The business world has watched in awe as Houston-based Enron has
collapsed under the weight of its financial indiscretions, which
included years of false earnings and hidden debt. In telling the tale of
how Enron fell from grace, the media drew attention to the company's
magnitude in order to give the public the context of just how big and
influential the company had been up until a short time ago. As the
Atlanta Journal-Constitution succinctly wrote, "It is the largest and
fastest corporate collapse in US history."
Several articles traced the road to Enron's past success and described
the company as a pioneer in the field of trading energy as a
commodity.
The New York Times (December 2) explained, Enron was "not only the
world's largest trader of electricity and natural gas, but also a
telecommunications company, an investment firm, a paper and lumber
producer, and an insurer.
It was, with more than $100 billion in revenue last year, the
nation's seventh-largest company."
All of this made its bankruptcy filing, the largest in US history, all
the more shocking. To further drive home the point, many newspapers
pointed out that the company's stock, which had been as high as $90 per share recently, closed at 26 cents.
A number of publications viewed Enron's unraveling from the point of
view of the competition, and observed that many of the energy traders
who had used Enron as a market maker had now left and were doing
business elsewhere.
In the eyes of The Wall Street Journal (December 3), Enron's loss was
its competitors' gain: "A half dozen of Enron's biggest rivals are
gearing up to grab chunks of the dominant share the energy concern held
in the natural gas and power-trading market." Competitors singled out
for being best positioned to gain in the long term included American
Electric Power, Duke Energy, Williams, El Paso, Dynegy, and Reliant.
However, several papers pointed out that in the short term, Enron's
collapse could bring trouble to the industry and its wide assortment of
creditors in the form of billions of dollars in unpaid debts and trades.
The media conveyed the notion that, in being such a large player in so
many industries, Enron was going to create a domino effect to hurt a
variety of companies as it imploded.
Enron's $10 billion lawsuit against one-time suitor Dynegy also
made headlines. The New York Times' (December 3) interpretation of the
lawsuit was that it "essentially accuses Dynegy of using the merger as a
ploy to weaken Enron even further."
The media did not tend to judge whether or not that specific lawsuit had
any merit, but a number of reports suggested that "Enron's rapid
unraveling was largely of its own making" (San Francisco Chronicle,
December 3).
The media is implying that there is plenty of blame to go around for the
Enron case: Enron's management, its board of directors, the company's
auditors (Arthur Andersen, who are now also being investigated), the
Securities and Exchange Commission, and the financial analyst community.
While Enron is taking steps to resurrect its trading platform in the
form of a joint venture with one or more banks, the future Enron will
likely be a shell of its former self.
Evaluation and analysis by CARMA International. Media Watch can be found
at www.carma.com.
