) resigned under board pressure amid a scandal over sham trades, probes by regulators, and pressure on its stock and debt ratings. Watson's resignation came four days after William McCormick Jr. quit as CEO of rival CMS Energy, which admitted doing sham trades with Dynegy, Reliant Resources, and others. And more heads in energy could roll.
A top contender to replace Watson is Dynegy President and COO Stephen Bergstrom, who helped Watson build the company during the past 17 years. Dynegy director Glenn Tilton, vice-chairman of ChevronTexaco, which owns 26.5% of Dynegy, will be interim chairman. Board member Daniel Dienstbier will serve as interim CEO. It's another European headache for Microsoft (MSFT
). Privacy regulators in Brussels have launched an investigation into Microsoft's Passport service. Netizens sign up for Passport to gain access to dozens of e-commerce and game sites without having to enter passwords each time. But Europeans say the service may violate stringent data privacy regulations in the Old World. Brussels may push to make it easier for Passport customers to protect and manage their personal data and to unsubscribe from the service. Such changes could complicate the rollout of Microsoft's .Net strategy, a sweeping gambit designed to make disparate Web sites communicate with one another and with programs on personal computers. Microsoft says Passport adheres to European data privacy standards. It's not what someone who has shelled out $60,000 or more for a car wants to hear: BMW is recalling the 17,000 7 Series sedans it has sold so far to check the electronic fuel pumps and throttle valves. In a few cases, problematic pumps cut the flow of gas to the engine, causing the cars to stall. Such recalls are commonplace, and this one will cost BMW only $3 million. But it's embarrassing for the Bavarian carmaker, which launched the 7 Series in November. The car was chosen Best Engineered Car of 2002 by Automotive Engineering International in March. But so far it is off to a bumpy start. Tyco International's (TYC
) efforts to obtain the highest price for its finance arm, CIT, were dealt a setback on May 24, when Lehman Brothers (LEH
) withdrew a $5 billion bid. Tyco insists it remains "on track" to sell CIT either to a third party or through an initial public offering by the end of June. Tyco must move quickly both to raise cash and restore CIT's access to the commercial paper markets. But few observers believe Tyco has much hope of getting the $6.5 billion it initially suggested for an IPO. Even that would be far below Tyco's $11.3 billion investment in CIT, acquired last June. The FCC has put the brakes on a controversial airwave auction scheduled for June 19. Congress had ordered the sale of licenses for spectrum now occupied by TV broadcasters to take place in time for the U.S. Treasury to pocket proceeds this fall. But the big wireless phone carriers objected. They complain that broadcasters currently using the spectrum could force bidders to pay a big ransom to get them to move out quickly. The broadcasters must give up those airwaves once they migrate to digital transmission by 2006, or whenever 85% of U.S. households get digital TV. Since that could take years, the FCC opted on May 24 to go ahead with an auction of channels 52-59, where there are fewer broadcasters, while postponing the sale of licenses in higher channels. Filling a vacancy left open for nearly six months, Xerox has a new chief financial officer. Lawrence Zimmerman, 59, stepped into a big job on May 28. The company, which recently settled a Securities & Exchange Commission case alleging accounting fraud in the late 1990s, still faces many challenges. A vital bank credit line has yet to close, and Moody's recently downgraded the company's credit status. Its stock has dropped 64% in the past two years, to a recent $9 a share. But Zimmerman is a veteran of corporate turnarounds. He spent 31 years at another blue chip forced to reinvent itself, IBM, which he left in 1998. -- Cisco's (CSCO
) third-quarter 10Q showed a 20% increase in its reserve for doubtful accounts.
-- Moody's lowered AT&T's (T
) debt to the second-lowest investment-grade rating.
-- McDonald's (MCD
) is considering adding undisclosed nonfood items at its restaurants. Shares of cable-TV operator Adelphia Communications (ADLAE
) fell 42%, to $1.16, on May 29 amid rumors it was running out of cash. Coudersport (Pa.)-based Adelphia is negotiating with lenders for $1 billion in equity infusions and wants to sell cable systems with nearly half its 5.3 million subscribers.