In Business This Week: HEADLINER
ABE GOSMAN: QUEASY OVER LA QUINTA
Investors loved riding along with real estate magnate Abraham Gosman as he made a $480 million personal fortune as a major owner of nursing homes. Now, as the 68-year-old Boston dealmaker moves to budget hotels, investors aren't so sure they have the stomach for the trip. On Jan. 4, Gosman's Meditrust, the nation's biggest health-care real estate investment trust, paid $3 billion to buy La Quinta Inns. And over the next few trading days, selling drove down the share price by 5%. It closed on Jan. 7 at 34 11/16. Suddenly, says Sutro & Co. analyst Craig Silvers, "a boring, reliable REIT became much more volatile."
Gosman dismisses the initial drop and says La QuintawillboostMedi- trust's cash flow by 15%. But La Quinta, with 270 hotelsin28 states, is viewed as more vulnerable to recessions than Meditrust's nursing homes. Another source of investor anxiety: La Quinta's largest shareholder, the Bass family, opted for cash for its shares instead of Meditrust stock.
Even so, Gosman still has a strong record. Meditrust's earnings grew by more than 20% since 1996, vs. about 15% for his peers.EDITED BY PAT WECHSLER By Geoffrey SmithReturn to top
BOEING HITS AN AIR POCKET
AIRBUS INDUSTRIE AND BOEING continue their dogfight for new airplane orders. The latest figures from Airbus show the European consortium gaining altitude. Airbus added 460 new orders during 1997, amounting to 45% of orders placed during the year. Aerospace analyst Peter Jacobs of Ragen MacKenzie says Airbus was more aggressive in pricing during the past year after Boeing blew away the European manufacturer with 762 new orders in 1996, more than double what Airbus logged. Boeing is expected to announce on Jan. 12 that it reeled in 560 new orders during 1997, which amounts to 15% fewer new orders than it snagged in the prior year.EDITED BY PAT WECHSLERReturn to top
A MR. FIX-IT FOR ZENITH?
DESPERATE FOR SOMEONE TO halt its bleeding, Zenith Electronics hired Robert Dangremond on Jan. 6 as acting CFO. Zenith hasn't turned a full-year profit since 1988. Its stock hit a 52-week low of 5 1/8 on Dec. 29 as credit firms downgraded its paper amid concerns that South Korean majority owner, LG Electronics, might pull out. Dangremond, of restructuring consultants Jay Alix & Associates in New York, has a history of righting wayward companies. Zenith is banking on HDTV and digital set-top boxes, and its picture is snowy. On Jan. 7 the stock closed at 6 3/16.EDITED BY PAT WECHSLERReturn to top
A BIG BLUE GAME OF MUSICAL CHAIRS
THE HEAD OF IBM'S $16 BILLION computer services business, Dennie Welsh, is taking a medical leave, prompting a reshuffling of the brass in Big Blue's PC, mainframe, and industry-specific sales organizations. Welsh, 55, helped move IBM into the computer services business six years ago and was key in turning it into one of the fastest-growing units, with 20% revenue increases each quarter over the past five years. Meanwhile, Samuel Palmisano, 46, who was running IBM's PC business, will take over as head of IBM's services group.EDITED BY PAT WECHSLERReturn to top