Features

Pharmaceutical platoon

National | Drug firms join the terrorism fight, AOL Time Warner bows to China, Dell takes low-price computing lower

Issue: "Homeland insecurity," Nov. 10, 2001

Chemical warriors
Pharmaceutical companies are enlisting early in the fight against terrorism. GlaxoSmithKline, Bristol-Meyers Squibb, and Johnson & Johnson last month announced that they will offer antibiotics free to the U.S. government if authorities approve the drugs for the treatment of anthrax. In exchange for the free medications, the firms also want the right to market to the general public their drugs as anthrax antidotes. Abbott Laboratories, Pfizer, and Pharmacia offered antibiotics to the government without conditions, although they, too, have asked permission to label their products as anthrax treatments. Meanwhile, some pharmaceutical firms are watching the U.S. government warily. Industry executives worry that negotiations on smallpox vaccine production could become a public debate in which manufacturers who would profit from such development are cast as villains. Since critics often paint the pharmaceutical industry as greed-driven, analysts say developers fighting bioterror should tread the profit motive lightly. So far the major vaccine manufacturers-Merck & Co., American Home Products Corp., GlaxoSmithKline PLC, and Aventis SA-have stressed patriotic or moral motives, saying they are prepared to answer a government call to develop smallpox vaccine. Market-savvy morality
AOL Time Warner has agreed to keep all sex and violence out of its programming-but only for its viewers in southern China. Late last month the company became the first foreign broadcaster to win cable television distribution rights in that country. Under an agreement with the Chinese government, AOL Time Warner will expand and retool its recently acquired channel Chinese Entertainment Television (CET), updating existing stodgy fare with edgier-but squeaky clean-programming. CET's new lineup will include game shows, dramas, and sitcoms stripped, by government decree, of the sex and violence that mark much of AOL Time Warner's American programming. Critics of the deal say the firm should mind morals in its own backyard before venturing overseas. "It's interesting that AOL Time Warner should show so much concern about offending political, cultural, and social norms in China, and so little about norms in America," said Melissa Caldwell, director of research and publications at Parents Television Council in Alexandria, Va. Ms. Caldwell points to recent surveys showing that up to 98 percent of Americans believe there is too much sexual content on television: "Yet AOL Time Warner continues to produce such shows as Sex in the City, and other fairly explicit programs for American audiences." Financial experts say the media conglomerate made a savvy deal: "It gives them a chance to prove they are responsible and trustworthy," Goldman Sachs media analyst James Mitchell told The New York Times. "That puts them ahead of Viacom and Disney when the [Chinese] market opens further." This proves, for AOL Time Warner at least, that the profit motive may lead to responsible behavior even when common decency doesn't. Knock yourself out
The top gun in the foundering PC industry may be zeroing in for the kill. Dell Computer Corp., the Austin, Texas-based firm that climbed to the top of the business over old war horses like IBM, Hewlett-Packard, and even the more nimble Gateway, last week unveiled its latest weapon: a pre-built home computer priced at less than $600. That's bad news for other players in an industry suffering through sluggish sales. Dell's bargain-basement entrant marks its second attempt to lure customers from retail stores to its direct-sales model. If consumers bite, store sales could fall further into the basement. In the first week following the Sept. 11 attacks, sales were off 50 percent over the same period last year, and the securities firm UBS Warburg projects an overall 10 percent loss this year compared with 2000. Such numbers are sobering for PC makers used to the buoyant late 1990s, when home PC sales climbed 25 percent each year. But analysts say Dell's strategy is risky. Today, nearly two-thirds of American homes have a PC, leading many observers to conclude that anyone who really wants a computer already has one. That means the industry's growth is more about replacement buying-or buying a second PC for the kids-than new sales. That buying pattern could hurt Dell's main profit center-direct sales of high-end custom-built computers.

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