But the darn guy has a smile on his face. This, of course, is just Skilling's setup to tell a Dallas audience of SMU Cox School of Business types that the giant is still kicking, and will try anything — even trading "weather options" — to keep itself financially robust. Seems Skilling's brother in Chicago is a meteorologist who's gotten him into "financial settlement contracts," which are bought by companies — like malls or snowmobile makers, for instance — whose business is dependent on the weather. "We're even looking at the rainfall market," says Skilling.
Rainfall as a spot market? Seemingly crazy thinking like this has paid off in the past for Skilling who has turned Enron from a gas pipeline business into a savvy Internet trader of commodities, everything from gas and energy to pulp and metals (two of their newer markets). Since Skilling came on board in 1990, revenues have shot up from $2.5 billion to $100 billion and he predicts they will reach $160 billion to $170 billion this year. (Uh, isn't this supposed to be a bad year?)
Market cap under his reign has gone from $3 billion to $62 billion — "until last week," he chortles, looking at the chart being projected on a megascreen nearby. Last week, alas, the stock was off 30 percent from its October highs. "Another chart that is no longer true," he says to laughs. Then the shareholder graphic flashes and he winces. "It used to be my favorite."
Enron, which soared on its tech connections, is now taking a beating with its tech-iness, and the boss is back to saying energy is their No. 1 business. And that's the good news. Prices for Enron's main market — natural gas — will skyrocket as demand climbs. Which is bad for Californians. Skilling predicts the shortfall in California this summer will be 5,000 megawatts — five times greater than the problem that sparked the power crisis in January. In fact, Skilling predicts Silicon Valley and homeowners alike will be paying for the state's misguided deregulation attempt for "another three to four or five years" until new infrastructure can take the edge off prices. "The state of California has given deregulation a terrible name," he says.
If soaring energy prices are good news for Enron stockholders, broadband is the bad. The company's new plaything, selling excess broadband capacity, isn't looking too hot right now despite an increase in activity. Enron's 20-year deal with Blockbuster last year to provide movies on demand right into your home collapsed recently after the Hollywood studios nixed Blockbuster's plans to control content. Now Enron is having to go to each studio, looking to sign up their archives for transmission.
This on top of the little problem that most people — even in places like Dallas, with its hot "Telcom Corridor" companies — can't get high-speed Internet service. Skilling, who once touted broadband as the future, now plays down its importance to the company's bottom line, predicting that it will take four to five years before it will become even 10 or 15 percent of net income.
Wonder if he took out a rainfall contract on that?