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Icahn Calling


It's likely a CEO's worst nightmare: Carl Icahn on Line 1. And Motorola (MOT) CEO Edward Zander could be getting that call soon. On Jan. 30 the billionaire investor said he has taken a 1.39% stake in the cell-phone maker and wants a board seat. Proxy battles have become Icahn's weapon of choice: In 2005 he forced himself and two allies onto the Blockbuster (BBI) board, and last year he was named chairman of ImClone Systems (IMCL) after a proxy fight.

A notorious bottom-fisher, Icahn no doubt sees value in Motorola, whose stock has faded 30% in the past year and picked up 6% after Icahn filed his stock position with the SEC. What he might do on the inside at Motorola is unclear, especially since it's already on a cost-cutting tear. But Motorola, which says it will consider Icahn's request before its still-unscheduled annual meeting, had best take him seriously. When Icahn starts dialing, the calls usually get more threatening.

See "Icahn Sets His Sights on Motorola" Look out, Pfizer (PFE)—the French may covet your crown. Is France's Sanofi-Aventis (SNY) mulling a bid for beleaguered U.S. drugmaker Bristol-Myers Squibb (BMY) to create the world's largest pharmaceutical outfit, with $56 billion in sales? The two have long been seen as natural partners thanks to their marketing alliance for blockbuster blood-thinning drug Plavix. Rumors of a deal in French newsletter La Lettre de l'Expansion on Jan. 29 fueled furious trading in both stocks, with Bristol stock rising 9.8% by Jan. 31. The companies aren't commenting.

See "Is Sanofi-Aventis after Bristol-Myers?" "There is no better person in the world to run Dell at this time than the man who created" the company, said Samuel Nunn Jr., lead director of Dell's board, in a statement on Jan. 31. Founder and Chairman Michael Dell is stepping in to run the troubled company again, replacing CEO Kevin Rollins, who resigned.

With a stroke of his pen, President George W. Bush tightened control over most federal agencies. The New York Times reported on Jan. 30 that a Jan. 18 White House directive requires regulators to clear policy and industry guidance with a new Presidential gatekeeper. Independent agencies like the Fed and SEC aren't covered by the order. In the meantime, the Senate tried to raise the $5.15 hourly minimum wage by $2.10 an hour. But it couldn't do it without throwing in $8 billion in tax breaks for the small businesses footing the increase. The tax package complicates negotiations with the House, where Democrats are throwing a fit over the tax cuts.

US Airways (LCC) hostile bid for Delta Air Lines (DALRQ) has been grounded. On Jan. 31 the Tempe (Ariz.) carrier announced it was abandoning its $9.75 billion offer shortly after Delta's creditors' committee said it would instead back the plan developed by management to exit bankruptcy as an independent. But don't expect Delta to fly solo for too long. Analysts still believe that once it leaves Chapter 11 later this year, it could pursue a wingman it prefers, most likely Northwest Airlines (NWACQ).

The U.S. economy trounced expectations by about half a percent, growing at a 3.5% annual rate in the fourth quarter. Buoyant consumer spending and a narrower trade gap offset another big drop in homebuilding. The surprise on trade: Exports jumped at a 10% annual rate while imports slipped 3%. The Commerce Dept.'s Jan. 31 advance report, which is subject to revision, terminated all talk of a rate cut by the Fed. Later in the day, Fed rate-setters stood pat at 5.25%.

The Jan. 22 ousting of Citigroup (C) wealth-management chief Todd Thomson by CEO Chuck Prince was followed by a Wall Street Journal report that Thomson had been let go for spending lavishly and for putting too much promotional money behind programs and events involving CNBC anchor and BusinessWeek columnist Maria Bartiromo. That led to a round of stories and columns raising ethical questions about Bartiromo's behavior because she appeared at events sponsored by Citigroup, a frequent CNBC advertiser, and flew on a company plane. Both Thomson and Bartiromo declined to comment. CNBC, calling Bartiromo "one of the most prolific and well-respected financial journalists in the industry," said she made 46 company-approved appearances in 2006 on behalf of the business news network, three at Citigroup-sponsored events. CNBC said it approved the flights and would reimburse Citigroup at commercial rates. It added that Bartiromo was not compensated for her appearances.

It took more than five years and an investment of $6 billion, but Microsoft's (MSFT) Windows Vista operating system finally debuted for consumers on Jan. 30. Chief Executive Steven Ballmer predicts that initial sales will double those of the previous update, Windows XP, in 2001, and PC makers expect zippier sales. But in the consumer technology sphere, Windows and Microsoft have been edged out on the excitement meter by the likes of MySpace.com, YouTube (GOOG), and Apple's (AAPL) iPhone.

See "Getting the Skinny on Vista Security" Ford (F) is an historic icon in American culture and business, but on Jan. 25 the company made history of another sort by posting its biggest annual loss ever: $12.7 billion in 2006. Much of that went to buyouts for some 38,000 employees and to shutter plants to cope with falling market share. Meantime, Toyota (TM) is poised to pass Ford as No. 2 in U.S. sales this year.

See "The Record Year Ford Hopes to Shake Off" You're on your own now, kid. After housing Kraft Foods (KFT) for nearly 19 years, Altria (MO) announced on Jan. 31 that it would spin off its 89% stake in the packaged-food giant to shareholders on Mar. 30. Altria looks like it'll do just fine as an empty-nester. The company will focus on the Philip Morris cigarette business—its Marlboro is No. 1 worldwide—and benefit from its 29% interest in another former subsidiary, brewer SABMiller (SBMRY). But it may take time for Kraft to find its way. The company has plenty of potential: A half-dozen of its brands boast sales of $1 billion or more. But many seem tired. Earnings before one-time items inched up 3% in 2006, to $3.2 billion, on a less than 1% rise in revenue, to $34.4 billion. CEO Irene Rosenfeld, brought in from PepsiCo's (PEP) Frito-Lay division last June, pledges a turnaround—but warns it won't happen overnight.

See "Kraft: Time to Sink or Swim"


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