When Blockbuster Inc. announced in July that it would deliver movies to consumers over a high-speed communications network, the only surprise was its lead partner. Cable operator? Phone company? Satellite service? Nope. It was Enron Corp., the nation's largest trader of gas and electricity.
What's an energy company doing in the movie distribution business? Using the Web to expand far beyond its traditional businesses, that's what. By providing instant connections to more buyers and sellers worldwide, the Web is helping Enron turn the energy business upside down--and steal a march on rivals like Dynegy Inc. in Houston and Williams Cos. in Tulsa. "Who else has built a market that is doing a billion dollars worth of transactions a day?" asks Gary Hamel, chairman of the consulting firm Strategos.
Enron's restless president, Jeffrey K. Skilling, is using the Web to plunge into even more new product categories. Enron aims to use its video network, for instance, to spur real-time trading of bandwidth over its Web system. Within five years, figures Salomon Smith Barney analyst Raymond C. Niles, earnings from the bandwidth business could surpass what Enron earns in its core wholesale energy business, which accounted for two-thirds of its $2 billion in operating profits last year.
Even with bandwith trading still in its infancy, Enron is racing to add other businesses via the Web. In August, it launched Clickpaper.com to buy and sell paper. And Enron Net Works, a new unit, is sniffing out fresh e-commerce opportunities. Possible targets: chemicals, data storage--even coffee, cocoa, and sugar.
Is Enron moving too far afield? It will face fierce competition from dot-com sites such as Altra Energy and telecom rivals like Global Crossing Ltd. But Skilling insists that Enron's Web weapons can upset the incumbents. "There are lots of markets that are really, really inefficient," he says. If Skilling has his way, they won't be for long.