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Leap of Faith


Clorox (CLX) has tapped a 22-year veteran in a bid to brighten its prospects. Gerald Johnston, who had been president and COO since 1999, takes over as CEO on July 1 from G. Craig Sullivan, who will remain chairman until yearend.

On June 18, the day before the appointment, Clorox estimated that fiscal fourth-quarter profits would come in between 67 cents and 68 cents a share, the low end of its previous forecast. The company blamed the poor results on rainy weather, which depressed sales of its Kingsford charcoal and Armor All car products.

Johnston joined Clorox in 1981 after 10 years with Procter & Gamble, working his way up from national sales manager for the Kingsford division. He told analysts that he will continue the Oakland (Calif.) company's cost-cutting drive, which has helped boost profits in recent quarters.

"He'll retain the status quo, and that's good, because the restructuring is working," says CIBC World Markets (BCM) analyst Joseph Altobello. Next step: sprucing up slow sales growth with new products. Odds are improving that consumers will be able to keep their wireless phone numbers when they switch carriers. Companies have been lobbying against so-called wireless portability, which the Federal Communications Commission has ordered them to adopt by Nov. 24. They fear customers will switch carriers more often, triggering a price war. But Verizon Wireless (VZ) broke ranks June 24 and embraced the change. Verizon, the nation's wireless leader, said it would not impose new fees to cover the cost of implementing the rule. That puts pressure on others to follow its lead. General Motors' Saturn div. can't seem to catch a break. The money-losing subsidiary decided to recall 254,000 of the slow-selling L-Series sedans on June 20 because of problems with the engine and ignition system. The car had a tendency to lose power or could be difficult to start. In a few cases, the car has caught fire. GM says that the repair job takes 30 minutes on each vehicle and that it will pay Saturn retailers for the work. "Unfortunately, recall campaigns are part of the business," says Jill Ladjiak, Saturn's vice-president for sales and marketing. Saturn has been known for high quality, but this year the brand fell to near the bottom of the J.D. Power annual initial quality survey. On June 24, the National Cancer Institute reported that the Merck (MRK) drug finasteride could reduce the risk of prostate cancer in healthy men by 25%. Finasteride is sold as Proscar for enlarged prostates and Propecia for male-pattern baldness, and combined sales are currently about $550 million a year. Analysts say sales might soar if the drug is approved for cancer prevention, but the study contained many caveats. For one thing, those men taking the drug who did develop cancer were more likely to have a more aggressive form of the disease than those on a placebo, for reasons researchers couldn't explain. Striving to keep the innovator mantle in the computer business, Apple Computer (AAPL) CEO Steve Jobs on June 23 unveiled several new products, including a machine he described as the "world's fastest personal computer." Dubbed the G5 PowerMac, the unit will boast more computing horsepower than any PC on the market when it ships in August, according to analysts. Jobs also previewed Apple's new operating system, code-named "Panther." The release thrusts Apple into the Internet video- and audio-conferencing businesses by coupling instant messaging technology with audio and video capabilities. "It's video conferencing for the rest of us," said Jobs. For several weeks, investors have been scooping up biotech stocks in anticipation of several new drug approvals. But they balked at the planned merger of Idec Pharmaceuticals (IDPH) and Biogen (BGEN) The all-stock deal, announced on June 23, is the largest biotech merger since Amgen (AMGN) acquired Immunex (AMGN) for $11 billion in 2001. The companies would have combined annual revenues of $1.6 billion, and they expect to save $300 million in expenses through 2007. But heft does not ensure compatibility. The companies have very different research strengths: San Diego's Idec markets cancer drugs, while Biogen, based in Cambridge, Mass., specializes in autoimmune disease. Jittery investors pushed down the shares of both Idec and Biogen by 6% the day after the announcement. -- Tenet Healthcare (THC) warned that second-half profits would fall short of expectations.

-- Vivendi's board is expected to meet on July 1 to choose among the bids for its U.S. entertainment properties.

-- The recording industry trade group plans to sue Internet song swappers. USG (USG) may be bankrupt, but there's still plenty of life left in the wallboard maker's stock. Buoyed by Senate committee action that would limit asbestos liabilities, investors bid up Chicago-based USG shares 46% in two days. The stock closed at $19.06 on June 25 -- its highest price in 28 months.


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