'We just cannot find stars'

THE stock market adores Alain Levy. Since he was parachuted in as new chairman of EMI's Recorded Music division less than two months ago, shares in the whole company have soared by 37%.

Yes, investors have warmed enthusiastically to Levy. What is mysterious is exactly why: the Frenchman has scarcely uttered a word in public since taking the job.

But now, Levy has finally broken cover to give his first hints of where he wants EMI to go - and he has indicated that he would not rule out its sale and dismemberment.

He says: 'I've learned that you can never say a company is not for sale - no company in this world can say that over the next five years they won't be for sale, or be sold.'

And if that were not enough to bring tears of joy to the toughest industry analyst, Levy also says he is ready to take EMI out of music manufacturing and distribution. In other words, EMI would take care of the stars and the tunes and someone else would make the CDs. 'It's not crucial - but yes, we will pursue this plan at a future time,' he says.

Levy, 54, who speaks immaculate English with a hint of an accent, has made it clear he won't shirk tough decisions to turn around EMI. Rival music executives predict that he will be 'quite unsentimental' when he wields the axe on the faltering parts of his empire.

Underperforming labels can expect the chop, and there could be much pain in the US, where EMI has been particularly unsuccessful.

Much of what Levy will have to do is predictable - cutting out the deadwood and finding new labels - but it is his thoughts on the industry that are fascinating. A friend of superstars such as Elton John and Luciano Pavarotti, he believes the industry is failing because it has not found more such big names.

He says: 'It has made music into a commodity - the three-minute single. That's dangerous because what people are really interested in are stars. The only one in the past three years has been Britney Spears. She has the magic of being more than just a nice sound.

'Using the analogy of the film industry, when you have blockbusters people go to the movies. It is the same for the music business.

You know what is scary? Compilations. The industry loves them, but it's frightening to see how many the kids are buying. 'It's great from a business point of view, but it's not good for the music industry,' he says in an interview with American Hits Magazine website hitsdailydouble.com.

Levy has a tough job. Last month, EMI reported that in the six months to the end of September it slid from a pre-tax profit of £59m to a loss of £13.6m.

EMI chairman Eric Nicoli, who took the gamble of appointing Levy, admitted that the company's US performance 'was disappointing', and he has predicted that full-year profits are likely to be down by 20%, so the City is looking for big things from Levy. Ideally, investors want him to do at EMI exactly what he achieved in his last big job, at PolyGram. There, he turned a middle-ranking music company into the world's number one - and most profitable - music company in the late Nineties.

It will be almost impossible for Levy to repeat the trick at EMI. The foundation of PolyGram's success was the rapid acquisition of labels such as A&M, Motown and Island. Unfortunately for Levy, there are no similar deals around.

And there seems to be no chance of a merger with Warner or Bertelsmann-Competition watchdogs will not allow the merger of two big industry players.

What Levy must do is find stars as glittering as the ones created at PolyGram - Bryan Adams, U2, Van Morrison, Andrew Lloyd Webber, Pavarotti, Bon Jovi and Sting.

He says: 'We plan to spend a lot of time creating our own world stars.'

It will take time, but he believes Nicoli has given him a clean slate and the time to make EMI enormously profitable again. Unlike others, EMI is not part of a huge media group, so it can move fast.

That is the challenge facing Levy. But sensibly he has not set himself any target to transform EMI into the world's biggest music company.

If he is successful, he forecasts that in five years 'EMI will be the best record company in the world'.

'And by best,' he says, 'I mean a friendly environment for artists and executives. It will have to have great profitability and great market share - but not the biggest because I think that would be too ambitious.'

If successful, Levy will be hugely rich. He is paid $1 million a year - not much by music industry standards - but he will receive £70m in share options if he meets demanding targets.

Levy will then have the cash and time to do what he loves most - forget business and be with his family.