Things were humming along at their usual pace inside the main terminal at the Burbank Airport on the morning of Sept. 11. Passengers hustled to boarding gates to await departures for San Jose, Oakland, Phoenix or wherever else business that day was taking them. Then terrorists roughly 3,000 miles away turned four commercial airliners into weapons of mass destruction, killing thousands in the process. A wave of mandated security measures, airline layoffs, flight cancellations and sharp declines in the number of passengers willing to travel by air quickly followed. The Burbank Airport’s governing board has shelved plans for a new terminal until the airline industry bounces back, and has sold a chunk of its adjacent property to cover a portion of its losses. Business at Burbank has slowly returned to near-normal levels, as airport Executive Director Dios Marrero recently told Business Journal reporter Jacqueline Fox. “When the terrorist attacks on the World Trade Center and the Pentagon caused the FAA to ground all aircraft, the word reached the Burbank Airport before any of our morning flights had departed. Our immediate concern was to communicate with passengers who had already arrived at the terminal of the need to cancel their travel plans and leave the airport, since it was clear air operations would not resume that day. “Surprisingly, the evacuation of the terminal facility turned out to be a very smooth process. Passengers who had begun boarding aircraft came back into the terminal and seemed to grasp very quickly the gravity of the situation and that there would be no air travel that day. They did not linger. They returned to their cars and left. In about an hour, the entire facility was virtually empty. “For the next several days the main task of the airport’s operations and security staff was to coordinate with the FAA, the airlines and local law enforcement agencies to ensure that new levels of security were in place. “There was also daily monitoring of unfolding events to better assess when the FAA might permit resumption of airline service and to prepare our security and operations divisions for that event. “The traveling public today is in a much more secure environment. The travel experience includes additional security measures that add steps to the processing of airline passengers. Our experience is that the airport’s customers not only accept whatever additional inconvenience this causes, but actually welcome the additional screening and visible presence of additional security personnel.”

Developers say they have no intention of postponing plans for a proposed 277-room Embassy Suites Hotel or two other major long-awaited projects in Glendale despite sharp declines in hotel occupancy rates since the Sept. 11 terrorist attacks and a downturn in the Southern California economy. Los Angeles-based Reliance Development Group and Arcadia-based Kam Sang Co. intend to construct the 41,588-square-foot hotel. The franchise of the Beverly Hills-based Hilton Hotel Corp. will have 4,000 square feet of meeting space, 2,910 square feet for food and beverage service and four levels of underground parking. The Reliance/Kam Sang development team was initially selected by Glendale officials in 1997 to build an office project on the city-owned property. But problems finding investors forced the city to consider other uses for the land, said Jeanne Armstrong, director of the city’s Department of Development Services. The Sept. 11 attacks pushed hotel occupancy rates down into the 20- and 30-percent range nationwide, forcing companies like Hilton to lay off workers, slash room rates and offer heavy promotions to weather the storm. The impact of the attacks on consumers, state budget woes resulting from the energy crisis and an economic slowdown are now expected to cut a deep swath across California’s tourist markets over the next year, threatening to further undermine the hotel industry. Ronnie Lamb, president of Kam Sang Co., said potential investors have delayed discussions on funding the Glendale project for 60 to 90 days while they see what form a market rebound will take. If entitlements are completed by Dec. 31, the project could break ground by next fall. Lamb conceded the industry has been affected by the attacks, but he pointed out that his project is an extended-stay facility and not linked to a convention center or a major tourist attraction. Consequently, he believes, funding will be obtainable and plans for the project remain on track. “What happened on Sept. 11 is hurting the tourism industry, but our statistics show us that the market for executive stay or extended stay hotels remains healthy,” said Lamb. Lamb said the price tag for the Glendale hotel is about $45 million and he expects it to be completed sometime in early 2004. Hilton spokesman Eric Jacobs said current market conditions are not expected to last long and the company has no intention of pulling out of agreements made prior to the attacks. “The developer has given us no indication of anything negative,” said Jacobs. “Nobody can tell what the future holds. But based on what you can see, we think this is a 20-week cycle. We are bullish and see this as a short-term lull.” Hilton has also just recently broken ground on two other Valley projects: Hilton Garden Inn in Calabasas and a 94-room Hampton Inn & Suites in Agoura Hills. The $7.5 million Agoura Hills project is being developed by Aberdeen, S.D.-based West Coast Developers and is expected to be completed by May 2002. According to Bruce Baltin, senior vice president with Los Angeles-based PKF Consulting, which tracks the hotel industry, the Glendale project is likely on solid ground because it is still in the land entitlement stages and because the hotel industry slump is not expected to last long. “Obviously, the events on Sept. 11 had a negative impact on the tourism industry and that hurts hotels, but all the expectations are that the market will return to normal. It always does,” said Baltin. He said Hilton’s stock price may have taken a beating in the weeks since the attacks, but its proposed projects that cater to the mid-level business traveler remain right on target. “The executive- and business-class customers haven’t stopped traveling,” said Baltin. “And they are not dependent on the tourism industry, so I wouldn’t expect Hilton’s Glendale project to be affected too much at this point in the game.” The Glendale City Council has also approved a plan by Santa Monica-based Caruso Affiliated Holdings and Foster City-based Legacy Partners for the long-awaited Glendale Town Center, a $100-million shopping center and apartment complex that would adjoin the southeastern side of the Glendale Galleria. The 15.8-acre project has been on and off the table for 15 years. Caruso’s proposal, touted as an “urban oasis,” includes 300,000 square feet of retail space, up to 500 apartments and a 1.7-acre public park, complete with fountains and communal gathering space. Previous proposals for the city-owned property included a luxury or business class hotel. Caruso’s does not. Principal Rick Caruso said he’s not concerned about current market conditions and is already getting interest from potential investors. “I’m comfortable with our plans,” said Caruso. “I think our timing is going to work out fine. We are a long-term holder and I’m not trying to time the market per se. I think if we were under construction now we might be concerned, but we’ve already had banks call us and express interest.” Los Angeles-based Roxbury Development has also been given city approval to construct the Glendale Millennium Office Tower at California Avenue and Central Boulevard. The 150,000-square-foot complex will include retail, office space and 412 parking spaces.

The wild swings in the stock market since Sept. 11 may at first glance seem to offer little direction to investors. But a closer look at the markets since they reopened on Sept. 17 shows that the hideous terrorist actions and the subsequent launch of air strikes in Afghanistan did little to stock prices that the companies’ own performance hadn’t already done. Many of the San Fernando Valley’s largest public companies recovered at least a portion of the huge losses sustained in the days immediately following Sept. 17, as have companies nationwide. But those that have made the greatest strides, in some cases surpassing their stock prices prior to the attacks, have also recorded some of the strongest financials. The stocks of those companies that performed poorly in recent quarters have not come back to the same degree, if they’ve rebounded at all. “In the research I’m dealing with, it’s definitely back to fundamentals,” said Joe Cooper, a research analyst with Thomson/First Call. “And with an even broader focus than what there had been.” Nearly all publicly held companies suffered from a broad scale sell-off that ensued when the markets reopened on Sept. 17. In one day, the Dow Jones Industrial Average lost 684.81 points, or 7.13 percent, while the Nasdaq fell 115.75 points, or 6.83 percent. Since then the markets have bounced around with dizzying intensity, rallying one day, shedding gains the next and ending the week of Oct. 8 to Oct. 12 with a 66.29 point loss for the Dow and a 1.93 gain for Nasdaq. For most companies in the Valley, an eleventh hour rally on Oct. 11 meant stocks had returned to levels close to or at their trading price on Sept. 10, only to lose steam on reports of Anthrax infections by the close of business the next day. But for a number of companies, stock prices have rebounded well, in some cases climbing to levels higher than they were prior to the attacks. Among the Valley’s largest publicly traded companies, Wellpoint Health Networks Inc., Health Net Inc. and Countrywide Credit Industries Inc. are all trading at or close to their prices prior to Sept. 11. Some are even trading higher. To some extent, analysts say, the stock performance is related to perceived strengths and weaknesses in industry sectors in general, health care and consumer staples are holding up well while entertainment and travel are not. “People get sick when the economy is booming, and they get sick when it’s bad, and that’s why the health care group is seen as a defensive-oriented earnings group,” said Patrick O’Hare, a market analyst with Briefing.com. “The same thing applies to Proctor & Gamble and Pepsi and Philip Morris. People are still going to need toilet paper and milk. It’s those types of stocks and companies that tend to outperform during economic downturns.” Shares in health care provider Wellpoint, for example, were trading at around $106 a share when the terrorists struck, only to rebound to a high of $110 on Oct. 1. Since then the stock has leveled somewhat to $105.94 on Oct. 12. Health Net has fared even better, proportionately. The stock was trading at about $18 a share, and has since climbed steadily to $20.71. Other, non-health care companies, however, have also had strong successes. The trading price of Countrywide rose from around $40 per share just before the attack to a current high of $43.35 at close of market Oct. 12. Not coincidentally, most of these firms also reported strong financial results in their most recent quarters. Wellpoint reported net earnings of $99.9 million, or $1.53 per diluted share, on revenues of $3.1 billion in its most recent quarter ended June 30. That compares with earnings of $83.6 million, or $1.30 per diluted share, on revenues of $2.2 billion for the period last year. Mortgage lender Countrywide reported net income rose to $123 million, or $1.00 per diluted share, on revenues of $684.5 million in its most recent quarter ended May 31, compared to earnings of $83.4 million, or 72 cents per diluted share, on revenues of $474.5 million in the same quarter of last year. Health Net did not follow the trend where its financials were concerned. In the company’s most recent quarter ended June 30, the company’s net loss was $14.2 million, or 12 cents per share, compared with net income of $38.6 million, or 32 cents per share, in the comparable quarter of 2000. Revenues rose 14 percent to $2.5 billion. Health Net attributed some of its earnings weakness to the sale of its Florida health plan. On the other side of the coin, the share prices of a number of companies Electro Rent Corp., Homestore.com Inc., K-Swiss Inc., Unova Inc., and Panavision Inc. among them have continued to lose ground, plummeting to levels well below their pre-Sept. 11 prices. The financial picture for these companies ranges from dismal to lackluster. Unova, which saw its stock price drop from $5.50 per share before the attacks to $3.50 when the market closed Friday, reported a loss of $12.7 million on revenues of $814.4 million compared to earnings of $15.7 million on sales of $965 million in the comparable period. At Homestore, share prices dropped from the $16 range prior to Sept. 11 to $7.95 on Oct. 12. Homestore recorded a net loss of $72 million, or 67 cents a share, on revenues of $129 million for the second quarter ended June 30, 2001, compared to a loss of $24.7 million on revenues of $50.1 million in the comparable period in 2000. Panavision, which in the second quarter was acquired by M & F; Worldwide Corp., saw improved revenues and earnings in its most recent quarter, taking into account the acquisition, but its six-month performance showed a net loss of 4 cents per share. Panavision, despite the improved performance in its most recent quarter, saw its share price drop from the $5.75 range prior to Sept. 11 to $4.65 on Oct. 12. Analysts point out that many investors are looking beyond sales and earnings to EBIDTA, debt, and other factors likely to affect a company’s performance in the near or long term. At the same time, the current climate has made safe bets out of some companies while making others appear riskier. “You look at tourism, the travel and entertainment industries have all gotten clobbered on the expectation that people are going to be less inclined to fly or go out because they’re worried about losing their jobs and terrorist actions,” said O’Hare.

Leaders of the group spearheading a Valley secession movement say a recently released plan for a breakup is merely a draft that addresses only one portion of their final proposal and that it’s too early to drive a stake through the heart of their cause. They also say the paid consultants who crafted the report rushed the findings in order to appease city officials opposed to a split. In the process, the report has created much confusion on both sides of the debate, but secessionists say revisions will be made in order to offer up a ballot initiative worthy of passage in the November 2002 election. The Draft Fiscal Analysis report, released Oct. 5 by the Local Agency Formation Commission (LAFCO), reversed the recommendations in an earlier proposal calling for a straight transfer of services and assets to a new Valley city. Instead, the plan, drafted for LAFCO by consultants from Philadelphia-based Public Financial Management (PFM), calls for the new city to contract for all municipal services except city street maintenance and give most of the $1 billion it will collect each year in revenue back to Los Angeles to cover the costs. Although the plan predicts the new Valley city would have more revenues than expenditures, it would start out with a meager $7 million surplus, which critics say isn’t enough of a cushion in times of economic uncertainty or in the case of a fiscal emergency. Richard Close, chairman of Valley VOTE, the group pushing for Valley cityhood, insisted last week that LAFCO’s latest blueprint for a breakup wasn’t supposed to tackle the issue of city assets. Close said LAFCO’s next step is to prepare the “terms and conditions,” which will describe which assets the new Valley city would either control outright or contract for. “The consultants have always assumed that there would be a division of assets,” said Close. “This is just a draft proposal of an economic analysis. In the meantime, we have met the test for a ballot initiative.” Keith Curry, managing director for PFM, agreed the report has been severely misinterpreted as a final proposal for a breakup. He said this plan gives secessionists the best opportunity to set up an independent city first, then go back and deal with complicated infrastructure questions later. Curry also said, though his firm would be involved in drafting the final “terms and conditions” that will address the transfer of assets, direction for that will come straight from LAFCO. “We didn’t include the discussion of city assets because we would have had to make judgements about assets that are really the jurisdiction of LAFCO,” said Curry. “We have no objection to the transfer of assets and the only reason they aren’t here in this report is because they are not needed for our recent report to work.” But William Powers, an attorney and Valley VOTE board member, said the consultants failed to present their findings clearly and appear to have caved into challenges posed in the city’s recently released response to the Initial Fiscal Analysis, which LAFCO submitted in June. “What happened was the consultants kind of threw a curve to everybody,” said Powers. “I think they got intimidated by city officials, so in terms of doing a complete job, they didn’t. But we have every confidence after hearings and after LAFCO’s final evaluations of assets, the final draft will contain elements of a meaningful ballot proposition.” Confused? You’re not alone. Roughly 250 residents and city officials turned up Thursday for the first of six public hearings on secession at Los Angeles Valley College, and many expressed concerns about the murkiness of the report and what the consultants would be coming up with next. Even City Councilwoman and LAFCO Commission Member Cindy Miscikowski agreed prior to the meeting that the latest report was raising eyebrows and furrowing brows all over city hall. “I do know that this report has surely taken almost all LAFCO board members by surprise,” said Miscikowski, a staunch secession opponent. “It’s kind of like they just threw this out there.” But the subtext is a question of fiscal survival: Can a fledgling city of 1.4 million people get the services it deserves on such a meager surplus during a time of war, potential state budget cuts and gloomy forecasts for a downturn in the region’s tourism markets? “Clearly $7 million seems to me to be a pittance,” said Robert M. Stern, president of the Los Angeles-based Center for Governmental Studies. “And unfortunately, given the state of the economy and the prospect of an emergency, such as a major earthquake, this (report) puts a real question mark out there as to whether they should be proceeding at this time.” But Close argued that the Valley’s equity in city assets would mitigate those concerns. “We have $1 billion a year to operate, plus we would have the existing Valley assets to work with,” he said. Close said he didn’t know if LAFCO would also recommend the new city share services based in Los Angeles, such as LAX and the port, or be given credit for its share of their net worth. “Do we really want to own a part of the harbor or LAX?” said Close. “To me, I think the best thing to do is to take a credit to reduce those liabilities. I believe it would be less destructive.” And what about the voters? How big of a surplus does a new Valley city have to have to persuade residents that, despite national calls for unity and a murky economic outlook, this is a good time to split up and start over? “Voters like smaller governments that are more responsive,” said Stern. “But the problem, of course, is the voters will be looking at the bottom line and I think they are going to be a little more conservative these days about not wanting to see major changes, which also means incumbents are likely to have an easier time getting reelected.” Not so, said Close. “People are going to vote for this because they want local control,” he said. “Every city is subject to budget cuts and adjustments when there are economic hurdles, regardless of what their surplus is. And, if the issue of recession comes into play, my response would be this: If we stay a part of the city of Los Angeles, and they have to cut expenses to cope with a state budget deficit, where do you think they are going to cut first? It’s going to be the Valley.”

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Burbank-based DIC Entertainment has formed a partnership with Japanese advertising agency Dentsu Inc. to co-produce the DIC animated television series, “Alienators: Evolution Continues,” in Asia. DIC CEO Andy Heyward said the partnership will allow his company to distribute its programs in Asia where DIC has had limited success so far. “Japan has been the most difficult territory of American animation producers to penetrate,” Heyward said. “With Dentsu behind us, we will not only be able to place our shows, we will also be able to negotiate far more lucrative deals.” The pact also allows Dentsu to seek distribution agreements for DIC’s animated “Madeline” series for television and home video in Japan. It also permits Dentsu to represent DIC as its licensing and merchandising agent in Japan. Dentsu has already invested $2 million in the “Alienators” project, which is seen in the U.S. on the Fox Broadcasting Co. network. Heyward said that the deal could result in a potential 25-percent revenue increase overall for DIC. However, the CEO of the privately owned company would not release specific revenue figures. Semtech Buys Stock Newbury Park-based Semtech Corp. has doubled the size of its current stock buyback program. The semiconductor maker now plans to purchase $100 million of its common stock and registered convertible subordinated notes through open market transactions. Semtech already has bought back about $24 million in stock and notes since its buyback program began in January. The company says it expects to meet its sales growth target of 3 to 5 percent for the quarter ending Oct. 28. With 5 percent sales growth, the company estimates its earnings would be about 9 cents per diluted share for the quarter. In the second quarter ending July 31, the company lost $5.1 million on revenue of $40.5 million, compared to $13.7 million in net income on $60.6 million in revenue for the same period last year. Last year, Semtech’s stock plunged from a high of $58.50 to $15 in December, only to rebound this past August for its 52-week high of $41.70. It closed Friday at $34.08. Nall Starts New Effects Firm Veteran visual effects artist Roger Nall has launched 11:11 Mediaworks, a new digital visual effects firm based in Van Nuys. Nall, whose credits include this year’s “Planet of the Apes” and the indefinitely postponed Arnold Schwarzenegger action film, “Collateral Damage,” said his new effects house will focus on state-of-the-art digital technology. Nall said his firm also specializes in digital post-production “repairs,” which include removing off-set wires and rigging from frames, as well as adding gun muzzle flashes, restoring film prints, color correction and scratch removal. “Repairs are becoming a focal part of our business,” he said. “It’s not that people are more prone to make mistakes now, but that they want to make the corrections more now than they used to because it’s cheaper now.” Nall worked at SOTA Digital in Van Nuys before beginning his own company. Dreamworks Staff Moves It didn’t take long for staff members of Dreamworks SKG’s television production unit to clear out of their offices on the 34th floor of Universal Studios’ 35-story office tower after the Sept. 11 attacks on the World Trade Center and the Pentagon. Although a Dreamworks spokeswoman said the move to its new Glendale campus was planned in phases between September and the end of the year, one staff member said they vacated their offices in the high-rise almost immediately after the attack because of fears associated with terrorist attacks on tall buildings. The studio’s spokeswoman said the move was in keeping with plans to centralize the company’s operations and not in reaction to the attacks. Digital Insight Plans Conference Calabasas-based banking software-maker Digital Insight Corp. will host a seminar on the state of e-financing for its clients beginning Oct. 21 at La Quinta Resort & Club in Palm Springs. “Digital Insight’s client conference takes advantage of our unique ability to bring together a large client base to discuss the lessons learned and the triumphs experienced,” said Dale Walker, president and COO of Digital Insight. Walker said e-financing has been accepted by a large segment of consumers and financial institutions, driving the industry’s growth. Although privacy and security issues remain concerns for some, Walker said, e-banking and e-financing will continue to grow with improved security features. Doubts About Vivendi Wireless Service Vivendi Universal SA’s bid to plug into the youth music market via a music service geared for mobile phone users could have a tough road ahead, say analysts who are skeptical of the service’s business model. “I just don’t think there are going to be enough users willing to pay for this service,” said Mark Lewis, a consultant with New York-based Weinstein Co. The service, dubbed Universal Music Mobile and scheduled to launch early next year, will offer a prepaid mobile phone subscription plan that provides basic voice telephone service and previews of new CD releases, music news, invitations for music events and offers of CD purchases. Users would be able to listen to new CDs one week ahead of their radio debut and up to three weeks ahead of actual release. Moreover, subscribers can access information on the artists and receive news on future releases and tours. But Lewis doubts Vivendi’s targeted audience teens and young adults will cough up the estimated $25 to $30 monthly fee, particularly given a mobile phone’s sometimes poor sound quality and often poor user interface. Staff reporter Carlos Martinez can be reached at (818) 676-1750, ext. 17 or by e-mail at [email protected].

Summary Business: Automobile parts and accessories Headquarters: Van Nuys CEO: Louis L. Borick Market Cap: $875 million Dividend Yield: 1.3% Total Liabilities: $92.4 million P/E: 12.8 Long-Term Debt: None Jeffrey Ornstein is hopeful, if philosophical, about his company’s stock price and third-quarter earnings (scheduled to be announced Oct. 16). “Right now things look OK,” said the Superior Industries International vice president and CFO, “but things can change pretty quickly.” The Van Nuys-based auto parts manufacturer has watched its stock price fluctuate over the past year along with the fortunes of the automotive industry itself. Trading as low as $29.12 on Dec. 15, 2000 and as high as $44.85 on July 16, Superior’s stock took a 9-point dive to $29.40 in the week after trading opened again following the Sept. 11 terrorist attacks. Following what passes now for good news about the prospects for stable automobile sales next year, it was trading at $38.45 on Friday. Superior’s prospects seemed particularly promising, despite a general slowdown in the automotive industry, when General Motors Corp. announced an agreement in mid-August to use Superior for almost all the aluminum road wheels on its vehicle lines. Then came the Sept. 11 attacks, stilling industrial activity in a number of sectors, followed by announcements that both Ford and GMC two important Superior customers were cutting production and closing plants. “We got hit pretty hard,” Ornstein said. However in the last two weeks, there may have been reason for optimism as other major car dealers followed GMC’s lead by offering zero-interest financing deals. And, although nationwide car sales were down 8.7 percent in September from the same month a year ago, most carmakers reported a rebound in the last 10 days of the month, thanks to the generous financing. “(The sales figures) were bad, but they weren’t as bad as most people thought,” Ornstein said. Contributing to that ever-so-cautious optimism was a report released Oct. 1 by Credit Suisse First Boston Corp. analyst Wendy Beale Needham upgrading Superior’s stock from a buy to a hold and predicting third-quarter earnings of 35 cents a share and 2001 earnings of $2.05. Superior’s earnings in the third quarter of 2000 were 66 cents a share and $3.05 a share for all of 2000. Credit Suisse automotive industry analysts lowered their forecasts for 2002 following the Sept. 11 attacks from a 2.5-percent increase in light vehicle production to a 4-percent decline. Analyst David Leiker of Robert W. Baird & Co. was a bit more optimistic than Beale Needham, anticipating a 2002 earnings estimate for Superior of $3.01 a share (down 24 cents from his pre-Sept. 11 estimate). And, according to Leiker, Superior is likely to weather the downturn in the automotive industry better than others. For instance, Leiker’s 2002 earnings estimate for parts maker Donnelly Corp. fell 66 cents to 84 cents a share after the Sept. 11 attacks. His 2002 estimate for Delphi Automotive Systems Corp. fell 33 cents to 67 cents a share and his Dura Automotive Systems Inc. estimate fell 76 cents to $2.24 a share. Beale Needham said, “Superior Industries has the strongest balance sheet of any auto parts company, with no debt, and is a solid free cash generator.” Superior had $79.9 million in net income on revenues of $644.9 million in 2000, compared to $70.8 million in net income on revenues of $571.8 million in 1999. Both Leiker and Beale Needham described Superior and its competitors in the auto parts industry as early-cycle stocks that will hit their bottoms earlier and rebound while other sectors in the market are still stagnant. Ornstein agreed, saying, “Our stock should continue to rebound, depending on any potential recession we could have.” However, he said, “The world situation has a big impact on us.” He said the flurry of sales inspired by the zero-percent financing late last month did little more than counter the damage done by GMC’s earlier announcement that it would reduce production by 3.7 percent or 50,000 vehicles in the fourth quarter. DaimlerChrysler also plans to cut production by 26,000 vehicles in the fourth quarter and Ford plans reductions as well.

Despite The Walt Disney Co.’s declining revenues in most divisions and an economic slowdown antagonized by terrorist attacks, analysts say its video-game software maker, Buena Vista Game Entertainment Studio, could see sharply higher sales this Christmas and continued growth in 2002 and 2003. “Even with what’s happening in Afghanistan, people are going out and buying these games,” said Sharon Williams, an analyst with A.G. Edwards Inc., who cautiously predicted sales of new video games could match last year’s holiday season record of roughly $6 billion industry-wide. Already, Disney is trotting out “Disney’s Extremely Goofy Skateboarding,” a CD-ROM for children, one of a slew of new titles that will be issued in time for the holiday rush. Jan Smith, the unit’s new president, said Disney plans to build on its brand and expand into Web-based games that allow players to compete against each other on wireless phones or hand-held devices. Buena Vista Game Entertainment Studio had been part of Disney’s under-performing Consumer Products Division. But last month it was spun off into its own division headed by a separate management team with plans to expand its gaming products for PCs, television, wireless telephones, digital set top boxes and hand-held wireless devices. The spin-off seems to be an attempt to separate what is a very promising business from a division that has experienced a sharp drop in sales at its 478 Disney Stores 128 of which are scheduled to close over the next three years. The unit makes games based on Disney characters, like Winnie the Pooh and Mickey Mouse, and educational programs for children, many of which are being readied for release this holiday season. “Christmas is a traditionally good time for game makers and we could see some huge numbers, not only for Disney, but the other game makers,” said Shawn Milne, an analyst with securities underwriter SoundView Technology Group Inc., who predicts the unit could triple sales by 2003. Disney’s interactive unit had been the brightest spot for Consumer Products by posting $23 million in growth last year at a time when the division reported a 6-percent revenue decline of $166 million. The unit had net income of $455 million on $2.6 billion in total revenue in 2000. Although Disney won’t say how much revenue its interactive unit generated last year since it was lumped with the rest of the Consumer Products Division, analysts estimate it grossed around $100 million a drop in the bucket compared to the $25.4 billion in revenue Disney collected last year. The $750 million bath Disney took this year with its now-defunct Go.com Web portal gave the company reason to reassess its online strategy and its video game business, Milne said. “If you include software and hardware, it’s a $20 billion-a-year industry and by 2005 it’ll be $35 billion, so it’s an important area that they’re getting into,” he said. Early sales of video games for Disney and others give some analysts reason for optimism during the holiday period. Perhaps as a preview of the holiday rush for new video games, Toysrus.com officials said last week that its pre-order allotment of Nintendo Co.’s GameCube video consoles sold out in four minutes. Last month, Microsoft Corp.’s Xbox consoles were also sold out within minutes by the on-line retailer, a subsidiary of Toys R Us Inc. While some game makers have toned down some of their more violent games as a result of the public’s heightened sensibilities over the Sept. 11 attacks, spokespeople for Disney and Calabasas-based THQ Inc. said none of their games were affected because they don’t sell violence-related themes. Milne said video game sales now are being fueled by people who have canceled travel plans and are looking for diversions closer to home like video games. “It’s a case of what’s hurting the airline industry is helping game makers, and that could go on into Christmas,” he said. Although U.S. military retaliation for the Sept. 11 terrorist attacks in New York and Washington, D.C. could adversely impact the economy, analysts said video game makers would see a boost in sales this holiday season. “So far, sales in the sector have rebounded significantly since the attacks, but we’re not in the critical part of the season just yet,” he said. While Milne would not predict how much of a boost Disney’s interactive unit would get during the holidays, it’s clear that the holiday season is the most lucrative period for video game makers by far. Top video game software maker, San Francisco-based Electronic Arts Inc., grossed $640 million during the quarter ending Dec. 30, 2000, or nearly half of its $1.3 billion in total sales last year. THQ grossed $190.9 million during that same quarter, or more than half of its $347 million in total revenue in 2000.

Proponents of a living wage received what they consider a victory as a second developer has agreed to a pact requiring that 70 percent of all jobs at a proposed commercial project in Sun Valley pay more than 50 percent above the federally mandated minimum wage. “We feel it’s a fair deal for us, potential tenants and the community,” said Randy Roth, president of Roth Properties Inc., developer of the SunQuest Industrial Park project on a 33-acre parcel in Sun Valley. The project is expected to accommodate a number of light industrial uses such as post-production firms, software manufacturing companies, truck repair shops and storage facilities. The effort marks the second time in a month that the Valley Jobs Coalition has struck a deal with developers of major commercial centers in the Valley. The first was last month’s agreement with NoHo Commons developer J.H. Snyder Co. According to the agreement, all of Roth’s tenants will have to guarantee that 70 percent of the people working for them earn the so-called living wage. The coalition defines a living wage as one that allows an income just above the federal poverty line for a family of four in Los Angeles: $7.72 an hour with benefits or $8.97 without. The federally mandated minimum wage is $5.75 an hour. Under the agreement, 75 percent, or 900 of the estimated 1,200 jobs, at the complex will be living wage jobs or Roth Properties could face sanctions from the city of up to $10,000 per month. “It’s something that I think we’re all after,” Roth said. The agreement with Roth and his SunQuest project comes about a month after NoHo Commons developer Jerry Snyder agreed to a similar deal with the coalition. “Overall, I think everyone benefits from this deal,” Snyder said. The North Hollywood project had long been stalled over land use issues and financing problems, forcing one developer to drop out earlier this year and Snyder to take over with a scaled-back version of the original plan. Developer J. Allen Radford, who abandoned the NoHo Commons project earlier this year, said developers and business owners are leery of the high costs associated with living wage agreements. Many potential tenants, he said, would rather go someplace else. “The (Snyder contract) is the first agreement of its kind that actually calls for sanctions for not meeting the living wage requirements,” said Roxane Auer, a community organizer with the Valley Jobs Coalition. Kevin Whelan, an organizer with another pro-living wage group, Association of Community Organizations for Reform, said the coalition’s effort marks a first for living wage activists. “A lot of these agreements didn’t have any teeth,” Whelan said. “But now they have a contract that calls for fines for non-compliance. That’s truly a first.” In the past, living wage activists with the Los Angeles Alliance for a New Economy managed to wangle pledges from developers of the Staples Center and a multi-use commercial complex in Hollywood to provide living wage jobs. However, neither carried sanctions for non-compliance. “It was a matter of having something that we couldn’t enforce,” said Auer. “It was the best we could do.” Snyder’s estimated $180 million NoHo Commons complex along Lankershim Boulevard in North Hollywood features 150,000 square feet of retail space and 200,000 square feet of office space. It also includes a supermarket and about 750 apartment units. It is expected to provide about 4,000 jobs, 70 percent of which would be under the living wage requirement. Lillian Burkenheim, project manager for the Los Angeles Community Redevelopment Agency, said getting the living wage agreement for the project was one of her agency’s key goals. “It’s going to help the people in the community with jobs, but it’s also going to improve the overall economy in the area,” she said. City Council President Alex Padilla, a resident of Pacoima, said he believes in the living wage movement, citing the number of people in Sun Valley and North Hollywood who earn a meager living.

Fernando Lopez Title: General Manager, KVEA Channel 52 and KWHY Channel 22 Age: 38 Education: B.A. in broadcast management from Cal State Los Angeles Career turning point: Coming to KVEA and taking his first position as a station general manager Personal: Married with two children Most admired person: Rick Blagiardi, Telemundo president. “He’s the one who gave me a chance and who believed in me, and stands for a lot of the things I believe in.” The manager of telemundo’s two stations in los angeles, fernando lopez, has a front seat as nbc acquires the spanish-language television network Glendale-based Spanish-language television station KVEA wasn’t exactly floundering when Fernando Lopez became its general manager nearly two years ago. But it was the proverbial also-ran to Univision Inc.-owned KMEX Channel 52, which long ago grew used to beating KVEA in the ratings by wide margins. It was late 1999 when Lopez took over and began putting his stamp on everything from programming to the Telemundo Inc.-owned station’s d & #233;cor. By stressing more KVEA-produced programs and doubling the staff of the news department, Lopez soon saw the ratings for the perennial second-place news department improve. Although KMEX continues to have the ratings edge, KVEA is closing the gap. According to Nielsen Research, the station’s 6 p.m. news program still lags behind KMEX with a 1.2 rating and 4 share, compared to its rival’s 3.0 rating and 11 share. Lopez’s job became more complicated in June when KVEA acquired the independent Spanish-language station KWHY Channel 22 for $250 million. Lopez is now that station’s general manager as well, turning it into KVEA’s sister station, but with its own independent programming. His job title could very well change again since after week’s announcement that NBC is acquiring Telemundo. Lopez says his ultimate goal is to make KVEA number one in Southern California’s Spanish-language market, but the competition gets more and more fierce all the time. Question: Last week’s announcement that General Electric, through its NBC subsidiary, is acquiring Telemundo ended a lot of speculation about it being somebody’s takeover target one way or the other. What kind of impact has all this speculation had on you and your stations? Answer: Actually, it’s a great feeling to see that Viacom and GE are recognizing us. It makes us feel good to see that interest. There’s a reason why Viacom became Viacom and GE became GE, by going after good opportunities. But if it happens or if it doesn’t happen, we’re not going to stop. We have a commitment to the people of this station. Q: Telemundo recently acquired one-time rival KWHY-TV and you’ve been named general manager of that station as well. What are your immediate plans for Channel 22? A: Channel 52 is owned and operated by Telemundo and carries programming from the Telemundo network. Channel 22 is an independent station. You want to balance that to give programming on a network level here and on a local level there. We want to keep Channel 22 local. Q: Why did Telemundo acquire KWHY? How will that acquisition help KVEA? A: You can own two TV stations in the same market and Telemundo figured that, not only are we going to be able to get a good competitive channel for Telemundo, we can do it in a very efficient way in one location. So, you have two stations that are separate entities, but you don’t need two different accounting departments and two sales departments. When you have two channels and you control two outlets for entertainment, it gives you more power. That’s why Univision is going with Telefutura (a second Spanish-language network being developed by Univision scheduled to have a Los Angeles affiliate by next year). Q: Did you know when you got here in late 1999 that Telemundo was planning to purchase Channel 22? A: No. My focus was to make Channel 52 the number one Spanish TV station in this market and that’s how I approached it. But by early December I started hearing that there might be a possibility and then, as 2001 started, I heard, “Guess what? You’re going to be running two TV stations.” Q: What’s the difference between KVEA and KMEX? A: Lots of things. The news, for instance. We try not to do the same thing as everybody else. Immigration is a big story for us. Education and crime is also important. But most of the people want to know things like how to buy a house and how to get a good job. Our counterparts (KMEX) are a lot more worried about car chases and high-impact kinds of stories which are like Chinese food that leave you kind of hungry. I think we’re more dedicated to informing and being a part of the community. Q: Univision again has the rights to broadcast World Cup soccer next year and your rival and its affiliate, KMEX-TV Channel 34, will show a full schedule of games. What will you do to combat that? A: You still need to cover that as a sports story and you have to cover the reaction from people. But not everybody likes soccer. Some people like movies and some others like other kinds of things, so you try to program like that. It’s not the first time that’s happened to us, so we have some plans for that. Q: KMEX has continued to lead in the ratings over KVEA, though its lead has narrowed this year. What does KVEA need to do to surpass it? A: This is a marathon. There is no magic bullet that’s going to happen tonight. There’s nothing here that you can do and say, “I’m going to do this and it’s going to happen for us.” It’s about consistency, having the right people doing the work day in and day out, and it’s the same situation if you’re doing newscasts in this city. Q: Some original programs that Telemundo developed last year that were patterned after mainstream TV series like “Charlie’s Angels” did very poorly in the ratings last year. Is that the end of Telemundo-produced shows that mimic those on mainstream networks? A: It was a good concept on paper, but it didn’t work for some reason. People are used to seeing novelas (soap operas) at night. It didn’t work and Jim McNamara, our CEO, was right when he said let’s go back to our bread and butter. It was a great idea that just didn’t work. Q: In the 18 months you’ve been at KVEA, you’ve put your mark on the station’s programming, but more particularly on the news operation. Why is news so important? A: I have a network-owned and operated station, so the only thing I can fully control is the news operation. So, if you have a good product, people will look at you and it has a halo effect to everything else. I was news director at KMEX and I worked in the news operations at KCBS and KTLA, so news is my first love. I knew news was the window into the community and, if you have a good news operation and you have solid journalists, people react to that. Q: What are some of the misconceptions about L.A.’s Latino television market? A: I think a lot of people underestimate the power of Spanish broadcasting. The misconception is that the Spanish TV market is not worth it and that it’s underground, but it’s not true. The numbers prove it. Just look at the Latino buying power in L.A. It’s huge ($66 billion in 1998, according to the U.S. Department of Commerce). Q: Do you feel that you’re under the gun to see these stations perform at higher levels than in the past? A: “Under the gun” isn’t the word I’d use. I put the pressure on myself because of people like (Telemundo President) Rick Blagiardi who gave me the opportunity to run these stations and I don’t wait to fail him. It’s mostly the way I am: I don’t want to fail. I don’t see it like someone saying you have three months to do something. So do I feel the pressure? No. But KVEA is the only station I know of that is doing better than last year.