S.W.O.T Analysis Of Enron

S.W.O.T. Analysis of Enron

MBA 503

University of Phoenix

05/10/06

Describe the Situation

"Enron is now officially out of the energy business. They are now in a new business: confetti." Ð'--Jay Leno http://politicalhumor.about.com/library/blenronscandal.htm It is a shame that one of the most powerful companies has now gone out of business, had reputations destroyed and used millions of tax payers dollars on court costs; all due not having good business ethics. This paper will show a S.W.O.T. analysis of Enron with their strengths, weaknesses, opportunities and Training.

Strengths

Enron employed the best of the best. Employees had great pride in their company and wanted to see it grow and flourish, they were willing to take it to the next level. I can tell you this, though: By far my best days in my career were as a consultant for Enron. The environment was an extreme rush. Very busy, very progressive and innovative. I've never worked with more talented people in my life and I'm so grateful I had the opportunity. Katie Walthall,

former Enron contractor http://www.chron.com/disp/story.mpl/side/1160419.html Enron had a strong public voice they made a large donation to the local Red Cross. After the Sept. 11 tragedy, Enron also provided shuttle buses to the George R. Brown (Convention Center) so Enron employees could donate blood for those in need. This was followed by having two M.D. Anderson bloodmobiles directly on-site. The United Way drive was a top event at the Enron Company and employees looked forward to being involved. Community service was encouraged and fully supported with Enron Employees. In short, Enron management really appeared to believe in and follow through with their stated visions and values.

It was not only the employees who were strength for the company; it was their smart business practices in the early days. In 1985 Houston Natural Gas merged with InterNorth, which is a natural gas company based in Omaha, Nebraska, to form the super modern-day Enron, an interstate and intrastate natural gas pipeline company. In 1989 Enron began to trade natural gas commodities. Over the years, the company became the largest natural gas merchant in North America and eventually they branched out into trading of other elements, from water to coal to steel. In 2000 Enron shows their mighty strength; in August Enron stock hits a record high of $90 a share. It is not a wonder something so good had to come to an end. Something majority of employees said took over in the final months of Enron Ð'- Greed.

Weaknesses

The mighty and powerful greed will be the biggest weakness in any company. For Enron it was their destroyer. You never have to remember the truth, but you always have to remember a lie. Unfortunately, Enron found themselves caught up in their untruths:

Venue What Enron Said What the Government

Contends

Ð'*" Analyst conference (Jan. 20, 2000)

Ð'* Enron Broadband Services has "built this network...and we are turning on the switch"; the critical "network control software" is in Enron's possession and incorporated and used in its network. (Skilling)

Ð'* Enron conservatively valued the EBS business at $30 million. (Skilling)

Ð'* EBS had neither the claimed broadband network, nor the critical software to run it, in place.

Ð'* The valuation was inflated by billions of dollars over what internal and external evaluations determined might be supportable

Ð'* Analyst call (April 12, 2000)

Ð'* Enron's wholesale energy "assets and investments business" recorded earnings of $220 million for the quarter...the upswing in earnings...was "basically the performance of the existing asset portfolios." (Skilling)

Ð'* About $85 million of the earnings were unrelated to the operating performance of Enron's energy business and were attributable to a scheme to generate earnings tied to an increase in Enron's stock price.

Ð'* Analyst call (Jan. 22, 2001)

Ð'* "For Enron, the situation in California had little impact on fourth quarter results"...and "nothing can happen in California that would jeopardize" Enron's earnings targets. (Skilling)

Ð'* Nonrecurring transactions such as Enron Broadband Services' video-on-demand venture with Blockbuster accounted for "a fairly small amount" of EBS revenues. (Unnamed conspirator)

Ð'* Enron reaped huge energy trading profits in California and concealed those earnings in undisclosed reserve accounts. Skilling also knew by late January that Enron may not be able to collect hundreds of millions owed it by California utilities.

Ð'* Skilling knew the sale of projected future revenues from the Blockbuster deal amounted to $53 million of EBS' quarterly revenues of $63 million.

Ð'* Analyst conference (Jan. 25, 2001)

Ð'* "Enron Broadband Services and Enron Energy Services are "strong franchises with sustainable high earnings power." (Skilling)

Ð'* EBS was performing poorly and EBS personnel had recommended shutting down or selling its network; EES was a struggling business owed hundreds of millions by California utilities that it could not collect.

Ð'* Analyst call (March 23, 2001)

Ð'* Enron was "highly confident" of its income target of $225 million for Enron Energy Services. (Skilling)

Ð'* EBS was "coming along just fine" and it was not laying off employees but rather "moving people around inside EBS" (Skilling)

Ð'* EES's management privately was predicting it would take a year or more for EES to become truly profitable.

Ð'* EBS was laying off employees and a senior EBS executive estimated Enron needed to take a loss equal to about half EBS's