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Technology Stocks : Winstar Comm. (WCII) -- Ignore unavailable to you. Want to Upgrade?

To: SteveG who wrote (7664)	8/11/1998 2:56:00 AM
From: SteveG	Respond to of 12468

<A> WSJ: Salomon Gives Analyst A Deal Of $25 Million By Anita Raghavan and Patrick McGeehan Staff Reporters of The Wall Street Journal NEW YORK -- The bar just went up for a select group of stock analysts on Wall Street. Salomon Smith Barney Inc., in a bid to stem key defections at the Wall Street securities firm, has given well-known telecommunications analyst Jack B. Grubman a package of cash and stock valued at about $25 million in a successful effort to keep him at the firm. The Salomon Smith Barney move comes after rival Goldman, Sachs & Co. made a strong bid to snare Mr. Grubman - who received a pay package from Salomon valued at about $10 million in 1997 - with a similarly lucrative offer. The big price tag for Mr. Grubman underscores the role that influential stock-research analysts like Mr. Grubman who can advise on mergers, and bring in other investmentbanking business, play at large brokerage firms that cater to small investors. At a time when small investors are hungering for fast-growing telecommunications stocks, Mr. Grubman has become something of a Pied Piper for these stocks. Last year, for instance, while Mr. Grubman was bearish on telephone stocks, he was a raging bull on the stock of Salomon investment-banking client WorldCom Inc. - a pick that helped earn him the No. 1 spot among wireline services analysts in Institutional Investor's 1997 All-American Research Team survey. Since Salomon, a unit of Travelers Group Inc., merged with Smith Barney, ownership of WorldCom stock in the Smith Barney retail brokerage system, which caters to small investors, has grown to 55 million shares from eight million sharesin no small part because of Mr. Grubman's bullish posture on the stock. Mr. Grubman was also cited in The Wall Street Journal's All-Star Analyst 1998 survey, ranking No. 3 for his earnings-estimate accuracy. Kevin McCaffrey, Salomon Smith Barney's head of U.S. stock research, declined to comment on Mr. Grubman's pay package. In an interview yesterday, Mr. Grubman said he decided to stay at Salomon because "at the end of the day I liked my platform and I really do like Sandy Weill a lot." A Goldman Sachs spokesman declined to comment. But Wall Street executive recruiters almost universally agreed that Mr. Grubman's new pay package was rare, particularly for research analysts and even for investment bankers. "You see that kind of money made at hedge funds or by proprietary traders who are trading billions of dollars of securities a day," said Gary Goldstein, president of Whitney Group, an executive-search firm. "It is very unusual for someone in banking or research of a top company to be paid that kind of money." Mr. Goldstein added that "it shows you how valuable that telecom franchise is and how important he is to that franchise." Alan Johnson, a compensation consultant at Johnson Associates in New York, said that at firms that sell stocks directly to individual investors, analysts build up their value by establishing a following among the brokers who cater to those customers. "The brokers trust them if they can spin stories that the retail sales force can use," said Mr. Johnson. Besides his credibility among investors, Mr. Grubman is valued by Salomon for the telecommunications-banking business he brings in each year. It was his relationship with WorldCom Chief Executive Bernard J. Ebbers that helped Salomon win the banking business when WorldCom moved to acquire MCI Communications Corp. last year. Salomon's move comes after the investment bank last week lost Michael Carr, its mergers and acquisitions chief, to Goldman and John V. "Jack" Kirnan, its top-ranked auto analyst, to Credit Suisse First Boston. At one point, while Goldman was courting both Messrs. Carr and Grubman, Salomon Co-Chief Executive Officer Deryck Maughan telephoned Goldman Co-Chief Executive Officer Jon Corzine to demand to know what was going on, people familiar with the situation say. Mr. Kirnan, ranked No. 2 among auto analysts last year in Institutional Investor's annual survey, was the eighth former Salomon Brothers analyst to leave the firm since it merged with Smith Barney late last year. Salomon Smith Barney has replaced five of those analysts with new hires. The firm is looking for a replacement for Mr. Kirnan, a spokeswoman said. The big pay package for Mr. Grubman is somewhat counter to Mr. Weill's style. He is known for being tightfisted even when it comes to paying hot-shot investment bankers. But Whitney Group's Mr. Goldstein said Mr. Weill and the heads of other publicly traded brokerage firms may have to be looser with their purse strings, especially with Goldman preparing to go public. "Goldman is raising the bar," Mr. Goldstein said. "They now have a currency that is going to make it very difficult for their competitors to hold onto their key people" unless they offer similar packages of cash and stock. In an interview last week, John Hoffmann, head of Salomon Smith Barney's research group, said, "We are going to be extremely competitive in research. We don't want to get in any crazy bidding wars. But we certainly are going to pay market" compensation.