WHITTLE MOVES TO SHOW CRITICS THEY'RE WRONG

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NEW YORK-Chris Whittle has sprung to life.

The chairman of Whittle Communications has just asked a visitor for a "tough question" and has been told his company today seems to have fallen far short of the promise it showed five years ago, when it was widely viewed as a new media powerhouse and he as its visionary leader.

He's out to prove otherwise. Grabbing a folder from his desk, Mr. Whittle begins paging through documents listing internal financial projections (some shown only on the condition they not be disclosed).

"What I think this company has successfully done is taken our two prominent places-healthcare and education-and transitioned them from small print properties to large electronic properties," Mr. Whittle says. "Was it sloppy in places? Yes. Bumpy? Yes. Mistakes? Yes.

"Hot company?" he asks, finally, meaning does that description still fit Whittle. "Yes."

Some people might dispute that. Whittle last week pulled the plug on Special Report, a money-losing TV and print system for physicians' waiting rooms that was once the company's most promising media property.

As a result, Whittle will lay off some 150 people, or 14% of its total workforce. The company is expected to register a decline in revenues and an overall loss for the fiscal year ending June 30, the second consecutive year of such bad news for Whittle's partners.

Whittle also last week appointed Donald F. Johnstone, 63, to fill the vacant post of president-ceo, from the same job at Philips Consumer Electronics Co., a Whittle general partner. Mr. Johnstone, an experienced senior manager, is expected to bring a much-needed sense of discipline to the Knoxville, Tenn.-based company.

The failure of Special Report after six years was the latest setback for Whittle. The company scrapped several development projects and laid off more than 100 employees in 1992 and last year was forced to scale back plans to build a chain of for-profit schools.

The 46-year-old Mr. Whittle, a consummate salesman who once predicted his company would have revenues of more than $500 million by the early 1990s, now admits that revenues will hover around $200 million for the next two years.

But he said Whittle's remaining properties-Channel One, a TV news network for schools, and Medical News Network, an interactive service for physicians-are profitable and that the company's cash flow is stronger than it has been in its 24-year history.

Mr. Whittle denied his partners pressured him to shut down Special Report, but laughed as he said, "The board was unanimously in favor of this decision.

He also denied there was pressure to name a new president. But an executive with one of Whittle's partner companies said last week, "It was certainly something the partners felt very strongly about. [Mr. Johnstone] can put in a certain discipline and focus that needs to be there."

Whittle's partners include Time Warner, which holds a 37.5% stake and Philips and Associated Newspaper Holdings, each with 25%. Philips is raising its stake to 33%, which will reduce Time Warner to 33% and leave the remaining 34% held by Associated and Mr. Whittle and his limited partners.

Time Warner tried without success to bail out last year. Executives close to Whittle predicted Time Warner will wait till the smoke clears from the latest moves before making a decision on its stake.

Mr. Whittle said Special Report had been losing money since it was converted from a magazine to a TV system in 1990. He blamed high distribution costs and said a weak advertising market was a secondary factor.

"The board was of a mind that we should take those resources and pour them into MNN," Mr. Whittle said.

Whittle two weeks ago announced it would spend $200 million to roll MNN out nationally in the next two years. Several major MNN test advertisers declined to sign on the rollout, but Whittle claims to have $147 million in pre-launch ad commitments.

When MNN is up and running, Mr. Whittle predicts it will have revenues of $200 million; Channel One has revenues of about $100 million. Edison Project, the for-profit chain of schools, operates as a separate business.

An eternal optimist, Mr. Whittle still paints a bright picture of Whittle's future.

He insists Whittle will play a significant role on the information superhighway, taking "pole positions" in healthcare and education.

"We've seen the ideas that have the greatest potential and said we were going to focus on those things. We've made the tough calls that we had to make and we've placed our bets," Mr. Whittle said.

Roll the dice.

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