Word of Sears, Roebuck & Co.'s plan to divest its brokerage and real estate operations triggered the postponement of a federal court trial between Sears subsidiary Discover Card and Visa and cast a wave of concern about what the business plan will mean to the 1,600-plus Utahns employed at the credit card's operations center in Sandy.
The plan, announced Tuesday, will eliminate $3 billion of debt and is intended to make Sears a stronger merchandiser.Sears plans to divest the Dean Witter Financial Group and the Coldwell Banker residential real-estate business next year. Sears also plans to sell to the public up to 20 percent of its Allstate insurance subsidiary.
The Dean Witter Group includes Sears' Discover Card. The Sandy operation handles 40 percent of the card's customer service calls annually and is twice as large as the company's other centers.
Sears officials said they do not anticipate any immediate changes in the Utah work force.
"I don't know what it means in the future. That will be decided by the new management or independent manager of Dean Witter as an independent location," said Gordon Jones, spokesman for Sears Roebuck and Co., in a telephone interview from his Chicago office Tuesday afternoon.
"I wouldn't anticipate any immediate changes. But again, we anticipate the initial 20 percent of the offering to be made during the first quarter and the complete spinoff later in 1993."
After hearing news of the sale, lawyers for Visa scurried into federal court in Salt Lake City and sought the postponement of a trial that pits Visa and Discover Card against each other.
The six-week trial was scheduled to begin Wednesday morning before U.S. District Judge Dee V. Benson.
Sears is suing for the right to issue Visa cards, which have a much wider reach than Sears' Discover card.
Visa likened the move to Burger King wanting to sell Big Macs. The card company is fighting Sears' move.
After a short meeting with Visa and Sears lawyers, Benson decided to empanel a jury Wednesday and Thursday but postpone the trial until Oct. 13.
"We wanted the opportunity to ascertain the facts relative to the announcement Sears made today as far as Discover Card being a major competitor of Visa. It commands, and these are Sears' numbers, the second-largest market share of the credit card industry," said David Brancoli, spokesman for San Francisco-based Visa USA, parent of the Visa network of cards.
Brancoli would not comment on the timing of the announcement, except to say: "It did occur the day before the trial was to start. As far as the timing is concerned, that's Sears' decision."
Business watchers say the dispute between Sears and Visa could reshape the superpowers of credit cards and affect the costs of buying with plastic for millions of consumers.
The battle landed in Utah's federal court after Sears bought MountainWest Savings and Loan from the federal government.
MountainWest already offered Visa cards to its customers. Sears planned to use the Salt Lake S&L to issue 1.5 million Visa cards to Sears customers across the country.
Visa discovered Sears owned MountainWest when the S&L ordered 1.5 million Visa cards with the "Prime Option" logo on them. The logo is a trademark of Sears' Dean Witter financial network.
Visa refused refused to fill the order and Sears sued, contending that Visa had violated federal antitrust laws. Visa counter-sued.
The 10th Circuit Court of Appeals has forbidden Sears to issue the Visa card until the matter is resolved by Benson.
Meanwhile, Wall Street welcomed the Sears announcement. Sears was the most actively traded stock on the New York Stock Exchange Tuesday, surging $3.371/2 to $44.75 with 5.9 million shares changing hands.
Shareholders critical of Sears management have demanded such a move in recent years as Kmart Corp. and Wal-Mart Stores Inc. surpassed Sears as the nation's top retailers.
From 1987 to 1991, Sears' annual retailing profits dropped more than 38 percent, to $486 million from $787 million, despite a nearly 12 percent increase in retailing revenue, to $31.4 billion.
During the same period, Dean Witter Financial Group's results improved from a $40 million loss in 1987 to a $345 million operating profit last year. Coldwell Banker produced $61 million in profits in 1991, a recession year, compared with $129 million five years ago.