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From the April 27, 1998, Washington Post
Developments: Continuing the trend it started in 1996, change is the main dish being served up at McDonald's. Last year the nation's largest fast-food chain attempted to regain a portion of its shrinking market by launching the Arch Deluxe line of sandwiches. Aimed at adults, the effort quickly burned up.
Next, McDonald's tried to jump on the retro bandwagon by offering 55-cent sandwiches. That too fizzled, and in June the company scrapped the plan under pressure from franchisees and the reality that the campaign had failed.
So in March, McDonald's offered up its latest attempt at luring customers. The company announced initiatives to improve restaurant operations, enhance returns and lower costs. The steps include the introduction of a new food preparation system for all domestic restaurants, a new financing approach to increase returns for owners and operators and plans to reorganize the corporate staff.
The centerpiece of the new initiatives is the food preparation system, dubbed "Made for You." It is designed to markedly expedite the time between ordering and receiving food, while also delivering it hotter and fresher. McDonald's expects the system to be in all its outlets by the end of next year.
The series of marketing flubs also led to a major reorganization of management. In July the company announced that Edward H. Rensi, president and chief executive of domestic operations, would retire immediately. No direct replacement was named for Rensi, but his duties fell to Jack M. Greenberg, who was appointed chairman of McDonald's USA in October 1996. A handful of other top executives also left the company. The former managers were replaced by five divisional presidents and management teams that report to Greenberg.
Developments: Bell Atlantic continued its metamorphosis in 1997. On Aug. 14, the company completed its long-anticipated merger with Nynex Corp., creating the world's second-largest telecommunications company, behind AT&T Corp. The new company, which retains the Bell Atlantic name, controls 40 million domestic access lines and has more than six million wireless customers.
Moreover, the merger gives the company a firm foothold in the highly coveted and potentially lucrative northeastern markets. This complements Bell Atlantic's already strong presence in the mid-Atlantic region, stretching the company from Virginia to Maine. These regions are vital to Bell Atlantic's push to be a long-distance carrier as about 45 percent of the nation's long-distance calls are made along the Atlantic coast.
As the new Bell Atlantic gains a grip in the long-distance market, the FCC is pushing for it to loosen its monopoly on local service. On July 19, Bell Atlantic and Nynex agreed to provisions the FCC says will make it easier for traditional long-distance carriers, such as AT&T, to begin offering local service. But in approving the merger a month later, the agency also called on Congress to expand its powers and force Bell Atlantic to move faster.
Nonetheless, the company's bottom line also grew last year. Revenue for the company edged up slightly to $30.2 billion, compared with $29 billion in 1996. Adjusted net income was $3.8 billion in 1997, an 8 percent increase from its $3.5 billion in 1996.
Developments: Last year was a mixed bag for Safeway in the Washington region. The supermarket chain broke ground on an $85 million warehouse distribution center in Prince George's County. The center is designed to expedite regional distribution and allow the company to open more stores in the area in the near future.
In the past few months, however, Safeway has reduced its presence in the local market. In December, the company announced the closing of its 21st and L streets NW location, only a few months after closing another store in Van Ness. The size of both stores -- roughly 10,000 square feet -- prevented them from generating large profits. The closings also continue the company's movement away from small, urban stores toward larger outlets. The majority of their new stores, including one in Southeast, are in excess of 50,000 square feet.
Despite the reduction, Safeway maintained its status as the area's No. 2 supermarket chain and increased its market share to 27.5 percent, up from 27.1 percent in 1996.
There also was a shake-up at corporate headquarters as Peter A. Magowan, chairman of the board of directors, announced his retirement on March 11. Magowan, who officially will relinquish his role next month, has been with the company for 30 years and has been chairman since 1980. He will be succeeded by Steven A. Burd, president and chief executive.
Developments: The major news for May this year came from the executive suite. On Jan. 14 David C. Farrell, 64, who has been the company's chairman and chief executive since 1985, announced his retirement. Farrell will step down officially at the end of this month.
When Farrell started, May controlled 103 department stores with revenue of $1.7 billion. The company now runs 369 stores across the country with revenue of $12.5 billion, making it the nation's second largest operator of department stores.
Also in January the company announced that two longtime May executives would move into the roles vacated by Farrell. Eugene S. Kahn, who is May's executive vice chairman and previously had been CEO of the Filene's division, will become president and chief executive. Jerome T. Loeb, who has been with the company since 1964, will be the chairman of the board.
Last year the company announced an aggressive plan to invest $3.4 billion over the next five years to open 100 new stores, remodel 100 existing stores and enhance distribution systems. As part of the expansion, the company opened four new Lord & Taylor stores and one Strawbridge's last year, though none was in the Washington area.
The company also announced a $650 million stock repurchase plan designed to increase shareholder value. The most recent plan continues a three-year effort that started with a $600 million repurchase in 1997 and $300 million May bought back in 1996.
Developments: In February Computer Sciences' world was temporarily turned upside down following a $9.8 billion takeover offer from Computer Associates International Inc. Wanting no part of the deal, Computer Sciences quickly turned down the proposal. But the Islandia, N.Y.-based company was not dissuaded and proceeded with a hostile takeover bid.
The fracas soon turned ugly amid suits, countersuits, reports of racism and bitterness between the company leaders. At the center of the battle was Computer Sciences' chief executive Van B. Honeycutt's contention that the close ties of Computer Associates and its chief executive Charles B. Wang to the Chinese government would conflict with the company's contracts with U.S. intelligence agencies. Wang called this statement "racist, sick and ugly" and acknowledged that it helped precipitate the ultimate withdrawal of his company's offer, which came on March 16.
Still, the fate of Computer Sciences is unsettled. Despite the expiration of the takeover bid, dissident shareholder Guy Wyser-Pratte filed a court motion in Nevada asking for the takeover hearing to proceed. Wyser-Pratte runs an investment firm that controls 400,000 shares of CSC stock. For its part, Computer Associates maintains that it no longer has an interest in CSC.
Developments: A year after President Alex J. Mandl left AT&T, the company found itself looking for a new chairman and chief executive in the wake of the resignation of Robert E. Allen.
In October, the company tapped C. Michael Armstrong to be Allen's successor. The appointment of the former CEO of Hughes Electronics Inc. was received positively by Wall Street. AT&T Vice Chairman John D. Zeglis was named president and chief operating officer.
Armstrong wasted little time mapping out his future vision of the company, which has been in flux and has been trying to carve out its role in the reshaped telecommunications industry for the past few years. In January, the new top man outlined a plan to cut from 15,000 to 18,000 jobs, launch a new Internet telephone service and renew focus on the local telephone and business communications markets.
The most recent job cuts come on the heels of a similar payroll reduction in 1996, but nearly two-thirds of the current round of reductions will come from voluntary departures. Dubbed "WorldNet Voice," the Internet telephone service routes calls through the Internet rather than telephone circuits. Callers would have to dial up to 32 numbers for a state-to-state call, but the rate would be as low as 7.5 cents per minute.
AT&T also acquired Teleport Communications Group. The $11.3 billion deal gives the long distance carrier a competitive presence in the local phone market.
Developments: Through mergers and acquisitions, Raytheon reshaped itself last year.
In July, the company completed its $2.9 billion acquisition of Texas Instruments' defense business. The deal markedly augmented Raytheon's missile and radar operations.
In December the company took its next big step, as it completed its $9.5 billion merger with Hughes Aircraft Co. The merger created the nation's third-largest defense contractor, trailing only Lockheed Martin Corp. and Boeing Co. Some of the new company's signature products are the Patriot and Sidewinder missiles.
In conjunction with the acquisition and merger, the company announced the formation of Raytheon Systems Co., which will be headquartered in the Washington area and will include the Hughes defense operations and other Raytheon outlets. The systems wing of Raytheon is expected to account for about 70 percent of the company's total sales and employ more than two-thirds of its employees, though only a fraction of those will be in the Washington area.
To run the new entity, Raytheon tapped William H. Swanson, who had been in charge of the company's Electronic Systems operation. Ken C. Dahlberg, former senior vice president of Hughes, also will have a leading role.
Raytheon's simulator facility in Herndon, formerly operated by Hughes, will be phased out as part of the merger. Four hundred local jobs will be lost and the positions will be switched to sights in Texas and New York. In January Raytheon announced company-wide layoffs totaling 8,700 workers over the next two years.
Developments: It was a tumultuous year for the package delivery giant. In August, about 170,000 unionized UPS employees walked out demanding higher wages and better jobs. The massive strike dragged on for 16 days, considerably diminishing UPS's bottom line and public stature.
During the strike, the vans, trucks and planes of the 90-year-old delivery service grounded to a halt, costing the company about $300 million per week. Those losses showed up at the end of the year as the company's revenue was $22.5 billion, about the same as last year. Net income, however, dropped from $1.2 billion in 1996 to $909 million last year.
When a deal finally was struck, workers won substantial pay increases, improved pension benefits and were promised 10,000 new full-time jobs over the next five years. The accord was widely viewed as a victory for the Teamsters Union and ostensibly workers everywhere, as UPS met union demands for creating full-time, rather than part-time, positions and agreed to leave the pension plans in the hands of the union.
UPS avoided another strike in January when it reached an agreement with the union that represents its 2,100 pilots. This time the company won concessions, as the Independent Pilots Association gave up its fight to achieve wage parity with the rest of the airline industry and instead settled on a contract that fell in line with pilots within the air package-delivery business.
Developments: The Ohio-based company dramatically increased its presence in the Washington region last year with the $1 billion purchase of McLean-based BDM International Inc. The acquisition, which formally went through on Dec. 24, expands the scope of the space and automotive giant's business to include information technology.
The union of the two companies is a good match as contractors such as TRW need technology firms to cement their place in the changing federal market. BDM also has a lucrative contract with a German carmaker that is a strong fit with TRW's core business. In February, the company named Philip A. Odeen to executive vice president and general manager of the systems and information technology group, the branch that formally was BDM.
In December, TRW secured its most lucrative contract of the year, the Intercontinental Ballistic Missile program run by the Air Force. The deal is for one year and is worth $84.9 million, but it includes 14 one-year options that run through 2012 and could bring the total amount to $3.4 billion.
But all the news wasn't positive for TRW last year. Former manager Richard Bagley filed suit against the company alleging that its space and technology division defrauded the government of more than $50 million. The Justice Department added its name to the lawsuit in February. TRW stated that it "strongly disagrees" with the allegations and is fighting the suit.
Developments: EDS continued its steady growth last year with a handful of acquisitions and a number of lucrative contracts. Last April, the company won a five-year $350 million contract with the Department of Energy to streamline its nationwide telecommunication integration services (TELIS). It marked the first outsourcing of a TELIS contract by a government agency. The contract is a major boon for local workers as the bulk of the work will be handled by its area government services divisions.
EDS also is capitalizing on the Year 2000 problem. The company signed contracts totaling more than $125 million to fix the "millennium bug" at companies. In accordance with these deals, EDS announced it will add 500 new jobs over the next few months.
Major acquisitions for the company included SOLCORP, an insurance software and consulting services provider based in Toronto. The deal gives the company an increased toehold in the insurance consulting industry, particularly in Britain and Australia.
In July the company also expanded overseas by picking up Citymax, a financial services subsidiary of the Credit Suisse Group. The move increases EDS's presence in the global securities industry, which the company sees as a major growth area.
© Copyright 1998 The Washington Post Company