Comcast Makes a Bid for AT&T; Cable Unit
In a stunning attempt to become the nation’s leading cable operator, Comcast Corp. made an unsolicited bid to acquire AT&T; Corp.’s cable television unit for $40 billion in stock.
AT&T; said its cable unit, the nation’s largest, is not for sale and it will proceed with plans to spin it off by the end of the year.
But after investors drove up AT&T;’s shares in support of the Comcast bid, AT&T; Chairman C. Michael Armstrong conceded that the board was taking it seriously.
News of the proposal also prompted cable maverick John Malone, AT&T;’s largest individual shareholder, to resign from the board a month early. Malone was angered to find out that the board had been discussing the Comcast deal without his knowledge.
If Comcast prevails, it will have 22 million cable customers--as many as AOL Time Warner Inc., the No. 2 cable operator, and DirecTV, the leading satellite provider, combined.
Sallie Hofmeister
Blue Cross to Link Bonuses to Patient Care
Blue Cross of California is scrapping an incentive program that rewards doctors in its HMO for controlling costs.
The unit of WellPoint Health Networks of Thousand Oaks instead is linking bonuses to patient satisfaction, a radical move in an industry devoted to shaving costs.
Employers groups praised Blue Cross’ initiative, saying they have been pushing HMOs to improve health care as premiums rise. But doctors and consumer groups said the program is not a panacea for the ills of the health insurance industry.
Blue Cross, with 2.2 million members, said the action was unrelated to patients’ rights legislation under consideration in Washington.
Experts expect Blue Cross’ action and the political mood to lead other HMOs to install similar rewards programs.
Denise Gellene
Latin Nations Feel Sting of Argentina’s Crisis
Argentina’s debilitated economy verged on collapse as stocks and bonds plummeted throughout much of Latin America in a shock wave that was all too reminiscent of past emerging market tremors.
Argentina’s long-running economic melodrama took a turn for the tragic when it was forced to pay 14.1% interest to sell three-month notes to pay its public debt, a rate that all agreed was unsustainable. The high rates would cancel out the effect of budget cuts and inhibit whatever prospects the country has for growing its way out of a three-year recession.
The note auction opened investors’ eyes to the unpleasant truth that an Argentine devaluation and default on $128 billion in debt may be inevitable. Currencies and bonds in Brazil, Mexico and other emerging markets also fell.
Meanwhile, the International Monetary Fund, which orchestrated a $40-billion bailout for Argentina only last December, and the Bush administration kept their distance, saying publicly that Argentina had the means to effect its own salvation.
Chris Kraul
$90-Million Award in Overtime Pay Case
In the first white-collar overtime case to go to a jury in California, Farmers Insurance Exchange was hit with a record $90-million judgment on behalf of 2,400 current and former claims adjusters.
The award, which could grow by as much as $40 million with interest and attorneys’ fees, stunned employers and was expected to increase pressure on companies to change overtime practices.
Experts also predicted the size of the award would encourage more white-collar workers to file lawsuits challenging their exemption to overtime requirements.
Farmers said it would appeal.
Hundreds of employers in California are facing similar class-action lawsuits from groups of managers, administrators and sales people who contend that they spend a majority of their time on menial and production tasks and are owed overtime.
Lisa Girion
Online Grocer Webvan Shutters Operations
Webvan Group Inc., the top online grocery delivery service, abruptly shuttered operations, leaving 750,000 customers trudging back to conventional markets. The company’s high-tech warehouses, colorful trucks and cheerful drivers never lured enough customers to turn a profit.
Webvan, based in Foster City, Calif., filed for bankruptcy protection and laid off most of its 2,000 employees, including nearly 600 in Southern California. The company halted service in all seven of its markets, including Los Angeles, Orange County, San Diego and the Bay Area.
The demise of the high-profile e-tailer casts more doubts on the chances of creating a successful retailer that can survive exclusively on the Internet.
Ken Cassar, an analyst with Internet research firm Jupiter Media Metrix, estimates that the company spent $143 for every $100 of groceries it sold.
Charles Piller
Merrill Limits Purchases of Stock by Analysts
Merrill Lynch & Co. became the first major U.S. brokerage to ban its analysts from buying shares of the companies they cover, an attempt by the firm to defuse criticism of potential conflicts of interest in the industry.
Merrill, the largest U.S. brokerage firm, said its 850 equity analysts must sell all the stocks they cover, put the holdings in managed accounts over which they have no discretion, or keep the shares and disclose the stake in research reports. They will not be permitted to buy more shares.
Wall Street research has come under sharp attack in the last year as many analysts maintained “buy” recommendations on technology stocks even as they lost most of their value.
Debora Vrana
Music Data Being Altered, Some Say
Somebody is messing with the music charts. Record industry officials told The Times that some independent consultants and merchants from Los Angeles to New York have developed a system to distort sales numbers that are reported to SoundScan, the research firm that tabulates data for Billboard magazine’s music charts.
The scheme involves retail clerks swiping a CD numerous times across a scanning machine to falsely boost sales figures. Through this technique, a recording can be pushed up as many as 10 positions on the charts, which could be enough to get a CD into the coveted top 10.
Billboard and SoundScan confirmed that they have found anomalies in their sales data and believe some record labels have been trying to tweak the figures.
Placement on the Billboard charts affects the amount of play a song receives on the radio, orders from retail outlets and the reputations of artists and label executives.
Representatives of the five major record conglomerates all denied knowledge of any label in their organizations participating in any schemes to enhance sales figures.
Chuck Philips
Black Women a Force as Business Owners
A report by the Census Bureau showed that nearly 40% of African American-owned businesses surveyed in 1997 were owned by women, about 10 percentage points greater than for other minority groups and for the nation’s business community as a whole.
Both nationally and in California, about 38% of African American-owned firms had female owners, compared with about 27% for both American Indian/Alaska Native firms and companies owned by Asians and Pacific Islanders, the census found.
About 28% of Latino-owned companies nationally were owned by women, slightly lower than the 30% figure for California.
Experts said African American women, many of whom are single parents, are using skills honed as the head-of-household to launch their own companies.
Karen Robinson-Jacobs
Stocks Extend Rally, Halt Downward Trend
The U.S. stock market rose for the week, with the Dow Jones industrial average posting its first positive week since May 18 and rising 2.8%. The technology-rich Nasdaq rose 4% for the week and the S&P; 500 added 2.1%.
In fact, Nasdaq had its biggest rally in almost three months on Thursday, as some investors seized on Microsoft Corp.’s announcement that sales will top forecasts as evidence that corporate profits will pick up this year.
Investors also responded to decent earnings from such giants as General Electric Co., and rewarded some tech firms that promised more cost cuts, such as Motorola Inc.
Though Thursday’s rally just returned the market to its level of a week ago, analysts said it may have been powerful enough to halt the downtrend that began in late May.
A Times Staff Writer
Napster Ordered to Stay Offline
Napster Inc. faced another potentially crippling legal setback in its efforts to remain afloat.
A federal judge ruled that the controversial Internet song-swapping service could not come back online until the judge is satisfied with the company’s efforts to halt music piracy.
The Redwood City, Calif.-based company filed an emergency request with the U.S. 9th Circuit Court of Appeals, arguing that an indefinite shutdown would cost Napster its competitiveness and its customer base.
The court is expected to rule within a few days.
The order by U.S. District Judge Marilyn Hall Patel in San Francisco came 10 days after Napster voluntarily suspended its service.
Jon Healey
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Please see Monday’s Business section for a preview of the week’s events.
