In Business This Week: Headliner
William Larson: I-Way Fatality
Running security software specialist Network Associates has proven as vexing as fighting hackers. On Dec. 26, the same day Network Associates warned of a disastrous fourth quarter, Chairman William Larson said he was stepping down. He will also give up his CEO title when a replacement is found. Gone with him are President Peter Watkins and Chief Financial Officer Prabhat Goyal. Board member Edwin Harper will take over as chairman.
Larson blamed major problems with sales distribution channels for the earnings surprise. As a result, he was forced to change accounting methods. Revenues, once expected to hit $250 million, will be about $65 million, while net losses will total $140 million. Even by the company's old accounting, quarterly revenues would have barely topped $200 million.
Wall Street is apoplectic. NA shares fell $8, or nearly 70%, on Dec. 27. Larson said he started looking for a replacement two months ago. Looks like the fourth-quarter gave him the final shove.By Jim Kerstetter in San Mateo; Edited by Monica RomanReturn to top
A Withdrawal from Reimported Drugs
Trying to show seniors that lawmakers were serious about taming prescription drug costs, Congress passed a bill this fall that would allow drugs to be reimported from countries such as Canada, where prices are lower. But now the Clinton Administration has put the kibosh on the plan. Because of "serious flaws and loopholes" in the bill, the U.S. Health Dept. can't certify that the plan will result in safe and cheaper drugs. Thus, wrote Health Secretary Donna Shalala to President Clinton on Dec. 26, it can't implement the measure. The problems she singled out: The legislation gives drug companies the power to block importation of cheaper drugs, and it automatically ends after five years.Edited by Monica RomanReturn to top
Milk Is Also the Real Thing
Coca-Cola plans to begin testing five or more new milk concoctions designed to attract drinkers age 12 and younger. The campaign, dubbed "Project Mother," is aimed at boosting the Atlanta beverage maker's flattening sales, now dominated by soft drinks. For Coke, the key is winning over mothers--not their children. That's why the company has spent the past year talking with nutritionists, pediatricians, and moms. It's looking for the right combination of taste and nutritional value that would persuade parents to substitute a tasty milk-based drink for a soft drink. Don't be surprised if you soon see one of Coke's famed polar bears on TV guzzling a milk drink rather than a cola.Edited by Monica RomanReturn to top
VISX Refocuses Expectations
Some people are tightening their belts by holding on to their eyeglasses. On Dec. 26, Santa Clara (Calif.)-based VISX, the largest maker of laser vision-correction systems, said it would miss fourth-quarter earnings estimates due to the slowing economy. It also added $18 million in reserves to protect against possible nonpayment by customers. Consumers are apparently deferring elective laser surgery, which costs up to $2,500 per eye and isn't typically covered by insurance. Analysts also fret about growing competition and the rise of potentially superior corrective procedures. Worried investors drove shares in VISX, which has annual sales of $233 million, down 26%, to 9 5/16.Edited by Monica RomanReturn to top