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From: 	djcustomclips@djinteractive.com@ENRON [mailto:IMCEANOTES-djcustomclips+40djinteractive+2Ecom+40ENRON@ENRON.com] 
Sent:	Thursday, April 12, 2001 2:34 PM
To:	168842@mailman.enron.com
Subject:	Rahil Jafry: USA:    Persistent problems chinking Enron's armor.

USA:
Persistent problems chinking Enron's armor.
By C. Bryson Hull

04/12/2001
Reuters English News Service
(C) Reuters Limited 2001.

HOUSTON, April 12 (Reuters) - The teflon around energy and trading powerhouse
Enron Corp. is starting to show some scratches, as negative events over the
past few months from India to its broadband unit, begin to take their toll,
analysts say.

Make no mistake, Wall Street still sees the Houston-based giant as the energy
convergence sector leader. Analysts polled by Thomson Financial/First Call
still believe Enron will meet its earnings per share targets of $1.75 for 2001.
But the stock has dropped to its lowest levels since late 1999, a slide which
started with news that Enron's keystone broadband content deal with
Blockbuster Inc. had fallen apart.

The stock had traded in the mid-$80s as recently as February, before the stock
market's recent collapse and a string of negative news. On Friday, it traded
at $57.45 on the New York Stock Exchange, down $1.06 cents or 1.8 percent, and
well off its high of $90.56 last August.

"Their share price hasn't been bulletproof and that's what counts. They were
up pushing $90 and they're now in the $50s while the energy sector has done
quite well, so they have underperformed quite a bit and that doesn't seem
bulletproof to me," analyst Andre Meade of Commerzbank Securities said.

Meade said the price fall came as investors took the bad news out of Enron's
valuation, particularly in devaluing the broadband business.

"With broadband the market initially gave them full credit. But investors got
smart over the next year, and once you got some bad news out there, you could
argue that valuation was pulled," Meade said.

But the bad news neither starts nor ends there.

The latest negative item came Wednesday, when a California federal judge
ordered Enron to return the University of California and California State
University systems to direct power access, which Enron says will cost them $12
million a month.

The universities' lawsuit which claimed Enron Energy Services breached their
power management contract, could cast a shadow over the Houston-based
company's power risk management arm which recently saw a huge upsurge in
business involving similar multimillion dollar deals with large corporations.

Other bad news includes broadband layoff talk, failed water company spinoff
Azurix Inc.'s impending sell-off its North American assets, the failure of the
video on demand deal with Blockbuster, word that the $2 billion sale of
utility Portland General is unlikely to go through and continuing payment
problems at the Dabhol power plant in India.

That long-running dispute in India reared its head again on Monday. Enron
confirmed it issued a notice of political force majeure to the Maharashstra
State Electricity Board (MSEB), which has consistently defaulted on payments.

Force majeure is an event beyond the control of a contractual party that could
not have been prevented.

"It's one of the steps in the process of protecting our rights. It's one step,
but it's not the only step," Enron spokesman John Ambler said.

Enron has already invoked payment guarantees from the Indian national
government, but it has refused to cover MSEB's $21.9 million December bill
until Enron and MSEB settle another dispute over a fine. The MSEB wants the
$85.8 million fine, which it levied, to cover its outstanding bills.

LAYOFFS OR REDEPLOYMENTS?

Another nettling problem for Enron is news of trouble at Enron Broadband
Services (EBS), the cutting-edge unit that encompasses a nascent bandwidth
trading operation and a broadband content services business.

Most recently, Enron has had to answer questions about a reduction in the
number of employees at EBS because of the stock market's faltering confidence
in telecoms generally.

Two weeks ago, the company characterized word of layoffs at the broadband unit
as nothing more than an internal redeployment of staff to areas that were
growing at a higher rate.

"It's word games. Initially they said they were redeploying, and that was not
the word I heard from inside the company, but that was the way they put it.
It's probably a little of both," said analyst John Olson of Houston investment
house Sanders Morris Harris.

EBS spokeswoman Kelly Kimberly on Monday said 227 employees were leaving the
broadband unit to work in other areas of the company.

"Most of them have elected to go into the redeployment pool or are already
moved into corporate or another business," Kimberly said.

Kimberly did not have an exact figure on the number who have opted to take a
severance package, but characterized it as a small percentage.

It has been a rough few weeks for EBS, which also suffered from the
Blockbuster debacle. Last month, the two announced a mutual end to a 20-year
exclusive video on-demand deal, which had been considered a cornerstone of
EBS' content services push.



Folder Name: Rahil Jafry
Relevance Score on Scale of 100: 79

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