Michael Cherkasky, 54, is taking some tough steps to resurrect Marsh & McLennan Cos. (MMC) from the massive scandal over bid-rigging and kickbacks. On Nov. 9, the new President and CEO announced that the world's largest insurance broker would cut 3,000 jobs, or 5% of the workforce, to cope with the aftermath of the investigation by New York Attorney General Eliot Spitzer. Cherkasky was a Spitzer colleague at the Manhattan District Attorney's office who went on to head Marsh Kroll, MMC's risk-consulting unit, before being tapped as CEO.
Cherkasky also announced that Marsh Mac's third-quarter net earnings plunged 94%, to $21 million. He blamed the drop on the need to set aside cash for a settlement and on plunging revenues from the controversial fees that brokers got for channeling business to certain insurers. With those fees now a thing of the past, the next challenge is finding a new business model to maintain the company's once-healthy margins.
Cisco Systems (CSCO) sent a chill through the market on Nov. 9 with a tepid forecast of 1%-to-3% revenue growth for the current quarter, vs. the 3%-to-4% most analysts expected. Its stock fell 6%, to 18.55, on Nov. 10. Since Cisco is a bellwether of tech spending, the news sent NASDAQ down as well. But Cisco's problems may be partly self-inflicted. Sales of its core networking routers have fallen for two straight quarters while rivals such as Juniper Networks (JNPR) increase their share. "Cisco is getting more aggressive on price," says rival Steve Kaufman of Avici Systems (AVCI). "But I don't see it getting better for them anytime soon."
It was a busy week for Roy Disney on the governance front. The former Walt Disney (DIS) director and critic of CEO Michael Eisner won approval from a Delaware court to appeal a lower court ruling that blocked him from releasing board deliberations in determining Eisner's pay package -- a key part of his strategy to force out the longtime Disney chief. Meanwhile, Disney and fellow dissident and financial adviser Stanley Gold are marketing a new $1.25 billion corporate governance fund aimed at investing in troubled companies. The fund would then push for improved board oversight and better management. The Shamrock Activist Value Fund said in an SEC filing that it had received $220 million from investors so far.
The Federal Communications Commission took a major step to encourage phone calling over the Internet. On Nov. 9 it said Net phone service provided by the likes of Vonage Holdings and cable companies will be subject to lighter federal, not state, regulation. Without a patchwork of rules from 50 states, Web-phone providers may have fewer costs. If traditional telcos such as the Bells design their voice-over-Internet services like Vonage, then they will get light regulation, too. But the FCC hasn't decided if, or how, Net providers will offer 911 service, pay subsidies guaranteeing all users affordable phone service, and cover their tab to other carriers to help place their calls.
For tech companies, the pressure to keep investors happy is on. On Nov. 10, Intel (INTC) said it will double its quarterly dividend to 8 cents a share beginning Mar. 1. The chip giant also authorized the buyback of 500 million shares of stock, worth $11.4 billion at today's prices. The move comes a day after Microsoft (MSFT) investors approved a plan for the software giant to pay out a special $32 billion one-time dividend. Tech companies have come under increasing criticism when they pile up large cash hoards, rather than returning funds to investors. Execs, frustrated with water-treading stock prices, are beginning to see higher dividends as a way to attract new investors.
-- MGM Mirage (MGG) is building a $4 billion city/resort on the Las Vegas strip.
-- IBM's (IBM) Blue Gene/L came in first in a closely watched biannual ranking of the world's fastest computers.
-- Starbucks' (SBUX) 2005 sales forecast fell below analysts expectations for the year.
Anthem (ATH) moved closer to being the largest U.S. health insurer on Nov. 9, after California regulators O.K.'d its $16.4 billion deal for WellPoint Health Networks (WLP). The two will spend $265 million to improve health care in the state. Anthem shares rose 5.5% to close at $91.23.