Paul Allen's wired world is looking increasingly tangled. On Oct. 22, Allen's majority-owned Charter Communications (CHTR) put Chief Operating Officer David Barford on leave, pending the outcome of a grand jury investigation into inflated subscriber counts and accounting irregularities. That sent Charter shares down 31%, to $1.20; back in December, the company traded at $16.
The share slide, coming after months of shareholder lawsuits, has slashed the value of Allen's stake in the nation's fourth-largest cable company by $7 billion over the past year. A slipping subscriber count recently led St. Louis-based Charter to cut revenue and cash-flow forecasts as customers defect to satellite services. Charter expects to report $1.4 billion in negative cash flow this year, but it says it has enough cash until things turn around in late 2003. The company is also cooperating with the grand jury. Insiders say Allen is holding off on plans to take Charter private, worried that a low bid would incite a new round of shareholder lawsuits. AOL Time Warner (AOL) sent a clear signal to federal investigators poring over the advertising deals at its America Online unit: The problems might not be very big ones. Based on its internal review of ad deals, AOL Time Warner said on Oct. 23 that it would restate financial results for the eight quarters ended June 30, 2002, reducing revenues by $190 million. AOL CEO Richard Parsons noted that $190 million represents 1% of AOL's total revenues during that period. AOL Time Warner says no further restatements connected with the ads will be necessary. UAL (UAL) could dodge the bankruptcy bullet after all. The parent of United Airlines has refiled for $1.8 billion in federal loan guarantees needed to pay debt due in November and avoid Chapter 11. Its first application, which included $520 million in pilot pay cuts over three years, was rejected in August. This time, UAL's unions agreed to $5.8 billion in concessions over 51/2 years. The unions still must hammer out details, but the Air Transportation Stabilization Board has signaled that the wage cuts and the savings from firing 1,250 employees will be enough. The semiconductor sector seems to be headed south once again. On Oct. 21, Dallas chipmaker Texas Instruments (TXN) said new orders declined 7% in the third quarter, after a spring surge. The slowdown caused lower-than-expected quarterly earnings of $188 million for TI, which is cutting 500 jobs. With orders weakening, TI expects that sales will drop 10% in the fourth quarter and profits will evaporate. TI says customers continue to ante up for chips for new wireless phones, but demand for parts for PCs, notebooks, servers, and peripherals has tanked. On Oct. 21, The Financial Accounting Standards Board proposed switching from the current rules-based system to the principles-based accounting used by most of the world. A change from precise accounting rules to the broad principles that define good accounting may be the right step to take in the wake of recent corporate scandals. Under the current system, critics maintain, companies often concoct elaborate ways to get around accounting rules instead of basing their decisions on sound underlying principles. For example, companies that own a certain percentage of another business must consolidate the two financial statements. But if they own just a fraction less, they don't. That rule allows accountants to treat the two stakes entirely differently, though they're nearly equal in size. Proponents of a principles-based approach say the shift will put the onus on accountants and companies to explain clearly the reasons why they have chosen a particular accounting treatment. Martha Stewart Living Omnimedia (MSO) is a lot closer to finding out whether the company can survive without its founder. The Securities & Exchange Commission is recommending civil charges--and a criminal probe by the Justice Dept. is continuing into allegations that she illegally traded shares of ImClone Systems and obstructed justice. Even if Stewart is slapped with civil and criminal charges, she could still carry on as CEO of Martha Stewart Living Omnimedia until those cases are resolved, according to securities lawyers. It wouldn't be until a settlement is reached that the SEC would be likely to bar her from acting as CEO. And if she's convicted on criminal charges, her sentencing would include a stipulation that she step down, lawyers say. -- George Soros will invest $150 million in Qwest Communications' (Q) telephone-book unit.
-- An FDA panel on Oct. 22 recommended approval of J&J's (JNJ) new drug-coated stent.
-- Dynegy (DYN) hired former Duke Energy (DUK) exec Bruce Williamson as its new CEO. Where's the Prozac? Eli Lilly (LLY) shares skidded 8% to $58.09 on Oct. 23 after the Indianapolis drugmaker warned fourth-quarter profits would fall 3% to 5% below forecasts. The reason? Generic competition is hurting its brand-name antidepressant and slowing sales of its other big medicines.