May 4, 1994

Companies Two giant pharmaceutical makers took aggressive steps to help them compete in the rapidly changing market for prescription drugs. SmithKline Beecham is buying Diversified Pharmaceutical Services, a discount drug marketer, for $2.3 billion. And Pfizer is creating a managed health care unit with Value Health. [ Page D1. ] Kodak will sell off noncore businesses like its Sterling Winthrop drug unit and concentrate on its photography operations. [ D1. ] Nynex and Times Mirror formed a joint venture to offer electronic shopping services in the New York City area. [ D1. ] Electronic Arts and Broderbund called off the planned merger between the two software makers. [ D5. ] Kemper will consider putting itself up for sale if its stock does not rise by at least 13 percent in the next year. [ D5. ] What amounts to a real estate merchant bank was formed by Hicks, Muse, Tate & Furst and Donaldson, Lufkin & Jenrette. [ D5. ] Junior bondholders of R. H. Macy oppose two competing reorganization proposals. [ D6. ] I.B.M. won an unusual endorsement from China for its PowerPC chip technology. [ D8. ] Viacom is exploring the sale of Madison Square Garden. [ D20. ] NBC will receive $2.5 million from a foundation to broadcast a special program on health care. [ A1. ] A Federal appeals panel, reversing its own opinion, threw out an author's libel suit against The New York Times. [ A21. ] The Economy Top business executives have contradictory feelings about the Federal Reserve's recent interest rate increases, the latest New York Times/CBS News Poll shows. On one hand, a majority praised the Fed's efforts to control inflation. But a majority also expressed alarm that the rising rates could hurt their sales. [ D1. ] Members of Congress engaged in partisan wrangling over rising rates. [ D2. ] The Government's economic forecasting gauge jumped 0.7 percent in March. [ D1. ] International Ecuador and its creditor banks have reached a foreign debt agreement that will restructure the country's payments on $7.6 billion in debt and overdue interest over the next 30 years. [ D15. ] Business Technology New York City is looking at a waste-disposal technology that a small Italian concern is promoting in Europe and the United States. The process involves shredding garbage, heating it and pressing it into ice-cube-sized bricks, and then steaming the bricks until they emit a gas that can be burned to make electricity. [ D7. ] Markets Stock prices were mixed, with blue chips advancing as a result of late computerized buying. The Dow Jones industrial average gained 13.39 points, to close at 3,714.41. [ D8. ] Treasury prices declined and interest rates rose after a Government report pointed to economic strength. The yield on the Treasury's 30-year bond rose to 7.35 percent. [ D16. ] The dollar continued to fall as traders questioned the Clinton Administration's commitment to defending it. [ D18. ] Coffee prices sprinted to a 2 1/2-year high amid continuing concerns about tight supplies. [ D18. ] Today's Columns Investors in Media Vision Technology learned that it is sometimes risky to believe a profit number before the auditors get through with the books. Floyd Norris: Market Place. [ D8. ] Bartle Bogle Hegarty of London is gambling that it can grow rapidly by helping American marketers explain what makes themselves specially American. Stuart Elliott: Advertising. [ D20. ]

State motor vehicle laws do little to keep thousands of New York City's worst drivers -- speeders and drunks and those who have no licenses at all -- off the road. Officials say the system has long penalized drivers who play by the rules, paying tickets when they get them and showing up for court dates, and has little power to stop those who ignore the laws and continue to drive.

Clinton Defends World Policy In a television program beamed around the world, President Clinton sought to explain why it has been so hard for him to take action in trouble spots like Haiti and Bosnia. Page A12. Unresolved: Suicide Debate Dr. Jack Kevorkian's acquittal has settled his legal status, but the debate over assisted suicide remains unresolved on many fronts. Page A16. Mostly Mozart No More? At Lincoln Center, there is talk of eliminating the Mostly Mozart Festival, which is to have its 28th season this summer. Page C15. Close (Budget) Call in Orbit Pentagon officials were ready to close down Clementine, a low-budget spacecraft that mapped the Moon, with its mission half done. But they relented under pressure. Page A18. Mixed Review on Rates Top business executives have contradictory feelings about recent interest-rate increases, a New York Times/ CBS News poll shows. Page D1.

Continuing the rapid change in the prescription drug industry, two of the world's largest pharmaceutical manufacturers announced moves yesterday to help them compete in the evolving environment of lower-priced drugs. SmithKline Beecham, a British-American company based in London, said it had agreed to buy Diversified Pharmaceutical Services, one of the largest marketers of discount-priced drugs to managed health care companies, for $2.3 billion in cash.

Prime Minister Yitzhak Rabin of Israel and Yasir Arafat, the chairman of the P.L.O., agreed early this morning on the final details of Palestinian self-rule in the Gaza Strip and in Jericho, clearing the way for a signing ceremony later today. "Everything is solved," said Nabil Shaath, the chief Palestinian negotiator. "Everything is agreed."

Largely abandoning forays into pharmaceuticals, household products and medical tests, the new leader of the Eastman Kodak Company announced yesterday that he would adopt the strategy George Eastman formulated over 100 years ago and concentrate on pictures. George M. C. Fisher, who came to the company from Motorola Inc. in December, said Kodak would sell its noncore businesses, including Sterling Winthrop Inc., which makes pharmaceuticals and over-the-counter drugs; L&F Products, which makes Lysol and other home and personal-care products, and the Clinical Diagnostics division, which produces medical testing devices. Together, they generated $3.7 billion last year, or about one-fifth of Kodak's $16.7 billion in revenues for 1993 -- a year in which Kodak had a $1.5 billion loss. 'Tremendous Opportunities' The company plans to build upon its traditional film and camera business and continue to perfect techniques for capturing images in digital form and storing and processing them as computer files. Such technologies have applications not only for photography but also for business customers in increasingly computerized workplaces. "Imaging offers Kodak tremendous opportunities for long-term success and growth," Mr. Fisher said at a news conference in New York yesterday. "To achieve maximum success, we have concluded that we must commit our entire resource base to imaging opportunities and divest noncore businesses." Kodak, based in Rochester, has been under pressure from investors to cut costs and improve performance. Indeed, it was unhappiness on the part of large, institutional investors that led the company's board to dismiss Mr. Fisher's predecessor, Kay R. Whitmore, last year. Investors responded positively to the company's announcement, and Kodak stock closed up $1.375 a share yesterday, ending the trading day at $46.125 on the New York Stock Exchange, where the stock's volume of 3.79 million shares made it the fourth most active. On Monday, Kodak's stock rose $3.25 a share on rumors that Sterling would be sold. The reaction among financial analysts was that Kodak was finally leaving businesses that it never should have entered in the first place. "He had to do it, and he did it," said Brenda Lee Landry, an analyst with the investment firm Morgan Stanley. "Those businesses were not making any money if you subtracted debt from operating earnings. So any earnings growth in the next 24 months will have to come from cost cutting." Many on Wall Street sounded a sharp note of skepticism about whether the company would find much profitability in conventional film. "The big question beyond the disposition of assets is what is going to happen to the core business," said B. Alex Henderson, with Prudential Securities Research. "How are they going to offset tremendously negative factors in film and paper and demonstrate they can make money in electronic imaging?" Among its health businesses, the company said it planned to retain only its medical and dental imaging businesses, which use both X-ray film and electronics. Kodak said that the French pharmaceuticals company Elf Sanofi, which has several joint programs with Sterling, had the right of first refusal to buy the pharmaceutical portion of Sterling Winthrop. No buyers have yet been found for the other, smaller pieces of Sterling, which include over-the-counter remedies, or for the other Kodak units that have been put up for sale. Kodak officials declined to say how much money they expected to realize from the sales, saying they were in preliminary negotiations with potential buyers. However, they conceded the company might have an unspecified "book loss" for the year, once all the details, including tax treatment, were worked out. This is the second major divestiture for Kodak, which last year spun off its Eastman Chemical Company, which had $3.9 billion in sales. In addition, the company has sold several smaller operations. Company Will Shrink As a result of the sales and divestitures, the company will be much smaller, with about $13 billion in sales compared with $20.2 billion at the end of 1992. But it will shortly have less debt as well because the company has said it will use the proceeds of the sales "to achieve significant debt reduction." At the end of the year, Kodak had $7.2 billion in long-term debt. Mr. Fisher said the divestitures would permit the company's managers to concentrate on the core imaging business. And he continued to resist calls from Wall Street to sharply reduce staffing levels. "Rather than simply take an ax to budgets and manpower, we are trying to change, in significant ways, how this company operates," Mr. Fisher said. Mr. Fisher said the company would "focus on profitable participation in the five links of the imaging chain: image capture, processing, storage, output, and delivery of images for people and machines anywhere in Kodak's worldwide market." He said Kodak would press its traditional sale of consumer products, like film and photographic paper, and would move into electronic imaging in areas where "Kodak can profitably compete." Mr. Fisher said he had established 10 special teams to improve return on net assets by increasing revenues and cutting costs. The program includes growth of market, asset management, span-of-control, cost of quality, research and development productivity, marketing opportunities, portfolio review, process re-engineering, cycle-time improvement and policy opportunities. Fisher to Lead Groups Mr. Fisher said he would personally lead the growth of market and cycle-time improvement groups. The biggest piece of the divestitures will be Sterling Winthrop, which Kodak acquired in 1988 for $5.1 billion. But analysts say Sterling has never become an integral part of Kodak's business and has been a drain on the company's capital budget and a distraction for management. Although Elf Sanofi has first rights to bid on Sterling's pharmaceutical operations, there may be at least one competitor. A spokesman for the German drug company Bayer A.G. said yesterday that the company was interested in buying Sterling Winthrop's over-the-counter drug business in the United States. Sterling markets a number of drugs under the Bayer name and the German pharmaceutical company has long wanted to reclaim its name in the United States. It lost control of the name in this country after World War I.

With their sales rising smartly, a majority of America's top executives are far more sanguine about the economy than the general public is, the latest New York Times/CBS News Poll shows. But many executives also have a complaint: they can't get the price increases that many say are needed to keep their businesses thriving. The executives favor, in effect, a bit more inflation -- for their industries, at least -- than the current mild national level.

Symbolizing the end of more than a decade of bitter fighting between telephone and newspaper companies about turf in the emerging information age, the Nynex Corporation and the Times Mirror Company, publisher of Newsday and New York Newsday, said yesterday that they had formed a joint venture to offer electronic shopping services in the New York City area. The agreement, which will combine the telephone company's directory listings with the newspaper company's advertising and news services, is intended to create a new electronic information resource that the companies can use as the basis for a variety of interactive electronic shopping projects. 'Personal Shopping Assistants' But initially, when the service is introduced next year, it will appear to be a step backward from the panoply of high-technology fax, personal computer and interactive video links to the new information network.

In the unwritten but sacrosanct code of the American Mafia, the boss of a mob family can be displaced only by death -- from natural causes or murder. For two years from a cell in the harshest prison in the country, the authorities say, John Gotti has exercised his autocratic power as the boss of the nation's largest Mafia group, the Gambino crime family. And for two years, according to law-enforcement officials, Mr. Gotti cautioned potential rivals that his conviction of murder and racketeering would be reversed and he would return to his regal haunts and swashbuckling life style in New York City.

With the Democratic leadership of the House of Representatives divided, a bill to ban 19 specific assault weapons faces almost certain defeat on Thursday when opponents force the bill to a vote. The defeat would probably prevent a ban on assault weapons from becoming part of the final anti-crime legislation that House and Senate negotiators expect to agree on later this month.

COURT BACKS MILITARY RECRUITING BANS New York's Court of Appeals became the first top state court to rule that school boards can ban military recruiters from their schools because of the Pentagon's policy of discrimination against homosexuals. A1. NEW YORK CITY GIULIANI REFUSES MONEY FOR SCHOOLS

CREME caramel is as easy to find in Ho Chi Minh City as it is in Paris. Baguettes poke out of baskets in every market and on every street corner, and from Haiphong, northern Vietnam's largest port, to the Mekong delta, in the south, French pastry look-alikes adorn bakery windows. Everywhere, too, the crumbling French colonial architecture lends a European air to this hauntingly beautiful country. From the aquamarine waters to the vibrant-green rice paddies, from the mountain ranges to the deep jungles, Vietnam comes in hundreds of shades of green, one more seductive than the next. No wonder the French, whose century-long rule of Vietnam ended in 1954, still love it and are returning in droves as tourists. Americans are on their way and their welcome will be warm.