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Granada Group, which won control of leading British hotelier Forte 10 months ago, on Wednesday reaped the fruits of its victory when it posted a 37 percent rise in annual profits to 480 million pounds ($806 million).
Media and leisure group Granada said that it was on target to keep a promise made in the heat of the takeover battle by boosting profits at Forte by over 100 million pounds per annum from the current year.
It said it had already achieved some 40 million pounds in profit improvements at Forte. Such rapid progress lifted the pre-tax, pre-exceptional profits to that 480 million pound figure, topping most share analysts' expectations.
Turnover in the year to end-September grew by 60 percent to 3.82 billion pounds as Granada grafted on Forte's hotel and roadside restaurant businesses.
Total dividend was raised by 11 percent to 13p per share.
"The key has been the speed with which we have been able to move on the Forte businesses," said chairman Gerry Robinson.
Granada took over family-controlled Forte in a 3.9 billion pound deal earlier this year after a bitter bid battle that raged over the Christmas and New Year period 12 months ago.
Analysts were surprised at the lacklustre reaction to Granada's strong results and an upbeat statement in which it said that trading had been encouraging in the first few weeks of its new financial year.
The shares, which had gained in recent days in anticipation of bumper results, slipped 7 1/2p to 885p by mid-afternoon in a generally gloomy market.
"Granada is a cheap stock on fundamentals and is backed by good management," said Greg Feehely of Kleinwort Benson.
Granada, which runs two British commercial television stations and a chain of high street rental stores, continues to reorganise following its acqusition of Forte.
It hopes to complete the sale of a group of top international hotels and the disposal of the Welcome Break chain of British motorway service areas in early 1997.
Analysts expect the hotels to raise a total of around 900 million pounds and the service areas a further 350-400 million pounds. That would help cut net debt from 3.5 billion pounds.
Granada sold the first of the 17 Exclusive hotels on Tuesday when Hong Kong based Mandarin Oriental International Ltd bought London's Hyde Park Hotel for 86 million pounds.
But Robinson said Granada planned to retain its 10.8 percent stake Granada holds in pay television operator British Sky Broadcasting. That investment is worth over one billion pounds.
The largest contribution came from the Restaurants division, which boosted profit before interest and tax by 80 percent to 217 million pounds on turnover which rose over 60 percent to 1.7 billion pounds.
The new Hotels unit contributed 168 million while Media made 163 million, up 17 percent. Profits from the high street rentals arm were marginally higher at 126 million. ($1=.5950 Pound)
| 21 |
A $22 billion deal between British Telecom and MCI Communications Corp. that would create the world's second largest telecoms group looked set to be announced Sunday, sources close to the talks said.
BT said it had scheduled a news conference for 8 a.m. EST Sunday at its Central London headquarters following an earlier announcement that it was in merger talks with MCI Communications Corp.
A spokesman said he could not say what the news conference would be about, only that it would be in connection with recent developments.
Executives from BT and MCI were locked in separate board meetings on opposite sides of the Atlantic Saturday as they and their advisers attempted to stitch together the biggest deal ever in the rapidly expanding telecommunications industry.
MCI, the number two U.S. long-distance phone company, sent shock waves through the global communications industry Friday when it said it was in talks about a takeover by BT.
BT, the dominant player in the British market, has been building its overseas presence in recent years and already has a 20 percent stake in MCI. The two also operate a joint venture known as Concert which serves customers in more than 50 nations.
Analysts are speculating on a price of $40 a share -- valuing MCI at $28 billion and leaving BT with a bill of about $22.1 billion to pay for the remaining 80 percent of MCI.
The deal would be the second largest involving a U.S. company -- topped only by the buyout of RJR Nabisco by Kohlberg Kravis Roberts & Co.
A BT spokesman confirmed that the BT board was meeting over the weekend to consider an anticipated proposal from MCI.
BT's nine-story corporate headquarters was a hive of activity Saturday as bankers, lawyers and advisers worked alongside the BT board. A BT spokesman said that the MCI board was also meeting in Washington.
BT and MCI have both said there are no assurances that an agreement will be reached or that any transaction will be consummated. They have said a further announcement is anticipated before the London stock market opens Monday.
BT had unsuccessful merger talks earlier this year with British rival Cable & Wireless -- a deal which would have created the world's fifth largest telecoms group by revenue.
Any BT/MCI deal would spawn a massive company with a market capitalisation of some $64 billion, just ahead of AT&T Corp -- the leading, but struggling, U.S. phone company. It would still be some way behind Japanese giant NTT Data Corporation -- the world's largest.
Analysts said a merged company would be a good fit in the ultra-competitive U.S. long-distance phone industry where MCI and number three Sprint have been battling AT&T.
Its critical mass would leave it excellently placed to expand into other international markets and new technologies -- MCI possessing the biggest Internet backbone in the U.S.
"This is AT&T Corp's worst nightmare," said consultant Jeffrey Kagan of Kagan Telecom.
AT&T said late Friday it was confident any MCI/BT deal would receive proper scrutiny by the U.S. government.
"We would expect that our government would condition any such merger on the complete and unqualified opening of the telecom market in the United Kingdom," it said.
However, analysts regard the British market as broadly open to competition.
For its part, Britain's Trade and Industry Department (DTI) said Saturday it was too early to say what regulatory hurdles any merger would have to clear.
| 21 |
Glasgow-based Stakis Plc and Saudi billionaire Prince al-Waleed bin Talal are the likely purchasers of the Metropole and Princess hotel chains from Lonrho Plc, analysts said on Wednesday.
British conglomerate Lonrho, in the throes of a demerger, said last month it had received interest from potential buyers of the hotels and shelved plans to float them.
The London daily Financial Times reported on Wednesday that the sale of the chains for more than 650 million pounds ($1 billion) could be completed within the next fortnight. There was no immediate comment from Lonrho on the report.
Stakis, which has some 46 British hotels, has refused to comment on reports it planned to buy the five Metropole properties. But the hotels and casino group remains the clear favourite to clinch a deal.
"It would be an excellent fit for Stakis. It's just the size of the deal that could cause concern," said analyst Fraser Ramzan of Lehman Brothers.
Markets have speculated that Stakis was planning a rights issue to fund the purchase of the Metropole hotels, valued at about 350 million pounds.
The Metropole group comprises five business and conference hotels located in the British cities of London and Birmingham and the seaside towns of Brighton and Blackpool.
Hotelier Millennium & Copthorne, floated in London this year, has effectively ruled itself out of the race. A company spokesman said Millennium had looked at the Metropole hotels but was not in talks to buy them.
Meanwhile. Prince al-Waleed is believed to be negotiating the purchase of the Princess chain, 10 properties of resorts in the United States, the Caribbean and Mexico.
Financial sources in the Gulf told Reuters this month that al-Waleed had exclusive rights to negotiate a deal at a price of $300 million. The prince has major investments in New York's luxury Plaza hotel, the Four Seasons hotel group, in the banking group Citicorp and Disneyland Paris theme park.
The hotel business is in a growth phase as economic recovery on both sides of the Atlantic help drive occupancy rates.
But there have also been a glut of hotel companies coming to Britain's market, with Jarvis Hotels and Thistle following the example of Millennium & Copthorne.
And there are signs of investor indigestion, as witnessed by recent cancellations of stock market floats.
Analysts said investors were now looking much more closely at the merits of individual companies but said they still expected the sector to remain positive into 1997.
"Over the past year, people have become far more discerning about the type of hotel business they become involved in. But that does not mean they are reluctant to invest in the sector," said Greg Feehley of Kleinwort Benson.
And if that is the case, there is also no shortage of property on the market, with British media and leisure group Granada selling 17 luxury hotels in Britain and overseas. The hotels, known as the Exclusive range, were acquired by Granada as part of the 3.9 billion pound takeover of leading British hotelier Forte last January.
American hotel companies ITT Sheraton and Marriott are reportedly among potential purchasers for the chain. A deal is expected to be concluded around the turn of the year.
| 21 |
Shares in British Sky Broadcasting (BSkyB) rose strongly on Monday after the pay television operator cleared a key regulatory hurdle and amid reports it planned to push ahead and launch digital services in Britain next year.
BSkyB shares added 19p to 495-1/2p by early afternoon, reversing a downward pattern which has seen them shed almost two pounds ($3.3) since mid-October.
The rise was fuelled by an announcement from Britain's Office of Fair Trading (OFT) that it had accepted BSkyB's new terms for the supply of its channels to cable operators.
The stock had earlier been boosted by a report in the Financial Times that BSkyB, 40 percent owned by Rupert Murdoch's News Corporation, was poised to order the set-top boxes required to receive its digital satellite services.
"The news flow has been positive and some funds which are underweight in BSkyB have been taking the opportunity to buy," said Anthony de Larrinaga of broker Panmure Gordon, commenting on the price rise.
However, he injected a note of caution.
"We still have to see the performance for dish sales in the run-up to Christmas. The decision to push ahead with digital may be partly a reflection of weaker analogue sales," he added.
The OFT approved BSkyB's revised "rate card" -- setting out the pricing and structure for the supply of satellite channels to cable operators.
"The changes increase the flexibility of cable operators in marketing their services," OFT Director General John Bridgeman said in a statement.
But the cable industry criticised the decision and vowed to continue its fight. One option is to take the issue to the European Commission.
"We fail to see how today's announcement is in the consumers' interest," the Cable Communications Association said in a statement.
BSkyB, which supplies a diet of top-quality sport and Hollywood movies, has more than five million subscribers -- 3.3 million receiving the service via a satellite dish and almost 1.9 million on cable.
BSkyB's shares have fallen from highs in the last two months because of regulatory concerns in Britain and worries over the apparent slow take-up of the digital services of Germany's DF1, in which BSkyB and Kirch Group are partners.
BSkyB has announced plans to launch digital satellite services supplying some 200 channels into Britain late next year but recent reports had suggested that it could delay the launch.
But the Financial Times quoted Murdoch as saying that BSkyB will go ahead with a decoder box concentrating on new channels plus pay-per-view sport and films. A decoder offering access to interactive services such as home shopping would follow later.
"Now I think we will go with a straight simple box and have a second-generation box a year later. How many people really want to do home shopping and banking on their television sets or buy things, we don't know yet," Murdoch was quoted as saying.
($1=.6027 Pound)
| 21 |
A $22 billion takeover of MCI Communciations Corp would mark a spectacular end to Sir Peter Bonfield's first year as chief executive of British Telecommunications Plc.
BT was this weekend locked in talks with MCI, the second largest U.S. long-distance phone company, about buying the 80 percent of MCI it does not own.
The deal, if it can be clinched, would be a major coup for the former computer industry executive who took the helm at BT last January when the company split the roles of chairman and chief executive. Sir Iain Vallance, who had been combining the two roles since 1987, became BT chairman.
Bonfield's appointment was cheered by City commentators when it was announced last November.
The influential Financial Times newspaper described it as "one of the most positive events in the group's history".
The newspaper said the appointment marked "a turning point in BT's transition from public sector utility to competitive services group".
Bonfield, 52, had built a reputation for boosting revenue, curbing costs and international expansion during his 10 years in charge of ICL, the British computer company owned by Japan's Fujitsu Ltd.
"His wide international experience, his dedication to quality management and his in-depth knowledge of the computing services industry will be of particular relevance to BT, as we continue our global expansion," Vallance said when Bonfield moved to BT.
Within a few months of his arrival BT was in talks with British rival Cable & Wireless about a merger that would have created a global telecommunications powerhouse.
Those talks ended unsuccessfully in May. But any MCI/BT deal would be bigger than that one that got away.
Bonfield has said he wants BT to be one of the most successful global telecoms companies 20 or 30 years from now. He believes BT's network of continental partners built up in recent years will allow it to become a true pan-European operator.
He has also targeted Asia-Pacific as a region where BT needs to expand, hence the attempt to do a deal with Cable and Wireless, which is very strong there.
Analysts say the critical mass from an MCI deal would provide the power to drive international expansion.
Bonfield also believes BT must become more responsive to its market. One of MCI's strengths is its reputation as an aggressive and fast-moving company.
He grew up in the small town of Hitchin, north of London, where he went to a local state school. He graduated in engineering from Loughborough University in the English Midlands in 1966.
He began his career with Texas Instruments, working in the field of semiconductors and computers in Europe, the Far East and the United States. He became a divisional director of Texas based in the U.S. before joining ICL in the early 1980s.
He became ICL managing director in 1984 and its chief executive and chairman the following year.
Bonfield, a trim, bearded individual, has an informal manner and a reputation for getting on well with colleagues. A married man, he lists his hobbies as sailing, jogging and music.
| 21 |
British media and leisure firm Pearson, awaiting the arrival of a new chief executive, enjoyed a stock market rally on Wednesday after a trading statement which analysts said contained no nasty surprises.
Pearson shares had gained 25p to 714 1/2p by 1300 GMT as a steady trading statement confounded the pessimists who had pushed the shares down to two-month lows on Tuesday.
Texan Marjorie Scardino will take over as Pearson chief executive from January, becoming the first woman to head one of Britain's top 100 companies.
Scardino, who is moving from the 50-percent Pearson-owned Economist Group, is on record as saying that Pearson's profit performance is not good enough.
Many share analysts say that Pearson has yet to complete its 1990s journey from industrial conglomerate to focused media company and that disposals are likely.
They believe Scardino may sell off the company's merchant banking interests and its Tussauds Group theme park and exhibition unit but they expect her to take her time before beginning to mould the company in her image.
Pearson has a 50 percent stake in London merchant bank Lazard Brothers and nine percent holdings in Lazard Freres in Paris and New York.
The Tussauds portfolio includes London's famous Madame Tussaud's waxwork exhibition and theme parks such as Alton Towers in the UK and Port Aventura in Spain.
There was a sense of relief after Pearson, which has interests ranging from newspaper and book publishing to television, said that trading conditions in the second half of the current year were in line with those of the first six months.
"All in all, it's in line with expectations but that in itself is good as the last few trading updates from the company have been disappointing," said Anthony de Larrinaga of brokers Panmure Gordon.
Pearson said that total video retuning costs associated with the launch of the Channel 5 terrestrial television channel next March would rise to around 150 million pounds ($250 million).
This is almost treble the sum initially earmarked for dealing with video recorders affected by interference from the new channel's signal. But it is below the figure quoted in some recent media reports.
Channel 5 has recently been awarded an extra frequency to boost its coverage to 80 percent of the country and Pearson said its business plan showed significantly higher rates of return than in the original bid.
Pearson said the retuning costs and a major film deal with Fox would come out of the 300 million pound original funding agreed by the Channel 5 shareholders. The other shareholders are Britain's United News & Media, U.S. investment firm Warburg Pincus and Luxembourg broadcast group CLT.
This year's losses from Mindscape, Pearson's ailing U.S. consumer software unit, should be in line with earlier forecasts of around 46 million pounds. Pearson also saw no real impact on its 1996 profits from the current strength of sterling.
| 21 |
A $22 billion deal between British Telecom Plc and MCI Communications Corp that would create the world's second largest telecoms group looked set to be announced on Sunday, sources close to the talks said.
BT said it had scheduled a news conference for 1300 GMT on Sunday at its Central London headquarters following an earlier announcement that it was in merger talks with MCI Communications Corp.
A spokesman said he could not say what the news conference would be about, only that it would be in connection with recent developments.
Executives from BT and MCI were locked in separate board meetings on opposite sides of the Atlantic on Saturday as they and their advisers attempted to stitch together the biggest deal ever in the rapidly expanding telecommunications industry.
MCI, the number two U.S. long-distance phone company, sent shock waves through the global communications industry on Friday when it said it was in talks about a takeover by BT.
BT, the dominant player in the British market, has been building its overseas presence in recent years and already has a 20 percent stake in MCI. The two also operate a joint venture known as Concert which serves customers in more than 50 nations.
Analysts are speculating on a price of $40 a share -- valuing MCI at $28 billion and leaving BT with a bill of about $22.1 billion to pay for the remaining 80 percent of MCI.
The deal would be the second largest involving a U.S. company -- topped only by the buyout of RJR Nabisco by Kohlberg Kravis Roberts & Co.
A BT spokesman confirmed that the BT board was meeting over the weekend to consider an anticipated proposal from MCI.
BT's nine-storey corporate headquarters was a hive of activity on Saturday as bankers, lawyers and advisers worked alongside the BT board. A BT spokesman said that the MCI board was also meeting in Washington.
BT and MCI have both said there are no assurances that an agreement will be reached or that any transaction will be consummated. They have said a further announcement is anticipated before the London stock market opens on Monday.
BT had unsuccessful merger talks earlier this year with British rival Cable & Wireless -- a deal which would have created the world's fifth largest telecoms group by revenue.
Any BT/MCI deal would spawn a massive company with a market capitalisation of some $64 billion, just ahead of AT&T Corp -- the leading, but struggling, U.S. phone company. It would still be some way behind Japanese giant NTT Data Corporation -- the world's largest.
Analysts said a merged company would be a good fit in the ultra-competitive U.S. long-distance phone industry where MCI and number three Sprint have been battling AT&T.
Its critical mass would leave it excellently placed to expand into other international markets and new technologies -- MCI possessing the biggest Internet backbone in the U.S.
"This is AT&T Corp's worst nightmare," said consultant Jeffrey Kagan of Kagan Telecom.
AT&T said late on Friday it was confident any MCI/BT deal would receive proper scrutiny by the U.S. government.
"We would expect that our government would condition any such merger on the complete and unqualified opening of the telecom market in the United Kingdom," it said.
However, analysts regard the British market as broadly open to competition.
For its part, Britain's Trade and Industry Department (DTI) said on Saturday it was too early to say what regulatory hurdles any merger would have to clear.
One potential problem is a media joint venture between MCI and Rupert Murdoch's News Corp. BT would end up with MCI's 13 percent non-voting stake in News Corp and this could cause regulatory difficulties in Britain.
British telecoms watchdog Oftel recently banned a joint advertising campaign between BT and satellite broadcaster BSkyB, a company in which News Corp is the main shareholder.
| 21 |
Merchant banking and Madame Tussaud's could be deemed surplus to requirements as a new management team at Britain's Pearson Plc mould a media company for the next millennium, analysts said on Wednesday.
The Pearson empire contains prize brands such as the Financial Times newspaper and Penguin books but Marjorie Scardino, who will take over as chief executive in January, has said that overall profit performance is inadequate.
Analysts say Pearson has yet to complete its 1990s journey from industrial conglomerate to focused media enterprise.
"The definition of their three core business areas -- Information, Education and Entertainment is a little imprecise," said Mark Beilby of Deutsche Morgan Grenfell. "They may have to jettison some high value assets and focus on pinpoint areas."
Analysts cite Anglo-Dutch company Reed Elsevier as an example of a media company which has successfully identified key market areas and built up strong positions in these -- the provision of high-margin business information being Reed's speciality.
They point out that Pearson, with a market capitalisation of around four billion stg, is not a media giant in global terms and that its capital and management time is being too thinly spread under the current structure.
Pearson's 50 percent stake in London investment bank Lazard Brothers -- which does not fit into one of the three core business areas -- is seen as a likely candidate for disposal.
"At some stage Lazards will go out of the door to make Pearson into more of a genuine media company," said Louise Barton of Henderson Crosthwaite.
Close boardroom links between Pearson and Lazards could complicate matters. However, analysts say a sale would go a long way towards convincing doubters that Scardino is prepared to shake up the company.
The Tussauds Group, which includes London's famous Madame Tussaud's waxworks museum and a number of theme parks, is also seen as peripheral and a drain on resources for a company which could earn richer pickings from television and publishing.
U.S. consumer software publisher Mindscape is the most glaring weakness, with Pearson forecasting a 46 million stg loss this year from a business it paid $462 million for in 1994.
"If it doesn't work, they'll have to close it down. But it might provide a positive return in a couple of years," said one analyst. Pearson is forecasting a return to profit for Mindscape in late 1997.
Pearson's uneven record has long made it potential prey for media rivals keen to pounce on its stellar assets and sell off the rest.
Recent newspaper reports suggested BSkyB was lining up a bid but the satellite broadcaster strongly denied them. Media and leisure company Granada and Reed-Elsevier have also been rumoured as possible bidders in recent months.
"You cannot dismiss the idea that BSkyB would be interested in Pearson's television interests as it tries to build up its content," said Henderson Crosthwaite's Barton.
Pearson's television interests include the Thames and Grundy production houses and a stake in Britain's planned fifth terrestrial station.
Pearson television supremo Greg Dyke is thought to favour a de-merger of the television businesses. But analysts said such a move would almost certainly prompt a bid for that part of the business from any one of BSkyB, Granada, Carlton Communications or United News & Media.
-- London Newsroom +44 171 542 7717
| 21 |
Britain's Ladbroke Group and the U.S. Hilton Hotels Corp (HHC) on Thursday unveiled an alliance to reunite the famous Hilton hotel brand around the world for the first time since 1964.
"We have been separated but now our companies are engaged," said Steve Bollenbach, HHC's chief executive officer.
"This will make Hilton the force to be reckoned with in the global hotel industry," Bollenbach told a news conference. "It will eliminate customer confusion and benefit millions of our customers worldwide."
HHC owns the Hilton name in the United States while Ladbroke holds the rights everywhere else through its Hilton International (HIC) subsidiary.
The two companies have signed an outline agreement to unify the Hilton brand, separated in 1964 when HIC was spun off from the American operation. Ladbroke acquired HIC in 1987.
In the alliance grouping 400 hotels in 49 countries, HHC and HIC intend to cooperate from next year on sales and marketing, loyalty programmes and hotel development.
Ladbroke also announced first half pre-tax profits of 72.8 million pounds ($113.5 million) before exceptional items, a 29 percent increase on last year and above analyst forecasts. The interim dividend was unchanged at 2.4 pence per share.
Ladbroke shares added 7.5p to a 1996 high of 215p in early trade before slipping back to close 2p firmer at 209.5p.
The alliance gives HHC a larger presence in the international hotel arena. It offers Ladbroke a major position in American hotels and the chance to participate in the expansion of HHC's U.S. gaming business.
The companies plan to finalise the agreement as soon as possible in order for it to become effective by early 1997.
Bollenbach and Ladbroke chief executive Peter George said the deal would be worth tens of millions of dollars when cost savings and extra sales were combined.
Share analysts applauded the alliance.
"The Hilton tie-up is more extensive than people expected. We are expecting big things from 1998 onwards," said Greg Feehely of Kleinwort Benson.
HHC intends to acquire a five percent stake in Ladbroke once the final agreement has been signed. Ladbroke has said it expects to invest significant sums in hotels and casinos developed by its partner in the United States.
"We're putting our money where our mouth is," said Bollenbach, a former Walt Disney Company executive who joined HHC in February.
He said one of his first calls at HHC was to his Ladbroke counterpart George. The two men subsequently met several times and even shared a holiday, rafting in Idaho with their wives.
Under the deal, George will join the HHC board while Bollenbach becomes a director of Ladbroke.
The Hilton hotel chain was founded in 1919 when Conrad Hilton opened his first hotel in the Texan town of Cisco.
In 1946, Hilton became the first hotel company to list on the New York Stock Exchange. HIC was spun off in 1964 and it was acquired three years later by Trans World Airlines. ($1=.6412 Pound)
| 21 |
United News & Media on Tuesday emerged with the winning hand after a lengthy poker game over the future of international exhibitions group Blenheim.
United, which has interests in British national newspapers and commercial television, trumped its rivals with an agreed offer valuing Blenheim at 592.5 million pounds ($935 million).
The deal will create the world's largest trade exhibition group with a turnover of more than 500 million pounds based on 1995 figures.
Media and financial services group United said it had already secured acceptances for 51 percent of Blenheim after offering five pounds per share.
"The acquisition will be earnings-enhancing in the first full year but the real attraction is the long-term growth we can get out by combining these businesses into one group," United chief executive Clive Hollick told Reuters.
United News shares added 30 pence to 683-1/2 pence after the announcement, while Blenheim gained 23 to 496-1/2.
Dutch publisher VNU, which last week acquired a 15 percent stake in Blenheim, said it would not make a counter bid and was likely to sell its stake. That decision effectively removed the threat of a bidding war developing for Blenheim.
Anglo-Dutch media group Reed-Elsevier had been regarded as a rival suitor, but sources close to the company indicated in recent days that it had dropped out of the running.
French utilities group Compagnie Generale des Eaux confirmed on Tuesday that it planned to sell its 15 percent stake in Blenheim following United's offer.
The deal ends an on-off saga that began in June when Blenheim said it had received a bid approach. In August it said that talks with an unnamed party had broken down but then made another statement a few weeks later confirming a new approach.
Analysts said that Blenheim's geographical strength in continental Europe, and France in particular, made it a good fit with United.
"After VNU's move, United have done well to tie it up at five pounds a share," said David Forster of Salomon Brothers.
"In Miller Freeman, United have a substantial established business in this area and Blenheim will fit well into it."
United's Miller Freeman subsidiary operates more than 100 exhibitions in the United States, Europe and Asia but the American market is seen as its main strength. These exhibitions are supported by a range of trade publications.
Blenheim operates more than 170 exhibitions worldwide but does not have a significant publishing portfolio.
"The directors of United believe that the Miller Freeman and Blenheim trade show portfolios are highly complementary geographically, by market sector, and in terms of operational management," United said in a statement.
The acquisition is the first major move by United since the national newspaper group merged with television and financial services group MAI earlier this year.
That merger doubled the size of the company, creating a British media major with a market capitalisation of more than three billion pounds. ($1=.6337 Pound)
| 21 |
Britain's Granada Group, which won control of hotel and catering empire Forte in January, Wednesday reported a 37 percent surge in full-year profits to 480 million pounds ($804 million).
The media and leisure group said that it would deliver on its promise to improve profits at Forte by over 100 million pounds ($167.5 million) per annum from 1996/97.
Calling the results "very satisfying," Granada Chairman Gerry Robinson told Reuters, "The key has been the speed with which we have been able to move on the Forte businesses."
Granada took over family-controlled Forte in a 3.9 billion pound ($6.5 billion) deal earlier this year after a bitter bid battle that raged over the Christmas and New Year period 12 months ago.
The company said Forte had responded well to its management and that it had already improved profitability there by approaching 40 million pounds ($67 million).
Granada continues to reorganize following the acquisition of Britain's leading hotel group. Robinson said there was substantial interest from a wide range of potential purchasers of the luxury hotels it has put on the market.
Granada sold the first of the 17 Exclusive hotels Tuesday when Hong Kong-based Mandarin Oriental International Ltd. bought London's Hyde Park Hotel for 86 million pounds ($144 million).
Robinson said Granada expected to complete the disposals by early 1997. Analysts calculate the sale of assets including the George V in Paris and Plaza Athenee in New York will raise a total of about 900 million pounds ($1.5 billion).
The Granada chairman said the company hoped to sell the Welcome Break chain of British motorway service areas in January or February of next year. The 21 sites were acquired in the Forte deal but must be sold off because of monopoly concerns.
But he said there were no plans to sell the 10.8 percent stake Granada holds in pay television operator British Sky Broadcasting.
Group turnover in the year to end-September climbed 60 percent to 3.82 billion pounds ($6.4 billion). Total dividend was raised by 11 percent to 13p (21.8 cents) per share.
Granada shares, which had risen in recent days in anticipation of bumper results, fell by 8p (13.4 cents) to 884 1/2p ($14.81) in a generally gloomy market.
The largest contribution came from the Restaurants division, which boosted profit before interest and tax by 80 percent to 217 million pounds ($363.5 million) as the Forte acquisition bore fruit.
The new Hotels unit contributed 168 million ($281.4 million) while Media, including Granada's two British commercial television stations, made 163 million ($273.0 million), up 17 percent. Profits from the high street rentals arm was marginally higher at 126 million ($211 million).
| 21 |
British mobile telephone company Cellnet on Friday reported strong growth in its customer numbers, confirming the British cellular market is healthy, already indicated by figures from rival Vodafone Group.
Cellnet, jointly owned by British Telecom and Securicor Group, said it had 2.68 million UK customers at the end of 1996, up from 2.3 million a year earlier.
Vodafone, the market leader in Britain, on Thursday reported a 20 percent increase in UK subscriber numbers over 1996 as a whole, reaching a total of some 2.8 million in December.
The market has settled down after a period of very rapid expansion at the beginning of the decade when mobile phones were a novelty.
However, analysts were impressed by the figures from Britain's two largest cellular companies and said there were signs of an increase in the rate of subscriber growth.
"Vodafone's performance was particularly creditable since historically they have done badly in Q4 while Cellnet did well, due to Cellnet's relative focus on the consumer market," broker SBC Warburg said in a research note.
Vodafone gained a net 146,000 UK subscribers in the last three months of last year once cancellations had been taken into account and said that its performance was an improvement on the corresponding 1995 quarter.
Vodafone shares added 4p to 244p on Friday, reversing the losses suffered in a generally weak market on Thursday.
Cellnet said its subscriber base had grown by 143,000 in the last three months of last year, against an increase of 215,000 in the Christmas quarter of 1995.
But Cellnet said that 1995 had been a bumper year and noted that the growth in its customer base was significantly higher than in the two previous quarters.
Both Vodafone and Cellnet are in the process of transferring their customers from older analogue networks to more efficient digital systems.
Vodafone said that more than 1.2 million of its UK customers were now on the digital network while Cellnet said it had over 880,000 digital customers.
One-2-One and Orange ORA.L, which offer only digital services, are due to release their connection figures next week. Orange shares were 2.5p higher at 188p on Friday.
| 21 |
Executives from British Telecom Plc and MCI Communications Corp were on Saturday attempting to stitch together a $22 billion merger that would turn BT into the world's second largest telecoms group.
MCI, the number two U.S. long-distance phone company, sent shock waves through the global communications industry on Friday when it said it was in talks about a takeover by BT.
BT, the dominant player in the British market, has been building its overseas presence in recent years and already has a 20 percent stake in MCI. The two also operate a joint venture known as Concert which serves customers in more than 50 nations.
Analysts are speculating on a price of $40 a share -- valuing MCI at $28 billion and leaving BT with a bill of about $22.1 billion to pay for the remaining 80 percent of MCI.
The deal would be the biggest yet in the rapidly changing telecommunications market and the second largest involving a U.S. company -- topped only by the buyout of RJR Nabisco by Kohlberg Kravis Roberts & Co.
A BT spokesman confirmed that the BT board was meeting over the weekend to consider an anticipated proposal from MCI.
He would not be drawn on where the meeting was taking place, saying only that BT chief executive Sir Peter Bonfield was not in the United States.
The spokesman said an announcement was anticipated prior to the opening of the London stock market on Monday. Sources close to the talks said no announcement was likely on Saturday.
BT and MCI have both said there are no assurances that an agreement will be reached or that any transaction will be consummated.
BT had unsuccessful merger talks earlier this year with British rival Cable & Wireless -- a deal which would have created the world's fifth largest telecoms group by revenue.
Any BT/MCI deal would spawn a massive company with a market capitalisation of some $64 billion, just ahead of AT&T Corp -- the leading, but struggling, U.S. phone company. It would still be some way behind Japanese giant NTT Data Corporation -- the world's largest.
Analysts said a merged company would be a good fit in the ultra-competitive U.S. long-distance phone industry where MCI and number three Sprint have been battling AT&T.
Its critical mass would leave it excellently placed to expand into other international markets and new technologies -- MCI possessing the biggest Internet backbone in the U.S.
"This is AT&T Corp's worst nightmare," said consultant Jeffrey Kagan of Kagan Telecom.
AT&T said late on Friday that it was confident any MCI/BT deal would receive proper scrutiny by the U.S. government.
"We would expect that our government would condition any such merger on the complete and unqualified opening of the telecom market in the United Kingdom," it said.
However, analysts regard the British market as broadly open to competition.
For its part, Britain's Trade and Industry Department (DTI) said on Saturday it was too early to say what regulatory hurdles any merger would have to clear.
One potential problem is a media joint venture between MCI and Rupert Murdoch's News Corp. BT would end up with MCI's 13 percent non-voting stake in News Corp and this could cause regulatory difficulties in Britain.
British telecoms watchdog Oftel recently banned a joint advertising campaign between BT and satellite broadcaster BSkyB, a company in which News Corp is the main shareholder.
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Britain's commercial television watchdog on Thursday invited applications to run terrestrial frequencies which will multiply the number of channels available to viewers in the new digital age.
"This is a very important day for UK viewers...as many as 35 or 36 channels could be available on digital terrestrial television," said Peter Rogers, chief executive of the Independent Television Commission (ITC).
The ITC is seeking applications to operate four "multiplexes", as the blocks of frequencies are known. Each block can carry as many as six digital channels.
The BBC has already been earmarked its own multiplex, and commercial networks ITV and Channel 4 will share one.
The ITC will award the 12-year licences on critieria including speed of roll-out of the service and the appeal of programming but a cash bid will not be required. Licences are expected to be awarded next spring and broadcasting could begin by mid-1998.
Britain is leading the way in the development of digital terrestrial but some observers question whether it will succeed.
Pay television operator BSkyB, in which Rupert Murdoch's News Corp is the largest shareholder, plans to launch a digital satellite service into Britain in late 1997 -- several months ahead of the terrestrial version.
The satellite version could offer several hundred channels and BSkyB's control of key movie and sporting rights are likely to make it an attractive proposition.
The ITC's Rogers told a news conference he was confident the terrestrial option would prove attractive to investors.
"I would be surprised and disappointed if we didn't have applications for all of the multiplexes," he said.
His view was shared by Paul Styles, a media expert at consultancy and accounting firm KPMG.
"Most people perceive digital bandwith to be valuable so I think there will be interest in the multiplexes," he said.
"This will not be an overnight sensation but a business to be built," he said, identifying ITV companies, cable groups and BSkyB itself as potential licence applicants.
Digital technology increases the number of channels which can be transmitted and enhances sound and picture quality. it also enables interactive services such as home shopping and home banking to be created.
Digital means converting sound and pictures into binary digits -- a series of noughts and ones -- rather than transmitting them as electric signals as now happens. A set-top box or "decoder" will be required to receive digital services.
This is also a source of controversy, as ITC officials admit that there is no current UK or European legislation to enforce a common standard for decoders.
That means that consumers could theoretically have to pay several hundred pounds (dollars) for a set-top box to receive BSkyB's digital services and then have to buy a second box a few months later to receive digital terrestrial.
British Labour Euro MP Carole Tongue on Thursday wrote to European Commissioner Martin Bangemann to demand that all set-top boxes provide a common interface for all broadcasters.
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Premier League Sunderland, one of the great names in the history of English soccer, said on Thursday that they hoped to raise up to 12 million pounds ($20 million) through a flotation on the London Stock Exchange.
The north-east club, which won the league title for the sixth and last time in 1936, joins a growing number of clubs seeking to capitalise on the popularity of the national game.
Premier league rivals Manchester United and Tottenham Hotspur have full stock market listings while clubs such as Chelsea trade on the secondary market.
Others are expected to follow suit as revenue from a television deal with satellite broadcaster BSkyB and higher crowds help to transform the sport's finances.
Sunderland said that the new funds would be used to add the finishing touches to a new 15 million pounds stadium, reduce borrowing and fund the purchase of new players.
"The proceeds will assist in retaining premier league status and enable the company to capitalise more fully upon the club's name, strong support and new opportunities arising from the move to the new stadium," chairman Bob Murray told a news conference.
Sunderland will leave their century-old Roker Park home at the end of the season and move to a 42,000-capacity stadium built on the site of a former colliery in the heart of the city.
The club, whose last real taste of glory came in 1973 when they won the F.A. Cup, are optimistic that the move to a new stadium will herald a period of prosperity on and off the pitch.
Sunderland were promoted to the premier league last season and forecast that increased gate receipts and television revenue would help double turnover this season to 13.6 million pounds.
Murray said that the new stadium should allow Sunderland to boost its season ticket holders from 17,000 to around 28,000. Roker Park is in a dilapidated state and large parts of the 22,000 capacity ground are vast terraces open to the elements.
Sunderland, managed by former England international Peter Reid, have only a modest playing squad without the star names of neighbours Middlesbrough and Newcastle United. They are fifth from bottom of the premier league and are likely to face a battle to avoid relegation this season.
The club conceded that staying in the premier league status was "critical" but said that it believed that increased income from the new stadium would offset lost television revenue if the team did go down.
Some 10 percent of the share issue will be made available to club employees and fans rather than institutional investors. The flotation is expected to value the club as a whole at 40-50 million pounds and share dealings will commence on December 24.
Chairman Murray and other leading shareholders, including manager Reid who has a six percent stake, have given undertakings not to dispose of any shares before early 1998.
($ = 0.596 British Pounds)
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Investors on both sides of the Atlantic applauded the planned $20 billion merger of British Telecom Plc and MCI Communications of the United States Monday, boosting their shares in stock market trading.
British, European and U.S. regulators will subject the deal to close scrutiny amid strong opposition to it from rivals, including American long-distance market leader AT&T Corp.
British Telecom, or BT, as it is known, said it was optimistic that the European Commission would clear the largest cross-border takeover deal in history, which will create one of the largest groups in the rapidly expanding global telecommunications sector.
Britain's communications industry regulatory agency said it was studying the details of the merger and it was too early to pass judgment.
BT Chief Executive Sir Peter Bonfield has said it could take a year to clear all the regulatory hurdles.
BT's shares powered 32-1/2 pence higher to 383 1/2p -- adding around two billion pounds ($3.3 billion) to the company's market value on huge trading volume of over 40 million shares.
MCI gained $1.25 to $31.50 in early trading on Nasdaq, while AT&T fell $1.125 to $33.50 on the New York Stock Exchange.
Despite the large cost of the deal to British Telecom -- it will be the biggest-ever acquisition by a British firm -- the deal is seen as having a compelling industrial logic, linking leading phone companies on both sides of the Atlantic.
For BT shareholders the deal is also being sugared with a promise of a special one-time 35p dividend payout and a higher rate of general dividend increases in the future.
"It is positive for BT shareholders and positive for the (telecoms) sector," said Jim McCafferty, analyst at ABN AMRO Hoare Govett.
For customers, the deal promises better service and lower international calling charges, while for businesses it means a company that can support them wherever they are.
The merged company will be called Concert Plc. It will be the second-largest international carrier after AT&T.
The deal values all of Washington, D.C.-based MCI at just over $25 billion. Since British Telecom already owns 20 percent of MCI, it will issue Concert stock and cash worth $20.1 billion for the remaining 80 percent. Holders of MCI stock will control a third of the stock in the combined company.
Larry Stone, BT's head of EU affairs, told Reuters he hoped the deal would be dealt with under the EU's fast-track merger rules and said he did not anticipate any anti-trust problems because the companies "operate in competitive markets."
Analysts expect British Telecom and MCI to start making overtures to major Asian players such as Japan's giant Nippon Telegraph and Telephone Corp.
But while seeking an Asian partner, MCI appears to be putting another one on a backburner.
MCI is to cut its stake in a U.S. satellite television venture with media tycoon Rupert Murdoch to 20 percent from 50 percent, and has said it will probably not increase its stake in Murdoch's News Corp as originally expected.
MCI paid $1.35 billion for a stake of just under 9 percent, and could increase it to 13 percent with another $1 billion investment.
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Wembley, England's home of soccer since the 1920s, will be the site of a new national stadium, the country's Sports Council announced on Tuesday.
The government-backed Council selected the north London venue ahead of the northern city of Manchester as the preferred location. Some 120 million pounds ($200 million) in National Lottery funding will be supplied to help turn the famous old stadium into a world class sports facility for the 21st century.
Wembley and Manchester were selected as the two leading candidates from five applicants last year. Sports Council chairman Sir Rodney Walker said that Wembley won out as it had greater potential to attract major international events.
The Sports Council has supported the English Football Association's bid to host soccer's World Cup in 2006 and the British Athletics Federation's attempts to attract the world championships in 2001.
But Manchester did not lose out completely as the Sports Council announced it had agreed in principle to provide up to 60 million pounds towards a new Stadium of the North to be used to host the Commonwealth Games in 2002, which have already been awarded to the city.
It said it would also consider backing Manchester council's bid for 20 million pound in funding for a new swimming and diving complex in the city, another Games facility.
"The Sports Council has agreed a 200 million package of financial support which will provide further opportunities for English and British sport to develop as a leading competitor on the world stage," Walker said.
A competition is to be held to select an architectural firm to design the English National Stadium at the site owned by Wembley Plc.
Architect Sir Norman Foster has already unveiled his radical plans for an 80,000-seater stadium.
In his design, Wembley's famous twin towers would be repositioned to form a new gateway to the stadium area. The stadium would also be spun round 90 degrees with a new North/South axis.
The Foster design also includes plans for retractable seating to allow spectators at field events like soccer and rugby league close proximity to the action. The seats would be moved back when track events were being held. ($1=.6027 Pound)
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Shares in English premier league soccer club Sunderland Plc got strong support on their market debut on Tuesday, trading up to 740 pence to score a 25 percent premium to the offer price of 585p.
The traditional combination of solid defence and star striker is no longer enough to gain success in English soccer and Sunderland joins a growing band of clubs that have moved on to the stock market recently to build up financial strength.
Sunderland reported last Friday that the public offer of shares was 2.7 times oversubscribed. A total of 2.15 million shares were sold under the flotation.
On Tuesday, the price was quoted at 732-1/2p by 0954 GMT to value the club at just under 60 million stg. Trading volume of 134,500 shares was registered.
Manchester United, Britain's most profitable club, was the model for English soccer flotations and now European rivals are seeking to emulate them in the financial stakes.
United, floated in 1991, has grown into one of Britain's 250 biggest quoted companies, with a market value of some 380 million stg. The value of the Manchester United brand name means that revenue from merchandising is as high as gate receipts.
Shares in Premier League club Tottenham Hotspur have also been quoted on the London Stock Exchange for several years but a number of other ambitious clubs are now following suit as the game flourishes.
Former champions Leeds United joined the market in August when they were taken over by media company Caspian Group while Premier League struggler Southampton has recently unveiled plans for a listing.
Share analysts believe that the trend will continue as revenue from a lucrative new contract with pay television operator BSkyB and potentially greater riches from the screening of matches on a pay-per-view basis make the newly listed clubs an attractive investment.
"We are not at saturation point -- Sunderland and Southampton are relatively small clubs compared with Newcastle and Man Utd but they are still going to have access to some chunky television revenue," said Nick Knight, an analyst with stock broker Nomura who has researched soccer club finance.
BSkyB signed a 670 million stg deal in June to secure live rights to Premier League soccer matches until 2001.
Under the deal glamour clubs such as Manchester United and Newcastle United, which is also looking at a flotation, are forecast to more than double their television revenue to over 12 million stg from next season.
Sunderland, promoted from Division One as champions last season, are expecting television and media income to increase more than tenfold to 3.5 million stg this season.
"The key is being in the Premier League or at least in Division One and thus having the potential to get into the Premier League," said Knight.
He believes that up to 20 of the 44 clubs in the top two sections could join the market in the next two or three years.
The trend is European-wide, Italian champions AC Milan, owned by media mogul Silvio Berlusconi, having tentatively planned a flotation for 1997.
A stock market listing enables soccer club owners to tap into new sources of finance, to dilute their own personal exposure to the risks of an expensive business and make it easier to cash in on their stake at some point in the future.
Sunderland, are raising over 10 million stg through their flotation -- funds that will be used to put the finishing touches to a new 42,000-seater stadium, cut debt and buy new players.
Southampton, who will obtain their listing via a merger with a company that builds retirement homes, are also seeking funds to move to a new and larger home.
Improved facilities and a reduction in crowd violence have helped to lift crowds by over 30 percent since the Premier League was launched in 1992.
The financial manna from satellite television has also reversed the exodus of top talent from these shores.
The Premier League clubs are now able to attract foreign talent away from wealthy continental rivals. Players such as Eric Cantona, Ruud Gullit and Fabrizio Ravanelli are now gracing the English game and being paid handsomely for doing so.
The enthusiasm is such that many Premier League matches are sold out weeks in advance, prompting great optimism about the financial prospects from the introduction of pay-per-view.
BSkyB is planning to launch digital satellite television late next year and that will create the additional channel space to show every Premier League fixture live on a pay-per-view basis, although no date has been set for its introduction.
Analysts believe pay-per-view could eventually be worth as much as 100 million stg a year to top clubs.
"Pay-per-view could be worth a million pounds per game to Manchester United, that's 40 million pounds per season just from league matches," said Alon Bull, who trades in soccer club shares at brokers Winterflood Securities.
"If you add in cup and European matches you're up to around 65 million and that could grow to 100 million in two or three years especially if the games are sold to Europe and maybe even the United States."
He forecast that the potential cash bonanza from pay-per-view made the leading soccer clubs potential prey for big business interests.
"The next gear up is where you get multinational companies bidding for football clubs," said Bull. "I can see the likes of Manchester United, Spurs and Newcastle being taken out by bidders," he added.
-- London Newsroom +44 171 542 7717
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The $22 billion takeover of MCI Communications Corp marks a spectacular end to Sir Peter Bonfield's first year as chief executive of British Telecommunications Plc.
BT and MCI, the second largest U.S. long-distance phone company, confirmed on Sunday that BT would buy the 80 percent of MCI it does not own.
The deal, if completed, is a major coup for the former computer industry executive who took the helm at BT last January when the company split the roles of chairman and chief executive. Sir Iain Vallance, who had been combining the two roles since 1987, became BT chairman.
Bonfield's appointment was cheered by City commentators when it was announced last November.
The influential Financial Times newspaper described it as "one of the most positive events in the group's history".
The newspaper said the appointment marked "a turning point in BT's transition from public sector utility to competitive services group".
Bonfield, 52, had built a reputation for boosting revenue, curbing costs and international expansion during his 10 years in charge of ICL, the British computer company owned by Japan's Fujitsu Ltd.
"His wide international experience, his dedication to quality management and his in-depth knowledge of the computing services industry will be of particular relevance to BT, as we continue our global expansion," Vallance said when Bonfield moved to BT.
Within a few months of his arrival BT was in talks with British rival Cable & Wireless about a merger that would have created a global telecommunications powerhouse.
Those talks ended unsuccessfully in May. But any MCI/BT deal would be bigger than that one that got away.
Bonfield has said he wants BT to be one of the most successful global telecoms companies 20 or 30 years from now. He believes BT's network of continental partners built up in recent years will allow it to become a true pan-European operator.
He has also targeted Asia-Pacific as a region where BT needs to expand, hence the attempt to do a deal with Cable and Wireless, which is very strong there.
Analysts say the critical mass from an MCI deal would provide the power to drive international expansion.
Bonfield also believes BT must become more responsive to its market. One of MCI's strengths is its reputation as an aggressive and fast-moving company.
He grew up in the small town of Hitchin, north of London, where he went to a local state school. He graduated in engineering from Loughborough University in the English Midlands in 1966.
He began his career with Texas Instruments, working in the field of semiconductors and computers in Europe, the Far East and the United States. He became a divisional director of Texas based in the U.S. before joining ICL in the early 1980s.
He became ICL managing director in 1984 and its chief executive and chairman the following year.
Bonfield, a trim, bearded individual, has an informal manner and a reputation for getting on well with colleagues. A married man, he lists his hobbies as sailing, jogging and music.
| 21 |
Marjorie Scardino, set to become Pearson chief executive in January, rejects the tag of company insider and has vowed to carry out radical change at the British media firm "if needed".
Selecting an American woman to head a top British company was certain to raise a few eyebrows in the City of London. But initial doubts are paradoxically based on the fact that she is seen as part of the Pearson family rather than a newcomer.
"The message that this appointment puts across is that we can expect more of the same from the company. That's not what the market wanted to hear," said one media analyst.
Scardino, 49, is chief executive of business publisher The Economist Group, 50 percent owned by Pearson.
But she said that The Economist is run as an independent operation and she is not part of the Pearson establishment.
"I would like to put that one to rest - I am an outsider to Pearson," the mother-of-three told Reuters.
She said that she had spoken to the members of the Pearson board and had been assured that they were prepared to accept radical change "if needed".
She said she was well aware of press and market criticism of a lack of management focus at Pearson, a company whose activities range from the Financial Times to Australian soap opera "Neighbours".
Pearson has sold off businesses in wine, china and oil services in recent years to concentrate on three media-related areas -- Information, Education and Entertainment.
"I know this company has been broken up and put back together (by journalists and analysts) in all kinds of ways. I think I'm aware of all the possibilities."
There was more bad press on Thursday as the market questioned her qualifications.
"She's apparently been very successful at the Economist but it's not the same as running a major PLc," said one analyst.
But she received a glowing reference from Economist chairman Dominic Cadbury: "I am sure that she will move quickly to assess the Pearson business and define a new strategic direction which she will set about implementing," he said.
Profits at the Economist have more than doubled during her three years as chief executive. Scardino is also a director of U.S. food giant ConAgra Inc and British retailer WH Smith.
Born in Arizona but brought up in Texas, Scardino worked in the 1970s as a lawyer in Savannah, Georgia -- the hometown of her journalist husband.
By night she helped him with his weekly Georgia Gazette newspaper where he won a Pulitzer prize for his work.
She moved to New York in the mid 1980s where she headed the Economist's North American operations for several years.
She lives in the swish west London quarter of Knightsbridge with husband Albert. The couple have three children -- the youngest of whom is making a name for himself as an actor.
Indeed, Hal Scardino, 11, is maybe better known than his high-powered Mum. His films include Marvin's Room with Meryl Streep, Diane Keaton and Robert de Niro and The Indian in the Cupboard, for which he won a best child actor award.
"He's been in a couple of movies but I wouldn't call him a star," she said. Her other son, Will, is 16 while daughter Adelaide, 18, has just returned to the U.S. to study.
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English football champions Manchester United extended their outstanding recent stock market form on Monday as renewed bid speculation sent the share price soaring by over 10 percent for the second straight session.
The latest gains were by a weekend report in the Sunday Express that American Mark McCormack's IMG marketing agency was considering a bid for United.
"We never make comments on unsubstantiated press stories," said an official at IMG's London office. But he said that IMG, most active in sports such as tennis and golf, was interested in increasing its involvement in football.
Earlier this year IMG lost out to sportwear company Adidas in a battle for control of former French football champions Olympique Marseille.
The Express report said that any credible bid for United would have to be pitched at around 650-700 pence per share, valuing the club at around 430 million pounds ($678 million).
United shares rocketed again on Monday, rising 54.5p to 568p, valuing the club at around 350 million pounds.
The share price has virtually trebled since the start of the year and added almost 25 percent in the last two sessions alone.
The latest winning run was triggered when chief executive Martin Edwards said last week that United's status as Britain's most profitable soccer club made it a likely bid target.
Publishing group VCI is reported to have made a 300 million pound bid for United earlier this year which was rejected.
Analysts say that United would be an attractive target for media companies, citing the U.S example of television mogul Ted Turner who owns the Atlanta Braves baseball team.
The potential income from pay-per-view television deals is also helping to drive the share price and may make United's main shareholders think twice about selling now.
"The directors own 22 percent of the club...They can sit back for five years and enjoy the football and then enjoy the benefits when the really big money comes in from pay-per-view," said Vinay Bedi of brokerage Wise Speke.
Pay-per-view is expected to be introduced by the end of the century and could allow leading clubs such as United to earn tens of millions of pounds annually from television.
Focus on such juicy future pickings also lifted shares in Tottenham Hotspur, the other Premier League club with a full London Stock Exchange listing. They added 11p to 461p.
United, who last season won the coveted English league and F.A. Cup double, had television income of 5.7 million pounds in 1995-96 when the club made a profit of 15.4 million before tax.
A new contract between the Premier League and satellite broadcaster BSkyB will mean that United's television income should treble to around 15 million pounds from next year. ($1=.6337 Pound)
| 21 |
The planned $20 billion merger of British Telecom and MCI is certain to shake up the global telephone business, officials and analysts said Monday, as regulators started digging in for a close look at the deal.
British Telecommunications Plc and MCI Communications Corp. on Sunday announced the largest trans-Atlantic takeover in history.
The deal would create a global powerhouse vying with AT&T Corp., Germany's Deutsche Telekom and a handful of other companies in a fast-changing, lucrative industry that will be a critical component of global commerce well into the 21st century.
The proposal will create work aplenty for British, American and European regulators who will review the merger, which would create a $40 billion company serving 43 million business and residential customers in 70 countries.
For consumers, it could mean better service and lower international calling charges, while the new company would aim to better support its business customers around the world.
It will cause sleepless nights for rivals such as AT&T, Sprint Corp., France Telecom and Deutsche Telekom as they weigh how to respond. Sprint is allied with the French and German companies in the Global One international venture while AT&T is part of a network of alliances called World Partners.
The new company, to be called Concert, plans to take on AT&T's dominance in the U.S. long-distance market, where MCI now has about 20 percent of a $75 billion business, and to win part of the $100 market for residential local phone service.
It also is expected to expand in the Asia-Pacific region -- a long-held aim for British Telecom.
British Telecom's stock jumped in London and New York, where its American shares rose $5.375 to $60.875 on the New York Stock Exchange in afternoon trading.
MCI shares also rose, but only 50 cents to $30.75, well below the possible value of as much as $39 a share based on the price of British Telecom's American shares. Worries about regulatory hurdles and the time to complete the deal held back the stock, industry analysts and takeover specialists said.
The merger still needed to win approval from regulators in America and Britain.
British Telecom said it was optimistic that the European Commission would clear the merger.
British officials have said only that they were looking at the deal. AT&T has already called on the U.S. Federal Communications Commission to give it thorough scrutiny.
AT&T also said U.S. and European regulators should not give approval unless there is more competition in British Telecom's home market.
British Telecom Chief Executive Sir Peter Bonfield has said it could take a year for the deal to win regulatory approval.
"There are a lot of hurdles to be cleared but I think the deal will go through," one London-based analyst said.
Federal rules prohibit a foreign company from owning more than 25 percent of a U.S. telephone company if the acquiror's home market is not open to competition.
Under the merger British Telecom, which already owns 20 percent of Washington-based MCI, will issue Concert cash and stock for the remaining 80 percent. Holders of MCI stock will end up controlling around a third of the merged company.
The merged company will acquire the 9 percent stake which MCI holds in Rupert Murdoch's News Corp. media empire. MCI, perhaps wary of regulatory concerns, said on Sunday it did not plan to pursue an option to increase this to 13 percent.
| 21 |
Shares in EMI Plc, one of the world's five music majors, climbed on Tuesday after the company said that long-term prospects for the stuttering global music market were positive.
EMI, which demerged from rentals company Thorn Plc three months ago, said profit before tax and exceptional items rose 9.4 percent to 112.5 million pounds ($188.4 million) in the six months to September 30. Net interim dividend per share increased by 12.7 percent to eight pence.
EMI shares, under pressure in recent weeks on fears that music sales were faltering after a decade of strong growth, added 15p to 1,286p in a generally lower market.
"These are excellent interim results from the EMI Group," chairman Sir Colin Southgate said in a statement.
"They have been achieved against a background of variable growth in the major markets and mixed results from our competitors," he added. "The increase in the interim dividend reflects our confidence in the long-term health of the music industry and EMI's position within it."
Finance Director Simon Duffy said EMI remained confident that the global music business would continue to grow by some 6-8 percent annually in the medium to long-term.
"This year is looking a little bit below that level," said Duffy, saying that markets were patchy but that overall first half industry growth had been 5.5 percent. However, he added that the impact was diluted by the strength of sterling.
The market's sluggishness has recently been reflected by 100 layoffs at various labels within Warner Music and 400 job cuts at PolyGram NV -- another of the top five in the world music business.
EMI said that sales in the United States were almost flat and declined slightly in France. But this was offset by improvements in Japan, Britain and Germany while Southeast Asia and Latin America boasted particularly large gains.
Turnover from the EMI Music division was down marginally at around 1.1 billion pounds but improved margins helped to boost operating profits to 131.9 million pounds from 124.6 million.
The HMV division, grouping record and book stores chains, had an operating loss of 11 million pounds which the company said was in line with expectations as its international expansion continued.
EMI said major releases for the key pre-Christmas quarter included the third and final Beatles Anthology album, which entered the American charts at number one. It is also releasing a triple album from The Artist Formerly Known as Prince and the debut from British newcomers the Spice Girls. ($1=.5970 Pound)
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Shares in English soccer champions Manchester United powered to record highs on Friday after the club's chief executive said the club was a likely bid target.
"Any successful company is an attractive takeover prospect. People are going to look at it, so it could well be the subject of more takeover proposals," chief executive Martin Edwards was quoted as telling The Times.
Britain's Press Association quoted Edwards as saying that any proposals would be given serious consideration.
"...If it arises, then we would have to look at it as and when. We would have a responsibility to talk. But it would have to be in the best interests of the shareholders and the supporters."
The speculation sent United shares soaring to record highs of over 5.0 pounds -- valuing the club in excess of 300 million pounds ($470 million).
The club responded to the swirl of speculation with a statement that its board was not aware of any bid approaches.
"...we have noted the recent media coverage suggesting that Manchester United have received an approach which may lead to an offer being made for the Company. The Board is not aware of any proposals," the club said.
The shares came off their highs after the statement but were still 42 1/2p firmer at 495p at around midday.
United shares have jumped from under two pounds at the end of January as the club won the coveted English league and F.A. Cup double.
The rise has also been fuelled by a lucrative new television deal signed by the Premier League with satellite broadcaster BSkyB which will virtually treble television income for top English soccer clubs..
United are reported earlier this year to have rejected a takeover bid from publishing group VCI which valued the club at 300 million pounds. VCI did a deal with United in January to buy the publishing rights to club videos and books.
The Times article named brewer Whitbread and media and leisure group Granada as potential bidders.
It reported that Edwards, who has a stake of around 17 percent in United, has said privately that it would require a bid of over 400 million pounds to buy the club.
Granada has strong ties with the Manchester area, operating the ITV commercial television franchise for north-west England. It is also known to be interested in developing a Manchester United magazine TV channel with the club.
But sources close to Granada effectively ruled out a takeover bid, saying that the company remained focused on digesting its acqusition of leading British hotel group Forte earlier this year.
Whitbread poured scorn on the suggestion.
"We would love to buy the club but there are as many beer drinkers in Liverpool, Newcastle and Chelsea," a Whitbread spokeswoman said, adding that Whitbread would not want to do anything to upset customers who were fans of other clubs. "The report is complete rubbish."
Share analysts say that the huge interest in soccer and the potential growth in revenue from pay-per-view television deals make a bid likely for United at some stage in the near future.
Pay-per-view is expected to be introduced before the end of the century following the planned launch of digital satellite television by BSkyB late next year. It could generate tens of millions of pounds for clubs like United, the best-supported team in the country. ($1=.6350 Pound)
| 21 |
Shares in British media and leisure firm Pearson Plc recovered on Wednesday following a trading statement which calmed market jitters about the outlook for the company.
Pearson had dipped to a two-month low on Tuesday but bounced back after the company said trading in the second half of the current year was in line with the first half. The shares were 20 1/2p firmer at 710p by 095 GMT.
Analysts said there was relief that Pearson, which passes into the hands of new chief executive Marjorie Scardino in January, had not produced any really nasty surprises.
"All in all, it's in line with expectations but that in itself is good as the last few trading updates from the company have been disappointing," said Anthony de Larrinaga of brokers Panmure Gordon.
Pearson said that total video retuning costs associated with the launch of the Channel 5 terrestrial television channel next March would rise to around 150 million pounds ($250 million).
This is almost treble the sum initially earmarked for dealing with video recorders affected by interference from the new channel's signal. But it is below the figure quoted in some recent media reports.
Channel 5 has recently been awarded an extra frequency to boost its coverage to 80 percent of the country and Pearson said its business plan showed significantly higher rates of return than in the original bid.
Pearson said the retuning costs and a major film deal with Fox would come out of the 300 million pound ($500 million) original funding agreed by the Channel 5 shareholders. The other shareholders are Britain's United News & Media, U.S. investment firm Warburg Pincus and Luxembourg broadcast group CLT.
This year's losses from Mindscape, Pearson's ailing U.S. consumer software unit, should be in line with earlier forecasts of around 46 million pounds. Pearson also saw no real impact on its 1996 profits from the current strength of sterling.
Pearson's interests range from the Financial Times newspaper, through to theme parks and television production.
The company's critics have long said it lacks focus and much attention is centred on the likely impact of Texan Scardino, the first woman to head one of Britain's leading companies.
"The key issue remains what the structure of Pearson will be. Which are the core areas and do all parts of the business fit?" said de Larrinaga. ($1=.6003 Pound)
| 21 |
United News & Media on Tuesday secured victory in a battle for control of international exhibitions group Blenheim with an agreed offer valuing the company at 592.5 million pounds ($935 million).
The deal will create the world's largest trade exhibition group with a turnover of more than 500 million pounds, based on 1995 figures.
Media and financial services group United said it had already secured acceptances for 51 percent of Blenheim after offering five pounds per share.
"The acquisition will be earnings-enhancing in the first full year but the real attraction is the long-term growth we can get out by combining these businesses into one group," United chief executive Clive Hollick told Reuters.
United News shares added 31p to 674-1/2p after the announcement, while Blenheim gained 22-1/2p to 496p.
Dutch publisher VNU, which last week acquired a 15 percent stake in Blenheim, said it would not make a counter-bid and was likely to sell its stake. That decision effectively removed the threat of a bidding war developing for Blenheim.
Anglo-Dutch media group Reed-Elsevier had been regarded as a rival suitor to United but sources close to the company indicated in the last few days that it had dropped out of the running.
The deal ends an on-off saga that began in June when Blenheim said it had received a bid approach. In August it said that talks with an unnamed party had broken down but then made another statement a few weeks later confirming a new approach.
Based on 1995 figures, combined turnover and operating profit would be 545.5 million pounds and 88 million pounds, respectively.
Analysts said that Blenheim's geographical strength in continental Europe, and France in particular, made it a good fit with United.
United's Miller Freeman subsidiary operates more than 100 exhibitions in the U.S., Europe and Asia but the American market is seen as its main strength. These exhibitions are supported by a range of trade publications.
Blenheim operates more than 170 exhibitions worldwide but does not have a significant publishing portfolio.
"The directors of United believe that the Miller Freeman and Blenheim trade show portfolios are highly complementary geographically, by market sector, and in terms of operational management," United said in a statement.
The acquisition is the first major move by United since the national newspaper group merged with television and financial services group MAI earlier this year.
That merger doubled the size of the company, creating a British media major with a market capitalisation of more than three billion pounds. ($1=.6337 Pound)
| 21 |
Shares in Pearson Plc fell on Thursday as the stock market gave an initial thumbs-down to the appointment of an American woman publishing executive as chief executive of the British media group.
Marjorie Scardino, 49, chief executive of The Economist Group that is half owned by Pearson -- which publishes the Financial Times British business daily -- will succeed Frank Barlow as chief executive at the end of the year.
Her appointment ends a long period of uncertainty over the succession to Barlow, 66, who is retiring.
But market players were dismayed by her close ties with the Pearson group and the fact that a big name executive had not been brought in from outside to knock the business into shape.
"The message that this appointment puts across is that we can expect more of the same from the company. That's not what the market wanted to hear," said one media analyst.
Pearson shares fell to a low of 668 pence after the announcement. They recovered a little but still ended the day 13p lower at 675.
The company also announced that Dennis Stevenson, a non-executive director, becomes deputy chairman now and will take over from Michael Blakenham as chairman next May.
Scardino said that she was not a Pearson insider.
"I would like to put that one to rest -- I am an outsider to Pearson," she told Reuters.
She said that a trust agreement meant that Pearson directors remained in a minority on the Economist board. "We jealously guard our independence, we're not a part of the Pearson group."
Trained as a lawyer, Scardino helped her journalist husband to run the Pulitzer Prize winning local weekly the Georgia Gazette in the 1970s. The couple moved to New York in the 1980s where she headed the Economist's North American operation.
Share analysts say that her main task is to bring focus to Pearson, a sprawling media and leisure company which has a market capitalisation of almost four billion pounds ($6.3 billion).
Barlow has reshaped the company in his six years in charge, selling off the Royal Doulton china business and wine and oil industry interests. The company has focused on three divisions -- Information, Education and Entertainment. Its activities range from Australian soap opera to the Financial Times and analysts say not all pieces of the jigsaw fit.
Scardino, a mother of three, said she was prepared to make radical changes "if needed".
"I know this company has been broken up and put back together (by journalists and analysts) in all kinds of ways. I think I'm aware of all the possibilities."
She won a ringing endorsement from Dominic Cadbury, her colleague as chairman of business publisher the Economist.
"I am sure that she will move quickly to assess the Pearson business and define a new strategic direction which she will set about implementing," he said.
"She has the appropriate experience of publishing and a background as a lawyer, as well as knowing the U.S. and British environments first hand, and has a great record of success in the Economist's growing business and circulation."
Revenue has increased by almost 80 percent in her time at trhe Economist while profit after tax has more than doubled to 17.7 million pounds this year from 7.8 million in 1993. ($1=.6299 Pound)
| 21 |
Britons will shortly learn how much they will be asked to pay to help fund the expansion of British Broadcasting Corporation (BBC) radio and television services in the multi-channel future.
The BBC has been lobbying the government to grant it an above-inflation increase in the annual licence fee, arguing that more money is needed if it is to remain at the forefront of broadcasting into the next millennium. The government is expected to announce its decision by early to mid-December.
The BBC, which calls itself "the world's most successful cultural institution", derives 95 percent of its funding from the annual fee payable by all television set owners.
The fee stands at 89.50 pounds ($150) and provided income of 1.8 billion pounds in the last financial year -- far outweighing the 77 million pound net benefit from the BBC's expanding commercial arm. The licence is guaranteed as a source of BBC funding for the next five years.
BBC Director-General John Birt launched his campaign for what he said would be the first real increase in the licence fee in over a decade at a conference in Edinburgh in August.
"If the BBC is to sustain the existing level of services; if it is to remain as creative and dynamic an institution in the 21st as it has been in the 20th century; if it is to innovate with high quality services in the new technologies...we shall need a real increase in the level of the licence fee," he said.
"Neither a new leap forward in efficiency, nor a vigorous drive to increase our commercial revenue will be enough."
The BBC is believed to be seeking a rise of around five pounds -- which would generate extra revenue of more than 100 million pounds. Annual inflation is currently 2.7 percent.
Birt's call has received a cool reponse from the ruling Conservatives and opposition Labour, wary of pinning a price rise on more than 20 million households in the run-up to a general election. The new rate would take effect in April while the election must be held by the following month.
Recent newspaper reports said that National Heritage Secretary Virginia Bottomley has settled for a five-year formula that would leave the licence fee unchanged in real terms.
The reports said that Bottomley would offer higher rises in the second and third years to help fund new digital services and commercial projects but that increases in the following two years would be pegged below inflation.
The BBC, which runs two television channels and five national radio stations and has an enviable reputation as a quality public service broadcaster, has stepped up its campaign.
"You want us to do things. We want to do them. Now please give us the means and we can get on with the job," Will Wyatt, chief executive of the BBC Broadcast division said in a recent speech.
"We have called for only a modest increase, but one which would enable us to achieve a disproportionate amount of good."
The BBC points out that it has cut its cost base by almost 20 percent over the past three years and increased programme investment by 300 million pounds.
The licence fee debate comes as the broadcasting industry is set to be revolutionised by the move to digital transmission.
Digital technology converts sound and pictures into binary digits -- a series of noughts and ones. It increases picture quality, multiplies the number of channels that can be broadcast and allows for the creation of interactive services.
Pay television operator BSkyB, in which Rupert Murdoch's News Corp is the leading shareholder, plans to launch a digital satellite service with some 200 channels into Britain from next year.
BSkyB, one of the corporate success stories of the 1990s, is Britain's leading pay television operator with more than five million subscribers. Its top package of premium films and live sports events costs subscribers 324 pounds per annum.
A terrestrial digital service, broadcast from land-based transmitters and offering some 36 channels, is expected to begin by mid-1998.
The BBC plans to use digital technology to offer all licence payers supplementary programming to its core BBC1 and BBC2 output plus a 24-hour news service. It plans to make them available via satellite and terrestrial distribution.
The BBC expects to retain a share of around a third of all viewing and listening in 2005, down from 45 percent as the number of channels multiplies and the market fragments.
The digital expansion creates fresh opportunities for the corporation to develop its BBC Worldwide commercial arm.
Worldwide is in negotiations with partners in Britain and the United States over the creation of a number of subscription channels, exploiting its strengths in areas such as comedy, drama and natural history.
Its partner in Britain is Flextech Plc, while it is working with Discovery Communications Inc on channels for international markets. Leading U.S. cable television operator Tele-Communications Inc is a major shareholder in both companies. It aims to launch its UK services in mid 1997.
Some media figures doubt the sustainability of the licence fee as subscription and pay-per-view services proliferate.
David Elstein, chief executive of Britain's new Channel 5 commercial television network, said recently that he believed that pay-per-view would eventually "consign the licence fee to history, where it belongs". ($1=.5953 Pound)
| 21 |
The purchase of British TV group Westcountry Television by Carlton Communications Plc slots another piece into the ITV jigsaw but analysts said on Monday it could be some time before the picture is complete.
"Westcountry was one which was on the table and Carlton have done well to snatch it but I am not convinced that there is going to be a massive rush for other ITV franchises," said Jason Crisp of Societe Generale Strauss Turnbull.
Carlton said on Saturday it had agreed to pay 85 million pounds ($143 million) for Westcountry, pipping United News & Media which had also been seeking to acquire the privately-owned broadcaster.
Analysts said that high prices for takeover targets was likely to dampen down takeover activity.
The ITV commercial television sector is going through a period of consolidation under new media ownership laws. The two-licence ownership limit has been removed and replaced by a cap of 15 percent of television audience.
The Westcountry deal adds the south-western corner of England to Carlton's licences in the English Midlands and for London weekday television. Carlton, United News and Granada Group Plc are the three main players in the sector and are expected gradually to tighten their grip.
The Westcountry move was described as a "useful" addition to Carlton's portfolio but analysts said it should be seen in context, noting that its 1995 pre-tax profit of five million stg was tiny compared with Carlton's 123 million pounds operating profit from broadcast television.
Carlton pipped United News at the post for Westcountry and the two could square up again in a battle for control of HTV, the ITV broadcaster to Wales and an area of southwest England which includes the cities of Bristol and Bath.
"What this means is that there are two suitors for HTV -- Carlton and United News," said one industry source.
United News took a 20 percent stake in HTV last month but said at the time that it regarded the stake as an investment and was not planning a full bid.
The Westcountry and HTV franchise areas are usually sold as a single package to advertisers while HTV does all the transmission for its smaller western neighbour. A move for HTV, which has a market capitalisation of some 315 million pounds, would have obvious benefits for Carlton.
"Carlton can afford to pay more for HTV than anyone else because it could wring out greater cost savings," said Louise Barton of Henderson Crosthwaite.
While United News and Carlton vie for supremacy in the south, Granada is expected to take over its northern neighbour Yorkshire-Tyne Tees Television at some point.
Granada has made its intentions clear by taking a 27 percent stake in Yorkshire, a company valued at over 800 million pounds.
Granada is believed to be sitting it out, waiting for some of the froth to come off the Yorkshire share price before it moves for the rest of the company. ($1=.5941 Pound)
| 21 |
Britons will shortly learn how much they will be asked to pay to help fund the expansion of British Broadcasting Corporation (BBC) radio and television services in the multi-channel future.
The BBC has been lobbying the government to grant it an above-inflation increase in the annual licence fee, arguing that more money is needed if it is to remain at the forefront of broadcasting into the next millennium. The government is expected to announce its decision by early to mid-December.
The BBC, which calls itself "the world's most successful cultural institution", derives 95 percent of its funding from the annual fee payable by all television set owners.
The fee stands at 89.50 pounds ($150) and provided income of 1.8 billion pounds in the last financial year -- far outweighing the 77 million pound net benefit from the BBC's expanding commercial arm. The licence is guaranteed as a source of BBC funding for the next five years.
BBC Director-General John Birt launched his campaign for what he said would be the first real increase in the licence fee in over a decade at a conference in Edinburgh in August.
"If the BBC is to sustain the existing level of services; if it is to remain as creative and dynamic an institution in the 21st as it has been in the 20th century; if it is to innovate with high quality services in the new technologies...we shall need a real increse in the level of the licence fee," he said.
"Neither a new leap forward in efficiency, nor a vigorous drive to increase our commercial revenue will be enough."
The BBC is believed to be seeking a rise of around five pounds -- which would generate extra revenue of more than 100 million pounds. Annual inflation is currently 2.7 percent.
Birt's call has received a cool reponse from the ruling Conservatives and opposition Labour, wary of pinning a price rise on more than 20 million households in the run-up to a general election. The new rate would take effect in April while the election must be held by the following month.
Recent newspaper reports said that National Heritage Secretary Virginia Bottomley has settled for a five-year formula that would leave the licence fee unchanged in real terms.
The reports said that Bottomley would offer higher rises in the second and third years to help fund new digital services and commercial projects but that increases in the following two years would be pegged below inflation.
The BBC, which runs two television channels and five national radio stations and has an enviable reputation as a quality public service broadcaster, has stepped up its campaign.
"You want us to do things. We want to do them. Now please give us the means and we can get on with the job," Will Wyatt, chief executive of the BBC Broadcast division said in a recent speech.
"We have called for only a modest increase, but one which would enable us to achieve a disproportionate amount of good."
The BBC points out that it has cut its cost base by almost 20 percent over the past three years and increased programme investment by 300 million pounds.
The licence fee debate comes as the broadcasting industry is set to be revolutionised by the move to digital transmission.
Digital technology converts sound and pictures into binary digits -- a series of noughts and ones. It increases picture quality, multiplies the number of channels that can be broadcast and allows for the creation of interactive services.
Pay television operator BSkyB, in which Rupert Murdoch's News Corp is the leading shareholder, plans to launch a digital satellite service with some 200 channels into Britain from next year.
BSkyB, one of the corporate success stories of the 1990s, is Britain's leading pay television operator with more than five million subscribers. Its top package of premium films and live sports events costs subscribers 324 pounds per annum.
A terrestrial digital service, broadcast from land-based transmitters and offering some 36 channels, is expected to begin by mid-1998.
The BBC plans to use digital technology to offer all licence payers supplementary programming to its core BBC1 and BBC2 output plus a 24-hour news service. It plans to make them available via satellite and terrestrial distribution.
The BBC expects to retain a share of around a third of all viewing and listening in 2005, down from 45 percent as the number of channels multiplies and the market fragments.
The digital expansion creates fresh opportunities for the corporation to develop its BBC Worldwide commercial arm.
Worldwide is in negotiations with partners in Britain and the United States over the creation of a number of subscription channels, exploiting its strengths in areas such as comedy, drama and natural history.
Its partner in Britain is Flextech Plc, while it is working with Discovery Communications Inc on channels for international markets. Leading U.S. cable television operator Tele-Communications Inc is a major shareholder in both companies. It aims to launch its UK services in mid 1997.
Some media figures doubt the sustainability of the licence fee as subscription and pay-per-view services proliferate.
David Elstein, chief executive of Britain's new Channel 5 commercial television network, said recently that he believed that pay-per-view would eventually "consign the licence fee to history, where it belongs".
($1=.5953 Pound)
| 21 |
Shares in Pearson Plc slipped on Thursday as the stock market reacted negatively to the appointment of a relatively little-known insider as chief executive of the British media group.
Marjorie Scardino, currently chief executive of The Economist Group that is half owned by Pearson, will succeed Frank Barlow as chief executive at the end of the year.
Dennis Stevenson, who is a non-executive director, becomes deputy chairman now and will take over from Michael Blakenham as chairman at Pearson's annual meeting next May.
The appointment of Scardino ends a long period of uncertainty over the succession to Barlow, 66, who had said he planned to retire by early next year.
But the market greeted her appointment with scepticism, with market players saying they knew little about her. The shares fell to a low of 668 pence, but later recovered to 678 for a loss of 10 pence.
"The market was looking for a big hitter and she wasn't the big name it was looking for," one market-maker said in reference to Scardino.
The market was also worried by a report in the Independent newspaper that said Pearson had resolved concerns about the tax implications of selling its stake in British satellite broadcaster BSkyB but faced difficulties separating direct and indirect holdings.
The report said Pearson's indirect stake of around four percent was worth 440 million pounds ($697.4 million) at BSkyB's current share price.
Pearson, which has a market capitalisation of almost four billion pounds, is a sprawling media and leisure company with interests ranging from the Financial Times business newspaper to television soap opera.
Analysts have criticised the company for a lack of a clear strategy and it has long been seen as a potential bid target.
Scardino said she was excited to be joining Pearson.
"It is one of the few companies positioned strongly enough to take advantage of the opportunities in the rapidly changing, digital-driven international marketplace."
Blakenham, who has been chairman of Pearson since 1983 following a six year stint as chief executive, said in statement the appointments completed the succession process at Pearson.
Barlow, who has been chief executive for seven years, had agreed to extend his contract for two years after his retirement date in 1995 in order to help implement the group's strategy to focus on the media sector.
"I think Pearson's future is very favourable and Marjorie Scardino is a very good appointment," he told Reuters.
Scardino, 49, has been chief executive of the Economist since 1992, before which she headed its North American operations.
Prior to that, she was partner in a Savannah, Georgia law firm and publisher and founder with her husband of a Pulitzer Prize-winning newspaper, the Georgia Gazette.
Stevenson is chairman of aircraft leasing group GPA and is also a non-executive director of British Sky Broadcasting, J. Rothschild Assurance Plc and Manpower Inc. ($1=.6309 Pound)
| 21 |
British media company Carlton Communications Plc, boosted by a 20 percent annual profit rise, said on Wednesday that it planned a drive into pay television.
Carlton, the country's largest commercial television (ITV) company, said it aimed to build on its broadcasting strengths in the multi-channel future.
"We want to build up our interests in pay television, both as a content provider and operator. These may encompass cable, satellite and digital television," chairman Michael Green said in a statement.
"Free television and pay channels should not be seen as competitors; they are complementary businesses...Carlton wants to establish a significant presence in both markets," he added.
Green was speaking as Carlton unveiled a 20 percent rise in pre-tax profit to 295 million pounds ($492 million) for the year to September 30. Carlton increased its dividend by 17.5 percent to 11.1 pence per share.
The figures were in line with analysts' forecasts but Carlton shares fell 8.5p to 495p in a weaker market.
Carlton last month agreed to pay 85 million pounds for Westcountry Television, the ITV company which broadcasts to the south-western corner of England. It also operates the ITV licences for the English Midlands and London weekday television and now broadcasts to 22 million people.
Green confirmed that Carlton was considering investing in digital terrestrial television, which is expected to be launched in Britain in 1998 and offer viewers up to 36 channels.
"Digital Terrestrial Television will expand free-to-air broadcasting in the UK and opens the door to the establishment of further pay television services. We are examining these investment opportunities very carefully," he said.
The Independent Television Commission (ITC) recently invited applications to operate the blocks of frequencies which will carry the digital channels.
Digital terrestrial will be broadcast from land-based transmitters and viewers will not need a satellite dish to receive it. They will, however, require a set-top decoder.
Carlton already has two subscription cable channels in the UK and pay television interests in France, India and Singapore.
Operating profits from Carlton's Television division grew by only five percent to 129 million pounds as advertising revenues remained flat. But the company said the outlook for advertising revenue was good.
Carlton's video division increased profit by 21 percent to 73 million pounds as demand for pre-recorded videocassettes continued to grow.
Its film processing arm boosted profits to almost 53 million pounds -- a 27 percent jump -- as the Hollywood studios continued their policy of releasing movies to large numbers of cinemas simultaneously.
The company's products division, aiming to become the world leader in tapeless editing for the television industry, increased profits to 43 million pounds from 32 million.
| 21 |
Satellite broadcaster BSkyB, the dominant force in British pay television, on Tuesday reported a 66 percent rise in full-year profit to 257.4 million pounds ($398.1 million).
Annual turnover climbed to more than one billion pounds as the number of subscribers in Britain and Ireland rose to 5.5 million for BSkyB, in which Rupert Murdoch's News Corp has a 40 percent stake.
Profit for the year to June 30, 1996 -- up more than 100 million pounds on the 155.3 million reported a year ago -- was towards the top end of analysts' forecasts. The full-year dividend of 5.5 pence was lower than expected, however.
BSkyB shares shed seven pence to 530p in early trading, having climbed to record highs in recent days.
"The continuing growth in subscribers, the increase in the number of channels and the renewal of the Premier League (soccer) contract until 2001 provide a firm base from which to pioneer the development of digital television in the UK," chief executive Sam Chisholm said in a statement.
"The agreement with Kirch Gruppe to develop the digital platform in Germany gives us a great opportunity to extend our business into continental Europe," he said.
BSkyB plans to launch a British digital television service next year.
Last month it signed a deal with the group headed by Bavarian media mogul Leo Kirch under which it will take a stake of up to 49 percent in DF1, Kirch's digital pay television operation.
BSkyB is expected to inject 200 million pounds into the alliance to cover start-up losses over the next three years. The deal gives BSkyB access to Europe's largest television market.
BSkyB said spending on programming rose by 28 percent to 420 million pounds after the purchase of golf, boxing and cricket events and the launch of new channels such as Disney.
The programming spend is set to rise further following a 670 million pound deal signed in June which will enable BSkyB to retain rights to broadcast live English Premier League soccer for the next five years.
One cloud on the horizon is a report that British cable companies may seek European Commission intervention over the fees BSkyB charges for its top channels.
The Financial Times said the cable companies fear they will not secure satisfactory conditions despite BSkyB undertakings to revise the structure of its wholesale rate card.
| 21 |
Britain's Ladbroke Group. and the U.S. Hilton Hotels Corp (HHC) on Thursday announced a worldwide alliance that will reunite the famous Hilton hotel brand after 32 years of separation.
HHC owns the Hilton name in the United States while Ladbroke holds the rights everywhere else through its Hilton International (HIC) subsidiary.
The two companies have signed an outline agreement to reunite the brand, separated in 1964 when HIC was spun off from the American operation. Ladbroke acquired HIC in 1987.
In the alliance grouping 400 hotels in 49 countries, HHC and HIC intend to cooperate from next year on sales and marketing, loyalty programmes and hotel development.
Ladbroke also announced first half pre-tax profits of 72.8 million pounds ($113 million) before exceptional items, a 29 percent increase on last year and above analysts' forecasts.
Interim dividend was unchanged at 2.4 pence per share.
Ladbroke shares added 7.5p to a 1996 high of 215p in early trade before slipping slightly to 213p.
"This deal makes good sense to our customers, our employees and our shareholders," Ladbroke Chief Executive Peter George said in a statement.
"Through this alliance, our two companies intend to lead the hotel and gaming markets worlwide," he added.
The companies plan to finalise the agreement as soon as possible in order for it to become effective by early 1997.
HHC intends to acquire a five percent stake in Ladbroke once the final agreement has been signed. George will join the HHC board while Stephen Bollenbach, his opposite number at HHC, will become a director of Ladbroke.
The two men said that the deal would could be worth several tens of millions of dollars when cost savings and extra sales were combined.
"It seems all upside, there's hard to see a downside," said George. He added the deal had been under negotiation since Bollenbach became HHC chief executive in February and was agreed only on Wednesday night.
It provides for the formation of a jointly owned company to market and develop the Hilton brand around the world.
HHC's guest loyalty programme, which has some five million members, will be extended worldwide. The companies will also participate in each other's future hotels development.
Ladbroke will also have the chance to become a partner in some of HHC's gaming developments in the United States.
Ladbroke said operating profits from HIC grew strongly to 70 million pounds in the first half while those from its betting and gaming division climbed 17 percent to 43.6 million pounds.
($1=.6421 Pound)
| 21 |
Britain's Granada Group, which won control of hotel and catering empire Forte in January, on Wednesday reported a 37 percent surge in full-year profits to 480 million pounds ($804 million).
The media and leisure group said that it would deliver on its promise to improve profits at Forte by over 100 million pounds per annum from 1996/97.
Granada chairman Gerry Robinson called the results "very satisfying". "The key has been the speed with which we have been able to move on the Forte businesses," he told Reuters.
Granada took over family-controlled Forte in a 3.9 billion pound deal earlier this year after a bitter bid battle that raged over the Christmas and New Year period 12 months ago.
The company said that Forte had responded well to its management and that it had already improved profitability there by approaching 40 million pounds.
Granada continues to reorganise following the acquisition of Britain's leading hotel group. Robinson said there was substantial interest from a wide range of potential purchasers of the luxury hotels it has put on the market.
Granada sold the first of the 17 Exclusive hotels on Tuesday when Hong Kong based Mandarin Oriental International Ltd bought London's Hyde Park Hotel for 86 million pounds.
Robinson said that Granada expected to complete the disposals by early 1997. Analysts calculate the sale of assets including the George V in Paris and Plaza Athenee in New York will raise a total of around 900 million pounds.
The Granada chairman said that the company hoped to sell the Welcome Break chain of British motorway service areas in January or February of next year. The 21 sites were acquired in the Forte deal but must be sold off because of monopoly concerns.
But he said there were no plans to sell the 10.8 percent stake Granada holds in pay television operator British Sky Broadcasting.
Group turnover in the year to end-September climbed 60 percent to 3.82 billion pounds. Total dividend was raised by 11 percent to 13p per share.
Granada shares, which had risen in recent days in anticipation of bumper results, fell by 8p to 884 1/2p in a generally gloomy market.
The largest contribution came from the Restaurants division, which boosted profit before interest and tax by 80 percent to 217 million pounds as the Forte acquisition bore fruit.
The new Hotels unit contributed 168 million while Media, including Granada's two British commercial television stations, made 163 million, up 17 percent. Profits from the high street rentals arm was marginally higher at 126 million.
| 21 |
Britain's commercial television watchdog on Thursday invited applications to run terrestrial frequencies which will multiply the number of channels available to viewers in the new digital age.
"This is a very important day for U.K. viewers...as many as 35 or 36 channels could be available on digital terrestrial television," said Peter Rogers, chief executive of the Independent Television Commission (ITC).
The ITC is seeking applications to operate four "multiplexes", as the blocks of frequencies are known. Each block can carry as many as six digital channels.
The BBC has already been earmarked its own multiplex and commercial networks ITV and Channel 4 will share one.
The ITC will award the 12-year licences on criteria including speed of roll-out of the service and the appeal of programming but a cash bid will not be required. Licences are expected to be awarded next spring and broadcasting could begin by mid-1998.
Britain is leading the way in the development of digital terrestrial television but some observers question whether it will succeed.
Pay television operator BSkyB, in which Rupert Murdoch's News Corp is the largest shareholder, plans to launch a digital satellite service into Britain in late 1997 -- several months ahead of the terrestrial version.
The satellite version could offer several hundred channels and BSkyB's control of key movie and sporting rights is likely to make it an attractive proposition.
Rogers told a news conference he was confident the terrestrial option would prove attractive to investors.
"I would be surprised and disappointed if we didn't have applications for all of the multiplexes," he said.
His view was shared by Paul Styles, a media expert at consultancy and accounting firm KPMG.
"Most people perceive digital bandwith to be valuable so I think there will be interest in the multiplexes," he said.
"This will not be an overnight sensation but a business to be built," he said, identifying ITV companies, cable groups and BSkyB itself as potential licence applicants.
Digital technology increases the number of channels which can be transmitted and enhances sound and picture quality. it also enables interactive services such as home shopping and home banking to be created.
Digital means converting sound and pictures into binary digits -- a series of noughts and ones -- rather than transmitting them as electric signals as now happens. A set-top box or "decoder" will be required to receive digital services.
This is also a source of controversy, as ITC officials admit that there is no current British or European legislation to enforce a common standard for decoders.
That means that consumers could theoretically have to pay several hundred pounds (dollars) for a set-top box to receive BSkyB's digital services and then have to buy a second box a few months later to receive digital terrestrial.
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British pay television operator BSkyB said on Friday that it was considering further investment in Germany and would beam its second pay-per-view sports event into Britain later this month.
The satellite broadcaster said pre-tax profit had risen by 31 percent to 66 million pounds ($107.5 million) in the three months to September 30.
The company, in which Rupert Murdoch's News Corp is the leading shareholder, said that total paying subscribers had reached 5.65 million at 30 September, a net increase for the quarter of 146,000.
"The company has performed strongly in the first quarter and has achieved significant growth in both revenue and profits," said BSkyB chief executive Sam Chisholm.
"Our increased investment in all areas of programming and the quality and choice we offer our subscribers will maintain our impetus," he added.
Operating revenues for the three months to September 30 increased to 266 million pounds, a rise of 24 percent on a year earlier. Earnings per share were 3.9 pence, 30 percent up.
BSkyB shares rose 4p to 582-1/2p although analysts said the subscriber growth figures were "unexciting" and the profits in line with expectations.
BSkyB said in July that it would take a stake of up to 49 percent in DF1, the German digital television venture launched by Bavarian media mogul Leo Kirch. BSkyB said on Friday it was considering investments in additional German Pay TV channels.
DF1 has made a slow start but the German pay television market is expected to expand rapidly in coming years.
BSkyB said it would show its second pay-per-view event on November 9 when Mike Tyson and Evander Holyfield meet in Las Vegas for the WBA heavyweight boxing crown.
BSkyB successfully experimented with pay-per-view when Tyson fought Briton Frank Bruno in March. More than 600,000 homes paid some 10 pounds to see that fight.
BSkyB has said it plans to introduce digital satellite broadcasting into Britain late next year. Pay-per-view sports events and movies are likely to be one of the prime sources of income from the extra channels provided by digital.
Niche channels Sky Scottish and The Computer Channel were launched on Friday, bringing the total number of channels available on Sky Television to over forty.
However, Friday's planned launch of WBTV-The Warner Channel was postponed at the 11th hour on Thursday evening.
The Warner Channel -- a mixture of Bugs Bunny cartoons and vintage movies -- was apparently a victim of the legal battle being fought in the United States between Murdoch and the combined might of CNN founder Ted Turner and Time Warner.
That clash of the titans centres on whether Time Warner, the second largest U.S. cable operator, will carry News Corp's 24-hour Fox News Service in New York City. Fox is a major rival to CNN, now part of Time Warner following a recent merger. ($1=.6141 Pound)
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United News & Media on Tuesday secured victory in a battle for control of international exhibitions group Blenheim with an agreed offer valuing the company at 592.5 million pounds ($935 million).
The deal will create the world's largest trade exhibition group with a turnover of more than 500 million pounds, based on 1995 figures.
Media and financial services group United said it had already secured acceptances for 51 percent of Blenheim after offering five pounds per share.
"The acquisition will be earnings-enhancing in the first full year but the real attraction is the long-term growth we can get out by combining these businesses into one group," United chief executive Clive Hollick told Reuters.
United News shares added 31 pence to 674-1/2 pence after the announcement, while Blenheim gained 22-1/2 to 496.
Dutch publisher VNU, which last week acquired a 15 percent stake in Blenheim, said it would not make a counter-bid and was likely to sell its stake. That decision effectively removed the threat of a bidding war developing for Blenheim.
Anglo-Dutch media group Reed-Elsevier had been regarded as a rival suitor to United but sources close to the company indicated in the last few days that it had dropped out of the running.
The deal ends an on-off saga that began in June when Blenheim said it had received a bid approach. In August it said that talks with an unnamed party had broken down but then made another statement a few weeks later confirming a new approach.
Based on 1995 figures, combined turnover and operating profit would be 545.5 million pounds and 88 million pounds, respectively.
Analysts said that Blenheim's geographical strength in continental Europe, and France in particular, made it a good fit with United.
United's Miller Freeman subsidiary operates more than 100 exhibitions in the United States, Europe and Asia but the American market is seen as its main strength. These exhibitions are supported by a range of trade publications.
Blenheim operates more than 170 exhibitions worldwide but does not have a significant publishing portfolio.
"The directors of United believe that the Miller Freeman and Blenheim trade show portfolios are highly complementary geographically, by market sector, and in terms of operational management," United said in a statement.
The acquisition is the first major move by United since the national newspaper group merged with television and financial services group MAI earlier this year.
That merger doubled the size of the company, creating a British media major with a market capitalisation of more than three billion pounds.
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Tottenham Hotspur chairman Alan Sugar said on Thursday that English soccer clubs could face financial ruin if they follow the example of big spenders such as Newcastle United.
Sugar was speaking after Premier League club Tottenham posted a record pre-exceptional profit of 10.2 million pounds ($16 million) for the 14 months to July 31. The club increased its total dividend to 5p from 3p.
English soccer is booming as television revenue helps to fund an influx of top foreign talents and the sector is seen as increasingly attractive for investors.
English champions Manchester United, listed along with Tottenham on the London Stock Exchange, this week announced an annual profit of 15 million pounds.
But Sugar warned that the Bosman Ruling under which players effectively become free agents at the end of their of their contracts was "a devastating blow to the football industry".
Sugar said he could not see the sense in deals such as privately-owned Newcastle's recent signing of England captain Alan Shearer from Blackburn Rovers for 15 million pounds.
"Even if you win everything in sight there is no way to make it pay," he said, noting that Newcastle would not be able to recoup any of their outlay on Shearer once his contract was up.
Tottenham, who reported 14-month figures because of a change in their financial year, took an exceptional charge of 7.3 million pounds to reflect a drop in the value of their squad.
The value fell after Belgian Jean-Marc Bosman won a landmark case at the European Court of Justice which ended the transfer fee system for players who were out of contract.
Sugar, who has a 40 percent stake in Tottenham, acknowledged that profit figures were meaningless to fans clamouring for new signings following the injury-hit team's indifferent start to the season.
He said funds were available to team manager Gerry Francis to strenghten the squad but declined to say how much.
"I would hope in the next two to three weeks that we will see some signings at the club," he added, saying that the club's aim was to sign promising young players on long-term contracts.
The head of consumer electronics group Amstrad, Sugar saved Tottenham from the verge of bankruptcy five years ago when he and former England coach Terry Venables took over the club.
But the two, both working-class London boys made good, fell out spectacularly and have become locked in a series of legal battles since Sugar forced Venables to leave the club in 1993. ($1=.6395 Pound)
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Political opposition to the BBC's call for more public funding lent added urgency on Monday to joint venture talks between the corporation and two rival pay television groups.
The two rivals for the BBC's hand are U.S.-controlled cable and satellite programmer Flextech and satellite broadcaster BSkyB, in which Rupert Murdoch's News Corp is the largest shareholder.
Both want to launch new subscription channels based on the BBC's wealth of quality programming.
The BBC is under increased pressure to beef up its commercial activities after politicians criticised its demand for an above-inflation licence fee increase.
BBC Director-General John Birt used a speech at the Edinburgh International Television Festival on Friday to launch the campaign for what he said would be the first real increase in the licence fee since 1985.
The fee, fixed by the government and payable by all television set owners, is 89.50 pounds ($139.1) annually.
Birt argued that more money was needed to ensure the BBC remains "the touchstone of quality" in the digital era.
But politicians from both main political parties appear opposed to his appeal. With a general election due by next May, party strategists believe it would be folly to support a rise.
The BBC is seeking to preserve its place at the heart of the broadcasting world as the industry gears up for a new era.
Digital technology -- in which images are transmitted as a series of binary digits rather than as varying electric signals as under the existing analogue method -- will soon make hundreds of extra channels available.
The BBC, with its huge library and production facilities, is an ideal partner for companies such as Flextech and BSkyB as they seek to compile attractive programme packages.
The BBC plans to offer a 24-hour news channel, supplementary programming and wide-screen tranmission to all licence fee payers in the digital era. Joint-venture subscription channels in areas such as drama and natural history would help fund this expansion.
The BBC reported a net benefit of 77 million pounds from commercial activity last year -- small beer compared with the 1.8 billion pounds generated by the licence fee. It is aiming to treble commercial income over the next few years.
Media industry analysts say that Flextech is in a strong position in talks with the BBC.
The two are already partners in UK Gold, a subscription channel showing vintage shows. British media group Pearson and Cox Communications of the U.S are also partners in UK Gold but Flextech is in talks to buy them out.
It could also unlock the lucrative north American market for the BBC as its parent, Tele-Communications Inc (TCI), is the largest cable television group in the United States.
A report in Sunday's Observer quoted Adam Singer, head of TCI's international division, as saying they would want any new Flextech-BBC channels to be carried on BSkyB's network as it has the widest distribution for pay channels in Britain.
But BSkyB, which is planning to launch digital satellite services offering some 200 channels in late 1997, would clearly prefer to deal directly with the BBC.
It could use its financial muscle to make the cash-strapped BBC an offer which the corporation would find hard to refuse.
($1=.6436 Pound)
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The head of British public television broadcaster Channel 4 urged the government on Monday to reject moves to privatise the service.
Channel 4 chief executive Michael Grade said that privatisation was "on the political agenda" and called on the government to "dispel this nonsense".
"The board of Channel 4 is going to fight this all the way," Grade told a meeting at the Edinburgh International Television Festival.
Free marketeers in the ruling Conservative party have suggested that Channel 4 could be put up for sale but privatisation is not currently part of government policy. Its advocates want it included in the Conservative manifesto for the general election due by next May.
Channel 4, set up in 1982 with a brief to transmit innovative and minority programming, is a statutory, state-controlled, corporation funded by advertising.
Its funding contrasts with state-controlled British Broadcasting Corporation (BBC), which is funded by a licence fee payable by everybody who owns a television set.
"We are the nursery for talent without one penny of public subsidy. I defy the Treasury to produce a justification for chucking this achievement down the drain," said Grade.
He said that privatisation would spell the end for Channel 4 in its current form and force it to become more mainstream.
"The only honest approach is to admit that a one-off Treasury "bank raid" can only be executed by making Channel 4 just another commercial network like ITV or Channel 5."
Grade highlighted Channel 4's promotion of the British film industry. Its support and funding has helped to produce recent international box-office hits like "Four Weddings And A Funeral" and "Trainspotting".
Recent reports have suggested that the sale of Channel 4 could raise as much as two billion pounds.
However, Anthony Fry from merchant bank BZW told the conference he was "totally unpersuaded" that Channel 4 was worth anything like as much as that.
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Shares in Britain's newly-demerged EMI Group Plc rose on Tuesday as the stock market applauded the company's resilience to tougher conditions in the music market.
EMI, which split from rentals company Thorn Plc three months ago, said profit before tax and exceptional items rose nine percent to 112.5 million pounds ($188.4 million) in the six months to September 30. Net interim dividend per share increased by 12.7 percent to eight pence.
EMI shares, which have shed some two pounds in recent weeks on fears that global music sales were faltering after a decade of strong growth, had added 9-1/2p to 1,280-1/2p by 1330 GMT after earlier climbing to 1290p.
"These are excellent interim results from the EMI Group," chairman Sir Colin Southgate said in a statement.
"They have been achieved against a background of variable growth in the major markets and mixed results from our competitors," he added. "The increase in the interim dividend reflects our confidence in the long-term health of the music industry and EMI's position within it."
Analysts said that EMI appeared in better shape than some of its rivals in a patchy worldwide market.
"What we have seen from their competitors was poor but EMI is insulated as it does not have so much exposure to the U.S.," said media analyst Lorna Tilbian of brokers Panmure Gordon, adding: "They tend to be strong in the areas where the growth is coming through."
Panmure are forecasting full-year profit excluding exceptional items of 403 million pounds and have a target share price of 1360p.
Finance Director Simon Duffy said EMI remained confident that the global music business would continue to grow by some 6-8 percent annually in the medium to long-term.
"This year is looking a little bit below that level," said Duffy, adding that markets were mixed but that overall first half music sales growth had been 5.5 percent. However, he added that the impact for EMI was diluted by the strength of sterling.
The market's sluggishness has recently been reflected by 100 layoffs at various labels within Warner Music and 400 job cuts at PolyGram NV -- two other music majors.
EMI said that sales in the United States were almost flat and declined slightly in France. But this was offset by improvements in Japan, Britain and Germany while Southeast Asia and Latin America boasted particularly large gains.
Turnover from the EMI Music division was down marginally at around 1.1 billion pounds but analysts ascribed this to the effect of exchange rates. Better margins helped to boost operating profits in the EMI Music division to 131.9 million pounds from 124.6 million.
The HMV division, grouping record and book stores chains, had an operating loss of 11 million pounds which the company said was in line with expectations.
EMI said major releases for the key pre-Christmas quarter included the third and final Beatles Anthology album, which entered the American charts at number one. It is also releasing a triple album from The Artist Formerly Known as Prince and the debut from British newcomers the Spice Girls. ($1=.5970 Pound)
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French radio group NRJ SA is aiming to break into the UK market by winning the fierce battle for a key London FM licence currently up for grabs.
NRJ, a group which has some 500 stations spread across six European nations, has focused its attention on the capital's youth, who it says are poorly served by existing stations.
"Mainstream music for young people does not exist in London. You have too many stations for adults," Marc Pallain, NRJ's head of development, said in an interview. "You have an extraordinary music scene and such a poor radio landscape," he added.
The Radio Authority, the body which oversees UK commercial radio, is expected to announce the winner of the licence in mid-January. Its choice will be based on criteria such as programme plans and financial viability of the applicants.
The frequency was vacated by easy-listening station Melody Radio, which relocated after complaining of interference in the south-west London area. However, the winner should be able to reach a potential audience of almost six million adults.
Twenty-five groups have put in bids, including stations aimed at gay men and lesbians, children, London's Irish community and the over-50s. The front-runners are believed to include Capital Radio, Atlantic, XFM and The Edge.
Capital Radio, which already has an FM licence and is the market leader in London commercial radio, wants to transfer its "Capital Gold" oldies station from its AM frequency.
Atlantic, backed by the UK radio arm of Luxembourg broadcaster CLT, The Edge and XFM are all music-based and aiming at a 15-34 year-old audience.
British actor Michael Caine is chairman of The Edge and his consortium also includes Radio One DJ and Channel 4 presenter Chris Evans. talent. Its co-founder is Chris Parry, manager of British band The Cure.
NRJ's "Energy" station plans to offer a blend of rock, rap and dance music which programme director Christophe Sabot says will be aimed primarily at the under-25s.
NRJ believes its network of stations across markets such as France, Germany and Scandinavia would allow it to give new British bands a European-wide platform.
Chairman Jean-Paul Baudecroux said that a London licence would appeal to many of the company's advertisers in mainland Europe. He said that the station could help to speed the development of radio advertising in the UK by giving companies greater access to young consumers.
Pallain said that NRJ, a company with a market value of some three billion francs, would aim to expand into other British cities if it secured a berth in the capital. He said that NRJ was already in talks with potential partners.
-- London Newsroom +44 171 542 8793
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British media company EMAP said on Monday it expected to bring a damaging boardroom row to a swift conclusion and build on a strong first-half profit performance.
Finance director David Grigson told Reuters that he believed that an extraordinary general meeting next month would resolve the boardroom battle that has undermined the company's share price in recent weeks.
"The EGM will be a purging process. It will clear the air and leave us with a smaller and happier board," he said.
The EGM, scheduled for December 2, has been called to seek the removal of rebel non-executive directors Ken Simmonds and Joe Cooke from the board.
The pair have led the opposition to changes made to the company's articles at its annual general meeting in July. The changes remove a requirement to maintain at least five non-executive directors and allow a director to be ousted if 75 percent of the board vote for his removal.
EMAP shares, which had fallen from 783p in early October, gained 10p to 732 1/2p after first half profits beat expectations and the company made a bullish statement on its second half prospects.
Pre-tax, pre-exceptional profit grew by 34 percent to 50.6 million pounds ($83.4 million) in the six months to September 30, 1996.
The company also posted a one-off gain of 113.5 million pounds on the sale in June of its regional newspaper business to Johnston Press Plc.
EMAP began life as a regional newspaper company in 1947 but has now decided to focus on commercial radio, consumer magazines and business communications -- trade papers and exhibitions.
It is one of Britain's top commercial radio operators and has a 16 percent share of the French consumer magazine market. Interim dividend was increased from 3.7p to 4.3p as the company looked to the future with optimism.
EMAP said that margins should improve as paper prices continue to decline. Proceeds from the sale of the regional newspaper business should lead to a significant reduction in interest charges.
"EMAP is optimistic about the prospects for the second half, and looks forward to a further sustained period of profit growth," the company said.
Operating profit from its British consumer magazines totalled 19.9 million pounds while the recent acquisition of Tele Star helped its French magazine operation more than double profits to 13.4 million.
Radio contributed 10 million pounds to operating profits, boosted by the acquisition last year of several stations in north-east England. Business communications made an operating profit of 10.2 million.
($1=.6067 Pound)
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The director-general of the BBC called on Friday for an increase in the British television licence fee to protect what he said was "the most successful cultural institution in the world".
Speaking at the Edinburgh International Television Festival, John Birt said the fee -- payable by all television set owners -- had fallen in real terms over the past decade and described the recent financial history of the BBC as "miraculous".
He said an increase was needed to help fund new services as digital technology multiplies the number of channels available.
"The BBC is the most successful cultural institution in the world, one of the great inventions of the 20th century. But it can no longer be taken for granted," Birt said.
"If it (the BBC) is to innovate with high-quality services in the new technologies as it has done again and again ... then at some point in the future -- and for the first time since 1985 -- we shall need a real increase in the licence fee."
A colour television licence costs 89.50 pounds ($139.10) annually. Licence income totals around 1.8 billion pounds each year -- 95 percent of BBC income. The money funds the BBC's five national radio stations as well as its two television channels.
Sources at the BBC said it wanted a modest rise in "low single (percentage) figures over time". The BBC will shortly begin talks with the government to review the licence fee -- currently pegged to inflation.
Any price increase would take effect from April 1, 1997. A general election is due in Britain by next May and the government might be reluctant to saddle viewers with a higher licence fee shortly before it went to the polls.
Birt said the BBC was now towards the bottom of the European licence fee league table. He added that a top-rate subscription to satellite broadcaster BSkyB, the dominant force in British pay television, costs 300 pounds annually.
The BBC says it has achieved cost savings of 100 million pounds in each of the past three years and aims to build on its commercial success as Europe's biggest broadcasting exporter.
But Birt said more licence money was vital.
Digital technology -- which will allow the creation of hundreds of new channels and interactive services such as home shopping -- is set to reach Britain next year.
BSkyB is planning to launch digital satellite services in late 1997 and a terrestrial version is expected to follow within a further 12 months.
The BBC is planning to offer licence-fee payers supplementary programming and a 24-hour news service as it moves into the digital era.
"It (digital) will mean upholding our national role -- and opening new doors wherever we can for licence fee payers," Birt added.
($1=.6436 Pound)
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The Office of Fair Trading (OFT) on Thursday launched a probe into the way travel companies sell foreign package holidays to millions of sun-seeking Britons.
The director-general of the consumer watchdog body, John Bridgeman, called a Monopolies and Mergers (MMC) inquiry into ownership links between leading tour operators such as Thomson and Airtours and retail travel agents.
The MMC will also be able to look at the practice among travel agents of offering holidays at a discount conditional on the purchase of specific travel insurance.
Both travel companies said they were confident they would be cleared by the 12-month MMC inquiry. But shares in Airtours plunged almost 10 percent in London, losing 69p to 644p.
Bridgeman noted that vertically-integrated companies like Thomson and Airtours supply a large proportion of a market worth seven billion pounds ($11.5 billion) and he was concerned that some of their practices could distort competition.
"I believe they have the market power to put competitors at a disadvantage, for example by de-racking (removing) or threatening to de-rack their brochures in an attempt to negotiate larger commissions," he said.
He also said they could pressurise tour operators not to supply independent travel agents on better terms or push their own holidays through in-house incentive schemes.
Thomson owns the leading Lunn Poly travel agency, while Airtours owns the number two travel agent Going Places.
Together they operate around 40 percent of British travel agents. They also supply around 45 percent of over 10 million foreign packages sold to Britons who make the annual pilgrimage to seek the sun around the Mediterranean or further afield.
Thomson, part of Canada's Thomson Corp, welcomed the probe.
"Thomson is confident that the industry at large, and Thomson in particular, will be vindicated from any allegations of anti-competitive practice," said Paul Brett, chairman and chief executive of Thomson Travel.
"We have been cleared by the OFT before in 1994 and we are sure that we will be cleared again by the MMC," he added.
Airtours deputy chief executive Harry Coe said there was no case to answer and claimed the British market offered the world's cheapest foreign holidays.
"Those behind the inquiry are the small tour operators and the small travel agents who can't stand the heat in the kitchen," he said.
But the smaller tour operators were delighted that the MMC was taking up the matter.
"Big companies are screwing the consumer and the smaller operators," said Sue Ockwell, head of the Association of Independent Tour Operators. ($1=.6072 Pound)
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Shares in Premier Farnell dipped on Monday after the newly enlarged electronic components distributor posted half-year profits slightly below expectations.
Premier Farnell was created in April when Britain's Farnell Electronics completed a $2.8 billion takeover of America's Premier Industrial Corp -- a company twice its size.
Pre-tax profit for the six months to July 28 totalled 56.1 million pounds ($88.4 million). That was down on the pre-tax figure of 71.3 million pounds a year earlier but that had been flattered by a large one-off gain.
More pertinently, analysts had forecast profit in a range of 57.5 to 61.6 million pounds and the failure to reach that level was reflected in a 10.5p decline in the share price to 670p.
The company said that the market for electronic components has shown much lower levels of growth in 1996 than in recent years and added it did not expect any major change in conditions for the rest of the year.
"I think the evidence is we've bottomed the cycle and the signs at the moment are positive. But we are planning on a more conservative basis at this moment in time," chief executive Howard Poulson told Reuters.
Premier said its priorities were the development and international expansion of the catalogue business and further exploitation of synergies between its transatlantic operations.
Poulson said he was delighted with progress on integration following an acquisition which had transformed the company, based in the northern English town of Wetherby, into the third largest electronic components distributor in the world.
"The integration is going superbly..I am very pleased with what people have done on both sides of the Atlantic," he said.
He said he did not see any further scope for cutting costs following the acquisition.
"I think we've finished with all of the cost-cutting. This was never a deal which was built on reducing overheads and getting rid of people," he said.
"We said we would remove duplication in our two head offices -- we've done that, we've probably dropped about 150 people since we made the acquisition." The company now has some 6,500 staff, 4,000 of whom are in the United States.
"What the business is about now is building sales and building our profits that way," he added.
Premier Farnell said its sales expansion projects were on schedule and should begin to make a contribution in the fourth quarter of the year. REUTER
($1=.6350 Pound)
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British-based exhibitions group Blenheim is seen as an ideal fit with rumoured suitor United News & Media, share analysts said on Monday.
United News & Media and Anglo-Dutch group Reed Elsevier have long been seen as rivals for the hand of Blenheim. However, industry sources said Reed was thought to be out of the running.
"Blenheim's strength in Europe and France in particular mean it would be a good fit (for United)," said one analyst. "The exhibitions business is also doing quite well at this stage in the cycle."
Dutch publisher VNU stirred the waters last week when it paid 500 pence a share to take a 15 percent stake in Blenheim. VNU declined comment on reports on Monday that it was set to increase its stake to 25 percent.
It said last week its 15 percent holding in Blenheim was a strategic long-term investment and said it had no intention of making an offer for the whole company unless rival offers emerged.
Its move is certain to have concentrated the mind of United News chief executive Clive Hollick, who is now reported to be weighing a bid of up to 520p per share, valuing Blenheim at some 480 million pounds ($757 million).
Blenheim shares closed 6 1/2p lower at 477 1/2p on Monday.
United News has so far refused to declare its hand. Analysts said a complicating factor was the continuing reorganisation of its businesses following its merger earlier this year with television and financial services group MAI. United News also publishes two British national newspapers.
"A bid makes a lot of sense but the timing is not good for United News," said media analyst Nick Ward of Credit Lyonnais Laing.
Blenheim, in which French utilities company Generale des Eaux has a 15 percent stake, posted pre-tax profits of 35.6 million pounds in 1995 on turnover of 202.5 million.
France was its largest source of revenue, accounting for 37 percent of earnings, followed by 26 percent from the U.S., 20 percent from Britain, 11 percent from Germany and six percent from the rest of the world.
Miller Freeman is the business magazines and exhibitions arm of United News. It operates in the U.S., Europe and Asia but analysts regard the American market as its main strength.
Analyst Anthony de Larrinaga of Panmure Gordon said a bid of around five pounds per share would represent an attractive deal for investors in both United and Blenheim.
He said that United was likely to be considering a bid between 480p and 530p per share. ($1=.6337 Pound)
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British National Lottery operator Camelot LOTT.CN on Tuesday posted lower interim profits as income from scratchcard sales fell by over 450 million pounds ($750 million).
Camelot chief executive Tim Holley also told Reuters that the planned second weekly National Lottery draw would be launched on February 5 and be held every Wednesday thereafter. Camelot, which has faced a storm of criticism over its jackpot earnings since the lottery was launched two years ago, reported pre-tax profits of 31.5 million pounds on sales of 2.1 billion pounds for the 24 weeks to September 14.
This compares with pre-tax profit of 36.2 million pounds and sales of 2.51 billion pounds in the same period a year ago.
Camelot's five shareholding companies -- Cadbury Schweppes, De La Rue, GTech UK, Racal Electronics and ICL shared a total dividend payount of 10 million pounds, up from 9.5 million.
Sales for the weekly National Lottery game rose two percent to 1.68 billion pounds. Two thirds of the adult population regularly buy tickets for the Saturday draw, an event which is televised live and has become a ritual for many Britons.
But sales of Camelot's "Instants" scratchcards fell from 871 million pounds last year to 419 million this time.
Camelot executives said that the decline in scratchcard sales was to be expected as the initial enthusiasm generated by their introduction in March 1995 waned.
"Mirroring the experience of lotteries worldwide, sales of Instants have fallen since their launch and are now settled at around 17 million pounds per week," Chairman Sir George Russell said in a statement.
Chief executive Holley said that the second weekly draw should boost sales of National Lottery game tickets by 15-20 percent from their current weekly average of 69 million.
Camelot said that over one billion pounds -- 50 percent of turnover -- had been handed out in prize money in the first half and that 567 million pounds had gone to "Good Causes" -- including charities and projects in sports and the arts.
Camelot, which has been granted a seven-year licence, said that over 40 percent of turnover went to "Good Causes" and the governnment in duties, making it the world's most efficient lottery operator.
Profit after tax is just under one percent of total sales and Holley dismissed criticisms of Camelot's performance.
"I think we have a slight problem in this country with success," he said, adding that foreign lottery companies were bemused by the atacks on Camelot.
The group confirmed plans to set up The Camelot Foundation to support organisations helping the disadvantaged and disabled.
Camelot will plough five million pounds into the foundation in its first year, which it said would make it one of the largest donors to charities among major British companies. ($1=.5994 Pound)
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British media group EMAP Plc on Monday ended a damaging boardroom row when its shareholders voted to oust two rebel non-executive directors, who had contested changes to the company's articles.
Shareholders backed the board and voted overwhelmingly in favour of resolutions seeking the removal of dissidents Ken Simmonds and Joe Cooke in a poll called at an extraordinary general meeting.
More than 109.2 million votes were registered in favour of each of the resolutions and 12.3 million against.
"I am confident that with these two resolutions passed, the board will be fully united and ready to give full attention to your company's business," chairman Sir John Hoskyns told shareholders at the EGM.
Simmonds, who has been a non-executive director of EMAP for 15 years, struck a conciliatory tone after what had been a bitter dispute.
"Catharsis and thinking about the future are good things. EMAP is going to continue to be great," he said.
EMAP shares, which had fallen from a 1996 high of 790p in the last two months as the dispute worsened, firmed 5p to 735.
The row centred on the removal of a provision for a minimum of five non-executive directors and another change allowing a director to be ousted on a 75 percent board majority without an EGM being called.
The changes were approved at the company's annual general meeting in July. Cooke and Simmonds had continued to oppose them, arguing that they transferred too much power from shareholders to the board.
"You should ensure that the board is your board," Simmonds told the EGM. "The board may now adjust itself quietly and without any notice to you."
Hoskyns said that the board had not been able to function properly while the dispute simmered.
EMAP has been one of Britain's fastest growing companies in recent years, selling out of its original regional newspaper business and expanding its UK local radio operations and its consumer magazine interests at home and in France.
It last month reported pre-tax profit of 50.6 million pounds ($85.2 million) in the first half of its current financial year on turnover of 388.3 million pounds.'
Hoskyns, who is 69 and intends to retire in 1998, denied press reports that he backed chief executive Robin Miller as his successor. Miller joined the company in 1965 as a reporter with Motor Cycle News magazine.
He also dismissed talk of a rift between Miller and managing director David Arculus.
"Robin and David have worked in partnership since 1974. That partnership has always been based on hard thinking, vigorous argument and mutual trust," he said. ($1=.5936 Pound)
| 21 |
Be Inc., a private software company which Apple Computer Inc. is eyeing as a possible acquisition target, will announce Tuesday that it will license software to an Apple rival, Be executives said.
Be will license its BeOS operating system -- a type of programme that controls the basic functions of a computer -- to Power Computing Corp., a maker of computers compatible with Apple's Macintosh, executives of the companies said. Power Computing will have an exclusive license until April 1997.
Apple itself has been considering using Be's software. Earlier this year, the No. 3 PC maker shelved a mired effort to rewrite the Macintosh operating system and has been looking outside, primarily at Be, for programming talent.
Be and Power Computing executives said their agreement was not a threat to Apple's plans. Instead, the companies are offering fast machines that would appeal to saavy users, such as programmers, game developers and Web site managers, known as Webmasters.
"This agreement has no impact on any deal we may or may not conclude with Apple," said Mark Gonzalez, marketing director at Be, based in Menlo Park, Calif.
An Apple spokesman declined to comment on the agreement.
Be, founded in 1992 by the former head of Apple's research and development, writes software that takes full advantage of the multimedia and computing capabilities of the PowerPC microprocessor, the same computer chip that serves as the brains of the Macintosh.
The company's BeOS includes many software features and innovations that Apple's programmers have not been able to include in Macintosh software.
Apple, struggling to set the Macintosh apart from personal computers running software from Microsoft Corp., has been negotiating with Be since June about licensing its products or buying Be outright, executives close to the negotiations have said.
Apple Chairman Gilbert Amelio and Chief Technology Officer Ellen Hancock have hinted in recent weeks that Apple planned to rewrite the core of the Macintosh software itself, but will turn to outside software companies for help in developing the features a computer user would see on the screen, including next-generation multimedia capabilities.
| 25 |
At this year's Comdex computer trade show, the most sought-after people are not Microsoft Corp.'s Bill Gates or Intel Corp.'s Andy Grove, but corporate computer buyers.
Personal computer makers and software vendors are relying heavily on their corporate customers this year to make up for disappointing sales to consumers, executives at the trade show said this week.
While many consumers have been putting off their computer shopping until early 1997 -- when new gadgets come out -- corporate customers are finally dumping their older PCs and buying lots of machines that can run the latest business software from Microsoft.
"Certainly we see a tremendously strong business environment as a major upgrade cycle is now occurring," said Michael Winkler, senior vice president at Compaq Computer Corp. "We think the fourth quarter will be excellent."
Winkler and other PC executives said the recent release of Microsoft's Windows NT operating system and Office 97 package of business programs was fueling corporate sales. These programs work best with the computing horsepower of machines based on Intel's top-of-the-line Pentium computer chip.
In large part because of strong corporate sales, domestic PC shipments in the fourth quarter were expected to rise 20 percent to 8 million units, according to International Data Corp., a market researcher.
"The bottom line here is that the outlook for '97 for our business is very strong," said Jim McDonnell, a group marketing manager of PCs at Hewlett-Packard Co..
Based on executives' bullish comments at Comdex this week, stocks of most PC makers have gained in recent days.
Compaq rose $1.375 to $81.875 and International Business Machines Corp. jumped $2.50 to $156.25, both on the New York Stock Exchange, while Intel added $1.75 to $122.50 and Sun Microsystems Inc. gained $2.50 to $59.50, both on Nasdaq.
Still, the fourth quarter has been disappointing to some PC makers, especially those that concentrate heavily on consumer sales.
Last year this time, the release of Microsoft's Windows 95, software that makes PCs easier to use, drew lots of people to computer stores to buy their first PCs. The industry has no such attraction this year.
In fact, analysts said, consumers were putting off computer shopping this Christmas season as the industry prepares new machines based on Intel's upcoming MMX technology. MMX-based machines, slated to be released in early 1997, will feature better video, sound and 3-D graphics.
In late October, computer stocks slid as CompUSA Inc. and other computer retailers reported softening sales heading into the crucial Christmas season.
"There's no question that the quarter started out slow, but we're hopeful that things are getting better," said Mal Ransom, senior vice president of marketing at closely held Packard Bell NEC Inc., the second-biggest PC maker in the United States behind Compaq.
Consumer sales appear to be improving as it gets closer to Christmas, while prices of computer components remain low, Ransom said. "It looks like we're going to get a reasonable quarter."
| 25 |
Apple Computer Inc executives on Thursday showcased products and technology geared toward business computer users, reaffirming its committment to corporate markets.
Apple Chief Operating Officer Marco Landi, in a speech at at a software trade show, also said Apple will put much of its resources into making the Macintosh work smoothly with other computer systems from rivals such as Microsoft Corp, Sun Microsystems Inc and International Business Machines Corp.
Apple has traditionally had a tough time selling its machines to big corporations, which prefer to buy machines based on Intel Corp computer chips running Microsoft software.
To win the favor of corporate programmers and technicians, Apple will release in coming months software and computers that can easily tap vital information stored in huge corporate databases, Landi said.
He also assured the audience of professional programmers that their investment in Apple technology and products is not in danger.
"Apple may have its ups and downs, but you can be sure we will be there for the long haul," Landi said at Oracle Open World, a trade show for users of Oracle Corp's corporate software.
Apple executives demonstrated the company's network servers for storing and distributing data using Oracle database management software.
They also demonstrated Apple's HotSauce technology -- software under development to make it easy for average computer users to search huge databases without knowing esoteric computer languages and commands.
In recent weeks, speculation has increased that Apple is close to buying Be Inc, a closely held software company in Menlo Park, Calif., to beef up its fundamental software.
Landi declined to comment about the speculation.
Other Apple officials said the company will outline its strategy for improving its Macintosh operating system in January.
-- Palo Alto desk +1 415 677 2542
| 25 |
Internet search firm Yahoo! Inc. Wednesday reported a smaller-than expected third quarter loss, reflecting sharply higher revenues from Internet advertising.
The Santa Clara, Calif.-based company reported a loss of $1.2 million, or 4 cents a share, for the quarter ended in September compared with a loss of $371,000, or 2 cents a share, in the 1995 quarter. Sales jumped to $5.2 million from $288,000 in the year ago quarter and $3.3 million in the second quarter.
Analysts had expected the company to lose 7 cents a share in the quarter, according to First Call, which tracks earnings estimates.
Yahoo! is an online directory that appears on computer screens as computer users tap the Internet, the global computer network. The service helps users find specific sites, articles and points of interest in the World Wide Web section of the Internet. Yahoo! makes its money from advertisers, which display banners on its Internet site.
The company, founded by two Stanford University students two years ago, went public in March.
Most of the quarter's loss came from the cost of advertising Yahoo! in traditional media, said Gary Valenzuela, chief financial officer. The company spent $4 million on sales and marketing, more than 14 times the $275,000 it spent a year ago. Research and development expenses also jumped in the quarter to $1.36 million.
"Our focus righrt now is absolutely on building market share, on expanding out reach globally and on adding" services to the site, Valenzuela said.
Valenzuela declined to say how much the company planned to spend on marketing and research and development in coming quarters.
Yahoo! said the number of advertiser grew to 340 in the third quarter from 230 in the second quarter quarter.
Yahoo! also reported more than 1 billion "hits," or viewings by computer users, in the quarter ended Sept. 30, giving the company an average of more than 14 million page views a day in September, up from an average of 9 million a day in June. The site is one of the most popular destinations on the Web.
Yahoo! had a loss of $1.4 million, or 5 cents a share, in the second quarter on sales of $3.3 million.
| 25 |
Most U.S. software publishers are expected to report only modest increases in their third-quarter earnings, reflecting a seasonal slowdown and a lack of new products this quarter.
"For the behemoths of the industry, like Microsoft (Corp) and Oracle (Corp ), business is still good," said Marshall Senk, an analyst at Robertson Stephens & Co in San Francisco. "Summer is the slow buying season for most of the industry," but setting aside the seasonal slowing, "business is still pretty okay."
Analysts expect Microsoft, the world's biggest personal computer software publisher, to report substantially higher earnings for its first quarter of fiscal 1997 on the back of strong sales of its networking software and business programs. Microsoft is scheduled to report results on Oct. 21.
Better-than-expected sales of personal computers in the past few months also will contribute to Microsoft's revenue, analysts said. Microsoft, based in Redmond, Wash., makes about a quarter of its revenue from the sale of its Windows family of operating systems. Operating systems are the type of software that controls the basic functions of every PC.
Microsoft benefits from strong PC sales because PC makers have to pay Microsoft a royalty for every copy of Windows they pack in the boxes of new machines.
Wall Street expects Microsoft to earn $0.90 a share, according to a survey of 24 analysts by First Call. In the same quarter a year ago, Microsoft earned $0.78.
Novell Inc, the biggest publisher of computer networking software, is not expected to perform as well.
The company is struggling to sell its NetWare flagship -- which controls the flow of computer information through departmental computer departments -- in the face of competition with Microsoft's Windows. Novell, based in Provo, Utah, also still faces management issues following the resignation of Bob Frankenberg, the former chief executive officer, said David Takata, an analyst at Gruntal & Co in Los Angeles.
"They clearly still have a lot of work to do" to get the company's management in order, Takata said.
Novell is expected to earn $0.18 a share in its fiscal fourth quarter, compared with $0.16 a year ago, according to a First Call survey of 17 analysts.
Meanwhile, vendors of software for large, corporate computer networks and database management tools are expected to continue to post substantial gains in the third quarter on continuing strong demand.
"For a relatively mature market, this niche is still growing at a good clip," said Jim Pickrel, an analyst at Hambrecht & Quist in San Francisco.
Pickrel said he expects Oracle and Informix Corp to report the most impressive results on strong sales of their database software -- computer programs which help big companies keep track of huge libraries of corporate information. Both are taking business from Sybase Inc, another database software publisher, which is still struggling to recover from marketing and technical shortcomings last year.
Sybase,is expected to report it broke even in the quarter, not counting charges for a restructuring, Pickrel said. In the year-earlier quarter, Sybase earned $0.01 a share.
Oracle, the biggest database software publisher, is expected to earn $0.27 a share for the fiscal second quarter ending November, according to a recent survey of 27 analysts by First Call. A year ago in the same quarter, it earned $0.21.
Hambrecht & Quist's Pickrel said Informix could pass Sybase this quarter in revenue to become the second biggest database vendor. Informix is expected to earn $0.18 a share, according to a First Call survey of 25 analysts. In the same quarter a year ago, Informix earned $0.16.
| 25 |
Database software company Informix Corp. said Friday it filed a lawsuit against Oracle Corp., accusing its bigger rival of stealing trade secrets by hiring away its employees.
Oracle hired 11 Informix employees from Informix's Portland, Ore., research and development centre. All 11 workers quit on Wednesday morning, said Informix Chief Executive Phil White.
Informix stock fell $1.50, or 6.6 percent, to $21.375 in active trading on Nasdaq. Oracle stock fell 87.5 cents to $39.625, also on Nasdaq.
"This is a blatant effort by Oracle," said White. "They're behind significantly technically. We're not going to let someone who's significantly behind technically just buy his way in."
Oracle officials called the lawsuit "ridiculous" and said the 11 programmers approached Oracle on their own. They also had approached Microsoft Corp. about jobs, said Jerry Held, Oracle senior vice president of server technologies.
"This is a group of senior developers that was very frustrated by the lack of vision of Informix top managers," Held said. "We did no active recruiting. I was called absolutely out of the blue" when the former Informix staff joined Oracle.
The lawsuit, filed on Thursday in Oregon Circuit Court in Portland, seeks unspecified damages. Informix on Thursday also obtained a temporary injunction barring the former employees from giving trade secrets to Oracle, Informix said.
Informix also charged Gary Kelley, a former Informix product development vice president who left for Oracle, with breach of contract. Kelley did not return phone calls to Oracle's Portland facility.
Informix, based in Menlo Park, Calif., and Oracle, based 20 miles north in Redwood Shores, Calif., both write sophisticated programmes that store and retrieve huge amounts of information in corporate computer networks.
The companies for years have been fighting a marketing war touting their advances in database technology with each new release of their respective flagship products.
White said he believed Oracle was interested in gaining Informix's expertise in writing software for so-called massively parallel computers -- top-of-the-line machines that can process huge amounts of transactions simultaneously.
The 11 Informix employees who left for Oracle were working on this type of product, White said.
Held said Oracle does not have an interest in Informix's technology because Oracle is ahead in that area.
"Oracle has had parallel technology for years," Held said. "Informix is playing catch-up. Phil has a knack for being behind and saying he's ahead."
Technology debates aside, the spat is the most serious between the companies in years. White, normally a publicity-shy executive, said he was livid about Oracle's tactics and intended to make the lawsuit a political cause in Silicon Valley for preventing employee raids.
White said he personally went to the home of Oracle Chief Executive Larry Ellison on Thursday night to discuss the issue, but Ellison was in Hong Kong. Both men live in the same small town in Silicon Valley.
"I'm doing this not only for Informix and for our shareholders but also for the industry," White said. "We can't let companies come in and throw big financial incentives and walk away with intellectual property we spent hundreds of millions of dollars developing."
In recent years, several software rivals in Silicon Valley have accused each other of trade secret theft by employee snatching.
In 1992, Borland International Inc. accused a former employee of sending confidential electronic mail to new employer Symantec Corp.. Last year, Cadence Design Systems Inc.. filed a similar charges against direct competitor Avant Corp..
The court has set a hearing in the Informix case for Feb. 7.
| 25 |
Apple Computer Inc. will unveil Monday a new family of portable PowerBook computers to fill a critical gap in its product line.
The new PowerBook 1400 family, scheduled to be sold in mid-November with prices starting at $2,500, will feature a built-in CD-ROM drive and a bigger screen. The models are designed to appeal to small office users and students, Apple said.
Until now, the lack of a CD-ROM drive in its portables has held back Apple in competing with offerings from International Business Machines Corp., Compaq Computer Corp. and Dell Computer Corp., analysts said.
The new family "isn't going to put them in the leadership role, but it's going to get them back in the game," said Bruce Steven, an analyst at market researcher International Data Corp.
Apple said it also plans to introduce another new series of PowerBooks in the first half of the 1997 with more advanced multimedia and communication capabilities. The company did not release any more specifications.
Apple has been scrambling to retool the PowerBook line. The predecessor to the new model, the PowerBook 5300, was recalled last spring because of several defects including a faulty AC power connector and a display casing that could easily crack.
The PowerBook 1400 will replace that family. The new machines will be based on a mid-range PowerPC microprocessor.
The faster microprocessor, the CD-ROM drive and bigger screen make the 1400 comparable in price and performance to top-selling models from other vendors, but the 1400 will have a tough time competing with low-priced offerings from second-tier PC manufacturers, Steven said.
Based on the memory, screen options and disk-drive size, the 1400 models will sell for an estimated $2,500 to $4,000 retail in the United States, an Apple spokeswoman said.
The entry-level model will not have the internal CD-ROM drive, she said.
Although the machines will go on sale in mid-November, there will be a limited supply on some models until after the New Year, she said.
| 25 |
Apple Computer Inc. Wednesday reported a $120 million loss in the first quarter of fiscal 1997 and warned investors it did not expect to return to profitability until September.
The troubled computer maker attributed the loss to slow sales of its its consumer-oriented Performa desktop computers during the normally robust Christmas quarter.
Apple's loss, which equalled 96 cents a share, compared with a loss of $69 million, or 56 cents a share, in the year-ago period. Sales for its first fiscal quarter ended on Dec. 27 fell to $2.13 billion from $3.15 billion.
Based on the weak first quarter results, the company said it planned to develop additional restructuring programmes during the second quarter with the goals of reducing its break-even point to $8 billion in annual revenues and enabling Apple to return to profitability by the fourth fiscal quarter, which ends Sept. 26, 1997.
Previously, Apple had promised to return to sustainable profits by March but industry analysts had started to question that goal after Apple disclosed less than two weeks ago that sales of its Performa line were running behind plan.
"While we were very disappointed by the Performa sales results and the associated loss, our financial position remains sound," said Apple Chief Financial Officer Fred Anderson. "We exited the quarter with $1.8 billion in cash and continued to show improvements in our inventory management during the quarter.
"Additionally we saw a 15 percent sequential increase in our high-end Power Macintosh sales," he said. "We significantly exceeded our internal plans for shipments of PowerBooks and expect their availability to continue to improve in the second quarter."
Nevertheless, analysts said the results, which Apple forecast less than two weeks ago represented a setback for Apple Chairman Gilbert Amelio, who had set a goal of stanching Apple's losses in 1996.
"Our expectations now do not show a profit until the fourth quarter, which ends in September," said Walter Winnitzki, analyst at brokerage PainWebber Inc. in New York.
| 25 |
Apple Computer Inc. Friday agreed to acquire NeXT Software Inc. for $400 million, a stunning move that reunites the computer company with its co-founder, Steven Jobs.
The acquisition will give Apple the software technology it needs to revamp the Macintosh personal computer, which has lost much of its technological luster to PCs running software from Microsoft Corp.
"The Mac has provided the innovation that the industry has been feeding off for the last 10 years," Jobs said. "It's time for someone to come up with innovation to drive the industry forward. Who better than Apple?"
Apple Chief Financial Officer Fred Anderson said the company will pay $350 million, mostly in cash and a little stock, for Redwood City, Calif.-based NeXT. Apple also will pay off NeXT's $50 million debt.
Jobs, who founded Apple with a friend in his garage 20 years ago, led Apple through its early years until he was fired by the company's board in 1985.
Apple said he will come back to Apple part-time to lead an effort to rewrite the fundamental software of the Macintosh. He will report to Apple Chairman Gilbert Amelio.
Apple will base much of its next-generation operating system -- the computer program that controls the basic function of the Mac -- on Nextstep.
NeXT's technology will not only provide many of the software bells and whistles that Apple needs to compete with Microsoft's Windows, but will attract outside software companies to write more titles for the Mac, Amelio said.
"Without question, the technology at NeXT was the superior technology, by a significant amount," Amelio said.
Apple had been for months looking outside for help after having abandoned an unfinished operating system code-named "Copland."
The company looked at operating system technology and multimedia software from companies such as Sun Microsystems Inc. and closely held Be Inc.
Amelio said with NeXT's existing technology, he hopes Apple will have a new operating system in 1997.
For Jobs, the cheerleader who instilled an attitude in Apple that the company was out to change the world, the merger is another stop in a strange odyssey.
After being fired by his successor John Sculley in 1985, he left to found NeXT, which initially made a line of whiz-bang computers.
When NeXT ran into financial trouble in the late 1980s, the company dropped its computers to concentrate on software. In the past two years, NeXT has been selling a line of reasonably successful software for creating sites on the Internet's World Wide Web.
Meanwhile, Jobs helped co-found Pixar Animation Studios, a production studio that uses powerful computers instead of drawings. The company made last year's hit "Toy Story."
Jobs said he will continue to run Pixar.
| 25 |
Apple Computer Inc.'s expected loss of $100 to $150 million in its fiscal first quarter is a serious setback to the company's unfolding comeback plan, industry analysts said on Saturday.
Apple was banking on a strong Christmas season this year to convince potential customers there are still plenty of people using the Macintosh and plenty of people willing to write software for it, analysts said.
The company also had hoped to show software developers there would be enough demand for their products while Apple engineers finish a major overhaul of the Mac's fundamental software with the help of recently acquired Next Software Inc.
But the loss shows Apple is having a much tougher time selling its PC than analysts expected.
"I can't tell you how many people have asked me about whether they should be buying from Apple when there's so much negative news out there," said Richard Zwetchkenbaum, an analyst at market researcher International Data Corp.
In the September quarter, Apple's share of the PC market worldwide fell to 5.4 percent from 8.7 percent in the same quarter a year ago, according to a recent Apple filing with the Securities and Exchange Commission. In the U.S., its share fell to 7.3 percent from 13.2 percent.
Apple on Friday blamed a shortage of PowerBook laptops and slow sales of its Performa line -- which is geared toward home users -- for the shortfall. Consumer sales traditionally account for 40 percent of Apple's Christmas quarter.
Revenue for the quarter ended Dec. 27 will be about 10 percent less than the $2.3 billion reported in the September quarter, Apple said.
Meanwhile, Apple faces more technological competition from PCs based on Intel Corp. Pentium microprocessors. Intel will release in a few weeks a new Pentium with so-called MMX technology that can handle computer graphics and sounds much better than before.
Tim Bajarin, president of market research firm Creative Strategies International Corp., said some consumers may have put off buying Macintosh Performas -- until now, a favored brand for running multimedia software -- in favor of waiting for PCs based on Intel's MMX chips.
"It is an image problem," Bajarin said. "Apple has not been able to convince the consumer that the software developers are coming back, and has not been able to convince them that Apple will be around in the future."
Not counting the $400 million purchase of Next, Apple expects to report a loss of $100 million to $150 million, the company said. Based on Apple's 123.7 million shares outstanding, the loss would be about $0.80 to $1.21 a share.
Wall Street expected Apple to report a per-share loss of $0.04, according to a survey of analysts by First Call.
The expected loss puts pressure on Apple Chairman Gilbert Amelio, who on Tuesday will outline his company's strategy to thousands of Macintosh customers and programmers at the Macworld trade show.
Amelio said on Friday the company would have to reduce its expenses by about $1 billion to $8 billion annually, to return to profit, a move that could include another round of firings.
Last year, the company laid off about 1,300 people.
In recent speeches Amelio said he did not expect the company's revenue to grow until 1998, but other executives have said they expected the company to have "sustainable profits" by the end of the March quarter.
While it is too early to forecast the March quarter's results, Apple is "telling people to recalibrate their expectations," David Harrah, corporate public relations director, said.
| 25 |
A motto of Bill Gates, chairman of Microsoft Corp., has been: "A computer on every desk running Microsoft software."
With that goal almost accomplished, Microsoft executives have set their sights on other flat surfaces, such as the kitchen counter, the living room's entertainment console and the back of airline seats.
At a Los Angeles conference for professional programmers, Microsoft executives outlined the company's plans to take its Windows family of operating systems into more types of computers, such as subway token vending machines, handheld portables and arcade video games.
The company also said it plans to spend much of its research and development budget to automate management tasks of personal computers and to simplify the machines' operations.
In recent weeks, Microsoft's competitors Sun Microsystems Inc. and Oracle Corp. have outlined their plans to build new types of computers, called network computers, that are simpler and cheaper to use than personal computers.
At Monday's Professional Developers Conference, Microsoft executives said future versions of its Windows -- which control about 80 percent of the world's desktop computers -- will do the same things.
"We are focusing now on the investments people have put in their computing technology and on increasing their returns," said Paul Maritz, Microsoft group vice president.
Maritz demonstrated software products that can recognize spoken commands. He also demonstrated programs that automatically take care of network chores without human help.
Features like these will help companies get more out of their investment in Microsoft products already in place, Maritz said.
He also demonstrated how programmers can use Windows in non-traditional types of computers. He showed a bullet-proof vending machine for New York subways that uses Windows software to dispense fares on smart cards.
| 25 |
Bay Networks Inc., keeping up with rivals in the computer networking business, said Wednesday it paid $99 million in cash and stock to buy closely held NetICs Inc.
The acquisition gives Bay Networks a line of devices called Fast Ethernet switches that are becoming increasingly popular with computer technicians for speeding up the flow of information through corporate computer networks.
Bay Networks' rivals Cisco Systems Inc. and 3Com Corp. have bought similar Fast Ethernet technology in recent months.
Bay Networks, based in Santa Clara, Calif., agreed to pay about $55 million in stock and $44 million in cash for NetICs, a company that has yet to report any revenue. Bay will charge "a substantial portion" of the purchase price against earnings for its quarter ending in December, the company said.
Bay Networks' stock was off 12.5 cents at $21.50 in late trading on the New York Stock Exchange.
The acquisition keeps Bay Networks up to date with rapidly emerging technology, said Dick Eyestone, its senior vice president. "We live in dog years in this industry. Six months is like forever," he said.
Eyestone, who will oversee NetICs' operation as a Bay Networks unit, said his company plans to use NetICs' designs in its own line of networking products. Bay will release the first product from the acquisition in the first quarter.
NetICs, formed in 1995 by a dozen engineers, will remain in Acton, Mass. Until now, NetICs has been developing its technology and has not had any revenue, said Gary Vacon, NetICs founder and president.
Some analysts said they were surprised by the amount of money Bay was willing to pay to get its hands on the technology.
"I know companies with revenues in this sector that would be happy to get $30 million," said Steve Koffler, an analyst at NatWest Securities in New York. "They obviously felt they need this technology."
Bay Networks executives said they are paying the standard price for high-tech startups.
"This is right in line with the industry standard and our expectations," said Bill Ruehle, Bay Networks chief financial officer. He declined to say how much revenue he expects NetICs products to generate.
| 25 |
Apple Computer Inc. stunned investors Wednesday by reporting an unexpected $25 million fourth quarter profit, stemming a year of management turmoil and swelling red ink.
The Cupertino, Calif.-based computer maker, which had been expected to report a loss of 30 cents a share, posted a profit of 20 cents a share for the last three months of fiscal 1996, its first quarterly profit this year.
In the same quarter a year ago, Apple earned $60 million, or 48 cents per share. Included in the most recent quarter's operating results was a gain of $17 million.
Fourth-quarter revenue for fiscal 1996 declined 23 percent to $2.32 billion from $3 billion.
Apple released the news after the market closed and its shares jumped as much as $4.25 to $30 a share in after-hours trading.
Industry analysts attributed the profit to Apple's aggressive cost cutting, a bigger-than-expected exodus of employees and lower prices for key components, such as memory chips.
"It is a shock," said Daniel Kunstler, an analyst at JP Morgan in San Francisco who was expecting a loss. "It seems they've brought the break-even point for their business down pretty dramatically. This is very encouraging."
Most important to investors, Apple could remain profitable in coming quarters, which would bolster confidence among consumers that it will be around for years and keep loyal customers from switching to IBM-compatible personal computers, analysts said.
Fred Anderson, Apple's chief financial officer, stopped short of predicting a profit in the first fiscal quarter.
He said, however, that he expects the company's costs to increase only slightly in the December quarter on higher advertising expenses and that first-quarter revenue should be about the same as in the fourth fiscal quarter.
"We continue to make progress in strengthening Apple's financial condition, as our $410 million in positive cash flow from operations during the quarter suggests," Anderson said.
"We've reduced inventories by nearly $400 million since June and completed the quarter with over $1.7 billion in cash and short-term investments," he said in a statement.
In the previous three quarters, Apple reported huge losses because of declining Macintosh sales, management turmoil and growing popularity of personal computers running Microsoft's Windows software, which compete with Macintosh.
The company began slashing its costs when former National Semiconductor Corp. chief Gilbert Amelio took charge of Apple in February.
With most of the cost-cutting plan completed, Apple now will concentrate on the much tougher task of increasing revenue, Anderson said.
While shipments were down 26 percent in the fourth quarter to 932,000 units from the year-ago quarter, Apple said shipments were up 11 percent from the third quarter, a sign that customers were once again buying Apple's products.
Apple has a slew of new products in the works.
On Monday, the company is expected to unveil a new low-end PowerBook, a much-needed portable computer to replace Apple's older glitch-prone models.
In the first calendar quarter, the company also is expected to introduce new low-end consumer desktop models, a niche from which Apple had retreated in an effort to cut costs.
For the full year, Apple reported a loss of $816 million, or $6.59 a share, reflecting a series of hefty one-time charges for inventory writedowns and restructurings. In fiscal 1995, Apple earned $424 million, or $3.45 a share.
Revenue for the year fell 11 percent to $9.83 billion from $11.1 billion a year ago.
| 25 |
Macromedia Inc. shares plunged to a two-year low Friday after the software company reported an unexpected third-quarter loss and said it could face weak sales for another quarter.
Some analysts said they also were concerned that Apple Computer Inc.'s declining sales could hurt Macromedia's revenue from sale of software for Macintosh computers in coming quarters.
Shares of the San Francisco graphics software vendor fell $4.19, or 31 percent, to $9.31 in Nasdaq trading -- the lowest price since December 1994.
Macromedia on Thursday reported a loss of $2.36 million, or 6 cents a share, for its fiscal third quarter ended Dec. 31, compared with net income of $7.15 million, or 18 cents a share, in the same quarter a year ago. Third-quarter revenue fell 9 percent to $28.1 million from $30.9 million.
Wall Street expected Macromedia to report net income of 14 cents a share, according to a recent survey of analysts by First Call.
Macromedia gets about half its revenue from Director, a computer programme that helps graphic artists make animated clips for video games and multimedia software.
Macromedia customers are putting off Director purchases until the company releases a new version in a couple of months, analysts said.
"We are left with the concern that there will be a dip in revenue" in the fourth quarter as well, said Kevane Wong, analyst at brokerage firm Jefferies & Co. in San Francisco.
Macromedia also gets about 60 percent of its revenue from Macintosh software sales. A slow rollout of high-end Macintosh PCs in Europe led to slow European sales for Macromedia as well, said Ed Bierdeman, analyst at Dakin Securities.
"The Mac market is like a block of ice melting in the sun," leaving many Mac software vendors, including Macromedia, to suffer, Bierdeman said.
Macromedia likely will post a small loss in its fiscal fourth quarter, ending in March, Bierdeman said.
Several analysts also said they were concerned Macromedia might not be able to finish the new version of Director until spring, which would jeopordize earnings until the quarter ended in June.
Macromedia officials could not be reached for comment immediately.
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Microsoft Corp said on Monday it had sent the final version of Office 97 -- a product that is expected to be its biggest revenue generator in 1997 -- to factories and will have it in stores within weeks.
The product, a package of Microsoft's top-selling business programs, is Microsoft's biggest new product since the release of Windows 95, and is expected by analysts to increase the company's revenue by about 15 to 20 percent this year.
About half of Microsoft's $8 billion in revenue came from business applications last year.
"People on the (Office 97) development team were jumping in the fountain this afternoon," just after Microsoft sent the final version to manufacturing, said Pete Higgins, Microsoft group vice president of applications.
The new version, which had been in development for more than two years, features better ties to the Internet, help tools that guide computer users through common tasks and a new component called Outlook, which manages computer users' documents, appointments, contacts and electronic mail.
Higgins said the standard edition of Office 97 will cost about $239 for users of existing versions of Office. He said Office 97 will be available on a limited basis in December, and more broadly in early January.
Foreign versions of the product will be available a month to six months later, he said.
Analysts said the new version has several significant features that could goad corporate computer buyers to upgrade.
"It will take some time to catch on because it requires a high-end PC," said Mary Meeker, an analyst at Morgan Stanley & Co. "But I think products like these are going to drive PC sales."
On Sunday, International Business Machine Corp's Lotus Development Corp unveiled its own suite of office applications, called SmartSuite 97, which it said would begin shipping in January.
Microsoft has roughly 70 percent of the market by unit volume, followed by Lotus with 23 percent, according to recent market research data.
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Apple Computer Inc.'s unexpected fourth quarter profit initially impressed Wall Street, but some analysts said Thursday that the computer maker was not out of the woods yet.
Apple on Wednesday reported a profit of $25 million for its fiscal fourth quarter, defying Wall Street's expectations for a loss. But analysts said that a steeper-than-expected 23 percent drop in revenue in the quarter could hurt the computer maker's prospects in the new fiscal year.
The analysts said sluggish revenues could force Apple to skimp on research and development spending just as rivals Microsoft Corp. and Intel Corp. are preparing innovative software for personal computers that could permanently squelch Apple's technology and ease-of-use bragging rights.
"Apple's never hit a wall like this before," said Kurt King, an analyst at Montgomery Securities in San Francisco. "They've never seen their sales drop this much before. It's possible they can recover, but unlikely."
Analysts attributed Apple's profit, equal to 20 cents a share, to aggressive cost cutting, lower prices for memory chips, as well as a one-time gain of $17 million. In the 1995 quarter, the Cupertino, Calif.-based company earned $60 million, or 48 cents a share.
Revenues fell to $2.32 billion from $3 billion.
While Apple's machines remain popular in education and publishing, the company has lost many customers to Compaq, Dell, Hewlett-Packard and other competitors.
The man hired in February to revive the company, Gilbert Amelio, the former head of National Semiconductor Corp., has cut costs aggressively but has not found a way to boost sales.
In the crucial December quarter, revenues will be about even with the $2.32 billion reported for the September quarter, Apple executives said.
The prospect of flat sales during the Christmas season, typically the year's busiest, could finally convince loyal developers of educational and consumer software to defect, further loosening Apple's hold on those markets, analysts said.
"I can't remember the last time Apple's revenue declined in the December quarter from the September quarter," said Jim Poyner at Oppenheimer in New York. "Christmas is supposed to be Apple's high-water mark. This isn't a good sign."
The cautious comments were reflected in Apple's stock, which retreated after an early-morning surge to close at $26.375, up 62.5 cents, on Nasdaq. Earlier, the stock was as high as $27.75.
Apple, which lost about $800 million in the three prior quarters, has been slow to introduce new products.
It is not expected to release a new line of low-cost Macintosh machines aimed at consumers until next year, and it has been slow to replace a glitch-prone line of PowerBook portable computers. A new PowerBook line is expected to be unveiled on Monday, analysts said.
In a conference call with reporters and analysts, Apple Chief Financial Officer Fred Anderson said PowerBook sales were expected to fall $150 million in the current quarter, adding to pressure on revenues.
Anderson also said the company's research and development budget would probably be flat next year.
But the $600 million or so that Apple spent in fiscal 1996 will not keep up with Microsoft and Intel, which are each pouring billions of dollars into improving the multimedia and Internet capabilities of personal computers, analysts said.
"Where are Apple's innovations going to come from?" said Richard Zwetchkenbaum at market researcher International Data Corp. "They've got to come up with something new, something from the ground up."
In the first half of calendar 1996, Apple's share of the domestic computer market fell to 6.7 percent from 9.9 percent in the 1995 period, Zwetchkenbaum said. The rest of the PC market is expected to grow 20 percent this year.
"Apple was the only vendor of the top ten PC makers to fall in shipments this year," Zwetchkenbaum said.
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Apple Computer Inc. said Thursday it will cut U.S. prices of its Power Macintosh personal computers by as much as 30 percent to make the machines more competitive with those from rival PC makers.
The price cuts are part of Apple's effort to make its machines as attractive as so-called Wintel PCs -- machines based on Intel Corp. microprocessors running Microsoft Corp Windows software.
Apple, based in Cupertino, Calif., said it will reduce the price of its high-end Power Macintosh 9500/200 to about $4,200 from $4,900.
The price of the entry-level Power Macintosh 7200/120 business machine will be cut to about $1,600 from $2,300, the company said. The price reductions, which will be effective Nov. 2, range from 9 percent to 30 percent.
Apple can afford the price cuts because it has reduced its costs significantly since a restructuring effort began nine months ago, said Byran Longmire, a Power Macintosh product manager at Apple.
"It shows that we can take aggressive pricing actions across many of our product lines and still maintain a healthy business," Longmire said.
Apple's computers have traditionally been priced higher than PCs with similar features made by companies such as International Business Machines Corp. and Compaq Computer Corp.
With the release of Microsoft's Windows 95 program a year ago, Apple lost much of its bragging rights for ease-of-use and saw many of its customers flee to the IBM-compatible world. In the past year, the company reported more than $800 million in losses amid falling sales.
To make its machines more attractive, Apple has had to cut its prices to keep customers from defecting.
"Now when a business customer does a feature-for-feature comparison between a Power Macintosh and a Wintel machine, that customer will find the Power Macintosh competitively priced," Gary Little, Apple's senior vice president of the Power Macintosh division, said in a statement.
The price cuts should help Apple increase the momentum it has gained in recent weeks, analysts said. Earlier this month, Apple reported an unexpected profit in its fiscal fourth quarter ended Sept. 30.
The price cuts will not "take Apple out of the hole, but we're seeing a more aggressive Apple, which is good news," said Scott Miller, an analyst at market researcher Dataquest Inc. The price cuts and the news about better financial health could convince more customers sitting on the fence to buy an Apple, Miller said.
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Synopsys Inc. said Thursday it agreed to buy Epic Design Technology Inc. for about $428.1 million in stock to gain expertise in a hot niche of the semiconductor design business.
Synopsys, which writes software to help engineers design computer chips, said it will issue 0.7485 of its shares for each of Epic's 13.7 million shares outstanding. Based on Synopsys's closing stock price of $41.75 on Wednesday, Synopsys would pay about $31.25 for each Epic share.
Shares of Epic, based in Sunnyvale, Calif., fell 87.5 cents to $31 in late Nasdaq trading. Shares of Synopsys, based in Mountain View, Calif., were unchanged at $41.75, also on Nasdaq.
Synopsys specializes in software used in designing the overall framework of a microchip. Epic specializes in software for designing individual microscopic circuits, millions of which make up the microchip.
The acquisition gives Synopsys an edge as the so-called design automation industry scrambles to come up with ways to help engineers design ever smaller chips, analysts said.
"We believe the Epic acquisition is a good strategic move," said Raj Seth, analyst at Cowen & Co. in Boston. "Synopsys picks up technologies that are increasingly critical to developing" the tiny "deep submicron" circuits.
Synopsys' customers, which include some of the world's biggest chip makers, have been asking for a suite of design software that would let engineers design a chip's framework as well as its circuits, said Aart de Geus, Synopsys chief executive.
Epic will become a unit of Synopsys, the companies said. Sang Wang, Epic chairman and CEO, will head the unit.
Synopsys will take an undetermined charge for the acquisition in the quarter the transaction is done, "ideally March," said Brooke Seawell, Synopsys chief financial officer. Because of little overlapping products, there should be no Epic job cuts, Seawell said.
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Apple Computer Inc. Wednesday reported a $120 million loss in its fiscal first quarter and warned investors it did not expect to report a profit until September.
The troubled computer maker, based in Cupertino, Calif., also said it expected revenue for the current fiscal year, which ends next September, to drop about 13 percent to $8 billion to $8.5 billion because of weak consumer sales.
Apple's loss, which equaled 96 cents a share, compared with a loss of $69 million, or 56 cents a share, in the year-ago quarter. Sales for the quarter ended Dec. 27 fell to $2.13 billion from $3.15 billion.
Apple attributed the latest quarterly loss to slow sales of consumer-oriented Performa desktop computers during the crucial Christmas quarter, which analysts said was partly due to concerns about Apple's future.
"Apple's been under a black cloud, and part of it has been Apple's doing," said Lou Mazzucchelli, analyst at brokerage Gerard Klauer Mattison in New York. "It's hard for a consumer to get the gumption to buy a Performa when everyone's asking, 'Is Apple dead yet?'"
Apple officials said the company will unveil in coming weeks its second restructuring program in two years, aimed at cutting operating costs by $400 million.
The plan could include more job cuts, Chief Financial Officer Fred Anderson said. Apple wants to reduce its break-even point to $8 billion in annual revenues to enable it to return to profitability by the end of September.
Previously, Apple had promised to return to sustainable profits by March. But industry analysts had started to question that goal after Apple disclosed less than two weeks ago that sales of its Performa line were running behind plan.
Apple, which posted a record loss last year of $816 million, has been struggling to return to profitability in the face of increased competition from computers using Microsoft Corp.'s Windows operating system and Intel Corp.'s computer chips.
Last February, Apple replaced Chief Executive Michael Spindler with National Semiconductor Corp. boss Gilbert Amelio and then, in December, announced a reunion with former co-founder Steven Jobs when it agreed to acquire Job's Next Software Inc. for $400 million.
Meanwhile, debt rating agency Standard & Poor's lowered Apple's corporate credit and debt rating another notch Wednesday, putting the company's debt further into junk bond status.
The rating agency said the downgrade reflected the challenges facing Apple, including reducing costs and restoring revenue growth, executing a cohesive operating system upgrade upon completion of the Next acquisition, and Apple's diminished liquidity and financial resources.
"Despite its position among the top five worldwide personal computer manufacturers ... Apple has been struggling with extremely competitive industry conditions, slipping market share, and operating losses," the rating agency said.
Despite the slowdown in Performa sales, Anderson said Apple's financial position remained strong.
"While we were very disappointed by the Performa sales results and the associated loss, our financial position remains sound," he said. "We exited the quarter with $1.8 billion in cash."
Anderson said there were some bright spots in its results. European shipments rose 50 percent in the first quarter from the fourth quarter. Sales to educational organizations also were above the company's goals, Anderson said.
Still, Performa sales, which account for about a third of Apple's revenues, will be weak for the rest of the year. "We had a major problem in this one product area," he said.
Analysts said the loss, which Apple forecast two weeks ago, represented a setback for Amelio. He had set a goal of stanching Apple's losses in 1996 and getting revenue growing again by 1998.
News of the latest loss can drive even more consumers to avoid buying Apple products, analysts said.
"The question is, can Apple wait until 1998 to get its growth engine going again?" said Walter Winnitzki, analyst at broker PaineWebber Inc. in New York.
Apple reported its results after the market closed. Apple closed at $17.25 a share, down 62.5 cents, on Nasdaq.
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When Apple Computer Inc. fired co-founder Steven Jobs in 1985, Apple employees did not know whether to cry or to rejoice.
Through the early 1980s, Jobs had inspired Apple engineers to create a computer called the Macintosh which would change the world. At the same time, though, Jobs and his mercurial temper burned out many of the same engineers who adorded him.
On Friday, more than 11 years after Jobs was ousted in a stunning boardroom coup, Apple took a huge gamble by bringing him back.
His assignment is to help the Cupertinto, California-based computer company revamp the software behind the Macintosh, an effort that had been mired for three years.
The bet is that Jobs is the only person who can inspire Apple's demoralised programmers to create software that would leapfrog Microsoft Corp's competing Windows operating system.
"He will help tremendously," said Randy Wigginton, a former Apple programmer who worked under Jobs to write the software of the original Mac. "Steve is incredibly bright, talented, amusing."
On Friday, as word of Apple's decision to rehire Jobs spread, shares of the company rose $1.25 or 5.6 percent, to $23.50.
Job's new company, NeXT Software Inc., which Apple agreed to acquire on Friday for $400 million, offers a computer operating system that has many of the software bells and whistles Apple has been looking for to catch up with rival Microsoft.
Apple had tried to reach a deal with closely held software company Be Inc., founded by another former Apple executive, Jean-Louis Gassee, but the talks broke down and the company turned to Jobs for help.
With NeXT's existing technology, Apple hopes to finish the overhaul of its popular Macintosh operating system -- the type of programme that controls the fundamental functions of a computer -- in late 1997.
But the key asset that Apple acquired is Jobs. He will serve part-time as a technology adviser and will report to Apple Chairman Gilbert Amelio.
Several Apple programmers working on the Mac overhaul said they have been frustrated for months with a string of weak managers who could not get the project past a rough sketch even after three years. With Jobs, the programmers said, they hope the project can finally move forward.
"Everybody is excited," said an Apple employee close to the project. "I am very excited."
The risk of hiring Jobs is his volatility. People who have worked for him said Jobs has a knack for inspiring engineers to think that their work is a life-or-death project, a sentiment Apple now needs. But the same sentiment can burn engineers out.
"In some ways he has mellowed, but he still has an incessant drive for perfection," said Joanna Hoffman, the Mac's first marketing manager.
Jobs could not be reached on Saturday for comment. On Friday he told reporters he was looking forward to rejoining the company he co-founded nearly 20 years ago out of his parent's garage.
"I feel very lucky to be a part-time Apple employee and work for Gil and advise him on product strategy."
Jobs also will work with Apple Chief Technical Officer Ellen Hancock, a veteran International Business Machines Corp. software manager who has set specific goals for the operating system team.
Jobs' visionary role and Hancock's strict, no-nonsense management style balance nicely, said Tim Bajarin, analyst at market researcher Creative Strategies Research.
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Apple Computer Inc. ( stunned investors Wednesday by reporting an unexpected $25 million profit for the last three months of its fiscal year.
The Cupertino, Calif.-based computer maker, which had been expected to report a loss of 30 cents a share, posted a profit of 20 cents a share, its first quarterly profit this year.
In the same quarter a year ago, Apple had net income of $60 million, or 12 cents. Included in the most recent quarter's operating results was a gain of $17 million.
Fourth-quarter revenue for fiscal 1996 declined 23 percent to $2.32 billion from $3 billion.
Apple released the news after the market closed and Its shares jumped as much as $4.25 to $30 a share in after-hours trading.
The profit came because of Apple's aggressive cost cutting, a bigger-than-expected exodus of employees and lower prices for key components, such as memory chips, analysts said.
"It is a shock," said Daniel Kunstler, an analyst at JP Morgan in San Francisco who was expecting a loss. "It seems they've brought the break-even point for their business down pretty dramatically. This is very encouraging."
Most important to investors, Apple could remain profitable in coming quarters, which would bolster confidence among consumers that it will be around for years and keep loyal customers from switching to IBM-compatible personal computers, analysts said.
Fred Anderson, Apple's chief financial officer, stopped short of predicting a profit in the first fiscal quarter.
He said, however, that he expects the company's costs to increase only slightly in the December quarter on higher advertising expenses and that first-quarter revenue should be about the same as in the fourth fiscal quarter.
"We continue to make progress in strengthening Apple's financial condition, as our $410 million in positive cash flow from operations during the quarter suggests," Anderson said.
"We've reduced inventories by nearly $400 million since June and completed the quarter with over $1.7 billion in cash and short-term investments," he said in a statement.
In the past three quarter, Apple reported huge losses because of declining Macintosh sales, management turmoil and growing popularity of personal computers running Microsoft's Windows software, which compete with Macintosh.
The company began slashing its costs when former National Semiconductor Corp. chief Gilbert Amelio took charge of Apple in February.
With most of the cost-cutting plan completed, Apple now will concentrate on the much tougher task of increasing revenue, Anderson said.
While shipments were down 26 percent in the fourth quarter to 932,000 units from the year-ago quarter, Apple said shipments were up 11 percent from the third quarter, a sign that customers were once again buying Apple's products.
Apple has a slew of new products in the works.
On Monday, the company is expected to unveil a new low-end PowerBook, a much-needed portable computer to replace Apple's older glitch-prone models.
In the first calendar quarter, the company also is expected to introduce new low-end consumer desktop models, a niche from which Apple had retreated in an effort to cut costs.
For the full year, Apple reported a loss of $816 million, or $6.59 a share, reflecting a series of hefty one-time charges for inventory writedowns and restructurings. In fiscal 1995, Apple earned $424 million, or $3.45 a share.
Revenue for the year fell 11 percent to $9.83 billion from $11.1 billion a year ago.
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Microsoft Corp. Monday will unveil a set of software technologies that lets programmers more easily create software for sharing information through corporate and public computer networks.
Microsoft executives, including Chairman Bill Gates, also will discuss at an event in Los Angeles development plans for the company's Windows family of operating systems, the company said Friday.
At one of its periodic Professional Developers Conferences, Microsoft executives will encourage programmers to write commercial software based on Microsoft's standards.
Microsoft's event will be held the same week Oracle Corp., Microsoft's biggest rival in the corporate software business, is holding a conference in San Francisco to pitch its own approach to writing programmes for shuffling information through huge networks.
Both companies in recent months have been retooling their key applications and networking software to work on the Internet's World Wide Web and internal corporate networks called intranets.
Writing even simple programmes to let computer users collaborate on documents through networks tradionally has required intimate knowledge of difficult programming techniques.
The technology Microsoft will unveil on Monday will relieve programmers of the need to know the secret handshakes of its Windows operating systems, said Tanya van Dam, a Microsoft group product manager.
The move would encourage developers to base more of their commercial products on Microsoft's Windows NT networking operating system, analysts said.
Oracle has a similar aim.
On Monday, the company will unveil its own tools for writing intranet software for tapping information stored in Oracle databases, Oracle executives said.
Corporate programmers have written huge libraries of financial, manufacturing and human resources software using Oracle's products. The new programming tools would let programmers easily convert the libraries to work on the Web, Oracle said.
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Apple Computer Inc is expected to report on Wednesday that it had a loss in its fiscal fourth quarter ended in September amid declining sales of its Macintosh computers, but a turnaround may be at hand.
Apple's management is likely to tell investors that the beleagured company is getting closer to resuming profitability, possibly as early as the December quarter, analysts said.
"The financial condition of the company has been strengthened," said Todd Bakar, an analyst at Hambrecht & Quist in San Francisco. "Questions of their long-term viability don't come up as often anymore."
In the past three quarters, Apple has reported huge losses as customers have defected to cheap IBM-compatible personal computers running Microsoft Corp's easy-to-use Windows 95 software. By cutting costs and firing workers, Apple has managed to whittle its losses.
Wall Street expects Apple, based in Cupertino, Calif., to post a loss of $0.30 a share, according to a recent survey of 23 analysts by First Call. In the fiscal fourth quarter last year, Apple reported net income of $60.1 million, or $0.48 a share, on revenue of $3.0 billion.
Apple's new management, under former National Semiconductor Corp chief Gilbert Amelio, has done a good job cutting expenses, analysts said.
Apple also has managed to raise enough cash to be out of a dire cash shortage, which threatened to hamper day-to-day operations. The company could even generate a little cash from its business this quarter, analysts said.
The trick now is to convince consumers that the Macintosh is a worthy competitor to PC clones.
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Apple Computer Inc. Chairman Gilbert Amelio said Tuesday the computer maker's three-year turnaround plan was still on track despite its statement last week that it will report a first-quarter operating loss of as much as $150 million.
Amelio, speaking to thousands of Macintosh computer enthusiasts at the MacWorld trade show here also called on several star computer industry executives to express their support for the Macintosh.
In his much-anticipated keynote speech, Amelio assured Mac customers the company will have a smooth transition as Apple shores up its finances and overhauls the fundamental software of the Macintosh.
"We will encounter a few bumps on the way, but I don't want that to shake your confidence," Amelio told Macintosh customers and software developers. "We are sticking to our strategy."
Apple has been struggling for the past year to stop huge financial losses, develop new software to make the Mac more modern and increase revenues. Under Apple's three year plan, it aims to stop financial losses in 1996, develop new products in 1997 and increase revenues in 1998.
Since Amelio became chairman of the Cupertino, Calif.-based company a year ago, he has slashed costs. In December, Apple also agreed to buy NeXT Software Inc. for $400 million to get its help in revamping the fundamental software of the Mac.
In order to move developers smoothly from Apple's current operating system to the new system, Apple said it plans to continue to deliver regularly scheduled upgrades to the current system while accelerating development of a new and advanced operating system.
The new operating system, code-named "Rhapsody," will be based on the merging of technologies from Apple and NeXT.
"Our goal is to be one of the world's strongest brands for consumer, education and the enterprise," Apple co-founder and Next Software President Steven Jobs said, adding Apple hoped to rely on Next's multimedia and computing intensive software to accomplish that goal.
Apple said Friday it expected to report a loss from operations of $100 million to $150 million because of weak sales of its Performa line of Macintosh computers. Revenue for the company's first quarter ended Dec. 27 is expected to drop 10 percent from the $2.3 billion reported in the September quarter.
Amelio blamed the shortfall on weak consumer sales for personal computers rather than a breakdown of Apple's strategy.
"We had one thing that really fell out of bed in a big way and that is, Santa Claus forgot to come," he said, referring to the surprisingly low sales of its Performa desktop PC line aimed at consumers.
The first quarter "was about retail sales, not about the fundamentals in the recovery of Apple," Amelio told a packed ballroom.
Industry experts say part of the blame for declining revenue falls on the perception that there is not as much software for the Macintosh as there is for PCs running Windows software from Microsoft Corp..
To boost the Mac's image, Amelio turned to executives from Microsoft, Sun Microsystems Inc., and Netscape Communications Corp. to announce software plans for future versions of the Mac.
"We see great opportunities for the Mac in the future," said Paul Maritz, Microsoft vice president in charge of application development.
At Macworld, Microsoft introduced its Internet Explorer browser for the Mac.
The Redmond, Wash.-based software giant, which has often battled Apple for control of the PC industry, also said it created a new product unit responsible for design and development of a Macintosh version of its widely used Microsoft Office software suite.
While Microsoft remains Apple's great nemesis in the operating systems software business, Microsoft also has long served as the leading independent developer of software applications that run on Apple Macintosh computers.
"When Apple's biggest third-party developer decides to commit new resources to its Macintosh applications business, that's a pretty clear sign that there's still money to be made in the Macintosh market," said Jeffrey Tarter, an industry analyst and publisher of Soft*Letter.
The creation of the new Macintosh product unit, part of the Microsoft desktop applications division, marks the first time in the history of the division that an entire product unit has focused exclusively on the Macintosh, Microsoft said.
James Barksdale, chief executives of Internet software vendor Netscape, also said his company will release versions of its communication software within the next few weeks that will run on Apple's next-generation operating system.
Apple's stock closed down 37.5 cents at $17.50 on Nasdaq.
| 25 |
Macromedia Inc. shares plunged to a two-year low Friday after the software company reported an unexpected third-quarter loss and said it could face weak sales for another quarter.
Some analysts said they also were concerned that Apple Computer Inc.'s declining sales could hurt Macromedia's revenue from sale of software for Macintosh computers in coming quarters.
Shares of the San Francisco graphics software vendor fell $4.19, or 31 percent, to $9.31 in Nasdaq trading -- the lowest price since December 1994.
Macromedia on Thursday reported a loss of $2.36 million, or 6 cents a share, for its fiscal third quarter ended Dec. 31, compared with net income of $7.15 million, or 18 cents a share, in the same quarter a year ago. Third-quarter revenue fell 9 percent to $28.1 million from $30.9 million.
Wall Street expected Macromedia to report net income of 14 cents a share, according to a recent survey of analysts by First Call.
Macromedia gets about half its revenue from Director, a computer program that helps graphic artists make animated clips for video games and multimedia software.
Macromedia customers are putting off Director purchases until the company releases a new version in a couple of months, analysts said.
"We are left with the concern that there will be a dip in revenue" in the fourth quarter as well, said Kevane Wong, analyst at brokerage firm Jefferies & Co. in San Francisco.
Macromedia also gets about 60 percent of its revenue from Macintosh software sales. A slow rollout of high-end Macintosh PCs in Europe led to slow European sales for Macromedia as well, said Ed Bierdeman, analyst at Dakin Securities.
"The Mac market is like a block of ice melting in the sun," leaving many Mac software vendors, including Macromedia, to suffer, Bierdeman said.
Macromedia likely will post a small loss in its fiscal fourth quarter, ending in March, Bierdeman said.
Several analysts also said they were concerned Macromedia might not be able to finish the new version of Director until spring, which would jeopordize earnings until the quarter ended in June.
Macromedia officials could not be reached for comment immediately.
| 25 |
Apple Computer Inc. said Tuesday it plans to to work with a restaurant operator to open cybercafes in the United States and Europe starting late next year.
The third-biggest maker of personal computers licensed its name and famous half-eaten apple logo to London-based Mega Bytes International BVI, a developer of theme parks. Mega Bytes will develop a high-tech chain of eateries where patrons can surf the Internet, play games and eat.
Apple said the restaurants are part of its plan to spread its famous brand into the everyday world, as other non-gourmet companies, such as Harley-Davidson Motorcyles and Nike Inc., have done.
The first restaurant, slated to open in Los Angeles in late 1997, will flaunt Apple's computers at every table, the company said. Customers can browse the World Wide Web with high-speed access, check out the latest CD-ROM titles and send e-mail.
Restaurants in London, Paris, New York, Tokyo and other cities will follow, Apple said.
Apple, based in Cupertino, Calif., will only make money from the licensing agreement, an Apple spokeswoman said. Terms of the agreement weren't disclosed. Mega Bytes will run the restaurants.
| 25 |
The stock of Vantive Corp. plunged as much as 24 percent Friday after the software company said it expects slowing revenue growth in the next two quarters because of a shortage of sales staff.
The warning came one day after the company reported better than expected third-quarter earnings.
Vantive, based in Santa Clara, Calif., lost $9.25 to close at $31.50 on Nasdaq trading of 4.5 million shares.
Vantive writes software that helps big companies, such as Hewlett-Packard Co. and Motorola Inc., find and keep track of customers and their requests.
In the past few quarters, Vantive's revenue has more than doubled each time on increasing demand for its customer-service products.
In the third quarter ended Sept. 30, the company's income jumped five-fold to $3.17 million, or 12 cents a share, from $632,000, or 3 cents, a year ago.
Wall Street had expected Vantive to earn 7 cents a share, according to First Call, which tracks analyst forecasts.
Third-quarter revenue more than doubled to $11.1 million from $4.29 million on strong software sales and service contracts, the company said.
In a conference call with analysts, however, Vantive executives said revenue in the its next two quarters will be about flat to slightly higher compared with the third. The company doesn't have enough qualified sales and marketing staff to sell its products, the company said.
"We believe most sequential growth for 1996 has already occurred," Kathleen Murphy, Vantive's chief financial officer, told the analysts.
The forecast caught Wall Street by surprise, since the firm had been expected to report continued revenue leaps.
Still, most said the forecast isn't a sign of extended tough times for Vantive.
"Even if sequential growth in the fourth and first quarter is flat, that (revenue) would be double what it was last year," in the same quarter, said Ed Bierdeman, an analyst for Dakin Securities.
Murphy said the company will concentrate on expanding and training its sales and support staff in the coming quarters. It takes about six months to train new sales people, so the new staff will not be effective until the second quarter of 1997.
| 25 |
Synopsys Inc. said Thursday it agreed to buy Epic Design Technology Inc. for about $428.1 million in stock to gain expertise in a hot niche of the semiconductor design business.
Synopsys, which writes software to help engineers design computer chips, said it will issue 0.7485 of its shares for each of Epic's 13.7 million shares outstanding. Based on Synopsys's closing stock price of $41.75 on Wednesday, Synopsys would pay about $31.25 for each Epic share.
Shares of Epic, based in Sunnyvale, Calif., fell 87.5 cents to $31 in late Nasdaq trading. Shares of Synopsys, based in Mountain View, Calif., were unchanged at $41.75, also on Nasdaq.
Synopsys specialises in software used in designing the overall framework of a microchip. Epic specialises in software for designing individual microscopic circuits, millions of which make up the microchip.
The acquisition gives Synopsys an edge as the so-called design automation industry scrambles to come up with ways to help engineers design ever smaller chips, analysts said.
"We believe the Epic acquisition is a good strategic move," said Raj Seth, analyst at Cowen & Co. in Boston. "Synopsys picks up technologies that are increasingly critical to developing" the tiny "deep submicron" circuits.
Synopsys' customers, which include some of the world's biggest chip makers, have been asking for a suite of design software that would let engineers design a chip's framework as well as its circuits, said Aart de Geus, Synopsys chief executive.
Epic will become a unit of Synopsys, the companies said. Sang Wang, Epic chairman and CEO, will head the unit.
Synopsys will take an undetermined charge for the acquisition in the quarter the transaction is done, "ideally March," said Brooke Seawell, Synopsys chief financial officer. Because of little overlapping products, there should be no Epic job cuts, Seawell said.
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Tandem Computer Inc on Wednesday will become the latest maker of high-end, proprietary computers to introduce a line of machines based on personal computer technology.
Tandem, which specializes in making transaction-processing computers for banks and stock exchanges, said it will unveil a line of servers based on Intel Corp's Pentium Pro microprocessors and Microsoft Corp's Windows NT networking operating system.
The servers -- which are computers souped up to control the flow of information through a network -- will include some of Tandem's technology for handling huge volumes of transactions, the company said. Tandem plans to pitch the machines to customers who want to set up shop on the Internet.
The machines are Tandem's first step to rely less on sales of computers based on its own proprietary software and technology.
Banks, telephone companies and stock exchanges still rely heavily on Tandem's so-called fault-tolerant computers for their heavy-duty computing.
But Tandem's sales growth has stalled in recent years as its customers have replaced some of its machines with networks of cheaper computers from companies such as Sun Microsystems Inc and Compaq Computer Corp.
To strike back, Tandem unveiled a strategy earlier this year that includes making servers based on off-the-shelf technology from Intel and Microsoft.
Other high-end computer makers, such as International Business Machines Corp and Digital Equipment Corp, embarked on similar strategies years ago.
With its new machines, Tandem plans to help its existing customers set up networks based on Microsoft's Windows NT networking software, said Chris Rooke, Tandem's vice president of corporate marketing.
"We expect Tandem to now be on our customers' vendor list when they're looking at using Windows NT in more business- critical applications," Rooke said. "Yes, we do expect to open new accounts, but we expect to still be Fortune 500-class customers."
Rooke said Tandem will concentrate on selling the machines as foundations for businesses that want to sell their wares online.
Tandem also plans on Wednesday to unveil a new line of its Himalaya servers, a line of proprietary servers for storing and retrieving huge libraries of corporate information.
Rooke declined to discuss the pricing of its new lines.
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A warning about weak Christmas sales from personal computer retailer CompUSA Inc. Thursday raised concerns that the entire computer industry may have a weak fourth quarter, sending PC stocks lower.
CompUSA, tradionally one of the healthier PC retailers, said it expected a disappointingly small rise in sales in the fourth quarter because of weak PC sales. The Dallas-based company was the third major PC retailer in two weeks to report a weak outlook.
"This is certainly not a good sign," said Scott Miller, an analyst at market researcher Dataquest Inc. in San Jose, Calif.
Stock in Compaq Computer Corp., the world's biggest PC maker, fell $2 to $72.375. Dell Computer Corp. slipped $1.875 to $51.25. And Intel Corp., the biggest maker of PC microprocessors, declined 56.25 cents to $130.375.
Analysts said PC companies that make machines geared toward home users, including Packard Bell NEC Inc. and Acer Inc., did have a disappointing year.
Unlike last year, when Microsoft Corp. released the Windows 95 operating system, there were no compelling new technologies in 1996 to drive consumers to stores.
But investors may be overreacting, analysts said. The three biggest personal computer makers -- Compaq, International Business Machines Corp. and Dell -- get only a sliver of their revenues from sales to consumers.
In fact, each of the big three is expected to have solid fourth-quarter financial results because of strong corporate sales.
"Our checks with distributors indicate that IBM is going to have over 30 percent growth (in its PC business) this quarter," said Gary Helmig, an analyst at brokerage SoundView Financial. "IBM's sales are not really focused in the consumer marketplace."
SoundView Thursday raised its rating on IBM to long-term buy from hold.
Neither Dell nor Compaq are expected to suffer from weak consumer sales in the fourth quarter, either, analysts said.
"Corporate sales are still strong, as far as I can see," Dataquest's Miller said. In the past couple of months, many big companies began buying huge numbers of PCs to take advantage of new business software from Microsoft, released late this year.
"The companies that are really suffering now are the ones that are very exposed to retail," said Don Young, an analyst at Prudential Securities in New York.
Those companies may continue to have weak sales increases into 1997, while consumers wait for new multimedia PCs to be released, analysts said.
Packard Bell and Acer officials could not immediately be reached for comment.
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The lean times for the video game software industry appear to be over.
Three of the largest game developers on Thursday reported results for the crucial December quarter that were better than Wall Street expected.
Electronic Arts Inc., Activision Inc. and Spectrum Holobyte Inc. said strong sales of games for personal computers and next-generation video game consoles, such as the Sony PlayStation, contributed to the strong results.
For the past year, the video game software industry had been in a funk while consumers waited for the release of advanced game machines from Sony Corp., Sega Enterprises and Nintendo Corp. The industry also lacked blockbusters to draw customers to the video game isle at stores.
The release of the PlayStation last year and the Nintendo 64 this year has revitalized the industry, analysts said.
"People are underestimating how truly red hot sales of the video game systems are," said David Farina, an analyst at brokerage William Blair & Co. in Chicago. "If history is any guide, we're in for a strong two-year cycle for my investors, cross my finger."
After the market closed, Electronic Arts, the biggest U.S. game publisher, said net income for its fiscal third quarter, ended Dec. 31, rose 25 percent to $36.7 million, or 66 cents a share, from $29.3 million, or 54 cents, in the same quarter a year ago.
Electronic Arts' revenue in the quarter jumped 13 percent to $271.1 million from $240.1 million on strong sales of games for the PlayStation and PCs, the company said.
Activision, another big game vendor, said net income in its Christmas quarter more than doubled to $4.12 million, or 28 cents, from $1.95 million, or 13 cents, a year ago.
Spectrum Holobyte, based in Alameda, Calif., said net income in the December quarter was $5.7 million, or 20 cents a share, more than double the 9 cents Wall Street expected. In the same quarter last year, Spectrum Holobyte had a loss of $9.95 million, or 41 cents a share.
The strong earnings likely will continue into the March quarter, analysts said, as consumers buy a new generation of PCs based on Intel Corp.'s MMX technology, which soups up the graphics capabilities of the machines.
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Apple Computer Inc.'s rehiring of company co-founder Steve Jobs and purchase of NeXT Software Inc. will give it a much-needed operating system, but analysts warned Monday the deal might not be enough to boost the computer maker's market share or bottom line.
"(The move) has a lot of PR value, but it looks to me that the company still has a strategic mess on its hand with $400 million less," said John Rossi, an analyst at the Robertson Stephens & Co. brokerage in San Francisco.
Apple said Friday it would pay $400 million to buy NeXT and rehire NeXT founder Jobs, Apple's mercurial co-founder, as part of a plan to revamp the Macintosh computer.
Apple bought NeXT because it needs an operating system -- the program that controls a computer's basic functions -- after its own attempt failed.
While NeXT's existing technology helps Apple make up for lost time and provides a decent foundation for a new operating system, the technology is not dazzling enough to set the Macintosh apart from computers running Microsoft Corp.'s Windows software, analysts said.
"Trying to prop up the brand name with a psychological hire is not going to solve Apple's problems," said one Wall Street analyst who asked not to be identified.
Analysts note that NeXT has failed to make any dent in the consumer computer market on its own. The company sold only 50,000 computers in four years as a hardware manufacturer before it focused entirely on software.
Some analysts also are disappointed that Apple chose NeXT over Be Inc., a closely held software company founded by another former Apple executive, Jean-Louis Gassee.
"I saw Be's technology. I was wowed by it," Rossi said. Be had many features that would have appealed to Macintosh customers, who do a lot of graphics design, video and image editing and desktop publishing. NeXT, Rossi said, "is aged" in comparison.
Still, Apple needed to come up with a technological blueprint to persuade outside software companies not to abandon the Macintosh.
By making no secret they were shopping around for technology, Apple's management had essentially told their customers the current Macintosh system was a dead end, analysts said.
If Apple had taken much longer to present its plan, Macintosh software developers would have begun to look for other ways to make a living.
"The technology direction implicit in the acquisition is a good one," said Ike Nassi, a former Apple executive and computer scientist who headed the software development effort.
Some investors agreed. Apple shares rose 12.5 cents to $23.625 in afternoon Nasdaq trading. The shares jumped $1.25 to $23.50 Friday as word spread of Apple's decision to buy NeXT, based in Redwood City, Calif.
Analysts said they may have to wait months to get a clearer picture from Apple about what the combination of NeXT and Apple software will look like.
"Merging operating systems is not a simple task," said Peter Andrew, an analyst at brokerage AG Edwards.
And it is still unclear where Apple will get the software expertise to include key features in the new operating system.
For example, neither Apple nor NeXT's software is efficient at handling several tasks simultaneously, such as recalculating a spreadsheet while faxing a document and updating stock quotes on the screen.
"There are many issues about how the NeXT operating system can revitalize the Mac," said Richard Zwetchkenbaum, an analyst at market researcher International Data Corp.
Apple executives are expected to give more technological details about their plan Jan. 7 at the MacWorld trade show in San Francisco.
Daniel Kunstler, an analyst with investment bank JP Morgan's San Francisco office, said Jobs, even if he helps Apple comes up with a brilliant operating system quickly, cannot save Apple alone.
"My investment thesis on Apple hinges on a lot of mileposts," including reporting a decent Christmas quarter this year and revamping its entire product line in 1997, Kunstler said. Finding an operating system was just one milepost, he said.
"The PC industry is one of the most dynamic and competitive in the world, and this announcement underscores that fact," said Microsoft spokesman Mark Murray. "We look forward to watching their efforts and competing in the marketplace."
He pointed out that Microsoft has been the biggest developer of applications for the Macintosh platform over the past 15 years.
"Until Apple provides more details on their future plans, it's going to be hard for anyone to say how they will partner with or support this new venture," he said. But he added that Microsoft would take a "hard look" at any new system, depending on customer demand.
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Apple Computer Inc. Wednesday reported a $120 million loss in the first quarter of fiscal 1997 and warned investors it did not expect to return to profitability until September.
The troubled computer maker attributed the loss to slow sales of its its consumer-oriented Performa desktop computers during the normally robust Christmas quarter.
Apple's loss, which equaled 96 cents a share, compared with a loss of $69 million, or 56 cents a share, in the year-ago period. Sales for its first fiscal quarter ended on Dec. 27 fell to $2.13 billion from $3.15 billion.
Based on the weak first quarter results, the company said it planned to develop additional restructuring programs during the second quarter with the goals of reducing its break-even point to $8 billion in annual revenues and enabling Apple to return to profitability by the fourth fiscal quarter, which ends Sept. 26, 1997.
Previously, Apple had promised to return to sustainable profits by March but industry analysts had started to question that goal after Apple disclosed less than two weeks ago that sales of its Performa line were running behind plan.
"While we were very disappointed by the Performa sales results and the associated loss, our financial position remains sound," said Apple Chief Financial Officer Fred Anderson. "We exited the quarter with $1.8 billion in cash and continued to show improvements in our inventory management during the quarter.
"Additionally we saw a 15 percent sequential increase in our high-end Power Macintosh sales," he said. "We significantly exceeded our internal plans for shipments of PowerBooks and expect their availability to continue to improve in the second quarter."
Nevertheless, analysts said the results, which Apple forecast less than two weeks ago represented a setback for Apple Chairman Gilbert Amelio, who had set a goal of stanching Apple's losses in 1996.
"Our expectations now do not show a profit until the fourth quarter, which ends in September," said Walter Winnitzki, analyst at brokerage PainWebber Inc. in New York.
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Intuit Inc., Microsoft Corp. and Checkfree Corp. said Thursday they jointly developed a software standard to make it easier to bank online.
The companies said their Open Financial Exchange -- a set of technical specifications -- will make it easier for depositors' personal computers to communicate with bank computers. That makes it easier to pay bills, transfer money between accounts and get balances via the Internet.
About 50 banks are expected to announce by fall that they will adopt the standard, said Intuit Executive Vice President Bill Harris. By then, each of the three companies also will unveil new lines of online banking products based on the standard.
Intuit and Redmond, Wash.-based Microsoft, fierce competitors since a merger agreement between them fell apart almost two years ago, said that by working together they will accelerate the adoption of online banking.
"In all of the meetings each of us have had, every one of the financial institutions asked us to bring this together," said Lewis Levin, head of Microsoft's desktop finance unit.
The alliance gets rid of the "mishmash" of standards Intuit, Microsoft and Checkfree were trying to push on banks, said Karen Epper, online banking analyst at market researcher Forrester Research.
Menlo Park, Calif.-based Intuit and Microsoft are the two largest vendors of personal financial software and checkbook programmes. Checkfree lets customers send checks and pay bills through their personal computers.
The companies said they will work with credit card issuer Visa to link Open Financial Exchange to Visa's bill payment network.
Other companies supporting Open Financial Exchange including banking software firm Edify Corp.
Stock in Microsoft, which also launched its Office 97 business software package Thursday, rose $1.125 to $85.75 in afternoon trading on the Nasdaq market. Checkfree climbed 62.5 cents to $15.375, while Intuit was unchanged at $34.625, also on Nasdaq.
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Database software company Informix Corp. said Friday it filed a lawsuit against Oracle Corp. accusing its bigger rival of stealing trade secrets by hiring away its employees.
Oracle hired 11 Informix research and development employees from Informix's Portland, Ore., research and development centre. All 11 workers quit Wednesday morning, said Informix Chief Executive Phil White.
"This is a blatant effort by Oracle," said White. "They're behind significantly technically. We're not going to let someone who's significantly behind just buy his way in."
Oracle officials could not immediately be reached for comment.
The lawsuit, filed Thursday in Oregon Circuit Court in Portland, seeks unspecified damages. Informix on Thursday also obtained a temporary injunction barring the former employees from giving trade secrets to Oracle, Informix said.
Informix also charged Gary Kelley, a former Informix product development vice president who left for Oracle, with breach of contract. Kelley did not return phone calls to Oracle's Portland facility.
Oracle stock dropped 62.5 cents to $39.875 in afternoon trading on Nasdaq, where it was among the most actively traded shares. Informix lost $1.625 to $21.25, also on Nasdaq.
Informix, based in Menlo Park, Calif., and Oracle, based 20 miles to the north in Redwood Shores, Calif., both write sophisticated database programmes that store and retrieve huge amounts of information in corporate computer networks.
The companies for years have been fighting a marketing war touting their advances in database technology with each new release of their respective flagship products.
White said he believed Oracle was interested in gaining Informix's expertise in writing software for so-called massively parallel computers -- top-of-the-line machines that can process huge amounts of transactions, such as bank ATM withdrawals, simultaneously.
The 11 Informix employees who left for Oracle were working on this type of product, White said.
White, normally a publicity-shy executive, said he was livid about Oracle's tactics and intended to make the lawsuit a political cause for preventing raids in high-technology industries.
White said he personally went to the home of Oracle Chief Executive Larry Ellison on Thursday night to discuss the issue, but Ellison was in Hong Kong. Both men live in the same small town in the hills of Silicon Valley.
"I'm doing this not only for Informix and for our shareholders but also for the industry," White said. "We can't let companies come in and throw big financial incentives and walk away with intellectual property we spent hundreds of millions of dollars developing."
In recent years, several software rivals in Silicon Valley have accused each other of trade secret theft by employee snatching.
In 1992, Borland International Inc. accused a former employee of sending confidential electronic mail to new employer Symantec Corp.. Last year, Cadence Design Systems Inc.(. filed a similar charges against direct competitor Avant! Corp.
The court has set a hearing in the Informix case for Feb 7.
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At this year's Comdex computer trade show, the most sought-after people are not Microsoft Corp.'s Bill Gates or Intel Corp.'s Andy Grove, but corporate computer buyers.
Personal computer makers and software vendors are relying heavily on their corporate customers this year to make up for disappointing sales to consumers, executives at the trade show said this week.
While many consumers have been putting off their computer shopping until early 1997 -- when new gadgets come out -- corporate customers are finally dumping their older PCs and buying lots of machines that can run the latest business software from Microsoft.
"Certainly we see a tremendously strong business environment as a major upgrade cycle is now occurring," said Michael Winkler, senior vice president at Compaq Computer Corp.. "We think the fourth quarter will be excellent."
Winkler and other PC executives said the recent release of Microsoft's Windows NT operating system and Office 97 package of business programmes was fuelling corporate sales. These programmes work best with the computing horsepower of machines based on Intel's top-of-the-line Pentium computer chip.
In large part because of strong corporate sales, domestic PC shipments in the fourth quarter were expected to rise 20 percent to 8 million units, according to International Data Corp., a market researcher.
"The bottom line here is that the outlook for '97 for our business is very strong," said Jim McDonnell, a group marketing manager of PCs at Hewlett-Packard Co..
Based on executives' bullish comments at Comdex this week, stocks of most PC makers have gained in recent days.
Compaq rose $1.375 to $81.875 and International Business Machines Corp. jumped $2.50 to $156.25, both on the New York Stock Exchange, while Intel added $1.75 to $122.50 and Sun Microsystems Inc. gained $2.50 to $59.50, both on Nasdaq.
Still, the fourth quarter has been disappointing to some PC makers, especially those that concentrate heavily on consumer sales.
Last year this time, the release of Microsoft's Windows 95, software that makes PCs easier to use, drew lots of people to computer stores to buy their first PCs. The industry has no such attraction this year.
In fact, analysts said, consumers were putting off computer shopping this Christmas season as the industry prepares new machines based on Intel's upcoming MMX technology. MMX-based machines, slated to be released in early 1997, will feature better video, sound and 3-D graphics.
In late October, computer stocks slid as CompUSA Inc. and other computer retailers reported softening sales heading into the crucial Christmas season.
"There's no question that the quarter started out slow, but we're hopeful that things are getting better," said Mal Ransom, senior vice president of marketing at closely held Packard Bell NEC Inc., the second-biggest PC maker in the United States behind Compaq.
Consumer sales appear to be improving as it gets closer to Christmas, while prices of computer components remain low, Ransom said. "It looks like we're going to get a reasonable quarter."
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Apple Computer Inc. Chairman Gilbert Amelio will outline a long-awaited plan Tuesday to revamp the Macintosh personal computer with the help of recently acquired Next Software Inc.
At the Macworld trade show here next week, Apple and dozens of other vendors also will unveil new products that could help boost the Macintosh market in 1997, analysts said.
This year's show will be more cheery than last year's, when Apple's future as an independent company was in doubt, customers and vendors said. In 1996, Apple's new management under Amelio stopped huge financial losses and acted quickly to come up with a plan to update the Mac.
"We're very pleased with the decisions Apple has made with the future of the Mac," said Bob Roblin, senior vice president of marketing at Adobe Systems Inc., one of the biggest suppliers of Mac software.
"It's going to be a much more upbeat show, but one where a lot of questions have to be answered."
The questions swirl around Apple's agreement last month to pay $400 million for Next, the company run by Apple co-founder Steven Jobs.
Apple, based in Cupertino, Calif., plans to take Next's well-regarded operating system -- a type of program that controls the basic functions of a computer -- and meld it with the Mac operating system. The Mac's fundamental software needs an overhaul to keep up with Microsoft Corp.'s Windows family of software.
While Apple management has outlined the Next strategy, Macintosh programmers and executives of Mac-related companies said they still needed lots of technical details before they could start working on new products.
"As a user, I want to know what this means for the interface, for the functionality, for my existing software," said Phil Schuller, vice president of product management at Macromedia Inc., a developer of graphics software.
Other highlights of Macworld are expected to be the release of new versions of several key Macintosh products.
Adobe officials said they will announce plans to start shipping later this month the latest version of PageMaker, which helps graphic artists design and compose magazines and newspapers and is one of the best-selling Mac programs.
Microsoft will unveil its long-awaited Internet Explorer browser for the Mac at the show, a company spokesman said.
Apple itself will announce plans to re-enter the online service business. It plans a World Wide Web site, dubbed Apple Club, where subscribers can download Mac software. An annual subscription will cost $19.95, an Apple spokeswoman said.
In 1996, Apple pulled the plug on eWorld, its first foray into the online business.
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Novell Inc. said Tuesday it will license one of its key technologies to other software companies in a move to expand its sources of revenue.
Novell, which publishes computer networking programmes, wants to establish the technology, Novell Directory Services, as a software foundation for letting people easily find others on the Internet and for sharing information.
The move is part of Orem, Utah-based Novell's strategy to adapt its corporate networking software to control the flow of information through global networks, company executives said.
"The goal is to get into electronic commerce," said Michael Simpson, director of marketing of Novell's Internet infrastructure division. "We believe a common infrastructure is necessary and we will provide it."
Simpson compared the variety of computer networks and software standards to the early days of the telephone industry, when a customer of one telephone company could not call someone who was a customer of another company.
Novell Directory Services, also known as NDS, would help users in huge corporate or public computer networks reach others without knowing arcane electronic addresses.
Adapted for the Internet, the technology also would let users communicate with others regardless of computer or software standards, Novell said.
Novell plans to license the technology to networking software companies, Internet service providers and online services. Novell and other software companies would make money by writing computer programmes that take advantage of the universal directory, the company said.
Tom Arthur, a Novell vice president, declined to say how much Novell expects to make from the move, but said it would see a significant boost by the middle of 1997.
He also declined to say which companies would license NDS, but said work is being done to adapt it to run on computers using networking software from Sun Microsystems Inc., Microsoft Corp. and Hewlett-Packard Co.
For the past two year, Novell has been trying to recover from a failed strategy of taking on Microsoft Corp., its biggest rival, in the word processor and spreadsheet business.
Novell dumped its application business by selling its WordPerfect Corp. unit earlier this year. But the company has had a tough time rebuilding its business around NetWare, its flagship networking product.
Microsoft has been chipping away at NetWare's market share with its rival offering, Windows NT.
Novell's stock edged down 12.5 cents to $10.50 on Nasdaq.
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Novell Inc. said Tuesday it will license one of its key technologies to other software companies in a move to expand its sources of revenue.
Novell, which publishes computer networking programs, wants to establish the technology, Novell Directory Services, as a software foundation for letting people easily find others on the Internet and for sharing information.
The move is part of Orem, Utah-based Novell's strategy to adapt its corporate networking software to control the flow of information through global networks, company executives said.
"The goal is to get into electronic commerce," said Michael Simpson, director of marketing of Novell's Internet infrastructure division. "We believe a common infrastructure is necessary and we will provide it."
Simpson compared the variety of computer networks and software standards to the early days of the telephone industry, when a customer of one telephone company could not call someone who was a customer of another company.
Novell Directory Services, also known as NDS, would help users in huge corporate or public computer networks reach others without knowing arcane electronic addresses.
Adapted for the Internet, the technology also would let users communicate with others regardless of computer or software standards, Novell said.
Novell plans to license the technology to networking software companies, Internet service providers and online services. Novell and other software companies would make money by writing computer programs that take advantage of the universal directory, the company said.
Tom Arthur, a Novell vice president, declined to say how much Novell expects to make from the move, but said it would see a significant boost by the middle of 1997.
He also declined to say which companies would license NDS, but said work is being done to adapt it to run on computers using networking software from Sun Microsystems Inc., Microsoft Corp. and Hewlett-Packard Co.
For the past two year, Novell has been trying to recover from a failed strategy of taking on Microsoft Corp., its biggest rival, in the word processor and spreadsheet business.
Novell dumped its application business by selling its WordPerfect Corp. unit earlier this year. But the company has had a tough time rebuilding its business around NetWare, its flagship networking product.
Microsoft has been chipping away at NetWare's market share with its rival offering, Windows NT.
Novell's stock edged down 12.5 cents to $10.50 on Nasdaq.
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This year's Comdex, the world's most influential computer trade show, will be the showcase for some unusual computers, including machines the size of paperback books.
A host of companies will introduce second-generation handheld computers, about the size of paperbacks, which can do much of the work their desktop counterparts handle.
The trade show, expected to draw 250,000 people to Las Vegas next week, also will feature the digital video disc, or DVD, an advanced compact disc for playing movies and storing computer information.
In addition International Business Machines Corp., Microsoft Corp. and other industry giants are expected to take their year-old battle over rival approaches to simplifying personal computers to the trade show floor.
Moreso than in recent years, this year's show will highlight how the PC, the centre of a $400 billion global industry, is moving into new venues such as the living room entertainment cabinet, shirt pockets and the backs of airline seats, industry executives said.
"As more and more of the population gains experience with PCs, the types of products consumers select will diversify, and the major players have to accommodate them," said Tom Grueskin, marketing manager at computer maker Gateway 2000 Inc.
Microsoft will kick off Comdex on Sunday night with the introduction of Windows CE, a computer programme that will run on handheld computers. Several companies, including Compaq Computer Corp., NEC Corp. and LG Electronics Inc. will unveil devices using the software.
The handheld PCs represent the industry's second big push in four years to sell tiny computers for managing appointments and contacts and keeping in touch with the office.
Analysts said the new more powerful machines will let users do things earlier models were not good at, such as writing lengthy e-mail and tapping the Internet. Microsoft has made strides in making it easier for the handhelds to share information with desktops, analysts said.
Microsoft also will unveil Microsoft Office 97, a major revision of its top-selling package of business programmes. The product will be one of the biggest revenue generators for the world's biggest PC software company, analysts said.
Consumer electronics companies will crash Comdex this year to formally introduce DVD. The technology is based on compact discs similar to music CDs, but with many times the storage capacity.
Next year, Toshiba Corp., Sony Corp., Matsushita Electric Industrial Co. and several other companies will sell DVDs that can play movies and music.
At Comdex, the computer arms of the consumer electronics companies will unveil DVD storage devices that plug into PCs. The so-called DVD-ROM players are expected to spur development of video games that use sophisticated 3-D animation.
By the middle of next year, high-end consumer PCs will be equipped with DVD-ROM players, said Paul Dempsey, senior vice president at Pioneer Electronic Corp.'s New Media division. Several game software companies will have DVD-based products ready to show at Comdex.
By early 1998, some DVD-equipped laptops may even be able to play full-length, full-screen movies, analysts said.
Comdex may also become an arena this year for competing versions of so-called network computers -- bare bones PCs that get most of their computing power from corporate or public computer networks.
IBM will introduce several network computers, geared toward corporate customers who need simple terminals for data entry and customer service tasks.
Meanwhile, Microsoft Chairman Bill Gates and Intel Corp. Chief Executive Andy Grove may give some details in keynote speeches about their companies' plans to redesign the guts of the PC to make them easier to maintain and upgrade.
Both Gates and Groves had pooh-poohed the concept of the network computer, but decided to take a second look when it became clear consumers were intrigued by the possibility of no-brainer PCs.
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Apple Computer Inc., struggling to remain the teacher's pet among computer makers, is turning a modified version of its handheld Newton organizer into an inexpensive portable computer for students.
The computer maker on Monday will unveil the Apple eMate 300, an $800 machine that looks like a grown-up's laptop with a keyboard and a flip-up screen, but in a rugged casing that can survive rough handling.
Apple plans to sell the machine directly to elementary and high schools, beginning early next year, as an alternative to personal computers. For the price of a $2,500 multimedia PC, a school can buy three eMates, Apple executives said.
"The federal government says we need to get to a three-to-one student-to-computer ratio by the year 2000," said Jim Groff, general manager of Apple's information appliances group. "I would say the eMate is the only credibled vehicle for accomplishing that."
More vital to Apple, the product could keep educators from abandoning the company as the leading supplier of computers for classrooms, analysts said.
"The potential for something like this in a classroom setting is tremendous," said Mike McGuire, a mobile computing analyst at Dataquest Inc. "This will be an indication to educators that Apple is one of the few companies spending time extending computing to more and more kids."
Apple needs a distinctive product to set itself apart from other personal computer makers crowding into the education market, analysts said.
Although Apple, based in Cupertino, Calif., still enjoys strong educational sales, sales of IBM-compatible personal computers by companies such as Compaq Computer Corp. are growing much faster.
Apple's computer has always been the favored tool for teaching children how to use computers. But in the face of Apple's uncertain future and a flood of cheap PCs, schools are less likely to remain loyal.
For the 1996-1997 school year, of all the computers that schools plan to buy, 56 percent will be Apple Macintoshs and 40 percent IBM-compatible machines, according to a recent report by Quality Education Data, an education market researcher. In the previous school year, the purchasing plans were 61 percent Macintosh and 38 percent PC.
"The numbers are overwhelming in favor of PCs," said Carole Cotton, president of CCA Consulting Inc., another tracker of technology purchases by schools.
"No school district can afford to make a mistake" when picking computers they will use for years, she noted.
Apple's Groff said, however, that the eMate is not the company's answer to competitors' inroads.
Instead, he said, the device was built for schools asking for a cheap, powerful computer that can offer educational software and Internet connections -- as well as endure rough handling by kids.
"When we introduced the Newton three years ago, it was a solution in search of an application," Groff said. Education turned out to be one of the best applications, he said.
Along with the eMate, Apple plans to unveil a beefier version of the Newton MessagePad on Monday. The new MessagePad 2000 features better Internet capabilities, easier connection to PCs and built-in word processing and spreadsheet software.
Analysts said, however, that the eMate is the more interesting device. Teachers and students will like it because it is not as esoteric and hard to run as a traditional personal computer.
"Kids are having to learn more about how to run a computer than about reading and writing," McGuire said. "The ability to have the kid just turn on the device and get right into the writing assigment is really valuable."
The eMate weighs four pounds (1.8 kg) and fits into a backpack. It can run for a week on rechargeable batteries, according to Apple.
The machine features a built-in word processor, drawing and equation-drawing programs and an address book. With an optional modem and software, students can browse the Internet.
Still, the eMate could be a tough sell for Apple.
Because its software is based on the Newton operating system, it cannot run the thousands of educational programs written for the Macintosh and for PCs running Microsoft Corp.'s Windows software.
Apple executives are confident, however, that the eMate will help the company place more its computers on students' desks.
"There's 52 million screaming (grades) K-to-12 children to sell to," said Robert Kondrk, Apple's manager of education product lines. "We've known for years this is an opportunity, but we didn't have the technology to do it before. We do now."
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Intuit Inc. shares jumped 24 percent Wednesday amid market speculation that American Express Co. is about to buy the struggling financial management software company.
Shares of Intuit, which publishes the best-selling Quicken personal finance computer program, surged $7 to close at $36.50 on Nasdaq. American Express rose 12.5 cents to $48.50 on the New York Stock Exchange.
Officials of both companies declined to comment about "market rumors," and an Intuit spokeswoman called the speculation "wild."
Analysts said American Express, the charge card and financial services company, would be interested in buying Intuit to enable it to jump into the booming online banking industry.
Intuit, analysts said, might be receptive to an offer because of increasing doubts about its future.
Even if American Express is not interested in acquiring Intuit, other companies may be, analysts said.
More than 9 million people, most of them affluent, use Intuit's Quicken to manage their finances and do their banking chores through their personal computers.
But Intuit's growth has stalled amid fierce competition with Microsoft Corp., a one-time suitor of Intuit, and a handful of banks which are offering online banking to their customers through the Internet.
"Intuit is staring down the barrel of a gun, and that gun is the Internet, which is making financial management easier," said Karen Epper, an online banking analyst at market researcher Forrester Research Inc in Cambridge, Mass.
Until two years ago, Intuit relied heavily on sales of its financial and tax software for its growth. Those sales have slowed as Intuit has cut prices.
Intuit also faces renewed competition from Microsoft, which tried to buy it in 1994. Microsoft dropped the acquisition in May 1995 because of opposition from government antitrust officials.
Since then, Microsoft, the world's biggest PC software company has spent hundreds of millions to take on Intuit.
To fuel its growth, Intuit set up a business two years ago to process online banking transactions between banks and depositors. Some investors saw the transaction business as a promising source of growth.
In September, however, Intuit sold its transaction processing unit, Intuit Services Corp., to rival CheckFree Corp.
Epper said Intuit's biggest challenge is figuring out how to grow. She said the company needs the backing of a bank or bigger computer company to fuel expansion into any new business.
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Cisco Systems Inc. said Tuesday its fiscal first quarter profit from operations rose 77 percent, reflecting strong sales of its computer networking equipment.
The company, which makes devices that control the flow of information between computers in a network, said earnings before gains and charges rose to $320.8 million, or 47 cents a share, for the three months ended Oct. 26, from $181.4 million or 28 cents in the same quarter a year ago.
Net income for the quarter, after taking into account a $174.6 million charge for the acquisition of Telebit Corp. and a $55.1 million gain from the sale of a minority investment, totaled $180.9 million, or 26 cents a share, slightly lower than the year-ago figure.
Revenues jumped 80 percent to $1.43 billion from $798.3 million.
Wall Street had expected Cisco, the world's biggest computer networking company and a bellwhether technology stock, to report a profit from operations of 46 cents, according to First Call, which tracks estimates.
Analysts said the company had a solid quarter, alleviating concerns in recent weeks about slowing sales of networking equipment.
"They surprised us on the revenue," said Eric Blachno, analyst at Bear Stearns in New York. "It was a little higher than we thought."
Cisco also managed to keep its gross margins -- a measure of how much profit a company makes from each dollar of sales -- at 65 percent, better than analysts had expected.
Cisco, based in San Jose, Calif., attributed the higher profits to strong sales across all its product lines.
"More of our customers are beginning to look at a single vendor" for all of their networking needs, said John Chambers, Cisco's chief executive.
The company reported its results after the market closed. For the day, the stock had gained $1.125 to close at $61.75. After the earnings release, the shares slipped 25 cents to $61.50 in after-hour trading.
Analysts said some investors may have been disappointed that Cisco's earnings per share were not higher. Frequently, Cisco reports per-share results that are at least 3 or 4 cents above forecasts.
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Apple Computer Inc. stunned investors Wednesday by reporting an unexpected $25 million profit for the last three months of its fiscal year.
The Cupertino, Calif.-based computer maker, which had been expected to lose around 30 cents a share in the quarter, posted a profit of 20 cents a share, the first time Apple was in the black this year.
Included in the operating results for the fourth quarter of Apple's fiscal 1996 was a gain of $17 million, or 14 cents a share.
Wall Street welcomed the news, bidding the company's stock price up $2.25 to $28 a share in after-hours trading.
Analysts cited improved manufacturing efficiencies, lower component costs and reduced operating expenses for the better-than-expected performance.
"It is a shock," said Daniel Kunstler, computer industry analyst at JP Morgan. "It seems they've brought the break-even point for their business down pretty dramatically. This is very encouraging."
In the year-ago quarter, Apple earned $60 million, or 48 cents a share. Revenues for the three months ended in September fell to $2.32 billion from $3.0 billion a year ago.
For the full year, Apple posted a loss of $816 million, or $6.59 a share, reflecting a series of hefty one-time charges for inventory writedowns and restructurings.
In fiscal 1995, Apple earned $424 million, or $3.45 a share.
During the year, Apple was hurt by a sharp decline in its market share, management turmoil and an inability to have the right products on the shelf at the right time.
However, in the last two quarters Apple has started to show signs of a turnaround under former National Semiconductor Corp. chief Gilbert Amelio.
In a statement, Amelio said Apple's financial situation is stablized, as evidenced by the improvement in gross margins during the quarter and cash flow.
"By increasing revenues sequentially and fortifying Apple's financial position in each of the last two quarters, we have achieved two very critical goals of Apple's transformation," Amelio said. "We remain confident about reaching sustainable profitability by the end of Q2 '97.
"As we move forward, our challenges will be to extend our competitive leadership in key markets and to reclaim the mantle of industry pioneer and innovator," he said.
Apple's gross margins -- the difference between what it sells its products for and the cost of goods -- rose to 22 percent in the fourth quarter from 18.5 percent in the third quarter.
More importantly, however, Apple ended the quarter with more than $1.7 billion in cash and short-term investments on hand, up from $952 million a year ago.
"We continue to make progress in strengthening Apple's financial condition, as our $410 million in positive cash flow from operations during the quarter suggests," said Apple Chief Financial Officer Fred Anderson. "We've reduced inventories by nearly $400 million since June and completed the quarter with over $1.7 billion in cash and short-term investments."
"Gross margins increased due to several factors, including declining component costs, improved manufacturing efficiencies, and sales of previously reserved inventory," he added. "We achieved further sequential reductions in operating expenses, primarily in general and administrative functions."
While shipments were down 26 percent in the fourth quarter to 932,000 units from the year-ago quarter, Apple said shipments were up 11 percent, a sign that customers were once again buying its products.
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The semiconductor industry's key indicator of computer chip demand rose in September to its highest level this year, reflecting a stronger-than-expected increase in new orders.
The Semiconductor Industry Association said Tuesday the North American book-to-bill ratio, which measures the value of orders against shipments, rose to 0.99 in September from a revised 0.93 in August. The ratio means manufacturers received $99 in new orders last month for every $100 in shipments.
Industry analysts had expected the ratio to inch closer to breakeven with most estimates averaging around 0.95.
New orders for chips rose to $3.19 billion, a 9 percent increase from August, and shipments inched upward to $3.22 billion, or 2.1 percent above August's level.
"From any perspective, these are the most positive numbers we've seen all year," Douglas Andrey, director of information systems and finance for the association, said in a statement. "The modest increase in orders for August and September suggest the 1996 slowdown in growth has bottomed out.
The ratio, a leading indicator of future demand tallied by the industry trade group, has been improving recently, reflecting an increase in orders by personal computer makers and more stable prices for memory chips.
"People are buying PCs as if there's no tomorrow," said Dan Klesken, an analyst at Robertson Stephens in San Francisco. "We're having a PC-led recovery in the chip industry."
Analysts predicted the better-than-expected ratio would likely send shares of key technology stocks higher on Wednesday.
In after-hours trading, shares of Intel Corp., the world's largest chipmaker, rose $1.375 to $103 and shares of Micron Technology Inc., a key supplier of memory chips, jumped 87.5 cents to $32.375.
Prices of memory chips, or DRAMs, plummeted over the course of the year to a fraction of what they were in January. Because memory chips make up about 40 percent of the unit volume of semiconductors shipped in a year, their prices have had a big influence on orders and sales measured in dollars.
But since mid-September, memory prices have risen 30 percent to 50 percent from their lows.
The September ratio marked the highest level since December of 1995 when the index hit 1.12. A year ago it stood at 1.16.
Micron said late last week that memory chip inventories were down to desirable levels from formerly excessive levels.
Worldwide, the ratio rose to 0.97 in August from 0.95 in July. Global figures include Asia, Europe, North America and Japan and are one month behind North American figures. The Japan book-to-bill ratio rose above 1.0.
Robertson Stephen's Klesken said he was particulary impressed by the rise in Europe, which had a ration of 1.04.
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Jilted once, financial software company Intuit Inc appears unlikely to return to the merger altar any time soon.
Buyout speculation has swirled around Intuit since May 1995, when Microsoft Corp. dumped its plans to buy the maker of popular personal finance software like Quicken and TurboTax. Last week, Intuit shares surged again on speculation American Express Co. was about to make an offer.
However, many industry analysts believe such a deal is not in Intuit's future, adding the best way for Intuit to grow is to attract as many partners as it can to set up online banking services.
"My personal belief is that Intuit is best able to maximize its value on its own," said David Farina, an analyst at William Blair.
Intuit's key asset is Quicken, a program that helps computer users track checkbook balances, check stock portfolios, pay bills, plan monthly budgets and lay out retirement plans.
The company depends on partnerships with dozens of banks and brokerages to provide online links between customers' personal computers and their accounts.
Intuit would turn off most of its partners if it were acquired by a big financial partner, Scott Cook, Intuit's chairman, insists.
"We would never become a captive of one financial institution or a small group of financial institutions," Cook told a group of investors in Florida on Friday.
Still, some analysts questioned whether Intuit has the marketing and financial muscle to compete on its own against Microsoft for long.
Microsoft, the world's biggest personal computer software company, is spending a big chunk of its $2 billion research and development budget on financial software and online banking services provided through the Internet.
Although Intuit still controls 70 percent of the market for personal financial software, Microsoft is gaining.
Intuit also needs capital to expand into new area, such as giving online investment advice, said Karen Epper, an analyst at Forrester Research, a market researcher. Such forays will likely hurt profits, she said.
"They might get dinged on their stock price, but this area is more in line with the consumer marketing business model they have," Epper said.
It could be years, however, before Intuit's push into new areas could pay off, Epper said.
Intuit said in September it expects lower revenue growth in the current fiscal year ending July 1997.
The company blamed a slow market for consumer software. Some of the shortfall is because of one-time suitor Microsoft, analysts said.
In October 1994, Microsoft stunned Wall Street by offering to buy Intuit for more than $1 billion, the biggest acquisition attempt in the software industry at the time.
Microsoft was willing to pay that huge sum to turn Quicken into a gateway for online banking services, an industry that's expected to rival brick-and-mortar retail banking in revenue in the next ten years.
Microsoft backed out of the deal in May 1995, however, when the Justice Department said it would sue Microsoft on antitrust grounds if it pursued the transaction.
Since then, Microsoft has spent hundreds of millions beefing up its rival Microsoft Money financial management program. The company also set up a division to sell networking and Internet software to banks.
To counter Microsoft's redoubled efforts, Intuit set up a business to process online transactions -- such as bill payments and account transfers -- between banks and depositors. Some investors saw the unit, Intuit Services Corp., as a promising source of revenue.
In September, however, Intuit sold the unit to rival Checkfree Corp., partly because it did not have the expertise to handle huge volumes of transactions.
Banks also were reluctant to have Intuit sit between them and their depositors, Epper said. Most banks preferred to reach their customers through the Internet instead of Intuit's proprietary network.
"Intuit is staring down the barrel of a gun, and that gun is the Internet, which is making financial management easier," Epper said.
It could be a while before Intuit outlines a new strategy for growing its business, analysts said.
Meanwhile, there may be more bouts of wishful thinking about an acquisition, they said.
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Most software publishers are expected to report only modest increases in their latest earnings, reflecting a seasonal slowdown and a lack of new products this quarter.
"For the behemoths of the industry, like Microsoft and Oracle, business is still good," said Marshall Senk, an analyst at Robertson Stephens & Co. in San Francisco.
"Summer is the slow buying season for most of the industry," but setting aside the seasonal slowing, "business is still pretty okay," he said.
Analysts expect Microsoft, the world's biggest personal computer software publisher, to report substantially higher earnings for its first fiscal 1997 quarter on the back of strong sales of its networking software and business programmes. Microsoft is scheduled to report results Oct. 21.
Better-than-expected sales of personal computers in the past few months also will contribute to Microsoft's revenue, analysts said.
Microsoft, based in Redmond, Wash., makes about a quarter of its revenue from the sale of its Windows family of operating systems -- a type of software that controls the basic functions of a personal computer.
The company benefits from strong PC sales because PC makers have to pay Microsoft a royalty for every copy of Windows they pack in machines they make.
Wall Street expects Microsoft to earn 90 cents a share, according to a survey of 24 analysts by First Call, which tracks Wall Street analysts' estimates. In the same quarter a year ago, Microsoft earned 78 cents a share.
Unlike Microsoft, however, Novell Inc., the biggest publisher of computer networking software, is not expected to perform as well.
The company is struggling to sell its NetWare flagship software, which manages networks of computers within a company, in the face of competition with Microsoft's Windows NT.
Novell, based in Provo, Utah, also faces management issues following the resignation of Bob Frankenberg as chief executive, said David Takata, an analyst at Gruntal & Co. in Los Angeles.
"They clearly still have a lot of work to do" to get the company's management in order, Takata said.
Novell is expected to earn 18 cents a share in its fiscal fourth quarter, compared with 16 cents a year ago, according to a First Call survey of 17 analysts.
Meanwhile, vendors of software for large, corporate computer networks and database management tools will continue to post substantial gains on continuing strong demand, analysts said.
"For a relatively mature market, this niche is still growing at a good clip," said Jim Pickrel, an analyst at Hambrecht & Quist in San Francisco.
Pickrel said he expects Oracle Corp. and Informix Corp. to report the most impressive results on strong sales of their database software -- programmes that help big companies keep track of huge libraries of corporate information.
Both are stealing business from Sybase Inc., another database software publisher, which is still struggling to recover from marketing and technical shortcomings last year.
Sybase is expected to report it broke even in the quarter, not counting charges for a restructuring, Pickrel said. In the year-earlier quarter, Sybase earned a penny a share.
Oracle, the biggest database software publisher, is expected to earn 27 cents a share for the fiscal second quarter ending Nov. 30, according to a survey of 27 analysts by First Call. A year ago it earned 21 cents.
Informix is expected to earn 18 cents a share, according to a First Call survey of 25 analysts. A year ago, Informix earned 16 cents.
Hambrecht & Quist's Pickrel said Informix could pass Sybase this quarter in revenue to become the second biggest database vendor.
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Apple Computer Inc. plans to release a new line of computers as early as 1998 that will run an operating system written from scratch, Chief Executive Gilbert Amelio said on Wednesday.
The new operating system -- the fundamental software that controls the basic functions of the computer -- will leapfrog Microsoft Corp.'s competing family of Windows software, Amelio told investors at the American Electronics Association conference in Monterey.
"When you are the minority player in the marketplace, as we are, you need something other than market share to distinguish yourself," Amelio said.
Amelio declined to specify what the new software would look like or how it would outperform Windows. But he promised it would "completely change the way" people get their work done on computers through applications, such as word processing and spreadsheets.
Earlier this year, Apple said it would abandon the overhaul of its Macintosh operating system, an effort code-named Copland. Apple programmers will use some of the components of Copland but will practically start from scratch, Amelio said.
Amelio also told investors, as he has done recently, that increasing the struggling computer maker's revenue and market share would not be a priority until he could improve the company's operations and product lines.
The effort may take until 1998.
"I have to have a solid foundation before I can build a castle," Amelio said. Without a solid foundation, Apple would improve its financial performance for one or two quarters but slide again, he said.
Apple, whose headquarters are in Cupertino, California, reported an unexpected profit of $25 million for the last three months of fiscal 1996, down from a profit of $60 million a year ago. Many on Wall Street had expected the company to post a loss for the quarter.
Investors have given Amelio credit for moving quickly to improve product quality, cut costs and fix production snafus. Apple is likely to report good progress in the next two quarters as well, said Michael Murphy, president of the California Technology Stock Letter and an investment fund. it faces "worrisome" quarters after March, Murphy added.
"Amelio's getting closer to fixing the company's problems," he said, "but we're not going to go back in yet."
| 25 |
Apple Computer Inc. stock tumbled Monday after the company said it expected a loss of up to $150 million in the latest quarter, prompting even some of the company's most loyal customers to question its survival.
Apple shares fell $3.875 to $17.875, the lowest level since mid-July, as more than 16.8 million shares traded, making it the most active issue on Nasdaq.
Industry analysts, who had expected Apple to post a small loss in the normally strong Christmas quarter, said the loss made it harder for customers to justify buying a Macintosh, given serious questions about the company's finances.
"You can't dismiss this as a one-time issue," Montgomery Securities analyst Kurt King said. "It really does say something about Apple's long-term position in the consumer market."
The troubled computer maker, struggling for the past year to shore up its finances and rebuild its image, said late on Friday that weak demand for its Performa personal computers would lead to an operating loss of $100 million to $150 million in its first fiscal quarter ended in December.
The company also said it may need further restructuring aimed at cutting another $1 billion in costs, which could mean another round of cutbacks at Apple.
More damaging, the company's woes make it harder for customers -- particularly corporate technology managers -- to justify choosing a Mac over personal computers running Windows software from Microsoft Corp., buyers at the Macworld trade show said Monday.
"It's definitely a fight," said Donald Laird, a computer consultant who advises companies about technology purchases. "Very seldom do I go into a shop where they're as objective (about Apple's technology) as I'd like them to be."
Complicating matters is a new generation computer chip by industry giant Intel Corp., which the company expects to unveil on Wednesday. Analysts said the new multimedia chip should dramatically boost Intel sales and spur sales for PCs powered by Microsoft software.
Experts said the perception that Apple was in serious financial trouble could keep potential customers away, leading to a spiral of bigger and bigger losses.
"It's frustrating" trying to convince customers they may be better off with a Mac, said Jeff Lauterette, a technical support engineer at EPI Systems, a big Macintosh dealer in Rockville, Md.
At a presentation Monday, Apple Chief Technical Officer Ellen Hancock assured big customers that Apple will concentrate on winning back big accounts now that the company has a clear technology strategy.
"We honestly do believe our lack of a (technology) strategy until a couple of weeks ago caused us the problem" of weak sales in the December quarter, she said. "We are ready to go back on the attack to tell (corporate customers) that we have excellent technology."
Last month Apple announced plans to buy Next Software Inc. for $400 million in a bid to update Apple's operating system.
News of the loss prompted several Wall Street analysts to stop recommending Apple's stock as an investment.
Bear Stearns Cos. Inc. cut its rating on Apple from hold to unattractive. Prudential Securities lowered its rating to hold from buy, according to a source at the brokerage house.
Apple Chairman Gilbert Amelio is expected to outline his company's strategy on Tuesday to thousands of Macintosh customers and programmers at the Macworld show. The highlight of his speech was expected to be Apple's plan to revamp its fundamental Macintosh software with technology acquired as part of the Next acquisition.
Some Apple customers said any technology improvement might be too late.
"I've been an Apple supporter since early on and the Mac has made a difference in my life," said Don Barrs, principal at Wilton Manors Elementary school in Florida. But he said he was under growing pressure to buy Windows-based computers.
"I have to be realistic about what's best for our school district and our children," Barrs said.
| 25 |
When Apple Computer Inc. fired co-founder Steven Jobs in 1985, Apple employees did not know whether to cry or to rejoice.
Through the early 1980s, Jobs had inspired Apple engineers to create a computer called the Macintosh which would change the world. At the same time, though, Jobs and his mercurial temper burned out many of the same engineers who adorded him.
On Friday, more than 11 years after Jobs was ousted in a stunning boardroom coup, Apple took a huge gamble by bringing him back.
His assignment is to help the Cupertinto, California-based computer company revamp the software behind the Macintosh, an effort that had been mired for three years.
The bet is that Jobs is the only person who can inspire Apple's demoralized programmers to create software that would leapfrog Microsoft Corp's competing Windows operating system.
"He will help tremendously," said Randy Wigginton, a former Apple programmer who worked under Jobs to write the software of the original Mac. "Steve is incredibly bright, talented, amusing."
On Friday, as word of Apple's decision to rehire Jobs spread, shares of the company rose $1.25 or 5.6 percent, to $23.50.
Job's new company, NeXT Software Inc., which Apple agreed to acquire on Friday for $400 million, offers a computer operating system that has many of the software bells and whistles Apple has been looking for to catch up with rival Microsoft.
Apple had tried to reach a deal with closely held software company Be Inc., founded by another former Apple executive, Jean-Louis Gassee, but the talks broke down and the company turned to Jobs for help.
With NeXT's existing technology, Apple hopes to finish the overhaul of its popular Macintosh operating system -- the type of program that controls the fundamental functions of a computer -- in late 1997.
But the key asset that Apple acquired is Jobs. He will serve part-time as a technology adviser and will report to Apple Chairman Gilbert Amelio.
Several Apple programmers working on the Mac overhaul said they have been frustrated for months with a string of weak managers who could not get the project past a rough sketch even after three years. With Jobs, the programmers said, they hope the project can finally move forward.
"Everybody is excited," said an Apple employee close to the project. "I am very excited."
The risk of hiring Jobs is his volatility. People who have worked for him said Jobs has a knack for inspiring engineers to think that their work is a life-or-death project, a sentiment Apple now needs. But the same sentiment can burn engineers out.
"In some ways he has mellowed, but he still has an incessant drive for perfection," said Joanna Hoffman, the Mac's first marketing manager.
Jobs could not be reached on Saturday for comment. On Friday he told reporters he was looking forward to rejoining the company he co-founded nearly 20 years ago out of his parent's garage.
"I feel very lucky to be a part-time Apple employee and work for Gil and advise him on product strategy."
Jobs also will work with Apple Chief Technical Officer Ellen Hancock, a veteran International Business Machines Corp. software manager who has set specific goals for the operating system team.
Jobs' visionary role and Hancock's strict, no-nonsense management style balance nicely, said Tim Bajarin, analyst at market researcher Creative Strategies Research.
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