sharing site Napster on May 14. The day began with CEO Konrad Hilbers resigning and ended with almost all the core team following suit, including co-founder Shawn Fanning. The exodus was to protest the Napster board's decision over the weekend to reject a buyout offer from media giant Bertelsmann.
Almost out of cash, Napster is likely to file for bankruptcy. "We could have saved this company," says Hilbers. "We had one last alternative with this [offer]." But now the site that transformed the music industry is nearly dead. After joining Bank One (ONE
) two months ago as an executive vice-president, Heidi Miller was promoted to chief financial officer on May 14. Miller, 49, is a former CFO of Citigroup (C
), where she had worked with James Dimon, Bank One's chief executive. Miller, who quit Citi in 2000 for an eight-month Internet fling as chief financial officer of priceline.com, recently served as vice-chairman of Marsh.
Miller has worked with Dimon since the early 1990s, when he hired her as an assistant at Primerica, and she will no doubt help him beef up Bank One through acquisitions. Dimon has long been expected to expand Bank One, the nation's sixth-largest bank, much as he and Miller helped build Citi.
She takes the CFO post from another longtime Dimon associate, Charles Scharf, who moves to head up retail banking at Bank One. Edison Schools (EDSN
), the nation's largest for-profit operator of public schools, with 74,000 students, reached a settlement with the SEC on May 14. The feds found that Edison had inflated reported revenues by including payments made by some of its school districts for items such as teachers' salaries. Edison vowed to change its revenue reporting and create an internal audit department.
The timing couldn't be worse for Edison, which has never earned a profit. Its stock is down 85% this year, and it's scrambling to raise up to $50 million from an outside investor to stem a financial squeeze. The U.S. Justice Dept. is investigating whether a currency-trading Web site run by 17 major banks has run afoul of antitrust laws. Justice's main gripe is the exclusive arrangement between the exchange, FXall, and participating banks--including J.P. Morgan Chase (JPM
) and Citigroup (C
)--preventing them from doing business on competing sites.
That type of arrangement caused Justice to successfully sue Visa and MasterCard, which prohibit their member banks from issuing American Express or Discover cards. The case is on appeal. Adelphia Communications (ADLAE
) CEO John Rigas quit, six weeks after the cable company disclosed it had guaranteed $2.3 billion in off-balance sheet loans to partnerships controlled by the Rigas' family. The nation's sixth-largest cable company installed outside board member Erland Kailbourne to succeed Rigas, who founded Adelphia in 1952. Under investigation by the SEC for the loans, Adelphia hired former Microsoft prosecutor David Boies to conduct a probe.
That's not Adelphia's only problem. Its largest outside shareholder, ex-cable operator Leonard Tow, wants the company to give up 3 of 11 board seats. And to reduce debt, Adelphia is seeking buyers for its cable systems, which serve 5.8 million customers. Paul Allen's Charter Communications (CHTR
) is among those interested. -- PPG Industries (PPG
) agreed to pay asbestos plaintiffs $2.7 billion over 21 years.
-- Sony (SNE
) and Microsoft (MSFT
) cut prices on their rival game consoles by $100 to $199.
-- CalPERS CEO James Burton, 51, said he'll leave the No. 1 pension fund this fall. Schering-Plough's (SGP
) stock slid 12% on May 15 after it said the Food & Drug Administration's Office of Criminal Investigations is conducting a probe of its products made in Puerto Rico. Schering is already in settlement talks with the FDA over manufacturing issues at its plants in New Jersey and Puerto Rico.