Word: enronizing
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What's remarkable is that Blockbuster's partner happens to be an energy company called Enron. At a time when so many old-economy companies seem helpless against the dizzying pace and technology of the digital age, Enron is demonstrating why FORTUNE magazine keeps voting it the most innovative large company in America. For years the Houston-based firm simply produced, transported and marketed natural gas. Then, as energy deregulation threatened profit margins in the gas business, Enron discovered it could make billions by trading and brokering packages of energy the way Midwesterners do pork bellies. Now Enron is moving...
...fact, Enron may be the most interesting old-economy company around. Since moving its trading operations from the phone to the Web eight months ago, the company has doubled revenues to more than $30 billion. Most of that is made through trading everything from energy and paper to weather risk derivatives and now bandwidth--more than 800 offerings in all. Think of eBay, but instead of auctioning $5 used Baby Gap pajamas, the company trades $600,000 blocks of natural gas--and pockets commensurately huge commissions. Boasts Enron president Jeffrey Skilling: "In terms of dollars transacted, we're the world...
...this year, that has meant $120 billion in transactions. And when you're running the network, all sorts of profitable opportunities arise. Last week, when word spread that natural-gas prices would spike this winter, Enron's in-house traders saw their gains surge as customers raced to lock in future supplies at today's prices. And Enron's stock price? It hit $90 last week, tripling its value of a year ago. Kind of like an Internet play, only better...
Lynda Clemmons, vice president at Enron, a Houston energy concern that buys and sells weather derivatives, says the concept emerged when companies' needs weren't being met by traditional insurance. "Insurance companies were saying, 'We can help you if a hurricane blows down your factory but not if it's 6[degrees] warmer this winter and your revenue drops,'" Clemmons says. The deregulation of the energy industry in 1995 meant that a new category of highly weather-sensitive businesses was suddenly forced to make a profit and became very interested in a product that could protect it from weather risks...
...Enron is also running up its own electric bill: the Houston company is paying $3.2 billion to acquire Oregon's Portland General Electric Co. in a deal that will give Enron access to low-cost hydroelectric power, 650,000 customers and an opportunity to go to school on retail operations...