The Next New Thing? The Old Economy

Remember the stocks Mom and Dad used to buy? Well, they’re back. Last week more technology firms were booted from London’s prestigious FTSE 100 index of the top 100 stocks. Now only one pure technology company, Sage, is left on the index, and the rest have been replaced by the “old economy” companies that make and distribute the things we eat, drink, and wear. While information technology and hardware have become the worst performing sectors on the market this year — the capitalization of software companies has fallen by an average of 39% — old economy stocks have quietly lasted out the boom and bust and are now reaping the benefits. But these companies didn’t emerge unchanged, notes Anthony Habgood, executive chairman of Bunzl, a paper distributor and maker of cigarette filters that moved into the FTSE 100 last week. “We took a very pragmatic view with respect to the use of new technology, as indeed have a lot of manufacturing companies,” he says, and this has transformed the way they interact with customers. It also brought gains in productivity, helping Bunzl manage double digit growth through the tech boom and increase profits 13% last year. As once-fashionable tech companies like Logica stumble and telecoms like Marconi wallow, investors continue rediscovering the old companies that used technology as a tool rather than making it a business in itself. Mom and Dad would be proud.

THE SINGLE CURRENCY
Murdoch Says the Euro is a No No
Just when Tony Blair thought it was safe to go back in the euro waters, one of the world’s most powerful media moguls has attacked Britain’s possible entry into the single European currency. In a rare interview with the Financial Times, Rupert Murdoch signaled that he would use his media empire — which includes 33% of Britain’s readership plus Sky Broadcasting — to send a message of “vote no” on a euro referendum. “The central issue,” said Murdoch, “is one of sovereignty,” which must be precisely what Prime Minister Blair is thinking as he evaluates this new challenge to his Labour government’s control by an Australian-born U.S. citizen. Labour has long courted Murdoch, winning endorsements from some of his papers before the last two elections. A new bill that freed Murdoch to buy terrestrial television station Channel 5 was seen by some as a sweetener to get Murdoch’s support, or at least neutrality, when the government announces its decision on euro entry by June 2003. If so, it was only sweet enough to make Murdoch hungry for a fight.

THE BOURSE
Buy Buy Britney
German group Bertelsmann is paying about $3 billion for Zomba Music. The label, which owns acts like Britney Spears, exercised a “put” option that forced Bertelsmann to buy.

Jacking Up Fiat
Signaling major restructuring ahead, Fiat CEO Paolo Cantarella resigned. He was replaced by Paolo Fresco, who learned his management style under Jack Welch at General Electric.

No Trade Is An Island
Instinet, a unit of British media group Reuters, will buy rival electronic-trading firm Island for $508 million in stock. The deal combines NASDAQ’s two biggest rivals.

French Attack
Shares in MobilCom fell 46% to ?7.25 when France Telecom said it was severing relations with the German phone operator for refusing to dismiss CEO Gerhard Schmid.

INDICATORS
A Toast With The Most
Scotland may not have made it to the World Cup, but they are there in spirit. Gains in South Korea and Japan helped Scotch whisky become the world’s most widely exported liquor, breaking the billion-bottle mark as the market grew 6.4% to $3.4 billion. Take that, England.

Consignia Consigned
After nearly two years and 2 million dollars, Consignia — the meaningless word used to rebrand Britain’s Post Office — is being returned to sender. The much-maligned name will be replaced by the traditional Royal Mail, a bargain at $1.4 million.

Making Payment Count
George Soros, the financier, launched a campaign to prevent billions of dollars of oil and mining payments from being stolen in developing countries each year. The campaign will push for increased transparency on royalty payments.

The Rating Game
Goldman Sachs became the first major bank to contest the downgrades of Japan’s credit rating by Moody’s, Fitch and Standard & Poor’s. Goldman Sachs said Japan is not a default risk and deserves an Aaa rating instead of A2, which places it below Botswana.

BOTTOM LINES
“A hedgehog could have crossed any major road in relative safety.”

Rob Maynard, Royal Automobile Club spokesman, on the absence of a rush hour during England’s early-morning Nigeria match “The problem I have is not firepower, it is a shortage of targets.”
Nani Beccalli, GE Europe CEO, on the company’s desire to buy European companies

“You’re worse than politicians.”
Tom McNally, member of Britain’s House of Lords, on cable executives’ evasive answers during hearings on a communications bill