He's flamboyant. He's full of ideas. But is he flying too close to the sun?


On a sultry September afternoon, a weary Richard Branson climbs aboard a Virgin Atlantic 747. Branson, founder and chairman of London-based Virgin Group, has just watched the jumbo jet unload 30 metric tons of relief equipment on hurricane-swept Antigua. He has also just come through a four-day publicity blitz that included celebrity cricket in Barbados and a catamaran cruise in St. Lucia to promote his airline's new Caribbean service. When the aftermath of Hurricane Georges forced him to cancel the Antigua leg of the V.I.P. junket, he quickly organized the relief effort, spotting a chance to engender local goodwill--and publicity. But ever the showman, Branson can't resist a final flourish. In the cool, darkened cabin of the nearly empty jet, he shakes a journalist's hand on a promise: to meet again on Virgin's inaugural flight into outer space.


Starship Virgin? Branson's dreams for his brand seem boundless. Since his counterculture days in the early '70s, when he lived on a houseboat in London, Europe's best-known entrepreneur has built an empire of some 200 companies with combined yearly revenues of an estimated $4 billion. His group spans three continents and includes planes, trains, financial services, music stores, cinemas, and cola. Restless and driven, Branson, who is worth an estimated $1.7 billion, according to London's Sunday Times, is a celebrity in Britain who rubs shoulders with royalty and pop stars. He's also an energetic self-promoter. It's no coincidence that Losing My Virginity, Branson's new autobiography, hits U.S. bookstores this month, just as he's expanding his airline, building new megastores, and rolling out his cola in the U.S. ''I want Virgin to be as well-known around the world as Coca-Cola,'' he says.


With ambitions like these, some people wonder whether Branson, 48, is in outer space already. The flamboyant and media-savvy entrepreneur, who once promoted a new venture by donning a wedding gown for photographers, has helped make Virgin a recognized name with strong associations. But with that name now attached to dozens of unrelated ventures, marketing experts warn that Branson risks diluting his brand. ''Overstretching ends up in only one way: snapping,'' says Jeremy Bullmore, an ad industry veteran and outside director for ad giant WPP Group PLC. ''I can't think of a company that has put its brand on so many products.''



Richard Branson at Launch of Virgin Cola


Then there's the question of Branson and his ability to manage this chaotic empire. Few of Virgin's businesses make big profits, and two of the biggest cash generators, Virgin Atlantic Airways (VIRGY) and an 18-month-old British railroad venture, are problematic. Analysts think the cyclical airline industry may be poised for a down cycle. Virgin Rail turns a profit with the help of government subsidies that will phase out by 2010. At a time when other companies are preparing for a global downturn, Branson is crisscrossing the U.S. on a book tour and gearing up for another attempt at circling the globe in a hot-air balloon in December.


1950, son of an English barrister and his former airline hostess wife.

Beaten at Scaitcliffe Preparatory School for poor grades. Skipped college and moved to London in the late 1960s to work on Student, a magazine he co-founded.


Mike Oldfield's Tubular Bells album, released in 1973 by Branson's Virgin Records.


Marriage to American Kristen Tomassi ends after wife-swapping episode. Marries Joan Templeman in 1989 after living together for a dozen years and having two children with her, Holly and Sam.


Estimated at $1.7 billion.




TRUE LOVE. Branson knows firsthand the dangers of stretching his business too far. Virgin made its name as a record label in the '70s, signing punkers the Sex Pistols. But during the recession of the early 1990s, Branson was forced by his bankers to sell the record business to raise cash for his struggling startup, Virgin Air. Branson still mourns the loss of the music business. ''I had to sell a company I loved,'' he says. Branson insists he'll never put himself at the mercy of bank lenders again.


Instead, he has embarked on a strategy he calls ''branded venture capital'' that has allowed him to launch a hodgepodge of businesses with minimal investment. Essentially, Branson manages the business and puts up the Virgin name, usually in exchange for a controlling interest, while his wealthy partners put up most of the cash. In financial services, he has teamed up with insurer Australian Mutual Provident and Royal Bank of Scotland PLC (RBSPrG) to sell retirement and other investment products in Britain. In trains, he has hitched to Stagecoach Holdings PLC, which operates double-decker buses in London. And until recently, his cola venture was backed by Cott Corp. (COTTF), the Canadian private-label soda maker. ''Not only does he come to us with great ideas, but he's willing to put in some of his own money to back them,'' says Randl L. Shure, managing director of BT Capital Partners Europe, an early partner in the rail venture and a current investor in Virgin Entertainment. When Stagecoach bought out its stake, BT nearly tripled its investment in less than two years.


The strategy has helped Branson expand his brand around the world. But teaming up with an equity partner carries its own risks, mainly that of having to buy out partners that are ready to move on. In the past several years, Branson has bought back stakes from Cott, Blockbuster Entertainment, and British retailer W.H. Smith, at a total cost of $270 million. And history shows the Virgin name is no guarantee of success. Notable nonstarters include ventures in vodka, computers, and a magazine.


Branson's toothy grin and corny publicity stunts have led some to dub him the P.T. Barnum of British business. But behind the scenes, he has a assembled an executive team with solid Establishment credentials. A year ago, Branson brought in Gordon McCallum, a former McKinsey & Co. consultant, as group strategy director to impose some discipline on how the Virgin brand is used. Stephen Murphy, the group's finance chief, is ex-Mars, Unilever (UN), and Quaker Oats (OAT). And behind his playful image, Branson himself is a tough competitor and negotiator.


SMALL STUFF. While most brand stewards use extreme caution before extending a valued name to a new product, Branson takes a different tack. He says Virgin is irreverent, eager to take on the Establishment, and dedicated to service. He believes that the occasional failure doesn't hurt, as long as Virgin is perceived to be fighting the good fight. Indeed, the one thread that runs through the tangle of Branson's business interests is his preference for entering industries where customers have few choices. ''We like to use the brand to take on some very large companies that we believe exert too much power,'' he says.


Yet for a people's champion, Branson has created a complex and opaque empire. Most of his companies are private and domiciled in tax havens such as the Channel Islands. Because he's constantly shifting companies around and forging and discarding business partnerships, it's hard to gauge Virgin's performance. Branson says he has built up a $420 million cash pile and that his companies produce a quarter-billion more in cash flow each year with scant debt. One reason its disparate ventures haven't hopelessly confused the Virgin image--or drained its finances--is that Branson doesn't mind starting small. Virgin's new bridal and fashion ventures, for example, are too tiny to matter much to the empire's financial well-being. And Branson says he's considering new ventures such as credit cards, phones, and health clubs.


No wonder it's a standing joke among Branson's top aides that they're paid to curb some of their boss's wilder schemes. ''Richard comes up with ideas, and we say: 'Down, Richard,''' jokes Virgin Atlantic CEO Steve Ridgway. Yet Virgin Atlantic was once widely predicted to follow Freddy Laker's as another doomed transatlantic startup carrier. Instead, in its 15-year history, it has shaken up the industry and stolen share from giant British Airways. Instead of trying to compete just on price, Virgin has offered better creature comforts--seat-back videos, an upgraded business class, onboard manicures and massages, and curbside check-in. Virgin Atlantic earned $129 million on sales of $1.4 billion for the year that ended on Apr. 30, and it threw off nearly $340 million in cash, making it one of the healthiest airlines in the world, says Michael K. Lowry, publisher of industry newsletter AirWatch Report. Now, Branson is lobbying the U.S. Congress to change the law prohibiting foreign carriers from owning more than 25% of a U.S. airline. Airline experts say he has little chance of success, and some believe Branson's real purpose is to prevent approval for the planned alliance between British Air (BAB) and American Airlines (AMR).




Richard Branson and Virgin Cola pack



Even more quixotic is Branson's push to launch Virgin Cola in Europe and the U.S. The effort puts him squarely in competition with Coca-Cola Co. (KO) and PepsiCo (PEP)--''cola duopolists,'' in Branson's words. Although he rode a vintage World War II tank through New York's Times Square last May to launch his soda, the brand's market share remains negligible. ''It would be easier to make a snowman in July in Florida than to take on Coke and Pepsi,'' says Beverage Digest publisher John Sicher. For starters, Branson has been without a bottling-and-distribution network since buying out Cott last year after the Canadian bottler balked at Virgin's aggressive expansion plans. Although Virgin Cola's quirky TV ads are still running, Virgin's investment to date is minimal and Branson has little riding on the venture except his prestige.


NEW TIMES. Almost as unlikely as cola is a foray into financial services. Nonetheless, Virgin Direct has made a surprisingly credible assault on Britain's financial-services sector. During the early '90s, virtually every big player in Britain's fledgling private pensions industry was tainted by allegations of high-pressure sales tactics and fraud. Financial services may seem at odds with Virgin's irreverent image, but Branson says that once again it gives the brand a chance to take on established players in the name of giving the customer a better deal. Still, this is a long-term proposition at best. The three-year-old venture has lost more than $33 million since it was launched, and CEO Rowan Gormley doesn't predict a profit until 2000 at the earliest.


Virgin Entertainment, which includes 148 book, music, and video megastores worldwide and a British cinema business, is a more obvious fit with the Virgin image. But though it makes money, it, too, has struggled. Last year, it closed six stores in Europe, and Branson has had to buy out two partners. Blockbuster wanted out after it was acquired by Viacom (VIA.B) in 1994. W.H. Smith put its stake up for sale last fall, when it decided to focus on its bookselling business. Simon Burke, 40, who became head of Entertainment 11 years ago, downplays any problems caused by the buybacks. ''Times are different now, and we have very strong cash flow,'' he says. ''We are well able to finance our own expansion.'' He says the business will earn about $100 million this year on sales of $1.4 billion. Virgin plans to add close to 20 stores next year, including nine in the U.S.



Branson's Bugaboos

Virgin Cola has made little headway against global giants Coca-Cola and Pepsi.


Service on newly acquired British train lines is shoddy. Dubbed ''a national disgrace'' by officials.


U.S. laws have blocked Branson's quest to fly the domestic skies.

Branson already crashed a hot-air balloon in Algeria in 1997 while attempting to circle the globe. He plans another try in December.



Of all Branson's far-flung enterprises, perhaps the one posing the greatest risk to the Virgin name is the 19-month-old rail business. Virgin acquired two capital-starved rail lines as part of British Rail's privatization amid promises that Branson would do what the government couldn't: make the trains run on time. But he underestimated how difficult it would be to improve service given the decrepit track and unionized workforce. As a result, Virgin has been plagued by embarrassing missteps and bad publicity. In late September, while Branson was island-hopping across the Caribbean, Virgin trains carrying Cabinet ministers and other V.I.P.s to the Labor Party's annual meeting were delayed, prompting Deputy Prime Minister John Prescott to call the privatized rail system ''a national disgrace'' and to lash out that ''when it comes to railways, I'm no Virgin.''


Branson admits the company screwed up but insists that by spending more than $3 billion on high-speed trains over the next four years, service will improve. Meanwhile, the frequent delays hurt. ''The experience is damaging Richard and Virgin's reputation overall,'' says Virgin Entertainment's Burke. ''But if we do get it right, it will restore Richard's heroic status because he would have taken something that was hopeless and made it better.''

It's crucial to the Virgin brand that Branson continue to be seen as a hero. And despite the rail problems, he still is, in Britain. For the second year in a row, Branson was named the country's best business leader in a survey of senior managers by KPMG Management Consultants, and his name is regularly floated as a possible Mayor of London.


Of course, that enormous personal appeal poses a difficult question. What are the prospects for Virgin if something should happen to Richard Branson? At the least, such a loss would leave Virgin without its ring-master. Branson, of course, emphasizes the positive: ''When artists die, their products sell for twice or three times as much. Hopefully, the same thing will happen to Virgin products if I go.'' As P.T. Barnum might have said: ''On with the show.''


Virgin Key Businesses

COMPANY                                 1998                CHANGE

VIRGIN TRAVEL GROUP LTD.*        Revenues            +20%
(includes Virgin Atlantic               $1.6 billion
and Virgin Holidays)                    Pretax profits       +38%
*For the year ended Apr. 30, 1998       $151 million

VIRGIN ENTERTAINMENT*              Revenues            +10%
(includes Megastore                     $1.3 billion
and Virgin Cinema)                       Pretax profits        +23%
*For the year ended Jan. 31, 1998       $81 million

VIRGIN RAIL*                              Revenues            +2%
(includes Cross Country                $671 million
and West Coast)                         Pretax profits        NA
*For 11-month period ending             $22.9 million
Feb. 28, 1998






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