1995-96: REVIEW AND OUTLOOK : People, Companies and Trends to Watch in ’96

DreamWorks SKG’s “studio for the 21st century” won’t be up and running in Playa Vista for several years, but 1996 will bring our first glimpses of movies and TV shows from the vaunted trio of Steven Spielberg, Jeffrey Katzenberg and David Geffen.

The real question is: Can the fare possibly live up to the hype?

The year should also see the breakup of AT&T; (again); a merger of First Interstate Bank with one suitor or another; the demise of the Bullock’s department store name; a fierce battle by an Internet David to keep the Microsoft Goliath at bay; the end of the electric utility industry’s monopoly; the debut of the $100-million Jurassic Park--The Ride at Universal Studios Hollywood; another epic U.S.-Japanese battle over semiconductors, and, with any luck at all, the most modest of price upticks--finally--in the Golden State’s residential real estate.

Here’s a look at these and other companies, people and trends that bear watching in the new year.

Hurray for Hollywood!

Sony Corp. President Nobuyuki Idei, who ousted top U.S. Sony official Mickey Schulhof, will indicate soon whether he plans to keep the company’s entertainment business, or divest all or part of it. . . . The two Michaels (Eisner and Ovitz) will have their hands full merging Walt Disney Co. with Capital Cities/ABC Inc. Other possibilities for Disney include adding pro football and basketball teams to the company’s growing sports empire. . . . The most anticipated enterprise in Hollywood, DreamWorks, will finally begin cranking out its first TV shows, records and films. In the works for ABC-TV in 1996 will be “High Incident,” a one-hour cop drama set in suburbia, and a half-hour comedy, “Champs.” George Clooney, star of NBC’s top-rated “ER,” has signed for the lead in DreamWorks’ first film, “The Peacemaker,” about smuggling of nuclear weapons out of the former Soviet Union.

The Sound of Music

R.E.M., the rock act from Athens, Ga., has only one album left on its Warner Bros. Records contract and is the hottest free agent in the music business. A decision to jump ship could spell big trouble for Warner Music Group, where 18 months of infighting has destabilized a once robust company. . . . Ted Field and Jimmy Iovine, founders of Interscope Records, were dumped in September by Time Warner Inc. in a controversy over explicit lyrics, but the label is on the verge of signing a lucrative new deal with EMI Music or PolyGram. . . . Doug Morris, who became chairman of MCA Music Entertainment Group after being fired from Time Warner, will seek to beef up the rock roster at the beleaguered company. . . . Jocelyn Cooper-Gilstrap, former president of New York publishing firm Midnight Songs, will take over in January as senior vice president at MCA Music’s Universal Records in New York. Cooper-Gilstrap, the talent whiz credited with helping discover hit soul singer D’Angelo, was the target of an industrywide bidding war.

Pacific Rim Shots

Watch for more Japanese financial institutions to go under. . . . The Japanese are taking to cyberspace in a big way, and rumor has it that plans are afoot to pipe karaoke over the World Wide Web. . . . Will the Japanese become cult followers of agents Mulder and Scully? “The X-Files,” Fox TV’s highly rated series, recently premiered on Asahi Television, dubbed in Japanese, after a $5-million promotional blitz. . . . Japan’s sleep-deprived “salarymen” will be able to pick up a Starbucks cappuccino when the Seattle-based coffeehouse makes its debut next spring. . . . U.S. traders are bracing for another round of saber rattling in July, when the landmark U.S.-Japan semiconductor agreement expires. Japanese business leaders have resented its inclusion of a 20%-market-share target for foreigners. . . . Japan’s beleaguered economy will have to emerge convincingly in 1996, or fears of a full-fledged depression could become self-fulfilling. With short-term interest rates near zero, the Bank of Japan’s ability to tweak the economy is just about exhausted. . . . Investors from Taiwan, South Korea and other developing Asian nations are stepping into the U.S. market in a big way. USC graduate Sae Hyun Uhm, 29, president of Los Angeles-based K. Young Inc., will start building the 18-story Palladian World Tower in Glendale--the first speculative high-rise office tower in the region in five years. . . . The hot and cold U.S.-China relationship promises to dominate the trade front, given the volatile mix of U.S. presidential politics, the Deng Xiaoping deathwatch, a key presidential election in Taiwan and a ballooning trade imbalance. All this uncertainty is causing temperatures to rise in Hong Kong, which is warily eyeing its return to Chinese control in July 1997.

Does This Compute?

Can Ian Diery, the former Apple Computer executive who took over as CEO of AST Research Inc. in November, halt the slide at that once proud Irvine company? . . . Netscape Communications Corp. founder Marc Andreessen, 24, could become the nerd icon of the ‘90s as he takes on Microsoft Corp.’s Bill Gates in a contest to decide the king of the wild and woolly Internet. . . . The soap opera continues at Apple Computer Inc., where CEO Michael Spindler fired a handful of veterans and now is being closely watched by A.C. “Mike” Markkula, the Apple co-founder who fired John Sculley. Although the Macintosh continues to eke out market share gains, the company’s long-term survival as an independent remains in doubt. . . . Speaking of which, IBM Corp.’s Louis Gerstner Jr. might be ready for another big move after buying Lotus Development Corp. Possible targets: Novell Inc. and Apple. . . . Redlands-based Environmental Systems Research Institute Inc., a fast-growing computer mapping company, is developing software to help with security for the 1996 Olympics in Atlanta.

Taking Stock of Finance

Federal investigations of the Nasdaq stock market are likely to come to a head, with the Securities and Exchange Commission announcing enforcement action on trading rules as early as January. . . . Likewise, federal criminal charges are expected to emerge in investigations into shady dealings between Wall Street brokerage firms and municipal governments. The events that led to Orange County’s bankruptcy filing are among many under the microscope. . . . Fidelity’s Magellan fund honcho Jeffrey Vinik might be in hot water with the feds, after making favorable public comments about Micron Technology Inc. in November--about the time he was dumping massive amounts of the stock. . . . The toughest test lies ahead for Internet-related companies such as Netscape Communications and Uunet Technologies, among 1995’s hottest issues. Some analysts suggest that it’s too early to call a peak in Internet mania, noting that biotech stocks enjoyed a three-year boom based purely on hopes and dreams.

Bank on This

James Montgomery, former chairman of Great Western Financial Corp., parent of Great Western Bank, moves to Washington for a one-year term as head of America’s Community Bankers, the top savings and loan trade group. His mission: Help Congress end the thrift industry as we know it by eliminating many of the rules that distinguish S&Ls; from banks. . . . William Siart, chairman of First Interstate Bancorp, will learn at a momentous shareholders meeting in February or March whether he still has a job. In what would be the nation’s biggest bank merger, First Interstate has agreed to be bought by First Bank System Inc. of Minneapolis, spurring a hostile bid by San Francisco-based Wells Fargo & Co. Siart has been promised the No. 2 post at a combined First Bank-First Interstate. . . . The new Los Angeles Community Development Bank, formed partly with federal funds the city received as a consolation prize for not getting a much coveted federal “empowerment zone” in 1994, will be making its first loans early in the year.

Unreal Estate

After sinking for more than five years, California home prices should begin a modest rise. . . . Santa Monica-based developer Robert Maguire--a most happy fella--plans to break ground by midyear on the 900-acre Playa Vista project. As everyone but Martians and Jovians knows by now, the centerpiece is the DreamWorks headquarters and studio. . . . To arrange that Playa Vista project, Los Angeles assembled an incentives dowry worth more than $70 million. Some economic development officials fear that the deal might spark more interregional warfare for jobs. . . . Meanwhile, job-hungry Los Angeles suddenly finds itself without any economic development honchos thanks to recent resignations by the deputy mayor for economic development and the director of the L.A. Business Team. Watch for appointments soon. . . . Ira Yellin, who renovated a historic complex of buildings including downtown’s Grand Central Market, will shift attention to Cathedral Square. The downtown project, which will include a 3,000-seat cathedral for the archdiocese of Los Angeles, a conference center and offices, could play a vital role in restoring the city’s core. . . . After years of wrangling, Orange County mogul Donald Koll will face what could be the final hurdles to his plan to put 3,300 homes on the Bolsa Chica wetlands near Huntington Beach. The California Coastal Commission is slated to vote in January.

Fun and Games

Universal Studios Hollywood President Bob Gault predicts a record year thanks to the opening in early summer of the theme park’s $100-million Jurassic Park--The Ride. The six-acre attraction is a river ride through dense jungle, featuring 16 life-size dinosaurs, including a Tyrannosaurus rex that munches cars. . . . Meanwhile, Disneyland, which unveiled its $100-million Indiana Jones adventure ride in early ‘95--and single-handedly boosted Orange County tourism--will begin renovating Tomorrowland, open a show in June to complement its “Hunchback of Notre Dame” movie and celebrate the final season, after 24 years, of the Main Street Electrical Parade. Disney also will reveal plans for a second park in Anaheim, replacing the ambitious plans for a $3-billion resort called Westcot, abandoned early this year. . . . Foreign visitors will flood downtown Los Angeles in June, when the Travel Industry Assn. of America hosts its 1996 Discover America International Pow Wow. The convention will draw 5,700 travel professionals from 70 countries, who among themselves will book a projected $2.5 billion in tours, car rentals and other travel deals. About 10% of the business usually ends up in the host region.

Moving Targets

Keep an eye on Northrop Grumman Corp. and Litton Industries Inc., Southern California aerospace concerns that are ripe to become targets of the industry’s merger mania. . . . Followers of defense king Lockheed Martin Corp. are bracing for more change as Norman Augustine becomes CEO on Jan. 1. Look for Augustine to accelerate the merging of Lockheed Martin divisions, which could mean more layoffs. . . . Harry Stonecipher, McDonnell Douglas Corp. CEO, will nail down more orders for the MD-95, now that the 120-seat jet has been formally launched. It will be built in Long Beach. . . . TRW Inc. Chairman Joseph Gorman has defied the odds by being conspicuously absent in the defense merger frenzy, and the company’s order backlog has grown apace, with expectation of further growth in ’96. . . . Bargain air fares will be rare as American, Delta, Northwest and other carriers try to keep profits rising. The exception will still be in California, where United Airlines’ Shuttle and Southwest Airlines will keep offering deep discounts. . . . Alhambra-based software company Cogent Systems, founded by two grads of USC, is part of a team vying for a contract to build the FBI’s massive new automated fingerprint recognition system. . . . Reclusive Las Vegas billionaire Kirk Kerkorian will find out in February whether Chrysler Corp. will take his advice on raising the auto maker’s stock price. A spurned Kerkorian could force a showdown in a May proxy fight. . . . Just six months into his term, United Auto Workers President Stephen Yokich has made a mark--announcing a merger with the steelworkers and machinists and throwing in the towel at Caterpillar Inc. His mettle will be tested in fall negotiations with the Big Three, where workers want hefty raises. . . . Auto makers are getting their way as the California Air Resources Board backs down on the state’s electric-vehicle mandate. . . . Electricity deregulation in California faces tough questioning from consumers, state legislators, and federal regulators, who must approve the utility commission’s controversial market-based plan.

One Ringie Dingie . . .

Henry Schacht, former CEO of Cummins Engine Co., will be in the hot seat as he tries to get AT&T;’s newly independent equipment business into fighting trim. Look for layoffs and acquisitions as Schacht fills in holes the slow-moving giant left to small entrepreneurs. . . . Long-distance providers such as AT&T;, Sprint Corp. and MCI Communications Corp. will start competing with Baby Bells in local phone markets. In one of the most formidable assaults, William Esrey, the unassuming chief of Sprint, and his cable TV partners will spend $3 billion on a wireless system. . . . Pacific Telesis Group and other regional Bell companies expect a booming business selling high-speed connections to businesses and home Netsurfers--and are preparing to offer standard cable service. . . . Watch for the Baby Bells to merge--with each other or with long-distance providers or cable companies.

TV or Not TV?

Westinghouse Electric Corp., the new owner of CBS Inc., has the hots for Gaylord Entertainment, owner of the Country Music Television and The Nashville Network cable channels. But Gaylord might prefer to sell to another suitor, such as MCA Inc. or ITT Corp. . . . Some cynics predict that Westinghouse will encounter big trouble with CBS later in 1996, unless new programming chief Leslie Moonves can reverse the network’s ratings slide. . . . General Electric Co. is waiting for challenges to the Time Warner-Turner Broadcasting System merger to be resolved before choosing a strategic partner or acquisition candidate. GE’s NBC had had its heart set on Turner, which owns CNN, but maybe Microsoft, NBC’s 50-50 partner in an all-news cable channel, is all the partner it needs. By the way, cable news channels are all the rage, with ABC, NBC and Fox all hoping to weigh in. . . . Michael Fuchs, who steered Home Box Office to success and then was ousted from Time Warner six months after taking the helm at Warner Music, will rise again. One scenario: Financier Ronald Perelman spins off his New World Fox affiliates to Rupert Murdoch, buys Sony Pictures Entertainment and puts Fuchs in charge. . . . It will be a make-or-break year for Gerald Levin, chairman of Time Warner, who was on the shareholders’ hit list in 1995 because of the company’s poor stock performance. He has bet the farm on the Turner merger, and his fate rests largely on whether he can pull it off with regulators and ornery partner US West.

Healthy, Wealthy . . .

WellPoint Health Networks Inc. Chairman Leonard Schaeffer won’t end up as chief exec of the nation’s No. 2 publicly traded managed-care company, now that the purchase of rival Health Systems International Inc. has fallen through. But look for WellPoint to shop for Blue Cross and Blue Shield health plans outside California as it seeks to become a national managed-care powerhouse. . . . Latino Care, a fledgling Santa Fe Springs health-care company, has formed the nation’s largest network of Latino physicians to tap the Latino market.

Location, Location

Federated Department Stores Chairman Allen Questrom will reshape Southern California retailing early in the year, eliminating the Bullock’s name in favor of Macy’s and converting 40 Broadway stores to Macy’s. Ten other Broadways will be sold, with the fate of an additional 21 locations undetermined, although as many as six could be converted to Bloomingdale’s. . . . Ron Burkle, head of Yucaipa Cos., which bought Ralphs Grocery Co., will be hunting for more store sites.

For the People

Patty DeDominic, president of Los Angeles-based PDQ Personnel Services, will globe-hop in her new post, liaison to Les Femmes Chefs d’Entreprises Mondiales (the World Assn. of Women Entrepreneurs). In February, she meets with Asian business owners in Bangkok, Thailand. . . . Nine labor unions, operating under the name Los Angeles Manufacturing Action Project, or LAMAP, are expected to get an AFL-CIO grant to start organizing hundreds of thousands of immigrant workers in the Alameda Corridor area. . . . Campaigns will be waged locally and nationally to boost wages for low-paid workers. . . . In March, more than 5,000 clothing retailers are expected at the Los Angeles Convention Center for Look, an international sportswear show--the city’s first garment industry trade show in seven years. . . . A coalition of female business owners, minority business groups and self-employed workers will line up to oppose the anti-affirmative action California Civil Rights Initiative as it attempts to work its way onto the November ballot. . . . The Teamsters will elect a new president in 1996, with incumbent Ron Carey facing a stiff challenge from none other than James P. Hoffa, son of former Teamster boss Jimmy Hoffa. . . .

Wired to the Max

Making cyberspace safe for electronic commerce will be a major preoccupation for Visa and Mastercard, who recently agreed to work together on the project.... Java, the new programming language from Sun Microsystems Inc., will give the World Wide Web a radical new look and feel, with far more interactivity and control for Net surfers.... With the growing popularity of the Net, look for attempts to produce a $500 “Net device” that relies on bandwidth, not disk storage for its computing power.... The first fruits of MCI and News Corp.’s online joint venture will hit computer screens next year, while the parent firms of two of the three major on-line services, Prodigy and CompuServe, are looking for buyers.... Logging onto the Net via the cable company will become a reality in some markets, as will buying enhanced TV programming from the phone company.... Tele-TV, the joint venture between Pacific Telesis, Nynex and Bell Atlantic, will seek to lure cable subscribers to its services.... As big competitors enter the field, the outlook for independent Internet service providers like Netcom and Earthlink is murky.... On-line games and “virtual worlds” such as Time Warner’s “The Palace” and Worlds Inc.’s “Alphaworld” will flourish as fast-modem prices continue to drop.... Insiders are waiting to see what Marina del Rey advertising agency Fattal & Collins does for an encore to “The Spot,” its splashy, online soap opera that is spawning imitations.... For those who prefer to play at home, Nintendo’s Ultra 64 and 3DO’s “M2” will join Sony and Sega’s dueling new video game platforms in the interactive fray. . . . Ambitious Graphix Zone Inc. in Irvine expects 1996 to be its go-ahead year thanks to the signing of jazz legend Herbie Hancock and Oscar-winning filmmaker Oliver Stone to produce interactive CD-ROM discs.

Booting Up Baby

Microsoft’s Bill Gates and his wife, Melinda French, are expecting delivery in late May of what has been referred to as the ultimate laptop, with an emphasis on soft wear. The big question is: Will Baby Gates be a chip off the old block?

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Contributing to this report were staff writers James Bates, Nancy Rivera Brooks, Claudia Eller, Denise Gellene, Amy Harmon, Leslie Helm, Michael Hiltzik, Sallie Hofmeister, David Holley, Evelyn Iritani, Greg Johnson, Don Lee, Patrick Lee, Hilary MacGregor, Greg Miller, Thomas S. Mulligan, Donald Nauss, John O’Dell, David Olmos, Scot Paltrow, James Peltz, Tom Petruno, Chuck Philips, Julie Pitta, Jesus Sanchez, Stuart Silverstein, Vicki Torres, Ralph Vartabedian, Debora Vrana and George White. Times correspondent Dan Margolis also contributed.

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Looking Ahead

Today’s Times Business section marks the start of more than a week’s worth of coverage on what’s ahead for the world of business in 1996 and what happened in 1995 that’s worth remembering. Here’s what’s in store:

Wednesday: Times staff writer Amy Harmon writes about why 1995 will be remembered as the year of the Internet.

Friday: Company Town looks back at an amazing year in Hollywood marked by stunning mergers, firings and hirings.

Dec. 31: Complete year-end section, with columns, predictions, news analyses and rankings.

Jan. 1: Special international outlook section.

Jan. 2: Company Town looks at the year ahead for Hollywood.