1. Food for Thought
A big merger has
licking their chops.
This week, the networking gearmakers cooked up a $13.4 billion trans-Atlantic tie-up. The deal will create a giant telecom supplier with $36 billion in market capitalization and more than 80,000 workers, even after the obligatory mass firings.
Of course, both companies were walloped in the collapse of the telecom bubble, and big telcos like AT&T (T) - Get Free Report continue to trim spending amid a consolidation push. But you'd never know that to listen to Lucent and Alcatel.
"We share a vision of where networks are going; a commitment to world-class customer service; and a highly skilled, motivated and global workforce," Alcatel CEO Serge Tchuruk enthuses. "The strategic logic driving this transaction is compelling," adds Lucent chief Pat Russo.
The sides haven't gotten around to naming the new company, but they know it will be based in Paris. They also know it will be headed by Russo, who doesn't speak French.
If that sounds like communication breakdown waiting to happen, it's not the only one. On a conference call Monday, investors wondered about the companies' aborted 2001 merger talks. Why, they asked, did the Lucent-Alcatel deal come together now, after it failed to click five years ago?
Here too, Tchuruk was quick to share his vision.
"The fit between the people was perhaps not as good as one would have hoped," Tchuruk explained. "As we say in France ... the mayonnaise did not hold."
Yes, if anyone can cut the mustard in the telecom business, it's these guys.
Dumb-o-Meter score: 95. Why put the new company in Paris? "Taxes had kind of a lot to do" with it, Lucent CFO Frank D'Amelio says -- a recent $861 million U.S. tax refund notwithstanding.
To view Colin Barr's video take on Lucent's entry in Five Dumbest this week, click here
Arrows From Apple
2. Basic Training
found a new way to give
the boot this week.
Steve Jobs & Co. rolled out some software that will allow MacIntoshes using Intel (INTC) - Get Free Report chips to run Windows XP. The software, tentatively called Boot Camp, will be part of Apple's next operating system and is available for download now.
Apple is hoping to expand its minuscule share of the personal-computer market by converting Windows users. But the Cupertino, Calif., company took pains to show it's not embracing Microsoft, whose buggy software resides on most PCs.
"Apple has no desire or plan to sell or support Windows, but many customers have expressed their interest to run Windows on Apple's superior hardware now that we use Intel processors," sniffs Philip Schiller, Apple's senior vice president of Worldwide Product Marketing.
Schiller's not the only one holding his nose. The Boot Camp download site takes shots at Windows, too.
"Macs use an ultra-modern industry standard technology called EFI to handle booting," Apple explains. "Sadly, Windows XP, and even the upcoming Vista, are stuck in the 1980s with old-fashioned BIOS. But with Boot Camp, the Mac can operate smoothly in both centuries."
The time-warp talk doesn't faze Redmond, Wash.-based Microsoft, though. "Windows is a great operating system," Microsoft claims.
It makes a great target for Apple's barbs, that's for sure.
Dumb-o-Meter score: 91. "Boot Camp will burn a CD of all the required drivers for Windows so you don't have to scrounge around the Internet looking for them," the Boot Camp site adds.
Out of Pocket
has another mess on its hands.
The Whitehouse Station, N.J., pharmaceuticals giant raised first-quarter guidance this week thanks to strong sales of cholesterol-fighting drug Zocor. But it also suffered its second loss in the Vioxx saga.
An Atlantic City jury said the arthritis drug was a "substantial factor" in the heart attack of John McDarby. The jury awarded $4.5 million in compensatory damages to the 77-year-old, who use a wheelchair, and his wife. Merck contends it didn't withhold or misrepresent data about Vioxx's safety, but it could face a punitive damage tab as high as $22 million on that issue. Merck withdrew Vioxx in September 2004 after research pointed to heart-attack risk.
McDarby lawyer Robert Gordon called Wednesday's verdict "a victory for 100,000 Americans who had heart attacks from Vioxx," The Associated Press reports.
One American who isn't participating in the victory is a plaintiff whose case was tried along with McDarby's. The jury ruled that 60-year-old Thomas Cona of New Jersey isn't due compensatory damages, in part because medical records showed only seven months of Vioxx use.
On the bright side, the jury awarded Cona $45 to cover the out-of-pocket cost of Vioxx, plus attorneys fees. And hey, that's just fine with lawyer Mark Lanier.
"My client was never in it for the money," Lanier says of Cona. "He was in it for the truth."
No, the people who sue big companies are never in it for the money.
Dumb-o-Meter score: 88. McDarby's lawyers aren't in it for the money either. "You can send a very soft message, a slap on the wrist message," one lawyer told jurors considering punitive damages. "I urge you to consider a loud, clear, decisive and convincing message to Merck and I urge you to submit it in language they'll understand."
Mother of All Excuses
4. April Showers
The folks at
Federated Department Stores
are nothing if not forward-thinking.
The Cincinnati-based operator of the Macy's and Bloomingdale's chains scored a coup this week by agreeing to sell Martha Stewart Living (MSO) housewares. There won't be any actual goods on the shelves till next fall. But by then, CEO Terry Lundgren insists, the Martha-styled bedsheets, towels and dishes "will create an enhanced shopping experience and attract new customers to Macy's."
The enhanced shopping experience can't come a moment too soon, judging from Federated's latest sales figures. Like many of its peers, Federated posted soft same-store sales for March.
As usual, retailers from Wal-Mart (WMT) - Get Free Report on down to J.C. Penney (JCP) - Get Free Report were quick to blame factors beyond their control for the slowdown. There's the unheard-of cool spring weather, of course. And then there's the revelation that Easter falls in April this year -- three weeks later than last year.
But here again, Federated shows admirable foresight. Where the Wal-Marts of the world want to carp about the timing of Easter, Federated is whining way ahead. The company said it expects April same-store sales to drop around 3% from a year ago, "reflecting a late Mother's Day."
We'll hold off on the flowers for now.
Dumb-o-Meter score: 85. Hopefully the timing of July 4 won't prove inconvenient for Federated.
5. Falling Westar
got another shiner this week.
Former chief David Wittig was sentenced Wednesday to 18 years in prison. Prosecutors say Wittig sought to loot the energy company of $3.3 billion through improper use of company aircraft and unapproved pay raises, among other things.
Wittig was convicted last September on 39 counts of conspiracy, fraud and money laundering. He was jailed Jan. 17 after prosecutors argued that he had transferred assets to his wife to avoid forfeiting them to the government, the
Kansas City Business Journal
The sentencing came eight years after the Topeka, Kan.-based company, then called Western Resources, made Wittig its CEO. At the time, Wittig was full of praise for his predecessor, John E. Hayes Jr., and for the organization Wittig would soon fleece.
"Under John's tenure, the company has grown stronger, larger and smarter," Wittig warbles in a May 11, 1998, press release.
Hiring Wittig looks none too smart now, though in retrospect maybe the warning signs were there all along. Before joining Western Resources, Wittig "spent six years at Salomon Brothers," the company said in the 1998 press release. Western adds that Wittig previously "spent 12 years with Kidder, Peabody & Co.," where at age 29 "he was one of the youngest partners in the history of the firm."
Of course, Salomon's name was so tarnished that
later dropped it for the memorable Citigroup Global Markets. For its part, Kidder collapsed in the 1990s, blaming trading mishaps by the immortal Joseph Jett.
reports, Wittig's lawyers insist in a recent court filing that the bad-guy rap is overdone.
"While in federal custody," they claim, "Wittig has helped a released inmate find 'local opportunities' and has been 'positive and helpful to other inmates.'" The lawyers, arguing for a 10-year sentence, go on to call Wittig a "model detainee."
Yes, just the qualities we're looking for in a CEO.
Dumb-o-Meter score: 79. Surprisingly, Wittig's lawyer said he was "very disappointed" in the 18-year, no-parole federal sentence.
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