Aerospace CEO Takes Wheel at Electric Car Firm

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Entrepreneur Elon Musk is already leading a company with plans to send men to Mars. Now, he’ll play a direct role in a totally different venture: electric cars.

Barely two weeks after his aerospace startup Space Exploration Technologies Inc. successfully launched its first unmanned rocket into orbit, Musk announced he’s taking over as chief executive of Tesla Motors Inc., a Bay Area startup that builds sporty electric cars.

Both companies are hitting critical junctures right now, and that raises the question: Can Musk divide his time between the two without short-changing both?

Frank Sietzen, a space industry analyst who worked for SpaceX when it was still in its infancy, said Musk can pull it off if he learns to delegate work better.

Sietzen described Musk as a hands-on boss who routinely logged 12 to 14 hour days, six to seven days a week at SpaceX, when it was a new company.

Musk is already chief executive and chief technology officer of Hawthorne-based SpaceX. After three unsuccessful attempts to get to space, its Falcon 1 rocket reached orbit at the end of September, making SpaceX the first company to put a privately funded and developed rocket into space.

It’s been a long time coming for Musk, who founded SpaceX in 2002 with the aim of sending men into space and has poured about $100 million into it from his own pocket.

Now, Musk is going to have to divide his attention between SpaceX and Tesla, which is grappling with its own challenges.

While there’s a backlog of orders for Tesla’s sleek high-end Roadster electric car, the company in mid-October announced it was laying off a portion of its 250 employees and closing a plant in Detroit.

Musk, a major investor in Tesla, wrote a blog post blaming the company’s struggles on the general economic downturn. He also announced the goal of making Tesla cash-flow positive within six to nine months.


Sour Notes

Activision Blizzard Inc.’s latest installment in its “Guitar Hero” franchise, “Guitar Hero World Tour,” is scheduled to hit store shelves Oct. 26, just as the corporate battle over money generated from music and rhythm video games is heating up.

The chief executives of Activision and Warner Music Group have recently traded jabs over the cut music companies receive from hugely popular video games such as “Guitar Hero,” in which players jam to rock songs on guitar-shaped game controllers.

The stakes are significant. “Guitar Hero” games have been a cash cow for Activision since it acquired the franchise in 2006, generating over $1.7 billion in revenue.

Game publishers reportedly pay record labels around $10,000 to re-record a song and up to $25,000 for master recordings. But some labels are asking for a bigger cut of the action, seeking a royalty of four to eight cents for each copy of a game that’s sold.

Edgar Bronfman Jr., chairman and chief executive at Warner Music, threw the first punch in the dispute during an earnings conference call in early August. Bronfman said the money that music companies receive from game publishers is “far too small,” and suggested that Warner might not license tunes to game companies in the future unless the terms change.

Then last month, Activision Chief Executive Robert Kotick told the Wall Street Journal that “Guitar Hero” is such a powerful promotional tool for the artists and their work, music companies might want to pay Activision instead.

The research backs up Kotick. According to a study from Brown University, 76 percent of “Guitar Hero” players ended up buying music they heard in the game.

In addition, as Wedbush Morgan Securities Inc. research analyst Michael Pachter pointed out, Activision is owned by Vivendi SA, which also owns Universal Music Group.

“Activision is in good shape to get access to good songs,” Pachter said. “They don’t really need the Warner guys. Given that, one might think Warner Music could get left out in the cold.”


Shareholder Suit

The shareholders of an Israeli satellite company that was an acquisition target of an L.A.-based investment firm aren’t happy that the deal fell apart.

Eight shareholders filed suit against Gilat Satellite Networks Ltd. in Jerusalem last week, according to a statement posted on Gilat’s Web site. The plaintiffs are seeking class-action status and damages equal to what they would have received if Gilat had been acquired by Galactic Holdings Ltd., an investment consortium spearheaded by L.A.-based Gores Group LLC, a private equity firm led by billionaire Alec Gores.

A $475 million acquisition deal fell apart in August and the two sides have since accused each other of breach of contract.


Staff reporter Charles Proctor can be reached at [email protected] or at (323) 549-5225, ext. 230.

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