In Business This Week: Headliner
John Reed: Hasta La Visa
In what may be a step toward severing relations between Citigroup and Visa, Citi co-CEO John Reed is quitting the U.S. and international boards of the credit-card association. Citi, the top card issuer, could wind up only putting out cards with the MasterCard logo.
The move is part of a long battle by Reed to establish Citi as a brand name, an effort he feels has been frustrated by Visa's aggressive marketing. "It goes back quite a ways," says David Berry, research director at investment bank Keefe, Bruyette & Woods. "John Reed has the view that Citi will be another great four-letter word like Nike or Coke." Citi accounts for nearly 17% of all Visa and MasterCard business, says the Nilson Report. Reed's goal: to put card associations' names on the back of the plastic and keep Citi's on the front.
Reed's role in credit-card policy belies talk that he will play a smaller part at Citigroup, the behemoth created by the '98 Citicorp-Travelers merger. "John has been very involved," says Berry. "Any presumption to the contrary is silly."EDITED BY KELLEY HOLLANDReturn to top
Cisco's New Sidekick: Motorola
A YEAR AGO, MOTOROLA WAS REELING. It was losing contracts in the digital cellular transmission business, and its cellular-phone business was sagging. But in 1999, things are looking up. The cell-phone business is rebounding, and Motorola's cost-cutting plan is about $250 million ahead of schedule. On Feb. 8, CEO Christopher Galvin announced a deal with Cisco Systems to build the world's largest wireless Internet system. The two plan to invest more than $1 billion to create a system to transmit voice, video, and data to cell phones and laptop computers. Wall Street is pleased. Says Warburg Dillon Read analyst Jeffrey Schlesinger: "It's the best card he could have played."EDITED BY KELLEY HOLLANDReturn to top
SBC Makes a Long-Distance Deal
SBC COMMUNICATIONS IS ON THE PROWL AGAIN. On Feb. 8, the San Antonio Baby Bell said it would buy up to 10% of Williams Companies' telecom division for about $500 million. Williams will carry SBC's long-distance traffic at favorable prices once SBC wins approval to enter the market--a decision expected by the end of 1999. Williams, about two-thirds of the way toward completing a nationwide fiber-optic network, is assured of volume when it begins connecting the No. 2 local phone company's customers to its system.EDITED BY KELLEY HOLLANDReturn to top
SmithKline Pulls Way Back
SOUND THE RETREAT. British drug giant SmithKline Beecham's five-year expansion stopped on Feb. 9 when CEO Jan Leschly said he would sell two key U.S. businesses, cut 3,000 jobs, and close 67 factories by 2002. Clinical Laboratories, acquired for $2.3 billion, will be sold to Quest Diagnostics for $1.03 billion in cash and a 29.5% equity stake in the expanded group. Diversified Pharmaceuticals Services, bought for $2.5 billion, will go to Express Scripts for $700 million. Leschly, who led 1998's failed merger try with Glaxo Wellcome, denies rumors the revamp may reignite talks. But at this rate, going solo may not work.EDITED BY KELLEY HOLLANDReturn to top