AT & T; Sells DirecTV Stake
AT & T; last week unloaded its 2.5 percent equity stake in El Segundo-based satellite broadcaster DirecTV Inc., selling it back to its parent Hughes Electronics Corp. for $161.8 million.
AT & T;’s pull-out from the satellite television business marks only the latest telephone company retreat from the industry. Earlier this year, a partnership between Pacific Bell and two other Baby Bells to create a satellite TV venture called Tele-TV was essentially scrapped.
Analysts last week speculated that AT & T; is leaving DirecTV in order to form links to cable television companies, which are working to upgrade their lines to support data transmission thus potentially providing assistance to AT & T; in its Internet efforts.
The divestiture is ironic considering AT & T; recently hired former Hughes head C. Michael Armstrong as its new chairman. Armstrong was instrumental in forming the relationship between AT & T; and Hughes to begin with. AT & T; paid $137.5 million for its DirecTV stake in March 1996, so it made a 17 percent return on its investment.
Analysts say the partnership was never fruitful for either party. Although AT & T; telemarketers attempted to sell consumers on DirecTV, they only managed to sign up between 35,000 and 50,000 subscribers, according to news reports. DirecTV has 3 million subscribers nationwide and is expected to pursue marketing partnerships with Baby Bells now that the AT & T; divestiture frees it to do so.
Guess Scolded
The U.S. Labor Department last week released a letter it sent to officials of Guess Inc. criticizing the company for making allegedly misleading statements in advertisements.
Guess’ newspaper ads, published in the Los Angeles Times and The New York Times, claimed state and federal authorities had ruled the company’s contractors to be completely in compliance with labor laws after a 12-month review. But authorities say they have never reviewed Guess’ program.
Further, the government objected to Guess’ claim in in-store fliers that it is on the “Trendsetter” list of manufacturers a list of companies considered exemplary by the Labor Department for their monitoring of contractors. Although L.A.-based Guess was on the list a year ago, it was placed on probationary status after federal inspectors found that Guess contractors had violated wage laws.
Guess officials said they are giving serious consideration to the Labor Department letter, but have not yet decided whether to pull the ads. The letter did not specify whether federal authorities would take action if the ads continue to run.
Home Prices Rise
More good news for homeowners and sellers was announced last week with the release of a study showing that home prices are rising in all seven Southern California counties for the first time in more than seven years.
Meanwhile, a trade association of Realtors in the San Fernando and Santa Clarita valleys released figures showing that home sales in that region rose 10.4 percent in November over the same month in 1996.
The Real Estate Research Council of Southern California found that home prices in L.A. County rose by 3.2 percent in October, compared with October 1996. Of the six other Southern California counties, only Santa Barbara County saw a higher percentage gain, at 3.3 percent. But even Riverside and San Bernardino counties, which have lagged in the housing recovery, saw price gains in October.
More recent figures came from the Southland Regional Association of Realtors, which tracked November home sales in the San Fernando and Santa Clarita valleys. The group found that the median home value in that area rose by 6.3 percent in November, to $170,000.
Analysts expect the upward trend in home prices and sales throughout Southern California to continue, thanks to low interest rates, strong demand and a strong economy.
Heir to News Corp. Throne
In an effort to put to rest investor concerns about the leadership succession at News Corp., media mogul Rupert Murdoch last week confirmed that his 26-year-old son Lachlan will take over the company when he steps down.
News Corp. officials said the decision was a joint agreement among the three Murdoch children involved in the business. Lachlan Murdoch currently heads News Corp.’s holding company that runs most of its activities in Australia and New Zealand; his elder sister Elisabeth Murdoch runs a satellite TV operation in Great Britain and younger brother James Murdoch heads News Corp.’s Internet operations.
Lachlan Murdoch has long been groomed as his father’s successor. However, the elder Murdoch has no intention of stepping down anytime in the near future analysts expect the 66-year-old Rupert to continue running the company for as long as he is physically able. The elder Murdoch is a constant world traveler but keeps his home base in Los Angeles.
Murdoch’s leadership is credited with building News Corp. into one of the world’s biggest media companies, part of the reason there is such concern over the effect of his loss on the company.
Tax Break for HMOs
The L.A. City Council last week approved a tax code amendment that will lower the tax payments of five health maintenance organizations by millions of dollars.
The five HMOs had threatened to leave the city unless their tax burdens were reduced. As a result, the council passed new rules exempting them from tax payments on income from any work by doctors and clinics outside city limits.
City taxes for the five HMOs combined are expected to drop from $25 million a year to around $7 million as a result of the change.
Although the amendment prompted more than an hour of debate when it was first proposed in late November, it was passed by a vote of 12 to 3 with no discussion last week. The three opponents were council members Joel Wachs, Rita Walters and Jackie Goldberg.
Chiat/Day Move
TBWA Chiat/Day Inc.’s move to Playa del Rey was announced last week by Mayor Richard Riordan.
Riordan put out a press release touting L.A.’s Business Team for keeping the well-known advertising agency in the city of Los Angeles. According to the release, the team, formed by Riordan to help retain business in the city, worked with Chiat/Day for six months searching for an appropriate location. The decision had been reported three months ago in the Business Journal.
The agency, creator of the Energizer Bunny and the controversial “Enjoy the Ride” campaign for Nissan, has outgrown its headquarters at the famous Binoculars Building in Venice. It has entered a long-term lease at a 100,000-square-foot warehouse in Playa Vista that is being renovated to house the agency.
Compiled by Dan Turner