Abigail Johnson, daughter of Fidelity Investments Chairman and CEO Edward "Ned" Johnson III, has been seen as her dad's successor since joining the firm in 1988. So it was a bit of a surprise when the mutual-fund giant announced on May 2 that the younger Johnson, 43, was being immediately transferred from running Fidelity's high-profile mutual-fund division to a more mundane unit that administers retirement, payroll, and other services for corporate clients.
A demotion? Hardly -- Abby Johnson isn't being sent to a backwater. While less glamorous than investments, the processing and administration unit is the top provider of 401(k)s and similar savings plans in Corporate America. It not only generates 43% of Fidelity's assets under management but also is Fidelity's fastest-growing business. The move will broaden Johnson's experience -- a must since her next job is likely to be the top spot when Ned, 74, retires.
IBM didn't wait long to let the other shoe drop. After the market closed on May 4, the tech giant announced a pretax write-off of between $1.3 billion and $1.7 billion to reduce its workforce by 3%, or about 10,000 to 13,000 jobs. Most of the cuts will come in Europe. IBM had telegraphed the restructuring at the same time it reported disappointing first-quarter earnings on Apr. 14. Revenues grew just 3%, to $22.9 billion, while earnings per share of 85 cents missed Wall Street's estimates by a nickel. Big Blue was hurt by weak demand for services and mainframes in March, especially in Europe.
Rivals Boeing (BA) and Lockheed Martin (LMT) have put aside their bickering over government rocket launches and formed a joint venture. The companies have been at odds since the disclosure that Boeing employees had thousands of pages of confidential Lockheed Martin documents, but the companies are dropping their lawsuits. The government has wanted two viable launch companies to assure access to space, but the shrunken launch market prompted the U.S. Air Force to prop up the companies by allocating launches, rather than holding cutthroat competitions. The companies estimate Uncle Sam could save $150 million a year from the consolidation. How much the two rivals save will depend on how well they recover consolidation costs. Their commercial launch operations will stay separate.
Time Warner (TWX) disclosed on May 2 that computer backup tapes with the names and Social Security numbers of current and past employees are missing. There is no evidence that the data have been misused, but the company referred the matter to U.S. Secret Service investigators. Time Warner joins other companies, including ChoicePoint (CPS), Lexis/Nexis, Polo Ralph Lauren (RL), and DSW Shoes, that have reported missing or stolen customer or employee data. In Time Warner's case, Boston-based data storage company Iron Mountain (IRM) picked up a container of tapes in New York on Mar. 22, but the box failed to show up later that day at a secure storage facility in New Jersey. Iron Mountain chalked it up to human error, while noting its 99.99% accuracy rate.
Federal authorities are cracking down on what the Securities & Exchange Commission dubs "vicemail," the latest twist in scams to pump and dump micro-cap stocks. On May 3, the SEC charged Michael O'Grady, a Georgia telemarketing executive, and two companies he controls with broadcasting thousands of phony "wrong number" stock tip voicemails. The messages were crafted to sound as if the caller were passing along a tip on a hot stock to a friend and dialed the number by mistake. O'Grady and the two companies settled the charges without admitting or denying wrongdoing.
-- Troubled insurance broker Marsh & McLennan's (MMC) first-quarter profits fell 70%.
-- Morgan Stanley (MWD) named lawyer David Heleniak vice-chairman.
-- US Airways Group (USAIRQ) took a $91 million charge to terminate pension plans.
Shares of MetLife (MET) rose 12.1%, to $43.55, on May 4, after it reported a 65% gain in first-quarter earnings, beating Street expectations. The insurer, which profited from higher fees, raised its annual forecast, citing its purchase of Travelers Life & Annuity.