ITT rips Forbes’ ‘hatchet job’ of management

Gary Thompson

Thursday, March 21, 1996 | 11:59 a.m.

ITT Corp. ripped a Forbes magazine cover story saying the Caesars World parent is a poorly managed company with no coherent business strategy.

"Our strategy is simple -- to be the best and biggest destination company in the world," said ITT spokesman Jim Gallagher. "The Forbes story is filled with inaccuracies."

The article, in the March 25 edition of the New York-based financial publication, says ITT paid too much to acquire casino, hotel and entertainment properties, including Caesars World resorts in Nevada and Atlantic City.

The magazine, launched by the late Malcolm Forbes and source of former Republican presidential candidate Steve Forbes' fortune, has a reputation for publishing biting, subjective analyses of American corporations. The ITT article is no exception.

It says Wall Street's high valuation of ITT is unwarranted, and that the company is nothing more than "a somewhat sexy-looking conglomerate that makes acquisitions on an opportunistic basis rather than on a strategic basis."

"The entire story lacks objectivity. It doesn't contain a single third-party quote," complained Gallagher. "The reporter admitted that Forbes doesn't write objective pieces."

"Gallagher's statement is accurate but only partially true," said Subrata Chakravarty, one of two authors of the ITT story. "We do tend to take unbalanced positions."

But that's by design, not accident.

"Every article we write must have a point of view," he said. "We are objective going in, but subjective coming out" of investigations into the companies Forbes profiles.

"Our editor hates 'two-handed' stories -- you know, 'on the one hand ... on the other hand.' When you finish reading a Forbes article, you should know what the writer feels about the company.

"I began to look at ITT with a considerable amount of skepticism about what they're doing and how they're doing it," Charavarty said. "The bottom line is we think ITT is a badly managed company that has no strategy."

Specifically, Charavarty writes that ITT Corp. Chairman Rand Araskog "has yet to prove that he can make good returns" from the $4.5 billion in assets the company bought over the past two years. Among them were the Caesars World properties that ITT acquired for $1.7 billion.

"No question: He paid top dollar for casino, hotel and entertainment properties," the article says. "He has yet to prove he can raise their profits sufficiently to justify the consistently huge prices paid."

Not so, said Gallagher.

"We don't think we overpaid, Wall Street doesn't think we overpaid and our shareholders don't think we overpaid," the ITT spokesman said. "We bought undervalued and underperforming assets and turned them around."

Gallagher said ITT Corp. stock rose $3 a share after the Forbes issue hit New York newsstands. It's lost some of that gain, analysts said, because of uncertainties over its New Orleans gaming plans. ITT and Caesars executives met with Louisiana officials Wednesday to discuss details of their offer to take over the Harrah's Jazz casino complex, closed several months ago due to slow business.

Bear Sterns gaming analyst Jason Ader said the article had virtually no impact on ITT's stock price.

"The large holders dismiss it as nothing more than a typical Forbes hatchet job," he said. "They, and we, think the company is doing very well."

Gallagher concurred.

"Caesars is performing far beyond our expectations," he said. "We know how to manage properties."

Gallagher was particularly annoyed over the wording of an anecdote regarding a high-rolling baccarat player who lost $1.7 million at Caesars Palace, but won $3 million at ITT's Desert Inn. "In the end," the article says, "ITT will probably get its money back, but doesn't the right hand know what the left hand is doing?"

"We've asked Forbes to document that story," said Gallagher. "But if they're talking about who we think they're talking about, they're talking about a guy who drops $7 million to $10 million a year with us."

As for ITT's overall business strategy, it's simple, he said: "When people leave home for entertainment, we want them to think ITT."