Philip Morris Shares Fall On Comments
Shares of Philip Morris Cos. Inc. slipped more than 3 percent Wednesday after the world's largest tobacco company acknowledged for the first time that smoking causes a number of lethal diseases.
The New York-based tobacco company's stock fell 1-1/16 to 32-15/16 in afternoon activity on the New York Stock Exchange while the Dow Jones Industrial average was off 184.90 to 10232.16.
As part of a new promotional campaign, the makers of Marlboro cigarettes admitted on their Web site that there is an ''overwhelming medical and scientific consensus that cigarette smoking causes lung cancer, heart disease, emphysema and other serious diseases in smokers.''
Along with a new Web site, the $100 million image campaign includes a series of commercials designed to promote Philip Morris' other businesses, Kraft Foods Inc. and Miller Brewing Co., and their philanthropic efforts.
Industry analysts said the acknowledgment should be a long-term boost for a company and industry that has remained tight-lipped while anti-tobacco activists and juries have kept their denial of health-related issues on the forefront.
``Cleary, the duel approach of the strong philanthropic messages in TV commercials and a Web site that acknowledges most of the hazards of smoking that it has been ambiguous about will help improve its image in the long-term,'' Martin Feldman, tobacco analyst of Salomon Smith Barney, said.
``But more importantly, it may help to reduce the degree of juror anger that is out there,'' he said, adding that the campaign was motivated by juror research conducted by the company over last year.
Feldman said the results of the Florida Engle Phase 1 trial and the two West Coast decisions played a big part in the decision to acknowledge the dangers of smoking. Tobacco companies have agreed to pay $246 billion to settle lawsuits brought on by states to recover their Medicaid costs to treat ill smokers.
``The tobacco industry's track record in individual suits is the key to valuation in the long run,'' analyst William Pecoriello of Sanford Bernstein said.
``Anti-tobacco groups have demonized the industry and influenced juries while the industry hid behind closed doors. The public image campaign addresses these concerns head-on, but should be viewed as part of a long-term solution, not a short term 'magic bullet fix''', he said.
Bonnie Herzog of Credit Suisse First Boston added: ``The company has been ignoring the public for years and through this campaign, Philip Morris can now finally embrace them,''