BIZ WATCH

By BILL SAPORITO, JANE VAN TASSEL AND BRUCE VAN VOORST

ITT SLIPS OUT OF HILTON'S GRASP

Dvide and remain unconquered. ITT Corp.'s twist on a classic strategy is sure to repel Hilton Corp., which made a $6.5 billion offer for the owner of Sheraton hotels and Caesar's casinos earlier this year. For the second time in two years, ITT is slicing itself into three separate, publicly traded companies. The parts will be ITT Destinations, a hospitality and gaming company; ITT Corp., publisher of overseas Yellow Pages directories; and ITT Educational Services, a group of technical schools.

The great divider is Rand Araskog, CEO of ITT Corp., who will run ITT Destinations. He also unveiled a $2.1 billion, $70-a-share stock buyback. An exultant Araskog claimed victory, but by busting up ITT he merely beat Hilton to the punch. Says Bruce Turner, a managing director for Salomon Brothers: "His strategy happened because [Hilton CEO Stephen] Bollenbach came calling and there was no question what he would do."

Araskog keeps intact his perfect record in takeover wars, although his empire is shrinking. When he took command in 1979, ITT had sales of $22 billion. His new outfit will have sales of $5.5 billion. That's a play on an old adage too: How do you make a small corporation? Start with a large one.

FAREWELL TO THE FIVE-AND-DIME

Last week, when Woolworth announced it was closing its 400 remaining F.W. Woolworth stores and laying off 9,200 people to focus on selling shoes and accessories, it seemed that another American icon was being swept aside by the cruel winds of change. Yet Woolworth suffered not from forces beyond its control so much as from generations of five-and-dime management of the 118-year-old chain. In the '60s the company was late in following its customers to malls, and its attempt at a discount chain, Woolco, lasted just 20 years. Similarly, in the early '90s, Woolworth homed in on mall locations just as shoppers were abandoning mall shopping in droves.

Many downtowns are reviving; yet other retailers have swiped huge chunks of Woolworth's business. Stores like Staples knocked off stationery, while drug chains like Rite Aid made deep inroads in variety goods. Current CEO Roger Farah, tired of trying to figure out how to sell notions, will convert many sites to FootLockers. Selling $100 Nikes is a much simpler--and more profitable--proposition.

ALL THAT GLITTERS IS WORTH A LOT LESS

Earlier this year, the Canadian company Bre-X created a scandal when it reported that the 200 million oz. of gold it had "discovered" were a hoax. That may not be all bad: investors don't have much use for the stuff anyway. Recently Australia, the world's third largest producer, confirmed the sale of about two-thirds of its holdings. The $1.87 billion gold dump followed sell-offs by Belgium and the Netherlands and reports that others would follow. Australia's sale sent the price sinking to $314.60 per troy oz., a 12-year low, before it recovered to $324. With production costs around $300 per oz., South Africa, the No. 1 producer, faces the loss of 50,000 mining jobs.

Gold prices have steadily declined since the '80s because with roaring stock markets and low inflation worldwide, sitting on noninterest-bearing gold makes little sense for governments. "There's no point in holding it," says Dale Henderson, a gold specialist at the Federal Reserve. That's true for individuals too. It doesn't mean you should sell your jewelry at a discount. Inflation could someday return, and besides, T-bills make lousy necklaces.