The Smart List
Our year-in-review salute to the bold moves, big bets, and brilliant innovations that paid off for dozens of America's most clever companies.
(Business 2.0) - Google grabbed most of the headlines in 2005, but it certainly didn't have a monopoly on smart. Thanks in part to the relentless march of Googlemania, many of the year's most important business highlights--the critical decisions and forehead-slapping insights that ultimately make people very rich--didn't even make the front page. (Neither, for that matter, did most of the boneheaded blunders found in our list of the 101 Dumbest Moments, on page 98.) That's where our annual Smart List comes in. We were keeping an eye on the year's big winners, and on the pages that follow, we've chronicled the moves that were pivotal to their success. Then we went back and reviewed our list to call out a few that deserve special recognition as the smartest of the smart. For all the companies you'll read about here, it was a very good year indeed.
DRESSED FOR SUCCESS
Jan. 3--Dress Barn, a $755 million women's fashion retailer, closes a $320 million buyout of Maurices, a 477-store chain that sells low-priced clothing in rural small towns. Exploiting a product category where Wal-Mart is weak, the new $1.1 billion company boasts a nearly threefold hike in quarterly profits and a record-high stock price by December.
FOSTERING IDOL WORSHIP
Jan. 18--Fox kicks off American Idol but decides once again to limit the show to one contest for the year--a move designed to keep the format fresh and viewers hungry. Fans are indeed famished: By season's end, Fox has shot from fourth to first place in the ratings battle for coveted young adults.
AN OUNCE OF PREVENTION ...
Jan. 25--As fears of an avian flu pandemic emerge, reps from Swiss drugmaker Roche signal plans to ramp up production of the company's Tamiflu influenza drug. Anxious government officials around the world are assured that they will have access to its supply. By year's end, Tamiflu sales near $930 million--nearly quadruple 2004 levels.
DREAMING OF P&G ... & G
Jan. 28--Procter & Gamble approves a $57 billion deal to acquire Gillette, making it the world's largest supplier of household and personal products. Gillette shareholder Warren Buffett calls it a "dream deal" for other reasons: The all-stock acquisition is a win-win for shareholders, as Gillette investors get a tax-free 18 percent premium while P&G announces plans to buy back as much as $22 billion in shares. P&G stock is up 8 percent by mid-December.
RAY COMES HOME EARLY
Feb. 1--Universal Studios releases its Ray Charles biopic, Ray, on DVD while the movie is still in theaters. The DVD rings up nearly $80 million in sales its first week--blowing past Ray's $75 million in total box office revenues.
PLAYING A DIFFERENT TUNE
Feb. 3--Napster launches an alternative to iTunes with a $15 monthly portable subscription service. RealNetworks and Yahoo quickly follow. Inside Digital Media estimates that the three rack up $250 million in '05 sales--less than iTunes, but respectable nevertheless.
$538M BUCK CHUCK
Feb. 4--Charles Schwab slashes online trade commissions by 35 percent to boost demand. One of several such cuts in 2005, the move helps daily trade volume jump 25 percent by November, and Schwab posts a $538 million profit.
GOODNIGHT, CARLY ...
Feb. 9--Hewlett-Packard's board of directors finally ousts CEO Carly Fiorina.
Feb. 14--BMW unveils its new Crispin Porter & Bogusky ad campaign that spoofs "counterfeit" Mini Coopers. It includes a TV spot, website, and DVD, and takes a top honor at the Cannes Lions International Advertising Festival. Mini sales through November climb 19 percent. Success attracts admirers; in September, Volkswagen America hands its $400 million account to CPB.
Feb. 15--J.C. Penney announces a new Nicole Miller-designed line of "dressy casual" wear for women. The goal: to position the 104-year-old retailer as slightly more upscale than Target but downscale from Macy's. It works: The company credits the Miller line with helping to drive a 58 percent hike in third-quarter profits.
March 7--The board of long-struggling electronics retailer Circuit City turns down its second takeover bid in two years. Rejecting the offer of $17 per share proves wise: By year's end, thanks to a revamped management team and a $10 million return to third-quarter profitability, Circuit City's stock climbs past $22.
IGER INHERITS THE KINGDOM
March 13--Disney puts the stormy era of Michael Eisner behind it with the board's election of Robert Iger to the CEO job. Iger, a former ABC executive credited with leading the network's turnaround, is seen as more likable--and less volatile--than his mercurial former boss.
KEYWORDS: PHOTOS, TAGS, SEARCH
March 18--Yahoo nabs fast-growing photo-sharing site Flickr for a bargain price estimated at less than $35 million. The acquisition signals Yahoo's renewed emphasis on user-generated content and keyword tags--key planks in its effort to differentiate its Internet search offerings from Google's.
... GOOD MORNING, MARK
March 29--HP investors cheer the hiring of Fiorina's replacement: NCR chief Mark Hurd, who moves quickly to cut jobs and boost investment in HP's high-margin printing and data-storage divisions. By December, HP's stock price is up 50 percent.
HOLDING BACK THE HOG
April 13--As a hedge against softening demand for its motorcycles, Harley-Davidson begins trimming dealer inventories. The company uses the ensuing scarcity to stoke demand for upcoming 2006 models. Investors worry, but U.S. sales spike 12 percent after the bikes' summer release. Third-quarter profits jump 16 percent on $1.4 billion in sales.
SPRING SOLSTICE, SUMMER HARVEST
April 14--GM shells out a reported $2 million to feature its upcoming Pontiac Solstice on The Apprentice. During the program, viewers are told that 1,000 cars will be available for preorder online the next day. Pontiac reaches that limit in 41 minutes. Demand remains strong when the Solstice debuts over the summer, and production is sold out through mid-2006.
LESS PAIN AT THE PUMP
April 15--While other airlines post a combined first-quarter loss of more than $2 billion, Southwest's profits triple to $76 million, thanks to the carrier's decision to lock in fuel prices at $26 a barrel through hedging strategies. As the market price jumps to more than $55 a barrel, Southwest saves $173 million in the quarter.
May 2--Three years after its predecessor company filed the largest Chapter 11 bankruptcy in U.S. history, MCI (formerly known as WorldCom) is acquired by Verizon for $8.5 billion. The price is 27 percent higher than Verizon's original offer, thanks to MCI's deft handling of a bidding war with Qwest.
YOU'VE GOT SALES
May 4--Time Warner reports that ad revenues at its long-troubled AOL unit surged 45 percent in the first quarter. A key driver: Advertising.com, the online ad broker acquired for $435 million in mid 2004. In December, Google pays $1 billion for a 5 percent stake in AOL.
THE NEW GAME BOYS
May 12--Microsoft unveils plans for its Xbox 360 game console, but the real winner is IBM. Big Blue inked deals to supply the chips that run not just the Xbox but also next-generation consoles due this year from Nintendo and Sony. The trifecta, which market research firm iSuppli says will generate annual sales of $1.2 billion for IBM, establishes IBM as a new heavyweight in consumer electronics.
A REAL WAL-BUSTER
May 19--Wal-Mart says it will shut down its online DVD-rental business and refer its customers to Netflix. The once-threatened startup adds 1.5 million new subscribers over the course of the year, bringing its total to more than 4 million. Rival Blockbuster remains stalled at 1 million online subscribers.
DESPERATE NO MORE
May 31--ABC announces that advance ad sales for the upcoming season netted $2.1 billion--a remarkable 31 percent jump from 2004, proving that new shows like Desperate Housewives and Lost, which hew closely to HBO's formula for complex and addictive programming, can make network TV feel like a must-see event.
THE MACINTEL IS BORN
June 6--Apple dumps IBM to embrace Intel as the chief supplier of chips for its Macs. Apple gets to exploit Intel's technical know-how and reliability, and Intel gets a primo role in the consumer electronics wars after losing the gaming console biz to IBM.
WANT FRIES WITH THAT FLICK?
June 13--Fast-food giant McDonald's commits to the home video rental business following a yearlong test in Denver. Video Business reports that the $1-a-night rentals, available at more than 800 McDonald's in six regions, boost revenues by an average of 5 percent per outlet.
ALL ABOUT EYEBALLS
July 18--Rupert Murdoch's News Corp. buys Intermix Media, parent of the hot social-networking startup MySpace.com, for $580 million. The deal gives News Corp. the Web's fourth-most-viewed website (ahead of No. 6 Google) and some of the most valuable online ad inventory on the market.
ABOVE THE STRIKE ZONE
Aug. 21--When union mechanics for Northwest Airlines go on strike, Northwest is ready. Nearly a year before, as contract renegotiations were getting under way, the carrier began training 1,200 replacement workers to be used in case of a work stoppage. Though the strike remains unresolved through late December, Northwest's on-time flight record exceeded prestrike levels within two months.
ALL REVENUES CONSIDERED
Aug. 31--NPR becomes the first radio network to successfully exploit the podcasting craze. By offering downloadable MP3 recordings of popular shows such as All Songs Considered, the broadcaster develops a new revenue stream, thanks to a six-month sponsorship deal from Acura.
WALKING THE WALK
Sept. 1--Wal-Mart scores a PR coup by donating truckloads of badly needed supplies, as well as $17 million in cash, to Hurricane Katrina victims in Louisiana and Mississippi--several days before the Federal Emergency Management Agency mobilizes an effective response.
SMALL PACKAGE, BIG PROFIT
Sept. 5--Kraft cashes in on consumers' concerns about bulging waistlines. A year after it launched a line of portion-controlled 100-calorie snack packs, sales of the slimmed-down servings top $100 million. Kraft today expands the line to include additional cookie brands.
THIN IS THE NEW PHAT
Sept. 7--Steve Jobs unveils Apple's latest digital-music player upgrade, the iPod Nano. Citing "staggering" demand for it, Apple announces the highest earnings in company history a month later: a record fourth-quarter profit of $430 million.
Sept. 24--After developing into a Category 5 hurricane in the Gulf of Mexico, Hurricane Rita takes the smartest right turn of the year, swerving to the north shortly before making landfall. Damage to critical oil and natural-gas refineries around Houston and Galveston proves less severe than expected. Despite fears of skyrocketing prices, oil remains stable at $65 per barrel.
Sept. 27--America West and bankrupt US Airways merge, creating the nation's fifth-largest carrier. The new airline, which operates as US Airways, will generate cost savings of $600 million annually. Wall Street applauds: Shares in the new US Airways are up more than 70 percent.
Oct. 3--As Ford releases its sales report for the first nine months, its revamped Mustang stands out as one of the No. 2 automaker's few bright spots. With the car's base model starting at less than $20,000 and its aggressive design reminiscent of Steve McQueen's ride in the movie Bullitt, Ford sells nearly 130,000 Mustangs through September--a 36 percent jump over 2004.
THE PUCK STOPS HERE
Oct. 5--Cable broadcaster Outdoor Life Network--best known for its Tour de France coverage--televises its first National Hockey League game as part of a three-year deal valued at $200 million. During the first two months of the season, OLN's ratings increase 100 percent over the same period in 2004.
Oct. 18--Wells Fargo announces record quarterly profits, driven by a 51 percent increase in new home loans. The spike comes a year after Wells, the nation's fifth-largest bank, said it would double its retail loan staff even as competitors like Washington Mutual shed workers amid rising interest rates. As the housing boom continues in '05, Wells sees its bet pay off.
Nov. 2--The FDA approves Genentech's Tarceva for treating late-stage pancreatic cancer, while seven of the company's other drugs clear phase 3 trials during the year. Genentech's fat pipeline hints at a windfall to follow: The stock price doubles in 2005, with earnings up 56 percent in the most recent quarter.
OLD DOG, NEW TRICK
Nov. 10--Warner Music Group becomes one of the first big publishers to establish an Internet-only label. Warner's Cordless Recordings unit signals a long-overdue rethinking of the industry's business model: Instead of focusing on albums, Cordless will release new artists' music in "clusters" of three or four songs via sites such as iTunes and Yahoo Music.
P2P FOR YOU AND ME
Nov. 22--Unlike the recording industry, which tried (and failed) to sue digital file-sharing technology out of existence, Hollywood adopts a more pragmatic stance by announcing plans to collaborate with the creators of the BitTorrent peer-to-peer network. In return for opening negotiations on systems to allow legal movie downloads, BitTorrent agrees to go legit, removing links leading to pirated content owned by studios that are members of the Motion Picture Association of America.
BUY BEFORE THE BOOM
Dec. 1--New data shows St. George, Utah, enjoyed the fourth-highest home price gains in the U.S. Several big homebuilders pulled out of Utah years ago, but local SunRiver St. George Development and Arizona-based SunCor saw the potential in St. George, which is just two hours from Las Vegas.
GAMING TO GO
Dec. 8--Electronic Arts, the world's largest videogame publisher, agrees to pay $680 million for Jamdat, the biggest maker of games for mobile phones. The U.S. market is expected to reach $2.1 billion in three years--and Jamdat currently publishes six of the 10 most popular titles. Jamdat CEO Mitch Lasky agrees to stay on to run EA's fledgling cell-phone business.