Magazine

Telecom Titans Tie The Knot


The markets are blessing the $13.4 billion nuptials of Alcatel (ALA) and Lucent (LU), creating the global No. 1 telecom-equipment maker. Although Alcatel is doing the buying, the French don't seem to mind that an American, Lucent CEO Patricia Russo, is set to run the $25 billion-a-year company, while Alcatel CEO Serge Tchuruk becomes non-executive chairman. Even left-wing daily Lib?ration praised Russo as a smart, down-to-earth boss with a deep amour for chocolate.

Expect a short honeymoon, though. Employees on both continents express alarm over a planned 10% cut in the combined 88,000-person payroll. The company also needs approval from France and the U.S. to spin off sensitive defense-related units. Smaller rivals such as Ericsson (ERICY), Nortel (NT), and Siemens (SI) may start seeking mates as well.

See "The Alcatel Effect"

Tremors shook techdom on Apr. 5 when Apple (AAPL) announced software dubbed Boot Camp that lets Mac users run Windows. For many PC buyers -- from corporate graphics departments to consumers disgusted with Microsoft's virus-prone operating system to people tired of their PCs but still attached to a few Windows programs -- the move cuts much of the risk of jumping to the Mac fold. Apple shares hopped 9% on the news as analysts talked of the company increasing its 3% slice of the market by several percentage points. One caveat, however: Apple says it won't do tech support for Boot Camp, and Microsoft (MSFT) may not support Windows on Macs, either.

GM (GM) continued to overhaul its power train. On Apr. 3 it agreed to sell 51% of its finance arm, GMAC, to a consortium led by Cerberus Capital Management. The deal will pump $14 billion into GM over three years. It also may boost GMAC's credit rating and lower its cost of capital. But half the unit's rich profits will now flow to Cerberus and its partners, including Citigroup (C). GM needs cash to buy out workers and develop models with pizzazz: Its March sales plunged 14.6% from the year before.

See "GMAC: Is GM Selling Its Seed Corn?"

This won't make life any easier for GM. On Mar. 31, as expected, bankrupt auto parts maker Delphi asked a federal court to junk its labor contracts so it can lay off 20,000 hourly workers and slash wages for the rest. The judge won't rule until June, and talks with the UAW may yield a compromise. The union hasn't authorized a strike yet. It's not clear it would walk anyway, since a long stoppage would likely topple GM into bankruptcy, too.

See "Twilight of the UAW"

Who says universal health care is a pipe dream? Massachusetts seems to have found a novel way to achieve it -- without a state takeover. On Apr. 4 the legislature passed a bill that would require all residents to buy health insurance by July 1, 2007. Low-income citizens would get big subsidies. More affluent folks would face stiff tax penalties if they didn't buy coverage. Republican Governor Mitt Romney is expected to make the bill a centerpiece of his likely run for the White House.

See "In Massachusetts, Health Care for All?"

Venezuelan President Hugo Ch??vez may be sitting on the world's largest oil deposits -- as many as 250 billion barrels. Although just 80 billion are proven reserves, that still makes Venezuela a force to reckon with. Ch??vez sent a message to Big Oil on Apr. 3 when Energy Minister Rafael Ram??rez told Total (TOT) of France and ENI (E) of Italy to return two fields because they refused to take on state-run PDVSA as majority shareholder. Sixteen other companies bowed to the new rules.

See "Venezuela's Seizure Ups the Ante"

While computer services companies aren't exactly sexy, suffering stodgy growth and cutthroat competition of late, their long-term contracts and steady cash flow make them juicy takeover bait. Next candidate: Computer Sciences (CSC), which put itself on the block on Apr. 4. Joseph Vafi, tech analyst at Jeffries & Co., says potential buyers such as IBM (IBM), Hewlett Packard (HPQ), and private-equity firms may have to pony up more than $11 billion.

See "Computer Sciences Goes on the Block"

They won't have Tom DeLay to kick around any more. The former superpartisan House Majority Leader, who was forced out of the top spot in September, said on Apr. 3 that he won't stand for reelection from Texas' 22nd District. It looked as if he might lose, largely because of legal woes. DeLay faces campaign-finance charges in Texas, and his ex-deputy chief of staff, Tony Rudy, recently pled guilty in federal court to conspiracy charges in the widening probe of lobbyist Jack Abramoff. DeLay's exit may well help his party hold on to his seat.

Fidelity and its Magellan Fund (FMAGX) customers learned the hard way that swelling assets can crimp performance. The Boston giant isn't about to make the same mistake with its current crown jewel, the top-performing and top-selling Contrafund, managed by Will Danoff. The growth fund, which climbed 16% last year and averaged 11% over the past 5 years, will snub new investors as of Apr. 28. At $65 billion, Contrafund was getting unwieldy even for Danoff, a quirky manager whose far-ranging research has created a more eclectic portfolio than most big funds employ.

In another game of company-union brinksmanship, Delta (DALRQ) pilots on Apr. 4 voted overwhelmingly to O.K. a strike if an arbitration panel tosses their contract. Delta, in Chapter 11, is seeking more than $300 million in concessions on top of the $1 billion the pilots kicked in before the bankruptcy. The union has offered $143 million. A strike would likely ground Delta for good, so insiders expect the two sides to shake hands on a deal.

It was the worst-kept secret in TV land: Today Show co-host Katie Couric told her audience on Apr. 5 that she was "listening to her heart" and ditching NBC (GE) to take over as anchor of the CBS Evening News. For CBS (CBS) CEO Leslie Moonves, the 49-year- old Couric represents a chance to spiff up the Tiffany Network's dowdy image with her trademark enthusiasm. Insiders say NBC offered her $20 million to re-up, while CBS will pay her $15 million but spare her the 4 a.m. wake-up calls. Couric's defection could be a blow to Today, which mints an estimated $250 million a year in profit. But is NBC really sorry to see her go? This could be the perfect time to liven up the show with a fresh face, and the network has been trying out substitutes to sit alongside Matt Lauer. The top choice appears to be an outsider: Meredith Vieira, co-host of ABC's The View. She'd come cheap, a mere $12 million, but she hasn't signed yet.


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