ENRON'S DILEMMA

Enron got heavily involved with telecom in 1998 when the market was hot. At the time, Frost & Sullivan projected that the electrical power industry would post a compound annual growth rate of just 1.1% from 1996 to 2003 but that telecom would produce 7% growth. In the current economic environment, however, investor demand and common sense dictates that companies focus on core competencies. 

Enron is no exception. The company is involved in dozens of businesses, ranging from bandwidth trading to helping farmers manage the cost of fertilizer. Enron, which has seen its share price drop from nearly $37 in mid-October to just above $11 last week, needs to whittle down its portfolio. Doing so would allow it to focus on its core work while demonstrating its determination to Wall Street, which has lost faith in the company. 

Telecom is a good business for Enron to put on the block. The recession in the communications sector is deeper than in the rest of the economy, making the company's telecom a drag on earnings. And even if its communications division was valued low, a sale would likely produce a better return on investment than one would expect, given that construction costs for its network were made cheaper by the rights-of-way already owned by its energy arm. Enron needs to regain its luster. In times like these, a company that tries to do a little of everything can do nothing completely.