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Former Gap (GPS) CEO Millard "Mickey" Drexler has taken on a new challenge: fixing J.Crew Group, the foundering retailer. As Crew's new chairman and CEO, Drexler, whose once unerring fashion instincts propelled Gap to iconic status as an American brand, will manage just 195 stores, counting factory outlets. That's a far cry from Gap's 4,100 shops.

Although Drexler, 58, will be the fourth CEO at J.Crew in five years, he's acting like someone who's in it for the long haul. He has invested $10 million in the company, which is 60%-controlled by Texas Pacific Group, and brought in as president a former Gap colleague, Jeffrey Pfeifle. Ken Pilot has resigned as J.Crew's CEO, and Emily Woods, the daughter of the company's founder, has stepped down as chairman but retains her board seat.

Like Gap, J.Crew suffered a sales skid when it aimed too young in its fashion mix. In a hopeful sign for J.Crew, though, Gap's sales have grown for three months now, thanks in part to Drexler's last merchandising revamp before he departed. Charging that auditors were "toothless" in the face of widespread fraud at Xerox (XRX), the Securities & Exchange Commission on Jan. 29 sued accountants KPMG and four partners. In a rare case of civil charges against a Big Four firm, the SEC alleges that KPMG ignored repeated warnings that Xerox was padding revenues by $3 billion between 1997 and 2000. The SEC says KPMG caved in to the client's demands, replacing lead auditors who questioned creative revenue schemes. Xerox has already paid a $10 million fine for accounting fraud, and its shareholders shrugged off the SEC suit. But KPMG and its auditors vow to fight, arguing that they caught the bad accounting and forced an outside investigation. For penalties, the SEC wants KPMG to cough up all its fees from Xerox--$26 million from auditing and $56 million for other consulting. A long-running legal saga in the wireless industry concluded when the U.S. Supreme Court ruled on Jan. 27 that bankrupt wireless startup NextWave Telecom can keep licenses for its spectrum. NextWave filed for bankruptcy after bidding for the airwaves at a Federal Communications Commission auction in 1996. The FCC reauctioned the licenses in 2001. Now, the court has decided that bankruptcy protects NextWave from the FCC's move. The feds will have to reimburse the $16 billion they got from the winners of its re-auction. Paul Allen may unplug from his "wired world." The Microsoft (MSFT) co-founder is looking to restructure his majority-owned Charter Communications (CHTR), say investment bankers. Allen could restructure Charter, which is struggling under $20 billion in debt, in a prepackaged bankruptcy, they say, although creditors might battle him for control. Allen may put more money into the company, but he has also talked to private equity firms such as Carlyle Group and Thomas H. Lee Partners about selling all or part of the company, according to sources. An Allen spokesman says he "remains committed" to Charter and his wired-world vision. Charter declined comment. EMC (EMC) is about to counter-attack competitors who have been grabbing share in the data-storage market. On Feb. 3, the company will launch a new line of high-end products that it says will outperform boxes from Hitachi Data Systems and IBM (IBM) but cost less. The move is likely to set off another round of price wars in the battered storage sector. EMC's least expensive model--starting at $400,000--could draw new customers from the fast-growing middle-tier storage market. But it could cannibalize higher-priced boxes that historically have made up the bulk of EMC's revenue. Can Delta Airlines (DAL) beat discount carriers like JetBlue Airways (JBLU) at their own game? The Atlanta-based carrier announced on Jan. 28 that it will launch a low-cost airline called Song. Charging fares from $79 to $299, the new carrier will compete with discounters that have eroded Delta's share of traffic to the lucrative Florida market. Delta doesn't exactly have a choice: 30% of its domestic revenues come from markets that are under assault from lower-cost competitors. Song will begin service on Apr. 15, with initial flights between John F. Kennedy International Airport and West Palm Beach, Fla. On this route--and others--it will compete with JetBlue, one of the most successful low-cost airlines. -- Ted Turner said he will step down as AOL Time Warner (AOL) vice-chairman.

-- Boeing (BA) unveiled a new line of jetcraft, the 7E7.

-- Sprint (FON) shares plunged on news that CEO William Esrey will leave the company. FMC Corp. (FMC) investors took a shellacking on Jan. 29, one day after the company put out disappointing earnings guidance for 2003. The main problem: FMC's chemicals business faces tough pricing. The company said it should earn only $1.75 to $2.00 per share in '03, about 30% below expectations. FMC shares slumped 24% to close at $19.


Steve Ballmer, Power Forward
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