Fast Talk: One Shrewd Move

It’s easy to look smart when times are good. What separates winners from losers are the moves their leaders make when times are hard. Six CEOs explain their shrewdest move of 2002.


William T. Esrey

Chairman and CEO, Sprint
Overland Park, Kansas

After Enron, but before WorldCom and Adelphia, the financial markets started putting pressure on the commercial paper of even the biggest companies in the country. [Commercial paper is unsecured debt issued by companies to finance their short-term-credit needs.] Sprint had $3.5 billion of commercial paper outstanding, and in February, we decided to pursue long-term financing on about $2 billion of that amount. When we went to the market, we had the opportunity to do not just $2 billion, but $5 billion. We took that opportunity and got out of the commercial-paper market altogether.


Thank goodness we did. The financial markets continued to erode, and the cost of financing in the telecom industry shot up — for companies who could get financing in the first place. Had we waited just a little bit longer, it would have been much more expensive. There’s a question of whether we could have done it at all.

Investors just don’t want to touch this industry right now. That will change, and the financial markets will see that communications is fundamental to the economy, with solid companies, solid products, and good customers. In the meantime, we don’t have to go back to the financing table for years. That move — whether it was lucky or smart — was one of the best that we made this year.

William T. Esrey became CEO of Sprint in 1985. He spearheaded the company’s entry into the long-distance telephone market in 1984, as well as its construction of the nation’s first all-digital fiber-optic network and the first nationwide wireless personal-communications network (PCS) in 1994. Sprint launched PCS Vision in August 2002, making it the first U.S. wireless carrier to launch a nationwide 3G network.


Scott McNealy

Chairman, President, and CEO
Sun Microsystems
Santa Clara, California

Our shrewdest move was not overreacting to the bubble or to the bust. We monetized the bubble. We put a lot of money in the bank. We didn’t make huge acquisitions in markets that we knew nothing about. We didn’t extend ourselves by borrowing money that we didn’t need. Instead, we put away billions of dollars for a rainy day. Now it’s raining — and for longer than a day.

Because we were smart then, we don’t have to make dumb moves today. During the past nine months, we’ve gained more share from IBM and HP than in any other nine months in the company’s history. Also, we’ve been able to protect our R&D investment. We didn’t have to slash and burn like other companies, and we’re still spending roughly $2 billion on R&D annually.

Maintaining that commitment to innovation is critical: 80% to 85% of the stuff in our pipeline is less than a year old. It’s vital for us to keep rethinking, reenergizing, even cannibalizing our product line. Cutting off that development would be like Budweiser running out of beer.


Scott McNealy cofounded Sun Microsystems in 1982 and has been CEO since 1984.

Julia Stewart

President and CEO IHOP Corp.
Glendale, California

My wisest move — and I’d recommend this to any new CEO — was spending my first year getting acquainted with our brand and the people behind it. I have 365 franchisees, nearly 1,100 restaurants, 300 corporate employees, and more than 40,000 people. I’m visiting as many restaurants as I can. In our revitalization effort, I’m working to involve everyone: general managers, corporate employees, the executive team, the board of directors, but most of all the franchisees.

I’m also going from region to region with a small group of franchisees. I make it a point to cook and wait on tables, to spend time “in the back of the house” with the folks who do the work every day. I’ve learned so much. More than anything, I’ve learned how strongly our customers and our employees feel about this brand. People love the fact that they’ve had the same server for 18 years. There are plenty of things that we can do better: new foods, new flavors, stronger advertising. But we are a 45-year-old American icon. We’re genuine. That’s a great strength on which to build.


Julia Stewart began her career in the food-service industry as a server at IHOP 32 years ago. She has since held executive positions at such companies as Taco Bell, Carl’s Jr., and Applebee’s. She rejoined IHOP as president in 2001 and was named CEO last May.

Jeffrey G. Katz

Chairman, president, and CEO, Orbitz Inc.
Chicago, Illinois

The travel industry is going through a deep transformation. There’s never been a time like this. The industry lost an estimated $7 billion last year, and it will lose the same this year.

When it comes to airlines, Southwest Airlines is now the competition for everyone. Lower costs are the basic goal of every airline. I like to say that we’re the Southwest of distribution: If you want access to the market at the lowest possible cost, that’s Orbitz.


At first, we aimed that promise at leisure travelers. Our smartest move this year was to launch a corporate product. We discovered that about 25% of Orbitz customers were using us for business. It was clear that we could take this great leisure model and make it work for business fliers, so we launched Orbitz for Business. We have a full-service travel agency as backup, but everything can be done online: Your assistant can book individual or group travel; the system can apply corporate discounts; itinerary dates can be sent back to the company.

Launching Orbitz for Business was a big move for us. We’ve done more than $2 billion in leisure-travel bookings, and our forecasts indicate that during the next four or five years, our business bookings will equal that of our leisure bookings. The economic environment is difficult for everyone, but it’s a great time to be an industry transformer.

Jeffrey G. Katz has been CEO of Orbitz since its founding in November 1999. The site was started by American, Continental, Delta, Northwest, and United. Prior to joining Orbitz, Katz was CEO of Swissair.


Carole Black

President and CEO
Lifetime Entertainment Services
New York, New York

It’s been a tough couple of years in the television business. For Lifetime, though, 2001 was our best year ever — and this year should top it. Our strong business performance reflects the strength of the Lifetime brand, which is a function of the loyalty of our viewers. I’m convinced that a big part of that loyalty is a response to our tradition of advocacy for women. Our mission is to entertain, support, and inform women in ways that are relevant to their lives.

Perhaps the biggest risk that we took this year — and it turned out to be the smartest move that we made — was to make a major commitment to our Stop Violence Against Women campaign. Last February, during the ratings sweep, all of our original programming addressed issues of violence against women. I warned top management that we were going to make this commitment and that we’d probably get hurt in the ratings. People use TV for escapism, and sweeps are always a tough period for cable channels, given all of the high-profile programs on the networks.

Instead, we had our best February ever. It’s just like my grandmother taught me: If you do the right thing, you’ll be rewarded. Our commitment to this kind of programming strengthened our viewers’ commitment to us.


Carole Black has been president and CEO of Lifetime Entertainment Services since March 1999. During her tenure, Lifetime Television has become the number-one-rated network among basic-cable networks in prime-time programming.

Kerry Killinger

Chairman, President, and CEO
Washington Mutual Inc.
Seattle, Washington

The smartest thing that we did was to stay focused on our long-term strategic plan, which meant growing the company when many others became conservative. Our long-term plan is to create the nation’s leading retailer of consumer financial services. We’re always designing new products and finding better ways to meet growing demand for financial services, but this year, we took three big steps toward that goal.

First, we entered the New York – New Jersey market. If we wanted to be America’s leading consumer bank, then we had to get into New York. We entered through acquisition and put a special emphasis on seeding our brand in that market and getting our new employees used to doing business the Washington Mutual way.


Second, we are now America’s leading home lender. We acquired a number of companies over the past two years to achieve this and spent this year completing the integration of those companies.

Third, I visited more than 20,000 employees. With the aftermath of September 11, this was an important year to do that. I wanted to communicate what strategies we have in place, what the core values of the company are, and what our brand stands for.

Kerry Killinger has been CEO of Washington Mutual Inc. since 1990.