In Business This Week: Headliner
Patrick J. Martin: Into the Fire at StorageTek
Give Patrick Martin credit: He's got guts. Martin, who on Tuesday was named chairman and CEO of Storage Technology, is joining a company that is on the ropes.
StorageTek, which makes disks and tapes for warehousing corporate computer data, has posted losses for two straight quarters and has cut 15% of its workforce so far this year. It's losing out to competitors such as IBM, which just a year ago was a key reseller that accounted for nearly 20% of revenues. StorageTek's main business, storage tapes for mainframes, is slowing. And its next big growth area, storage disks, is dominated by EMC, says A.G. Edwards analyst Shebly Seyrafi.
So why does Martin want the job? "The ability to run your own company is just so appealing," says the 23-year veteran of Xerox, where he was last a senior vice-president. "It certainly does have some challenges," Martin admits. He replaces David Weiss, who offered to quit in February when the Louisville (Colo.) company's problems worsened.By Jim Kerstetter in San Mateo, Calif.; Edited by Anne NewmanReturn to top
Northwest's Daunting Price Tag
With only a few weeks to go before antitrust cops could clear the takeover of US Airways by UAL, the world's largest airline, rival AMR is feeling the heat to ink a deal with No. 4 carrier Northwest Airlines. But at the price Northwest is asking, don't expect news right away. AMR, the parent of American Airlines, first approached Northwest about a merger in late May, shortly after UAL unveiled its acquisition plan. The Justice Dept. could clear UAL's deal in mid-August, unless American comes up with its own pact, which could delay the feds while they weigh both transactions. Yet American and Northwest are miles apart: American has reportedly offered $3.7 billion, or $44 a share. And Northwest? It wants $100 each.Edited by Anne NewmanReturn to top
What Is Daimler Thinking?
No wonder DaimlerChrysler shareholders are puzzled. On July 9, the company admitted it may move its investor and public relations staffs to the top of New York's famed Chrysler building. The hope is that being closer to Wall Street will help the auto maker win favor with shareholders, whose stock has lost about half its value since early 1999. But news reports said DaimlerChrysler would pay twice the going rate in Manhattan--and spend another $5 million remodeling the famed Cloud Club restaurant. The prospect of swanky new digs comes amid major cost-cutting at the home offices in Stuttgart and Auburn Hills, Mich. Union leaders in Germany fear 1,000 job cuts. A company spokesman says nothing has been decided, but adds, "It's not about employees, it's more about creative cost reductions."Edited by Anne NewmanReturn to top
A Big Bombshell from Rite Aid
Rite Aid has answered two of investors' biggest questions. On July 12, the drugstore chain said it was selling its drug benefit management unit, PCS Health Systems, to health management company Advance Paradigm for $1 billion. A day earlier, Rite Aid reported restated earnings for the past few years that revealed 1998 and 1999 results were inflated by a total of $1 billion. That accounting led former CEO Martin Grass to resign last year. "The magnitude of the restatement is numbing," says Midwest Research analyst Eric Bosshard.Edited by Anne NewmanReturn to top