Category: Big Business

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Without Portfolio

Portfolio magazine, Condé Nast’s big business magazine, closed down today. Because it’s Condé Nast and because it was all about big money, people keep talking up the purported $100 million (or is that $150 million?) that was spent on this mag for fewer than two years of existence.

Anyway, everybody’s got some sort of post-mortem about it: Daniel Gross, Jon Fine, Megan McArdle, a former staffer. My two cents: they were stupid to launch a mass-market publication about unphotogenic finance wonks at a time when print is dying. I don’t think Condé likes the internet, because ads for luxury brands don’t look good on a computer screen, so they were stuck trying to sell luxury companies big money ads in a recession.

Maybe they’ll finally come around and support my magazine about comic books, basketball, and gin, especially since I don’t need $100 million to launch it. I could probably get by with $30 or $40 million.

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Save Our Newspapers!

. . . Otherwise, where will we get such awesome journalism as this NYTimes article about how male movie actors are getting fat as they get older?

A scene from the new journalistic thriller “State of Play” says it all.

Jeff Daniels, as the politician George Fergus, squares off with Russell Crowe, as the pen-wielding journalist Cal McAffrey.

Two men. One notebook. Four chins.

Hollywood’s pool of leading men is getting larger — and not necessarily in a good way.

The best part — and there are plenty of good parts, including the bit about how today’s aging male leads might be thinner if they just smoked cigarettes, like Humphrey Bogart (dead at 57 from throat cancer), Clark Gable (dead at 59 from a sudden heart attack), and James Stewart (dead at 264 from being a nice guy) — is that the article ends by treating an utterly implausible quote for a Hollywood PR rep at face value!

[Russell Crowe] might want to get some diet advice from Jason Segel.

Mr. Segel, 29, was fairly hefty in “I Love You, Man,” a comedy released by Paramount Pictures and DreamWorks in March. But his face looked surprisingly thin on billboards advertising the film.

The advertising photos were done some weeks after the film shoot, with a slimmer Mr. Segel, said Katie Martin Kelley, a publicity executive with Paramount. “There was no retouching done,” Ms. Kelley said.

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What’s the worst that could happen?

Bob: Our big biotech industry conference always attracts waves of moonbat-crazy protesters. Remember that time in San Francisco when they wore riot gear, dived under the buses that were carrying attendees to the convention center, and screamed at attendees with bullhorns?

Irv: Sure! And what about the time the policeman had a fatal heart attack during protests in Philadelphia? That was terrible! I hope nothing like that happens again!

Oscar: Hey, guys! I just invited Karl Rove to speak on a panel at this year’s conference!

(I’m thinking of making this an occasional series, too. Maybe enough wrong-ass stuff will crop up every week that I can justify making it my Thursday post. My big decision: do I keep it as “What’s the worst that could happen?” or relaunch it as “I see nothing that could go wrong with this plan!”)

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Opening Foreclosing Day!

During his playing days, former MLBer and steroid abuser Lenny Dykstra explained to a writer that he was totally unwilling to read, for fear it would affect his batting eye. This reached the point where he wouldn’t even look at road signs (presumably, while he was being driven somewhere). So when my boss, a huge Mets fan, said to me about a year ago, “I saw this thing on Lenny Dykstra on HBO Real Sports last night. He’s a financial genius!”, I was more than a little skeptical. After all, last I’d heard about Dykstra, he was running a car wash in California and getting cleared of charges that he was sexually harassing a 17-year-old employee. All of a sudden, he was a stock wiz and the publisher of a magazine for rich athletes.

I concluded that you couldn’t find a bigger sign that we were in a financial bubble than the hyping of Lenny Dykstra as a stock-picking savant.

(Another big sign of that bubble was the New Yorker deciding to commission a lengthy profile on Dykstra around this time. Interestingly, they seemed to choose a writer who doesn’t know much about baseball or finance. Maybe he’s a car wash expert. I can’t find any references to this article in the magazine’s coverage of the global finance collapse and the media’s role in hyping easy money.)

Here’s some of that Real Sports segment:

You’d think Jon Stewart would’ve picked this clip as part of his Jim Cramer beatdown-montage. To quote Mr. Cramer, “I think people don’t think of Lenny as sophisticated. But I am telling you, Bernie, that not only is he sophisticated, but he’s one of the great ones in this business. He’s one of the great ones.”

So how’s that financial empire doing now? Well, the NYPost has just coined the name “Lienny Dykstra,” on account of his default on his $12 million mortgage.

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Too Big To Fail?

Here’s my From the Editor column from the March issue of my magazine. Enjoy:

Too Big To Fail?

The pharmaceutical industry is experiencing a deepening productivity crisis. The industry’s preferred escape mechanism from this predicament has been to increase investment in current business activities — primarily R&D and sales — to sustain productivity levels or, ideally, to exploit economies of scale. This has been implemented through organic growth of critical resources and/or M&A. The fact that productivity continues to decline after a decade of vigorous growth in investment levels, and against a background of increasing company size, bears testament to the fallibility of this strategy.

We published those words in the June 2002 issue of Contract Pharma, in an article called Networked Pharma, by Jennifer Coe of Datamonitor, which discussed “innovative strategies to overcome margin deterioration.” I cited the passage above in that issue’s From the Editor page, as I argued that “economies of scale” shouldn’t be a compelling reason for $10+ billion companies to acquire $8 billion companies.

A month later, Pfizer bought Pharmacia for $60 billion.

Almost seven years later, the industry is still experiencing that productivity crisis. And Pfizer just bid $68 billion for Wyeth.

I admit that I was naïve in the ways of business and industry back in 2002, but I have to say that my opinions on mega-mergers haven’t changed much. As I wrote then:

My problem with mega-mergers is that, after the pipeline has been temporarily sated (although it remains to be seen whether the original problems with the pipeline are going to crop up again), the buying company is left to integrate tens of thousands of workers, reprioritize drugs in development by both firms, and meet unrealistic sales and savings projections. Typically, this last part is only accomplished by jettisoning a portion of those thousands of workers, creating more short-term disarray.

Sure, it’s possible that the Pharmacia deal would have worked out for Pfizer had Cox-2 inhibitors (like Celebrex and Bextra) not been hammered by Merck’s Vioxx withdrawal, but we can’t prove a counterfactual.

So now, as every major pharma company is slimming down, reducing salesforce, closing or selling off manufacturing sites and shuttering labs, the industry’s biggest player is doubling down by acquiring a competitor that has strengths in small molecule R&D, vaccines/biologics and consumer health, but also faces patent expirations and an R&D slowdown of its own.

There’s been plenty of speculation from analysts and industry figures as to why Pfizer chose to pursue this type of deal, rather than going after small biopharmas and tech-based startups. Is it for the R&D model, the current revenues, the vaccines, the lower-margin-but-more-consistent consumer business? Is it to achieve even greater size? Frankly, I can’t see much value in being able to say, “We’re #1!” at a time when “too big to fail” has become an epithet.

In the acquisition announcement, Pfizer stated, “It is expected that no drug will account for more than 10% of the combined company’s revenue in 2012.” Given that Lipitor, which currently accounts for 25% of Pfizer’s sales, will be falling off the board by 2011, it’s possible they could have achieved this goal without adding Wyeth’s roster of products.

A lot of things have changed since 2002, but I still think that mega-consolidation — in any industry — rapidly transitions from “too big to fail” to “too big to succeed.”

—Gil Y. Roth