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Show The Salt Lake Tribune BUSINESS Sunday, December31, 1995 1995: Year Of Winners AndLosers A random sampling of victors and vanquished, hubris and humiliation during the year: WINNERS @ Boeing Co.: Despite a protracted strike by more than 30,000 machinists, the world’s leading commercial plane makerthrived. In Novemberit wona record order from Singapore Airlines for up to 77 new 777 jetliners, a deal potentially worth $12.7 billion Walt Disney Co.: The creator of Mickey Mouse and distributor of the hit holiday film “Toy Story” catapulted into a global entertainment-informationsuperpowerwith a $19 billion deal to purchase Capital Cities/ABCInc., announced in July. The merger will combine the leaderin fantasy entertainmentwith the best-rated TVnetwork. @ Microsoft Corp. Unfazed by government antitrust inquiries, the leading personal-computer software company launchedits Windows 95 upgradein August with mind-numbing publicity. ChairmanBill Gates authored a book about the future, gained widening attention as a techno-soothsayer and refocused his company’s efforts on exploiting the Internet as the next great sea changein the evolution of computers @ Netscape Communications Corp.: Creator of a popular software for browsing the Internet. Netscape became oneof the most successful public stock offerings of history in August The company had never made a profit or sold its product but shares more than doubled in value the first day to $60 and doubled again by December. W@ Intel Corp.: The leading maker of personal computer “brains” overcamea publicity disaster from a flawin its flagship Pentium chip discovered in 1994. Pentium sales soared and the companyreported double-digit earnings gains, in cluding a 41 percent increase in the third quarter of 1995. LOSERS: @ Daiwa Bank of Japan: The world’s 2lst largest bank wasindicted for fraud in the United States and ordered to leave the country because of a scandalatits New York branch, where a senior trader concealed $1.1 billion in losses from unauthorized Treasury bond trades over 12 years. @ USAir Group Ine.: Hope for a merger with a stronger U.S. partner faded in November when United Airlines parent UAL Corp. said it wasn't interested in merging The decisionleft the outlook for USAir moreuncertain after five years of losses, the impending retire- ment of its chairmanandlabor costs that remain among the highest @ Kmart Corp.: The big discount chain was dogged by its inability to compete effectively with rivals like Wal-Mart and Target. Despite closing more than 200 poorly performing stores during the year, rehabbingotherstores and revamping senior management, the company’s sto hit a 13-year low and rumors of a possible bankruptcy reorganization persisted Dow Chemical Co.: The company known for house- hold products ranging from Saran Wrap to Fantastik spray cleaner was tagged for potentially enormousliabilityin lawsuits over leaky silicone breast implants. Although Dow never made orsold the implants, a Nevada jury found it responsible because the Dow Corning Corp., partly owned by Dow Chemical once was the leading im- plant manufacturer. @ Rubbermaid Ine. Knownfor its unbreakable buckets and Little Tykes kids playgear, Rubbermaid Inc. was badly hurt byexec: utive departures, weakened demand, rising plastics prices, slumping profits and increasingly restive investors. In December it announced a restructuring that would eliminate 9 percent of the work force and close ninefactories. Merger Frenzy ’95: This Time It Could Get Personal BySteve Sakson THE 1995’s corporate contortions ASSOCIATED PRESS NEW YORK — Maybe youhad to drive a little farther to get to 1995 wasa yearof someofthe biggest mergersin history, but someofthe biggest breakups, 100 the bank. Perhaps you had to change doctors becauseyour boss signed on with a health-mainte- ‘ nance organization Your favorite newspaper may TEN MERGERSTHAT MADEPAGE1 \y have gotten thinner, or disappeared altogether. Grudgingly, you may have started shopping for clothes at that expensive bou- mMarch 7 PLC Wellcome Q Glaxo PLC tique because all the department stores seem to beselling the same stuff. All these changes are rooted in the takeover and makeoverbinge agreesto sell outforsis billion, creating} world's largest Co. to buy Capital drug maker. aren't news by themselves. Just about everybody knows someone whohas been “downsized” out of a career — or had it happen to them. In 1995, however, the upheaval reached more deeplyinto everydaylife. Banks combinedat a relentless pace to save money, chopping hundredsof branches. Employers accelerated their moves into managed-healthcare. Two-thirds of the people with a May 1 “# billion. aneDigest bank CBSInc. agreesto Inc., operator of ul Lotus Development by IBM for $3:52billion sa Corp. agrees to buyout iCLitre i Corp. to buy mAug. 1 Seagram Co. to buy 80 percent of MCA States Power Co. for $7.5 asi0 billion stock mdune ti wApril 9 Wisconsin Energy Corp. and Northern buy Ted Turner's abe empire agree to aseslge Premano as System Inc. of @ Minneapolis. i aio baron sweeping America’s corporations. Mergers and restructuring mSept. 22 TimeWiamerInc. 1 Corpland Chase Manhattan Cor procs 10'910.3 Se BJuly31 SC Walt Disney “+ Cities/ABCInc. for mAug. 28 Chortical Banking Bion ss First California's inerstale Bancorp Surrenders to Southern Pacific Rail Corp. for $5.4 a $5.4 billion announce a $6 Universal Studios buyout offer from billion merger. Co., for $5.7 billion Westinghouse. billion. ug the biggestfrei railroad in Kile America. COMPANIES THAT SPLIT June 13 ITT Corp., owner of sports teams, hotels, health plan nowbelong to lower- cost HMOs. Media companies merged to contractors and insurance, saysit will split into three announces it will spin off its computer services subsidiary Electronic Data Nov. 28 Sept. 20 casinos, defense strengthen their grip on what we see, hear and read. Theyslashed less profitable businesses. Retail chains that had built too manystores declared bankruptcy MERGERS AND BREAKUPS companies, medical technology it will split in three company Baxter in voluntary saysit will split in than the one InternationalInc. AT&T Corp. says breakup bigger two. Breakupsand spinoffs of subsidiaries SON Hospital supplier and dreds of stores shuttered and once-ferocious competitors now Corporate contortionism continu This year, it affected the rest of us Tae} Mergers and acquisitions Systems. or were taken over, leaving hun- owned bythe same company. RT This year set records for the number of companies combining andthose breakingup. BAug. 7 General Motors 2.000 1,000 0 forced in 1984 UL» abu 20— MERGERS 10— . 1985 1987 1989 1991 1993 BREAKUPS et i» oc 1995 1985 1987 1989 = 1991 1995 Ss of Dec. 8 Associated Pres Many of the changesare pos- sible because of new technology Bankingis a good example. The banks are under pressure to cut costs because of new competitors — corporations like AT&T and GM that issue credit cards, or credit unions that offer cheap mortgages. Mergershelpcut the payrolls, a bank's biggest expense. The Federal Reserve Board and the accounting firm Deloitte & Touche estimate that U.S, banks may close up to half their branches — 30,000 — by 2000 This allows the banks to spend moneyto offer their customers technological advances. “Newfinancial services will be available like electronic banking, stocks and mutual funds by phone or over the Internet.” said Richard Berner, economist of Mellon Bank in Pittsburgh The downside is that millions of people don’t have computers and simply want tosee a teller so they can deposit their paychecks. “A segment of the population is going to be left out,’ New York state Ser. Franz Leichter said in August after Chase Manhattan Bank and Chemical Bank announced their $10 billion marriage. In health care, the managedcare revolution that began a couple of years ago entered a new phase in 1995. The rapid growth of HMOs, which offer comprehensive health care for a flat monthlyfee, has chopped annual health-carepremium increases from 20 percent to near nothing. HMOs, hungry for profits in this rapidly growing business, snapped up competitors and expanded into newmarkets. In one of the biggest deals, Minneapolis’ United HealthCarepaid $1.65billion for MetraHealth, itself the product of a merger of MetLife and Travelers’ health-care busi- tests, said Richard Belous, economist with the National Planning Association, a business and laborfinanced think tank in Washington. Mergers and cutbacks in the media business drew plenty of headlinesthis year. Newspaper closures — a longstanding trend — accelerated as weaker papers were knocked out by low profits and high costs, notably a 40 percent increase in the price of newsprint. Theyear’s casualties included Newsday, The Baltimore Sun and The Houston Post. Major cutbacksaffected the Los Angeles Times, Miami Herald and Philadelphia Inquirer. Less obvious, but perhaps more Critics of this trend sayit’s vic- timized patients because some HMOsare cutting care to keep premiumslowand remain profitable, “It’s being donebysacrificing a lot of the services we knowand love,” like easy accessto the best hospitals, specialists and medical are too concerned about profits. They cite ABC’s apology to Philip Morris for claiming the tobacco industry “spikes” cigarettes with nicotine, and CBS's de- | hindsight whenit’s too late to join 30.38 points to 4,003.33 Some highlights: Asthe year begins, the Dow Jones industrials average is at 3,834.44, the Standard & Poor's 500-stock index is at 459.27 and the Nasdaq composite index is at 751.96. Jan. 30: The Dow reaches whatwill turn out to be its low for the year, bottoming out at 3,832.08. Two dayslater, the Fed raised rates for the seventh time economies agree to cooperate to strengthen the dollar, which had fallen 20 percent against the yen since the start of the year. ™@ May18: The Dow plummets 81.96 points to 4,340.64, the biggest single-day drop in six months, amid fears that interest rates had bottomed out @ May31: The Dow shoots up 86.46 pointsto a record 4,465.14, the biggest one-day point gain since Dec. 23, 1991. and Investors asset-backed bonds, rose about 17 percent. Say 1995 Was Good for Them @ Continued from F-1 and the last highly visible bear on Wall Street. said a April 19: The dollar falls to a post-war low, touching 79.75 yen davies trading in Tokyo. April 25: Finance ministers of the world’s most powerful “paradigm shift” had occurredfor the third time in the past 40 years. ‘The fear ofinflation, which is the modern-dayequivalent of the depression fears of 40 years ago, has beenlifted,” Shulmansaid. Thedisappearanceof theinflation goblin produced bond gains that were almost as intoxicating. The yield on the30-year Treasury bond, which falls when prices rise, declined 2 percentage points, from just over 8 percent around Thanksgiving 1994, to endtheyear at 5.94 percent The Lehman Brotherstotal-return index of Treasury, corporate Of the three markets, investors in the dollar had theleast to cheer about. The J.P. Morgandollar index against 19 currencies skidded 10 percent from January to April, then recouped someofits losses in the fall. But it wasstill down 2 percent for the year. As with so manyhistories of the financial markets, the stage for this past year’s hugegainswasset the year before. Bonds and stocks performed dismally in 1994, but bond prices started rising that November and madesolid gains through June 1995. On July 6, the Federal Reserve gave investors an Independence Daypresent whenit eased shortterm interest rates by 0.25 per- cent, reversing a 17 month-long strategyof tightening to fight inflation that had doubled the benchmarkfederal fundsrate to 6 percent from 3 percent. The central bank eased once again on Dec. 19 Bond investors cheeredthat the Fed’s tightening strategy had its safe. You could be next “People are constantly being questioned about their activities, whether they are relevantor not. he said. “They're constantly being asked to make sure what they're doing is important to the compa- at Macy’s and Stern's directly across the street from each other in New YorkCity. Both are owned ny’s objectives.” July 19 5,500 Drops to 4,628.87 4,900 4,600 hb ee yedng -| 4,300 | 4000 invest jump technology stocks May 18, . Jan. 30 Hits 3892.08, its lowforthe year, as inves tors worry | Dec. 18 Drops 101.52 or 1.96 percent to 5,075.21, biggest Weekly closes of the Dow Jones industrials for 1995 5,200 in less than a year. @Feb. 23: First close above 4,000 for the Dow, which rises lon Bank's Berner. So if you kept your job this year, don’t get lulled into thinking | TRACKING THE DOW Of Financial Milestones THE ASSOCIATED PRESS This wasthekindof year investors dream about, often from done during a recession, said Mel- “Ironically even as technology permits many more and different voices, there are fewerentities actually controlling the distribution of those voices. This undermines the democratic process.” In stores, strips and malls, consolidation has meant one-time competitors are allies. Just look cause their new corporate parents Some Key Dates in a Year the fun The Dow Jonesindustrial average kept reaching newall-time highs. Only two months — January and August — failed to producea record. ers, still is worried significant, are the effects of the mega-mergers like Westinghouse’s purchase of CBS and Walt Disney’s buyout of ABC. Critics say the TVnetworksare abandoning hard-hitting journalism be- nesses. by Federated DepartmentStores, Others joined a parade into bankruptcy this year including Caldor’s, Bradlee’s, Jamesway, Elder-Beerman, and Edison Brothers. The inevitable result hundreds of fewer stores, fewer choices for consumers. “People have complained for years that all the big department stores had the same merchandise. Nowtheyliterally will,’ said Sandra Shaber, an economist with the suburban Philadelphia consulting firm Wefa Group. In the midst of these changes downsizing has become established as a normalpart of American business — notjust something cision against running a hardhitting interview with former Brown & Williamson executive Jeffrey Wigand becauseit feared a lawsuit Somesay objective journalism is threatened. NBC howledin protest when TV Guide featured “Party of Five,” a struggling Fox Network show, on its cover. Fox and 7VGuide are owned by Rupert Murdoch's News Corp. Otherssay technology advances in cable television and the Internet will allow thousands of new voices to be heard. AndrewSchwartzman, director of the Media Access Project, an advocate for viewers and listen- aboutinterest rates going up. Plummets to and worry about 4,340.64 on fears interest rates. point dropinfour years, on concern about budget. mmm 1 that interest rates Keb2 havebottomed out, SS hatethatation will grow only L moderately. ees } Se ie July 6 inatorihe first time since 1992 limbs v Sept. 12 50c Bee - ie Steady streak of fecord highs pete tech: : Begins another Hie Haar) 4.684 00 | Nov. 214a Citta aed woe Semmaet 470721, 3,700 Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct @ July 6: The Dow rises 48.77 to points the previous day, the Dow a record 4,664.00 as the Fed lowersinterestrates for thefirst time since September 1992. WJuly 19: After falling 50.01 tumbles as much as 133 points morebeforerecovering somelost groundto close down 57.41 points at 4,628.87 in record trading. seemed to workto create slow but steady growth withlittle inflation. As measured by the Labor Department’s consumerprice index, inflation rose at a pace ofless than 3 percent this past year. Although commodity prices are ris- stock at an annualized rate of about$70 billion, according to the ing, labor costs, which represent two-thirds of companies’ sales revenues, are barely growing. “Thereis a sustainably lowrate ofinflation with absolutelyno evidencethatit will accelerate,” said Steven Einhorn, co-chairman of the investment policy committee at Goldman, Sachs & Co Bond and stock investors also were cheered by the Republican election victory in 1994 that prompted seriousness in Washington about cutting the nation’s budgetdeficit. Corporations boosted stock prices by reporting earningsgains Federal Reserve, outpacing the new issuance of $55 billion commonshares. Mergers and acquisitions also removed supply. Just as supply was shrinking. demand soared. Investors shoveled nearly $112.1 billion of new moneyinto stock mutual funds by the end of November, according to the Investment CompanyInstitute, a trade group. Thatlifted total net assets of stock funds past $1 trillion According to Standard & Poor's Corp., the biggest winners were electronics defense and instrumentation companies, up 87.5 percent and 68.4 percent, respectively. They were followed by health-care and drug stocks, up 66.6 percent, medical products and supplies, up 64.3 percent; and of more than 20 percent in each of the first two quarters. Analysts expect them to be up 12 percent to 15 percent for the year Stock prices also rose because the supply of stock declined money-center banks, up 59.3 percent. The worst performers werecyclical sectors including steel Companies bought back their own ers, down 5.8 percent; specialty down 11.3 percent; trucking down 8.8 percent; paper contain- Nov. Dec. ~__AssociatedPress MNov. 21: The Dow climbs 40.46 points to 5,023.55, first close above 5,000 and 60th record high of the year, more than in any other year this century. retailers, down 3.8 percent; and metal and glass containers, up 4.1 percent Eventhe dollar, which hit postwar lows this past Spring, rebounded to beat out the worst stock performers. The dollar started the year at about 101.40 Japanese yen and 1.50 German marks, retreated against both currencies in April, then crawled back in the fall By year-end the dollar was trading at 103.40 yen, up “4 percent for the year, and 1.4366 marks, down 7 percent Howlong the bull market in stocks can last is one of the great unknowns. Manyofthe factors that got the partystartedarestill in place. But the markets’ history, which is basically cyclical, argues for a retrenchment in 1996 “I'm entering 1996 with some trepidation,’ said James Solloway, a director at Argus Research, a New York investment firm. “These increases just can. not be repeated. We'll be luckyto hang on to what we've got |