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July 24, 2001

Creative Teenagers Barter For College Education

Last year two New Jersey teenagers, 18-year-old Chris Barrett and his childhood pal Luke McCabe, pitched themselves as "spokesguys" for any corporation willing to fund their higher education.

Today Barrett is at Pepperdine University's sunny Malibu (CA) campus while McCabe is a freshman at USC (University of Southern California)...thanks to First USA Bank.

The bank and the students claim this is a first for such a bartered sponsorship, where, between classes, the two will wear clothing with First USA Bank logos and speak with students about establishing credit and managing their money.

In exchange for the students providing such services, the mammoth credit card issuer has agreed to pick up $40,000 for one year's tuition, room, board, and student fees.

The California schools were their first choices because, the two guys claim, being 3,000 miles away from home gives them a different perspective on life. The teenagers came up with the novel idea last summer when they were interns for a small independent media relations firm near their home.


Vendor Financing A Two-Edged Sword

Telecommunications equipment providers who extended generous financing terms for easy sales to promising young companies are finding out there is another side to the story.

Because of the problems incurred, the need to scrutinize borrowers more closely, as well as adopting better risk-management techniques, may well be the way of the future for these providers. (Even though vendor finance loans are usually initiated by the sales force.)

But that doesn't solve the immediate problem, which is an impact on the vendors' financial performance, since loan losses in excess of reserves are charged to current earnings.

The Wall Street Journal estimates there is at least $25.6 billion worth of loans (at risk) on the books of nine global telecom giants.



Here And There. . .

  • Bank of America and AOL Time Warner have put together a $100 million reciprocal-ad effort, wherein B-of-A will be advertising across a number of AOL's media platforms including CNN, internet sites, and magazines. In turn AOL will advertise at B-of-A's branches, its ATM machines, and Internet bank.

  • Mexican cement maker Cemex has launched a new currency-transaction service called Construmex in Los Angeles. The service will enable Mexican immigrants in the U.S. to send money to Cemex distributors in Mexico for the purchase of house-building materials.

  • A study by the Markle Foundation, a New York group focused on mass communication, says the public views the Internet as a source of information, more as a library than as a way to shop, bank, or invest. (Interestingly, the study also found that about 70% of the public believes information on the Internet isn't to be trusted.)

  • The July issue of U.S. Banker reports that Sony, the electronics giant, is getting into the online banking business. Even though, according to the magazine, stand-alone Internet banking just doesn't work...at least for the present."

    Sony is quickly bringing together some key components by bartering a stake in their new concern for valuable contributions, i.e. Sumitomo Mitsubishi Banking is making its 7,600 ATMs available for a 16% stake, and J.P. Morgan Chase has a 4% share for providing a set of personal financial tools.

  • Yugoslavia's oil monopoly has set up a consortium of domestic companies for exporting goods and services to pay for Russian gas imports. Tinned fruit and vegetables, furniture, carpets, paints, ceramic tiles, medicines, and medical equipment are a few of the barter items which will be used to secure Russian natural gas.

  • Major corporations and big banks were aggressively moving into venture-capital investments a few years ago, either as a source of additional profit or as a way to keep tabs on new technologies.

    During 1995, corporate VC funds invested $361 million in some 59 companies. By 2000 those numbers jumped up to $5.7 billion in 340 companies, according to PricewaterhouseCoopers.

    But during the first three months of 2001, venture capital investing by corporations took a huge dive--falling by 81%!! (That's compared to a 39% drop in investments by the traditional, stand-alone venture funds.)

 

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