In Business This Week: HEADLINER
WILLIAM McGUIRE'S HEADACHE AT UNITED HEALTHCARE
United Healthcare CEO William McGuire seemed immune to managed care's woes. But after a surprise $900 million write-off that quashed its deal to buy Humana, the physician-turned-exec is struggling to regain investor confidence. "Bellwether stocks are not supposed to do this," snaps Merrill Lynch analyst Roberta Walter. She thinks it will take a year of solid earnings to restore the stock, off 34% since the announcement on Aug. 6.
What really peeved investors--and shocked some directors--were problems in what they had been told would be a growth area: enrolling Medicare patients. McGuire admits he underestimated the complexity and cost of the business. And there will be larger-than-expected charges for a planned restructuring. "There's no question about humility," says McGuire.
Apart from the internal problems, one director says there had "certainly been some mixed feelings" about the need to do the Humana deal. McGuire insists the charges were not aimed at sabotaging it, but says United is "better off" cleaning house first.By Richard MelcherReturn to top
BILL GATES'S COURTROOM DRAMA
HERE'S AN ALTERNATIVE TO MONICAGATE FOR TV PUNDITS: How about dissecting Bill Gates's performance on tape when he testifies in the federal antitrust case against Microsoft? On Aug. 11, Judge Thomas Penfield Jackson ordered that court be open to the public--and possibly televised--when Gates and other Microsoft execs testify. Company lawyers are appealing the ruling with the U.S. Court of Appeals for the District of Columbia. Microsoft is proposing that the executive depositions be videotaped while the company and Justice argue over whether the tapes should be aired publicly. Microsoft's move makes it almost certain that the Sept. 8 start date for the trial will be delayed.EDITED BY KELLEY HOLLANDReturn to top
IS BURMA TOO HOT FOR ARCO?
ARCO, ONE OF TWO AMERICAN OIL COMPANIES DOING BUSINESS IN BURMA, said on Aug. 11 that it plans to get out. It says new priorities after its $3.3 billion acquisition of Union Texas Petroleum made it decide not to renew its oil exploration lease. But Simon Billenness, senior analyst at socially responsible investment firm Franklin Research & Development, argues that shareholder pressure to stop doing business with Burma over human rights concerns "simply wore down management." Arco had spent about $50 million on two offshore wells. The move makes Unocal the last big U.S. investor in Burma.EDITED BY KELLEY HOLLANDReturn to top
CHECKFREE TAKES A BAD BOUNCE
SHARES OF CHECKFREE HOLDINGS DROPPED 41% on Aug. 12 after the home-banking service provider warned analysts that fiscal 1999 earnings would be 12 cents-16 cents a share, half what they had expected. CheckFree said subscriber growth in fiscal 1999 will be 4% to 6%, not 8% to 10%. Why the changes? Banks are delaying marketing independent online banking services such as CheckFree while they promote their own Web sites. Also, bank mergers such as the pending combination of Wells Fargo and Norwest are slowing the growth of online banking. Finally, analysts say CheckFree faces intensifying competition from Microsoft and First Data.EDITED BY KELLEY HOLLANDReturn to top