Hits & Misses
(Business 2.0) – [HIT] Kreme vs. cream. In May, Krispy Kreme joined a long list of companies blaming the low-carb fad for subpar earnings. But if Atkins is destroying the doughnut market, how to explain the smash U.S. debut of Japanese cream-puff maker Beard Papa's? When the chain opened its first two American outlets in New York this spring, lines for the $1.25 pastries began snaking around the block. Already a $189 million empire in Asia, Beard Papa's will open five more stores this year, including another in New York and locations in Los Angeles and Washington.
[MISS] Why there's no "hard" in Microsoft. When it comes to software, it's tough to beat Microsoft. But the Redmond juggernaut has again proved vulnerable when it ventures away from the desktop. The latest failure came in May, when Microsoft pulled the plug on its Wi-Fi hardware business after its market share shrank by half to just 6.6 percent. A Microsoft spokesperson called the effort a success because it had "raised the bar" on Wi-Fi's security and ease of use, but analysts attributed the software giant's withdrawal to plummeting profit margins in the face of stiff competition and a yearlong delay in introducing higher-speed wireless routers.
[HIT] No-fault divorce. After four years in a marriage of convenience with Hyundai Motors, DaimlerChrysler has decided to sell its 10.5 percent stake in South Korea's biggest carmaker. But don't worry about the former couple. Hyundai is coming off a record year and plans to launch six new or redesigned U.S. models by 2006. Daimler, meanwhile, walks away with the house--the $400 million it invested in Hyundai is now worth about $1 billion.
[HIT] "In" this season: slimmer price cuts. Ann Taylor built its reputation among career women by making sensible clothes. Now the company is building a reputation on Wall Street for its sensible markdown strategies. In the first quarter, its gross margin jumped from 52 to 54.8 percent and profits almost doubled to $31 million. The secret? Software from Massachusetts firm ProfitLogic helped merchandising execs make fewer but more targeted price cuts.
[HIT] A subliminal message from our sponsors. Major League Baseball committed a PR error when it announced plans to place ads on the bases during games in June. Which makes it all the more impressive that the NBA was able to similarly insinuate advertising into its game without a peep of dissent. At New Jersey Nets games this season, the McDonald's "I'm Lovin' It" jingle blared over the loudspeakers every time a Nets player hit a three-point shot. McDonald's plans to bring the three-point jingle to other pro basketball venues next season as part of a larger sponsorship package that will enrich the NBA by an estimated $1 million per team.
[MISS] Hey, who smuggled in the cream puffs? Bankruptcy is supposed to function like a fat farm: The food sucks and the exercise is a pain, but you come back fit and lean. Not so for MCI, which emerged from two years in Chapter 11 only to announce that it had lost $388 million in the most recent quarter and would lay off 7,500 more employees. CEO Michael Capellas blamed "unfavorable regulatory conditions," but a more likely culprit is Ma Bell: AT&T has siphoned off multimillion-dollar MCI clients like Booz Allen Hamilton and Finish Line by vowing to match prices on corporate accounts.
[MISS] Maybe there is such a thing as bad publicity. Salesforce.com CEO Marc Benioff's brash, adversarial style has helped his startup gain the attention it's needed to win business from larger rivals like Siebel Systems (see "The Biggest Mouth in Silicon Valley," September). But on the eve of his company's crowning moment--its IPO--Benioff's relentless pursuit of word-of-mouth buzz came back to bite him. After Benioff gave an interview to the New York Times during the company's pre-IPO "quiet period," Salesforce received an SEC inquiry and agreed to delay its stock offering by at least a month.