10 to Watch in 2007

From "triple plays" and replacement organs to a new Philadelphia mayor, 2007 promises a lot to hold the business community's attention. A look at 10 issues and people expected to make news.

Dan Matthias,

Chairman, chief executive officer

Rebecca C. Matthias,  President, chief operating officer

Mothers Work Inc.

Rebecca and Dan Matthias , the married founders of Mothers Work Inc., raised eyebrows last month when they sold almost half a million shares of the Philadelphia company's stock.

But Rebecca Matthias , 53, said that she and her husband, who is 63, still "have a lot of plans for the future," and a lot of stock.

Fiscal 2006 was a "groundbreaking-change year for us," she said, as the company grappled successfully with increased competition. Its stock price more than quadrupled. The company developed maternity lines for Sears and Kohl's and tested Destination Maternity, big stores that have all the company brands, spas and exercise rooms. "It's like a department store for pregnant women," Matthias said. "It's been so successful that we're really ramping up. "

Mothers Work also has begun selling financial services - college-savings plans - and hopes to expand into mortgages and life insurance. And it plans to broaden its Web site to include a broad array of information for pregnant women.

Ian Corydon, an analyst who covers Mothers Work for B. Riley & Co., said stock experts sometimes worry about why insiders sell stock, but he thinks the company is on the right track. "We're looking for another big earnings increase this year," he said.

- Stacey Burling

David Juliano, Executive vice president,  marketing and product development

Comcast Corp.

David Juliano is Comcast Corp.'s bundle guy.

His job is to hit Verizon Communications Inc. and other competitors over their corporate heads with Comcast's "triple play," a package of video, voice and Internet services starting at $99 a month.

So far, Comcast, which introduced the voice product only last year, has been beating the phone companies.

But Verizon and AT&T Inc. are fighting back with their own bundles.

Juliano, executive vice president for marketing and product development, has been in the hot seat before - adding more than 6.4 million customers in five years as head of Comcast's then-fledgling high-speed-Internet business.

One source of growth: The Wilmington native made Comcast's Internet product available at 5,000 retail locations, including RadioShacks and Best Buys.

"The notion was that people would be able to get Comcast services where they buy associated products," Juliano said.

He is expanding on that concept this year. Earlier this month, Comcast and Circuit City opened a new store in Medford, Mass., called Connect that lets consumers handle and buy high-end products and services from the two companies.

He said he had only just begun. Comcast's triple-play and other services will launch in millions of new homes this year, he said.

There is just one more bundle he has to look out for: A new grandchild, born Dec. 3.

- Miriam Hill

Business Tax Burden

Watching the mayor's race in the City of Philadelphia

Construction cranes assembling condo high-rises on the Delaware River or the 58-story Comcast tower in Center City show a city beating with economic life.

But property development doesn't tell the whole story.

Philadelphia, which has been shedding companies and workers since the early 1970s, lost an additional 25,000 to 30,000 jobs during Mayor Street's two terms in office.

There has been a modest recovery in 2006: a net gain of 1,000 to 2,000 jobs. But many people would say the city has lost the tourism-led momentum of the late 1990s.

With the city's mayoral election of 2007, economic issues could again take the spotlight. The region's workers and businesses remain some of the most heavily taxed in the nation.

A flashpoint in the tax debates has been Philadelphia's business-privilege taxes, which are levied separately on revenue, or gross receipts, and profits. Local businesses say the taxes exact a heavy toll on the city and contribute to the job drain to the suburbs.

There will likely be dueling economic platforms among the declared candidates, who are former City Councilman Michael Nutter, businessman Tom Knox, U.S. Rep. Chaka Fattah and State Rep. Dwight Evans. For example, Fattah said in an interview Thursday that he would like to restructure the city's taxes so they are "tax neutral" when compared with the suburbs. He said he would roll his plan out as the election unfolds.

"Nobody taxes business the way we do," said Brett Mandel, a one-man jackhammer on the tax issue and executive director of Philadelphia Forward, a nonprofit group. Taxes have to be cut to preserve the city's job base, he said. "We're not talking about jobs shipped to India here. We're talking about jobs moving to Ardmore or Pennsauken. "

Randall Miller, history professor at St. Joseph's University and an expert on the Philadelphia area, said the city's escalating murder rate could overshadow economic issues in the mayoral race. "The question is whether it knocks everything off the table," he said.

Miller said that tax-cutting has faded somewhat from the public discourse and that most people don't view it as a cure-all. He expects the tax structure to be one of several economic issues discussed by mayoral candidates. The others could be coordinated economic development, casinos and corruption.

- Bob Fernandez

Steven A. Nichtberger,  President and chief executive officer

Tengion Inc.

After nearly a decade at Merck & Co. Inc. in late 2003, Steven Nichtberger left to head Tengion Inc., a start-up developing replacement organs and tissues using patients' own cells.

Although the science originated in Boston, Nichtberger, 45, a Wharton School graduate and a cardiologist, located the corporate headquarters in King of Prussia. He recruited an experienced management team and has raised $89 million in private-equity capital. Tengion is poised to begin human clinical trials next year on its first product, a bladder.

The technology was developed by Anthony Atala and scientists at Children's Hospital of Boston. Between 1999 and 2001, Atala, a pediatric urologist, and his team successfully implanted replacement bladders in seven children, ages 4 to 19, whose bladders had been damaged by spina bifida.

Tengion, which has 70 employees, is constructing a 45,000-square-foot manufacturing plant in East Norriton, Montgomery County, where the company has already moved its corporate offices.

Working with Atala, now at the Wake Forest Institute for Regenerative Medicine in Winston-Salem, N.C., Tengion has replicated the technology, which researchers believe may hold promise for other tissues and organs, including the kidney, blood vessels, heart, liver, pancreas and nerves.

If all goes well, the company hopes by the end of the decade to have the first neo-bladders commercially available for children with dysfunctional bladders due to spina bifida and spinal-cord injuries.

- Linda Loyd

Philadelphia Slots

Casino construction to begin

SugarHouse Gaming

Foxwoods Development Corp. L.L.C.

SugarHouse Gaming and Foxwoods Development Corp. L.L.C. this month won the two coveted city licenses to build casinos on the Delaware waterfront. But revenue to the state is expected to begin flowing in the spring of 2008, when SugarHouse opens a temporary slots facility.

SugarHouse, controlled by Chicago billionaire developer Neil G. Bluhm, and Foxwoods, run by the Mashantucket Pequot Tribal Nation in Connecticut, will try to make their mark on the Philadelphia region. SugarHouse plans to break ground this spring on its temporary gambling hall, with its permanent casino to open in about two years. Foxwoods plans to break ground on its permanent slots parlor in April, with an anticipated November 2008 opening.

Both operators will spend the new year getting through a potentially long appeals process. They have to win over community groups that are not supportive of the casinos in their neighborhoods and fine-tune plans to handle increased traffic. The casinos also need to get final approvals for their plans and permits to begin building their half-billion-dollar gambling houses.

The immediate concern facing both operators is a challenge to their licenses. At least one lawsuit is expected to be filed with the state Supreme Court to overturn or delay the Pennsylvania Gaming Control Board's decision. Board Chairman Tad Decker said after the city licenses were awarded Dec. 20 that the seven-member board was bracing for a challenge.

An appeal to the state Supreme Court could hold up construction of new slots casinos for months. Board spokesman Doug Harbach said any groups wanting to file an appeal, such as unhappy host communities, have to do so within 30 days of the board's order and adjudication. Those orders are expected to be issued sometime next month and will contain the board's opinion on the license winners.

- Suzette Parmley

Richard T. Clark,  Chairman and chief executive officer

Merck & Co. Inc.

Clark's second year at the helm may be just as difficult as his first, if that's possible. But it's sure to be crucial to Merck's future.

Having contained Merck's crisis in strategy, morale and market value, Clark now has to keep up the momentum and make good on promises, including doubling earnings by 2010 and bringing more breakthrough drugs to market.

Clark, 60, also will have to steer some grand new strategies through treacherous waters known as Corporate Culture, which run deep at Mother Merck.

"Culture eats strategy for lunch," Clark likes to tell his executives, according to Peter Loescher, the new marketing chief who is grappling with just that problem.

So far, Clark is beating the skeptics. On his watch in 2006, Merck launched five new products. Its stock price returned to levels not seen since Vioxx was on the market. And employees appear to have regained optimism and trust in their leaders, notably a CEO reputed for strolling through company cafeterias just to chat.

Case in point: Two weeks ago, Clark took over the role of board chairman from Lawrence Bossidy, the former executive of Honeywell Internationl Inc. and General Electric Co. who had backed Clark's discredited predecessor, Ray Gilmartin, also an outsider. Employees reportedly did not balk at Clark's controversial consolidation of power. Rather, they saw a resurgence of trusted insiders and the true Merck.

- Thomas Ginsberg

W. Douglas Parker, Chairman and chief executive officer

US Airways Group Inc.

Doug Parker apparently likes the challenge of transforming old, bankrupt airlines into leaner companies that can compete with younger, low-cost rivals such as AirTran Airways and Southwest Airlines.

A year ago, Parker was three months into the integration of US Airways, which had been in Chapter 11 twice in three years, and America West Airlines, which he had led before their merger. The new entity kept the US Airways name because it was better known than America West.

Now, Parker, 45, wants to change the name of his company again, by bringing Delta Air Lines Inc. out of court protection with an $8.7 billion offer made Nov. 15. He proposed adopting the even-better-known Delta name for what would become the world's largest airline.

Unlike with the US Airways deal, however, Parker faces stiff opposition, from Delta's board and management, which filed its own reorganization plan for the Atlanta-based carrier Dec. 20. Delta's creditors and a bankruptcy judge also will have to be convinced that US Airways' proposal is better for all stakeholders than the management plan.

- Tom Belden

Troublesome Baggage Handling

No. 1 problem

US Airways Group Inc.

Travelers can start 2007 with high hopes that the region's biggest airline may have finally solved its baggage-service mess here.

Starting with the 2004 Christmas holidays, while it was still in bankruptcy, US Airways struggled to hire, train and retain enough Philadelphia baggage handlers to keep bags moving efficiently. The airline also needed to replace much of the aging bag-handling equipment it inherited from previous managements. Service deteriorated again last summer when attrition ran higher than expected, and waits for arriving bags often stretched to an hour.

Under the direction of Philadelphia managing director Tony Grantham, and with new equipment in place and more people hired, US Airways' performance began to improve this fall. Thanksgiving service went smoothly.

Just before Christmas, bags were popping onto carousels in 29 minutes or less for 95 percent of arriving flights. Passengers have said recently that bags often reach the carousels before they can get off a flight and walk to the bag-claim area.

This year, US Airways executives say the service should become even more efficient when the airline reorganizes the way it dispatches crews to meet flights, and increases the number of workers on each crew from four to six.

- Tom Belden

David Grasso, President

Grasso Holdings Inc.

David Grasso entered the real estate world at age 12, working for his father's company and making coffee runs for carpenters, cleaning up sites, and carrying Sheetrock.

Today, Grasso Holdings Inc. employs 120 and deals in millions of dollars. The 36-year-old is seen as one of Philadelphia's rising figures in real estate, and he is credited with infusing value in struggling Center City properties.

In 2006, Grasso added to his portfolio projects such as the Packard Building, the Lofts at Bella Vista, and the Valley Square lifestyle center, a 140-acre mixed-use development in Bucks County. He bought the Graham Building in Center City for $35 million and moved his headquarters there.

In Philadelphia, Grasso has created buzz for a 1.2-million-square-foot, mixed-used building at 1601 Vine St., scheduled to be the new home for a much larger Whole Foods Market.

This year, Grasso Holdings is making forays into the Midwest. It is also planning to gobble up a $350 million office property in Manhattan and grow its residential holdings in the city.

"Our future lies nationally, not locally," Grasso said recently.

- Madhusmita Bora

Brian Tierney,  Chief executive officer,

Philadelphia Media Holdings L.L.C.

Publisher, The Inquirer

and Philadelphia Daily News

The "new era in Philadelphia journalism" that Tierney's investor group promised when it bought the city's daily papers and Philly.com last year began with a drop in national advertising and circulation; tough contract negotiations; and plans for layoffs, mostly in the Inquirer news staff.

With the decks cleared, Tierney, 49, says he will focus on new ad and news delivery systems, and improved online and print products. He also has pledged to spend millions of dollars on initiatives such as equipment for the printing plant, Web site improvements, and marketing and promotion of The Inquirer and Philadelphia Daily News. Having named Inquirer veteran Bill Marimow as that paper's new editor, Gannett Co. Inc. cost-cutter Mark Frisby to run operations, and former Pennsylvania Lottery executive director Edward Mahlman as chief promoter, Tierney is recruiting "national figures" to head the key advertising and online departments.

And he has inspired local groups from Boston to Los Angeles to attempt to buy their own daily papers.

- Joseph N. DiStefano